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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Form 10-K

For the fiscal year ended December 31, 2002

or

For the transition period from               to             

Commission File Number 000-28160

WESTERN WIRELESS CORPORATION

(425) 586-8700

Securities registered pursuant to Section 12(b) of the Act:
None

Securities registered pursuant to Section 12(g) of the Act:
Class A Common Stock

     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 [  ]

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [  ]

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes [X] No [  ]

     The aggregate market value of the voting stock held by nonaffiliates of the registrant, computed by reference to the closing sale price of the registrant’s common stock on June 30, 2002 as reported by the NASDAQ Stock Market was $252,813,853.

     Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the following documents are incorporated by reference into the indicated parts of this Form 10-K: Proxy Statement for its 2003 annual shareholders meeting to be filed with the United States Securities and Exchange Commission — Part III.

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Western Wireless Corporation
Form 10-K
For The Fiscal Year Ended December 31, 2002

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     Cautionary statement for purposes of the “Safe Harbor” provisions of the Private Litigation Reform Act of 1995. This Annual Report on Form 10-K, including Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7, contains statements that are not based on historical fact, including without limitation statements containing the words “believes,” “may,” “will,” “estimate,” “continue,” “anticipates,” “intends,” “expects” and words of similar import, constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, events or developments to be materially different from any future results, events or developments expressed or implied by such forward-looking statements. Such factors include, among others, the following: general economic and business conditions, nationally, internationally and in the regions and countries in which Western Wireless Corporation operates; demographic changes; technology changes; competition; changes in business strategy or development plans; the high leverage of the Company and our ability to access capital markets; the ability to attract and retain qualified personnel; existing governmental regulations and changes in, or the failure to comply with, governmental regulations; our ability to acquire and the cost of acquiring additional spectrum licenses; liability and other claims asserted against the Company; and other factors referenced in the section entitled “Risk Factors” included elsewhere in this report and in the Company’s public offering prospectuses and its periodic reports filed with the Securities and Exchange Commission.

     Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. The Company disclaims any obligation to update any such factors or to publicly announce the result of any revisions to any of the forward-looking statements contained herein to reflect future results, events or developments.

     Unless the context requires otherwise, “Western Wireless,” “the Company,” “we,” “our” and “us” include us and our subsidiaries.

PART I

Item 1. BUSINESS

General

     We are one of the largest providers of rural wireless communications services in the United States. Our wireless operations are primarily in rural areas due to our belief that there are significant strategic advantages to operating in these areas. We believe rural markets provide growth opportunities greater than those that exist in more densely populated urban areas because these markets typically have lower current penetration rates and less competition.

     We provide wireless services, under the CellularONE ^® (“CellularONE”) and Western Wireless^® brand names, to approximately 1.2 million subscribers in the western United States using multiple digital and analog technologies. We operate in 88 Rural Service Areas (“RSAs”) and 18 Metropolitan Service Areas (“MSAs”) with a combined population of approximately 10 million people. Our network is one of the nation’s largest rural wireless communications systems, covering approximately 25% of the continental United States in 19 western states. We support our customers through our retail locations throughout our service area and through our call centers in Manhattan, Kansas, and Issaquah, Washington.

     In addition, through our subsidiary, Western Wireless International Holding Corporation (“WWI”), we are licensed to provide wireless communications services to over 75 million people in nine countries. As of December 31, 2002, WWI’s consolidated and unconsolidated subsidiaries served, in aggregate, approximately 2.1 million mobile subscribers. See “The Business of WWI,” for more information.

     Western Wireless was organized in 1994. Our principal corporate office is located at 3650 131st Avenue S.E., Suite 400, Bellevue, Washington 98006. Our phone number is (425) 586-8700. Our corporate website address is www.wwireless.com.

     We make available free of charge through our website our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to these reports, as soon as practicable after we have electronically filed such material with, or furnished such material to, the SEC.

