<PAGE>
===============================================================================
                    SECURITIES AND EXCHANGE COMMISSION

                          Washington, D.C. 20549

                                FORM 10-QSB

             [X]  QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
                      OF THE SECURITIES EXCHANGE ACT OF 1934

             For the quarterly period ended September 30, 1998

                                    OR

             [ ]  TRANSITION REPORT UNDER SECTION 13 OR 15(d)
                  OF THE SECURITIES EXCHANGE ACT OF 1934

          For the transition period from __________ to _________

                      Commission File Number: 0-24121


                   DAKOTA TELECOMMUNICATIONS GROUP, INC.
     (Exact Name of Small Business Issuer as Specified in its Charter)




           DELAWARE                                   91-1845100
(State or Other Jurisdiction of          (I.R.S. Employer Identification No.)
 Incorporation or Organization)

           29705 453RD AVENUE                       (605) 263-3301
    IRENE, SOUTH DAKOTA 57037-0066            (Issuer's Telephone Number,
(Address of Principal Executive Offices)         Including Area Code)


Check whether the issuer (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 issuer was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes  __X__     No _____

There were 2,160,150 shares of Dakota Telecommunications Group, Inc. Common
Stock, without par value, outstanding as of October 27, 1998.

Transitional Small Business Disclosure Format (check one): Yes ____  No __X__

===============================================================================

<PAGE>
                   DAKOTA TELECOMMUNICATIONS GROUP, INC.


                                   INDEX

===============================================================================

PART I.  FINANCIAL INFORMATION                                       PAGE NO.

 Item 1.   FINANCIAL STATEMENTS

    DAKOTA TELECOMMUNICATIONS GROUP, INC. AND SUBSIDIARIES

         Consolidated Balance Sheet -
          September 30, 1998 (Unaudited) and December 31, 1997. . . .    3

         Consolidated Statement of Operations -
          Three Months Ended September 30, 1998 and 1997 (Unaudited).    4

         Consolidated Statement of Operations -
          Nine Months Ended September 30, 1998 and 1997 (Unaudited) .    5

         Consolidated Statement of Cash Flows -
          Nine Months Ended September 30, 1998 and 1997 (Unaudited) .    6

         Notes to Consolidated Financial Statements (Unaudited) . . .    7


  Item 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION   12


PART II. OTHER INFORMATION

  Item 1.  LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . .    29

  Item 2.  CHANGES IN SECURITIES . . . . . . . . . . . . . . . . . .    29

  Item 5.  OTHER INFORMATION . . . . . . . . . . . . . . . . . . . .    30

  Item 6.  EXHIBITS AND REPORTS ON FORM 8-K. . . . . . . . . . . . .    31


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






                                      -2-
<PAGE>
                      PART I.  FINANCIAL INFORMATION

Item 1.  FINANCIAL STATEMENTS

          DAKOTA TELECOMMUNICATIONS GROUP, INC. AND SUBSIDIARIES

                        CONSOLIDATED BALANCE SHEET
           SEPTEMBER 30, 1998 (UNAUDITED) AND DECEMBER 31, 1997
===============================================================================
<TABLE>
<CAPTION>
                                              ASSETS

                                                                      SEPTEMBER 30,         DECEMBER 31,
                                                                           1998                 1997
                                                                    -----------------     ----------------
<S>                                                                 <C>                  <C>
CURRENT ASSETS:
   Cash and Cash Equivalents                                         $      1,705,383     $      4,297,938
   Temporary Cash Investments                                                 100,000              300,000
   Accounts Receivable, Less Allowance for
     Uncollectibles of $415,400 and $298,700                                3,749,093            4,216,025
   Income Taxes Receivable                                                     27,321               62,987
   Materials and Supplies                                                   1,883,839            1,109,226
   Prepaid Expenses                                                           427,297              275,567
                                                                     ----------------     ----------------
      Total Current Assets                                                  7,892,933           10,261,743
                                                                     ----------------     ----------------

INVESTMENTS AND OTHER ASSETS:
   Excess of Cost over Net Assets Acquired                                  5,661,715            4,869,096
   Other Intangible Assets                                                    781,836              809,843
   Other Investments                                                        1,524,024            2,037,571
   Deferred Charges                                                         1,506,636              653,373
                                                                     ----------------     ----------------
      Total Investments and Other Assets                                    9,474,211            8,369,883
                                                                     ----------------     ----------------
PROPERTY, PLANT AND EQUIPMENT, NET                                         26,304,230           25,408,266
                                                                     ----------------     ----------------
TOTAL ASSETS                                                         $     43,671,374     $     44,039,892
                                                                     ================     ================

                              LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
   Current Portion of Long-Term Debt                                 $      1,430,000     $      1,390,000
   Notes Payable                                                            2,162,573            1,500,000
   Accounts Payable                                                         1,925,389            2,290,727

                                      -3-
<PAGE>
   Payable Under Floor Plan Arrangements                                      547,756              569,287
   Other Current Liabilities                                                1,341,233            1,171,772
                                                                     ----------------     ----------------
      Total Current Liabilities                                             7,406,951            6,921,786
                                                                     ----------------     ----------------
LONG-TERM DEBT                                                             30,793,121           29,200,469
                                                                     ----------------     ----------------
DEFERRED CREDITS                                                              161,051              113,565
                                                                     ----------------     ----------------

STOCKHOLDERS' EQUITY:
   Common Stock                                                            10,979,987            8,523,870
   Treasury Stock at Cost                                                     (12,325)             (12,325)
   Other Capital                                                            1,176,299            2,298,006
   Retained Earnings                                                       (5,833,710)          (2,005,479)
   Unearned Employee Stock Ownership                                       (1,000,000)          (1,000,000)
                                                                     ----------------     -----------------
      Total Stockholders' Equity                                            5,310,251            7,804,072
                                                                     ----------------     ----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                           $     43,671,374     $     44,039,892
                                                                     ================     ================
</TABLE>




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





















                                      -4-
<PAGE>
           DAKOTA TELECOMMUNICATIONS GROUP INC. AND SUBSIDIARIES

                   CONSOLIDATED STATEMENT OF OPERATIONS
              THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
                                (Unaudited)
===============================================================================
<TABLE>
<CAPTION>

                                                                            1998                1997
                                                                      ---------------      ---------------
<S>                                                                  <C>                  <C>
REVENUES:
   Local Network                                                      $       424,577      $       309,401
   Network Access                                                           1,417,276              888,876
   Long Distance Network                                                      936,349              869,378
   Cable Television Service                                                   442,353              376,113
   Computer Network Service                                                 5,489,635                    -
   Internet Service                                                           463,126              296,064
   Wireless Telecommunications                                                259,691                    -
   Other                                                                       26,386               86,154
                                                                      ---------------      ---------------
      Total Operating Revenues                                              9,459,393            2,825,986
                                                                      ---------------      ---------------
COSTS AND EXPENSES:
   Plant Operations                                                         1,634,272            1,018,806
   Cost of Goods Sold                                                       4,425,144
   Depreciation and Amortization                                            1,156,948              820,124
   Customer                                                                   884,806              378,798
   General and Administrative                                               1,979,398            1,045,974
   Other Operating Expenses                                                   247,623              180,687
                                                                      ---------------      ---------------
      Total Operating Expenses                                             10,328,191            3,444,389
                                                                      ---------------      ---------------
OPERATING LOSS                                                               (868,798)            (618,403)
                                                                      ---------------      ---------------
OTHER INCOME AND (EXPENSES):
   Interest and Dividend Income                                                62,724               88,524
   Interest Expense                                                          (593,458)            (383,231)
                                                                      ---------------      ---------------
      Net Other Income and Expenses                                          (530,734)            (294,707)
                                                                      ---------------      ---------------

LOSS BEFORE INCOME TAXES                                                   (1,399,532)            (913,110)

INCOME TAX BENEFIT                                                              8,000              232,784
                                                                      ---------------      ---------------


                                      -5-
<PAGE>
NET LOSS                                                              $    (1,391,532)     $      (680,326)
                                                                      ===============      ===============

BASIC AND DILUTED LOSS PER SHARE                                      $         (0.52)     $         (0.69)
                                                                      ===============      ===============
   (Since 1997 Reorganization)

</TABLE>




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



































                                      -6-
<PAGE>
           DAKOTA TELECOMMUNICATIONS GROUP INC. AND SUBSIDIARIES

                   CONSOLIDATED STATEMENT OF OPERATIONS
               NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
                                (Unaudited)
===============================================================================
<TABLE>
<CAPTION>

                                                                            1998                1997
                                                                      ---------------      ---------------
<S>                                                                  <C>                  <C>
REVENUES:
   Local Network                                                      $     1,248,714      $       924,903
   Network Access                                                           4,097,470            2,796,044
   Long Distance Network                                                    2,662,143            2,438,754
   Cable Television Service                                                 1,278,309            1,156,633
   Computer Network Service                                                13,008,166                    -
   Internet Service                                                         1,284,079              776,016
   Wireless Telecommunications                                                259,691                    -
   Other                                                                      383,904              348,317
                                                                      ---------------      ---------------
      Total Operating Revenues                                             24,222,476            8,440,667
                                                                      ---------------      ---------------
COSTS AND EXPENSES:
   Plant Operations                                                         4,449,232            2,672,679
   Cost of Goods Sold                                                      10,376,666                    -
   Depreciation and Amortization                                            3,313,164            2,379,769
   Customer                                                                 2,370,318              828,096
   General and Administrative                                               5,334,793            3,006,705
   Other Operating Expenses                                                   712,360              829,798
                                                                      ---------------      ---------------
      Total Operating Expenses                                             26,556,533            9,717,047
                                                                      ---------------      ---------------

OPERATING LOSS                                                             (2,334,057)          (1,276,380)
                                                                      ---------------      ---------------

OTHER INCOME AND (EXPENSES):
   Interest and Dividend Income                                               150,873              240,509
   Interest Expense                                                        (1,653,047)            (791,920)
                                                                      ---------------      ---------------
      Net Other Income and Expenses                                        (1,502,174)            (551,411)
                                                                      ---------------      ---------------

