UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 10-Q

Commission File Number 0-3024

NEW ULM TELECOM, INC.
(Exact Name of Registrant as Specified in Its Charter)

27 North Minnesota Street
New Ulm, Minnesota 56073
(Address of Principal Executive Offices, Including 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 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 is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

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

Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of May 12, 2006: 5,115,435 shares of common stock outstanding.

NEW ULM TELECOM, INC. AND SUBSIDIARIES
MARCH 31, 2006

NEW ULM TELECOM, INC. AND SUBSIDIARIES

PART I. FINANCIAL INFORMATION

ITEM I. FINANCIAL STATEMENTS

UNAUDITED CONSOLIDATED BALANCE SHEETS

ASSETS

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

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NEW ULM TELECOM, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED BALANCE SHEETS (continued)

LIABILITIES AND STOCKHOLDERS’ EQUITY

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

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NEW ULM TELECOM, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

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

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NEW ULM TELECOM, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

YEAR ENDED DECEMBER 31, 2005 AND
THREE MONTHS ENDED MARCH 31, 2006

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

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NEW ULM TELECOM, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

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

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NEW ULM TELECOM, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – CONSOLIDATED FINANCIAL STATEMENTS

The consolidated financial statements include the accounts of New Ulm Telecom, Inc. and its wholly owned subsidiaries (the “Company”). All material intercompany transactions and accounts have been eliminated.

The presentation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and disclosure of contingent assets and liabilities at the balance sheet date, and the reported amounts of revenues and expenses during the reporting period. The estimates and assumptions used in the accompanying consolidated financial statements are based upon management’s evaluation of the relevant facts and circumstances as of the time of the financial statements. Actual results could differ from those estimates. The Company’s financial statements are also affected by depreciation rates prescribed by regulators, which may result in different depreciation rates than for an unregulated enterprise.

Revenues are recognized when earned, regardless of the period in which they are billed. Interstate network access revenues are furnished in conjunction with interexchange carriers and are determined by cost separation studies and nationwide average schedules. Revenues include estimates pending finalization of cost studies. Interstate network access revenues are based upon interstate tariffs filed with the Federal Communications Commission by the National Exchange Carrier Association and state tariffs filed with state regulatory agencies. Management believes recorded revenues are reasonable based on estimates of cost separation studies, which are typically settled within two years. Local network and intrastate access revenues are based on tariffs filed with the state regulatory commissions. Revenues from system sales and services are derived from the sale, installation, and servicing of communication systems. In accordance with EITF 00-21, these deliverables are separate units of accounting. Customer contracts of sales and installations are recognized using the completed-contract method, which recognizes income when the contract is substantially complete. Rental revenues are recognized over the rental period.

Income taxes have been calculated in proportion to the earnings and tax credits generated by operations. The Company’s effective income tax rate is higher than the U.S. rate due to the effect of state income taxes.

The balance sheets and statement of stockholders’ equity as of March 31, 2006, and statements of income and the statements of cash flows for the periods ended March 31, 2006 and 2005 have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations, and changes in cash flows at March 31, 2006 and for the three-month periods ended March 31, 2006 and 2005 have been made.

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The accompanying unaudited interim financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These condensed financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2005. The results of operations for the period ended March 31, 2006 are not necessarily indicative of the operating results to be expected for the entire year.

NOTE 2 – STATEMENTS OF CASH FLOW

Supplemental Disclosures of Cash Flow Information:
        Cash paid during the three months ended March 31:

Noncash investing activities included $157,155 and $91,593 during the periods ended March 31, 2006 and 2005, respectively, relating to plant and equipment additions placed in service, which are reflected in accounts payable at March 31, 2006 and 2005.

NOTE 3 – SECURED REDUCING REVOLVING CREDIT FACILITY

In fiscal 2001, the Company entered into a $15 million secured ten-year reducing revolving credit facility with CoBank, ACB, maturing in 2011. At March 31, 2006, there were $8,625,000 of direct borrowings outstanding under this facility at a variable interest rate of 6.51%. The Company also entered into a $10 million secured ten-year reducing revolving credit facility during fiscal 2001 with CoBank, ACB, maturing in 2011. At March 31, 2006, there were $5,750,000 of direct borrowings outstanding under this facility at a variable interest rate of 6.51%.