Domestic Business and Strategy

     Our goal is to be the premier provider of high quality wireless communications services in our rural markets. We provide voice and data services to both businesses and consumers including our own subscribers and other companies’ subscribers who roam through our service areas. We believe that our 800 MHz licenses, utilizing multiple digital and analog technologies, give us a strategic advantage in our rural markets. We have also acquired certain 1900 MHz Personal Communication Services (“PCS”) licenses to supplement our coverage in a few markets. We believe there are inherent competitive advantages and growth opportunities unique to rural markets. The following are the key elements of our strategy:

	•		Expand and enhance our domestic wireless network to increase capacity, expand coverage and provide additional features
	•		Increase domestic subscriber growth, usage and services available to our subscribers
	•		Continue to provide high-quality and reliable telecommunications services to people in sparsely populated areas, with support from state and federal Universal Service Funds
	•		Remain the roaming partner of choice for national and other regional carriers, regardless of technology
	•		Continue to lower our operating costs, increase the use of more efficient channels of distribution and continue to deliver strong operating results
	•		Continue to consolidate wireless licenses that are contiguous with our existing markets, including possible trades, acquisitions or dispositions

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Expand and enhance our domestic wireless network to increase capacity, expand coverage and provide additional features

     Our cellular network operates over radio frequencies licensed by the Federal Communications Commission (“FCC”). We operate 25 MHz of spectrum between 800 – 900 MHz using both analog and digital technologies. Analog technology assigns only one voice circuit per radio channel. However, digital technologies are more efficient as a single radio channel in a digital system can carry multiple transmissions simultaneously. Digital systems utilize Time Division Multiple Access (“TDMA”), Code Division Multiple Access (“CDMA”) or the Global System for Mobile Communications (“GSM”) transmission technologies, none of which are compatible with each other. However, most markets in the United States have at least one cellular/PCS operator offering each technology.

     We believe it is critical to continue to expand network coverage and increase capacity in our existing voice network to support both our subscribers and those subscribers of our roaming partners. We continue to offer analog technology in all of our markets. We have deployed digital TDMA in all our markets and in 2001 we began deploying CDMA in our markets. Our CDMA platform allows us to economically expand the minutes of use (“MOU”) available to our customers and introduce a wide range of wireless Internet-related services and other new features. As of December 31, 2002, CDMA was available to approximately 50% of the population covered by our domestic licenses. We will continue to offer TDMA digital services primarily for our roaming partners, but we believe that most wireless carriers in the United States will utilize GSM or CDMA based digital technology platforms as they migrate to the next generation of wireless technology. We believe our CDMA platform will support our wireless data strategy and attract additional roaming traffic not currently served by our existing analog and TDMA networks. As national carriers who are our roaming partners, such as AT&T Wireless Services, Inc. (“AT&T Wireless”) and Cingular Wireless (“Cingular”), develop and build their GSM digital technology platforms and accumulate significant subscribers who might roam into our coverage areas, we expect to add this third digital platform to accommodate roaming customers if we can enter economic business arrangements.

     We believe our cellular systems, which we generally own in large geographic clusters in predominately rural areas, provide us a strategic advantage in our markets. Cellular systems, which operate in the 800 MHz frequency band, are ideal for providing coverage to large geographic areas in sparsely populated areas. In addition, each of our cellular systems provides 25 MHz of spectrum, which enables us to deploy several digital technologies to meet the needs of both our own subscribers and our diverse roaming partners. Although we have acquired three 1900 MHz PCS licenses to supplement our network coverage, 1900 MHz systems are less efficient in rural areas due to the smaller range of coverage per cell site.

Increase domestic subscriber growth, usage and services available to our subscribers

     High Quality and Affordable Services — We offer our subscribers high quality communications services, as well as several custom calling services, such as call forwarding, call waiting, conference calling, enhanced directory assistance with hands-free dialing, voice message storage and retrieval, caller ID, wireless web, short messaging service, data services and no-answer transfer. The nature of the services offered varies depending upon the market. In addition, all subscribers can access local government emergency services from their cellular handsets (at no charge) by dialing 911. We have designed our pricing options to be simple and understandable, while still meeting the varied needs of our customer base. A majority of our rate plans consist of a fixed monthly access charge (with varying allotments of included minutes) plus variable charges per minute of additional use. In most cases, we separately charge for our custom calling services.

     We provide extended regional and national service to our subscribers through regional and national roaming arrangements, thereby enabling our subscribers to seamlessly make and receive calls while in other cellular service areas. New rate plans introduced in 2002 offer our subscribers regional calling plans and roaming packages that allow them to pay home usage rates while traveling within specified regional zones, both within and outside of our service areas. These rate plans also offer larger allotments of included minutes.

