10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 10-Q

(Mark One)
x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended September 30, 2010
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from     to     .

Commission File Number 0-3024

NEW ULM TELECOM, INC.

(Exact name of registrant as specified in its charter)

Minnesota	41-0440990
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

27 North Minnesota Street
New Ulm, Minnesota 56073
(Address of principal executive offices and zip code)

(507) 354-4111
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definition of “large accelerated filer, accelerated filer, and smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
o Large accelerated filer o Accelerated filer o Non-accelerated filer x Smaller reporting company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

The total number of shares of the registrant’s common stock outstanding as of November 12, 2010: 5,115,435.

1

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION
Item 1	Financial Statements	3-7
	Consolidated Statements of Income (unaudited) for the Three and Nine Months Ended September 30, 2010 and 2009	3
	Consolidated Balance Sheets (unaudited) as of September 30, 2010 and December 31, 2009	4-5
	Consolidated Statements of Cash Flows (unaudited) for the Nine Months Ended September 30, 2010 and 2009	6
	Consolidated Statements of Stockholders’ Equity (unaudited) for the Year Ended December 31, 2009 and for the Nine Months ended September 30, 2010	7
	Condensed Notes to Consolidated Financial Statements (unaudited)	8-19
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19-31
Item 3	Quantitative and Qualitative Disclosures About Market Risk	31
Item 4	Controls and Procedures	31-32
PART II – OTHER INFORMATION
Item 1	Legal Proceedings	32
Item 1A	Risk Factors	32
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	32
Item 3	Defaults Upon Senior Securities	32
Item 4	Removed and Reserved	32
Item 5	Other Information	32
Item 6	Exhibits	32
	Signatures	33
	Exhibits	34-38

2

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

NEW ULM TELECOM, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2010			2009			2010			2009
OPERATING REVENUES:
Local Service	$	1,720,909		$	1,774,231		$	5,048,128		$	5,347,210
Network Access		3,448,325			3,330,982			10,079,589			10,244,409
Video		1,217,870			1,119,291			3,423,056			3,243,936
Data		612,121			688,261			1,788,461			1,904,336
Long Distance		183,176			181,883			523,284			577,687
Cellular		16,892			78,547			43,415			400,462
Other Non-Regulated		946,528			857,327			2,698,394			3,033,540
Total Operating Revenues		8,145,821			8,030,522			23,604,327			24,751,580
OPERATING EXPENSES:
Plant Operations (Excluding Depreciation and Amortization)		1,418,725			1,216,401			4,171,233			3,790,859
Cost of Video		1,073,610			902,891			3,060,921			2,781,986
Cost of Data		255,287			314,264			732,294			1,045,812
Cost of Other Nonregulated Services		365,961			477,282			805,954			1,652,047
Depreciation and Amortization		2,448,099			2,382,610			7,387,098			7,104,867
Selling, General and Administrative		1,560,605			1,604,955			4,711,784			5,095,238
Total Operating Expenses		7,122,287			6,898,403			20,869,284			21,470,809
OPERATING INCOME		1,023,534			1,132,119			2,735,043			3,280,771
OTHER (EXPENSE) INCOME
Interest Expense		(696,411	)		(752,723	)		(2,084,151	)		(2,224,560	)
Interest Income		3,244			(5,781	)		87,652			93,370
Interest During Construction		17,066			64,037			30,870			163,577
Equity in Earnings of Hector Investment		154,241			167,550			438,870			540,280
Loss on Settlement of HTC Escrow		—			(506,993	)		—			(506,993	)
Gain on Sale of Equity Investments		4,338			941,766			4,338			941,766
CoBank Patronage Dividends		—			—			513,436			556,318
Other Investment Income		95,315			(47,601	)		172,820			(37,148	)
Total Other Income (Expense)		(422,207	)		(139,745	)		(836,165	)		(473,390	)
INCOME BEFORE INCOME TAXES		601,327			992,374			1,898,878			2,807,381
INCOME TAXES		270,547			478,015			753,269			1,265,639
NET INCOME	$	330,780		$	514,359		$	1,145,609		$	1,541,742
BASIC AND DILUTED NET INCOME PER SHARE	$	0.06		$	0.10		$	0.22		$	0.30
DIVIDENDS PER SHARE	$	0.08		$	0.08		$	0.24		$	0.28
WEIGHTED AVERAGE SHARES OUTSTANDING		5,115,435			5,115,435			5,115,435			5,115,435

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

3

NEW ULM TELECOM, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)

ASSETS

	September 30, 2010		December 31, 2009
CURRENT ASSETS:
Cash and Cash Equivalents	$	2,395,627	$	2,526,490
Receivables, Net of Allowance for Doubtful Accounts of $775,746 and $549,000		1,219,525		1,696,270
Income Taxes Receivable		908,585		2,355,672
Materials, Supplies, and Inventories		1,575,665		1,295,638
Deferred Income Taxes		948,309		953,968
Prepaid Expenses		710,028		255,698
Total Current Assets		7,757,739		9,083,736
INVESTMENTS & OTHER ASSETS:
Goodwill		29,707,100		29,516,324
Intangibles		22,811,316		24,216,886
Hector Investment		19,937,890		19,392,310
Other Investments		4,070,675		3,904,188
Other Assets		256,988		354,662
Total Investments and Other Assets		76,783,969		77,384,370
PROPERTY, PLANT & EQUIPMENT:
Telecommunications Plant		91,492,858		88,548,209
Other Property & Equipment		5,094,855		4,669,052
Video Plant		6,749,797		5,580,260
Total Property, Plant and Equipment		103,337,510		98,797,521
Less Accumulated Depreciation		66,801,557		61,030,271
Net Property, Plant & Equipment		36,535,953		37,767,250
TOTAL ASSETS	$	121,077,661	$	124,235,356

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

4

NEW ULM TELECOM, INC.
CONSOLIDATED BALANCE SHEETS (continued)
(Unaudited)

LIABILITIES AND STOCKHOLDERS’ EQUITY

	September 30, 2010			December 31, 2009
CURRENT LIABILITIES:
Current Portion of Long-Term Debt	$	3,332,965		$	2,957,965
Accounts Payable		1,230,296			1,924,806
Other Accrued Taxes		204,697			187,932
Financial Derivative Instruments		156,372			—
Deferred Compensation		674,927			694,511
Other Accrued Liabilities		1,969,380			1,626,950
Total Current Liabilities		7,568,637			7,392,164
LONG-TERM DEBT, Less Current Portion		44,195,394			46,793,859
NONCURRENT LIABILITIES:
Loan Guarantees		489,708			514,666
Deferred Income Taxes		13,493,970			13,709,382
Other Accrued Liabilities		92,617			109,657
Financial Derivative Instruments		2,427,648			2,036,361
Deferred Compensation		1,230,552			1,798,726
Total Noncurrent Liabilities		17,734,495			18,168,792
COMMITMENTS AND CONTINGENCIES:		—			—
STOCKHOLDERS’ EQUITY:
Preferred Stock - $1.66 Par Value, 10,000,000 Shares Authorized, 0 Shares Issued and Outstanding		—			—
Common Stock - $1.66 Par Value, 90,000,000 Shares Authorized, 5,115,435 Shares Issued and Outstanding		8,525,725			8,525,725
Accumulated Other Comprehensive Income (Loss)		(2,071,046	)		(1,851,735	)
Retained Earnings		45,124,456			45,206,551
Total Stockholders’ Equity		51,579,135			51,880,541
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	121,077,661		$	124,235,356

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

5

NEW ULM TELECOM, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

	Nine Months Ended
	September 30, 2010			September 30, 2009
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	1,145,609		$	1,541,742
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Depreciation and Amortization		7,416,405			7,134,328
Gain on Sale of Equity Investments		(4,338	)		(941,766	)
Undistributed Earnings of Hector Investment		(438,870	)		(540,280	)
Noncash Patronage Refund		(179,703	)		(194,711	)
Distributions from Equity Investments		—			235,251
Loss on Settlement of HTC Escrow		—			506,993
Changes in Assets and Liabilities:
Receivables		478,761			539,754
Income Taxes Receivable		1,447,087			(1,240,915	)
Inventories		(256,069	)		172,607
Prepaid Expenses		(454,330	)		(39,644	)
Deferred Charges		—			30,297
Accounts Payable		(462,631	)		236,502
Accrued Income Taxes		—			(1,570,860	)
Other Accrued Taxes		16,765			28,328
Other Accrued Liabilities		325,390			(620,729	)
Deferred Income Tax		78,237			462,109
Deferred Compensation		(587,758	)		(733,087	)
Net Cash Provided by Operating Activities		8,524,555			5,005,919
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to Property, Plant, and Equipment, Net		(3,596,845	)		(4,033,768	)
Proceeds from Sale of Equity Investments		4,338			1,890,000
Acquisition of Glencoe CATV System		(1,600,000	)		—
Other, Net		(11,742	)		(244,852	)
Net Cash Used in Investing Activities		(5,204,249	)		(2,388,620	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal Payments of Long-Term Debt		(2,223,465	)		(2,294,004	)
Issuance of Long-Term Debt		—			400,000
Dividends Paid		(1,227,704	)		(1,432,322	)
Net Cash Used in Financing Activities		(3,451,169	)		(3,326,326	)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(130,863	)		(709,027	)
CASH AND CASH EQUIVALENTS at Beginning of Period		2,526,490			3,320,510
CASH AND CASH EQUIVALENTS at End of Period	$	2,395,627		$	2,611,483
Supplemental cash flow information:
Cash paid for interest	$	2,055,901		$	2,326,181
Net cash (received) paid for income taxes	$	(795,000	)	$	3,670,090