LOSS BEFORE INCOME TAXES                                                   (3,836,231)          (1,827,791)

INCOME TAX BENEFIT                                                              8,000              292,880
                                                                      ---------------      ---------------
                                      -7-
<PAGE>
NET LOSS                                                              $    (3,828,231)     $    (1,534,911)
                                                                      ===============      ===============

BASIC AND DILUTED LOSS PER SHARE                                      $         (1.42)     $         (1.56)
   (Since 1997 Reorganization)                                        ===============      ===============
</TABLE>




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





































                                      -8-
<PAGE>
          DAKOTA TELECOMMUNICATIONS GROUP, INC. AND SUBSIDIARIES

                   CONSOLIDATED STATEMENT OF CASH FLOWS
               NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
                                (Unaudited)
===============================================================================
<TABLE>
<CAPTION>

                                                                             1998               1997
                                                                      -----------------    ---------------
<S>                                                                   <C>                  <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net Loss                                                            $     (3,828,231)    $   (1,534,911)
   Adjustments to Reconcile Net Loss to Net
      Cash Provided By (Used In) Operating Activities:
         Depreciation and Amortization                                        3,313,164          2,379,769
         Deposits                                                                     -            274,889
         Receivables                                                            547,988            313,141
         Income Taxes Receivable                                                 35,666            138,698
         Prepaids                                                              (149,066)           (77,100)
         Accounts Payable                                                      (394,934)           522,324
         Other Current Liabilities                                              105,388             98,033
         Deferred Credits                                                        47,486            (39,050)
         Other                                                                   38,201                  -
                                                                       ----------------    ---------------
            Net Cash (Used In) Provided By Operating Activities                (284,338)         2,075,793
                                                                       ----------------    ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Purchase of Property, Plant and Equipment, Net                            (3,860,718)       (11,131,102)
   Materials and Supplies                                                      (703,170)          (689,547)
   Sale of Temporary Cash Investments                                           200,000            349,000
   Purchase of Other Investments                                                (18,121)        (1,250,637)
   Sale of Other Investment                                                     502,174                  -
   Acquisition, Net of Cash Acquired                                           (288,088)                 -
   Purchase of Other Intangible Assets                                          (19,326)           (81,759)
   Deferred Charges                                                            (861,970)              (883)
                                                                       ----------------    ---------------
      Net Cash Used In Investing Activities                                  (5,049,219)       (12,804,928)
                                                                       ----------------    ---------------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Principal Payments of Long-Term Debt                                      (1,017,348)          (386,059)
   Proceeds from Issuance of Note Payable                                     5,723,248         11,686,551
   Principal Payments of Note Payable                                        (2,660,675)                 -
   Construction Contracts Payable                                               (38,633)           459,761
   Retirement of Patronage Capital                                                    -            (28,235)
   Other                                                                            593           (85,151)

                                      -9-
<PAGE>
   Issuance of Common Stock                                                     251,815                  -
   Increase in Deferred Income Taxes                                                  -           (238,000)
   Conversion of Warrants to Common Stock                                       482,002                  -
                                                                       ----------------    ---------------
      Net Cash Provided by Financing Activities                               2,741,002         11,408,867
                                                                       ----------------    ---------------

NET INCREASE (DECREASE) IN CASH AND
   CASH EQUIVALENTS                                                          (2,592,555)           679,732

CASH AND CASH EQUIVALENTS at Beginning of Year                                4,297,938          2,121,444
                                                                       ----------------    ---------------
CASH AND CASH EQUIVALENTS at End of Period                             $      1,705,383    $     2,801,176
                                                                       ================    ===============
</TABLE>




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




























                                      -10-
<PAGE>
          DAKOTA TELECOMMUNICATIONS GROUP, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                (Unaudited)
===============================================================================

NOTE 1 - CONSOLIDATED FINANCIAL STATEMENTS

The balance sheets as of September 30, 1998 and December 31, 1997,
statements of operations for the three and nine months ended September 30,
1998 and 1997 and cash flows for the nine months ended September 30, 1998
and 1997 have been prepared by the Company without audit.  In the opinion
of management, all adjustments (consisting only of normal recurring
accruals) necessary to present fairly the financial position, results of
operations and changes in cash flows have been made.

The Consolidated Financial Statements have been prepared in accordance with
the requirements of Item 301(b) of Regulation S-B and with the instructions
to Form 10-QSB.  Accordingly, certain information and footnote disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted.
These condensed financial statements should be read in conjunction with the
financial statements and accompanying notes for the years ended December
31, 1997 and 1996.  The results of operations for the three- and nine-month
periods ended September 30, 1998 are not necessarily indicative of the
operating results to be expected for the year ending December 31, 1998.


NOTE 2 - NOTES PAYABLE

The Company has a line of credit arrangement for $1.5 million with Rural
Telephone Finance Cooperative ("RTFC") which expires in 2002.  Interest is
payable quarterly at variable monthly rates determined by RTFC with a cap
at prime plus 1.5%.  Any advances must be paid in full within 360 days of
the advance and remain at a zero balance for at least five consecutive
business days.  A balance of $1,500,000 was outstanding as of September 30,
1998.

In October 1998, the Company's secured line of credit arrangement for $4
million with RTFC was increased to $6 million and expires January 1, 2000.
Interest is payable quarterly at variable monthly rates based on the
prevailing bank prime rate plus 1.5%.  A balance of $2,400,000 was
outstanding as of September 30, 1998.

The $800,000 line of credit with Norwest Bank which would have expired on
April 1, 1999 was replaced by a new line of credit agreement with Norwest
dated September 10, 1998 for a maximum of  $2,000,000 at the prime rate
plus one and one half percent expiring September 3, 2001, at which point it
may be renewed on an annual basis thereafter.  This line of credit is
                                      -11-
<PAGE>
          DAKOTA TELECOMMUNICATIONS GROUP, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                (Unaudited)
===============================================================================

secured by essentially all of the assets of DTG DataNet, Inc., a wholly owned
subsidiary of the Company.  The amount outstanding at September 30,
1998 was $662,573.

NOTE 3 - PAYABLE UNDER FLOOR PLAN ARRANGEMENT

The Company's additional $500,000 credit limit for the floor plan
arrangement with the IBM Credit Corporation expired August 31, 1998.  The
amount outstanding at September 30, 1998 on the original $350,000 agreement
was $113,902.  The Company also had $433,854 outstanding on another floor
plan arrangement as of September 30, 1998.

NOTE 4 - INCOME TAXES

As of July 22, 1997, the income of the Company became taxable at the
federal level.  Prior to that date, the Company operated as a cooperative
and had been granted tax exempt status under Section 501(c)12 of the
Internal Revenue Code of 1986, as amended.

At September 30, 1998 and December 31, 1997, the Company had net deferred
tax assets primarily as a result of the net operating losses.  The full
amount of the net deferred tax asset was offset by a valuation allowance
due to uncertainties relating to the future utilization of these net
operating losses.  The tax benefit of $8,000 at September 30, 1998 is due
to additional refunds receivable for net operating losses that can be
applied against income in a prior year.

NOTE 5 - ACQUISITIONS

On July 1, 1998, the Company purchased the outstanding stock of Vantek
Communications, Inc. and Van/Alert, Inc. in exchange for 48,000 shares of
the Company's stock valued at $12.50 per share, long-term debt of $250,000
and $250,000 in cash.  The debt is convertible into Company stock.  The
acquisition resulted in an excess of cost over net assets acquired of
$1,046,919.  This amount is being amortized over 15 years.

The long-term debt of $250,000 at 9% interest is payable in monthly
installments of $5,190 until July 1, 2003.

NOTE 6 - CAPITAL STOCK

Former holders of common stock and capital credit accounts of Dakota
Cooperative Telecommunications, Inc. (the "Cooperative") are entitled to
                                      -12-
<PAGE>
          DAKOTA TELECOMMUNICATIONS GROUP, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                (Unaudited)
===============================================================================

receive shares of common stock of the Company, without any further
consideration, upon receipt by the Company of properly executed transmittal
documents in acceptable form.  If all such persons had satisfied the
conditions to receive shares at September 30, 1998 and December 31, 1997, a
total of 395,376 and 847,302 additional shares of the Company's common
stock, respectively, would have been issued and outstanding as of those
dates.  Other capital includes that amount of stockholders' equity that
would have been included in common stock if those shares had been issued
and outstanding at September 30, 1998 and December 31, 1997.

The Company approved an offering of 400,000 shares of common stock at a
purchase price of $12.50 per share to existing shareholders and employees
as of January 27, 1998.  The offering expired on March 11, 1998 and 19,485
shares of common stock were issued.

At the annual meeting, the shareholders approved an amendment to the
Company's Certificate of Incorporation to increase the authorized number of
shares of common stock from 5,000,000 to 10,000,000.


NOTE 7 - SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
                                                                              1998                1997
                                                                         --------------      -------------
<S>                                                                     <C>                 <C>
CASH PAID FOR:
    Interest                                                             $    1,569,349      $     791,920
    Income Taxes                                                                      -             18,883

NONCASH INVESTING AND FINANCING ACTIVITY:
    Acquisitions:
       Fair Value of Assets                                              $    1,252,941
       Liabilities                                                              110,771
                                                                         --------------
          Net Assets Acquired                                                 1,142,170
       Less Common Stock Issued for Acquisition                                 600,000
          Cash Acquired                                                           4,082
          Long-Term Debt Issued for Acquisition                                 250,000
                                                                         --------------
       Acquisition, Net of Cash Acquired                                 $      288,088
                                                                         ==============
</TABLE>
                                      -13-
<PAGE>
          DAKOTA TELECOMMUNICATIONS GROUP, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                (Unaudited)
===============================================================================

NOTE 8 - LOSS PER SHARE

Basic loss per share as of September 30, 1998 was based on the average
number of shares of common stock outstanding during the period.  The number
of shares used in the calculation was 2,692,321 as of September 30, 1998.