     Data Services — Our wireless Internet portal, MyCellOne.com, delivers a wide range of wireless Internet-related services including a personal e-mail service, access to external e-mail (for example, Yahoo^® and Hotmail^® accounts), Personal Information Management (“PIM”) services that include calendars, to-do lists and synchronization with personal computers, web browsing, games, a customizable home page and information alerts that are sent to the subscriber’s phone as short messages. In 2002, we expanded the services and capabilities of the portal to allow intercarrier messaging, e-mail to short message translation functionality and the downloading of ringtones and icons to handsets. We will continue to evaluate new products and services, such as data, that may be complementary to our wireless operations.

     In 2002, we began market testing next generation 1xRTT based high-speed packet data networks in Billings, Montana and Midland, Texas. These networks provide services at data speeds significantly faster than those currently available. Additionally, unlike most existing networks, the data devices on these high speed data networks communicate with the Internet, Intranets and other IP based networks through “always on” connections enabling faster, more immediate interactions and communications between users.

     Wireless Residential Services (“WRS”) — We utilize our existing network infrastructure and cellular licenses to provide wireless local voice and data services primarily to residential customers. These services involve the use of a wireless access unit at a customer’s residence. The wireless access unit provides the customer a dial tone and transmits the signal to the nearest cell site. We believe that WRS offers many customers a cost-effective and reliable alternative to local wireline carriers. In addition, WRS can be deployed in regions not currently served by local wireline carriers. For example, in November 2000, we began providing WRS to residents of the Pine Ridge Indian Reservation. Many of these residents did not previously have access to wireline services.

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Continue to provide high-quality and reliable telecommunications services to people in sparsely populated areas, with support from state and federal Universal Service Funds

     We have been a strong proponent of regulatory neutrality between various communications technologies, especially with respect to sparsely populated rural areas. As part of this effort, we have filed applications with appropriate regulatory authorities to be designated an Eligible Telecommunications Carrier (“ETC”) in order to allow us to receive federal and state Universal Service Fund (“USF”) support. The USF was established to provide support to telecommunications carriers offering basic telephone service in rural, insular and high cost areas. As of December 31, 2002, we have been successful in obtaining full or partial ETC status in 14 states and the Pine Ridge Indian Reservation, and are providing services we believe are eligible for USF payments in 11 of those 14 states and the Pine Ridge Indian Reservation. In 2003, we plan to seek designation as an ETC qualified to receive USF funds in additional areas. Initially, on September 30, 2002 and again on December 31, 2002, we submitted our requests to receive funding for certain of our traditional mobile services customers that reside in areas in which we are eligible to receive federal universal service funding. We expect to submit similar requests on a quarterly basis throughout 2003 and believe it is likely that in 2003 we will receive most, if not all, of the requested funding. Depending on the amounts received, such funding could have a significant beneficial impact on our 2003 subscriber revenues, ARPU and cash flow.

Remain the roaming partner of choice for national and other regional carriers, regardless of technology

     We believe we are in a unique position to be the roaming partner of choice for national carriers whose customers roam throughout our service areas. We have made significant investments in our network which enable us to offer high quality and reliable service to our roaming partners. We believe the high costs of constructing PCS networks in our rural footprint presents a barrier to the national PCS carriers. In addition, our network supports the three largest leading technology platforms that national cellular and PCS carriers use currently. We expect to add the fourth platform, GSM, to our network as the number of national carriers’ customers that would use such platform in our service areas becomes significant enough to support this investment in GSM service if we can enter economic business arrangements.

     We have roaming agreements with most of the major wireless carriers in North America, including AT&T Wireless, Cingular and Verizon Wireless Corporation (“Verizon”). These agreements allow their customers to roam on our network and allow our subscribers to utilize those carriers’ networks. Similarly, these agreements provide attractive rates to us for our customers who roam in areas outside our wireless network. During 2002, approximately 59% or $136 million of our domestic roamer revenues were attributable to AT&T Wireless. In March 2002, we extended our roaming agreement with AT&T Wireless which remains in effect through June 15, 2006. Additionally, in 2002 we entered into new roaming agreements with Verizon and Cingular effective through March and April 2005, respectively.

Continue to lower our operating costs, increase the use of more efficient channels of distribution and continue to deliver strong operating results

     We believe that our success has been and will continue to be attributable in large part due to our low operating costs. In 2002, we lowered our costs of providing service. We have taken several significant steps to reduce our cost of providing service. We have entered into a national wholesale long distance contract with a leading long distance carrier that has lowered our cost of providing long distance service to our customers. We also have new roaming agreements with national wireless carriers that substantially lower the per minute costs we incur when our customers roam on their networks.