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

6

NEW ULM TELECOM, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)

YEAR ENDED DECEMBER 31, 2009, AND
NINE MONTHS ENDED SEPTEMBER 30, 2010

					Accumulated Other Comprehensive Income (Loss)
	Common Stock							Retained Earnings			Total Equity
	Shares		Amount
BALANCE on December 31, 2008		5,115,435	$	8,525,725	$	(2,229,103	)	$	45,405,280		$	51,701,902
Net Income									1,642,828			1,642,828
Dividends									(1,841,557	)		(1,841,557	)
Unrealized Gains of Equity Method Investee						175,900						175,900
Unrealized Gains on Interest Rate Swaps, Net of Deferred Income Taxes						201,468						201,468
BALANCE on December 31, 2009		5,115,435		8,525,725		(1,851,735	)		45,206,551			51,880,541
Net Income									1,145,609			1,145,609
Dividends									(1,227,704	)		(1,227,704	)
Unrealized Gains of Equity Method Investee						106,710						106,710
Unrealized Losses on Interest Rate Swaps, Net of Deferred Income Taxes						(326,021	)					(326,021	)
BALANCE on September 30, 2010		5,115,435	$	8,525,725	$	(2,071,046	)	$	45,124,456		$	51,579,135

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

7

NEW ULM TELECOM, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2010 (Unaudited)

Note 1 – Basis of Presentation and Consolidation

The accompanying unaudited condensed consolidated financial statements of New Ulm Telecom, Inc. (NU Telecom) and its subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) for interim financial information and with the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and disclosures normally included in annual financial statements prepared in accordance with GAAP have been omitted or condensed pursuant to such rules and regulations. In the opinion of management, the unaudited condensed consolidated financial statements reflect all adjustments (consisting only of normal and recurring accruals) considered necessary for the fair presentation of the financial statements and present fairly the results of operations, financial position and cash flows for the interim periods presented as required by Regulation S-X, Rule 10-01. These unaudited interim condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and notes thereto contained in our Annual Report on Form 10-K for the year ended December 31, 2009.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures at the date of the financial statements and during the reporting period. Actual results could differ from these estimates. The results of operations for the interim periods presented are not necessarily indicative of the results that may be expected for the fiscal year as a whole or any other interim period.

Our consolidated financial statements include NU Telecom and its subsidiaries. All inter-company transactions have been eliminated from the consolidated financial statements.

Revenue Recognition

We recognize revenue when (i) persuasive evidence of an arrangement exists, (ii) delivery of the product has occurred or a service has been provided, (iii) the price is fixed or determinable and (iv) collectability is reasonably assured.

Revenues are earned from our customers primarily through the connection to our local network, commercial television programming and Internet services (both dial-up and high-speed). Revenues for these services are billed based on set rates for monthly service or based on the amount of time the customer is utilizing our facilities. The revenue for these services is recognized when the service is rendered.

Revenues earned from interexchange carriers (IXCs) accessing our network are based on the utilization of our network by these carriers as measured by minutes of use on the network by the individual carriers. Revenues are billed at tariffed access rates for both interstate and intrastate calls. Revenues for these services are recognized based on the period the access is provided.

8

Interstate access rates are established by a nationwide pooling of companies known as the National Exchange Carriers Association (NECA). The Federal Communications Commission (FCC) established NECA in 1983 to develop and administer interstate access service rates, terms and conditions. Revenues are pooled and redistributed on the basis of a company’s actual or average costs. NU Telecom settlements from the pools are based on its actual costs to provide service, while the settlements for NU Telecom subsidiaries – Western Telephone Company, Peoples Telephone Company, and Hutchinson Telephone Company (HTC) are based on nationwide average schedules. Access revenues for NU Telecom include an estimate of a cost study each year that is trued-up subsequent to the end of any given year. Our management believes the estimates included in our preliminary cost study are reasonable. We cannot predict the future impact that industry or regulatory changes will have on interstate access revenues.

Intrastate access rates are filed with state regulatory commissions in Minnesota and Iowa.

We derive revenues from system sales and services through the sale, installation and servicing of communication systems. In accordance with Accounting Standards Codification (ASC) Topic 605 – Revenue Recognition, these deliverables are accounted for separately. We recognize revenue from customer contracts for sales and installations using the completed-contract method, which recognizes income when the contract is substantially complete. We recognize rental revenues over the rental period.

Cost of Services (excluding depreciation and amortization)

Cost of services includes all costs related to delivery of communication services and products. These operating costs include all costs of performing services and providing related products including engineering, network monitoring, and transport cost.

Selling, General and Administrative Expenses

Selling, general and administrative expenses include direct and indirect selling expenses, customer service, billing and collections, advertising and all other general and administrative costs associated with the operations of the business.

Depreciation and Amortization Expense

Depreciation expense is computed using principally the straight-line method based on estimated service or remaining useful lives of various classes of depreciable assets. Amortization expense is computed using the straight-line method based on the lives of identified finite-lived intangible assets.

Income Taxes

The provision for income taxes consists of an amount for taxes currently payable and a provision for tax consequences deferred to future periods. Deferred income taxes are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities, and their respective tax bases. Significant components of our deferred taxes arise from differences (i) in the basis of property, plant and equipment due to the use of accelerated depreciation methods for tax purposes, as well as (ii) in partnership investments and intangible assets due to the difference between book and tax bases. Our effective income tax rate is normally higher than the United States tax rate due to state income taxes and permanent differences.

9

We account for income taxes in accordance with ASC Topic 740 – Income Taxes. As required by ASC Topic 740, we recognize the financial statement benefit of tax positions only after determining that the relevant tax authority would more-likely-than-not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. On April 29, 2010, the Minnesota Department of Revenue completed its audit of our state tax returns for the years 2006, 2007 and 2008. Following the completion of that audit, we recognized approximately $124,000 in net tax benefits in April 2010 to eliminate accrued income taxes related to gains on our Midwest Wireless holdings sold in 2006. The above mentioned tax examination also resulted in an additional state tax liability plus interest of $22,944.

Per ASC Topic 740, we had approximately $36,300 of unrecognized tax benefits at September 30, 2010 that, if recognized, would favorably affect the income tax provision when recorded.

We are primarily subject to United States, Minnesota and Iowa income taxes. Tax years subsequent to 2005 remain open to examination by federal and state tax authorities. Our policy is to recognize interest and penalties related to income tax matters as income tax expense. At December 31, 2009 we had $32,804 accrued for interest or penalties related to income tax matters and at September 30, 2010 we had $6,567 accrued for interest or penalties related to income tax matters.

Recent Accounting Developments

Effective February 10, 2010 we adopted Accounting Standards Update (ASU) 2010-09 – Subsequent Events, which provides amendments to ASC Topic 855 – Subsequent Events, removing the requirement for SEC filers to disclose the date through which an entity has evaluated subsequent events. The adoption of ASU 2010-09 did not have a significant impact on our disclosures.

Issued in January, 2010 ASU 2010-06 – Fair Value Measures and Disclosures, provides amendments to ASC Topic 820 – Fair Value Measurements and Disclosures, that will provide more robust disclosures about (i) the different classes of assets and liabilities measured at fair value, (ii) the valuation techniques and inputs used, (iii) the activity in level 3 fair value measurement and (iv) the transfers between levels 1, 2 and 3. ASU 2010-06 is effective for fiscal years beginning after December 15, 2010. We do not expect the adoption of ASU 2010-06 to have a material effect on our financial statements or our disclosures.

Issued in October, 2009 ASU 2009-13 – Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements, provides guidance for separating consideration in multiple-deliverable arrangements. The guidance will be effective for us January 11, 2011. We are currently assessing the impact of this guidance on our consolidated financial statements.

We reviewed all other significant newly issued accounting pronouncements and determined they are either not applicable to our business or that no material effect is expected on our financial position and results of operations.

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Note 2 – Noncash Investing Activities

Noncash investing activities included $111,448 and $426,740 for the periods ended September 30, 2010 and 2009, respectively. These activities related to plant and equipment additions placed in service during the first nine months of 2010 and 2009, respectively, and are recorded in our accounts payable at September 30, 2010 and 2009, respectively.

Note 3 – Fair Value Measurements

We have adopted the rules prescribed under ASC Topic 820 for our financial assets and liabilities. Our adoption of ASC Topic 820 did not affect our financial position, results of operations, liquidity or disclosures, as we did not have any financial assets or liabilities that were measured at fair value on a recurring basis as of January 1, 2008. In accordance with ASC Topic 820, we elected to defer the adoption for all non-financial assets and liabilities that are not recognized or disclosed at fair value in the financial statements on a recurring basis until January 1, 2009. This includes goodwill and non-financial long-lived assets that are measured at fair value in impairment testing. ASC Topic 820 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities that are required to be recorded at fair value, we consider (i) the principal or most advantageous market in which we would transact business related to those assets and liabilities, and (ii) the market-based risk measurements or assumptions, such as inherent risk, transfer restrictions and credit risk that market participants would use in pricing the asset or liability.

