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

                                   Form 10-KSB

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

                  For the fiscal year ended: December 31, 2002.

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

         For the transition period from ______________ to ______________

                         Commission file number: 0-26525

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

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

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

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

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

                           Common Stock, no par value
                                (Title of class)

      Check whether the registrant (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X No ___

      Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. |X|

      State registrant's revenues for its most recent fiscal year: $5,975,363

      State the aggregate market value of the voting and non-voting common
equity held by non-affiliates: $9,083,480, as of March 1, 2003. The registrant's
stock is not listed on any exchange or otherwise publicly traded, and the value
of the registrant's stock for this purpose has been based upon the current $280
per share redemption price of the registrant's stock as determined by its board
of directors. In determining this figure, the registrant has assumed that all of
its directors and officers and its chief operations officer and chief financial
officer are affiliates, but this assumption shall not apply to or be conclusive
for any other purpose.

      State the number of shares outstanding of each of the registrant's classes
of common equity, as of the latest practicable date: 32,812 shares of common
stock, no par value, at March 1, 2003.

      Transitional Small Business Disclosure Format:    Yes ___ No X


<PAGE>


Cautionary Statement on Forward Looking Statements.

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

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

      o     adverse changes by the Federal Communications Commission 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 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 regulatory actions taken by
            long distance carriers;

      o     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;

      o     changes in employee relations;

      o     industry conditions and occurrences, including bankruptcies and
            insolvencies of long distance carriers (such as Global Crossing and
            WorldCom) and consolidations in the telecommunications and cable
            industries;

      o     economic conditions at the national, regional and local levels,
            which were highly uncertain at the time of the preparation of this
            annual report;

      o     political conditions and occurrences at the international, national,
            regional and local levels, including acts and/or threats of
            terrorism or war;



                                      (i)
<PAGE>

      o     the general emotions and psychology of the economy, the markets and
            consumers, which can at times be totally unrelated to actual
            economic or market conditions or other tangible factors;

      o     litigation;

      o     ever increasing costs and expenses which are necessary to Breda's
            business but which are outside of Breda's control, such as health
            and other insurance costs;

      o     acts or omissions of competitors and other third parties;

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

      o     reductions in or other changes to governmental programs assisting or
            affecting the telecommunications and cable industries, and in
            particular programs which aid providers of those services to rural
            areas;

      o     continued availability of financing, and on favorable terms; and

      o     effects of greater competition, including, without limitation,
            competition requiring new pricing or marketing strategies or new
            product offerings and the risk that Breda will not be able to
            respond on a timely or profitable basis, and the competitive effect
            of relationships with other carriers causing new pricing for
            services such as interexchange access charges and wireless access
            charges.



                                      (ii)
<PAGE>

                                     PART I

Item 1.     Description of Business.

            General.

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

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

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

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

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

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

            Local Exchange Carrier Services.

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

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

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

            All of the towns are in central and southern Iowa.


<PAGE>


            The primary services provided by Breda, Prairie Telephone and
            Westside Independent are providing their subscribers with basic
            local telephone service and access services for long distance calls
            outside the local calling area. As of December 31, 2002, they were
            serving approximately 2,671 telephone numbers and related access
            lines. Breda, Prairie Telephone and Westside Independent derive
            their principal revenues from providing these services.

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

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

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

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

                  o     The IUB must approve of any expansion beyond the
                        telephone service areas currently served by Breda,
                        Prairie Telephone and Westside Independent. The primary
                        factors that will be considered by the IUB in the event
                        of a request for an expansion will be the managerial,
                        financial and technical abilities of Breda, Prairie
                        Telephone or Westside Independent, as the case may be.
                        Although they do not anticipate material difficulties in
                        the event of any proposed




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<PAGE>


                        expansion, there is no assurance that any future
                        proposed expansion in the service areas of Breda,
                        Prairie Telephone or Westside Independent will be
                        approved by the IUB. (FCC approval for any proposed
                        expansion will also be necessary, as discussed below.)

                  o     The IUB has 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. Breda, Prairie Telephone and
                        Westside Independent were able to obtain the designation
                        because they are able to provide services defined in the
                        Iowa Administrative Code, Utilities Division 199,
                        Chapter 39, as services 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, and the
                        loss of the designation 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. This designation therefore
                        does not materially affect the operation of their
                        businesses, and the designation was obtained solely
                        because it was necessary in order to be eligible to
                        receive universal services funding. They received, in
                        the aggregate, approximately $418,335 of universal
                        services funding in 2001 and $657,290 of universal
                        services funding in 2002. Breda anticipates receiving
                        universal services funding in 2003 in an amount
                        comparable to that received in 2002.

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

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

                  o     The FCC regulates the amount of the access charge rates
                        that can be charged by Breda, Prairie Telephone and
                        Westside Independent for interstate long



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<PAGE>


                        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
                        to Breda, Prairie Telephone and Westside Independent,
                        and is discussed below.

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

                  o     The FCC regulates the amount of support payment funding
                        that will be received by Breda, Prairie Telephone and
                        Westside Independent. The FCC does so primarily by
                        targeting how the support payment funding received from
                        the National Exchange Carriers Association and the
                        Universal Service Administrative Company will be
                        allocated among the various possible recipients of the
                        funding. The allocation may vary from year to year
                        depending on the FCC's determination. It is not possible
                        to predict how the FCC will allocate the support payment
                        funding in any year, and the amount of support payment
                        funding received by Breda, Prairie Telephone and
                        Westside Independent will vary from year to year. For
                        example, Breda, Prairie Telephone, and Westside
                        Independent received, in the aggregate, support payment
                        funding of $1,310,180 in 2001, and $1,373,246 in 2002.
                        Those amounts include the amount of the universal
                        services funding component which is listed in the above
                        discussion regarding the IUB.

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



                                       4
<PAGE>


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

            Telephone services providers like Breda, Prairie Telephone and
            Westside Independent are subject to competition from other
            providers. As a result of the Telecommunications Act of 1996,
            telephone companies are no longer afforded exclusive franchise
            service areas. Under that Act, competitors can now offer telephone
            services to Breda's, Prairie Telephone's and Westside Independent's
            subscribers, and also request access to their lines and network
            facilities in order to offer any type of service that can be
            provided through those lines and facilities. The Act and the
            regulations promulgated by the FCC and state regulatory agencies to
            implement various parts of the Act could have a material adverse
            effect on Breda, Prairie Telephone and Westside Independent because
            they open up Breda, Prairie Telephone and Westside Independent to
            competition that they were not subject to in the past.

            There are numerous telephone companies which have filed to provide
            telephone services throughout all of Iowa. If any of those companies
            choose to provide service in any of Breda's, Prairie Telephone's or
            Westside Independent's service areas, there would be a reduction in
            revenue. To date, however, no company has chosen to compete in any
            of Breda's, Prairie Telephone's or Westside Independent's service
            areas. Breda does not know the plans of any companies, but Breda
            currently believes the possibility of any company entering any of
            those service areas in 2003 is small.

            Although competition is permitted, Breda, Prairie Telephone and
            Westside Independent currently do not, as indicated above, have
            direct competition in providing basic local telephone service in
            their existing service areas. They do, however, experience
            competition in providing access services and other services to long
            distance carriers. For example, they experience competition in
            providing access services for long distance when their subscribers
            use private line transport, switched voice and data services,
            microwave, or cellular or personal communications service. In those
            cases, the subscriber is not using Breda's, Prairie Telephone's or
            Westside Independent's networks or switches, so they cannot charge
            access charges to the long


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<PAGE>

            distance carrier. Various other competitors and forms of competition
            are also likely to arise in the future as technological advances
            continue to occur in the telecommunications and cable industries.

            Breda is required to provide local number portability (LNP) in its
            telephone exchanges that fall within the 100 largest metropolitan
            statistical areas (MSA's) in the United States. A MSA is the
            coverage area of a city as in a telephone network. LNP, a mandate of
            the Telecommunications Act of 1996, lets subscribers keep their
            phone numbers, and access to advanced calling features, after
            changing service providers. Two of the seven telephone exchanges
            serviced by Breda, Prairie Telephone and Westside Independent
            Telephone fall within one of the 100 largest MSA's in the United
            States. To date, Breda has received no requests from any competitive
            local exchange carrier for this service in either of those two
            exchanges. Breda estimates that requests for this service in those
            two exchanges would be minimal. Breda is in compliance and able to
            meet this requirement should a request be received for the service.

            The Communications Assistance for Law Enforcements Act ("CALEA") was
            passed by Congress in 1994 and sets forth the assistance
            capabilities that telecommunications carriers need to maintain to
            support law enforcement in the conduct of lawfully authorized
            electronic surveillance. Pursuant to a court order or other lawful
            authorization, carriers must be able to 1) isolate all wire and
            electronic communications of a target transmitted by the carrier
            within its service territory; 2) isolate call-identifying
            information of a target; 3) provide the intercepted communications
            and call-identifying information of a target; 3) provide the
            intercepted communications and call-identifying information to law
            enforcement; 4) carry out the intercepts unobtrusively, so targets
            are not made aware of the electronic surveillance, and in a manner
            that does not compromise the privacy and security of other
            communications.

            Breda and all carriers were ordered to meet the J-Standard (basic)
            capabilities by June 30, 2000, and the "punch list" (six additional
            capabilities) by September 30, 2001. Breda filed a petition on June
            30, 2000, under Section 107(c) of CALEA, which permits a carrier to
            file a petition with the Federal Communications Commission (FCC) for
            a maximum extension of two years. Breda prepared a Flexible
            Deployment Assistance Guide that it sent to the Federal Bureau of
            Investigation identifying its switch specific information and a
            deployed generic timeline that indicated when its switch would be
            CALEA compliant. The FBI reviewed the Flexible Deployment Guides and
            then recommended to the FCC that they approve Breda's 107(c)
            Petition. Breda received an extension until June 30, 2002.

            On September 21, 2001, the FCC released an Order, which mandated
            that carriers implement two of the "punch list" items by September
            30, 2001. However, since the due date was so close the FCC granted
            carriers until November 19, 2001 to be in compliance or ask for an
            extension. The FBI issued a Flexible Deployment Assistance guide for
            "Packet-Mode Communications" that dealt with carriers offering



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            services such as DSL and ISDN. The FCC allowed carriers to file a
            packet-mode flex guide and amend their initial 107(c) Petition to
            file for a two-year extension with a deadline of November 19, 2001.
            Breda was in compliance with the packet-mode requirements as of
            November 19, 2001. Upon the conversion to Desktop Media, L.L.C. as
            its internet service provider, Breda again reviewed the CALEA
            requirements, and based on information provided by the equipment
            vendors has determined that Breda's equipment is in compliance with
            the packet-mode requirements. Because of its interrelated systems of
            hardware and software, Breda continues to monitor these systems for
            CALEA compliance.

            On April 11, 2002, after review by the courts, the FCC ordered
            carriers to install the "punch list" capabilities by June 30, 2002.
            In May 2002, the FBI published the Third Edition Flexible Deployment
            Assistance Guide, which was intended to assist carriers submitting
            petitions to the FCC for extensions of the June 30, 2002 compliance
            date for the six missing technical capabilities.

            On June 25, 2002, Breda, Prairie Telephone and Westside Independent
            each filed with the FCC a supplement to the Section 107 (c)
            extension granted for their respective switches, for a further
            two-year extension until June 30, 2004. They had also previously
            filed on June 11, 2002, the Third Edition Flexible Deployment
            Assistance Guide Template to the FBI. Breda, Prairie Telephone and
            Westside Independent have received acknowledgment that the CALEA
            Implementation Section of the FBI received the materials submitted
            by them in response to the Third Edition of the Flexible Deployment
            Assistance Guide. If the FBI, with the aid of the law enforcement
            community, determines that a carrier's proposed deployment schedule
            is consistent with law enforcement priorities, it may provide
            support for the carrier's petition under Section 107 (c) of CALEA.
            The FCC decides whether or not to grant any carrier's petition.
            While Breda has not received the official extension decision from
            the FCC, Breda has taken all steps to meet the guidelines as
            presented.

            Breda has determined to expand its core business of providing
            telephone services into the adjacent market area of Carroll, Iowa,
            where it is presently offering Internet services through BTC, Inc.
            BTC, Inc. is an Iowa corporation that was incorporated in 1997
            primarily to explore the possibility of becoming a competitive local
            exchange carrier in some Iowa communities which are not served by
            Breda, Prairie Telephone or Westside Independent. A provider must
            receive a Certificate of Public Convenience and Necessity from the
            Iowa Utility Board ("IUB") before it can provide landline, local
            telephone service in Iowa. In addition to the certificate
            requirement, a provider cannot provide local service until it has
            received IUB approval for its tariffs and for maps and other
            documentation showing its service territory. Also, while the IUB's
            rules do not require interconnection agreements with other local
            service providers in the service territory, it is usually necessary
            to provide expected service. BTC, Inc. has finalized an
            interconnection agreement with Qwest.

            On July 17, 1997, BTC, Inc. filed an application with the IUB for
            issuance of a Certificate of Public Convenience and Necessity. The
            IUB issued an



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            Order Granting Application on August 26, 1997, to BTC, Inc. wherein
            it was noted that the IUB found that BTC, Inc. has demonstrated that
            it has the necessary technical, financial, and managerial ability to
            provide local exchange service and that its application did serve
            the public interest. In the order, the IUB stated that BTC, Inc.
            would be issued a certificate when BTC, Inc. obtained an approved
            tariff setting forth the prices, terms, and conditions of local
            exchange in Iowa. The IUB also approved the maps filed by BTC, Inc.
            on July 17, 1997.

            On January 23, 2003, BTC, Inc., d/b/a Western Iowa Networks, filed
            an amendment to its approved application reflecting the fact that it
            will be doing business as Western Iowa Networks. Also, on January
            23, 2003, BTC, Inc. filed a proposed local exchange tariff.
            Revisions to the tariff were filed on February 23, 2003. On March 7,
            2003, the IUB issued an order approving the amended application,
            approving the proposed tariff and its revisions, and issuing a
            certificate of public convenience and necessity.

            Some of the cellular ventures in which Breda, Prairie Telephone and
            Westside Independent have invested provide cellular services in the
            telephone exchange areas serviced by them. As previously discussed,
            cellular services are competitive with the telephone services
            provided by Breda, Prairie Telephone and Westside Independent. Breda
            does not believe, however, that investments in cellular ventures are
            inconsistent or in conflict with Breda's, Prairie Telephone's or
            Westside Independent's overall business. Breda also believes those
            investments are one method of attempting to diversify across the
            various telecommunications technologies which were available at the
            time of the preparation of this annual report.

            Revenues are also generated from sales of cellular phones and
            related service packages. For example, Breda has an agency agreement
            dated June 1, 1999 with U.S. Cellular which allows Breda to sell
            cellular phones and related packages to the public, and Breda
            receives commissions on those sales. U.S. Cellular had notified
            Breda that the agreement would be terminated effective May 31, 2001.
            U.S. Cellular subsequently proposed a new agreement, but Breda had
            serious concerns about that agreement, including the fact that the
            new agreement would pay lower commissions to Breda. Breda
            subsequently received a letter from U.S. Cellular stating that
            Breda's current contract with U.S. Cellular would be extended to
            December 1, 2001, to attempt to allow the parties to reach an
            agreement on open issues. U.S. Cellular later sent Breda another
            proposed new agreement, but that new agreement was not executed by
            Breda. Although it is likely that some form of new agreement will
            need to be entered into with U.S. Cellular, at the time of the
            preparation of this annual report Breda was continuing to operate
            under its June 1, 1999 agency agreement with U.S. Cellular. The
            agency agreement provides that it automatically renews for a period
            of one year on each June 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 agency
            agreement. As indicated above, Breda anticipates that a new agency
            agreement will need to be entered into with U.S. Cellular at some
            point, and possibly in 2003. Breda



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            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 has also been operating the U.S. Cellular kiosk located in the
            Walmart store in Carroll, Iowa under the June 1, 1999 agency
            agreement since August of 2002. Prior to that time, U.S. Cellular
            directly operated this outlet in competition with Breda's retail
            outlet in Carroll, Iowa.

            Breda, Prairie Telephone and Westside Independent also face
            competition in the sale and lease of telephone, cellular and related
            equipment because there are numerous competitors who sell and lease
            that equipment.

            The cellular ventures in which Breda, Prairie Telephone and Westside
            Independent have invested face ever increasing and changing
            competition in providing cellular services and equipment from the
            various competitors offering cellular and personal communication
            services.

            The competition in all of the areas mentioned in the preceding
            paragraphs is based primarily on cost, service and experience.

            Broadcast Services.

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

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

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

            As of December 31, 2002, Tele-Services was providing cable
            television services to approximately 3,257 subscribers.

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

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


                                       9
<PAGE>


               o   Arcadia - June, 2009           o   Malvern - October, 2016
               o   Auburn - January, 2004         o   Neola - November, 2003
               o   Bayard - May, 2008             o   Riverton - February, 2013
               o   Beaverlake - December, 2008    o   Oakland - November, 2009
               o   Breda - Year-to-Year Basis     o   Sidney - February, 2005
               o   Churdan - June, 2008           o   Tabor - September, 2016
               o   Farragut - January, 2009       o   Thurman - February, 2013
               o   Grand Junction - May, 2008     o   Treynor - October, 2022
               o   Hamburg-Year-to-Year Basis     o   Westside - June, 2009
               o   Lohrville - March, 2008

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

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

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

            The Telecommunications Act of 1996 also applies to cable services
            provided by local exchange carriers ("LEC"). The Act eliminates the
            prohibition on LEC provision of video programming in its service
            area. LECs and others may offer video programming under regulations
            that vary according to the type of video service being provided
            (radio-based, common carriage, cable TV systems, or open video
            systems). Under the Act, regulation is lifted for cable programming,
            for a basic service tier that was the only service subject to
            regulation on December 31, 1994, in any franchise area in which the
            operator services 50,000 or fewer subscribers.

