D&E Communications, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations

(in thousands, except per-share amounts) (unaudited)			Three Months Ended June 30,						Six Months Ended June 30,
			2003			2002			2003			2002
Total operating revenues			$	43,287		$	26,830		$	85,372		$	46,407
Total operating expenses				36,820			27,521			73,702			46,861
Operating income (loss)				6,467			(691	)		11,670			(454	)
Total other income (expense)				(5,212	)		(5,555	)		(9,629	)		(6,731	)
Income (loss) from continuing operations before income taxes and dividends on utility preferred stock				1,255			(6,246	)		2,041			(7,185	)
Income taxes (benefit)				428			(2,288	)		743			(2,437	)
Dividends on utility preferred stock				17			17			33			33
Total income taxes and dividends on utility preferred stock				445			(2,271	)		776			(2,404	)
Income (loss) from continuing operations				810			(3,975	)		1,265			(4,781	)
Discontinued operations:
	Gain on disposal of discontinued D&E Wireless segment, net of operating losses during phase-out period and net of income taxes of $29,199			—			55,785			—			55,785
	Loss from operations of discontinued Paging business, net of income tax benefit of $24, $3, $27 and $5			(46	)		(6	)		(53	)		(9	)
Cumulative effect of change in accounting principle, net of income taxes of $177				—			—			260			—
Net Income			$	764		$	51,804		$	1,472		$	50,995
Weighted average common shares outstanding				15,453			10,722			15,437			9,047
Weighted average common shares and equivalents outstanding				15,498			10,722			15,480			9,047
Basic and Diluted Earnings (Loss) per Common Share
	Income (loss) from continuing operations		$	0.05		$	(0.37	)	$	0.08		$	(0.53	)
	Income from discontinued operations			—			5.20			—			6.17
	Cumulative effect of accounting change			—			—			0.02			—
		Net income per common share	$	0.05		$	4.83		$	0.10		$	5.64
Dividends per common share			$	0.13		$	0.13		$	0.25		$	0.25

Officers		Board of Directors
Anne B. Sweigart	Robert M. Lauman	John Amos	G. William Ruhl
Chairman & President	Vice Chairman &	Thomas H. Bamford	Steven B. Silverman
	Senior Executive Vice President	Paul W. Brubaker	W. Garth Sprecher
		Ronald E. Frisbie	Anne B. Sweigart
G. William Ruhl	Albert H. Kramer	Robert A. Kinsley	D. Mark Thomas
Chief Executive Officer	Senior Vice President, Operations	Robert M. Lauman	Richard G. Weidner
Thomas E. Morell	W. Garth Sprecher
Senior Vice President,	Senior Vice President & Secretary
Chief Financial Officer
&Treasurer

D&E Communications, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets

(in thousands, except share amounts) (unaudited)		June 30,			December 31,
		2003			2002
Assets
Current assets		$	46,877		$	46,885
Investments			6,549			6,455
Property, plant and equipment			318,418			310,456
	Less accumulated depreciation		123,167			109,351
			195,251			201,105
Other assets
	Assets held for sale		—			6,665
	Goodwill		147,488			147,488
	Intangible assets, net of amortization		175,865			178,964
	Other		13,089			14,256
			336,442			347,373
Total assets		$	585,119		$	601,818
Liabilities and Shareholders’ Equity
Current liabilities		$	33,547		$	50,139
Long-term debt			244,630			244,966
Other liabilities			106,766			104,664
Preferred stock of utility subsidiary, series A 4 1/2%			1,446			1,446
Shareholders’ Equity
	Common stock, par value $0.16, authorized shares 30,000,000		2,524			2,512
	Outstanding shares: 15,492,305 at June 30, 2003; 15,413,640 at December 31, 2002
	Additional paid-in capital		158,856			158,101
	Accumulated other comprehensive income (loss)		(7,327	)		(7,071	)
	Retained earnings		49,959			52,343
	Treasury stock at cost, 306,913 shares at June 30, 2003; 306,910 at December 31, 2002		(5,282	)		(5,282	)
			198,730			200,603
Total liabilities and shareholders’ equity		$	585,119		$	601,818