ASC Topic 820 includes a fair value hierarchy that is intended to increase consistency and comparability in fair value measurements and related disclosures. The fair value hierarchy is based on inputs to valuation techniques used to measure fair value that are either observable or unobservable. Observable inputs reflect assumptions market participants would use in pricing an asset or liability based on market data obtained from independent sources, while unobservable inputs reflect a reporting entity’s pricing based upon its own market assumptions. The fair value hierarchy consists of the following three levels:

Level 1:	Inputs are quoted prices in active markets for identical assets or liabilities.
Level 2:	Inputs are quoted prices for similar assets or liabilities in an active market; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable, and market–corroborated inputs that are derived principally from or corroborated by observable market data.
Level 3:	Inputs are derived from valuation techniques in which one or more significant inputs or value drivers are unobservable.

In 2008, we entered into interest rate swaps with our lender CoBank, ACB to manage our cash flow exposure to fluctuations in interest rates. These instruments were designated as cash flow hedges and were effective at mitigating the risk of fluctuations on interest rates in the market place. Any gains or losses related to changes in the fair value of these derivatives are accounted for as a component of accumulated other comprehensive income (loss) for as long as the hedge remains effective.

11

The fair value of our interest rate swap agreements was determined based on Level 2 inputs.

Other Financial Instruments

Equity Investments - It is not practicable to estimate fair value for investments in companies carried on the cost basis due to a lack of quoted market prices. We did, however, evaluate the fair value of our investments in our companies at December 31, 2009 using a combination of a discounted cash flow model and a market-based approach. The assumptions used in the estimates of fair value are based on a combination of historical results and trends, new industry developments, future cash flow projections as well as relevant comparable company earnings multiples for the market-based approach. It is our opinion that the carrying value of our investments in our companies approximates the fair market value.

Debt – We estimate the fair value of our long-term debt based on the discounted future cash flows we expect to pay using current rates of borrowing for similar types of debt. Fair value of the debt approximates carrying value.

Other Financial Instruments - Our financial instruments also include cash equivalents, trade accounts receivable and accounts payable for which the current carrying amounts approximate fair market value.

Note 4 – Goodwill and Intangible Assets

We account for goodwill and other intangible assets under ASC Topic 350 – Intangibles – Goodwill and Other. Under the provisions of this accounting standard, goodwill and intangible assets with indefinite useful lives are not amortized, but are instead tested for impairment (i) on at least an annual basis and (ii) when changes in circumstances indicate that the fair value of goodwill may be below its carrying value.

As required by ASC Topic 350, we do not amortize goodwill and other intangible assets with indefinite lives, but test for impairment on an annual basis or earlier if an event occurs or circumstances change that would reduce the fair value of a reporting unit below its carrying amount. These circumstances include, but are not limited to (i) a significant adverse change in the business climate, (ii) unanticipated competition or (iii) an adverse action or assessment by a regulator. Determining impairment involves estimating the fair value of a reporting unit using a combination of (i) the income or discounted cash flows approach and (ii) the market approach that utilizes comparable companies’ data. If the carrying amount of a reporting unit exceeds its fair value, then the amount of the impairment loss must be measured. The impairment loss is calculated by comparing the implied fair value of the reporting unit’s goodwill to its carrying amount. In calculating the implied fair value of the reporting unit’s goodwill, the fair value of the reporting unit is allocated to all of the assets and liabilities of the reporting unit. The excess of the fair value of a reporting unit over the amount assigned to its other assets and liabilities is the implied value of goodwill. We recognize impairment loss when the carrying amount of goodwill exceeds its implied fair value. We completed our annual impairment test for acquired goodwill in the fourth quarter of 2009, which resulted in no impairment charges to goodwill.

Our intangible assets subject to amortization consist of acquired customer relationships, regulatory rights and a noncompetition agreement. As of December 31, 2009 our management determined that our trade name intangible was no longer an indefinite-lived intangible asset due to the rebranding of HTC’s products and services. Management anticipates that this rebranding process will take approximately three years to complete. We anticipate an additional charge to amortization expense of $266,667 per year, over the three years beginning in 2010, due to this rebranding process.

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We amortize intangible assets with finite lives over their respective estimated useful lives. Identifiable intangible assets that are subject to amortization are evaluated for impairment. The components of our identified intangible assets are as follows:

			September 30, 2010				December 31, 2009
	Useful Lives		Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Definite-Lived Intangible Assets
Customers Relationships		14-15 yrs	$	19,378,445	$	3,793,807	$	19,230,785	$	2,760,566
Regulatory Rights		15 yrs		4,000,000		733,329		4,000,000		533,333
Non-Competition Agreement		5 yrs		800,000		439,993		800,000		320,000
Trade Name		3 yrs		800,000		200,000		800,000		—
Indefinitely-Lived Intangible Assets
Video Franchise				3,000,000		—		3,000,000		—
Total			$	27,978,445	$	5,167,129	$	27,830,785	$	3,613,899
						—
Net Identified Intangible Assets					$	22,811,316			$	24,216,886

We periodically reassess the carrying value, useful lives and classifications of identifiable assets. Amortization expense related to the definite-lived intangible assets was $1,553,230 and $1,350,181 for the nine months ended September 30, 2010 and 2009, respectively.

Our total estimated amortization expense for the remaining three months of 2010 and the five years subsequent to 2010 is as follows:

• (October 1 – December 31) - $519,339

• 2011 - $2,066,814

• 2012 - $2,066,814

• 2013 - $1,640,147

• 2014 - $1,640,147

• 2015 - $1,640,147

Note 5 – Secured Credit Facility

In connection with our acquisition of HTC, NU Telecom entered into a credit facility with CoBank, ACB. Under this credit facility, NU Telecom entered into Master Loan Agreements (MLA) and a series of supplements to those respective MLAs.

New Ulm and its respective subsidiaries also entered into security agreements under which substantially all of the assets of NU Telecom and its respective subsidiaries have been pledged to CoBank, ACB as collateral. In addition, NU Telecom and its respective subsidiaries have guaranteed all obligations under the credit facility.

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The loan agreements also put restrictions on the ability of NU Telecom to pay cash dividends to its shareholders. NU Telecom is allowed to pay dividends (a) (i) in an amount up to $2,050,000 in any year and (ii) in any amount if NU Telecom’s “Total Leverage Ratio,” that is, the ratio of its “Indebtedness” to “EBITDA” (in each case as defined in the loan documents), is equal to or less than 3.50 to 1.00 and (b) in either case, if NU Telecom is not in default or potential default under the loan agreements.

As of September 30, 2010 we were in compliance with the financial ratios in the loan agreements.

As described in Note 6 – “Interest Rate Swaps” to the Consolidated Financial Statements of this Quarterly Report on Form 10-Q, we have entered into interest rate swaps that effectively fix our interest rates and cover $45.0 million of our debt at a weighted average rate of 5.72%, as of September 30, 2010. The additional $8.5 million available under the credit facility remains subject to variable interest rates, with an outstanding balance of $2.5 million at an effective weighted average interest rate of 2.7%, as of September 30, 2010.

Note 6 – Interest Rate Swaps

We assess interest rate cash flow risk by continually identifying and monitoring changes in interest rate exposures that may adversely affect expected future cash flows and by evaluating hedging opportunities.

We generally use variable-rate debt to finance our operations, capital expenditures and acquisitions. These variable-rate debt obligations expose us to variability in interest payments due to changes in interest rates. The terms of our credit facilities with CoBank, ACB require that we enter into interest rate agreements designed to protect us against fluctuations in interest rates, in an aggregate principal amount and for a duration determined under the credit facility.

To meet this objective, we entered into Interest Rate Swap Agreements with CoBank, ACB dated February 26, 2008. Under these Interest Rate Swap Agreements and subsequent swaps that each cover a specified notional dollar amount, we have changed the variable-rate cash flow exposure on the debt obligations to fixed cash flows. Under the terms of these interest rate swaps, we pay a fixed contractual interest rate and (i) make an additional payment if the LIBOR variable rate payment is below a contractual rate or (ii) receive a payment if the LIBOR variable rate payment is above the contractual rate.

Each month, we make interest payments to CoBank, ACB under its loan agreements based on the current applicable LIBOR Rate plus the contractual LIBOR margin then in effect with respect to each applicable loan, without reflecting any interest rate swaps. At the end of each calendar quarter, CoBank, ACB adjusts our aggregate interest payments based upon the difference, if any, between the amounts paid by us during the quarter and the current effective interest rate set forth in the table below. All net interest payments made by us are reported in our consolidated income statement as interest expense.

Pursuant to these interest rate swap agreements, we entered into interest rate swaps covering (i) $39.0 million of our aggregate indebtedness to CoBank, ACB effective March 19, 2008 and (ii) an additional $6.0 million of our aggregate indebtedness to CoBank, ACB effective June 23, 2008. These swaps effectively lock in the interest rate on (i) $6.0 million of variable-rate debt through March 2011, (ii) $33.0 million of variable-rate debt through March 2013, (iii) $3.0 million of variable-rate debt through June 2011 and (iv) $3.0 million of variable-rate debt through June 2013.