            The Act provides several exceptions for acquisitions and joint
            ventures (which otherwise to a large extent are prohibited) for
            certain small and rural systems. These exceptions are based on
            annual operating revenues, number of cable subscribers served,
            location of the cable subscribers served, and common ownership or
            control issues with any of the 50 largest cable TV system operators
            in existence on June 1, 1995, and if the cable system operates in a
            television market not in the top 100 television markets as of June
            1, 1995.



                                       10
<PAGE>


            A LEC may obtain, upon agreement with a cable TV operator on rates,
            terms, and conditions, the use of the transmission facilities of a
            cable system extending from the last multi-user terminal to the
            premises of the end user, if such use is reasonably limited in scope
            and duration, as determined by the FCC. The Act also permits a LEC
            to acquire or joint venture under different terms and conditions in
            cases where the subject market meets the FCC's definition of
            "competitive". Finally, the FCC may waive the acquisition and joint
            venture prohibitions if it determines the economic viability of the
            market merits the waiver or that a waiver would otherwise be in the
            public interest, and the local franchising authority approves.

            Breda currently contemplates that any competition in the cable
            industry arising as a result of the Telecommunications Act of 1996
            may occur at a slower pace than will be the case for telephone
            services providers, in particular in rural areas like those served
            by Tele-Services.

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

            There is, however, competition in other forms. For example,
            Tele-Services experiences strong competition from wireless and
            satellite dish providers, and that competition has been increasing
            in recent years. Various other competitors and forms of competition
            are also likely to arise in the future as technological advances
            occur in the telecommunications and cable industries.

            Another factor faced by Tele-Services is the declining population
            base in the small rural communities served by Tele-Services, which
            adversely affects Tele-Services' current and prospective customer
            base.

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

            Internet Service Provider.

            Breda, Prairie Telephone and Westside Independent also provide
            internet access through their telephone lines. They were providing
            internet access to approximately 578 subscribers as of December 31,
            2002. Internet access is also provided by BTC, Inc. in some areas
            which are outside of the telephone exchange areas currently


                                       11
<PAGE>

            served by Breda, Prairie Telephone and Westside Independent. The
            area served by BTC, Inc. is currently limited to Carroll, Iowa and
            various communities surrounding Carroll, Iowa. BTC, Inc. provided
            internet access to approximately 1,683 subscribers as of December
            31, 2002. BTC, Inc. is a wholly owned subsidiary of Prairie
            Telephone. BTC, Inc. is an Iowa corporation that was incorporated in
            1997.

            Breda, Prairie Telephone, Westside Independent and BTC, Inc.
            continue to face ever increasing competition in providing dial-up
            and high speed internet access. For example, Breda has been
            experiencing price-point competition for Internet services from Iowa
            Telecom in three communities since the late fourth quarter 2000.
            Breda had been the sole provider of Internet services in those
            communities until that time. Iowa Telecom purchased the telephone
            exchanges for those communities in 1999 and began operating them on
            June 1, 2000. In late 2000, Iowa Telecom expanded the services
            offered in those communities to include Internet services and at a
            lower price than is offered by Breda. As a result, Breda has lost
            Internet customers in the three communities. BTC is experiencing
            intense pricing and free services competition in providing internet
            access in its Carroll, Iowa market. There are at least five
            competitors in this relatively small market area, and BTC has
            experienced a 13.8% decline in its dial-up customer base in this
            market during the last twelve months.

            Breda is pursuing additional marketing approaches to attempt to
            retain and increase its internet customer base, but Breda believes
            there will be continuing competitive pressures to lower dial-up
            rates and to provide higher speed Internet access.

            One step that Breda had taken to lower Breda's underlying Internet
            costs was through Prairie Telephone's acquisition in October of 2001
            of a 10% ownership interest in Desktop Media, L.L.C. As of December,
            2002, Desktop Media, L.L.C. provided internet service provider
            support services to Prairie Telephone and the other telephone
            companies who have invested in Desktop Media, L.L.C. Subsequent to
            December 31, 2002, and prior to the filing of this annual report,
            Breda contracted with ACG Solutions to provide its Internet
            operating system support and to move its end user help-desk
            technical support to eCi Technical Support Solutions. The end user
            help-desk technical support was moved on March 4, 2003. Prairie
            Telephone has retained its 10% ownership interest in Desktop Media,
            L.L.C. While lowering its underlying Internet costs in order to
            compete at a lower price point for Internet services was a critical
            point in the move to eCi, Breda also desired to offer its Internet
            customers 24-hour a day, 7-day a week end user help-desk technical
            support, as well as being able to brand these services under its own
            name for customer service continuity. Breda also reduced its pricing
            of Internet services and bundled Internet services with its long
            distance services in August, 2001 in order to attempt to compete at
            a lower price point for Internet services. Breda's reduction of its
            pricing has led to a decrease in Breda's overall revenue from
            Internet service fees. In order to attempt to provide a more
            competitively priced, high speed Internet service, BTC, Inc.
            completed the process of installing equipment in the Qwest central
            office in July of 2002 that allows BTC, Inc. to use a product that
            Qwest offers called line sharing.



                                       12
<PAGE>


            Although Breda expects the overall potential customer base for
            Internet access to continue to increase, it is becoming more
            difficult to predict what increases, if any, Breda might experience
            in its Internet customer base given the increasingly competitive
            pressures in this area. It is also possible that Breda might
            continue to experience declines in its Internet customer base. Also,
            as noted above, competitive pressures regarding pricing may lead to
            little or no growth, or even declines, in Internet service revenues,
            even if Breda is successful in increasing its Internet customer
            base.

            Breda uses part of BTC Inc.'s business location in Carroll, Iowa as
            a retail store for the sale and lease of telephone, cellular and
            related equipment and merchandise. The stored opened for business in
            April 2000.

            BTC, Inc. was the successful bidder at an auction on December 23,
            2002, for a commercial building located in Carroll, Iowa. The
            closing date for the purchase was January 20, 2003. Breda presently
            leases space adjacent to its present location to accommodate its
            retail and sales operations in Carroll. The recently acquired
            building has approximately 4450 sq. ft., which is over two times the
            space of the present location, and will allow Breda to consolidate
            its present operations, and will afford Breda the opportunity to
            expand its service offerings from the Carroll location. It is
            anticipated that the transfer of the Carroll, Iowa operations from
            its present location to its new location will occur during third
            quarter 2003.

            Other.

            Prior to 2002, telemarketing services revenue was reported as a
            component of other revenue and was generated by Prairie Telephone's
            subsidiary, Pacific Junction Telemarketing, Inc. There was no
            telemarketing service revenue generated in 2002. On July 26, 2001,
            Pacific Junction's telemarketing call number supplier (Results
            Telemarketing, Inc.) notified Pacific Junction that it would no
            longer be able to provide calling numbers to Pacific Junction. Breda
            and Pacific Junction were unable to locate new sources of
            telemarketing calling numbers, so Pacific Junction's telemarketing
            center was closed on July 26, 2001. Breda has determined that it is
            very unlikely that Pacific Junction's telemarketing center will ever
            be reopened, and Breda is in the process of dissolving this
            corporation. The closing of Pacific Junction's telemarketing center
            resulted in the loss of telemarketing services revenue and local
            network services revenue. The telemarketing calls made by Pacific
            Junction were primarily intended to provide a source of access
            services revenue for Breda, and the closing of the telemarketing
            center also accordingly led to a decline in Breda's access services
            revenue.



                                       13
<PAGE>

            Miscellaneous Business.

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

            Prairie Telephone has purchased spectrum for providing personal
            communications services in the Yale telephone exchange area. The
            purchase occurred in March of 1999. Spectrum is bandwidth allocated
            by the FCC which can be used in the transmission of voice, data and
            television communication. Prairie Telephone, along with the
            telephone companies for the Casey, Menlo, and Panora, Iowa areas,
            has also become a member of Guthrie Group, L.L.C. Guthrie Group,
            L.L.C. has acquired spectrum for some telephone exchange areas
            located in Guthrie County, Iowa.

            Breda also purchased spectrum for providing personal communications
            services in the Breda and Lidderdale exchange areas in March of
            1999. Breda has, however, sold that spectrum to Carroll County
            Wireless, L.L.C., at Breda's cost. Breda and two other independent
            telephone companies are the members of Carroll County Wireless,
            L.L.C. The two other telephone companies who are members of Carroll
            County Wireless, L.L.C. have also sold their respective personal
            communications services licenses to Carroll County Wireless, L.L.C.
            at their cost. Carroll County Wireless, L.L.C. has also purchased
            personal communications services licenses for various areas in
            Carroll County, Iowa. Carroll County Wireless, L.L.C. owns personal
            communications services licenses for nearly all of Carroll County,
            Iowa.

            Although difficult to predict, personal communications services may
            become very important in the future and may be highly competitive
            with current cellular services. Breda and Prairie Telephone have not
            made any firm decision on whether they will ever offer any personal
            communications services, and, as indicated above, Breda has
            transferred the personal communications services licenses it held
            for its Breda and Lidderdale exchange areas to Carroll County
            Wireless, L.L.C. Breda itself may therefore never directly offer any
            personal communications services. In any event, Breda and Prairie
            Telephone estimate that it will take at least one to three years for
            the surrounding areas to build out their personal communications
            systems to the point where Breda, Prairie Telephone, Guthrie Group,
            L.L.C. or Carroll County Wireless, L.L.C. could connect to those
            systems and be able to begin to provide personal communications
            services.

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

            Revenues may also arise from investments in other entities which
            provide cellular phone services or which invest in other cellular
            phone or telecommunications


                                       14
<PAGE>


            ventures. For example, Prairie Telephone has made investments in RSA
            #1, Ltd. and RSA #7, Ltd. Those entities are Iowa limited
            partnerships which provide cellular services in rural areas in
            central and southern Iowa. Prairie Telephone also owns .67% of Iowa
            Network Services' outstanding stock. Westside Independent owns .45%
            of Iowa Network Services' outstanding stock.

            Breda has made an investment in RSA #9, Ltd. and RSA #8, Ltd.
            Westside Independent has also made an investment in RSA #8, Ltd. RSA
            #8, Ltd. and RSA #9, Ltd. provide cellular services in rural areas
            in southern and central Iowa.

            On October 1, 2002, Breda bought its pro-rata share of a 7.88539%
            ownership interest in Alpine Communications, L.C. for $248,276 when
            its owner elected to sell that interest. As a result of this
            purchase, Breda now owns 17.4229% of the membership interests in
            Alpine Communications, L.C. Alpine Communications, L.C. provides
            telecommunications exchange and local access services, long distance
            service, and cable television service in service areas located
            primarily in Clayton County in northeastern Iowa.

            Breda's pro-rata share of the earnings or losses of these
            investments, based on its ownership interest, is reported on Breda's
            income statement on a quarterly basis. Some of the above investments
            may be a source of cash flow for Breda, Prairie Telephone and
            Westside Independent through distributions which may be made by the
            entities. While Breda is able to significantly influence management
            decisions in these equity investment entities, none of Breda,
            Prairie Telephone or Westside Independent controls any distribution
            decisions, so no distributions are ever guaranteed, and the timing
            and amount of any distributions will likely vary greatly from year
            to year.

            Breda receives a nominal annual fee from Alpine Communications, L.C.
            in consideration for Breda's chief operations officer serving as an
            officer of the management committee of Alpine Communications, L.C.

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

            In October of 2000, Breda, Prairie Telephone and Westside
            Independent each purchased 10,000 shares of common stock in NECA
            Services, Inc. The purchase price was $10 per share, resulting in a
            total consolidated investment of $300,000.


                                       15
<PAGE>


            NECA Services, Inc. ("NSI") is a for-profit corporation that was
            organized to carry on and expand various business opportunities
            which may from time to time be presented to the National Exchange
            Carrier Association, Inc. ("NECA"). NSI's officers are also the
            officers of NECA, and they have extensive experience in the
            telecommunications industry. It is currently contemplated that
            non-regulated business opportunities will be conducted by NSI so
            that NECA can concentrate on its traditional core tariff and pooling
            services. For example, the NECA board has authorized the assignment
            of certain National Exchange Carrier Association contracts to NSI,
            which include the contract with the Universal Service Administrative
            Company for support of the federal schools and libraries and rural
            health care universal service programs.

            Only NECA members or affiliates were given the opportunity to
            purchase shares of stock in NECA.

            There is no assurance that any of Breda, Prairie Telephone or
            Westside Independent will ever receive any returns on or other value
            from their investment in NECA, whether by distributions or increases
            in the value of NECA's common stock. Breda did, however, receive
            notification on February 3, 2003, that the Board of Directors of
            NECA has approved a $.50 per share dividend payable on April 1, 2003
            to the shareholders of record on March 1, 2003.

            There are substantial restrictions imposed upon any transfer of
            shares in NECA, all of which potentially adversely affect the value
            and marketability of the NECA stock.

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

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

            Service Marks.

            Breda has registered the mark "W.I.N. Western Iowa Networks" with
            the United States Patent and Trademark Office, and has been
            utilizing the mark and some related logos since the second quarter
            of 2001. Breda hopes the use of the mark and logos will create an
            integrated, unified marketing approach for all of the products and
            services of Breda and its subsidiaries and will increase awareness
            of those products and services. Breda did not make any change in the
            scope or nature of its or any of its subsidiaries' business in
            connection with the adoption and use of the mark and logos.

            Employees.

            As of December 31, 2002, Breda had 33 full time employees. Breda
            employs all of those employees, but those employees also provide the
            labor and services for Prairie



                                       16
<PAGE>

            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 two of Breda's
            employees have written employment agreements. Those employment
            agreements are with the chief operations officer and the chief
            financial officer of Breda. Breda also utilizes part-time employees
            on an as needed basis.

            Pacific Junction had 3 full-time employees and utilized
            approximately seventeen part time employees prior to the closing of
            its telemarketing center on July 26, 2001. Pacific Junction did not
            have collective bargaining or labor agreements with any of its
            employees.

            Sale of Shares of Stock in Central Iowa Cellular, Inc.

            On May 12, 2000, Prairie Telephone sold all of its 3,000 shares of
            common stock in Central Iowa Cellular, Inc. to AirTouch Iowa, LLC.
            Central Iowa Cellular, Inc. is an Iowa corporation that was
            organized in 1983 by Prairie Telephone and some other Iowa based
            independent telephone companies for purposes of becoming a partner
            in Des Moines MSA General Partnership. Des Moines MSA General
            Partnership is an Iowa partnership which provides cellular telephone
            services to customers within the Des Moines, Iowa metropolitan area.
            Prairie Telephone's 3,000 shares of stock constituted 20% of the
            total issued and outstanding shares of stock of Central Iowa
            Cellular, Inc.

            The aggregate purchase price received by Prairie Telephone for the
            3,000 shares of stock was $5,226,034. The sale resulted in a pre-tax
            gain of $5,018,714, with $4,900,959 of that gain included in Breda's
            operations during the second quarter of 2000, and the remaining
            $117,755 of the gain included in Breda's operations during the third
            quarter of 2000.

            Some of the various representations, warranties and covenants given
            and made by Central Iowa Cellular, Inc. and the shareholders of
            Central Iowa Cellular, Inc. in the stock purchase agreement that was
            entered into as part of the transaction were made jointly and
            severally, so Prairie Telephone would have liability for a breach of
            the stock purchase agreement by Central Iowa Cellular, Inc. or any
            one or more of the other shareholders of Central Iowa Cellular, Inc.

            Prairie Telephone also entered into a tower proceeds agreement in
            connection with the sale of its shares of stock in Central Iowa
            Cellular, Inc. The two primary purposes of the tower proceeds
            agreement were to address certain sublease payments payable to Des
            Moines MSA General Partnership and to repurchase certain warrants
            held by Des Moines MSA General Partnership. The amounts received by
            Prairie Telephone under the tower proceeds agreement, which was
            finalized in the third quarter of 2000, are included in the purchase
            price amount set forth above.


                                       17
<PAGE>


            The negotiations for the sale of the shares of stock in Central Iowa
            Cellular, Inc. initially began and arose out of the proposed
            assignment and transfer by AirTouch Iowa, LLC of its interest in Des
            Moines MSA General Partnership to another entity. Prairie Telephone
            and the other shareholders of Central Iowa Cellular, Inc. took the
            position that the proposed assignment granted them a right of first
            refusal and possibly other rights under their agreement with
            AirTouch Iowa, LLC. Prairie Telephone and the other shareholders of
            Central Iowa Cellular, Inc. determined, however, after negotiations,
            to sell their shares of stock in Central Iowa Cellular, Inc. to
            AirTouch Iowa, LLC rather than attempting to enforce their rights of
            first refusal. The primary factor which caused Prairie Telephone to
            reach this determination was Prairie Telephone's and Breda's
            determination that the purchase price offered by AirTouch Iowa, LLC
            was favorable. The purchase price was a negotiated price that
            Prairie Telephone believed was representative of the fair value of
            Prairie Telephone's shares of stock in Central Iowa Cellular, Inc.
            No formula or other fixed or identifiable principles were utilized
            in establishing the purchase price.