NOTE 4 – GOODWILL AND INTANGIBLE ASSETS

At March 31, 2006, the Company had goodwill for wireline acquisitions of $3,218,906, and goodwill associated with equity investments, included in cellular investments, of $4,890,389. The Company annually tests the goodwill of $3,218,906 associated with wireline acquisitions under SFAS 142 and has determined that the goodwill associated with this investment is unimpaired. The cellular investment goodwill of $4,890,389 was considered under APB Opinion 18 and it was determined to not be impaired.

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The Company owned 9.88% of Midwest Wireless Holdings, LLC (MWH) at March 31, 2006 (9.88% at December 31, 2005). The Company accounts for its investment in MWH using the equity method, and earnings from the investment are material to the Company’s net income. At December 31, 2005 MWH, had investments in cellular, Local Multipoint Distribution Service (LMDS) and Personal Communications Service (PCS) licenses totaling $212,093,566. MWH has determined that these licenses have indefinite useful lives and are not impaired.

The components of goodwill are summarized below:

Definite lived intangibles are summarized below:

Intangible assets with definite lives are amortized over their useful lives. The estimated amortization expense for intangible assets will be $2,052 per year for the next five years.

NOTE 5 – SEGMENT INFORMATION

The Company is organized into three business segments: the Telecom Segment, the Cellular Segment, and the Phonery Segment. The Telecom Segment consists of the operations of its incumbent local exchange carriers (ILEC’s), its competitive local exchange carrier (CLEC), and its operations that provide Internet and video services. The Cellular Segment includes the sales and service of cellular phones and accessories, and a 9.88% cellular investment in MWH. The cellular investment in the Cellular Segment is recorded on the equity method on the financial statements and is presented in this note using the proportionate consolidation method. The Company records its 9.88% investment in MWH using the proportionate consolidation method so that it can be compared to the cellular industry, as well as the Company’s other business segments, and because the Company’s Chief Operating Decision Maker (CODM) reviews the performance of MWH using the proportionate method. The Phonery Segment includes the sales and service of customer premise equipment (CPE), transport operations, and the resale of long distance toll service. No single customer accounted for a material portion of the Company’s revenues in any of the last three years.

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Segment information is as follows:

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The Company’s future results of operation and other forward-looking statements are subject to risks and uncertainties, including, but not limited to, the effects of deregulation in the telecommunications industry as a result of the Telecommunications Act of 1996. Such forward-looking statements are subject to risks and uncertainties that could cause the Company’s actual results to differ materially from such statements and the Company disclaims any obligation to update or revise any forward-looking statements based on the occurrence of future events or the receipt of new information. See “Risk Factors” in Item 1A of the 2005 Form 10-K.

OVERVIEW

The Company operates three business segments. The majority of its operations consist of the Telecom segment which provides telephone services, Internet services, and cable television services to numerous communities in Minnesota and Iowa. A second segment, the Cellular segment, includes the sales and service of cellular phones and accessories, and a 9.88% interest in Midwest Wireless Holdings L.L.C. (MWH) and records this investment on the equity method of accounting. The Company uses proportionate consolidation in its segment reporting because this is how the Chief Operating Decision Maker (CODM) reviews the performance of MWH. The third segment, the Phonery segment, includes the sales and service of customer premise equipment, transport operations, and the resale of long distance toll service.

RESULTS OF OPERATIONS

CONSOLIDATED OPERATING RESULTS

The following is a summarized discussion of consolidated results of operations. More detailed discussion of operating results by segment follows this discussion.

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Summary of Operations

RESULTS OF OPERATIONS BY BUSINESS SEGMENT

Telecom Segment Operations

The Telecom segment revenues represented 85.1% of the Company’s consolidated operating revenues for the three-month period ended March 31, 2006 before intercompany eliminations. Revenues are primarily earned by providing approximately 16,700 customers access to the local network in ILEC and CLEC operations, and by providing inter-exchange access for long distance network carriers. The Telecom segment also earns revenue by providing Internet services, including high-speed DSL Internet access, and video services to its subscribers, directory advertising, and through billing and collecting for various long distance companies. This segment has invested in its infrastructure so that it can provide its customers with the latest technological advances, including being able to offer its “triple-play” of services. Total Telecom segment revenues for the three-month period ending March 31, 2006 decreased $2,085 or 0.1% compared to the same period last year. All information contained in the following table is before intercompany eliminations.