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As of September 30, 2010, we had the following interest rate swaps in effect.

Loan #	Maturity Date		Notional Amount	Current Effective Interest Rate (1)
RX0583-T1	03/31/2011	$	2,000,000	4.92% (LIBOR Rate of 2.67% plus 2.25% LIBOR Margin)
RX0583-T1	03/31/2013	$	11,250,000	5.51% (LIBOR Rate of 3.26% plus 2.25% LIBOR Margin)
RX0583-T2	06/30/2011	$	3,000,000	6.40% (LIBOR Rate of 4.15% plus 2.25% LIBOR Margin)
RX0583-T2	06/30/2013	$	3,000,000	6.79% (LIBOR Rate of 4.54% plus 2.25% LIBOR Margin)
RX0584-T1	03/31/2011	$	4,000,000	5.17% (LIBOR Rate of 2.67% plus 2.50% LIBOR Margin)
RX0584-T1	03/31/2013	$	21,750,000	5.76%; (LIBOR Rate of 3.26% plus 2.50% LIBOR Margin)

(1) As described in Note 5 – “Secured Credit Facility” to the Consolidated Financial Statement of this Quarterly Report on Form 10-Q, each note initially bears interest at a LIBOR rate determined by the maturity of the note, plus a “LIBOR Margin” rate equal to either 2.25% or 2.50% according to the individual secured credit facility. The LIBOR Margin decreases as the borrower’s “Leverage Ratio” decreases. The “Current Effective Interest Rate” in the table reflects the rate we pay giving effect to the swaps.

These interest rate swaps qualify as cash flow hedges for accounting purposes under ASC Topic 815 – Derivatives and Hedging. We have reflected the affect of these hedging transactions in the financial statements. We recognized an unrealized loss, net of tax, of $326,021 for the nine months ended September 30, 2010 and an unrealized gain, net of tax, of $98,593 for the nine months ended September 30, 2009. The unrealized loss and gain were reported in other comprehensive income (loss). If we were to terminate our interest rate swap agreements, the cumulative change in fair value at the date of termination would be reclassified from accumulated other comprehensive income (loss), which is classified in shareholders’ equity, into earnings on the consolidated statements of income.

We have determined the fair value of our interest rate swap agreements at September 30, 2010 based on valuations received from CoBank, ACB. The fair value indicates an estimated amount we would receive or pay if the contracts were canceled or transferred to other parties.

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The activity on the interest rate swap agreements was as follows:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2010			2009			2010			2009
Gain (Loss) on Derivative Instruments	$	98,648		$	(510,460	)	$	(547,659	)	$	165,620
Deferred Income Tax		(39,923	)		206,583			221,638			(67,027	)
Gain (Loss) Reported in Accumulated Other Comprehensive Income (Loss)	$	58,725		$	(303,877	)	$	(326,021	)	$	98,593

Note 7 – Other Investments

We are a co-investor with other rural telephone companies in several partnerships and limited liability companies. These joint ventures make it possible to offer services to customers, including digital video services and fiber optic transport services, that we would have difficulty offering on our own. These joint ventures also make it possible to invest in new technologies with a lower level of financial risk. We recognize income and losses from these investments on the equity method of accounting. For a listing of our investments, see Note 10 – “Segment Information” to the Consolidated Financial Statements of this Quarterly Report on Form 10-Q.

On June 30, 2009 NU Telecom entered into an Equity Securities Purchase Agreement with Iowa Telecom where we agreed to sell our ownership interests in SHAL Networks, Inc.; SHAL, LLC; Direct Communications, LLC and En-Tel Communications, LLC to Iowa Telecom. On September 24, 2009 NU Telecom completed the sale of its ownership interests for approximately $1.9 million in cash and fiber facilities valued at $67,500, including specified customary adjustments. The sale of these equity investments resulted in a gain of $1,045,599 in the third quarter of 2009. The sale of these minority-owned investments allowed NU Telecom to monetize non-core investments. In addition, this transaction released NU Telecom from approximately $5.7 million in loan guarantees to Rural Telephone Finance Cooperative for loans to SHAL, LLC and En-Tel Communications, LLC. See Note 8 – “Guarantees” to the Consolidated Financial Statements of this Quarterly Report on Form 10-Q for more information regarding our guarantees.

Note 8 – Guarantees

On January 30, 2004 we guaranteed a portion of the indebtedness of FiberComm, LC in connection with the refinancing of a fifteen-year loan, maturing in January, 2019 made by American State Bank to FiberComm, LC. As of September 30, 2010 we had recorded a liability of $338,416 in connection with this guarantee.

In 2009, we guaranteed additional indebtedness of FiberComm, LC in connection with an additional loan entered into on March 23, 2009 maturing January 1, 2015 made by American State Bank to FiberComm, LC. As of September 30, 2010 we have recorded an additional liability of $151,292 in connection with the guarantee on this loan. As a result of these two guarantees, we have guaranteed a total of $489,708 of indebtedness of FiberComm, LC as of September 30, 2010. Either of these two guarantees may be exercised if FiberComm, LC does not make its required payments on these notes.

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Note 9 – Deferred Compensation

As part of the acquisition of HTC, we have recorded other deferred compensation relating to the estimated present value of executive compensation payable to certain former executives of HTC.

Compensation over the next five years includes deferred wages totaling $1,057,583 and continuation of employee benefits. The difference between the recorded deferred compensation on the balance sheet and compensation to be paid over the next five years is due to life-time employee benefits.

Note 10 – Segment Information

We operate in the Telecom Segment and have no other significant business segments. The Telecom Segment consists of voice, data and video communication services delivered to the customer over our local communications network. The Telecom Segment operates the following incumbent local exchange carriers (ILECs) and competitive local exchange carriers (CLECs) and has investment ownership interests as follows:

Telecom Segment Businesses

●	ILECs:
	§	New Ulm Telecom, Inc., the parent company;
	§	Hutchinson Telephone Company, a wholly-owned subsidiary of NU Telecom;
	§	Western Telephone Company, a wholly-owned subsidiary of NU Telecom; and
	§	Peoples Telephone Company, a wholly-owned subsidiary of NU Telecom;
●	CLECs:
	§	New Ulm Telecom, Inc. located in Redwood Falls, Minnesota; and
	§	Hutchinson Telecommunications, Inc., a wholly-owned subsidiary of HTC, located in Litchfield, Minnesota;
●	Our investments and interests in the following entities include some management responsibilities:
	§	Hector Communications Corporation (HCC) – 33.33% ownership interest;
	§	FiberComm, LC – 25.18% ownership interest;
	§	Broadband Visions, LLC (BBV) – 16.26% ownership interest; and
	§	Independent Emergency Services, LLC (IES) – 14.29% ownership interest.

No single customer accounted for a material portion of our consolidated revenues.

Note 11 – Comprehensive Income

Our comprehensive income includes two items in addition to net income. The first is an unrealized gain (loss) resulting from our one-third ownership share of HCC’s accumulated other comprehensive income (loss). HCC’s accumulated comprehensive income (loss) differs from the “HCC investment income” reported on our consolidated statements of income. The second item reflects the change in the unrealized gains (losses) of the interest rate swap agreements, net of deferred income taxes that we have entered into with CoBank, ACB. These interest rate swap agreements cover $45.0 million of our indebtedness to CoBank, ACB, and are described in Note 6 – “Interest Rate Swaps” to the Consolidated Financial Statements of this Quarterly Report on Form 10-Q.

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Components of our comprehensive income consist of the following:

	Three Months Ended September 30,					Nine Months Ended September 30,
	2010		2009			2010			2009
Net Income	$	330,780	$	514,359		$	1,145,609		$	1,541,742
Other Comprehensive Income (Loss):
Unrealized Gain (Loss) of Equity Method Investee		50,438		(26,316	)		106,710			109,767
Change in Unrealized Gains (Losses) of Interest Rate Swap Agreements, Net of Deferred Income Taxes		58,725		(303,877	)		(326,021	)		98,593
Total Comprehensive Income	$	439,943	$	184,166		$	926,298		$	1,750,102

Note 12 – Commitments and Contingencies

We are involved in certain contractual disputes in the ordinary course of business. We do not believe the ultimate resolution of any of these existing matters will have a material adverse effect on our financial position, results of operations or cash flows. We did not experience any changes to material contractual obligations in the first nine months of 2010. Refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2009 for the discussion relating to commitments and contingencies.

Note 13 – Hector Communications Corporation

On November 3, 2006 we acquired a one-third interest in HCC. HCC is owned equally by NU Telecom, Blue Earth Valley Communications, Inc. and Arvig Enterprises, Inc. Each of the owners provides management and other operational services to HCC and its subsidiaries.

Our President and Chief Executive Officer, Mr. Bill D. Otis, has been named Chairman of the Board of Directors and President of HCC. Ms. Barbara A.J. Bornhoft, our Vice-President and Chief Operating Officer, also serves on the Board of Directors of HCC.