Item 2.     Description of Property.

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

            Breda owns or leases the following real estate:

                  o     Breda moved into its corporate offices at 112 East Main,
                        Breda, Iowa on September 13, 2002. The corporate office
                        building has approximately 7,680 square feet, and is
                        utilized by Breda, Tele-Services, Prairie Telephone,
                        Westside Telephone and BTC, Inc. The corporate office
                        was previously located at 103 East Main, Breda, Iowa,
                        and the real estate and building were leased by Breda
                        and Prairie Telephone from Tele-Services. Tele-Services
                        sold that property pursuant to a real estate contract on
                        September 12, 2001. Prairie, Tele-Services and BTC, Inc.
                        each pay Breda $1,000 per month for leasing of corporate
                        offices. Westside pays Breda $500 per month for leasing
                        of corporate offices.

                  o     Breda's new corporate offices now sit on the real estate
                        previously described as being just east of Breda, Iowa.
                        The building located on the site was attached to the new
                        corporate office building. The building which was
                        attached to the new office structure is Breda's central
                        office building and 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 located on a portion of this real estate.



                                       18
<PAGE>

                  o     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.).

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

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

                  o     Breda leases a major portion of the building owned by
                        BTC, Inc. at 526 N. Carroll Street, Carroll, Iowa. Breda
                        utilizes this portion of the building as a retail store
                        for the sale and lease of telephone, cellular and
                        related equipment and merchandise. Breda pays BTC, Inc.
                        $1,000 per month for the lease. It is anticipated that
                        this building will be sold after the move to the new
                        building which was purchased on January 20, 2003.

            Prairie Telephone owns or leases the following real estate:

                  o     Prairie Telephone's corporate offices are located in
                        Breda's building at 112 East Main, Breda, Iowa. Prairie
                        Telephone pays Breda $1,000 per month for Prairie
                        Telephone's use of space at the building.

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

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

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


                                       19
<PAGE>


                  o     Prairie Telephone owns the real estate and building
                        located at 804 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.

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

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

            Pacific Junction previously leased the property at 120 Main Street,
            Breda, Iowa, but that lease was terminated at its normal expiration
            date of April 1, 2002, given that Pacific Junction's telemarketing
            business was discontinued on July 26, 2001.

            BTC, Inc. owns the real estate and building located at 526 N.
            Carroll Street, Carroll, Iowa. The building houses some equipment
            used by BTC, Inc. in providing internet access. A major portion of
            the building is leased by Breda and is used as a retail store for
            the sale and lease of telephone, cellular and related equipment and
            merchandise. The store opened for business in April, 2000. BTC, Inc.
            receives $1,000 per month in rental from Breda. BTC, Inc.'s building
            has approximately 1,804 square feet. All equipment and functions
            performed in this building will be moved to the new location in
            Carroll once remodeling is completed.

            BTC, Inc. became the owner of the real estate and building located
            at 603 N. Adams, Carroll, Iowa, on January 20, 2003. It is
            anticipated that the present tenants will vacate the building by the
            end of second quarter 2003. It is anticipated that renovations and
            remodeling work will take place during early third quarter of 2003,
            and all present operations and equipment housed in the building at
            526 N. Carroll Street, Carroll, Iowa will be moved by early fourth
            quarter of 2003.

            BTC, Inc. also leases approximately 886 square feet of space in the
            building adjoining its Carroll location. The original term of this
            lease expires on April 30, 2003. The aggregate monthly rental
            payable by BTC, Inc. under the lease is $450. All utilities are also
            paid by BTC, Inc. The space is accessible from the inside of the
            building through a connecting, shared door. The functions performed
            at this location will also be moved to the newly purchased building
            in Carroll upon completion of the renovations.


                                       20
<PAGE>


            Westside Independent owns the real estate and building located at
            131 South Main Street, Westside, Iowa. Effective September 20, 2002,
            Westside's corporate offices were moved to 112 East Main, Breda,
            Iowa and the building is no longer used for Westside's corporate
            offices. This building also houses equipment used to switch, record
            and transmit telephone calls. The equipment is used in providing
            telephone services to Westside and the surrounding rural area. The
            building also houses some equipment used by Tele-Services in its
            cable business. The building has approximately 1,600 square feet.

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

            As noted above, Tele-Services previously owned the real estate and
            buildings comprising 103 East Main, Breda, Iowa and which were
            utilized by Tele-Services, Breda and Prairie Telephone as their
            corporate offices until Breda's new corporate office building was
            completed on September 13, 2002. Tele-Services has sold the real
            estate and buildings on contract. The remaining contract balance was
            paid in full on February 14, 2003.

            All of the real estate and substantially all of the other assets of
            Breda, Prairie Telephone and Tele-Services are subject to mortgages
            and security agreements given by those corporations to the Rural
            Telephone Finance Cooperative to stand as security and collateral
            for the loan which is described in the following paragraph.

            The aggregate amount outstanding as of December 31, 2002 under
            Breda's existing loan agreement with the Rural Telephone Finance
            Cooperative was $1,912,625. The loan has a fifteen year term that
            matures in September 2013.

            Prairie Telephone and Breda also have lines of credit available from
            the Rural Telephone Finance Cooperative in the amounts of,
            respectively, $500,000 and $1,500,000. Those lines of credit will
            currently expire on November 30, 2005 and December 1, 2005,
            respectively. No amounts were outstanding under either of those
            lines of credit on December 31, 2002.

            The Rural Telephone Finance Cooperative required Westside
            Independent to execute a guaranty of the loan made by the Rural
            Telephone Finance Cooperative to Breda to


                                       21
<PAGE>


            finance the purchase of Westside Independent by Breda and the
            purchase of a related company, Westside Communications, Inc., by
            Tele-Services. Both of those purchases occurred in June of 1998.
            (Westside Communications, Inc. was dissolved effective December 2,
            1999, and all of its assets were transferred to, and all of its
            liabilities were assumed by, Tele-Services at that time.) Westside
            Independent's guaranty is secured by a mortgage and security
            agreement which covers its real estate and substantially all of its
            other assets.

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

            Breda, Prairie Telephone and Westside Independent also each own
            various equipment used to switch, record and transmit telephone
            calls in the areas serviced by them. BTC, Inc. also owns certain
            equipment. This equipment is all housed in buildings owned or leased
            by them, as discussed above. Breda believes that the normal and
            ordinary useful life of this type of equipment is approximately 5-12
            years. The current equipment was purchased at various times over the
            period of 1998 to 1999. Breda believes the equipment is now in good
            operating condition and repair, considering ordinary wear and tear
            and depreciation. Breda, Prairie Telephone, Westside Independent and
            BTC, 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. 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 or other governmental
            authorities whose areas are being served, and others are on or
            across private property.

Item 3.     Legal Proceedings.

            As of the date of this annual report, Breda was not aware of any
            pending legal proceeding to which Breda was a party or to which any
            of Breda's property was subject, other than routine litigation that
            was incidental to its business. As of the date of this annual
            report, Breda was not aware that any governmental authority was
            contemplating any proceeding against Breda or any of its property.


                                       22
<PAGE>


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

            No matters were submitted to a vote of the shareholders of Breda
            during the period of October 1, 2002 through December 31, 2002.


                                     PART II

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

            Breda is authorized to issue 5,000,000 shares of common stock. Breda
            had 33,000 shares of its common stock issued and outstanding as of
            December 31, 2002. Those shares were held by approximately 582
            different shareholders.

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

            The common stock can only be issued to:

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

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

            As indicated, only residents of the Breda and Lidderdale telephone
            exchange service areas served by Breda are eligible to purchase
            stock. Although Breda also provides telephone services to Macedonia,
            Iowa and the surrounding area, residents of Macedonia, Iowa and the
            surrounding rural area cannot acquire any shares of common stock of
            Breda even if they are receiving telephone services from Breda.
            Subscribers to any services from any of Breda's subsidiaries cannot
            buy common stock of Breda unless they also meet the requirements
            discussed above in this paragraph.

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


                                       23
<PAGE>


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

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

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

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

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

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

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

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

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

            The board of directors has historically established the issuance
            price and the redemption price at approximately 75% of the book
            value of Breda. The board of directors has historically made this
            determination in March, April or May of each year, based upon
            Breda's then most recent year-end audited 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 issuance price and the redemption price as so
            determined by the board of directors then generally applies until
            the board of directors makes a new determination and announces the
            new price at the next annual shareholders meeting.


                                       24
<PAGE>


            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,
            however, on November 2, 1999, by adopting a resolution fixing the
            issuance price for newly-issued shares and the redemption price to
            be $149 per share. The $149 amount 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 issuance price and redemption price given the
            prior 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 issuance price and redemption price
            for Breda's shares of common stock to be $180 per share. The $180
            amount was determined based upon Breda's 1999 audited financial
            statements. The $180 per share price 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 the issuance price for newly
            issued shares of Breda's common stock and the redemption price for
            Breda's shares of 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 issuance price and
            the redemption 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 previously determined issuance and redemption
            price of $180 per share. The shareholders of Breda were notified of
            the increase in the issuance price and the redemption price for
            Breda's shares of common stock from $180 to $235 per share by letter
            dated June 14, 2000.

            Prairie Telephone's sale of its shares of stock in Central Iowa
            Cellular, Inc. is discussed above in Item 1 of this annual report.
            At the time the board made its determination on June 12, 2000,
            Prairie Telephone had received, in the aggregate,


                                       25
<PAGE>


            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 issuance
            price and redemption price discussed above, Prairie Telephone's
            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. As indicated, the board of directors believed
            this was a material event which made it appropriate to make a new
            determination of the issuance price and redemption price for shares
            of Breda's common stock.

            The board of directors returned to Breda's historical practices at
            its meeting on March 12, 2001, at which meeting the board of
            directors adopted a resolution fixing the issuance price and
            redemption price for Breda's shares of common stock to be $258 per
            share. The $258 per share amount was determined based upon Breda's
            2000 audited financial statements. The $258 per share price was
            announced and became effective at the May 16, 2001 annual meeting of
            the shareholders.

            The board of directors continued to follow Breda's historical
            practices on this issue at its meeting on April 8, 2002, at which
            meeting the board of directors adopted a resolution fixing the
            issuance price and redemption price for Breda's share of common
            stock to be $280 per share. The $280 per share amount was determined
            based upon Breda's 2001 audited financial statements. The $280 per
            share price was announced and became effective at the May 21, 2002
            annual meeting of the shareholders.

            The board of directors currently intends to continue to otherwise
            address this issue on an annual basis consistent with the above
            described historical practices of the board of directors, 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.

            The issuance and redemption price as determined by the board of
            directors has increased from $27 per share in 1995 (based on the
            1994 year-end audited financial statements of Breda) to $280 per
            share pursuant to the April 8, 2002 action of the board of directors
            as described above. Breda does not believe that the amount of this
            increase is indicative of potential future increases, however, in
            particular given that:

                  o     The referenced increase was due primarily to two
                        "one-time" material events, those being the sale of
                        Breda's direct broadcast satellite operation and the
                        sale of Prairie Telephone's stock in Central Iowa
                        Cellular, Inc., and

                  o     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, repurchases of common stock by
              Breda currently is the primary


                                       26
<PAGE>


            method for a shareholder to be able to sell the shareholder's
            shares. As discussed below, 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, but there are no current plans to arrange any other
            auctions in the future. Breda also maintains a list of shareholders
            desiring to sell their shares, and of other shareholders desiring to
            purchase those shares, as discussed below.

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

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

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

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

            Over the period of January 1, 1996 through June 24, 1996, Breda
            repurchased four hundred and twenty-four shares of its common stock
            from two shareholders, at a purchase price of $27 per share. Over
            the period of June 25, 1996 through February


                                       27
<PAGE>


            20, 1997, Breda repurchased seven hundred and eighty-nine shares
            from nine different shareholders, at a purchase price of $31 per
            share. Over the period of February 21, 1997 through March 1, 1998,
            Breda repurchased one thousand nine hundred and ninety-six shares of
            its common stock from fourteen different shareholders, at a purchase
            price of $41 per share. Over the period of March 2, 1998 through
            December 31, 1998, Breda repurchased three hundred and fifty-eight
            shares of its common stock from five different shareholders, at a
            purchase price of $64 per share.

            No shares were repurchased by Breda during the period of December
            31, 1998 through December 31, 1999, except that in November, 1999,
            Breda did effectuate a repurchase of forty shares by depositing the
            purchase price for those forty shares with the appropriate Iowa
            authorities under Iowa's escheat laws. The forty shares were held of
            record by twenty different shareholders that Breda had been unable
            to locate. The purchase price utilized for this purpose was $149 per
            share. Breda also deposited the amount of the April 21, 1999
            dividend that was otherwise payable on the forty shares. The total
            amount deposited by Breda was $6,080, with $120 of that amount being
            for the April 21, 1999 dividend.

            Over the period of January 1, 2000 through December 31, 2000, Breda
            repurchased four hundred forty-one shares of its common stock from
            fourteen different shareholders, at a purchase price of $235 per
            share.

            Over the period of January 1, 2001 through June 30, 2001, Breda
            redeemed 220 shares of its common stock from two different
            shareholders, at a purchase price of $235 per share. During the
            quarter ended June 30, 2001, Breda redeemed 1,104 shares of its
            common stock from five different shareholders, at a purchase price
            of $258 per share. Over the period of July 1, 2001 through December
            31, 2001, Breda redeemed 892 shares of its common stock from
            nineteen different shareholders, at a purchase price of $258 per
            share.

            During the period of January 1, 2002 through March 31, 2002, Breda
            redeemed 244 shares of its common stock from six different
            shareholders, at a purchase price of $258 per share. During the
            period of April 1, 2002 through June 30, 2002, Breda redeemed 43
            shares of its common stock from one shareholder at a purchase price
            of $258 per share, and 720 shares of its common stock from ten
            different shareholders, at a purchase price of $280 per share.
            During the period of July 1, 2002 through December 31, 2002, Breda
            redeemed 1,018 shares of its common stock from 15 different
            shareholders, at a purchase price of $280 per share.

            There may have been transfers among the shareholders of Breda during
            the above periods for which Breda did not exercise its right of
            first refusal. 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 RFTC. Those
            restrictions are discussed below in this Item.


                                       28
<PAGE>


            Breda has no plans to and has not agreed to register any of its
            shares of common stock under any federal or state securities laws.
            Since Breda has been subject to the reporting requirements of the
            Securities Exchange Act of 1934 for a period of over ninety days,
            Rule 144 under the Securities Act of 1933 would be available to
            permit the resale of shares of common stock by shareholders, subject
            to certain restrictions contained in Rule 144, including the
            requirement that the shareholder has held his or her shares for a
            period of one year prior to the date of resale. Once a shareholder
            (other than a shareholder who is an officer or director of Breda)
            has held his or her shares of common stock for a period of two
            years, the shareholder would be able to resell the shares without
            restriction under Rule 144. As discussed above, however, the
            governing documents of Breda impose numerous material limitations
            and restrictions on a shareholder's ability to sell or transfer any
            shares of Breda's common stock.

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

                  o     the shareholder no longer receives service from Breda,

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

                  o     the shareholder dies, or

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

            As of December 31, 2002, there were 22 shareholders with multiple
            voting rights arising from their prior ownership of Class A stock,
            and they have one vote for each share of the former Class A stock
            previously held by them.

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


                                       29
<PAGE>


            as of the close of the second quarter in 1999. No officers or
            directors of Breda sold or purchased any shares in the auction.
            Breda does not have any plans to arrange any other auctions in the
            future.

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

            During the calendar year 2000, five separate sales of shares
            occurred between shareholders on the list. Two sales each involved
            two shares, which were sold for $235 per share. One sale involved
            fifty-three shares, which were sold for $235 per share. One sale
            involved thirty-one shares, which were sold for $155 per share. One
            sale involved two shares, which were sold for $149 per share. Breda
            elected not to exercise its right of first refusal on these sales.

            During the calendar year 2001, three separate sales of shares
            occurred between shareholders on the list. Two sales each involved
            seven shares, which were sold for $258 per share. The other sale
            involved forty-three shares, which were also sold for $258 per
            share. Breda elected not to exercise its right of first refusal on
            these sales.

            During the calendar year 2002, three separate sales of shares
            occurred between shareholders on the list. Two sales involved two
            shares which were sold for $258 per share. The other sale involved
            three shares which were also sold for $258 per share. Breda elected
            not to exercise its right of first refusal on these shares.


                                       30
<PAGE>


            Breda does not participate in, and has no responsibility for,
            negotiating the terms and conditions of any sale of shares between
            anyone on the list.

            Breda has only declared and paid four dividends to its shareholders
            since Breda was incorporated in 1964. One of those dividends was
            declared on March 15, 1999. It was in the amount of $3.00 per share,
            for an aggregate dividend of $113,166. The second dividend was
            declared on March 13, 2000. It was also in the amount of $3.00 per
            share, for an aggregate dividend of $113,046. The third dividend was
            declared on March 12, 2001. It was also in the amount of $3.00 per
            share, for an aggregate dividend of $111,087. The fourth dividend
            was declared on April 8, 2002. It was also in the amount of $3.00
            per share, for an aggregate dividend of $104,214.