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Local network revenue decreased in the Telecom segment by $40,152 or 3.9% for the three months ended March 31, 2006 compared to the same period in 2005. Local network revenue decreased during this period as a result of a decrease in access lines of approximately 220 for the first quarter of 2006 compared to the same period in 2005, and reduced charges for DSL wholesale service. The decrease in access lines is due to customers increasingly utilizing their wireless phones and customers dropping second phone lines in their homes when they move their Internet service from a dial-up platform to a DSL platform.

Network access revenue decreased $17,496 or 1.2% for the three months ended March 31, 2006 compared with the same period in 2005. The decrease in network access revenue reflects the overall decrease in minutes of use and the negative effects of downward pricing pressure on network access pricing, a common industry trend. The effect of the decrease in access minutes of use was minimized due to the increased number of access subscribers in the Redwood Falls, MN CLEC during the first quarter of 2006 as compared to the same period in 2005. In order to minimize the impact on the Company, the Company continues to monitor the negative effects of network access pricing and the downward trend in access minutes of use. The Telecom segment has maintained and enhanced its infrastructure, and has invested approximately $10 million in capital expenditures since 2003. These capital expenditures have enhanced this segment’s infrastructure and have allowed the Company to receive additional settlements from the National Exchange Carrier Association (NECA). The additional investment in the local loop (access line cost) has made the Company eligible for high-cost loop funding through the Universal Service Fund. The Telecom segment experienced a 5.1% decrease in access minutes for the three months ended March 31, 2006 as compared to the same period in 2005, a common industry trend.

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Other operating revenues increased $55,563 or 4.8% for the three months ended March 31, 2006 compared with the same period in 2005. Due to the infrastructure enhancements that have taken place since 2000, the Telecom segment has been able to offer its customers a “triple-play” of services over the existing infrastructure and offer its services on a CLEC basis to the city of Redwood Falls, MN. The video product offered in New Ulm, Essig, Searles, Courtland, Springfield, Sanborn and Redwood Falls, MN was responsible for $23,476 of the increase in these revenues. The remainder of the revenue increase was attributed to Telecom segment’s sale of Internet services.

Operating expenses, excluding depreciation and amortization, increased $103,450 or 4.7% for the three-month period ended March 31, 2006 compared with the same period in 2005. The increases in cash operating expenses were the result of increased selling, general and administrative costs, and the increasing expenses associated with the expanded array of services offered such as video and DSL that allow the Company to offer the “triple-play” of services to its customers. The Telecom segment has recognized the value in being able to compete in all aspects of communication services. This realization has motivated the segment to enhance its awareness of customer satisfaction (including 24 hours a day, 7 days a week access to Internet support due to customers’ desire for this service), offer additional services (video and DSL), pursue aggressive marketing to develop brand recognition, and provide solutions for our customers’ evolving communication needs. The Company has expanded its services and product offerings in an effort to meet its objective of achieving 100% customer satisfaction by making the customer its top priority, deserving the Company’s best service, attitude and consideration.

Depreciation and amortization expenses decreased $71,585 or 6.8% for the three months ended March 31, 2006 compared with the same period in 2005. The decreases were due to certain long-lived assets that have become fully depreciated, while the Company continues to make investments in the Telecom segment’s infrastructure.

Operating income decreased $33,950 or 8.8% for the three months ended March 31, 2006 compared with the same period in 2005. The decrease in operating income was primarily due to the cost of providing additional services (video and DSL) to an increasing customer base, and additional general and administrative expenses associated with the commitment of the Telecom segment to effectively compete in all aspects of communication services and to provide superior customer-focused service for the Telecom segment’s complete array of products and services. The Telecom segment also realizes potential for growth by competitively offering its array of services in an increasing number of communities. The Telecom segment began offering its services competitively in the City of Redwood Falls, MN in September 2002. The Company is always striving for cost efficiencies and technological improvement to enhance its operating margins for the Telecom segment. The $2,085 decrease in revenues combined with a $31,865 increase in operating expenses resulted in the $33,950 decrease in operating income.