The following table summarizes financial information of HCC for the periods ended September 30, 2010 and 2009:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2010		2009		2010		2009
Operating Revenues	$	7,108,154	$	7,138,552	$	20,765,949	$	21,277,348
Operating Income		1,407,903		1,672,415		4,277,190		5,075,179
Net Income		462,721		502,648		1,316,609		1,620,839

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Note 14 – Acquisition of Cable Television Assets (CATV)

On June 14, 2010 NU Telecom completed the acquisition of all of the assets of the CATV system located in and around Glencoe, Minnesota from Midcontinent Communications for approximately $1.6 million pursuant to the Asset Purchase Agreement dated March 30, 2010. NU Telecom funded the purchase with current cash reserves. The acquisition resulted in the addition of approximately 1,200 connections to our video and Internet services.

The allocation of the purchase price for the CATV assets has been based on the asset’s fair values. ASC Topic 805 – Business Combinations, establishes criteria for determining whether intangible assets should be recognized separately from goodwill. ASC Topic 350 states that goodwill and intangible assets with indefinite lives are not amortized, but rather are tested for impairment on at least an annual basis.

The allocation of the net purchase price of the CATV assets is shown below:

Current assets	$	23,958
Property, plant and equipment		1,237,607
Customer relationship intangible		147,659
Excess cost over net assets acquired (Goodwill)		190,776
Cash paid for acquisition	$	1,600,000

This acquisition was accounted for using the acquisition method of accounting for business combinations, and accordingly, the acquired assets were recorded at estimated fair values as of the date of the acquisition. Based upon our final purchase price allocation, the excess of the purchase price and acquisition costs over the fair value of the net identifiable tangible assets acquired was $338,435. The estimated useful life of the customer relationships intangible asset is 14 years.

Note 15 – Subsequent Events

We have evaluated and disclosed subsequent events through the filing date of this Quarterly Report on Form 10-Q.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward Looking Statements

The Private Securities Litigation Reform Act of 1995 contains certain safe harbor provisions regarding forward-looking statements. This Quarterly Report on Form 10-Q may include forward-looking statements. These statements may include, without limitation, statements with respect to anticipated future operating and financial performance, growth opportunities and growth rates, acquisition and divestiture opportunities, business strategies, business and competitive outlook, and other similar forecasts and statements of expectation. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “targets,” “projects,” “will,” “may,” “continues,” and “should,” and variations of these words and similar expressions, are intended to identify these forward-looking statements. Such forward-looking statements are subject to risks and uncertainties that could cause NU Telecom’s actual results to differ materially from such statements. Factors that might cause differences include, but are not limited to, those contained in Item 1A of Part II, “Risk Factors” of this quarterly report on Form 10-Q and Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2009, which is incorporated herein by reference.

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Because of these risks, uncertainties, and assumptions and the fact that any forward-looking statements made by NU Telecom and its management are based on estimates, projections, beliefs and assumptions of management, they are not guarantees of future performance and you should not place undue reliance on them. In addition, forward-looking statements speak only as of the date they are made. With the exception of the requirements set forth in the federal securities laws or the rules and regulations of the SEC, we do not undertake any obligations to update any forward-looking information, whether as a result of new information, future events or otherwise.

Critical Accounting Policies

The preparation of our financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and the related disclosure of contingent assets and liabilities. A description of the accounting policies that we consider particularly important for the portrayal of our results of operations and financial position, and which may require a higher level of judgment by our management, is contained under the caption, “Critical Accounting Policies,” in the Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2009.

Results of Operations

Overview

NU Telecom offers a diverse array of communications products and services. Our ILEC businesses provide local telephone service and network access to other telecommunications carriers for calls originated or terminated on our network. In addition, we provide long distance service, dial-up and broadband Internet access, and video services. In 2002, we expanded our geographic service area by competitively providing service as a CLEC in the city of Redwood Falls, Minnesota. This CLEC provides local telephone service, long distance service, dial-up and broadband Internet access, and video services using our facilities. In 2008, we completed our acquisition of HTC, adding both an ILEC and a CLEC to our portfolio of operations. On June 14, 2010 we completed the acquisition of the assets of the CATV system operating in and around Glencoe, Minnesota, continuing the expansion of our service area. We also sell and service other communications products.

Our operations consist primarily of providing services to customers for a monthly charge. Because many of these services are recurring in nature, backlog orders and seasonality are not significant factors. Our working capital requirements include financing the construction of our networks, which consists of switches and cable, data, Internet protocol (IP) and commercial television programming. We also need capital to maintain our networks and infrastructure; fund the payroll costs of our highly skilled labor force; maintain inventory to service capital projects, our network and our telephone equipment customers; and to provide for the carrying value of trade accounts receivable, some of which may take several months to collect in the normal course of business.

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Trends

During 2010, we continued to be affected by both increasing competition and the effects of the current United States economic decline. Despite the challenging economic times, we have continued to expand our services and product offerings. By offering customers outstanding customer service and the products and services they desire, we believe that we have positioned ourselves to take advantage of an improving economic climate in which consumers enhance their utilization of communication services.

As the quantity and type of competitors within the telecommunications industry continue to grow, competition will remain intense. We have continued to experience competition from CATV providers, voice over Internet protocol providers, wireless and other competitors during the past several years. Competition, combined with consumers substituting other methods for traditional voice services, has and will continue to negatively affect our current and future local and network access revenue streams. Over a one year period and as measured on September 30, 2010, access lines had decreased 696 or 2.4%, compared to access lines as of September 30, 2009. It should be noted that the 2.4% decline in access lines is below the industry average.

As we experience access line losses, our network access revenue will continue to decline consistent with industry-wide trends. A combination of changing minutes of use, carriers optimizing their network costs and lower demand for dedicated lines may affect our future network access revenue. Network access revenue may also be significantly affected by potential changes in rate regulation at the state and federal levels. We continue to monitor regulatory changes as we believe that rate regulation will continue to be scrutinized and may be subject to change.

We have built a state-of-the-art broadband network and continue to increase connectivity speeds to customers, along with the bundling of our voice, Internet and video services, allowing us to meet customer demands for products and services. We continue to focus on the research and deployment of advanced technological products that include broadband services, private line, VoIP, digital video and IP television services (IPTV).

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Financial results for the Telecom Segment for the three and nine months ended September 30, 2010 and 2009, respectively, are included below:

Telecom Segment	Three Months Ended September 30,				Nine Months Ended September 30,
	2010		2009		2010		2009
Operating Revenues
Local Service	$	1,720,909	$	1,774,231	$	5,048,128	$	5,347,210
Network Access		3,448,325		3,330,982		10,079,589		10,244,409
Video		1,217,870		1,119,291		3,423,056		3,243,936
Data		612,121		688,261		1,788,461		1,904,336
Long Distance		183,176		181,883		523,284		577,687
Bill Processing		3,266		6,712		11,114		21,544
Cellular		16,892		78,547		43,415		400,462
Other		943,262		850,615		2,687,280		3,011,996
Total Operating Revenues		8,145,821		8,030,522		23,604,327		24,751,580
Cost of Services, Excluding Depreciation and Amortization		3,113,583		2,910,839		8,770,402		9,270,705
Selling, General and Administrative		1,560,605		1,604,954		4,711,784		5,095,237
Depreciation and Amortization Expenses		2,448,099		2,382,610		7,387,098		7,104,867
Total Operating Expenses		7,122,287		6,898,403		20,869,284		21,470,809
Operating Income	$	1,023,534	$	1,132,119	$	2,735,043	$	3,280,771
Net Income	$	330,780	$	514,359	$	1,145,609	$	1,541,742
Capital Expenditures	$	1,214,621	$	1,314,739	$	3,596,845	$	4,033,768

	September 30,
Key metrics	2010		2009
Access Lines		28,428		29,124
Video Customers		10,152		9,530
Broadband Customers		9,659		9,060
Dial Up Internet Customers		1,109		1,662
Long Distance Customers		13,941		14,358

Revenue

Local Service – This recurring revenue is generated primarily through the sales of basic voice telephone services, enhanced calling features, local private lines and circuits, reciprocal compensation from wireless carriers and other miscellaneous local services. Local service revenue was $1,720,909, which is $53,322, or 3.0% lower in the three months ended September 30, 2010 compared to the three months ended September 30, 2009 and was $5,048,128, which is $299,082, or 5.6% lower in the nine months ended September 30, 2010 compared to the nine months ended September 30, 2009. The decreases were primarily due to a decrease in access lines of 696 or 2.4% from September 30, 2010 compared to September 30, 2009 and customers canceling other features including call-waiting, caller identification, etc. Our access lines are decreasing as customers are increasingly utilizing other technologies, such as wireless phones and IP services, as well as customers eliminating second phone lines when they move their Internet service from a dial-up platform to a broadband platform.

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The number of access lines we serve as an ILEC has been decreasing, which is consistent with a general industry trend. To help offset declines in local service revenue, we implemented an overall strategy that continues to focus on selling a competitive bundle of services. Our focus on marketing competitive service bundles to our customers helps create value for the customer and aids in the retention of our voice lines.

