425 1 w61019e425.txt 425 FOR D&E COMMUNICATIONS Filed by D&E Communications, Inc. Pursuant to Rule 425 under the Securities Act of 1933, as amended Subject Company: Conestoga Enterprises, Inc. Commission File No.: 333-76488 Presentation to D&E Shareholders on May 23, 2002 following the 2002 Annual Shareholder Meeting. [D&E COMMUNICATIONS LOGO] MANAGEMENT UPDATE REGARDING CONESTOGA ACQUISITION FOLLOWING THE 2002 ANNUAL SHAREHOLDER MEETING MAY 23, 2002 DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS THIS PRESENTATION INCLUDES "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, REGARDING, AMONG OTHER THINGS, OUR BUSINESS STRATEGY, OUR PROSPECTS AND OUR FINANCIAL POSITION. THESE STATEMENTS CAN BE IDENTIFIED BY THE USE OF FORWARD-LOOKING TERMINOLOGY SUCH AS "BELIEVES," "ESTIMATES," "EXPECTS," "INTENDS," "MAY," "WILL," "SHOULD," "COULD" OR "ANTICIPATES" OR THE NEGATIVE OR OTHER VARIATION OF THESE OR SIMILAR WORDS, OR BY DISCUSSIONS OF STRATEGY OR RISKS AND UNCERTAINTIES. FORWARD-LOOKING STATEMENTS IN THIS PRESENTATION INCLUDE, AMONG OTHERS, STATEMENTS CONCERNING: - PROJECTIONS OF OUR FUTURE RESULTS OF OPERATIONS, CASH FLOWS OR FINANCIAL CONDITION; - MANAGEMENT'S ESTIMATES OF CERTAIN IDENTIFIED ANTICIPATED COST SAVINGS AND OTHER SYNERGIES RESULTING FROM THE CONESTOGA ACQUISITION; - OUR BUSINESS STRATEGY AND OUR ABILITY TO CAPITALIZE ON ANY OF OUR COMPETITIVE STRENGTHS; - THE DESCRIPTION OF OUR BUSINESS UPON COMPLETION OF THE CONESTOGA ACQUISITION; - OUR ABILITY TO CONSUMMATE THE PROPOSED CONESTOGA ACQUISITION AND TO REALIZE THE EXPECTED BENEFITS RELATED TO IT; AND - THE CONTINUED AVAILABILITY OF CAPITAL RESOURCES. THE EXPECTATIONS REFLECTED IN THESE FORWARD-LOOKING STATEMENTS ARE INHERENTLY SUBJECT TO RISKS, UNCERTAINTIES AND ASSUMPTIONS ABOUT US AND OUR SUBSIDIARIES AND WE CANNOT ASSURE YOU THAT SUCH EXPECTATIONS WILL PROVE TO BE CORRECT. IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE FORWARD-LOOKING STATEMENTS MADE HEREIN ARE SET FORTH IN THE PRELIMINARY OFFERING CIRCULAR WITH RESPECT TO THE NOTES IN CERTAIN OF OUR FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION AND INCLUDE, WITHOUT LIMITATION, RISKS RELATED TO THE FOLLOWING: - INCREASING COMPETITION IN THE COMMUNICATIONS INDUSTRY; - A COMPLEX AND UNCERTAIN REGULATORY ENVIRONMENT; - OUR ABILITY TO INTEGRATE CONESTOGA'S OPERATIONS INTO OUR BUSINESS; - THE IMPACT ON OUR BUSINESS IF WE ARE UNABLE TO SELL THE CONESTOGA WIRELESS BUSINESS; AND, - THE IMPACT ON OUR BUSINESS OF OUR SIGNIFICANT INDEBTEDNESS AND THE COVENANTS RELATING TO THIS INDEBTEDNESS ALL SUBSEQUENT WRITTEN AND ORAL FORWARD-LOOKING STATEMENTS ATTRIBUTABLE TO US OR PERSONS ACTING ON OUR BEHALF ARE EXPRESSLY QUALIFIED IN THEIR ENTIRETY BY THE CAUTIONARY STATEMENTS INCLUDED IN THIS PRESENTATION. WE UNDERTAKE NO OBLIGATION TO PUBLICLY UPDATE OR REVISE ANY FORWARD-LOOKING STATEMENTS, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE. IN LIGHT OF THESE RISKS, UNCERTAINTIES AND ASSUMPTIONS, THE FORWARD-LOOKING EVENTS DISCUSSED IN THIS PRESENTATION MIGHT NOT OCCUR. [D&E COMMUNICATIONS LOGO] 2 -------------------------------------------------------------------------------- STRATEGIC AND OPERATIONAL OVERVIEW -------------------------------------------------------------------------------- BUSINESS STRATEGY -------------------------------------------------------------------------------- Leading wireline-focused provider of integrated communications in our existing and surrounding markets - LEVERAGE CORE ASSETS - CAPITALIZE ON THE CONVERGENCE OF VOICE AND DATA COMMUNICATIONS TECHNOLOGIES - CAPITALIZE ON COST SAVINGS OPPORTUNITIES - CONTINUE TO FOCUS ON CUSTOMER SERVICE - INCREASE SALES OF ENHANCED TELEPHONE SERVICES - INCREASE SALES OF INTERNET SERVICES - SELECTIVELY PURSUE STRATEGIC ACQUISITIONS [D&E COMMUNICATIONS LOGO] 4 BUSINESS OVERVIEW -------------------------------------------------------------------------------- [D&E COMMUNICATIONS LOGO] [CONESTOGA ENTERPRISES INC. LOGO] RLEC - 62,104 access lines - OVER 100 YEAR HISTORY - 85,109 access lines - Line density = 273 - STABLE CASH FLOW; 50+% EBITDA - Line density = 148 MARGINS CLEC - Launched in Q4 99 - 3 MARKETS WITHIN 10 MILES; ALL - Launched in 98 MARKETS WITHIN 100 MILES OF RLEC - 8,420 access lines - 20,030 access lines - NO NEW MARKETS PLANNED INTERNET SERVICES - 11,533 dial-up subscribers - OPPORTUNITY TO MARKET TO - 1,906 DSL subscribers CONESTOGA CUSTOMERS - 2,482 DSL subscribers - 1,103 cable modem subs SYSTEMS INTEGRATION - Data & voice networking - EBITDA POSITIVE - Voice networking - Driver for convergence WIRELESS - Sold April 1, 2002 - PROACTIVE REALLOCATION OF CAPITAL - Divesting INTO CORE BUSINESS - $40 million net proceeds
[D&E COMMUNICATIONS LOGO] 5 HIGHLY COMPLEMENTARY FOOTPRINTS -------------------------------------------------------------------------------- Neighboring incumbent providers combine to create 20th largest ILEC [PENNSYLVANIA SERVICE AREA MAP GRAPHIC] PRO FORMA OPERATING STATISTICS(1) RLEC ACCESS LINES ....................................... 147,213 CLEC ACCESS LINES ....................................... 28,450 DIAL-UP ISP SUBSCRIBERS ................................. 11,701 DSL SUBSCRIBERS ......................................... 4,388 VIDEO SUBSCRIBERS (CATV) ................................ 3,317 FIBER ROUTE MILES ....................................... 829
1990-2000 POPULATION GROWTH(2) PENNSYLVANIA ............................................ 3.4% LANCASTER COUNTY ........................................ 11.3% BERKS COUNTY ............................................ 10.7%
---------- (1) As of March 31, 2002. (2) Source: U.S. Census. [D&E COMMUNICATIONS LOGO] 6 ADVANCED ALL-DIGITAL NETWORK -------------------------------------------------------------------------------- - SEAMLESS NETWORK - Common OEM vendor - Interconnection underway - ADVANCED TOPOLOGY - Digital switching - Fiber rich transport - Host / remote architecture PRO FORMA NETWORK SUMMARY
SWITCH SWITCH VENDORS HOST REMOTE COUNT ------------------------------------------------------------------------------- Northern Telecom ........................... 5 116 121 Alcatel .................................... -- 23 23 Other ...................................... -- 23 23 ---- ---- ---- Total .................................... 5 162 167
[PENNSYLVANIA SERVICE AREA MAP GRAPHIC] [D&E COMMUNICATIONS LOGO] 7 SERVICE DIFFERENTIATION --------------------------------------------------------------------------------
CUSTOMER SERVICE SALES - Personalized services - Relationship-based - Minimize automated routing - Local community presence - Single point of contact - History and reputation - 24 x 7 x 365 staffing CUSTOMER - Indigenous workforce - Modern NOC - Customer focus - Logistical coordination - order, provisioning - Business: direct and consultative and help desk - Residential: team approach - Remote monitoring and troubleshooting
[D&E COMMUNICATIONS LOGO] 8 -------------------------------------------------------------------------------- FINANCIAL OVERVIEW -------------------------------------------------------------------------------- SUMMARY PRO FORMA HISTORICAL FINANCIALS(1) -------------------------------------------------------------------------------- ($ in Millions) PRO FORMA REVENUE [BAR GRAPH] 1999 $141.0 2000 $147.6 2001 $162.1