Options, rights and warrants have not been considered in the computation of
diluted loss per share since their effect would be anti-dilutive because of
the net loss.  If the 395,376 shares issuable at September 30, 1998 to
former holders of Cooperative common stock and capital credit accounts upon
satisfaction by such holders of conditions to issuance, which have not been
issued as a result of the reorganization, were considered issued for the
entire period, the loss per share would have been $1.24 for the nine months
ended, and $.45 for the three months ended, September 30, 1998.


NOTE 9 - COMMITMENTS

The Company has made commitments to provide cable access television service
to the cities of Luverne and Marshall, Minnesota and Canton, South Dakota.
These cities have required that bonds and financial securities be provided
to ensure performance by the Company.  The Company has obtained $832,500 in
irrevocable letters of credit to fully cover these requirements.


NOTE 10 - SUBSEQUENT EVENTS

On October 27, 1998, the Board of Directors approved an Agreement and Plan
of Merger with McLeodUSA Incorporated, pursuant to which the Company will
be merged with and into a wholly owned subsidiary of McLeodUSA Incorporated
(the "Merger").  All of the stock of the Company and each right to receive
one share of Company common stock will be exchanged for the right to
receive .4328 shares of McLeodUSA Incorporated common stock.  The maximum
number of shares of McLeodUSA Incorporated common stock to be issued is
1,295,000.  The Merger is subject to stockholder and regulatory approval.
The Merger agreement requires the Company to pay McLeodUSA Incorporated a
$2,500,000 penalty if alternative offers are pursued.

On April 24, 1998, the Company entered into a Merger Agreement to purchase
the outstanding stock of Hurley Communications  in exchange for stock, cash
and notes valued at $180,000.  The purchase was been approved by the FCC
and was consummated on November 1, 1998.

                                      -14-
<PAGE>
          DAKOTA TELECOMMUNICATIONS GROUP, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                (Unaudited)
===============================================================================

On October 27, 1998, the Company entered into a lease agreement of fiber
optic cable facilities with McLeodUSA Incorporated.  The lease is for
twenty years.  The entire lease fee of $5,000,000 for the twenty years has
been paid in advance.







































                                      -15-
<PAGE>
Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

     Management provides the following discussion as its analysis of the
Company's financial condition and results of operations.  This analysis
should be read in conjunction with the separate consolidated financial
statements of the Company and the notes thereto included in this report.
References to the Company below include the Company and its wholly owned
subsidiaries.

FORWARD-LOOKING STATEMENTS

     Except for any historical information contained herein, the matters
discussed in this Quarterly Report on Form 10-QSB contain certain "forward-
looking statements" within the meaning of Section 21E of the Securities
Exchange Act of 1934, as amended, and should be read in conjunction with
the Company's 1997 Annual Report on Form 10-KSB. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors
including, but not limited to, economic, key employee, competitive,
governmental, regulatory and technological factors affecting the Company's
growth, operations, markets, products, services, licenses, the ability of
the Company and its third party vendors to make their computer software
Year 2000 compliant by the projected deadlines and on budgeted costs and
other factors discussed in the  Company's  other filings with the
Securities and Exchange Commission.  These factors may cause the actual
results, performance or achievements of the Company, or industry results,
to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements.
Given these uncertainties, readers are cautioned not to place undue
reliance on such forward-looking statements. Furthermore, the Company
undertakes no obligation to update, amend or clarify forward-looking
statements, whether as a result of new information, future events or
otherwise.

OVERVIEW

     The Company is a competitive local exchange carrier ("CLEC")
specializing in the design, construction and operation of broadband hybrid
fiber optic communications systems for small communities in South Dakota
and the surrounding states.  The Company provides a full range of bundled
products and services to its customers, including switched local dial tone
and enhanced services, network access services, long distance telephone
services, operator assisted calling services, telecommunications equipment
sale and leasing services, cable television services, computer equipment
sales, mobile radio, paging, Internet access and related services and
computer and data networking products and services, using both wireline and
wireless technologies.



                                      -16-
<PAGE>
     In 1996 the Company began a major reorganization and expansion
program.  This program included the conversion of the Company from a stock
cooperative into a publicly held Delaware business corporation, the
redesign and rebuilding of the Company's switching center and fiber
backbone network, which was completed in 1997, and the expansion of the
Company's operations through selected acquisitions.  During 1996, the
Company purchased the assets of 19 cable television systems.  In December
1996, the Company, through a wholly owned subsidiary, merged with TCIC
Communications, Inc. ("TCIC"), a South Dakota-based provider of long
distance and operator services.  Also in December 1996, in a similar
transaction, the Company merged with I-Way Partners, Inc. ("Iway"), one of
South Dakota's largest Internet service providers.  In December 1997, the
Company merged with Futuristic, Inc. dba DataNet ("DataNet"), a leading
regional local area network/wide area network ("LAN/WAN") integrator
located in Sioux Falls, South Dakota.  These companies continue to operate
as wholly owned subsidiaries of the Company under the names DTG
Communications, Inc., DTG Internet, Inc., and DTG DataNet, Inc.,
respectively.

     In July 1998, the Company, through a wholly owned subsidiary, merged
with Vantek, Inc. and Van Alert, Inc. ("Vantek"), a regional specialized
mobile radio and paging company in southeastern South Dakota. Vantek
continues to operate as a wholly owned subsidiary of the Company under the
name Dakota Wireless Systems, Inc. ("DWS"). On November 1, 1998 the
Company, through DWS, acquired substantially all of the assets of Hurley
Communications, a regional specialized mobile radio company and a cellular
telephone agent serving an area complementary to that served by DWS.

     On October 27, 1998, the Company entered into an Agreement and Plan of
Merger (the "Merger Agreement") whereby the Company will be merged (the
"Merger") with and into a wholly owned subsidiary of McLeodUSA Incorporated
("McLeodUSA"). The Merger is expected to be completed within three to six
months, pending a number of issues including, but not limited to, approval
by the Company's stockholders, FCC license transfers and other various
regulatory approvals.   In conjunction with the Merger Agreement the
Company and McLeodUSA entered into a 20-year dark fiber lease agreement
with an aggregate value of $5,000,000 paid by McLeodUSA in advance on
October 28, 1998. Revenues under this agreement will be reported on a
deferred basis, resulting in additional revenues in 1998 of approximately
$42,000 and approximately $250,000 per year for the remainder of the lease
term.

     The Company's reorganization and expansion plans have had, and will
continue to have, significant impacts on the Company's financial condition
and results of operations.  As part of its network-rebuilding project, in
1995 the Company reassessed the remaining useful life of its old
facilities.  In 1996 and 1997, the Company incurred approximately $5.8
million and $13.6 million in new capital expenditures, respectively.

                                      -17-
<PAGE>
During the first nine months of 1998, the Company incurred an additional
$3.9 million in capital expenditures as well as purchased $703,000 of
additional materials for its 1998 developments.  The Company anticipates
spending substantial additional funds for its continuing development
programs. These expenditures have been, and future expenditures are
anticipated to be, financed through substantial increases in the Company's
long-term debt.  These changes are expected to combine to result in
substantially higher depreciation and interest expenses with corresponding
reductions in the Company's net income.  In addition, to implement its
growth plans, the Company completed the acquisitions described above and
increased its employee base from 34 employees at December 31, 1995 to 185
employees at September 30, 1998, resulting in additional increases in
amortization expense and employee-related operating expenses.  While the
Company anticipates that its revenue base will continue to grow as it
completes its new facilities and markets new services, the resultant higher
expense levels from a combination of higher depreciation, amortization and
interest expense, as well as additional employee expenses, will likely
cause the Company to recognize and report net after-tax losses.

FINANCIAL CONDITION

     The implementation of the Company's reorganization plans has had a
significant impact on the Company's balance sheet and financial condition.
The following discussion reviews the material changes in the Company's
balance sheet accounts.

     Cash and Cash Equivalents and Temporary Cash Investments decreased
from $4,598,000 at December 31, 1997, to $1,805,000 at September 30, 1998,
a decrease of $2,793,000.  The decrease was used for capital expenditures,
investment in acquisitions and to fund operating expenses.

     Net Accounts Receivable decreased from $4,216,000 at December 31,
1997, to $3,749,000 at September 30, 1998, a decrease of $467,000.  This
decrease was primarily due to the payments of additional funds due to the
Company from the National Exchange Carriers Association for final
adjustments to the Company's access revenue requirements from its 1996 and
1997 telephone operation cost studies.

     Materials and Supplies inventories increased from $1,109,000 at
December 31, 1997 to $1,884,000 at September 30, 1998, an increase of
$775,000.  Of the increase, $72,000 was a non-cash transaction related to
the acquisition of Vantek. The balance of this increase represents
additional materials on hand to be used in the Company's 1998 and 1999
development projects.

     Prepaid Expenses increased from $276,000 at December 31, 1997 to
$427,000 at September 30, 1998, an increase of $151,000.  This increase was
due to an increase in prepaid insurance.

                                      -18-
<PAGE>
     Other Investments decreased from $2,038,000 at December 31, 1997 to
$1,524,000 at September 30, 1998, a decrease of $514,000.  This decrease
was primarily due to a sale of a treasury bill by the Company during the
first quarter of 1998.

     Deferred Charges increased from $653,000 at December 31, 1997 to
$1,507,000 at September 30, 1998, an increase of  $854,000, which was
primarily related to software purchases and development for the Company's
new billing system and construction project deposits.

     Current Liabilities increased from $6,922,000 at December 31, 1997 to
$7,407,000, at September 30, 1998, a net increase of $485,000. The increase
is primarily related to an increase in accrued liabilities for Company
contributions to its Employee Stock Ownership Plan, which was adopted in
December 1997.

     Long-Term Debt increased from $29,200,000 at December 31, 1997 to
$30,793,000, at September 30, 1998, an increase of $1,593,000. This
increase is the result of $2,400,000 in advances made under a $6,000,000
revolving credit line with the Rural Telephone Finance Cooperative ( the
"RTFC"), offset by payments on existing Long-Term Debt.  The advances were
used to fund the Company's 1998 construction projects.   See Notes 2 and 3
to the Consolidated Financial Statements.