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

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

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

            No shares of stock were issued by Breda in 2002. 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 or exchangeable into or
            for common stock of Breda. Breda's shares of common stock are not
            convertible into any other securities.

Item 6.     Management's Discussion and Analysis of Financial Condition and
            Results of Operations.

            Overview.

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


                                       31
<PAGE>


            Breda 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. Breda also provides
            long distance services to its customers in local exchanges as well
            as the surrounding market area through BTC, Inc. 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.
            Breda also had telemarketing services that do not meet the
            quantitative threshold for a reportable segment. The telemarketing
            services were discontinued during 2001.

            The five subsidiaries of Breda, all of which operate publicly and
            conduct business as Western Iowa Networks, and the segments in which
            they operate are:

               Local Exchange Carrier

                 Prairie Telephone Co., Inc.
                 Westside Independent Telephone Company
                 BTC, Inc. - competitive local exchange carrier (CLEC) presently
                 providing long distance services.

               Broadcast Services

                 Tele-Services, Ltd.

               Internet Service Provider

                 BTC, Inc. (a subsidiary of Prairie Telephone Co., Inc.)

               Other

                 Pacific Junction Telemarketing Center, Inc. (a subsidiary of
                 Prairie Telephone Co., Inc.)

            Breda's primary source of consolidated revenues is from the
            telephone services provided by Breda, Prairie Telephone and Westside
            Independent. The operating revenues from telephone services are
            primarily derived from the following types of fees and charges:

                  o     Flat monthly fees charged to subscribers for basic local
                        telephone services. As of March 1, 2003, those fees
                        varied from approximately $11.50 to $35.00 per month.
                        The monthly fee is higher for subscribers who elect to
                        have additional services and features, such as custom
                        features.

                  o     Access charge revenues payable by long distance carriers
                        for intrastate and interstate exchange services provided
                        to those long distance carriers. Access charge rates may
                        be at a flat or fixed rate or may depend upon usage. As


                                       32
<PAGE>


                        discussed above in Item 1 of this annual report, access
                        charge rates are subject to regulation by the FCC.
                        Access charge revenues constitute a substantial part of
                        Breda's, Prairie Telephone's and Westside Independent's
                        revenues, and a material risk to them arises from the
                        regulation of access charge rates by the FCC. Breda
                        anticipates continuing pressure for the lowering of
                        state and federal access charge rates, so future
                        reductions in access charge rates are likely.

            The access charge rate payable to telephone companies like Breda,
            Prairie Telephone and Westside Independent which utilize the
            "average schedule" basis for receiving access charge revenues, is
            based on, among other things, the number of miles of their cable
            over which they transfer long distance calls made by their
            subscribers. Breda's total access charge revenues have been
            increasing in recent years, but Breda believes those increases are
            attributable to increased numbers of subscribers, increased calling
            patterns and technological advances. There is no assurance that
            those trends will continue, and it is in fact unlikely that there
            will be any further material increases in the number of subscribers
            without the acquisition of additional calling areas by Breda,
            Prairie Telephone or Westside Independent.

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

            On October 20, 2000, a comprehensive access charge rate reform and
            deregulation plan for non-price cap, incumbent local exchange
            carriers (LEC's) was submitted to the FCC by the Multi-Association
            Group (MAG). LECs include most of the small and mid-sized local
            exchange carriers that service rural and insular areas in the U.S.,
            such as Breda, Prairie Telephone and Westside Independent. MAG was a
            coalition of the National Rural Telecom Association, the National
            Telephone Cooperative Association, the Organization for the
            Promotion and Advancement of Small Telecommunications Companies and
            the United States Telecom Association.

            One of the purposes of MAG was to formulate a comprehensive plan to
            settle major proceedings pending at the FCC and complete reforms
            required by the Telecommunications Act of 1996. In general terms,
            the MAG plan was designed to, among other things, modify interstate
            access charge rules and universal service support for non-price cap,
            incumbent LEC's.


                                       33
<PAGE>


            The FCC's October 11, 2001 order on the MAG plan regarding access
            charge rate reform and deregulation for non-price cap, incumbent
            local exchange carriers became effective for Breda, Prairie
            Telephone, and Westside Independent on July 1, 2002. Breda did not
            experience adverse effects in 2002, and continues to believe that
            the FCC's order on the plan will not have any materially adverse
            effects on Breda's or its subsidiaries' revenues in 2003.

      o     Revenue from the sale and lease of customer premises telephone
            equipment and other similar items and other miscellaneous customer
            services, such as custom calling services. Since the completion of
            the upgrading of their telephone switches in 1998 and 1999, Breda,
            Prairie Telephone and Westside Independent have had the capability
            and are offering many more custom calling features to their
            subscribers. Revenues from custom calling features are not, however,
            a major or material source of revenue.

      o     Fees from long distance providers for billing and collection
            services for long distance calls made by subscribers. Breda, Prairie
            Telephone and Westside Independent have been experiencing increased
            competition in this area over the past three years. Their
            competitors include other third parties providing these services,
            and competition from the long distance providers themselves since
            some providers have decided to handle their own billing and
            collection. Breda has not made a determination to cease billing and
            collection for other carriers.

      o     Fees from per minute rate plans and calling plan fees on long
            distance calls made by subscribers of BTC, Inc., Breda, Prairie and
            Westside Telephone. Breda has experienced a 51% increase in its long
            distance customer base since December of 2001.

      o     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. BTC, Inc. has experienced intense
            competition from a handful of internet service providers in BTC,
            Inc.'s market area, and experienced a 13.8% decrease in its Carroll,
            Iowa customer base after May 2002, when another competitor came into
            the market with a marketing strategy of free months of service and
            low rates for extended months.

Breda's other primary source of consolidated revenue is generated from
Tele-Services' cable business. Tele-Services' operating revenues arise primarily
from monthly fees for basic and premium cable services provided to its cable
subscribers. Tele-Services' main competition at the time of the preparation of
this annual report was from satellite dish providers. The FCC now allows
satellite dish providers to provide local channels, which has had an adverse
effect on Tele-Services, given that its ability to provide local channels was,
in the past, one reason subscribers might


                                       34
<PAGE>


            choose Tele-Services' cable services over a satellite dish. Other
            rulings and decisions by the FCC are possible, and may provide
            satellite dish providers (or other providers as changes in the
            telecommunications and cable industry occur) with equal or greater
            advantages than Tele-Services can offer to its subscribers, which
            could obviously have an adverse effect on Tele-Services' business.
            As indicated, changes in the telecommunications and cable industry
            are continually occurring, and technological advances may provide
            Tele-Services subscribers with other options. For example, Iowa
            Network Services is beginning to offer cable services in Iowa over
            existing telephone lines, and it is estimated that up to 70
            independent telephone companies in mostly rural Iowa will be able to
            offer cable television programming over their telephone lines by
            2005. This option, and others which might arise through other
            changes or advancements in technology, could have material adverse
            effects on Tele-Services in the future. Breda currently believes,
            however, that the cable services provided by Tele-Services will
            continue to be desirable in the areas served by Tele-Services for at
            least those subscribers who desire a lower priced product that
            allows local channel options.

            Tele-Services is working with an engineering firm to look at and
            work on consolidating its head-end equipment with the goal being
            that the equipment will then be able to serve two or more
            communities, instead of just one community, as is currently the
            case, and to lower maintenance costs for that equipment.
            Tele-Services is, however, also evaluating the option of upgrading
            some of its cable TV systems and installing additional equipment and
            electronics to be able to provide more channel line-up options to
            its subscribers and to also possibly offer Internet access services
            over a cable modem.

            Another issue being faced by Tele-Services at the time of the
            preparation of this annual report was the trend of the companies
            which provide programming licensing to cable services providers, to
            require the cable services providers to include particular channels
            on their systems as a condition of receiving a programming license.
            Tele-Services anticipates that it will continue to need to upgrade
            its plant, equipment and cables in order to add more channel
            line-ups so that it can stay competitive and continue to be able to
            obtain programming licenses.

            The cost of upgrades in 2003, and of any continuing or further
            head-end equipment consolidation, is estimated to be less than
            $300,000.

            Other miscellaneous sources of revenue are also discussed in the
            financial statements included in Section 7 of this annual report.

            In the past, revenues were also generated from the telemarketing
            activities of Pacific Junction. Those activities also provided a
            source of access charges revenue for Breda through the telemarketing
            calls made by Pacific Junction. As noted above in this annual
            report, however, Pacific Junction's telemarketing center was closed
            on July 26, 2001, and Breda is in the process of dissolving this
            corporation.


                                       35
<PAGE>


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

                                                     2001                2002
                                                    ------              ------
                  Local Exchange Carrier (1)         67.3%               71.5%
                  Broadcast (2)                      17.0%               16.3%
                  Internet Service Provider (3)      12.9%               12.2%
                  Other (4)                           2.8%                0.0%
                                                    ------              ------
                                    Total           100%                100%

                  (1)   Includes (i) flat monthly fees charged to subscribers by
                        Breda, Prairie Telephone and Westside Independent 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, and (iv) per minute rates and calling plans
                        rates for long distance services, and (v) monthly
                        cellular commissions, advertising fees, and
                        miscellaneous revenues.

                  (2)   Includes monthly fees charged for basic and premium
                        cable services.

                  (3)   Includes monthly fees charged for internet services.

                  (4)   Includes revenues from telemarketing services. Pacific
                        Junction's telemarketing operations were, however,
                        discontinued on July 26, 2001.

            Twelve-months ended December 31, 2002 Compared to Twelve-months
            ended December 31, 2001

            Net Income

            Consolidated net income for 2002 was $1,218,421, a $70,849 or 6.2%
            increase compared to year-end 2001 when the consolidated net income
            was $1,147,573.

            The $70,848 increase in net income resulted from the following four
            factors:

                  1)    Consolidated operating income, which is Operating
                        Revenues less Operating Expenses, generated from the
                        local exchange carrier segment, the broadcast segment,
                        and the internet service provider segment, increased
                        $248,440, or 43.5% for the twelve-month period ended
                        December 31, 2002, when compared to the twelve-month
                        period ended December 31, 2001.


                                       36
<PAGE>


                  2)    Other income (expense), which includes such items as
                        interest and dividend income, income from equity
                        investments, interest expense, and gains (losses) on the
                        sale of investments and property, decreased $59,091 or
                        4.8% for the twelve months ended December 31, 2002, when
                        compared to the twelve-month period ended December 31,
                        2001.

                  3)    Income taxes increased $47,733 or 7.4% for the twelve
                        month period ended December 31, 2002, when compared to
                        the twelve-month period ended December 31, 2001.

                  4)    The cumulative effect of an accounting change, net of
                        tax, decreased Breda's income by $70,768 during the
                        twelve-month period ended December 31, 2002, when
                        compared to the twelve-month period ended December 31,
                        2001. This net of tax item reflects an impairment of
                        goodwill for which there was no corresponding entry
                        during the twelve-month period ended December 31, 2001.

            Operating Revenues

            There was an increase in total operating revenues for the
            twelve-month period ended December 31, 2002, when compared to the
            twelve months ended December 31, 2001 of $91,119, or 1.5%. The
            segments making up total operating revenues and their contributions
            to the $91,119 increase in 2002 are: local exchange carrier services
            - $316,642; broadcast services - ($23,339); Internet services -
            ($35,971) and other services revenue ($166,213).

            Local Exchange Carrier Services - $316,642

            As noted above in the segment table, local exchange carrier services
            revenue accounted for 71.5% of the operating revenue in 2002. The
            components of, and their contributions to the $316,642 increase in
            local exchange carrier services revenue for the twelve months ended
            December 31, 2002 when compared to the twelve months ended December
            31, 2001 are: a) local network services $4,184, b) network access
            services $35,174, c) long distance services $63,464, d) billing and
            collection services ($23,050), e) cellular services $216,199 and f)
            miscellaneous $20,671.

            Both local network services and network access services revenue were
            nearly  identical in 2002 to their revenues in 2001,  with a .7% and
            1.5%  increase,  respectively,  in 2002  when  compared  to the same
            twelve  month  period  ending  December  31,  2001.  Breda  has  not
            experienced  an adverse  effect from the  implementation  in 2002 of
            different  methodologies of support payment funding regulated by the
            FCC. However, Breda has been adversely affected through lower access
            revenue  because  Qwest no longer  pays  access  revenue for traffic
            originating  with a wireless  carrier that uses Qwest to deliver the
            traffic  back to a number  served  by local  exchange  carriers  who
            participate  in the  use of the  switching  and  network  facilities
            offered by Iowa Network Services (INS). The Qwest nonpayment of


                                       37
<PAGE>


            wireless traffic is being studied by a joint task force, and Breda
            believes that it could receive some revenue from this source again
            in the future. With the closure of its telemarketing center on July
            26, 2001, Breda also no longer receives access revenue for long
            distance calls made through the center.

            Breda's long distance services revenue continues to grow with the
            increase in its customer base for these services. Long distance
            services should continue to be a growth area for Breda in 2003 as
            Breda continues to market this service as both a stand-alone service
            and as part of a package with other services such as Internet. The
            twelve month period ended December 31, 2002, reflected a 135.5%
            increase in long distance services revenues when compared to the
            twelve month period ended December 31, 2001, and is a direct
            reflection of the 47.5% increase in Breda's long distance customer
            base.

            Breda expanded its cellular retail location by taking over the
            management of a U.S. Cellular kiosk located in the Walmart store in
            Carroll, Iowa, on August 1, 2002. The $216,199, or 31.1%, increase
            in cellular services revenue for the twelve month period ended
            December 31, 2002, when compared to the twelve month period December
            31, 2001, reflects the increased sales generated through this retail
            location and the increased sales generated through the efforts of
            outside sales staff.

            Breda's miscellaneous revenue in 2002 included $76,196 of
            uncollectible revenue. The bulk of the uncollectible revenue was
            attributable to the access revenue that is not collectible because
            of Chapter 11 bankruptcy filings by Global Crossing on January 28,
            2002, and by WorldCom on July 21, 2002.

            Broadcast Services ($23,339)

            Broadcast services revenue decreased $23,339, or 2.3%, for the
            twelve month period ended December 31, 2002, when compared to the
            twelve month period ended December 31, 2001. As noted previously,
            Breda's subsidiary, Tele-Services, continues to face competition
            from satellite providers that can now include local channels in
            their package offerings. Tele-Services experienced a 1.7% decrease
            in its customer base during the calendar year 2002.

            Internet Services ($35,971)

            Internet services revenue decreased $35,971, or 4.7%, for the twelve
            month period ended December 31, 2002, when compared to the twelve
            month period ended December 31, 2001. This decrease in revenue is
            directly attributable to the decrease in Breda's Internet service
            customer base as a result of the intense competition by multiple
            suppliers in BTC, Inc.'s Carroll, Iowa, market area. As noted
            previously, Breda also bundled Internet services with long distance
            services and lowered pricing of the Internet services, which also
            reduced Internet service revenues in 2002.


                                       38
<PAGE>


            Other Services Revenue ($166,213)

            Telemarketing services revenue is reported as other revenue, and it
            decreased $166,213, or 100%, when comparing the twelve-month period
            ended December 31, 2002, to the twelve-month period December 31,
            2001. The decrease is attributable to the fact that Pacific
            Junction's telemarketing center was closed on July 26, 2001, and
            there were no corresponding telemarketing services revenues in 2002
            when compared to the same period in 2001.

            Operating Expenses

            There was a decrease in total operating expenses of $157,321, or
            3.0%, for the twelve-month period ended December 31, 2002, when
            compared to the twelve-month period ended December 31, 2001. The
            components making up operating expenses are cost of services,
            depreciation and amortization, and selling, general and
            administration expenditures.

            Cost of services increased $36,742, or 1.6%, for the twelve-month
            period ended December 31, 2002, when compared to the twelve-month
            period ended December 31, 2001. Most of the increase in cost was a
            direct correlation to increased service revenue for long distance
            services and cellular services. Long distance costs increased 92.3%
            and cellular service costs increased 17.8% in order to provide those
            increased services during 2002.

            Depreciation and amortization expense decreased $58,216, or 5.2%,
            for the twelve-month period ended December 31, 2002, when compared
            to the twelve month period ended December 31, 2001. Breda allocated
            part of the purchase price paid for Westside Independent Telephone
            Company and its cable TV subsidiary in 1998 to goodwill. Effective
            January 1, 2002, however, generally accepted accounting principles
            established by the Financial Accounting Standards Board no longer
            allowed the expensing, or amortizing, of a portion of this goodwill
            over a fifteen-year period. Approximately all of the $58,216
            decrease in depreciation and amortization expense for the
            twelve-month period ended December 31, 2002, is attributable to the
            termination of this expense amortization. There was also a $12,165
            decrease in depreciation and amortization expense which is
            attributable to the fact that there was no depreciation expense for
            Pacific Junction during the twelve months ended December 31, 2002
            since Pacific Junction's telemarketing center was not in operation
            during that time period. The overall depreciation and amortization
            expense increased in the other telephone, cable TV, and Internet
            operations because of new equipment, buildings, and capital items
            being depreciated which offset some of the decrease in the
            depreciation and amortization expense attributable to the closure of
            the telemarketing center in July 2001.