D&E Communications, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows

(in thousands) (unaudited)		Six Months Ended June 30,
		2003			2002
Cash flows from operating activities of continuing operations		$	20,021		$	2,721
Net cash provided by (used in) investing activities from continuing operations			1,520			(167,623	)
Net cash provided by (used in) financing activities from continuing operations			(2,365	)		95,963
	Cash provided by (used in) continuing operations		19,176			(68,939	)
Net cash provided by (used in) discontinued operations			(20,553	)		75,475
Increase (decrease) in cash and cash equivalents			(1,377	)		6,536
Cash and cash equivalents
	Beginning of period		15,514			615
	End of period	$	14,137		$	7,151

Dear Shareholder,

The second quarter of 2003 marked the one-year anniversary of the merger of D&E Communications, Inc., and Conestoga Enterprises, Inc. I am pleased to report that the integration of our company is proceeding as planned.

Our three local telephone companies continue to provide a solid base for our business despite a decline in wireline phones, a national trend that has emerged in recent years. Although the line count in our three phone companies is gradually declining, the loss has been less than that experienced by other companies in our industry. Several large telephone companies recently reported a decline in access lines of 3.5 percent or more for the 12 months ending June 30, 2003; D&E’s RLEC line count declined less than 2 percent during this period.

Meanwhile, we have seen solid growth in lines in our edge-out markets (CLEC) and in DSL subscribers and web hosting customers. Below is a summary of changes in line counts and subscribers during the first two quarters of 2003:

	June 30		Dec. 31		Change
	2003		2002
RLEC Lines		144,374		145,310		-0.6	%
CLEC Lines		34,212		30,200		+13.3	%
DSL Subscribers		6,385		5,615		+13.7	%
Dial-Up Internet Subscribers		13,022		12,652		+2.9	%
Web Hosting Customers		759		651		+16.6	%

In the second quarter of 2003, we reported several developments related to our competitive communications services. For example, we announced that our contract to provide technology services in more than 550 Wawa convenience stores is continuing. We also launched an affinity program with the Harrisburg Regional Chamber of Commerce, in which our company offers special pricing on communications services to businesses that are members of the Chamber. This program is meant to

enhance our presence in Pennsylvania’s state capital, one of our edge-out (CLEC) markets.

Revenues for the second quarter of 2003 were $43 million, compared to $27 million during the same quarter last year. Financial results for Conestoga operations are reflected in the full quarter for 2003, but were only included in last year’s results after D&E acquired Conestoga on May 24, 2002. Net income for second-quarter 2003 was $764,000, compared to $52 million in the same period of 2002. Earnings per common share were $0.05, compared to $4.83 per share in the same period last year. Net income and earnings per share in second-quarter 2002 were affected by the sale of our interest in the PCS ONE wireless operation, which resulted in a one-time, after-tax gain of approximately $56 million, or $5.20 per share.

We have also continued our focus on our capital program and returning a portion of our profits to shareholders. During the first six months of 2003, we spent $8 million primarily for computer equipment and software for our billing system upgrade and Internet e-mail system, outside plant facilities and network infrastructure. We declared a quarterly dividend of 12.5 cents per share, payable September 15, 2003, to shareholders of record as of September 2, 2003.

Finally, as previously announced, at the end of the second quarter D&E Communications was added to the Russell 3000 Index of the nation’s largest publicly-traded stocks, based on market capitalization. I hope that each of you is as pleased as I am about our company reaching this milestone.

Sincerely,
Anne B. Sweigart
Chairman & President

Any forward-looking statements concerning the development of our business are based upon the current beliefs and expectations of D&E’s management. Such statements are not guarantees of future performance, and various risks, uncertainties, and other factors could cause actual results to differ materially from our expectations. Factors that could adversely affect our business and financial performance are contained in our past and future filings with the U.S. Securities and Exchange Commission. D&E undertakes no obligation to revise or update its forward-looking statements.