     In 2002, we launched an enterprise voice portal (“EVP”) throughout our call center operations. The EVP enables our customers to access their account and billing information over the phone without the intervention of a customer service representative. We also employ the use of the Internet as a customer care tool. The Internet allows our customers to obtain answers to routine inquiries and make payments. These actions would have formerly required the customer to speak to a customer care representative. In March 2003, we consolidated call center operations into two locations and closed our call center in McAllen, Texas. We continue to offer customer service in the English and Spanish languages.

     We have also focused on reducing the costs of acquiring subscribers. During 2002, we decreased our number of owned store locations and the headcount associated with running those locations. This decreased our fixed costs and shifted more of our sales and marketing emphasis to the variable cost of agent and indirect channels.

     Since the Company was established, we have focused on delivering consistent and strong operating results. In 2002, we increased annual domestic EBITDA (total revenues less total operating expenses exclusive of depreciation, amortization, asset dispositions and stock-based compensation) for the eighth consecutive year and generated unlevered free cash flow (EBITDA less capital expenditures) from domestic operations for the sixth consecutive year, more than doubling the amount of domestic free cash flow as compared to 2001. By continuing to lower our operating costs and maximizing the efficiency of our distribution channels, we believe we can improve our financial leverage and further increase our cash flow.

Continue to consolidate wireless licenses that are contiguous with our existing markets, including possible trades, acquisitions or dispositions

     It is part of our ongoing strategy to evaluate business opportunities including potential trades, acquisitions and dispositions to better consolidate our footprint. In June 2002, we were notified by the FCC that we were the successful bidder for the North Dakota 3 RSA license.

Marketing, Sales and Customer Service

     Our sales and marketing strategy is designed to generate continued net subscriber growth and increased subscriber revenues. We target a customer base we believe is likely to generate higher monthly service revenues, while attempting to achieve a low cost of adding new subscribers.

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     Marketing — We market our products and services under the names CellularONE, the first national brand name in the cellular industry, and Western Wireless^®, both of which we own. We also license the CellularONE name to other wireless communications providers. The regional and national advertising campaigns conducted by the CellularONE Group have enhanced our advertising exposure at a lower cost than what could be achieved by us alone. In June 1999, we became a 50% partner in the CellularONE Group, and in July 2001, acquired the remaining 50% of the CellularONE Group. In 2003, the CellularONE Group advertising program will continue to focus on more regional advertising of direct benefit to CellularONE’s licensees.

     In 2002, we launched service in Amarillo, Texas under the name Western Wireless^®.

     Sales and Distribution — We sell our products and services through a combination of direct and indirect channels. We operate both stores and kiosks under the CellularONE and Western Wireless^® brand names and utilize a direct sales force trained to educate new customers on the features of our products. Sales commissions generally are linked both to subscriber revenue and subscriber retention, as well as activation levels. In 2002, we opened two retail outlets in Amarillo, Texas under the Western Wireless^® name.

     We believe that our local retail locations provide the physical presence in local markets necessary to position CellularONE and Western Wireless^® as a quality local service provider and give us greater control over both our costs and the sales process. In 2002, we focused on expanding our indirect network of national and local merchants and specialty retailers in order to reduce our fixed sales and marketing costs. However, we will continue to use a combination of direct and indirect sales channels, with the mix depending on the requirements of each particular market.

     We also act as a retail distributor of handsets and maintain inventories of handsets. Although subscribers generally are responsible for purchasing or otherwise obtaining their own handsets, we have historically sold handsets below cost and expect to continue to do so in the future.

     Customer Service — Providing high quality customer service is a significant element of our operating philosophy. We are committed to attracting and retaining subscribers by providing consistently superior customer service. We currently operate call centers in Manhattan, Kansas and Issaquah, Washington. Our call centers maintain highly sophisticated monitoring and control systems and well-trained customer service and technical staffs to handle both routine and complex questions as they arise, 24 hours a day, 365 days a year.