            Selling, general and administration expenses decreased $135,847, or
            7.1%, for the twelve month period ended December 31, 2002, when
            compared to the same period in 2001. This decrease was mainly
            attributable to the $157,951 reduction in wages,


                                       39
<PAGE>


            benefits, insurance, professional fees, and taxes that resulted from
            the closure of the Pacific Junction telemarketing center on July 26,
            2001, and for which there were minimal, corresponding expenditures
            in 2002 since the telemarketing center was not operational in 2002.
            Increases in wages, benefits, advertising expenditures, and training
            expenditures offset the telemarketing operations decrease. Decreases
            in corporate operations and general taxes also resulted from the
            elimination of a supervisory position in early 2002, and decreased
            tax rates levied by the taxing authorities in the various counties
            for 2002.

            Operating Income

            The net result of the operating services revenue and operating
            expenses was an increase of $248,440, or 43.5%, in operating income
            for the twelve month period ended December 31, 2002, when compared
            to the same twelve month period in 2001.

            Other Income (Expense)

            Other income (expense) decreased $59,091, or 4.8%, during the twelve
            month period ended December 31, 2002, when compared to the same
            twelve month period in 2001, and was mainly attributable to three
            items. The first item, interest and dividend income, decreased
            $44,709, or 13%, and was mainly due to lower interest income rates
            available on investments during 2002. The second item was the
            $102,986 gain that Tele-Services recognized on the sale of its
            former corporate office building at 103 East Main in Breda, Iowa, on
            October 1, 2002. The third item was that income from equity
            investments decreased $92,259, or 9.1%, during the twelve month
            period ended December 31, 2002, when compared to the same twelve
            month period in 2001. In the first quarter 2002, Breda began to
            report its cellular investments and its investment in Alpine
            Communications, L.C. on the equity method. The corresponding twelve
            month period ended December 31, 2001, has been restated in
            accordance with generally accepted accounting principles as
            discussed below in this annual report. The income from equity
            investments reported 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 decrease in equity investments reported on Breda's
            income statement for the twelve month period ended December 31,
            2001, is a reflection of the net increases and decreases in the net
            operating income of these investments. One of the investments,
            Alpine Communications, L.C., in accordance with the SFAS 142 and
            SFAS 144, assessed its recorded balances of goodwill, indefinite
            lived intangible assets and long-lived assets. As a result, Alpine
            Communications, L.C. determined an impairment related to its
            long-lived assets, and part of the decrease in equity investments
            reported on Breda's income statement for the twelve month period
            ended December 31, 2002, included Breda's pro-rata share of this
            impairment loss.


                                       40
<PAGE>


            Income Before Income Taxes

            Income before income taxes increased $189,349, or 10.6% for the
            twelve month period ended December 31, 2002, when compared to the
            twelve month period ended December 31, 2001. The $189,349 increase
            resulted from the $248,440 increase in operating income and the
            $59,091 decrease in other income (expense).

            Net Income

            Income taxes increased $47,733, or 7.4%, for the twelve month period
            ended December 31, 2002, when compared to the same period in 2001,
            and is a direct reflection of the increased income generated in
            2002. The effective tax rate in 2002 was 34.9%, versus 36% in 2001.
            These effective tax rates differ from the U.S. statutory rate
            primarily due to state income taxes, and the proportion of
            investments with state tax exemptions.

            The cumulative effect of an accounting change, net of tax, decreased
            Breda's income by $70,768 during the twelve month period ended
            December 31, 2002, when compared to the twelve month period ended
            December 31, 2001. The net of tax item reflects an impairment of
            goodwill for which there was no corresponding entry during the
            twelve month period ended December 31, 2001. The Financial
            Accounting Standards Board issued Financial Accounting Statement No.
            142 in August 2001 relating to the treatment of goodwill, and these
            accounting principles are incorporated into Breda's financial
            statement beginning January 1, 2002. As noted previously in the
            discussion on the decrease in Breda's depreciation and amortization
            expense for the twelve month period ended December 31, 2002, as
            compared to the twelve month period ended December 31, 2001, Breda
            is no longer able to expense over a fifteen year period the portion
            of the Westside purchase price, which had been allocated to
            goodwill. The goodwill is now reviewed for impairment, that is,
            written down and expensed against earnings, only in the periods in
            which the recorded value of goodwill is more than its fair value.
            Financial Accounting Statement No. 142 requires that Breda recognize
            an impairment loss when the carrying amount of goodwill is greater
            than its implied fair value. These tests have been applied to the
            goodwill and intangible assets of Breda and its subsidiaries, and
            the net-of-tax, impairment expense is Breda's estimate of the
            expense to offset earnings for the carrying amount of the Westside
            purchase goodwill attributable to broadcast services which is in
            excess of the fair value of that asset based on discounted cash flow
            valuation.

            Net income increased $70,848, or 6.2%, for the twelve month period
            ended December 31, 2002, when compared to the same period in 2001.


                                       41
<PAGE>


            Liquidity and Capital Resources at Twelve Months ended December 31,
            2002

            Cash Flows

            Cash flows from operations continue to be a steady source of funds
            for Breda. Cash provided from operations was $1,650,381 in 2002 and
            $2,247,272 in 2001. Cash flows from operations in 2002 were
            primarily attributable to a positive net income of $1,218,421 plus
            the addition of non-cash expenses of $1,070,569 from depreciation
            and amortization, which were then offset by $721,247 of non-cash,
            equity income in unconsolidated affiliates. Cash flows from
            operations in 2001 were primarily attributable to a positive net
            income of $1,147,573 plus the addition of non-cash expenses of
            $1,128,785 from depreciation and amortization, which were offset by
            $339,698 of non-cash equity income in unconsolidated affiliates.

            Cash used in investing activities was $1,623,797 in 2002, and
            $758,379 in 2001. Capital expenditures relating to ongoing business
            were $754,895 in 2002 and $624,270 in 2001. A new corporate office
            building was constructed in 2002 at a cost, which includes
            furnishings and fixtures, of $480,000. Breda expects capital
            expenditures in 2003 to be at similar levels to those made in 2002.
            Capital used in investing activities in 2002 included the additional
            $248,273 investment in Alpine Communications L.C., the $160,000
            issuance of a note receivable from the purchaser of the former
            corporate office building sold on contract on October 1, 2002, and
            the purchase of investments with excess cash during the normal
            course of operations.

            Cash used in financing activities was $791,265 in 2002 and $796,055
            in 2001. In 2002, cash was used to repay $126,365 of borrowings from
            the RTFC, to redeem common stock for $560,686, and to pay dividends
            of $104,214. In 2001 cash was used to repay $118,300 of long-term
            debt, to redeem common stock for $566,668, and to pay dividends of
            $111,087. Breda funds the redemption of its stock from cash flows
            from operations. During 2002, Breda redeemed 2,025 shares for
            $560,686. Breda anticipates that the cash used for stock redemptions
            in 2003 will be similar to that used in 2002.

            Working Capital

            Working capital was $1,948,514 as of December 31, 2002, compared to
            working capital of $2,664,323 as of December 31, 2001. The ratio of
            current assets to current liabilities was 3.6 to 1.0 as of December
            31, 2002 and 5.3 to 1.0 as of December 31, 2001.

            Breda had a $601,941 decrease in current assets during the
            twelve-month period ended December 31, 2002, when compared to the
            twelve months ended December 31, 2001. The decrease in current
            assets was mainly attributable to a $941,791 decrease in cash and
            temporary investments and a $299,289 increase in accounts
            receivable, resulting in a corresponding increase in long-term
            investments. Customer accounts receivable as of December 31, 2002
            were comparable to customer accounts


                                       42
<PAGE>


            receivable as of December 31, 2001. The $299,289 increase in
            accounts receivable was mainly attributable to NECA pooling
            receivables, unpaid access charges due from slow paying carriers,
            estimated post bankruptcy payments from Global Crossing and
            WorldCom, and access payments from Qwest for October, November and
            December 2002, while they were making an in-house billing software
            conversion. Part of the Qwest software conversion involved billing
            functions being reviewed and processed at new locations so carrier
            invoices sent to the prior billing locations were not processed
            until the local telephone companies resubmitted their invoices to
            the new processing center. The Qwest receivables have since been
            paid prior to the filing of this annual report.

            During September 2001, Tele-Services entered into a contract with
            Toyne, Inc. to sell its corporate building for $200,000. The company
            received a cash deposit of $20,000 at the time of the contract, and
            another $20,000 at the time of possession on October 1, 2002.
            $140,000 of the remaining $160,000 on this contract is shown in
            long-term note receivables and $20,000 is included in short-term
            note receivables. The remaining contract amount of $160,000 was paid
            in full on February 14, 2003.

            Current liabilities increased $113,868 as of the end of the twelve
            month period ended December 31, 2002, when compared to the end of
            the same period in 2001. Accounts payable and accruals increased
            $62,869, which mainly was the result of a 24-month over earnings
            NECA accrual of approximately $82,200 and a $35,000 co-location
            invoice from Qwest, which was received at year-end for work
            performed prior to year-end.

            Common stock had a net increase of $203,550 during the twelve month
            period ended December 31, 2002, when compared to the twelve months
            ended December 31, 2001. This increase resulted primarily from two
            items. One was the $22 per share increase in outstanding shares
            value on May 21, 2002, and the other was a decrease in the number of
            outstanding shares through the redemption of 2,025 share of common
            stock by Breda during the twelve month period ended December 31,
            2002. The increase in retained earnings during the twelve month
            period ended December 31, 2002, when compared to the twelve months
            ended December 31, 2001, is the net effect of the stated value stock
            adjustment of $764,236, the dividends paid in 2002 of $104,214, and
            the year-to-date net income as of December 31, 2002.

            Breda anticipates that substantial expenditures will need to be made
            for software upgrades that will be necessary in order for Breda,
            Prairie Telephone and Westside Independent to become compliant with
            the requirements of the Communications Assistance for Law
            Enforcement Act ("CALEA"). The latest, revised estimate of the cost
            for upgrading Breda's, Prairie Telephone's and Westside
            Independent's software to become compliant with CALEA, once the
            software changes are available from the vendor, is $405,000.


                                       43
<PAGE>


            Breda's capital requirements to start up its CLEC project in
            Carroll, Iowa is estimated to be less than $300,000 and will be
            funded internally.

            Breda anticipates that its 2003 operational, investing and financing
            activities will be similar to 2002, and can be funded internally
            through operations and temporary investments.


                                       44
<PAGE>

Item 7.     Financial Statements.

                           BREDA TELEPHONE CORPORATION
                                AND SUBSIDIARIES
                                   BREDA, IOWA

                        CONSOLIDATED FINANCIAL STATEMENTS
                        WITH INDEPENDENT AUDITORS' REPORT
                     Years Ended December 31, 2002 and 2001



                                       45
<PAGE>

                           BREDA TELEPHONE CORPORATION
                                AND SUBSIDIARIES
                                   BREDA, IOWA

                                    CONTENTS

                                                                   Page

Independent Auditors' Report                                         47

Consolidated Financial Statements:

     Consolidated Balance Sheets                                  48-49

     Consolidated Statements of Income                               50

     Consolidated Statements of Stockholders' Equity                 51

     Consolidated Statements of Cash Flows                           52

     Notes to Consolidated Financial Statements                 53 - 66


                                       46
<PAGE>



                          INDEPENDENT AUDITORS' REPORT


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

We have audited the accompanying consolidated balance sheets of Breda Telephone
Corporation (an Iowa corporation) and subsidiaries as of December 31, 2002 and
2001, and the related consolidated statements of income, stockholders' equity
and cash flows for the years then ended. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. 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. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Breda Telephone
Corporation and subsidiaries as of December 31, 2002 and 2001, 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.

As discussed in Note 4 to the consolidated financial statements, the Company has
changed its method of accounting for certain investments from the cost method to
the equity method.


West Des Moines, Iowa
February 6, 2003


                                       47
<PAGE>


                           BREDA TELEPHONE CORPORATION
                                AND SUBSIDIARIES
                                   BREDA, IOWA

                           CONSOLIDATED BALANCE SHEETS
                           December 31, 2002 and 2001

<TABLE>
<CAPTION>
                                                                                  2001
                                                              2002           (as restated)
                                                          -----------        -------------
                                 ASSETS

CURRENT ASSETS
<S>                                                      <C>                  <C>
  Cash and cash equivalents                              $  1,032,734         $  1,797,415
  Temporary investments                                       459,059              636,169
  Accounts receivable                                         835,667              536,378
  Notes receivable                                            116,000                   --
  Interest receivable                                          68,053               75,058
  Prepaid income taxes                                             --               51,280
  Inventories                                                  91,114               93,028
  Other                                                        85,025              100,265
                                                         ------------         ------------
                                                            2,687,652            3,289,593
                                                         ------------         ------------


OTHER NONCURRENT ASSETS
  Long-term investments                                     3,136,576            2,494,073
  Other investments:
   Investments in unconsolidated affiliates at equity       3,454,159            2,489,639
   Nonmarketable equity securities at cost                    807,564              811,497
  Goodwill                                                    896,812            1,016,757
  Intangibles                                                   1,556                1,556
  Notes receivable                                            512,792              451,502
                                                         ------------         ------------
                                                            8,809,459            7,265,024
                                                         ------------         ------------


PROPERTY AND EQUIPMENT                                      5,190,176            5,609,292
                                                         ------------         ------------



     TOTAL ASSETS                                        $ 16,687,287         $ 16,163,909
                                                         ============         ============
</TABLE>


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


                                       48
<PAGE>


                           BREDA TELEPHONE CORPORATION
                                AND SUBSIDIARIES
                                   BREDA, IOWA

                           CONSOLIDATED BALANCE SHEETS
                           December 31, 2002 and 2001

                                                                        2001
                                                     2002          (as restated)
                                                 -----------       -------------
      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
  Current portion of long-term debt              $   134,981       $    126,365
  Accounts payable                                   262,544            199,675
  Accrued taxes                                      167,079            141,439
  Other                                              174,534            157,791
                                                 -----------       -------------
                                                     739,138            625,270
                                                 -----------       -------------

LONG-TERM DEBT, less current portion               1,777,644          1,912,625
                                                 -----------       -------------

DEFERRED CREDITS                                     105,534            114,564
                                                 -----------       -------------

STOCKHOLDERS' EQUITY
  Common stock - no par value, 5,000,000
   shares authorized, 33,000 and 35,025
   shares issued and outstanding at $280
   and $258 stated values, respectively            9,240,000          9,036,450
  Retained earnings                                4,824,971          4,475,000
                                                 -----------       -------------
                                                  14,064,971         13,511,450

      TOTAL LIABILITIES AND STOCKHOLDERS'
       EQUITY                                    $16,687,287       $ 16,163,909
                                                 ===========       ============

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


                                       49
<PAGE>

                           BREDA TELEPHONE CORPORATION
                                AND SUBSIDIARIES
                                   BREDA, IOWA

                        CONSOLIDATED STATEMENTS OF INCOME
                     Years Ended December 31, 2002 and 2001


                                                                    2001
                                                     2002       (as restated)
                                                 -----------    ------------

OPERATING REVENUES                               $ 5,975,363     $ 5,884,244
                                                 -----------     -----------
OPERATING EXPENSES
  Cost of services                                 2,312,590       2,275,848
  Depreciation and amortization                    1,070,569       1,128,785
  Selling, general, and administration             1,772,184       1,908,031
                                                 -----------     -----------
                                                   5,155,343       5,312,664
                                                 -----------     -----------

OPERATING INCOME                                     820,020         571,580
                                                 -----------     -----------

OTHER INCOME (EXPENSES)
  Interest and dividend income                       299,276         343,985
  Interest expense                                  (146,571)       (155,731)
  Income from equity investments                     918,511       1,010,770
  Other, net                                          90,213          21,496
                                                 -----------     -----------
                                                   1,161,429       1,220,520
                                                 -----------     -----------

INCOME BEFORE INCOME TAXES                         1,981,449       1,792,100
                                                 -----------     -----------

INCOME TAXES                                         692,260         644,527
                                                 -----------     -----------

INCOME BEFORE CUMULATIVE EFFECT
  OF ACCOUNTING CHANGE                             1,289,189       1,147,573
                                                 -----------     -----------

CUMULATIVE EFFECT OF ACCOUNTING
  CHANGE, NET OF TAX                                 (70,768)
                                                 -----------     -----------

NET INCOME                                       $ 1,218,421     $ 1,147,573
                                                 ===========     ===========

NET INCOME PER COMMON SHARE BEFORE
  CUMULATIVE EFFECT OF ACCOUNTING CHANGE         $     37.95     $     31.80
                                                 -----------     -----------

CUMULATIVE EFFECT OF ACCOUNTING
  CHANGE, NET OF TAX                                   (2.08)             --
                                                 -----------     -----------

NET INCOME PER COMMON SHARE                      $     35.87     $     31.80
                                                 ===========     ===========


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


                                       50
<PAGE>

                           BREDA TELEPHONE CORPORATION
                                AND SUBSIDIARIES
                                   BREDA, IOWA

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                           December 31, 2002 and 2001

<TABLE>
<CAPTION>
                                                           Common Stock                   Retained
                                                     Shares            Amount             Earnings              Total
                                                     ------         -----------          -----------         ------------
<S>                                                  <C>            <C>                  <C>                 <C>
Balance at December 31, 2000 (as restated)           37,241         $ 8,751,635          $ 4,289,997         $ 13,041,632