     Total Stockholders' Equity decreased from $7,804,000 at December 31,
1997 to $5,310,000 at September 30, 1998, a decrease of approximately
$2,494,000.  This decrease was caused by the Company's operating losses of
$3,828,000 during the first nine months of 1998 offset by additional equity
raised by the Company from the exercise of outstanding warrants and the
sale of stock to the Company's existing shareholders.  See Note 6 to the
Consolidated Financial Statements.

LIQUIDITY AND CAPITAL RESOURCES

     The Company believes that it has adequate internal resources available
to finance its current operating requirements.  Net Cash Used In Operations
was $284,000 in the first nine months of 1998.  See the Consolidated
Statement of Cash Flows included in the Company's Consolidated Financial
Statements. As discussed above, the Company entered into a 20-year dark
fiber lease agreement with McLeodUSA in October 1998 under which McLeodUSA
made a one-time payment of $5 million.  In addition, the Company maintains
two lines of credit with the RTFC, a $1.5 million revolving credit line
which was fully drawn at September 30, 1998 and a $6 million project
development line of credit with the RTFC, $3.6 million of which was
available as of September 30, 1998.  Finally, the Company uses a
combination of the floor plan financing arrangements and a $2,000,000
working capital line of credit to fund inventory holding costs in its


                                      -19-
<PAGE>
DataNet operation.  See Note 2 and 3 to the Consolidated Financial
Statements.

     The Company's 1999 expansion plans will require it to substantially
expand its employee base beginning in November 1998, resulting in
additional employee expenses which will likely cause the Company to
experience negative monthly operating cash flows until its new development
projects are completed and new subscribers are added in late 1999 and in
the year 2000.  In addition, the Company currently anticipates investing
between $50 and $55 million in new capital expenditures in 1999 in
connection with its new development projects.  The Company currently plans
to fund these requirements through a combination of additional equity and
long-term project debt.

     The Company's primary long-term lender is the RTFC, which provided the
funds for the Company's 1997 and 1998 construction projects.  On July 17,
1998, the RTFC agreed to additional long-term financing in the amount of
$35,263,128. This financing is contingent on the Company raising an
additional $20 million in equity.  Under the terms of the Merger Agreement
with McLeodUSA, McLeodUSA is required to make a capital contribution to the
Company of $20 million immediately following the completion of the Merger.
The Company currently plans to use this equity to support the additional
long-term debt financing from the RTFC, and to use the combination of these
funds to finance its operations and capital expenditure program in 1999.
While the Merger with McLeodUSA is expected to be completed within three to
six months, it is subject to a number of conditions outside of the
Company's control including, but not limited to, approval by the Company's
stockholders, FCC license transfers and various other regulatory approvals.
There can be no assurance that the Merger will be completed.  If the Merger
is not completed, the Company would be unable to finance its expansion
plans and would likely stop its ongoing development activities and
substantially reduce the size of its operations. In such an event,
management believes that the Company's operations would return to positive
operating cash flow within three months.

     As part of the Company's expansion program, the Company routinely
enters into cable television franchise agreements with new communities.
Some of these agreements require the Company to post performance and
development bonds.  As of September 30, 1998 the Company has secured
performance and payment bonds and irrevocable letters of credit totaling
$832,500 to various cities that have granted franchise agreements to the
Company. Of this amount, $650,000 is secured by promissory notes between
the Company and one of its lenders. In addition, the Company has had issued
an additional $25,000 in performance bonds since the end of the third
quarter. See Note 9 to the Consolidated Financial Statements. Prior to the
start of construction in the various markets that have granted franchise
agreements, the Company will be required to post an additional $1.6 million
in construction bonds. As new franchise agreements are granted there will

                                      -20-
<PAGE>
be corresponding increases in the bonding requirements of the Company.
While the Company has not experienced any difficulty in posting these bonds
in the past, absent the completion of the Merger with McLeodUSA or another
transaction providing additional equity to the Company, there is no
assurance that it will be able to continue to provide the financial
resources to post additional bonds in the future.

RESULTS OF OPERATIONS

     The Company's reorganization plans have also significantly changed its
results of operations, primarily due to the additional entities acquired by
the Company in the mergers described above.  As a result, the comparison of
the financial results of the Company's present operations to its past
operations should be carefully analyzed. The following discussion
summarizes the Company's results of operations.

THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1998

     Total Operating Revenues increased from $2,826,000 during the third
quarter of 1997 to $9,459,000 in the same period of 1998, an increase of
$6,633,000, or approximately 235%.  Of this increase, $5,490,000 reflects
the addition of revenues from the Company's DataNet operations acquired in
December 1997. An additional $259,000 of this increase represents revenues
from the acquisition of DWS.  Finally, $528,000 of this increase was the
result of an increase in access revenues, discussed in more detail below.
The balance reflects other internal growth in the Company's operations.

     Plant Operations expense increased from $1,019,000 during the third
quarter of 1997 to $1,634,000 in the same period of 1998, an increase of
$615,000, or approximately 60%.  Approximately $20,000 of this increase was
due to the additional costs and expenses from the operations of DataNet and
DWS. Approximately $492,000 of this increase is related to increased access
costs from the Company's long distance and Internet operations. The
remaining increase is related primarily to the start-up and operational
costs associated with the Company's competitive local exchange carrier
operations in its new markets.

     Cost of Goods Sold, a new category of operating expense, was
$4,425,000 in the third quarter of 1998, reflecting expenses associated
with the Company's DataNet and DWS operations.

     Depreciation and Amortization expense increased from $820,000 in the
third quarter of 1997 to $1,157,000 in the same period of 1998, an increase
of $337,000 or approximately 41%.  Approximately $89,000 of this increase
was due to the amortization of the excess of cost over net assets acquired
in the acquisition of DataNet and DWS, as well as the depreciation expense
of assets used in these operations.  The balance of this increase is due


                                      -21-
<PAGE>
primarily to the depreciation of additional assets placed in service by the
Company during 1997 and 1998 as part of its network expansion program.

     Customer operating expenses increased from $379,000 in the third
quarter of 1997 to $885,000 in the same period of 1998, an increase of
$506,000 or approximately 134%.  Of this increase, $395,000 related to the
customer service expenses associated with the DataNet operation. The
remaining increase is primarily due to increased costs in the Company's
competitive local exchange carrier operations in its new markets.

     Other costs and expenses, including General and Administrative and
Other Operating Expenses, increased from $1,227,000 during the third
quarter of 1997 to $2,227,000 in the same period of 1998, an increase of
$1,000,000 or approximately 81%.  Of this increase, $313,000  was related
to expenses associated with the DataNet and DWS operations.  The balance of
this increase is primarily related to additional operating expenses
associated with the development and implementation of the Company's
competitive local exchange carrier expansion plans.

     Interest Expense increased from $383,000 for the third quarter of 1997
to $593,000 during the same period of 1998, an increase of $210,000, or
approximately 55%. This increase is primarily due to the increase in long-
term debt incurred by the Company to fund its 1997 and 1998 operations and
capital expenditures.

     Basic loss per share for the third quarter of 1998, based on 2,692,321
average outstanding shares, was $0.52. This compares with a loss of $0.69
per share for the third quarter of 1997 on 985,216 average outstanding
shares.   See Note 8 to the Consolidated Financial Statements.

NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1998

     Total Operating Revenues increased from $8,441,000 during the first
nine months of 1997 to $24,222,000 in the same period during 1998, an
increase of $15,781,000, or approximately 187%.  Of this increase,
$13,440,000 reflects the addition of revenues from the Company's DataNet
and DWS operations acquired in December 1997 and July 1998.  Of this
increase, $1,301,000 represents additional access revenues, discussed in
more detail below. The balance reflects other internal growth in the
Company's operations.

     Plant Operations expense increased from $2,673,000 during the first
nine months of 1997 to $4,449,000 during the same period of 1998, an
increase of $1,776,000, or approximately 66%.  Approximately $62,000 of
this increase was due to the additional costs and expenses associated with
the operation of the DataNet and DWS operations.  Approximately $1,398,000
is related to increased access costs from the Company's long distance and
Internet operations.  The remaining increase is related primarily to the

                                      -22-
<PAGE>
start-up and operational costs associated with the Company's competitive
local exchange carrier operations in its new markets.

     Cost of Goods Sold, a new category of operating expense, was
$10,377,000 in the first nine months of 1998, reflecting expenses
associated with the Company's DataNet and DWS operations.

     Depreciation and Amortization expense increased from $2,380,000 in the
first nine months of 1997 to $3,313,000 in the same period of 1998, an
increase of $933,000 or approximately 39%.  Approximately $230,000 of this
increase was due to the amortization of the excess of cost over net assets
acquired in the acquisition of DataNet and DWS, as well as the depreciation
expense of assets used in these operations.  The balance of this increase
was due primarily to the depreciation of additional assets placed in
service by the Company during 1997 and in the first nine months of 1998 as
part of its network expansion program.

     Customer operating expenses increased from $828,000 in the first nine
months of 1997 to $2,370,000 in the same period of 1998, an increase of
$1,542,000, or approximately 186%.  Of this increase, $901,000 related to
the customer service expenses associated with the DataNet and DWS
operations. The remaining increase is primarily due to increased costs in
the Company's competitive local exchange carrier operations in its new
markets.

     Other costs and expenses, including General and Administrative and
Other Operating Expenses, increased from $3,837,000 during the first nine
months of 1997 to $6,047,000 in the same period of 1998, an increase of
$2,210,000, or approximately 58%.  Of these expenses, $90,951 in 1997 was
due to the inclusion of one-time, nonrecurring charges associated with the
conversion and merger of the Company into a publicly traded business
corporation in 1997.  Of these expenses, $57,000  in 1998 was due to the
inclusion of one-time, nonrecurring charges associated with the
registration and sale of stock to the Company's stockholders during the
first quarter.  See Note 6 to the Consolidated Financial Statements.  Of
the remaining $2,169,000 increase in other costs and expenses,
approximately $796,000 was due to the additional costs and expenses from
the operations of DataNet and DWS. The remaining increase is primarily due
to increased costs in the Company's competitive local exchange carrier
operations in its new markets.