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Cellular Segment

The Cellular segment operations include the sales and service of cellular phones and accessories, and the Company’s 9.88% ownership interest in MWH. The operating income from sales of cellular phones and accessories increased by $16,480 for the three month period ending March 31, 2006 compared to March 31, 2005, due primarily to an increase in the sale of cellular phones. The cellular partnership income increased $620,007 or 48.0% for the three months ended March 31, 2006 compared to the same period ended in 2005. This increase was the result of revenue and income growth as MWH continues to gain market share and offer customers new phones, new features and new service plan options. The Cellular segment information for its investment in MWH is shown in the following table using the proportionate consolidation method. The Company records its 9.88% investment in MWH using the proportionate consolidation method so that it can be compared to the cellular industry, as well as the Company’s other business segments, and because the Company’s CODM reviews the performance of MWH using the proportionate method.

A recap of income for the cellular segment using the equity method to record earnings on its investment in MWH, is contained in the following table.

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Phonery Segment

The Phonery segment represented 12.4% of the consolidated operating revenues for the three-month period ended March 31, 2006 before intercompany eliminations. Revenues are earned primarily by sales, installation and service of business telephone systems and data communications equipment. In addition, the Phonery segment leases network capacity to provide additional network access revenues and resells long distance toll service. This segment’s expertise is the quality installation and maintenance of CPE, provision of customer long distance needs and transport solutions in communication to end user customers. All information contained in the following table is before intercompany eliminations.

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Operating revenue increased $72,997, or 15.9%, for the three months ended March 31, 2006 compared to the same period ended 2005. The Phonery segment experienced increased operating revenues due to increased sales of customer premise equipment (CPE), and increased revenues from transport operations. These increases were offset by a decrease in the resale of long distance toll revenues of approximately $8,000.

Operating expenses, excluding depreciation and amortization decreased $17,063 or 6.9% for the three months ended March 31, 2006 compared to the three months ended March 31, 2005. This decrease in operating expenses occurs as this segment strives for cost efficiencies, while continuing to endeavor to reach the customer service goal of achieving 100% customer satisfaction. This segment continues to seek new technologies to better serve customer needs and to operate efficiently.

Depreciation and amortization expenses remained the same for the three months ended March 31, 2006 compared with the same period in 2005.

Operating income increased by $90,060 or 47.4% for the three months ended March 31, 2006 compared to the three months ended March 31, 2005. This increase in income was the result of the increased income from CPE sales and service, and leased network access.

LIQUIDITY AND CAPITAL RESOURCES

Capital Structure

The total long-term capital structure (long-term debt plus shareholders’ equity) for the Company was $44,566,451 at March 31, 2006, reflecting 73.1% equity and 26.9% debt. This compares to a capital structure of $44,143,281 at December 31, 2005, reflecting 71.5% equity and 28.5% debt. Management believes adequate internal and external resources are available to finance ongoing operating requirements, including capital expenditures, business development, debt service and the payment of dividends for at least the next 12 months.

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Cash Flows

Cash provided by operations was $2,301,258 for the three-month period ended March 31, 2006 compared to $2,631,879 for the three-month period ended March 31, 2005. Cash flows from operations for the three months ended March 31, 2006 and 2005 were primarily attributable to net income plus non-cash expenses for depreciation and amortization.

Cash flows used in investing activities were $756,976 for the three months ended March 31, 2006 compared to $594,628 for the same period in 2005. Capital expenditures relating to on-going businesses were $743,916 during the first three months of 2006 as compared to $518,558 for the same period in 2005. The Company operates in a capital-intensive business. The Company is continuing to upgrade its local networks for changes in technology to provide the most advanced services to its customers. The Company expects total plant additions of approximately $3,235,000 in 2006.

Cash flows used by financing activities were $1,085,389 for the three-month period ended March 31, 2006 compared to cash flows used by financing activities of $1,051,116 for the three-month period ended March 31, 2005. Included in cash flows used in financing activities were debt repayments and dividend payments.

Dividends

The Company paid dividends of $460,389 during the first quarter of 2006 and $426,116 during the first quarter of 2005. This represented a dividend of $.09 per share for 2006 and $.0833 per share for 2005. The Board of Directors reviews dividend declarations based on anticipated earnings, capital requirements and the operating and financial condition of the Company. The Company has made no announcements or plans to change the dividends above or below historic levels for the remainder of 2006. The Company does not expect its payout of dividends at the existing level to negatively impact the liquidity of the Company.