    Comprehensive Income:
      Net income                                                                           1,147,573            1,147,573

    Dividends paid                                                                          (111,087)            (111,087)

    Common stock redeemed, net                       (2,216)           (566,668)                                 (566,668)

    Stated value stock adjustment                                       851,483             (851,483)
                                                     ------         -----------          -----------         ------------

Balance at December 31, 2001 (as restated)           35,025           9,036,450            4,475,000           13,511,450

    Comprehensive Income:

     Net income                                                                            1,218,421            1,218,421

    Dividends paid                                                                          (104,214)            (104,214)

    Common stock redeemed, net                       (2,025)           (560,686)                                 (560,686)

    Stated value stock adjustment                                       764,236             (764,236)
                                                     ------         -----------          -----------         ------------

Balance at December 31, 2002                         33,000         $ 9,240,000          $ 4,824,971         $ 14,064,971
                                                     ======         ===========          ===========         ============
</TABLE>


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


                                       51
<PAGE>

                           BREDA TELEPHONE CORPORATION
                                AND SUBSIDIARIES
                                   BREDA, IOWA

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                     Years Ended December 31, 2002 and 2001

<TABLE>
<CAPTION>
                                                                                                   2001
                                                                              2002             (as restated)
                                                                           -----------         -------------
<S>                                                                        <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net income, as restated for 2001                                         $ 1,218,421         $   1,147,573
  Adjustments to reconcile net income to net
   cash provided by operating activities:
    Depreciation and amortization                                            1,070,569             1,128,785
    Amortization of investment tax credits                                      (9,769)               (9,769)
    Deferred income taxes                                                          739                49,295
    Cumulative effect of accounting change                                     119,945                    --
    Gain on sale of building                                                   102,611                    --
    Note receivable discount                                                   (17,290)              (11,502)
    Equity income in unconsolidated affiliates, net of distributions
     received of $197,264 and $671,072 in 2002 and 2001, respectively         (721,247)             (339,698)
    Changes in operating assets and liabilities:
       (Increase) decrease in assets                                          (223,850)              332,166
       Increase (decrease) in liabilities                                      110,252               (49,578)
                                                                           -----------         -------------
    Net cash provided by operating activities                                1,650,381             2,247,272
                                                                           -----------         -------------

CASH FLOWS FROM INVESTING ACTIVITIES
   Capital expenditures                                                       (754,895)             (624,270)
   Cost of removing plant, net of salvage                                          831                30,908
   Purchase of investments                                                  (1,464,892)             (343,484)
   Proceeds from the sale of investments                                       999,499               371,582
   Issuance of note receivable                                                (160,000)             (440,000)
   Purchase of other investments - at equity                                  (248,273)                   --
   Purchase of other investments - at cost                                      (3,400)              (67,805)
   Sale of other investments - at cost                                           7,333               314,690
                                                                           -----------         -------------
    Net cash used in investing activities                                   (1,623,797)             (758,379)
                                                                           -----------         -------------

CASH FLOWS FROM FINANCING ACTIVITIES
   Common stock redeemed                                                      (560,686)             (566,668)
   Repayment of long-term debt                                                (126,365)             (118,300)
   Dividends paid                                                             (104,214)             (111,087)
                                                                           -----------         -------------
    Net cash used in financing activities                                     (791,265)             (796,055)
                                                                           -----------         -------------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                          (764,681)              692,838

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                               1,797,415             1,104,577
                                                                           -----------         -------------

CASH AND CASH EQUIVALENTS AT END OF YEAR                                   $ 1,032,734         $   1,797,415
                                                                           ===========         =============
</TABLE>


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


                                       52
<PAGE>

                           BREDA TELEPHONE CORPORATION
                                AND SUBSIDIARIES
                                   BREDA, IOWA

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2002 and 2001


NOTE 1.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

            Nature of Business

            The Breda Telephone Corporation is a provider of telecommunications
            exchange and local access 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 and reflect practices appropriate to the telephone and cable
            television industries. Management uses estimates and assumptions in
            preparing its consolidated financial statements. Those estimates and
            assumptions affect the reported amounts of assets and liabilities,
            revenues and expenses, and the disclosure of contingent revenues and
            expenses. Telephone operations reflect practices appropriate to the
            telephone industry. The accounting records of the Company's
            telephone operations 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 of the Company's cable television operations
            are maintained in accordance with the Uniform System of Accounts for
            Class A CATV Companies as prescribed by the National Association of
            Regulatory Utility Commissioners.

            Principles of Consolidation

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

            Cash and Cash Equivalents

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

            Investments

            Certificates of deposit bought and held by the Company until
            maturity are carried at cost, which approximates market.

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


                                       53
<PAGE>

                           BREDA TELEPHONE CORPORATION
                                AND SUBSIDIARIES
                                   BREDA, IOWA

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2002 and 2001


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

            Investments, (Continued)

            Nonmarketable equity investments, over which the Company has
            significant influence and/or a 20% ownership, are reflected using
            the equity method of accounting. Under the equity method, the
            Company's investment is increased for investments, capital
            contributions, and loans to the investee entities, and for its
            proportionate share of the investees' earnings. The Company's
            investment is decreased for loan repayments and distributions from
            the investee entities, and for its proportionate share of the
            investees' losses. The Company recognizes its proportionate share of
            earnings and losses from each investee on a quarterly basis,
            reflecting the prior quarter's net income/loss of each investment
            accounted for under the equity method.

            Inventories

            Inventories include both merchandise held for resale and materials
            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 inventories, used in the construction of the
            Company's facilities to provide telecommunications services, are
            recorded at average cost.

            Property and Equipment

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

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

            Renewals and betterments of units of property are charged to
            telephone and cable television plant in service. When telephone or
            cable television plant is retired, its cost is removed from the
            asset account and charged against accumulated depreciation together
            with removal cost less any salvage realized. No gains or losses are
            recognized in connection with routine retirements of depreciable
            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 undiscounted cash
            flows estimated to be generated by those assets are less than the
            assets' carrying amount. Based on current conditions, management
            does not believe any of its long-lived assets are impaired.

            Goodwill and Intangibles

            In January, 2002, the Company adopted Statement of Financial
            Accounting Standards (SFAS) No. 142 "Goodwill and Other Intangible
            Assets". Under SFAS 142, the Company no longer amortizes goodwill
            and intangible assets deemed to have indefinite lives. These assets
            are subject to periodic impairment tests. Intangible assets with
            definite lives continue to be amortized.


                                       54
<PAGE>

                           BREDA TELEPHONE CORPORATION
                                AND SUBSIDIARIES
                                   BREDA, IOWA

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2002 and 2001


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

            Income Taxes

            Income taxes are accounted for using a liability method and provide
            for the tax effects of transactions reported in the consolidated
            financial statements including both taxes currently due and
            deferred. Deferred taxes are adjusted to reflect deferred tax
            consequences at current enacted tax rates. Deferred income taxes
            reflect the net tax effects of temporary differences between the
            carrying amounts of assets and liabilities for financial reporting
            purposes and the amounts used for income tax purposes. Significant
            components of the Company's deferred tax assets and liabilities
            arise from differences between the book and tax basis of property
            and equipment, partnership interests 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. Investment
            tax credits (ITC), which were deferred prior to the Tax Reform Act
            of 1986, are being amortized over the life of the plant which
            produced the ITC.

            Revenue Recognition

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

            Local network service, cable television service and internet 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, in part, on an
            average schedule settlement formula administered by the National
            Exchange Carrier Association (NECA) which is regulated by the FCC.
            The traffic sensitive portion of interstate access revenues is
            billed on an individual company access charge structure as approved
            by the FCC. The intrastate portion of access revenues is billed on
            an individual company tariff access charge structure based on
            expense and plant investment of the Company as approved by the state
            regulatory authority. The tariffs developed from these formulas are
            used to charge the connecting carrier and recognize revenues 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 tariffed and
            contracted rates.

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

            The Company uses the reserve method to recognize uncollectible
            customer accounts. Uncollectibles increased in 2002 (resulting in a
            decrease in revenues, net of settlements, of $91,520) as a result of
            the failure of certain interexchange carriers. Uncollectibles are
            included within miscellaneous operating revenues.

            Reclassifications

            Certain reclassifications have been made to the 2001 financial
            statements to conform with the 2002 presentation.


                                       55
<PAGE>

                           BREDA TELEPHONE CORPORATION
                                AND SUBSIDIARIES
                                   BREDA, IOWA

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2002 and 2001


NOTE 2.     TEMPORARY AND LONG-TERM INVESTMENTS

            The amortized cost and fair value of certificates of deposit and
            investments classified as held-to-maturity are as follows:

<TABLE>
<CAPTION>
                                                                 Gross            Gross
                                               Amortized       Unrealized       Unrealized         Fair
                                                  Cost            Gains          Losses            Value
                                              -----------     ------------      ----------      ------------
<S>                                           <C>             <C>               <C>             <C>

                     December 31, 2002

             Certificates of deposit          $   275,000     $                 $               $    275,000
             Held-to-Maturity:
                Municipal bonds                 2,971,671          134,022          (4,449)        3,101,244
                Government securities             348,964              858          (2,436)          347,386
                                              -----------     ------------      ----------      ------------
                                              $ 3,595,635     $    134,880      $   (6,885)     $  3,723,630
                                              ===========     ============      ==========      ============

                     December 31, 2001


             Certificates of deposit          $   350,000     $                 $               $    350,000
             Held-to-Maturity:
                Municipal bonds                 2,739,846           49,492         (11,693)        2,777,645
                Government securities              40,396              479                            40,875
                                              -----------     ------------      ----------      ------------
                                              $ 3,130,242     $     49,971      $  (11,693)     $  3,168,520
                                              ===========     ============      ==========      ============

                                                  2002            2001
                                              -----------     ------------
             Amounts classified as:
                  Current                     $   459,059     $    636,169
                  Noncurrent                    3,136,576        2,494,073
                                              -----------     ------------
                                              $ 3,595,635     $  3,130,242
                                              ===========     ============
</TABLE>

              Proceeds from the sale of available-for-sale securities were
              $37,500 in 2001 and the gross realized loss on the sale of
              available-for-sale securities totaled $1,909.

              Certificates of deposit and investments classified as
              held-to-maturity at December 31, 2002, are summarized below by
              contractual maturity date:

                 Due in one year or less                       $      459,059
                 Due after one year through five years              1,486,632
                 Due after five years                               1,649,944
                                                               --------------

                                                               $    3,595,635
                                                               ==============

                                       56
<PAGE>

                           BREDA TELEPHONE CORPORATION
                                AND SUBSIDIARIES
                                   BREDA, IOWA

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2002 and 2001


NOTE 3.     NOTES RECEIVABLE

            Notes receivable consist of the following:

                                                      2002            2001
                                                  -----------     ------------
            Desk Top Media, L.L.C.  -  13%        $   468,792     $    451,502
            Toyne, Inc.             -   7%            160,000               --
                                                  -----------     ------------
                                                      628,792          451,502
              Less current portion                   (116,000)              --
                                                  -----------     ------------
                                                  $   512,792     $    451,502
                                                  ===========     ============

            The note with Desk Top Media, L.L.C. has an original balance of
            $500,000, matures in 2006 and reflects interest at 13%. The note is
            shown net of unamortized discounts of $31,208 and $48,498 at
            December 31, 2002 and 2001, respectively. Principal payments of
            $12,000 plus interest are due the first of each month beginning May
            of 2003 and shall be due each month thereafter until paid in full.

            During September 2001, the Company entered into a contract with
            Toyne, Inc. to sell its corporate building for $200,000. The Company
            received a cash deposit of $20,000 and the contract established
            payment terms. On October 15, 2002, the Company received a
            promissory note for $180,000 at a rate of 7%. The note is payable in
            four equal installments of $20,000, plus interest through 2005 and a
            final installment of $100,000 plus interest is payable in 2006. The
            transaction resulted in a before tax gain of $102,611. The note
            balance at December 31, 2002 is $160,000.

NOTE 4.     OTHER INVESTMENTS

            INVESTMENTS IN UNCONSOLIDATED AFFILIATES AT EQUITY

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

                                                      2002            2001
                                                  -----------     ------------
               Alpine Communications, L.C.        $   988,228     $    819,147
                 RSA #1, Ltd.                         693,328          505,728
                 RSA #7, Ltd.                         244,490          209,646
                 RSA #8, Ltd.                         534,867          319,068
                 RSA #9, Ltd.                         860,493          486,381
                 Quad County Communications            98,738          110,531
                 Carroll County Wireless, L.L.C.       24,886           30,009
                 Guthrie Group, L.L.C.                  9,129            9,129
                                                  -----------     ------------
                                                  $ 3,454,159     $  2,489,639
                                                  ===========     ============

            The Company continues to have a 17.42% ownership interest in Alpine
            Communications, L.C. (Alpine). The Alpine group operates several
            telephone exchanges in eastern Iowa.

            The Company's percentage ownership interests in RSA #1, Ltd., RSA
            #7, Ltd. and RSA #8, Ltd. are 9.1%, 7.1% and 11.7%, respectively, at
            December 31, 2002. In addition, the Company owns a 16.7% interest in
            RSA #9, Ltd. partnership of which they have no original cash
            investment.


                                       57
<PAGE>

                           BREDA TELEPHONE CORPORATION
                                AND SUBSIDIARIES
                                   BREDA, IOWA

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2002 and 2001


NOTE 4.     OTHER INVESTMENTS, (Continued)

            INVESTMENTS IN UNCONSOLIDATED AFFILIATES AT EQUITY, (Continued)

            Additionally, Westside Independent Telephone Company, a wholly-owned
            subsidiary of Breda Telephone Corporation, has a 33.33% ownership
            interest in Quad County Communications (Quad County). This entity
            owns and operates a fiber optic network.

            The Company's percentage interests in Carroll County Wireless,
            L.L.C. and Guthrie Group, L.L.C. are 33.33% and 25%, respectively.
            Both companies have purchased the licenses to provide personal
            communication services (PCS); however, neither company has begun
            providing PCS services as of December 31, 2002 or 2001 The
            operations of these entities are immaterial to the consolidated
            financial statements

            Condensed consolidated financial data for the twelve months ended
            September 30, 2002, and September 30, 2001, for Alpine, RSA #1, RSA
            #7, RSA #8, RSA #9 and Quad County is as follows:

                                                      2002           2001
                                                  ------------   ------------
                      Revenues                    $ 41,987,013   $ 35,322,732
                      Expenses                      30,542,190     25,499,718
                                                  ------------   ------------
                      Net income                  $ 11,444,823   $  9,823,014
                                                  ============   ============


                      Current assets              $ 13,208,958   $ 11,191,366
                      Non-current assets            35,823,617     28,533,590
                      Current liabilities            4,753,174      7,247,295
                      Non-current liabilities       16,845,194     11,839,552

            During first quarter 2002, the Company changed its method of
            accounting from the cost method to the equity method for the
            investments in Alpine, RSA #1, RSA #7, RSA #8 and RSA #9. Management
            has made this decision based on an evaluation of each investment and
            the level of influence the Company has with respect to each
            investment. Accordingly, retained earnings at December 31, 2000 and
            net income for the year ended December 31, 2001, have been restated
            resulting in increases of $213,583 and $208,325, respectively. The
            increase in net income due to this restatement increased earnings
            per share by $5.77 for the year ended December 31, 2001.

            LONG-TERM INVESTMENTS AT COST

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

<TABLE>
<CAPTION>
                                                                            2002         2001
                                                                         ----------   ----------
<S>                                                                      <C>          <C>
               NECA Services, Inc. - stock                               $  300,000   $  300,000
               Rural Telephone Finance Cooperative - certificates           192,070      196,003
               Rural Telephone Bank - stock                                 165,789      165,789
               Iowa Network Services - stock                                 78,705       78,705
               Desk Top Media, L.L.C.                                        60,000       60,000
               Other                                                         11,000       11,000
                                                                         ----------   ----------
                                                                         $  807,564   $  811,497
                                                                         ==========   ==========
</TABLE>


                                       58
<PAGE>

                           BREDA TELEPHONE CORPORATION
                                AND SUBSIDIARIES
                                   BREDA, IOWA

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2002 and 2001


NOTE 5.     GOODWILL AND INTANGIBLES

            Goodwill consists of the following:

<TABLE>
<CAPTION>
                                                                        2002                   2001
                                                                   -------------          -------------
<S>                                                                <C>                    <C>
               Balance, Beginning of Year                          $   1,016,757          $   1,336,083
                  Goodwill amortized                                          --               (319,326)
                  Goodwill impairment                                   (119,945)                    --
                                                                   -------------          -------------
               Balance, End of Year                                $     896,812          $   1,016,757
                                                                   =============          =============

               Unamortized Intangibles consist of the following:

                                                                        2002                   2001
                                                                   -------------          -------------
                  PCS Licenses                                     $       1,556          $       2,051
                  Less accumulated amortization                               --                   (495)
                                                                   -------------          -------------
                                                                   $       1,556          $       1,556
                                                                   =============          =============
</TABLE>

            In accordance with the SFAS 142, the Company assessed its recorded
            balances of goodwill and indefinite lived intangible assets in 2002.
            As a result, the Company determined an impairment of $119,945
            related to goodwill existed on January 1, 2002. It was determined
            that the goodwill related to the purchase price of Westside
            Communications, Inc., which is a component of the broadcast segment,
            was impaired. Fair value was determined using a discounted cash flow
            method. The impairment loss of $70,768, net of tax, is presented in
            the income statement as a cumulative effect of an accounting change.