     Interest Expense increased from $791,000 for the first nine months of
1997 to $1,653,000 during the same period in 1998, an increase of $862,000,
or approximately 109%. This increase is primarily due to the increase in
long-term debt incurred by the Company to fund its 1997 and 1998 capital
expenditures.



                                      -23-
<PAGE>
     Basic loss per share for the first nine months of 1998, based on
2,692,321 outstanding shares, was $1.42. This compares with a loss of $1.56
per share for the first nine months of 1997 on 985,216 average outstanding
shares.   See Note 8 to the Consolidated Financial Statements.

ACCESS REVENUES

     Access revenues are the result of tariffs developed, filed and imposed
by local exchange companies for allowing long distance carriers (generally
referred to as interexchange carriers or "IXCs") to access their end user
customers in the local exchange network.  For small incumbent local
exchange carriers ("ILECs") like the Company who are members of the
National Exchange Carriers Association ("NECA"), access revenues are
determined, in the case of interstate calls, according to rules issued by
the FCC and administered by NECA and, in the case of intrastate calls, by
state regulatory agencies.  The entire access charge environment for small
ILECs is subject to a complex and changing set of state and federal
regulations, with some of the revenues directly billed to end users in the
form of subscriber line fees and federal/state access charges, and some of
the revenues coming directly from NECA.  Current rules also result in
different calculations of revenue requirements depending on (i) company
size; (ii) whether a company is a  Regional Bell Operating Company ("RBOC")
or non-RBOC company; and (iii) whether a company is a rural or non-rural
company.

     For NECA members like the Company, NECA acts as a pooling mechanism
and imposes a uniform tariff on IXC's for NECA-member companies.  NECA
collects payments from IXCs and distributes settlement payments to its
members based on a number of factors, including the allocated cost of
providing service.  A variety of factors, including increased subscriber
counts, cultural and technological changes and rate reductions by IXCs,
have resulted in a consistent pattern of increasing use of the nation's
telephone network since 1984.  This growth has produced higher revenues for
NECA and increased settlements for its participating members, including the
ILEC division of the Company.  These increases, notwithstanding the
increase in the Company's ILEC operating expenses, resulted in the increase
in the Company's access revenues.   The Company cannot ensure that future
changes in the rules, both for interstate and intrastate calls, will not
adversely affect the calculated revenue requirement of, and the resulting
revenues to, the Company.

     For CLECs, which include the Company's new competitive developments,
there are varying rules between federal and state jurisdictions, and
substantial uncertainty exists as to if and how the existing access charge
environment (that has historically determined revenue requirements for
ILECs) should apply to CLECs.  The Company is aware that American Telephone
and Telegraph ("AT&T") has requested the Federal Communications Commission
("FCC") to issue a declaratory ruling that IXCs may elect not to purchase

                                      -24-
<PAGE>
switched access services offered under tariff by CLECs.  AT&T claims that a
substantial number of CLECs are attempting to impose switched access
charges that are higher than those charged by ILECs in the areas where the
CLECs operate.  Comments on AT&T's request are due December 7, 1998, and
reply comments are due December 22, 1998.  The Company believes that it
has, for its CLEC operations, based its filed access tariffs on
appropriate, historical allocated cost data from its ILEC operations.  The
Company had only nominal CLEC access revenues in the comparable 1997
period.  For 1998, the CLEC access revenue has increased in direct
proportion to its increase in the Company's CLEC customer base.   There can
be no assurance that future changes in the rules, both for interstate and
intrastate calls, either as a result of the AT&T petition or otherwise,
will not adversely affect the calculated revenue requirement, and the
resulting revenues to the Company from its CLEC operations.

INCOME TAXES

     The Company historically operated as a stock cooperative and was
granted tax-exempt status under Section 501(c)(12) of the Internal Revenue
Code of 1986, as amended.  Accordingly, income tax expense was related only
to certain ancillary operations, such as the Company's cable television
operations.  Beginning with the Company's conversion from a cooperative to
a Delaware business corporation in July 1997, all of the Company's
operations became taxable.  However, because of the Company's consolidated
net losses, the Company has accumulated  income tax loss carryovers.  See
Note 4 to the Consolidated Financial Statements for a full discussion of
the Company's income tax issues.

EFFECTS OF INFLATION

     The Company is subject the effects of inflation upon its operating
costs.  The Company's local exchange telephone operations are subject to
the jurisdiction of the South Dakota Public Utilities Commission with
respect to a variety of matters, including rates for intrastate access
services and the conditions and quality of service.  Rates for local
telephone service are not established directly by regulatory authorities,
but their authority over other matters may limit the Company's ability to
implement rate increases.  In addition, the regulatory process inherently
restricts the ILEC division of the Company's operations the ability to
immediately pass cost increases along to customers, unless the cost
increases are anticipated and the rate increases are implemented
prospectively. The CLEC and other non-ILEC divisions of the Company are
subject to competitive pressures, which may limit the Company's ability to
pass through inflation related costs to its non-captive customer base.

     All of the Company's long-term debt from the RTFC bears interest on a
floating rate set by the RTFC on a monthly basis.  This variable rate was
6.65% at September 30, 1998.  Effective November 1, 1998, the RTFC

                                      -25-
<PAGE>
decreased the interest rate on all obligations with them by 0.55% The
Company has the option to fix the interest rate on all or a portion of
these loans on a quarterly basis.  Should inflation rates significantly
exceed the Company's expectations, interest rates could increase and the
Company's debt service expenses could increase beyond acceptable limits or
make the RTFC or any other lender unwilling to extend additional credit to
the Company.

COMPETITION

     In February 1996, President Clinton signed into law the 1996
Telecommunications Act (the "1996 Act"). The new law represents the biggest
change in the rules governing local telephone service since Congress
imposed federal regulation and established the FCC in 1934.  Under the 1996
Act, the monopoly on local service enjoyed by LECs is eliminated and LECs
must allow competitors access to their local network facilities.  The
Company does not know to what extent it will be subject to local
competition in the markets it serves under the new rules. The final results
of the changes made by the new law will not be known for some time until
new rulemaking by the FCC and state regulatory agencies has been completed.
The Company is monitoring developments regarding the new regulatory climate
closely and expects its operations may be materially affected by the new
rules, but the Company cannot predict what effect the new rules will have
on its business.

     The Company is presently the only provider of local telephone service
in its historical nine local communities and directly competes with each
ILEC in the new communities it is developing. Technological developments in
competing technologies, such as cellular telephone, digital microwave,
coaxial cable, fiber optics and other wireless and wired technologies, may
result in new forms of competition to the Company's landline services.  The
Company and many other members of the local exchange carrier industry are
seeking to maintain a strong, universally affordable public
telecommunications network through policies and programs that are sensitive
to the needs of small communities and rural areas served by the Company.
However, there is no assurance that the Company will be able to continue to
do so in the future.

     All of the Company's cable television franchises are non-exclusive.
In addition to competition from off-air television, other technologies also
supply services provided by cable television.  These include low power
television stations, multi-point distribution systems, over-the-air
subscription television and direct broadcast satellites.  The Company
believes that cable television presently offers a wider variety of
programming at a lower cost than any competing technology.  However, the
Company is unable to predict the effect current or developing sources of
competition may have on its cable business.


                                      -26-
<PAGE>
     The Company's unregulated Internet, long distance, operator services
and computer network services businesses are subject to intense competition
from many different companies, many of which have substantially greater
resources than the Company.

YEAR 2000 READINESS DISCLOSURE

AN INTRODUCTION TO THE YEAR 2000 PROBLEM

     The Company is highly dependent upon advanced computer systems and
specialized software for the conduct of its business.  These systems
include switching and network operations, billing and customer care,
accounting and reporting and Internet operating systems, as well as a wide
assortment of personal computer productivity software.  In 1997, as part of
its reorganization plan, the Company installed new accounting and reporting
systems and began the installation of a new billing and customer service
system, currently scheduled for completion in 1999.  It also rebuilt its
Internet operating systems and installed a new switching platform and
software system.

     As part of its systems replacement process, the Company addressed an
issue that is facing all users of automated information systems.  The issue
is that many computer systems that process date sensitive information based
on two digits representing the year of the event may recognize a date using
"00" as the year 1900 rather than the year 2000.  The inability to
correctly recognize "00" as the year 2000 could affect a wide variety of
automated information systems, such as mainframe applications, invoicing
and receivables tracking systems, event scheduling systems, personal
computers and telecommunication systems, in the form of software failure,
errors or miscalculations.

     The discussion below describes the Company's efforts to address this
problem.  Readers are cautioned not to place undue reliance on the following
forward-looking statements. Furthermore, the Company undertakes no
obligation to update, amend or clarify these forward-looking statements,
whether as a result of new information, future events or otherwise.

YEAR 2000 COMPLIANCE PROGRAM

     It is difficult to predict with certainty what will happen to the
Company's operations when the year 2000 date is triggered.  While the
Company has received written certifications from its vendors that its new
software systems are year 2000 compliant, given the complexity of the
specialized software used by the Company and the relative newness of the
year 2000 problem, there can be no assurance that unanticipated operating
problems will not occur in the Company's systems.  Further, like all
telecommunications companies, the Company relies on the continuing
operations of other telecommunications companies to provide worldwide
communications services.  The Company must be concerned not only with its
                                      -27-
<PAGE>
own internal systems, but also with the inter-related systems of many other
companies over which it exercises no control.  Given these circumstances,
the Company believes that it is likely that certain of its services will be
adversely affected by this problem, although the extent and impact of these
service disruptions are virtually impossible to estimate at this time.