Network Access – We receive a variety of fees and settlements to compensate us for the origination, transport and termination of calls and traffic on our network. These include fees assessed to IXCs, subscriber line charges imposed on end-users and settlements from nationally administered revenue pools. Network access revenue was $3,448,325, which is $117,343, or 3.5% higher in the three months ended September 30, 2010 compared to the three months ended September 30, 2009. This increase was largely due to increased interstate access revenue settlements for the three months ended September 30, 2010 compared to September 30, 2009. Network access revenue was $10,079,589, which is $164,820 or 1.6% lower in the nine months ended September 30, 2010 compared to the nine months ended September 30, 2009. This decrease was primarily due to a decrease in our network access revenues of approximately $156,000 in the second quarter of 2010 due to NECA settlement true-ups and the settlement of a dispute with an IXC. As our access lines decrease, our overall minutes of use decline and this, combined with IXCs optimizing their networks, thus lowering the demand for special access circuits, also could contribute to the decline in the utilization of our network and a corresponding decrease in our revenues.

Video – We receive monthly recurring revenue from end-user subscribers for providing commercial television programming. Video revenue was $1,217,870, which is $98,579, or 8.8% higher in the three months ended September 30, 2010 compared to the three months ended September 30, 2009 and was $3,423,056, which is $179,120 or 5.5% higher in the nine months ended September 30, 2010 compared to the nine months ended September 30, 2009. The increases were primarily due to rate increases and the addition of the Glencoe CATV system in June 2010. In addition, in 2010, we launched IPTV services in New Ulm, Courtland, Redwood Falls, Hutchinson and Litchfield, Minnesota and Aurelia, Iowa. This new enhanced service offering provides customers with desired features and options, such as digital video recording.

Data – We receive monthly recurring revenue by providing dial-up and high speed Internet access to residential and business customers. Internet revenue was $612,121, which is $76,140, or 11.1% lower, in the three months ended September 30, 2010 compared to the three months ended September 30, 2009 and was $1,788,461, which is $115,875 or 6.1% lower in the nine months ended September 30, 2010 compared to the nine months ended September 30, 2009. The decreases were primarily the result of a decrease in dial-up Internet customers of 553 customers, or 33.3%. Despite the decline in data revenues and dial-up Internet customers, data operating margins have increased due to the increase in higher margin broadband customers. In addition, with the acquisition the CATV system in Glencoe, we added approximately 300 broadband customers which also helped offset the loss of the dial-up Internet customers. We expect future growth in this area will be driven by customer migration from dial-up Internet to broadband products, such as our broadband services, expansion of service areas, including Glencoe, Minnesota, and our aggressively packaging and selling service bundles.

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Long Distance – Our end-user customers are billed for toll or long-distance services on either a per-call or flat-rate basis. This includes the provision of directory assistance and operator services. Long distance revenue was $183,176, which is $1,293, or 0.7% higher in the three months ended September 30, 2010 compared to the three months ended September 30, 2009. This increase was primarily due to an increase in customer usage of our long distance services for the three months ended September 30, 2010 compared to September 30, 2009. Long distance revenue was $523,284, which is $54,403 or 9.4% lower in the nine months ended September 30, 2010 compared to the nine months ended September 30, 2009. This decrease was primarily the result of the loss of 2.9% of our customer base from September 30, 2010 compared to September 30, 2009, as customers are utilizing other technologies such as wireless and IP services to satisfy their long distance communication needs.

Bill Processing – We provide bill processing and collection as a service to other telephone service providers. We receive a fee for providing this service. The revenue received for these services has been declining as more providers are directly billing their customers and as we limit other telephone and enhanced service providers access to our billing services.

Cellular – Prior to September 1, 2009, we were an authorized agent for Alltel. As an authorized agent, we earned revenue through the sales and service of cellular phone and accessories. In addition, we received commissions for selling Alltel services. In the fourth quarter of 2009, we began offering a Company-branded service (Tech Trends Wireless) and agency sales for Unicel. Due to these changes in our cellular revenue structure starting in 2009, our cellular revenue was $16,892, which is $61,655, or 78.5% lower in the three months ended September 30, 2010 compared to the three months ended September 30, 2009 and was $43,415, which is $357,047, or 89.2% lower in the nine months ended September 30, 2010 compared to the nine months ended September 30, 2009.

Other Revenue – Other revenue consists primarily of sales of customer premise equipment (CPE), transport services, maintenance and adds/moves/change revenue. Other revenue was $943,262, which is $92,647, or 10.9% higher in the three months ended September 30, 2010 compared to the three months ended September 30, 2009. This increase was primarily due to an increase in CPE revenue for the three months ended September 30, 2010 compared to September 30, 2009. Other revenue was $2,687,280, which is $324,716, or 10.8% lower in the nine months ended September 30, 2010 compared to the nine months ended September 30, 2009. This decrease was primarily the result of a decrease in CPE revenue due to the current United States economic downturn as customers are delaying the replacement and upgrades of their equipment.

Cost of Services (excluding Depreciation and Amortization)

Cost of services (excluding depreciation and amortization) was $3,113,583, which is $202,744, or 7.0% higher in the three months ended September 30, 2010 compared to the three months ended September 30, 2009. This increase was primarily due to increased software and hardware maintenance expense associated with our new billing and accounting systems, which were implemented in the third quarter of 2009 and increased labor expense in 2010 as we had capitalized labor in 2009 associated with the implementation of our new billing and accounting systems. Cost of services (excluding depreciation and amortization) was $8,770,402, which is $500,303, or 5.4% lower in the nine months ended September 30, 2010 compared to September 30, 2009. This decrease was primarily due to management efforts to contain costs in the current economic climate.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $1,560,605, which is $44,349, or 2.8% lower in the three months ended September 30, 2010 compared to the three months ended September 30, 2009 and was $4,711,784, which is $383,453, or 7.5% lower in the nine months ended September 30, 2010 compared to the nine months ended September 30, 2009. The decreases were primarily due to management efforts to contain costs in the current economic climate.

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Depreciation and Amortization

Depreciation and amortization was $2,448,099, which is $65,489, or 2.7% higher in the three months ended September 30, 2010 compared to the three months ended September 30, 2009 and was $7,387,098, which is $282,231, or 4.0% higher in the nine months ended September 30, 2010 compared to the nine months ended September 30, 2009. At December 31, 2009 NU Telecom management determined that our trade name intangible asset acquired with the purchase of HTC had become a definite-lived intangible asset. This resulted in the recognition of an additional $66,667 of amortization expense for the three months ended September 30, 2010 compared to the three months ended September 30, 2009 and an additional $200,000 recognized for the nine months ended September 30, 2010 compared to the nine months ended September 30, 2009.

Operating Income

Operating income was $1,023,534, which is $108,585, or 9.6% lower in the three months ended September 30, 2010 compared to the three months ended September 30, 2009. This decrease was due to a $223,884 or 3.2% increase in operating expenses, partially offset by a $115,299 or 1.4% increase in operating revenues. Operating income was $2,735,043, which is $545,728, or 16.6% lower in the nine months ended September 30, 2010 compared to the nine months ended September 30, 2009. This decrease was due to a $1,147,253 or 4.6% decrease in operating revenues, partially offset by a $601,525 or 2.8% decrease in operating expenses, all of which are described above.

Other Income and Interest Expense

Interest expense was $696,411, which is $56,312, or 7.5% lower in the three months ended September 30, 2010 compared to the three months ended September 30, 2009 and was $2,084,151, which is $140,409, or 6.3% lower in the nine months ended September 30, 2010 compared to the nine months ended September 30, 2009. The decreases were primarily the result of lower outstanding debt balances.

Interest income was $3,244, which is $9,025, or 156.1% higher in the three months ended September 30, 2010 compared to the three months ended September 30, 2009. Interest income was $87,652, which is $5,718, or 6.1% lower in the nine months ended September 30, 2010 compared to the nine months ended September 30, 2009. As a result of servicing our debt, excess cash available to purchase investments was lower, and combined with lower interest rates offered by banks and other investment institutions, our interest income has declined.

HCC investment income was $154,241, which is $13,309, or 7.9% lower in the three months ended September 30, 2010 compared to the three months ended September 30, 2009 and was $438,870, which is $101,410, or 18.8% lower in the nine months ended September 30, 2010 compared to the nine months ended September 30, 2009. Our HCC investment income reflects our equity portion of HCC’s net income. HCC net income was $462,721, which is $39,927, or 7.9% lower in the three months ended September 30, 2010 compared to the three months ended September 30, 2009 and was $1,316,609, which is $304,230, or 18.8% lower in the nine months ended September 30, 2010 compared to the nine months ended September 30, 2009. This decrease was a result of declining revenues and decreased profitability.

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Other investment income increased $142,916 in the three months ended September 30, 2010 compared to the three months ended September 30, 2009 and increased $209,968 in the nine months ended September 30, 2010 compared to the nine months ended September 30, 2009. Other investment income includes our equity ownerships in several partnerships and limited liability companies. We recorded $95,315 in income from equity investments for the three months ended September 30, 2010 compared to a $47,601 loss for the three month ended September 30, 2009 and recorded $172,820 in income from equity investments for the nine months ended September 30, 2010 compared to a $37,148 loss for the nine months ended September 30, 2009.