            Amortization of intangible assets with indefinite lives and goodwill
            in 2001 resulted in a decrease of $89,311 in 2001 net income.
            Without this amortization, 2001 net income before income tax would
            have been $1,881,411.

                                       59

<PAGE>

                           BREDA TELEPHONE CORPORATION
                                AND SUBSIDIARIES
                                   BREDA, IOWA

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2002 and 2001


NOTE 6.     PROPERTY AND EQUIPMENT

            Property and equipment includes the following:

<TABLE>
<CAPTION>
                                                                2002               2001
                                                            ------------       ------------
<S>                                                         <C>                <C>
            Telephone Plant in Service :
                 Land                                       $     41,508    $        39,008
                 Buildings                                     1,210,087            731,772
                 Other general support assets                  1,465,661          1,419,467
                 Central office assets                         2,256,252          2,212,489
                 Cable and wire facilities                     4,458,039          4,134,895
                 Other plant and equipment                       778,145            693,482
                                                            ------------       ------------
                                                              10,209,692          9,231,113
                                                            ------------       ------------

            Cable Television Plant in Service:
                 Franchise                                        32,992             32,992
                 Land                                              6,086              8,586
                 Buildings                                       127,938            248,855
                 Towers, antennas and head end equipment       1,509,394          1,509,394
                 Cable and wire facilities                     1,573,524          1,573,524
                 Other plant and equipment                       177,445            193,470
                                                            ------------       ------------
                                                               3,427,379          3,566,821
                                                            ------------       ------------


                          Total property and equipment        13,637,071         12,797,934
                          Less accumulated depreciation        8,468,035          7,471,139
                                                            ------------       ------------
                                                               5,169,036          5,326,795
                          Plant under construction                21,140            282,497
                                                            ------------       ------------
                                                            $  5,190,176       $  5,609,292
                                                            ============       ============
</TABLE>

            Depreciation on depreciable property resulted in a composite rate of
            8.1% for both years ended December 31, 2002 and 2001.

NOTE 7.     LONG-TERM DEBT

            Long-term debt consists of the following:

<TABLE>
<CAPTION>
                                                                2002                2001
                                                            ------------       ------------
<S>                                                         <C>                <C>
                   Rural Telephone Finance Cooperative
                       7.35% (Fixed Rate)                   $  1,912,625       $  2,038,990
                            Less current portion                (134,981)          (126,365)
                                                            ------------       ------------
                                                            $  1,777,644       $  1,912,625
                                                            ============       ============
</TABLE>


                                       60
<PAGE>

                           BREDA TELEPHONE CORPORATION
                                AND SUBSIDIARIES
                                   BREDA, IOWA

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2002 and 2001


NOTE 7.     LONG-TERM DEBT, (Continued)

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

                                                       Principal
                                                   ----------------
                       2003                        $        134,981
                       2004                                 144,183
                       2005                                 154,013
                       2006                                 164,513
                       2007                                 175,729

            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.

            The Company has a line of credit with the RTFC for $1,500,000. The
            approved line of credit is available until December 1, 2005 at a
            rate of 5.75% at December 31, 2002. No funds were advanced under the
            line at December 31, 2002.

            In addition, Prairie Telephone Company, Inc. a wholly-owned
            subsidiary of Breda Telephone Corporation, has a line of credit with
            the RTFC for $500,000. This approved line of credit is available
            until November 30, 2005 at a rate of 5.75% at December 31, 2002. No
            funds were advanced under the line at December 31, 2002.

            Cash paid for interest, net of amounts capitalized for 2002 and
            2001, totaled $146,571 and $155,731, respectively.

NOTE 8.     INCOME TAXES

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

<TABLE>
<CAPTION>
                                                                    2002               2001
                                                               ------------       -------------
<S>                                                            <C>                <C>
               Federal income taxes:
                    Current tax expense                        $    503,880       $     446,358
                    Deferred tax expense (benefits)                    (531)             36,157

                    Amortization of investment tax credits           (9,769)             (9,769)
               State income taxes:
                    Current tax expense                             198,888             158,643
                    Deferred tax expense (benefits)                    (208)             13,138

                                                               ------------       -------------
               Total income tax expense                        $    692,260       $     644,527
                                                               ============       =============
</TABLE>


                                       61
<PAGE>


                           BREDA TELEPHONE CORPORATION
                                AND SUBSIDIARIES
                                   BREDA, IOWA

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2002 and 2001


NOTE 8.     INCOME TAXES, (Continued)

            Deferred federal and state tax liabilities and assets reflected in
            the Consolidated Balance Sheets are summarized as follows:

                                                             2002         2001
                                                        ----------    ----------
               Deferred Tax Liabilities
                    Federal                             $  269,312    $  433,974
                    State                                   79,530       152,478
                                                        ----------    ----------
                        Total Deferred Tax Liabilities     348,842       586,452
                                                        ----------    ----------

               Deferred Tax Assets
                    Federal                                197,347       374,364
                    State                                   70,202       131,534
                                                        ----------    ----------
                        Total Deferred Tax Assets          267,549       505,898
                                                        ----------    ----------

                    Net Deferred Tax Liability          $   81,293    $   80,554
                                                        ==========    ==========
               Current portion                          $       --    $        -
               Long-term portion                            81,293        80,554
                                                        ----------    ----------
                    Net Deferred Tax Liability          $   81,293    $   80,554
                                                        ==========    ==========

            The tax provision differs from the expensfrom applying the federal
            statutory rates to income before taxes as the result of state income
            taxes and the amortization of investment tax credits.

            Prepaid income taxes of $51,280, appearing on the consolidated
            balance sheet at December 31, 2001, reflect overpayments of
            estimated taxes.

            Cash paid for income taxes for 2002 and 2001 totaled $566,317 and
            $367,241, respectively.

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

                                                          2002        2001
                                                         ------      ------

            Statutory federal income tax rate             34.0%       34.0%
            State income taxes, net of federal benefit     9.6%        9.6%
            Amortization of investment tax credits         (.1)        (.1)
            Dividends received deduction                  (1.5)       (1.6)
            Tax exempt interest                           (3.9)       (4.0)
            Other                                         (3.2)       (2.0)
                                                         ------      ------
                 Effective income tax rate                34.9%       35.9%
                                                         ======      ======

            The Company files a consolidated tax return including their
            subsidiaries, Prairie Telephone Company, Inc., Westside Independent
            Telephone Company and Tele-Services, Ltd.


                                       62
<PAGE>

                           BREDA TELEPHONE CORPORATION
                                AND SUBSIDIARIES
                                   BREDA, IOWA

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2002 and 2001


NOTE 9.     OPERATING SEGMENTS INFORMATION

            The 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 also had
            telemarketing services that do not meet the quantitative threshold
            for a reportable segment. These services were discontinued during
            2001.

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

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

<TABLE>
<CAPTION>
                                              Local                         Internet
                                            Exchange                        Service
                       2002                  Carrier        Broadcast       Provider         Other           Total
                       ----                -----------     ----------      ----------      ---------     ------------
<S>                                        <C>             <C>             <C>            <C>            <C>
              Revenues and sales           $ 4,273,999     $   975,336     $  726,028     $       --     $  5,975,363
              Intersegment income
                  and sales                         --              --             --             --               --
              Interest income                  291,951           7,321              4             --          299,276
              Interest expense                 146,571              --             --             --          146,571
              Depreciation and
                  amortization                 667,403         310,214         92,952             --        1,070,569
              Income tax expense
                  (benefit)                    810,014         (29,439)       (86,273)        (2,042)         692,260
              Segment profit (loss)          1,384,318        (114,925)       (47,807)        (3,165)       1,218,421
              Segment assets                14,345,956       1,463,418        828,015         49,898       16,687,287
              Expenditures for
                  segment assets               596,549          14,136        144,210             --          754,895

                  2001 (As restated)

              Revenues and sales           $ 3,957,357     $   998,675  $     761,999 $      166,213     $  5,884,244
              Intersegment income
                  and sales                         --              --             --             --               --
              Interest income                  334,872           9,113             --             --          343,985
              Interest expense                 155,731              --             --             --          155,731
              Depreciation and
                  amortization                 713,366         328,005         75,249         12,165        1,128,785
              Income tax expense
                  (benefit)                    806,653         (64,107)       (72,983)       (25,036)         644,527
              Segment profit (loss)          1,305,954         (92,250)       (30,103)       (36,028)       1,147,573
              Segment assets                13,872,744       1,536,731        805,410         39,782       16,254,667
              Expenditures for
                  segment assets               507,202          51,077         65,991             --          624,270
</TABLE>


                                       63
<PAGE>

                           BREDA TELEPHONE CORPORATION
                                AND SUBSIDIARIES
                                   BREDA, IOWA

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2002 and 2001


NOTE 9.     OPERATING SEGMENTS INFORMATION, (Continued)

<TABLE>
<CAPTION>
                                                                                                  2001
                Reconciliation of Segment Information                      2002               (As restated)
                                                                       ------------           -------------
<S>                                                                    <C>                    <C>
              REVENUES:
                   Total revenues for reportable segments              $  5,975,363           $   5,718,031
                   Other revenues                                                --                 166,213
                                                                       ------------           -------------
                       Consolidated Revenues                           $  5,975,363           $   5,884,244
                                                                       ============           =============

              PROFIT:
                   Total profit for reportable segments                $  1,221,586               1,183,601
                   Other profit (loss)                                       (3,165)               (36,028)
                                                                       ------------           -------------
                       Net Income                                      $  1,218,421           $   1,147,573
                                                                       ============           =============


              ASSETS:
                   Total assets for reportable segments                $ 16,637,389           $  16,214,885
                   Other assets                                              49,898                  39,782
                   Elimination of intercompany receivables                       --                 (90,758)
                                                                       ------------           -------------
                       Consolidated Assets                             $ 16,687,287           $  16,163,909
                                                                       ============           =============
</TABLE>



NOTE 10.    NET INCOME PER COMMON SHARE

            Net income per common share for 2002 and 2001 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,
            2002 and 2001 were 33,968 and 36,083, respectively.

NOTE 11.    STOCK VALUE ADJUSTMENT

            During May 2001, the board of directors authorized a $23 increase in
            the stated value of each share of common stock from $235 to $258.
            There were 37,021 shares outstanding at the time of the value
            adjustment, which reduced retained earnings by $851,483.

            During May 2002, the board of directors authorized a $22 increase in
            the stated value of each share of common stock from $258 to $280.
            There were 34,738 shares outstanding at the time of the value
            adjustment, which reduced earnings by $764,236.

NOTE 12.    STOCK RESTRICTIONS

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

            o     Individuals purchasing new shares of stock must be living
                  within the service areas of the Breda Telephone Corporation
                  and subscribe to its telephone services. In addition, new
                  stockholders are limited to purchasing no more than thirty
                  shares of stock directly from the Breda Telephone Corporation.


                                       64
<PAGE>

                           BREDA TELEPHONE CORPORATION
                                AND SUBSIDIARIES
                                   BREDA, IOWA

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2002 and 2001


NOTE 12.    STOCK RESTRICTIONS, (Continued)

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

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

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

            o     A one-time stock transfer to a family member (spouse, child,
                  grandchild, parent, grandparent, or sibling) is allowed for
                  shareholders of record for the shares they held in 1995 even
                  if such transferee resides outside of the telephone exchange
                  service area and is not a subscriber of the Breda Telephone
                  Corporation's telephone services.

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

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

NOTE 13.    EMPLOYEE BENEFIT PLAN

            The Company adopted for its employees who have met certain
            eligibility requirements, a defined benefit retirement and security
            program sponsored by the National Telephone Cooperative Association
            (NTCA). The plan calls for the Company to contribute 8.6% of each
            enrolled employees' annual gross salary. As a condition of
            participation, each participating employee must also contribute a
            minimum 3% of their annual gross salary. Contributions made by the
            Company totaled $88,860 and $80,538 for the years ended December 31,
            2002 and 2001, respectively.

NOTE 14.    CONCENTRATIONS OF CREDIT RISK

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

            The Company received 42% of its 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.


                                       65
<PAGE>

                           BREDA TELEPHONE CORPORATION
                                AND SUBSIDIARIES
                                   BREDA, IOWA

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2002 and 2001


NOTE 15.    RELATED PARTY

            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, 2002 and
            2001 were approximately $778,500 and $575,000, respectively. At
            December 31, 2002 and 2001, $111,755 and $58,925 were due from RSA
            #9 for commissions.

NOTE 16.    COMMITMENTS AND CONTINGENCIES

            The company has entered into an agreement to purchase a building for
            $246,000. The transaction is expected to close during the first
            quarter of 2003.

            Additionally, the Company has purchase commitments totaling
            approximately $60,000 for a fiber optic cable project to be
            completed during the spring of 2003.


                                       66
<PAGE>


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

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

                                    PART III

Item 9.     Directors, Executive Officers, Promoters and Control Persons.

            Directors and Officers.

            The directors and executive officers of Breda are as follows:

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

              Dean Schettler                   50           President and
                                                            Director

              Clifford Neumayer                54           Vice-President and
                                                            Director

              Larry Daniel                     60           Secretary and
                                                            Director

              Charles Thatcher                 51           Director

              Roger Nieland                    67           Director

              John Wenck                       64           Director

              Dave Grabner                     54           Director and
                                                            Treasurer

            Dean Schettler has been a director of Breda since April, 1997, and
            the President of Breda since April, 1998. His current term as a
            director will end at the annual shareholders meeting which is held
            in 2003. He has also been a director of each of Breda's subsidiaries
            since April, 1997, and the president of the subsidiaries since
            April, 1998. Mr. Schettler has been employed by Pella Corporation,
            Pella, Iowa, since August, 1986. He was a moulder technician until
            August, 1997. Since that time he has been a production coordinator.
            Pella Corporation is a window and door manufacturer.

            Clifford Neumayer has been the Vice-President and a director of
            Breda since April, 1996. He was re-elected as a director at the May
            21, 2002 annual meeting of the


                                       67
<PAGE>


            shareholders, and his current term as a director of Breda will end
            at the annual shareholders meeting which is held in 2005. He has
            also held each of those positions with each of Breda's subsidiaries
            since April, 1996. Mr. Neumayer has been self employed as a farmer
            since 1970.

            Larry Daniel has been the Secretary and a director of Breda since
            April, 1995. His current term as a director of Breda will end at the
            annual shareholders meeting which is held in 2004. He has also held
            each of those positions with each of Breda's subsidiaries since
            April, 1995. Mr. Daniel is a self- employed farmer, and has been for
            at least the last five years.

            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 is held in 2004. He has also served as a
            director of each of Breda's subsidiaries since May, 2001. Mr.
            Thatcher has been an owner of Midwest Wholesale Building Products in
            Carroll, Iowa for approximately the last 18 years. Midwest Wholesale
            Building Products is a wholesaler/retailer of lumber, building
            products and materials.

            Roger Nieland has been a director of Breda since May, 2000. His
            current term as a director of Breda will end at the annual
            shareholders meeting which is held in 2003. He has also served as a
            director of each of Breda's subsidiaries since May, 2000. Mr.
            Nieland is currently self-employed as a farmer, and has been for at
            least the last five years. Mr. Nieland has been a director of Iowa
            Ethanol Coop since September, 1994. Iowa Ethanol Coop organized the
            start-up of a corn milling plant in Glidden, Iowa. The corn milling
            plant operates under the name Iowa Corn Processors. Mr. Nieland has
            also served as a trustee for Wheatland Township, in Carroll County,
            Iowa.

            John Wenck has been a director of Breda since April, 1997. His
            current term as a director of Breda will end at the annual
            shareholders meeting which is held in 2003. He has also served as a
            director of each of Breda's subsidiaries since April, 1997. Mr.
            Wenck is currently self-employed as a farmer. He was also previously
            employed by the United Parcel Service as a delivery driver.

            Dave Grabner has been a director of Breda since April, 1999, and the
            Treasurer of Breda since May, 2001. He was re-elected as a director
            at the May 21, 2002 annual meeting of the shareholders, and his
            current term as a director of Breda will end at the annual
            shareholders meeting which is held in 2005. He has also been a
            director of each of Breda's subsidiaries since April, 1999, and the
            Treasurer of each of Breda's subsidiaries since May, 2001. Mr.
            Grabner is currently self-employed as an electrician, and has been
            for at least the last five years. He was also previously
            self-employed as a farmer.

            The number of directors for Breda is currently fixed at seven. Each
            of Breda's directors is elected to a three year term and until his
            or her successor is elected. The terms of the directors of Breda are
            staggered, so that three of the directors' terms expire in one year,
            two expire the next year, and two expire the following year. If a


                                       68
<PAGE>


            person has served for three consecutive terms as a director, that
            person must be off the board for at least one year before the person
            can again be elected as a director. Each director of Breda must also
            be a shareholder of Breda, and a director will automatically cease
            to be a director if he or she sells or transfers all of his or her
            shares of common stock in Breda. Each director must also be at least
            18 years of age.