     In an attempt to minimize the disruption to the extent possible, the
Company has formed a Year 2000 Oversight Committee (the "Committee") with
the full authority to establish methodologies, recommend expenditures, and
to marshal additional resources as necessary to address the year 2000
problem.  The Committee has the full support of senior management and
includes high-level representation from many of the Company's major
internal business functions. The Committee is responsible for researching,
planning, executing, implementing and completing the year 2000 compliance
goals of the Company. The systems being evaluated by the Committee include
the Company's telecommunications network   (the "Network"), which processes
voice and data information relating to its communications operations,
Information Technology ("IT") internal business systems, which include
certain operational, financial and administrative functions, and non-
information technology ("Non-IT") systems, which include certain systems
that  use embedded micro controllers in their operation.  As of the date of
this report and as discussed in more detail below, the Committee's
assessment of the Company's year 2000 issues is not yet complete and is not
expected to be completed until next year.

     In developing its year 2000 readiness plan, the Company has developed
and uses the following definitions:

     "Education" means quantifying the awareness that Company employees
have regarding the year 2000 issue, including understanding of the year
2000 problem, what it means to be year 2000 compliant, understanding known
problems on respective platforms, recommended solutions, and how to create
year 2000 compliant products.  Education also includes the full
participation in and cooperation with year 2000 activities as needed to
achieve year 2000 compliance within the Company.

     "Survey" means identifying the components, their vendors and/or
manufacturers with point of contact, address and phone, software version,
hardware model number, quantity and number of licenses for all hardware
(mainframe, mid-range servers, connectivity equipment, personal computers,
printers, facilities, environmental systems such as heating, cooling,
power, and security, etc.), software applications, software products
(files, databases, spreadsheets, etc.), electronic data interfaces
(including third party software and hardware).

     "Business Critical/Y2K Critical" means the percentage of all of the
components in inventory which have been rated as "high," "medium," or "low"
for the following two questions: "How critical is this component to the

                                      -28-
<PAGE>
continued operation the business?" and "What level of year 2000 impact is
there on the component?".

     "Cost Assessment" means the percentage of the components for which the
cost of making the component year 2000 compliant has been estimated.

     "Date Assessment" means the percentage of all components in the
Company's inventory for which a date has been estimated for fixing, testing
and implementation if such components are not year 2000 compliant or if
compliance is unknown.

     "Corrections" means that percentage of the total number of inventory
components that are not year 2000 compliant and require
correction/remediation to become compliant and which have been corrected.

     "Replacement" means that percentage of the total number of inventory
components that are not year 2000 compliant and require replacement to
become year 2000 compliant, which have been replaced to date.

     "Testing and Verification" means that percentage of the total number
of inventory components that require testing and verification by the vendor
and the user(s), which have been tested and verified to date.

     "Implementation" means that percentage of the total number of
components that must be corrected or replaced to achieve year 2000
compliance and which have been implemented into production status to date.

     Based on these definitions, the following are the Company's current
estimates of its state of year 2000 readiness and target completion dates
by service types:

INCUMBENT LOCAL EXCHANGE CARRIER OPERATIONS (INCLUDING NON-IT COMPONENTS)

Education--50% complete; target completion 4th quarter 1998.
Survey--25% complete; target completion 1st quarter 1999.
Business Critical/Y2K Critical--0% complete; target completion 1st quarter
1999.
Cost Assessment--0% complete; target completion 1st quarter 1999
Date Assessment--0% complete; target completion 1st quarter 1999.
Corrections--0% complete; target completion 2nd quarter 1999.
Replacement--0% complete; target completion 2nd quarter 1999.
Testing and Verification--0% complete; target completion 2nd quarter 1999.
Implementation--0% complete; target completion 3rd quarter 1999.

COMPETITIVE LOCAL EXCHANGE CARRIER OPERATIONS (INCLUDING NON-IT COMPONENTS)

Education--75% complete; target completion 4th quarter 1998.
Survey--25% complete; target completion 1st quarter 1999.

                                      -29-
<PAGE>
Business Critical/Y2K Critical--0% complete; target completion 1st quarter
1999.
Cost Assessment--0% complete; target completion 1st quarter 1999.
Date Assessment--0% complete; target completion 1st quarter 1999.
Corrections--0% complete; target completion 2nd quarter 1999.
Replacement--0% complete; target completion 2nd quarter 1999.
Testing and Verification--0% complete; target completion 2nd quarter 1999.
Implementation--0% complete; target completion 3rd quarter 1999.

WIRELESS OPERATIONS (INCLUDING NON-IT COMPONENTS)

Education--0% complete; target completion 4th quarter 1998.
Survey--25% complete; target completion 1st quarter 1999.
Business Critical/Y2K Critical--0% complete; target completion 1st quarter
1999.
Cost Assessment--0% complete; target completion 1st quarter 1999.
Date Assessment--0% complete; target completion 1st quarter 1999.
Corrections--0% complete; target completion 2nd quarter 1999.
Replacement--0% complete; target completion 2nd quarter 1999.
Testing and Verification--0% complete; target completion 2nd quarter 1999.
Implementation--0% complete; target completion 3rd quarter 1999

DATANET OPERATIONS (INCLUDING NON-IT COMPONENTS)

Education--50% complete; target completion 4th quarter 1998.
Survey--50% complete; target completion 1st quarter 1999.
Business Critical/Y2K Critical--50% complete; target completion 1st quarter
1999.
Cost Assessment--0% complete; target completion 1st quarter 1999.
Date Assessment--0% complete; target completion 1st quarter 1999.
Corrections--0% complete; target completion 2nd quarter 1999.
Replacement--0% complete; target completion 2nd quarter 1999.
Testing and Verification--50% complete; target completion 2nd quarter 1999.
Implementation--0% complete; target completion 3rd quarter 1999.

COMPANY INFORMATION TECHNOLOGY SYSTEMS

Education--50% complete; target completion 4th quarter 1998.
Survey--50% complete; target completion 1st quarter 1999.
Business Critical/Y2K Critical--50% complete; target completion 1st quarter
1999.
Cost Assessment--0% complete; target completion 1st quarter 1999.
Date Assessment--0% complete; target completion 1st quarter 1999.
Corrections--0% complete; target completion 2nd quarter 1999.
Replacement--0% complete; target completion 2nd quarter 1999.
Testing and Verification--50% complete; target completion 2nd quarter 1999.
Implementation--0% complete; target completion 3rd quarter 1999.


                                      -30-
<PAGE>
CABLE TELEVISION OPERATIONS (INCLUDING NON-IT COMPONENTS)

Education--50% complete; target completion 4th quarter 1998.
Survey--25% complete; target completion 1st quarter 1999.
Business Critical/Y2K Critical--0% complete; target completion 1st quarter
1999.
Cost Assessment--0% complete; target completion 1st quarter 1999.
Date Assessment--0% complete; target completion 1st quarter 1999.
Corrections--0% complete; target completion 2nd quarter 1999.
Replacement--0% complete; target completion 2nd quarter 1999.
Testing and Verification--0% complete; target completion 2nd quarter 1999.
Implementation--0% complete; target completion 3rd quarter 1999.

INTERNET OPERATIONS (INCLUDING NON-IT COMPONENTS)

Education--50% complete; target completion 4th quarter 1998.
Survey--50% complete; target completion 1st quarter 1999.
Business Critical/Y2K Critical--50% complete; target completion 1st quarter
1999.
Cost Assessment--0% complete; target completion 1st quarter 1999.
Date Assessment--0% complete; target completion 1st quarter 1999.
Corrections--0% complete; target completion 2nd quarter 1999.
Replacement--0% complete; target completion 2nd quarter 1999.
Testing and Verification--0% complete; target completion 2nd quarter 1999.
Implementation--0% complete; target completion 3rd quarter 1999.

     A component of assessing the Company's ILEC, CLEC and cable networks
includes an assessment and survey of year 2000 readiness of key business
partners. The network relies significantly on the provisioning and
switching capabilities of the other ILECs and IXCs in those markets in
which the Company provides services.  The Company has not received
certification from these carriers indicating that they are year 2000
compliant, but has been notified that some of the carriers have initiated
programs to mitigate their year 2000 issues in 1999.  However, there can be
no assurance that the systems of the carriers will become year 2000
compliant before January 1, 2000.

YEAR 2000 READINESS COSTS

     To date, the Company's primary costs for its year 2000 compliance
program are employee costs associated with the Company's internal
management information systems employees and other personnel, which the
Company expenses as part of its General and Administrative Expense. Such
costs to date have not been material. The Company currently estimates that
the total cost to make the Company's internal systems year 2000 compliant
is approximately $250,000, most of which will be expensed by the Company as
the costs are incurred.


                                      -31-
<PAGE>
CONTINGENCY PLANS

     The Company believes that the design of its network and support
systems could provide the Company with certain operating contingencies in
the event material external systems fail. The Company's major network
operating facilities and systems are backed up with auxiliary power
generators capable of operating all equipment and systems for indeterminate
periods should power supplies fail. Certain ancillary systems are backed
up by emergency battery systems. In addition, contingency plans are
currently being developed to address other problem areas. Because of
the inability of the Company's contingency plans to eliminate the
negative impact that disruptions in other carriers' services would
create, there can be no assurance that the Company will not experience
disruptions in its services.

     The Company believes that with modifications to existing software and
conversions to new software, the year 2000 issue will not pose significant
operational problems for its internal systems. However, given the current
uncertainty about the possible extent of the year 2000 problem, management
cannot provide assurance that these efforts will be successful or that the
remediation costs will not be materially different from the Company's
current estimates. At worst case, failure by the Company or by certain of
its interconnected service providers or software vendors to remediate year
2000 compliance issues could result in the disruption of the Company's
operations, possibly impacting operation of the network and the Company's
ability to bill or collect revenues.  A prolonged network outage could have
a material adverse effect on the Company's results of operations, cash
flows, and could possibly affect its ability to service its indebtedness.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

     In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard No. 131, "Disclosures about
Segments of an Enterprise and Related Information" ("SFAS 131").  This
pronouncement, effective for calendar year 1998 financial statements,
requires reporting segment information consistent with the way executive
management of an entity disaggregates its operations internally to assess
performance and make decisions regarding resource allocations.  Among
information to be disclosed, SFAS 131 requires an entity to report a
measure of segment profit or loss, certain specific revenue and expense
items and segment assets.  SFAS 131 also requires reconciliations of total
segment revenues, total segment profit or loss and total segment assets to
the corresponding amounts shown in the entity's consolidated financial
statements.  The Company expects that the adoption of SFAS 131 will require
the Company to discontinue reporting segments currently disclosed in its
annual consolidated financial statements due to the increasing convergence
of its computer, telephone and cable television businesses.