Our gain on the sale of equity investments for the nine months ended September 30, 2010 of $4,338 reflects our pro-rata share of the distribution of remaining amounts that had been held in a Trust Account to cover potential additional expenses (including audit, legal and miscellaneous expenses) in connection with the Midwest Wireless Holdings sale to Alltel Corporation. This distribution represents the final distribution of all remaining funds from the Midwest Wireless Holdings/Alltel transaction. Our gain on the sale of equity investments for the nine months ended September 30, 2009 of $941,766 resulted from a gain recognized through the sale of our equity ownerships in SHAL Networks, Inc.; Direct Communications, LLC and En-Tel Communications, LLC.

Other income for the nine months ended September 30, 2010 and 2009 included a patronage credit earned with CoBank, ACB as a result of our debt agreements with them. The patronage credit allocated and received in 2010 amounted to $513,436, compared to $556,318 allocated and received in 2009. CoBank, ACB determines and pays the patronage credit annually, generally in the first quarter of the calendar year based on its results from the prior year. We record these patronage credits as income when they are received.

Income Taxes

Income tax expense was $270,547, which is $207,468, or 43.4% lower in the three months ended September 30, 2010 compared to the three months ended September 30, 2009 and was $753,269, which is $512,370, or 40.5% lower in the nine months ended September 30, 2010 compared to the three months ended September 30, 2009. The effective tax rates for the nine months ending September 30, 2010 and 2009 were 39.7% and 45.1%, respectively. The effective tax rate for the nine months ended September 30, 2010 compared to the nine months ended September 30, 2009 was lower due to the recognition of approximately $124,000 in net tax benefits, see Note 1 – “Basis of Presentation and Consolidation” to the Consolidated Financial Statements of this Quarterly Report on Form 10-Q. Excluding the impact of the recognition of the tax benefit, the September 30, 2010 effective income tax rate would have been approximately 46.2%. The effective tax rate differs from the federal statutory tax rate primarily due to state income taxes and other permanent differences.

Hector Communications Corporation Investment

In accordance with GAAP, we currently report our one-third ownership of HCC on the equity method. Under this method, we report net income or net loss each period from HCC’s operations. For the three months ended September 30, 2010 and 2009, we reported net income of $154,241 and $167,550, respectively. For the nine months ended September 30, 2010 and 2009, we reported net income of $438,870 and $540,280, respectively. All reported net income amounts reflect our one-third ownership. As set forth in Note 13 – “Hector Communications Corporation” to the Consolidated Financial Statements of this Quarterly Report on Form 10-Q, however, in the first nine months of 2010 and 2009, HCC had revenues of $20.8 million and $21.3 million, respectively, that are not reflected in our financial statements.

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The pro forma information for our investment in HCC is shown in the following table using the proportionate consolidation method. We are providing this pro forma information to show the effect that our HCC investment would have on our operating income before interest, taxes, depreciation and amortization (OIBITDA) if we included these earnings in our operating income.

	Three Months Ended September 30,				Nine Months Ended September 30,
	2010		2009		2010		2009
Operating Revenues	$	2,369,385	$	2,379,517	$	6,921,983	$	7,092,449
Operating Expenses, Excluding Depreciation and Amortization		1,098,251		1,051,207		3,102,419		3,123,350
Depreciation and Amortization		801,833		770,839		2,393,834		2,277,373
Total Operating Expenses		1,900,084		1,822,046		5,496,253		5,400,723
Operating Income		469,301		557,471		1,425,730		1,691,726
Net Income	$	154,241	$	167,550	$	438,870	$	540,280

NU Telecom OIBITDA was $3,471,633 and $3,514,729 for the three months ended September 30, 2010 and 2009, respectively and was $10,122,141 and $10,385,638 for the nine months ended September 30, 2010 and 2009, respectively. If we included our proportionate share of HCC’s OIBITDA, NU Telecom’s combined OIBITDA would have increased to $4,742,767 and $4,843,039 for the three months ended September 30, 2010 and 2009, respectively and $13,941,705 and $14,354,737 for the nine months ended September 30, 2010 and 2009, respectively.

	Three Months Ended September 30,				Nine Months Ended September 30,
	2010		2009		2010		2009
NU Telecom Operating Income	$	1,023,534	$	1,132,119	$	2,735,043	$	3,280,771
NU Telecom Depreciation and Amortization		2,448,099		2,382,610		7,387,098		7,104,867
NU Telecom OIBITDA	$	3,471,633	$	3,514,729	$	10,122,141	$	10,385,638
HCC Proportionate Operating Income	$	469,301	$	557,471	$	1,425,730	$	1,691,726
HCC Proportionate Depreciation and Amort		801,833		770,839		2,393,834		2,277,373
HCC Proportionate OIBITDA	$	1,271,134	$	1,328,310	$	3,819,564	$	3,969,099
Combined OIBITDA	$	4,742,767	$	4,843,039	$	13,941,705	$	14,354,737

Adjusted OIBITDA is a common measure of operating performance in the telecommunications industry. The presentation of OIBITDA is not a measure of financial performance under GAAP and should not be considered in isolation or as a substitute for consolidated net income (loss) as a measure of performance and may not be comparable to similarly titled measures used by other companies.

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A recap of our net income, using the equity method to record earnings on our investment in HCC is contained in the following table.

	Three Months Ended September 30,						Nine Months Ended September 30,
	2010			2009			2010			2009
Operating Revenues:	$	8,145,821		$	8,030,522		$	23,604,327		$	24,751,580
Operating Expenses, Excluding Depreciation and Amortization		4,674,188			4,515,793			13,482,186			14,365,942
Depreciation and Amortization Expenses		2,448,099			2,382,610			7,387,098			7,104,867
Operating Expenses		7,122,287			6,898,403			20,869,284			21,470,809
Operating Income		1,023,534			1,132,119			2,735,043			3,280,771
Interest Expense		(696,411	)		(752,723	)		(2,084,151	)		(2,224,560	)
Interest Income		3,244			(5,781	)		87,652			93,370
HCC Investment Income		154,241			167,550			438,870			540,280
Loss on Settlement of HTC Escrow		0			(506,993	)		0			(506,993	)
Gain on Sale of Equity Investments		4,338			941,766			4,338			941,766
CoBank Patronage		0			0			513,436			556,318
Other Income (Expense)		112,381			16,436			203,690			126,429
Income (Taxes) Benefit		(270,547	)		(478,015	)		(753,269	)		(1,265,639	)
Net Income	$	330,780		$	514,359		$	1,145,609		$	1,541,742

Liquidity and Capital Resources

Capital Structure

NU Telecom’s total capital structure (long-term and short-term debt obligations, plus stockholders’ equity) was $99,107,494 at September 30, 2010, reflecting 52.0% equity and 48.0% debt. This compares to a capital structure of $101,632,365 at December 31, 2009, reflecting 51.0% equity and 49.0% debt. Management believes adequate operating cash flows and other internal and external resources, such as our cash on hand and revolving credit facility, are available to finance ongoing operating requirements, including capital expenditures, business development, debt service and temporary financing of trade accounts receivable.

Cash Flows

Our short-term and long-term liquidity needs arise primarily from: (i) capital expenditures; (ii) working capital requirements needed to support the growth of our business; (iii) debt service, (iv) dividend payments on our common stock and (v) potential acquisitions.

Our primary sources of liquidity for the nine months ended September 30, 2010 were proceeds from cash generated from operations and cash and cash equivalents held at the beginning of the period. In addition, we currently have $6 million available under our revolving credit facility.

While it is often difficult for us to predict the impact of general economic conditions on our business, we believe that we will be able to meet our current and long-term cash commitments through our operating cash flows. We were in full compliance with our debt covenants as of September 30, 2010 and anticipate that we will be able to plan for and match future liquidity needs with future internal and external resources.

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Cash Flows from Operations

Cash generated by operations for the nine months ended September 30, 2010 was $8,524,555, compared to cash generated by operations of $5,005,919 for the nine months ended September 30, 2009. The increase in cash flows provided by operations for the nine months ended September 30, 2010 compared to the nine months ended September 30, 2009 was primarily due to changes in the timing of income taxes receivable and accrued income taxes.

Cash generated by operations continues to be our primary source of funding for existing operations, capital expenditures, debt service and dividend payments to shareholders. Cash and cash equivalents at September 30, 2010 were $2,395,627, compared to $2,526,490 at December 31, 2009.

Cash Flows used in Investing Activities

We operate in a capital intensive business. We continue to upgrade our local networks for changes in technology in order to provide advanced services to our customers.

Cash flows used in investing activities were $5,204,249 for the nine months ended September 30, 2010, compared to $2,388,620 used in investing activities for the nine months ended September 30, 2009. Cash flows used in investing activities was lower in 2009 as we received proceeds of $1,890,000 from the sale of our interests in SHAL Networks, Inc.; SHAL, LLC; Direct Communications, LLC and En-Tel Communications LLC to Iowa Telecom. On June 14, 2010 we completed the acquisition of the CATV system in and around Glencoe, Minnesota for $1,600,000. In addition, capital expenditures relating to other on-going operations were $3,596,845 for the nine months ended September 30, 2010, compared to $4,033,768 for the nine months ended September 30, 2009. We expect total plant additions to be approximately $5,000,000 in 2010. We plan to finance upgrades through the remainder of 2010 through our existing working capital and cash flow from operations.