PRO FORMA EBITDA(2) [BAR GRAPH]
PRO FORMA PRO FORMA ADJUSTMENTS COMBINED ----------- -------- 1999 $49.9 2000 $49.0 2001 $52.8 $6.2 $46.6
---------- (1) Excludes the financials of PCS ONE (sold on April 1, 2002) and Conestoga Wireless Company (assets held for sale). (2) Includes an approximately $3.6 million anticipated to result from headcount reductions and an approximately $1.0 million anticipated to result from other operating and corporate expense savings. Also adjusted for anticipated (a) non-recurring costs, (b) non-cash compensation expense and (c) retention compensation. [D&E COMMUNICATIONS LOGO] 10 PRO FORMA RLEC REVENUE AND EBITDA -------------------------------------------------------------------------------- ($ in Millions) RLEC generates significant recurring cash flows [BAR GRAPH]
Revenue EBITDA ------- ------ 1998 $84.3 $43.8 1999 $89.1 $47.6 2000 $92.5 $49.1 2001 $98.8 $51.8
[D&E COMMUNICATIONS LOGO] 11 PRO FORMA SEGMENT REVENUE AND EBITDA(1) -------------------------------------------------------------------------------- ($ in Millions) CLEC [BAR GRAPH]
Revenue EBITDA ------- ------ Q1 2001 $7.1 $(0.7) Q2 2001 $7.4 $(1.0) Q3 2001 $7.5 $(1.4) Q4 2001 $7.5 $(1.2) Q1 2002 $8.1 $(0.4)
SYSTEMS INTEGRATION [BAR GRAPH]
Revenue EBITDA ------- ------ Q1 2001 $8.8 $0.5 Q2 2001 $9.1 $0.1 Q3 2001 $9.8 $0.6 Q4 2001 $9.2 $0.2 Q1 2002 $8.6 $0.2
INTERNET SERVICE(2) [BAR GRAPH]
Revenue EBITDA ------- ------ Q1 2001 $0.3 $(0.6) Q2 2001 $0.4 $(0.5) Q3 2001 $0.6 $(0.5) Q4 2001 $0.7 $(0.3) Q1 2002 $0.9 $(0.2)
---------- (1) Does not adjust for intercompany transactions. (2) Internet Services launched in Q4 2000. [D&E COMMUNICATIONS LOGO] 12 -------------------------------------------------------------------------------- TRANSACTION OVERVIEW -------------------------------------------------------------------------------- TRANSACTION SUMMARY(1) -------------------------------------------------------------------------------- ($ in Millions, except per share data) SUMMARY FINAL CALCULATIONS (1) D&E Average Trading Price $ 15.56 Conversion Ratio ($33.00 / $15.56) 2.1208 Shares to be Issued 7,865,925 Stock Consideration $ 122.4 Cash Consideration $ 149.6 --------------- Total Equity Consideration $ 272.0 Assumed Conestoga Debt $ 80.3 --------------- Total Transaction Value $ 352.3 Price per Line $ 3,351.1
---------- (1) Assumes a May 24, 2002 closing date and 55% of Conestoga common stock is converted into cash consideration and 45% is converted into D&E common stock. [D&E COMMUNICATIONS LOGO] 14 -------------------------------------------------------------------------------- D&E'S REGISTRATION STATEMENT ON FORM S-4, WHICH INCLUDES THE JOINT PROXY STATEMENT OF D&E AND CONESTOGA AND THE PROSPECTUS RELATED TO D&E COMMON SHARES, WAS DECLARED EFFECTIVE BY THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 24, 2002. INVESTORS AND SECURITY HOLDERS MAY OBTAIN A FREE COPY OF THE REGISTRATION STATEMENT AT THE COMMISSION'S WEB SITE AT WWW.SEC.GOV. THE DOCUMENTS FILED WITH THE COMMISSION BY D&E MAY ALSO BE OBTAINED FOR FREE FROM D&E BY DIRECTING A REQUEST TO D&E, 124 EAST MAIN STREET, EPHRATA, PENNSYLVANIA 17522, ATTN: INVESTOR RELATIONS. CERTAIN OF THESE DOCUMENTS MAY ALSO BE ACCESSED ON D&E'S WEB SITE AT WWW.DECOMMUNICATIONS.COM WHEN THEY BECOME AVAILABLE. THE REGISTRATION STATEMENT AND THE DEFINITIVE JOINT PROXY STATEMENT/PROSPECTUS AND OTHER RELEVANT DOCUMENTS SHOULD BE READ CAREFULLY, BECAUSE THEY CONTAIN IMPORTANT INFORMATION. [D&E COMMUNICATIONS LOGO] 15