                                      -32-
<PAGE>
     In June 1998, the FASB issued Statement of Financial Accounting
Standard No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("SFAS 133").  SFAS 133 establishes accounting and reporting
standards requiring that every derivative instrument (including certain
derivative instruments embedded in other contracts) be recorded in the
balance sheet as either an asset or liability measured at its fair value.
SFAS 133 requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met.
Special accounting for qualifying hedges allows a derivative's gains and
losses to offset related results on the hedged item in the income
statement, and requires that a company must formally document, designate,
and assess the effectiveness of transactions that receive hedge accounting.

     SFAS 133 is effective for fiscal years beginning after June 15, 1999.
A company may also implement SFAS 133 as of the beginning of any fiscal
quarter after issuance (fiscal quarters beginning June 16, 1998 and
thereafter).  SFAS 133 cannot be applied retroactively.  SFAS 133 must be
applied to (a) derivative instruments, and (b) certain derivative
instruments embedded in hybrid contracts that were issued, acquired, or
substantively modified after December 31, 1997 (and, at the company's
election, before January 1, 1998).

     The Company does not expect the impact of the adoption of SFAS 133 to
be material on the Company's results of operations as the Company does not
currently hold any derivative instruments or engage in hedging activities.

     No other recently issued accounting pronouncements are expected to
have a significant effect on future financial statements.





















                                      -33-
<PAGE>
                        PART II.  OTHER INFORMATION

Item 1.  LEGAL PROCEEDINGS

     There are no pending environmental or legal issues that the Company
believes will have a significant effect on either the operational of
financial condition of the Company.  The incumbent cable provider in
Marshall, Minnesota, Bresnan Communications ("Bresnan"), filed an appeal
with the Minnesota Court of Appeals (File No. C8-98-1139) on June 26, 1998,
of the grant of a competitive franchise by the City of Marshall to the
Company.  The parties to the appeal are Bresnan, the City of Marshall, and
the Company.  The appeal seeks to have the appellate court reverse the
decision granting the franchise.  In addition, on June 26, 1998, Bresnan
filed an action in state court (Fifth Judicial Circuit) directly against
the City of Marshall alleging a failure to provide certain requested
information and a violation of the open meeting laws by the Marshall
Municipal Utilities Commission and the City in the consideration of the
grant of the franchise to the Company.  Bresnan alleges that this conduct
has so tainted the granting of the franchise that the court should find the
franchise to be void.  The Company is not a party to this lawsuit, but will
continue to monitor its progress.  The Company believes there is no factual
basis for the allegations in the complaint.  The Company believes that
neither legal action is meritorious.  Because the Company is a party to the
appeal, it will file briefs and orally argue its position before the
appellate court.  However, in light of the possible negative outcomes to
either of these actions, the Company has suspended further work in the
Marshall area.  Construction efforts and funds intended for Marshall
equipment have been shifted to other areas where the Company has been
awarded franchises.  If Bresnan is successful in either action, the
financial impact on the Company for work already completed would not be
material and would not have a negative effect on future periods.

     In addition, on October 1, 1998, Bresnan filed an action in the
District Court of the State of Minnesota (Fifth District) against the
Company alleging, among other things, defamation and disparagement of
Bresnan's business.  The action is based on the publication of a letter by
the Company in the MARSHALL INDEPENDENT newspaper.  Bresnan seeks damages
in an amount in excess of $50,000, together with interest and attorney's
fees.  The Company believes it has meritorious defenses and plans to
vigorously defend this action.


Item 2.  CHANGES IN SECURITIES

     On July 1, 1998, the Company issued 48,000 shares of the Company's
common stock to Lemar Van Heuveln, Norma Van Heuveln and Karen Boersma
Leisinger in connection with the acquisition of Vantek Communications, Inc.
and Van Alert, Inc.  The Company relied upon, among others, the exemption
under Section 4(2) of the Securities Act of 1933.
                                      -34-
<PAGE>
Item 5.  OTHER INFORMATION

     All information with respect to year 2000 issues provided by the
Company in this Quarterly Report and in other reports and materials
previously filed with the Securities and Exchange Commission (the
"Commission"), as set forth on Exhibit 99.5 to this Quarterly Report, are
"Year 2000 Readiness Disclosures" under the Year 2000 Information and
Readiness Disclosure Act.

     The Bylaws of the Company provide that no matter submitted by a
stockholder may be presented for stockholder action at an annual or special
meeting of stockholders unless written notice of the matter is delivered to
the Company before a designated deadline prior to the applicable meeting of
stockholders.  The deadline for submitting stockholder proposals for
consideration at the next annual meeting of stockholders is November 26,
1998.

     On October 27, 1998, the Company entered into an Agreement and Plan of
Merger (the "Merger Agreement") with McLeodUSA Incorporated ("McLeodUSA")
and West Group Acquisition Co., a wholly owned subsidiary of McLeodUSA
("MergerSub").  The Merger Agreement was previously filed as Exhibit 2.1 to
the Form 8-K filed with the Commission on November 10, 1998 and is
incorporated herein by reference.

     Pursuant to the terms of the Merger Agreement, MergerSub will be
merged (the "Merger") with and into the Company and the Company will become
a wholly owned subsidiary of McLeodUSA.   As a result of the Merger, each
share of the Company's common stock will be converted into the right to
receive 0.4328 of a share of McLeodUSA's Class A common stock (the
"Exchange Ratio").  The maximum number of shares of McLeodUSA's Class A
common stock issuable pursuant to the Merger (assuming the exercise of all
outstanding options to purchase the Company's common stock) is expected to
be approximately 1,295,000 shares.  In addition, under the terms of the
Merger Agreement, each option to purchase the Company's common stock will
become or be replaced by an option to purchase a number of shares of
McLeodUSA's Class A common stock equal to the number of shares of the
Company's common stock that could have been purchased (assuming full
vesting) under the stock option multiplied by the Exchange Ratio.
McLeodUSA has agreed to register under the Securities Act of 1933 the
shares of its Class A common stock to be issued in the Merger.

          Consummation of the Merger is subject to the satisfaction of
certain conditions, including (i) approval of the Merger Agreement and the
Merger by the stockholders of the Company, (ii) effectiveness of the
registration statement registering the shares of McLeodUSA's Class A common
stock to be issued in the Merger, (iii) compliance with all applicable
provisions of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and
the expiration of all applicable waiting periods thereunder, (iv) receipt

                                      -35-
<PAGE>
of required regulatory approvals and (v) certain other customary
conditions.  Each director and certain executive officers of the Company
have entered into Voting Agreements pursuant to which, among other things,
they have agreed to vote their shares of common stock of the Company in
favor of the Merger Agreement and the Merger at a meeting of the
stockholders of the Company.  The forms of Voting Agreement were previously
filed as Exhibits 99.1 and 99.2 to the Form 8-K filed with the Commission
on November 10, 1998 and are incorporated herein by reference.  The form of
Voting Agreement of Craig A. Anderson, the President, Chief Financial
Officer and Treasurer of the Company, was filed as Exhibit 99.3 to the Form
8-K filed with the Commission on November 10, 1998 and is incorporated
herein by reference.

     A copy of the press release, dated October 28, 1998, issued by
McLeodUSA and the Company regarding the transaction described above was
previously filed as Exhibit 99.4 to the Form 8-K filed with the Commission
on November 10, 1998 and is incorporated herein by reference.

Item 6.  EXHIBITS AND REPORTS ON FORM 8-K

    (a)  EXHIBITS.  The following exhibits are filed as part of this
report:

EXHIBIT
NUMBER                        DOCUMENT


 2.1  Agreement and Plan of Merger dated as of October 27, 1998 by
      and among Dakota Telecommunications Group, Inc., McLeodUSA
      Incorporated and West Group Acquisition Co.  Filed as
      Exhibit 2.1 to the Company's Form 8-K filed with the
      Commission on November 10, 1998 and here incorporated by
      reference.

 3.1  Certificate of Incorporation of Dakota Telecommunications
      Group, Inc., a Delaware corporation, as amended. Previously
      filed as Exhibit 3.1 to the Company's Quarterly Report on
      Form 10-QSB for the quarter ended June 30, 1998 and here
      incorporated by reference.

 3.2  Bylaws of Dakota Telecommunications Group, Inc., a Delaware
      corporation, as amended.

 4.1  Certificate of Incorporation of Dakota Telecommunications
      Group, Inc., a Delaware corporation.  See Exhibit 3.1 above.

 4.2  Bylaws of Dakota Telecommunications Group, Inc., a Delaware
      corporation, as amended.  See Exhibit 3.2 above.

                                      -36-
<PAGE>
 4.3  Rights Agreement, dated as of July 22, 1997, between the
      Company, and Norwest Bank Minnesota, N.A., which includes
      the form of Rights Certificate as Exhibit A and the Summary
      of Rights to Purchase Preferred Stock as Exhibit B.  Filed
      as Exhibit 4.3 to the Registrant's Report on Form 10-QSB for
      the quarter ended September 30, 1997 and here incorporated
      by reference.

 4.4  Standstill Agreement dated November 27, 1996, among Dakota
      Cooperative Telecommunications, Inc., and the Selling
      Shareholders of TCIC Communications, Inc.  Filed as Exhibit
      4.7 to the Registrant's Form S-4 Registration Statement that
      became effective on June 13, 1997 (the "S-4 Registration
      Statement") and here incorporated by reference.

 4.5  Standstill Agreement dated November 27, 1996, among Dakota
      Cooperative Telecommunications, Inc. and the Selling
      Shareholders of I-Way Partners, Inc.  Filed as Exhibit 4.8
      to the S-4 Registration Statement and here incorporated by
      reference.