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

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

                         Name            Age      Position
                         ----            ---      --------

                  Robert J. Boeckman     42       Chief Operations Officer and
                                                  Co-Chief Executive Officer

                  Jane A. Morlok         49       Chief Financial Officer and
                                                  Co-Chief Executive Officer

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

            Mr. Boeckman has been employed by Breda in various capacities since
            May, 1982. Prior to January, 1995, he was Breda's assistant manager.
            He was the manager of Breda from January, 1995 to March, 1998, at
            which time he was given the title chief operating officer. His
            current titles are chief operations officer and co-chief executive
            officer.

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


                                       69
<PAGE>


Item 10.    Executive Compensation.

            Summary Compensation Table.

            The following summary compensation table shows the compensation paid
            by Breda to Robert J. Boeckman, Breda's Chief Operations Officer, in
            the 2002, 2001 and 2000 fiscal years, and to Jane Morlok, Breda's
            Chief Financial Officer, in fiscal year 2002. Mr. Boeckman's
            services are similar to those normally provided by the chief
            executive officer of an Iowa corporation.

            Summary Compensation Table

<TABLE>
<CAPTION>
             Name and                                        Other Annual        All Other
             Position          Year     Salary(1)   Bonus    Compensation(2)  Compensation(3)
             --------          ----     ---------   -----    ---------------  ---------------
<S>                            <C>    <C>         <C>         <C>              <C>
         Robert J. Boeckman,   2002   $  84,341   $   9,082   $  1,795         $  18,067
         Chief Operations      2001   $  81,853   $  11,200   $  2,370         $  18,157
           Officer             2000   $  80,000   $   2,000   $  1,890         $  15,703

         Jane Morlok,          2002   $  78,602   $   8,250   $  1,808         $  17,282
         Chief Financial
           Officer
</TABLE>

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

            (2) This amount includes payments by Breda from a fund established
            by Breda based upon sales of cell phones. The fund is allocated
            equally among the employees employed at Breda's and Westside
            Independent's offices. All employees share in the fund even if they
            are not involved in the sale of cell phones. Neither Mr. Boeckman
            nor Ms. Morlok is involved in those sales. The amounts also include
            a yearly clothing allowance and the estimated yearly value of
            services provided to these individuals by Breda or its subsidiaries
            at no cost. Those services are local telephone service, basic cable
            service, internet access, and cellular phone service.

            (3) This amount represents contributions by Breda to Breda's defined
            benefit retirement and security program, which is sponsored by the
            National Telephone Cooperative Association. The program requires
            Breda to contribute an amount equal to 8.6% of a participant's
            annual gross salary. See also footnote 1 above regarding
            participants' contributions to the program. This amount also
            includes a long term disability contribution of 1.12% of salary and
            employer-paid premiums on health, life and accidental death and
            dismemberment insurance.

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


                                       70
<PAGE>


            Director Compensation.

            Since June, 2000, all of Breda's directors have received $125 for
            each regular, special and conference call meeting of the board of
            directors. The vice-president, secretary and treasurer of Breda also
            currently receive an additional $25 for each regular, special and
            conference call meeting of the board of directors, and the president
            of Breda receives an additional $100 per meeting. Those payments are
            made to those individuals in their capacities as directors, and are
            based upon their additional duties at the meetings of the board of
            directors. Breda's directors received $100 for each regular, special
            and conference call meeting in 1999 and through May, 2000. The vice
            president, secretary and treasurer also received an additional $25
            per meeting in 1999 and 2000. The president received an additional
            $50 per meeting in 1999 and through May, 2000.

            Since June, 2000, all of Breda's directors have received $150 per
            day for all day meetings of the board of directors. The directors
            received $125 per day for all day meetings of the board of directors
            in 1999 and through May, 2000.

            Since June, 2000, all of Breda's directors have received $150 for
            each outside meeting attended by a director and which lasts over
            three hours. The directors received $125 for each such meeting in
            1999 and through May, 2000. The directors receive one-half of their
            regular meeting rate for each outside meeting which lasts less than
            three hours. Outside meetings are not formal meetings of the board
            of directors. Examples of outside meetings include conventions and
            city council meetings.

            Since October, 2001, directors who serve on a committee have
            received $150 for each committee meeting which does not coincide
            with another meeting of the board of directors.

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

            Breda's directors may also receive internet access from Breda or its
            subsidiaries at no cost. The current estimated yearly value of
            internet access is $300. They were also entitled to receive internet
            access in 1999, 2000 and 2001.

            Employment Agreements.

            Breda entered into a new employment agreement with both Robert
            Boeckman and Jane Morlok on April 1, 2002. Breda does not believe
            that the employment agreements were materially different from
            Breda's prior employment agreements with Mr. Boeckman and Ms.
            Morlok, but each of the employment agreements did include
            compensation adjustments.



                                       71
<PAGE>


            Mr. Boeckman. Under the terms of Mr. Boeckman's employment
            agreement, he is employed in the capacity of chief operations
            officer and co-chief executive officer of Breda. Mr. Boeckman is
            responsible for the day-to-day operations of Breda under his
            employment agreement.

            Mr. Boeckman's employment agreement will terminate on April 1, 2003.
            Breda may terminate the employment agreement if Mr. Boeckman is
            absent from his employment under the employment agreement by reason
            of illness or other incapacity for more than 26 consecutive weeks.
            Breda will pay Mr. Boeckman compensation during any such period of
            illness or incapacity in accordance with Breda's sick pay policy as
            then in effect. Breda may also terminate the employment agreement
            for cause upon five days written notice to Mr. Boeckman. The
            employment agreement provides that "for cause" includes, without
            limitation:

                  o     Fraud or theft,

                  o     Falsifying records,

                  o     Refusal to carry out a specific order of the Board of
                        Directors,

                  o     Abuse, discrimination, or harassment of another
                        employee,

                  o     Unauthorized dissemination of records or information,

                  o     Divulging confidential information,

                  o     Possession of illegal drugs or weapons while on Breda
                        property,

                  o     Conviction of a crime, the nature of which would be
                        calculated to render an employee undesirable as a
                        co-manager and detrimental to the best interests of
                        Breda, and

                  o     Using or possessing intoxicants or narcotics of any kind
                        while on Breda premises or being at work under the
                        influence of such substances.

            Breda may also terminate the employment agreement at any time,
            without cause, by giving 30 days written notice to Mr. Boeckman. In
            this event, if requested by Breda, Mr. Boeckman shall continue to
            render his services and shall be paid his regular compensation up to
            the date of termination. In addition, Mr. Boeckman shall be paid on
            the date of termination a severance allowance equal to the amount
            remaining to be paid under the employment agreement.

            Mr. Boeckman may terminate the employment agreement, at any time, by
            giving 60 days notice to Breda. In this event, Breda shall pay Mr.
            Boeckman his compensation up to the date of termination, but Mr.
            Boeckman shall not be entitled to any severance payment and will not
            be considered for any performance bonus.


                                       72
<PAGE>


            If Mr. Boeckman's employment terminates by reason of his death,
            Breda is only obligated to make whatever payments may be required
            under its pension plan.

            Mr. Boeckman's yearly salary under the employment agreement is
            $85,000. Mr. Boeckman may also receive a bonus under the employment
            agreement. The employment agreement includes an attachment which
            sets forth some guidelines which may be followed by the board of
            directors in determining whether a bonus will be given and the
            amount of the bonus, but the employment agreement provides that the
            final determination as to the amount of the bonus rests solely in
            the discretion of the board of directors.

            The employment agreement also provides that Mr. Boeckman shall be
            entitled to all employee benefits extended to all full time
            employees of Breda. Some of those benefits currently include health
            insurance, life insurance, disability insurance, cellular phone
            service, a clothing allowance, free local telephone service, free
            internet access and free basic cable service. Breda will also
            contribute an amount equal to 8.6% of Mr. Boeckman's annual gross
            salary to the defined benefit retirement and security program which
            is sponsored by the National Telephone Cooperative Association.
            Breda will also provide Mr. Boeckman with the pre-retirement death
            benefit that is available through the National Telephone Cooperative
            Association. Mr. Boeckman is also reimbursed for all reasonable and
            appropriate expenses incurred in carrying out his duties under the
            employment agreement.

            Mr. Boeckman's employment agreement includes a limited noncompete
            covenant and confidential information covenant.

            Ms. Morlok. Ms. Morlok's employment agreement is similar to Mr.
            Boeckman's employment agreement. The primary differences between Ms.
            Morlok's employment agreement and Mr. Boeckman's employment
            agreement are as follows:

                  o     Ms. Morlok's capacities under her employment agreement
                        are chief financial officer and co-chief executive
                        officer.

                  o     Ms. Morlok's annual salary under her employment
                        agreement is $80,000.

            As noted above, both Mr. Boeckman's and Ms. Morlok's employment
            agreement will terminate by its terms on April 1, 2003. Breda will
            therefore need to negotiate an extension of the current employment
            agreements or new employment agreements with Mr. Boeckman and Ms.
            Morlok prior to that date. Breda does not anticipate any break in
            service for either Mr. Boeckman or Ms. Morlok.

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


                                       73
<PAGE>


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

            Breda is only authorized to issue common stock.

            The following table sets forth some information on the percentage
            ownership of Breda's common stock as of March 1, 2003 by:

                  o     each of Breda's directors;

                  o     each of Breda's officers;

                  o     the person employed by Breda as its chief operations
                        officer; and

                  o     all directors and officers of Breda and the chief
                        operations officer of Breda as a group.

                            Security Ownership Table

<TABLE>
<CAPTION>
                  Name and Address of
                     Beneficial Owner            Number of Shares   Percentage Ownership
                  -------------------            ----------------   --------------------
<S>                                              <C>                <C>
                  Dean Schettler                        30                 .0909%
                  16326 120th St.
                  Breda, Iowa 51436

                  Clifford Neumayer                    181                 .5485%
                  11846 Ivy Avenue
                  Breda, Iowa 51436

                  Larry Daniel                           2                 .0061%
                  15731 Robin Avenue
                  Glidden, Iowa 51433

                  Roger Nieland                        110*                .3333%
                  13312 Eagle Avenue
                  Breda, Iowa 51436

                  John Wenck                             6                 .0182%
                  23909 140th St.
                  Carroll, Iowa 51401

                  Charles Thatcher                       2**               .0061%
                  15053 Granite Avenue
                  Breda, Iowa 51436
</TABLE>


                                       74
<PAGE>


<TABLE>
<CAPTION>
                  Name and Address of
                     Beneficial Owner            Number of Shares   Percentage Ownership
                  -------------------            ----------------   --------------------
<S>                                              <C>                <C>
                  Dave Grabner                          55***              .1667%
                  11098 130th Street
                  Breda, Iowa 51436

                  Robert Boeckman                       30                 .0909%
                  23678 150th Street
                  Carroll, Iowa 51401

                  All directors and officers           416                 1.261%
                  and the chief operations
                  officer as a group
                  (8 persons)
</TABLE>

                  *        Forty-three of these shares are held by
                           Mr. Nieland's spouse.
                  **       One of these shares is held by Mr. Thatcher's spouse.
                  ***      One of these shares is held by Mr. Grabner's spouse.

            To Breda's knowledge, no person or group is the beneficial owner of
            more than 5% of Breda's common stock and no person or group holds
            more than 5% of Breda's common stock under a voting trust or similar
            arrangement.

Item 12.    Certain Relationships and Related Transactions.

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

                  o     any director or officer of Breda,

                  o     any nominee for election as a director of Breda,

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

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

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

            (a)   A list of the exhibits included as part of this annual report
                  is set forth in the Exhibit Index which immediately precedes
                  such exhibits and is incorporated herein by this reference.

            (b)   Breda did not file any reports on Form 8-K during the period
                  of October 1, 2002 through December 31, 2002.


                                       75
<PAGE>


Item 14.    Controls and Procedures.

            The principal executive officer and principal financial officer of
            Breda have evaluated the effectiveness of Breda's disclosure
            controls and procedures and have concluded that the disclosure
            controls and procedures are sufficient and have been effective for
            the purposes for which they are intended.

            There have not been any significant changes in Breda's internal
            controls or in other factors that could significantly affect Breda's
            internal controls subsequent to the date of the evaluation of
            Breda's internal controls.


                                       76
<PAGE>


                                   SIGNATURES

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

                                     BREDA TELEPHONE CORP.


Date: March 28, 2003                 By: /s/ Robert Boeckman
                                         -----------------------------
                                         Robert Boeckman, Chief Operations
                                         Officer and Co-Chief Executive Officer


Date: March 28, 2003                 By: /s/ Jane Morlok
                                         -----------------------------
                                         Jane Morlok, Chief Financial Officer
                                         and Co-Chief Executive Officer

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


By: /s/ Clifford Neumayer            By: /s/ Larry Daniel
    ----------------------------         -----------------------------
    Clifford Neumayer,                   Larry Daniel, Secretary
    Vice-President and                   and Director
    Director                             Date:  March 28, 2003
Date:  March 28, 2003


By: /s/ Roger Nieland                By: /s/ John Wenck
    ----------------------------         -----------------------------
    Roger Nieland, Director              John Wenck, Director
Date:  March 28, 2003                Date:  March 28, 2003


By: /s/ Dean Schettler               By: /s/ Dave Grabner
    ----------------------------         ----------------------------
    Dean Schettler, President            Dave Grabner, Treasurer
    and Director                         and Director
Date:  March 28, 2003                Date:  March 28, 2003


By: /s/ Charles Thatcher             /s/ Robert J. Boeckman
    ----------------------------     --------------------------------
    Charles Thatcher, Director       Robert J. Boeckman, Chief Operations
Date:  March 28, 2003                Officer and Co-Chief Executive Officer
                                     Date:  March 28, 2003

                                     /s/ Jane Morlok
                                     --------------------------------
                                     Jane Morlok, Chief Financial Officer and
                                     Co-Chief Executive Officer
                                     Date: March 28, 2003


                                       77
<PAGE>

                                 CERTIFICATIONS


      I, Robert Boeckman, certify that:

      1. I have reviewed this annual report on Form 10-KSB of Breda Telephone
Corp.;

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

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

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

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

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

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

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


                                       78
<PAGE>


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

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

      6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

         Date:  March 28, 2003

                                       /s/ Robert Boeckman
                                       -----------------------------------------
                                       Robert Boeckman, Chief Operations Officer
                                       and Co-Chief Executive Officer

      I, Jane Morlok, certify that:

      1. I have reviewed this annual report on Form 10-KSB of Breda Telephone
Corp.;

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

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

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

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

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


                                       79
<PAGE>


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

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

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

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

      6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

      Date: March 28, 2003

                                           /s/ Jane Morlok
                                           ------------------------------------
                                           Jane Morlok, Chief Financial Officer
                                           and Co-Chief Executive Officer



                                       80
<PAGE>

                                  EXHIBIT INDEX
                Exhibits to Form 10-KSB of Breda Telephone Corp.
                   for the Fiscal Year Ended December 31, 2002

Description of Exhibit.

      2.    Plan of Acquisition, Disposition, Reorganization Arrangement,
            Liquidation or Succession

            (a)   Stock Purchase Agreement dated March 29, 2000,
                  by and among AirTouch Iowa, LLC, Central Iowa
                  Cellular, Inc., Prairie Telephone Company,
                  Inc., Panora Tele-communications, Inc., Walnut
                  Creek Communications, Inc., Minburn Telephone
                  Company, and Interstate Enterprises, Ltd.
                  (Filed as Exhibit 2.1 to Breda's Form 8-K dated
                  March 29,2000 and filed April 12, 2000, and
                  incorporated herein by this reference.)

            (b)   Des Moines Tower Proceeds Agreement dated as of
                  March 29, 2000, by and among AirTouch Com-
                  munications, Inc., Panora Telecommunications,
                  Inc., Walnut Creek Communications, Inc.,
                  Minburn Telephone Company, Interstate
                  Enterprises, Ltd. and Prairie Telephone
                  Company, Inc., along with Exhibits A and B
                  thereto. (Filed as Exhibit 2.2 to Breda's Form
                  8-K dated March 29, 2000 and filed April 12,
                  2000, and incorporated herein by this
                  reference.)

      3.    Articles of Incorporation and Bylaws

            (a)   Amended and Restated Articles of Incorporation
                  of Breda Telephone Corp. (Filed as Exhibit 3.1
                  to Breda's Registration Statement on Form
                  10-SB, and incorporated herein by this
                  reference.)

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

      10.   Material Contracts.

            (a)   Employment Agreement dated April 1, 2002
                  between Breda and Robert Boeckman. (Filed as
                  Exhibit 10(a) to Breda's Form 10-QSB for the


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<PAGE>


                  quarterly period ended June 30, 2002, and
                  incorporated herein by this reference.)

            (b)   Employment Agreement dated April 1, 2002
                  between Breda and Jane Morlok. (Filed as
                  Exhibit 10(b) to Breda's Form 10-QSB for the
                  quarterly period ended June 30, 2002, and
                  incorporated herein by this reference.)

      *21.  Subsidiaries of the Registrant.                             E-1

      *99.  Certification of Financial Information

            (a)   Certification of Chief Operations Officer and         E-2
                  Co-Chief Executive Officer pursuant to 18
                  U.S.C. Section 1350, as adopted pursuant to
                  Section 906 of the Sarbanes-Oxley Act of 2002.

            (b)   Certification of Chief Financial Officer and          E-3
                  Co-Chief Executive Officer pursuant to 18
                  U.S.C. Section 1350, as adopted pursuant to
                  Section 906 of the Sarbanes-Oxley Act of 2002.



*Included with this filing.


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