Sale of MWH

On November 17, 2005, MWH and Alltel Corporation (“Alltel”) entered into a definitive agreement under which Alltel agreed to purchase MWH. The total compensation to be paid by Alltel totals $1.075 billion, including payments to MWH shareholders, payments to minority interest holders in certain MWH properties and assumption of MWH’s outstanding debt. If the transaction is consummated, the Company expects its portion of the proceeds from the sale before taxes to be approximately $80,000,000, with approximately 90% of the proceeds to be received shortly after closing and the remaining amount to be paid at six months and at fifteen months after closing. U.S. Cellular Corporation has initiated proceedings at the FCC and in Delaware State court, however, contesting the definitive agreement. MWH currently expects to close the transaction in 2006, subject to resolution or settlement of U.S. Cellular’s claims, satisfaction of customary conditions and receipt of regulatory approvals. See Item 5, Other Information on this Form 10-Q on page 25.

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Although the Company had not definitely determined how it would use the proceeds from the sale of Midwest, it is currently analyzing a number of alternatives, including the reduction of its indebtedness, the payment of a special dividend and the acquisition of one or more businesses that would complement its existing business segments. The acquisition of any business would be subject to the negotiation and execution of definitive agreements.

Working Capital

The Company had a working capital deficit of $523,044 as of March 31, 2006, compared to working capital deficit of $646,284 as of December 31, 2005. The increase of $123,240 in working capital reflects the Company’s increase in cash and cash equivalents. The ratio of current assets to current liabilities was 1.0:1.1 as of March 31, 2006 and 1.0:1.2 as of December 31, 2005.

Long-Term Debt

In fiscal 2001, the Company entered into a $15 million secured ten-year reducing revolving credit facility maturing in 2011. The borrowings under the credit facility bear interest, at the Company’s option, at either fixed or variable rates, currently at variable rates, linked to the Company’s overall leverage ratio. This ten-year loan requires equal monthly payments of $125,000. At March 31, 2006, there were $8,625,000 of direct borrowings outstanding under this facility at an interest rate of 6.51%.

Also, in fiscal year 2001, the Company entered into a $10 million secured ten-year reducing revolving credit facility maturing in 2011. The borrowings under the credit facility bear interest, at the Company’s option, at either fixed or variable rates, currently at variable rates, linked to the Company’s overall leverage ratio. Principal payments of $250,000 per quarter are required on this loan. At March 31, 2006, there were $5,750,000 of direct borrowings outstanding under this facility at an interest rate of 6.51%.

Other

The Company has not conducted a public equity offering. It operates with original equity capital, retained earnings and indebtedness in the form of senior debt. The Company believes its current debt to total capital proportions of 27 to 73 percent will be adequate for the foreseeable future.

By utilizing cash flow from operations and current cash balances, the Company feels it has adequate resources to meet its anticipated operating, capital expenditures, and debt service requirements.

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Recent Accounting Developments

In February 2006, the FASB issued SFAS No. 155, Accounting for Certain Hybrid Instruments (“SFAS 155”). SFAS 155 amends SFAS 133 and SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities (“SFAS 140”). SFAS 155 allows financial instruments that have embedded derivatives to be accounted for as a whole, eliminating the need to bifurcate the derivative from its host, if the holder elects to account for the whole instrument on a fair value basis. In addition, among other changes, SFAS 155 (i) clarifies which interest-only strips and principal-only strips are not subject to the requirements of SFAS 133; (ii) establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation; (iii) clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives; and (iv) eliminates the prohibition on a qualifying special-purpose entity (“QSPE”) from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial interest. SFAS 155 is to be applied prospectively and is effective for all financial instruments acquired or issued for fiscal years beginning after September 15, 2006. SFAS 155 is not expected to have a material impact on the Company’s consolidated financial statements.