 4.6  Dakota Cooperative Telecommunications, Inc. Form of Option
      Agreement.  Filed as Exhibit 4.12 to the S-4 Registration
      Statement and here incorporated by reference.

 4.7  Agreement Regarding Stock (I-Way Partners, Inc.) dated
      November 27, 1996.  Filed as Exhibit 4.13 to the S-4
      Registration Statement and here incorporated by reference.

 4.8  Agreement Regarding Stock (TCIC Communications, Inc.) dated
      November 27, 1996.  Filed as Exhibit 4.14 to the S-4
      Registration Statement and here incorporated by reference.

 4.9  Dakota Telecommunications Group, Inc. Common Stock
      Certificate.  Filed as Exhibit 4.16 to the S-4 Registration
      Statement and here incorporated by reference.

 4.10 Dakota Telecom, Inc. Loan Agreement with Rural Telephone
      Finance Cooperative dated January 29, 1996.  Filed as
      Exhibit 4.34 to the S-4 Registration Statement and here
      incorporated by reference.

 4.11 Dakota Cooperative Telecommunications, Inc. and Dakota
      Telecom, Inc. Loan Agreement with Rural Telephone Finance
      Cooperative dated June 24, 1997.  Filed as an exhibit to the
      Registrant's Report on Form 10-QSB for the quarter ended
      June 30, 1997 and here incorporated by reference.


                                      -37-
<PAGE>
 4.12 Dakota Cooperative Telecommunications, Inc. and Dakota
      Telecom, Inc. Mortgage and Security Agreement with Rural
      Telephone Finance Cooperative dated June 24, 1997.  Filed as
      Exhibit 4.31 to the Registrant's Report on Form 10-QSB for
      the quarter ended June 30, 1997 and here incorporated by
      reference.

 4.13 Dakota Cooperative Telecommunications, Inc. and Dakota
      Telecom, Inc.  Pledge and Security Agreement with Rural
      Telephone Finance Cooperative dated June 24, 1997.  Filed as
      Exhibit 4.33 to the Registrant's Report on Form 10-QSB for
      the quarter ended June 30, 1997 and incorporated by
      reference.

 4.14 The Company has several classes of long-term debt
      instruments outstanding in addition to those described in
      Exhibits 4.11 through 4.14.  The amount of these classes of
      debt outstanding on September 30, 1998, does not exceed 10%
      of the Company's total consolidated assets.  The Company
      agrees to furnish copies of any agreement defining the
      rights of holders of any such long-term indebtedness to the
      Securities and Exchange Commission upon request.

   27 Financial Data Schedule.

 99.1 Form of Voting Agreement of directors of Dakota
      Telecommunications Group, Inc.  Filed as Exhibit 99.1 to the
      Company's Form 8-K filed with the Commission on November 10,
      1998 and here incorporated by reference.

 99.2 Form of Voting Agreement of certain executive officers of Dakota
      Telecommunications Group, Inc. who are not also directors.
      Filed as Exhibit 99.2 to the Company's Form 8-K filed with the
      Commission on November 10, 1998 and here incorporated by reference.

 99.3 Form of Voting Agreement of Craig A. Anderson.  Filed as Exhibit 99.3
      to the Company's Form 8-K filed with the Commission on November 10,
      1998 and here incorporated by reference.

 99.4 Press Release of McLeodUSA Incorporated and Dakota
      Telecommunications Group, Inc. dated October 28, 1998
      announcing signing of Merger Agreement.  Filed as Exhibit
      99.4 to the Company's Form 8-K filed with the Commission on
      November 10, 1998 and here incorporated by reference.

 99.5 Prior Year 2000 Readiness Disclosures

    (b)  REPORTS ON FORM 8-K. No reports on Form 8-K were filed
during the quarter covered by this Report.
                                      -38-
<PAGE>
                               SIGNATURES

         In accordance with the requirements of the Exchange Act the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                                  DAKOTA TELECOMMUNICATIONS
                                    GROUP, INC.



Date: November 16, 1998           By /S/ THOMAS W. HERTZ
                                  Thomas W. Hertz
                                  Chairman and Chief Executive Officer


Date: November 16, 1998           By  /S/ CRAIG A. ANDERSON
                                  Craig A. Anderson
                                  President and Chief Financial Officer
                                  (Principal Financial and
                                     Accounting Officer)




























                                      -39-
<PAGE>
                               EXHIBIT INDEX

EXHIBIT
NUMBER                       DOCUMENT

 2.1  Agreement and Plan of Merger dated as of October 27, 1998 by
      and among Dakota Telecommunications Group, Inc., McLeodUSA
      Incorporated and West Group Acquisition Co.  Filed as
      Exhibit 2.1 to the Company's Form 8-K filed with the
      Commission on November 10, 1998 and here incorporated by
      reference.

 3.1  Certificate of Incorporation of Dakota Telecommunications
      Group, Inc., a Delaware corporation, as amended.  Previously
      filed as Exhibit 3.1 to the Company's Quarterly Report on
      Form 10-QSB for the quarter ended June 30, 1998 and here
      incorporated by reference.

 3.2  Bylaws of Dakota Telecommunications Group, Inc., a Delaware
      corporation, as amended.

 4.1  Certificate of Incorporation of Dakota Telecommunications
      Group, Inc., a Delaware corporation, as amended.  See
      Exhibit 3.1 above.

 4.2  Bylaws of Dakota Telecommunications Group, Inc., a Delaware
      corporation, as amended.  See Exhibit 3.2 above.

 4.3  Rights Agreement, dated as of July 22, 1997, between the
      Company, and Norwest Bank Minnesota, N.A., which includes
      the form of Rights Certificate as Exhibit A and the Summary
      of Rights to Purchase Preferred Stock as Exhibit B.  Filed
      as Exhibit 4.3 to the Registrant's Report on Form 10-QSB for
      the quarter ended September 30, 1997 and here incorporated
      by reference.

 4.4  Standstill Agreement dated November 27, 1996, among Dakota
      Cooperative Telecommunications, Inc., and the Selling
      Shareholders of TCIC Communications, Inc.  Filed as Exhibit
      4.7 to the Registrant's Form S-4 Registration Statement that
      became effective on June 13, 1997 (the "S-4 Registration
      Statement") and here incorporated by reference.

 4.5  Standstill Agreement dated November 27, 1996, among Dakota
      Cooperative Telecommunications, Inc. and the Selling
      Shareholders of I-Way Partners, Inc.  Filed as Exhibit 4.8
      to the S-4 Registration Statement and here incorporated by
      reference.


<PAGE>
 4.6  Dakota Cooperative Telecommunications, Inc. Form of Option
      Agreement.  Filed as Exhibit 4.12 to the S-4 Registration
      Statement and here incorporated by reference.

 4.7  Agreement Regarding Stock (I-Way Partners, Inc.) dated
      November 27, 1996.  Filed as Exhibit 4.13 to the S-4
      Registration Statement and here incorporated by reference.

 4.8  Agreement Regarding Stock (TCIC Communications, Inc.) dated
      November 27, 1996.  Filed as Exhibit 4.14 to the S-4
      Registration Statement and here incorporated by reference.

 4.9  Dakota Telecommunications Group, Inc. Common Stock
      Certificate.  Filed as Exhibit 4.16 to the S-4 Registration
      Statement and here incorporated by reference.

 4.10 Dakota Telecom, Inc. Loan Agreement with Rural Telephone
      Finance Cooperative dated January 29, 1996.  Filed as
      Exhibit 4.34 to the S-4 Registration Statement and here
      incorporated by reference.

 4.11 Dakota Cooperative Telecommunications, Inc. and Dakota
      Telecom, Inc. Loan Agreement with Rural Telephone Finance
      Cooperative dated June 24, 1997.  Filed as an exhibit to the
      Registrant's Report on Form 10-QSB for the quarter ended
      June 30, 1997 and here incorporated by reference.

 4.12 Dakota Cooperative Telecommunications, Inc. and Dakota
      Telecom, Inc. Mortgage and Security Agreement with Rural
      Telephone Finance Cooperative dated June 24, 1997.  Filed as
      Exhibit 4.31 to the Registrant's Report on Form 10-QSB for
      the quarter ended June 30, 1997 and here incorporated by
      reference.

 4.13 Dakota Cooperative Telecommunications, Inc. and Dakota
      Telecom, Inc.  Pledge and Security Agreement with Rural
      Telephone Finance Cooperative dated June 24, 1997.  Filed as
      Exhibit 4.33 to the Registrant's Report on Form 10-QSB for
      the quarter ended June 30, 1997 and incorporated by
      reference.

 4.14 The Company has several classes of long-term debt
      instruments outstanding in addition to those described in
      Exhibits 4.11 through 4.14.  The amount of these classes of
      debt outstanding on September 30, 1998, does not exceed 10%
      of the Company's total consolidated assets.  The Company
      agrees to furnish copies of any agreement defining the
      rights of holders of any such long-term indebtedness to the
      Securities and Exchange Commission upon request.

<PAGE>
   27 Financial Data Schedule.

 99.1 Form of Voting Agreement of directors of Dakota
      Telecommunications Group, Inc.  Filed as Exhibit 99.1 to the
      Company's Form 8-K filed with the Commission on November 10,
      1998 and here incorporated by reference.

 99.2 Form of Voting Agreement of certain executive officers of
      Dakota Telecommunications Group, Inc. who are not also
      directors.  Filed as Exhibit 99.2 to the Company's Form 8-K
      filed with the Commission on November 10, 1998 and here
      incorporated by reference.

 99.3 Form of Voting Agreement of Craig A. Anderson.  Filed as
      Exhibit 99.3 to the Company's Form 8-K filed with the
      Commission on November 10, 1998 and here incorporated by
      reference.

 99.4 Press Release of McLeodUSA Incorporated and Dakota
      Telecommunications Group, Inc. dated October 28, 1998
      announcing signing of Merger Agreement.  Filed as Exhibit
      99.4 to the Company's Form 8-K filed with the Commission on
      November 10, 1998 and here incorporated by reference.

 99.5 Prior Year 2000 Readiness Disclosures