Our current working capital was used to complete the acquisition of the CATV System in and around Glencoe, Minnesota. Other investing expenditures have been financed with cash flows from current operations. We believe that our current operations will provide adequate cash flows to fund our plant additions for the upcoming year; however, funding from our revolving credit facility is available if the timing of our cash flows from operations does not match our cash flow requirements.

Cash Flows used in Financing Activities

Cash used in financing activities was $3,451,169 for the nine months ended September 30, 2010. This included long-term debt repayments of $2,223,465 and dividends paid to shareholders of $1,227,704. Cash used in financing activities was $3,326,326 for the nine months ended September 30, 2009. This included long-term debt repayments of $2,294,004 and dividends paid to shareholders of $1,432,322, partially funded through the issuance of long-term debt of $400,000.

Working Capital

Working capital (i.e. current assets minus current liabilities) was $189,102 as of September 30, 2010 compared to working capital of $1,691,572 as of December 31, 2009. The ratio of current assets to current liabilities was 1.0 and 1.2 as of September 30, 2010 and December 31, 2009, respectively. In addition, if it becomes necessary, we will have sufficient availability under our revolving credit facility to fund any fluctuations in working capital and other cash needs.

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Dividends

We declared a quarterly dividend of $.08 per share for the first, second and third quarters of 2010, which totaled approximately $409,235 each quarter. We declared a quarterly dividend of $.10 per share for both the first and second quarters of 2009, which totaled $511,543 for those two quarters; and a quarterly dividend of $.08 per share for the third quarter of 2009, which totaled approximately $409,235 for that quarter. Our Board of Directors reviews quarterly dividend declarations based on anticipated earnings, capital requirements and our operating and financial condition. The cash requirements of our current dividend payment practices are in addition to our other expected cash needs, both of which we expect to be funded with cash flows from operations.

Our loan agreements have put restrictions on our ability to pay cash dividends to our shareholders. However, we are allowed to pay dividends (a) (i) in an amount up to $2,050,000 in any year and (ii) in any amount if NU Telecom’s “Total Leverage Ratio,” that is, the ratio of our “Indebtedness” to “EBITDA” (in each case as defined in the loan documents) is equal to or less than 3:50 to 1:00, and (b) in either case if NU Telecom is not in default or potential default under the loan agreements. If we fail to comply with these covenants, our ability to pay dividends would be limited. At September 30, 2010, we were in compliance with the financial ratios in our loan agreements.

Obligations and Commitments

As of September 30, 2010 we had an unsecured loan in the amount of $31,859 with the City of Redwood Falls, Minnesota that bears interest at 5% and matures on January 1, 2012.

In connection with our acquisition of HTC in 2008, NU Telecom and HTC, as NU Telecom’s new subsidiary, entered into a credit facility with CoBank, ACB. Information about our contractual obligations, including obligations under the credit facility, and along with the cash principal payments due each period on our unsecured note payable and long-term debt is set forth in the following table. For additional information about our contractual obligations as of September 30, 2010 see Note 5 – “Secured Credit Facility” to the Consolidated Financial Statements of this Quarterly Report on Form 10-Q.

Description	Total		October 1 - December 31 2010		2011-2012		2013-2014		Thereafter
Deferred Compensation	$	1,905,479	$	106,083	$	865,908	$	133,137	$	800,351
Long-term Debt		47,528,359		734,500		6,907,859		39,886,000		—
Interest on Long-term Debt (A)		10,126,484		660,156		5,100,023		4,366,305		—
Loan Guarantees		489,708		9,172		74,415		251,463		154,658
Operating Lease		36,675		7,335		29,340		—		—
Purchase Obligations (B)		286,692		286,692		—		—		—
Total Contractual Cash Obligations	$	60,373,397	$	1,803,938	$	12,977,545	$	44,636,905	$	955,009

A. Interest on long-term debt is estimated using rates in effect as of September 30, 2010. We use interest rate swap agreements to manage our cash flow exposure to interest rate movements on a portion of our variable rate debt obligations (see Note 6 – “Interest Rate Swaps” to the Consolidated Financial Statements of this Quarterly Report on Form 10-Q).

B. Purchase obligations consist primarily of commitments incurred for capital improvements. We have a contract for plant upgrades in Glencoe, Minnesota. Other than this contract, there were no purchase obligations outstanding as of September 30, 2010.

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Long-Term Debt

See Note 5 – “Secured Credit Facility” to the Consolidated Financial Statements of this Quarterly Report on Form 10-Q for information pertaining to our long-term debt.

Regulation

In March 2010, the FCC released the National Broadband Plan which contemplates significant changes to overall telecommunications policy in relation to access charges and underlying support. At this time, we cannot predict the outcome, timing or potential impact of these recommended changes.

Recent Accounting Developments

See Note 1 – “Basis of Presentation and Consolidation” to the Consolidated Financial Statements of this Quarterly Report on Form 10-Q for a discussion of recent accounting developments.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We do not have operations subject to risks of foreign currency fluctuations. We do, however, use derivative financial instruments that qualify as cash-flow hedges to manage our exposure to interest rate fluctuations on a portion of our variable-interest rate debt. Our objectives for holding derivatives are to minimize interest rate risks using the most effective methods to eliminate or reduce the impact of these exposures. Variable rate debt instruments are subject to interest rate risk. On March 19, 2008 we executed interest-rate swap agreements, effectively locking in the interest rate on $6.0 million of our variable-rate debt through March 2011, and $33.0 million of our variable-rate debt through March 2013. On June 23, 2008 we executed interest-rate swap agreements, effectively locking in the interest rate on $3.0 million of our variable-rate debt through June 2011, and $3.0 million of variable-rate debt through June 2013. A summary of these agreements is contained in Note 6 – “Interest Rate Swaps” to the Consolidated Financial Statements of this Quarterly Report on Form 10-Q.

We report the cumulative gain or loss on current derivative instruments as a component of accumulated other comprehensive income (loss) in shareholders’ equity. If the protection agreement is concluded prior to reaching full maturity, the cumulative gain or loss is recognized in earnings. At the conclusion of the full term maturity of the protection agreement, no gain or loss is recognized. Our earnings are affected by changes in interest rates as a portion of our long-term debt has variable interest rates based on LIBOR. If interest rates for the portion of our long-term debt based on variable rates had averaged 10% more for the nine months ended September 30, 2010 interest expense would have increased approximately $9,000.

Item 4. Controls and Procedures

As of the end of the period covered by this Quarterly Report on Form 10-Q (the Evaluation Date), we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, regarding the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) promulgated under the Securities and Exchange Act of 1934, as amended). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded, as of the end of the period covered by this Quarterly Report, that our disclosure controls and procedures ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in applicable rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, in a manner that allows timely decisions regarding required disclosure.

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There have been no changes in our internal control over financial reporting during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

Other than routine litigation incidental to our business there are no pending material legal proceedings to which we are a party or to which any of our property is subject.

Item 1A. Risk Factors.

There have not been any material changes to the risk factors previously disclosed in Item 1A, “Risk Factors,” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2009.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Removed and Reserved.

None.

Item 5. Other Information.

None.

Item 6. Exhibits.

See “Index to Exhibits” on page 34 of this Form 10-Q.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	NEW ULM TELECOM, INC.
Dated: November 12, 2010	By	/s/ Bill D. Otis
		Bill D. Otis, President and Chief Executive Officer
Dated: November 12, 2010	By	/s/ Curtis O. Kawlewski
		Curtis O. Kawlewski, Chief Financial Officer

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INDEX TO EXHIBITS

Exhibit Number	Description
31.1	Certification pursuant to Rule 13a-14(a) under the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification pursuant to Rule 13a-14(a) under the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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EX-31.1

EXHIBIT 31.1

CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Bill D. Otis, certify that:
1.	I have reviewed this Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2010 of New Ulm Telecom, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
	a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s Board of Directors (or persons performing the equivalent functions):
	a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
	b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 12, 2010	By	/s/ Bill D. Otis
		Bill D. Otis
		President and Chief Executive Officer

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EX-31.2

EXHIBIT 31.2

CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Curtis O. Kawlewski, certify that:
1.	I have reviewed this Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2010 of New Ulm Telecom, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
	a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):
	a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
	b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 12, 2010	By	/s/ Curtis O. Kawlewski
		Curtis O. Kawlewski
		Chief Financial Officer

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EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO
18 U.S.C., SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of New Ulm Telecom, Inc. on Form 10-Q for the period ended September 30, 2010 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Bill D. Otis, Chief Executive Officer of New Ulm Telecom, Inc., certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of New Ulm Telecom, Inc.

Date: November 12, 2010	By	/s/ Bill D. Otis
		Bill D. Otis
		President and Chief Executive Officer

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EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO
18 U.S.C., SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of New Ulm Telecom, Inc. on Form 10-Q for the period ended September 30, 2010 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Curtis O. Kawlewski, Chief Financial Officer of New Ulm Telecom, Inc., certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of New Ulm Telecom, Inc.

Date: November 12, 2010	By	/s/ Curtis O. Kawlewski
		Curtis O. Kawlewski
		Chief Financial Officer

38