In November 2005, the FASB issued FSP FAS 115-1 and FAS 124-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments, which amends SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities, SFAS No. 124, Accounting for Certain Investments Held by Not-for-Profit Organizations and APB Opinion No. 18, The Equity Method of Accounting for Investments in Common Stock. This FSP addresses the determination as to when an investment is considered impaired, whether the impairment is other-than-temporary and the measurement of an impairment loss. FSP FAS 115-1 and FAS 124-1 also includes accounting considerations subsequent to the recognition of an other-than-temporary impairment and requires certain disclosures about unrealized losses that have not been recognized as other-than-temporary impairments. The guidance in this FSP is effective for reporting periods after December 15, 2005. The implementation of FSP FAS 115-1 and FAS 124-1 is not expected to have a material impact on the Company’s financial condition or results of operations.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company does not have operations subject to risks of foreign currency fluctuations, nor does the Company use derivative financial instruments in its operations or investment portfolio. The Company’s earnings are affected by changes in interest rates as its long-term debt is based on a national variable rate and a 30-day fixed rate based on the Company’s leverage ratio. The amounts of borrowings at 30-day fixed and variable rates fluctuate over time. If interest rates for the portion of the Company’s long-term debt based on variable rates and 30-day fixed rates, which ranged between 5.31% and 6.51%, had averaged 10% more for the first three months of 2006, the Company’s interest expense would have increased approximately $21,000. In October 2005, the Company began converting a portion of its variable-rate debt to short-term fixed rate debt to mitigate its exposure to rising interest rates.

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ITEM 4. CONTROLS AND PROCEDURES

The Company maintains a system of disclosure controls and procedures that is designed to provide reasonable assurance that information, which is required to be disclosed, is accumulated and communicated to management timely. At the end of the period covered by this report, the Company carried out an evaluation under the supervision and with the participation of its management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective in timely alerting them to material information relating to the Company required to be disclosed in periodic filings with the SEC.

There were no significant changes in the Company’s internal controls or in other factors that could significantly affect these internal controls subsequent to the date of the Company’s most recent evaluation.

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PART II. OTHER INFORMATION

ITEM 1A. RISK FACTORS

There have been no material changes to the risk factors described in our annual report on Form 10-K for the year ended December 31, 2005.

ITEM 5. OTHER INFORMATION

Sale of MWH

In November 2005, Alltel Corporation (Alltel) entered into a definitive agreement to purchase MWH licenses, customers and network assets for $1.075 billion in cash. In January 2006, the members of MWH approved the transaction and agreed to a merger of MWH with Alltel. Closing of this transaction, which is currently expected to occur on or about July 3, 2006, and is subject to approval by certain regulators and resolution of certain contingencies.

The regulatory and legal processes relating to the MWH/Alltel transaction continue to move forward. U.S. Cellular Corporation has initiated proceedings at the FCC and in Delaware State court, however, contesting the definitive agreement. The Department of Justice and Federal Communications Commission are considering a divestiture proposal presented by Alltel, and the Department of Justice has indicated a decision regarding divestiture plan should be available soon. On March 10, 2006, an initial hearing was held in Delaware on the lawsuit filed by the U.S. Cellular Corporation. The judge considered preliminary motions by both sides (plaintiffs’ motion for a preliminary injunction and defendants’ motion for judgment on the pleadings), but did not render a decision. The lawsuit is scheduled for a trial on May 10 – 12, 2006. The original transaction agreement between MWH and Alltel included a termination of April 17, 2006. By mutual agreement, MWH and Alltel have extended the termination date of the Transaction Agreement to July 3, 2006. It is expected that this extension will provide sufficient time to complete the regulatory work and legal activities.

If the transaction is approved, the Company expects its portion of the proceeds from the sale before taxes to be approximately $80,000,000, or an estimated $55,000,000 after income taxes, with approximately 90% of the proceeds to be received shortly after closing and the remaining amount to be paid at six months and at fifteen months after closing.

Although the Company has not definitely determined how it would use the proceeds from the sale of Midwest, it is currently analyzing a number of alternatives, including the reduction of its indebtedness, the payment of a special dividend and the acquisition of one or more businesses that would complement its existing business segments. The acquisition of any business would be subject to the negotiation and execution of definitive agreements.

Executive Officer Compensation

On March 28, 2006, the Board of Directors of the Company adopted the New Ulm Telecom, Inc. Fiscal 2006 Management Incentive Plan (the “2006 Plan”). The 2006 Plan provides for the payment of cash compensation to executive officers upon achievement of predetermined targets.

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Under the 2006 Plan, the officers can earn a bonus up to the following percent of their salaries:

In order for these officers to earn a bonus in any area, the Company must achieve 80% of target in that area. No bonus will be paid under the 2006 Plan, however, unless the Company achieves at least 80% of target net income.

If available, awards will typically be paid two and one-half months following the end of the fiscal year. Participants need to be employed through the last day of the fiscal year in order to receive any award for that year.

ITEM 6. EXHIBITS

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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.

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INDEX TO EXHIBITS

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