     We utilize credit check procedures at the time of sale and continuously monitor customer churn (the rate of subscriber attrition) and other events (such as service agreement expiration dates), which can impact customer churn. It is our belief that we can effectively manage customer churn through an outreach program staffed by our sales force and customer service personnel and through our efforts to predict more accurately the timing of potential customer churn. The outreach program is intended to not only enhance subscriber loyalty, but also to increase add-on sales and customer referrals. This program allows the sales staff to check customer satisfaction, as well as to offer additional calling features, such as voice mail, call waiting and call forwarding.

Markets and Systems

     We operate cellular systems in 18 MSAs and 88 RSAs. We have also acquired selected PCS licenses to supplement our coverage. At December 31, 2002, we owned 100% of each of our licenses. In aggregate our licenses cover a geographic population of more than ten million people. Several inherent attributes of RSAs and small MSAs make such markets attractive. Such attributes typically include:

	•		relative under-penetration as compared to more urban areas
	•		population bases of customers with substantial needs for wireless communications
	•		the ability to cover large geographic areas with fewer cell sites as compared to urban areas
	•		less intense competitive environments
	•		less vulnerability to PCS and other competition
	•		large distances between population centers resulting in a higher proportion of roaming revenues than in urban areas

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     The following table sets forth the areas in which we hold licenses and the population covered by those licenses. The population data is estimated for 2003 based upon 2002 Claritas, Inc. (“Claritas”) estimates, and is adjusted by us by applying Claritas’ positive and negative growth factors:

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(1)		We are the licensed A-2 carrier, servicing a portion of the Arizona 1 RSA.
(2)		The population for the Idaho 3 RSA represents those areas where we have construction permits to build cell sites under our Idaho 2 license.
(3)		We are the licensed A-2 carrier, servicing a portion of the New Mexico 2 RSA.
(4)		The population for New Mexico 6 includes 100 persons in the New Mexico 3 RSA where we are the licensed A-2 carrier, servicing a portion of the New Mexico 3 RSA.
(5)		We are the licensed A-2 carrier, servicing a portion of the Wyoming 3 RSA.
(6)		Represents incremental population as portions of the Basic Trading Areas overlap certain cellular licenses.

Competition

     Competition for subscribers among wireless communications providers is based principally upon the services and features offered, the technical quality of the wireless system, customer service, system coverage, capacity and price. Under current FCC rules, there may be up to six PCS licensees in each geographic area in addition to the two existing cellular licensees. Also, Specialized Mobile Radio (“SMR”) dispatch system operators have constructed digital mobile communications systems, referred to as Enhanced Specialized Mobile Radio (“ESMR”), in many cities throughout the United States, including some of the markets in which we operate. Due to the high cost of construction, we do not believe PCS systems will be built in most of our RSAs in the near future.

     Although we believe there are competitive advantages to operating in rural markets, we do operate in a competitive environment. Each of our cellular markets face one cellular competitor, such as Verizon, Alltel Corporation or Cingular. Additionally, we have PCS and ESMR competitors in most of our MSAs. Continuing industry consolidation has resulted in an increased presence of these regional and national wireless operators within our service areas. More recently, some national wireless operators have begun to build small networks in certain of the more densely populated or well-traveled portions of our service areas. The use of national advertising and promotional programs by national wireless operators run in our markets are a source of additional competitive and pricing pressures even though these operators may not provide service in these markets. We also compete with wireless Internet, paging, dispatch services, resellers and landline telephone

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service providers in some of our service areas. Increasingly, cellular service is becoming a viable alternative to landline voice services for certain customer segments, putting cellular licensees in direct competition with traditional landline telephone service providers. One or two-way paging services that feature voice messaging and data display, as well as tone only service, may be adequate for potential subscribers who do not need to speak to the caller. Potential users of cellular systems may find their communications needs satisfied by other current and developing technologies.

     In the future, we expect to face increased competition from entities providing similar services using other communications technologies. In addition, the auctioning and subsequent deployment of technology in additional spectrum and the disaggregation of spectrum could also generate new competition for us. While some of these technologies and services are currently operational, others are being developed or may be developed in the future. Continuing technological advances in the communications field make it difficult to predict the nature and extent of additional future competition.

Suppliers and Equipment Vendors

     We do not manufacture any of the handsets, cell site or switching equipment used in our operations. The high degree of compatibility among different manufacturers’ models of handsets with cell site and switching equipment allows us to design, supply and operate our systems without being dependent upon any single source of such equipment. The handsets and cell site equipment used in the operations are available for purchase from multiple sources. Manufacturers phased out the production of analog handsets during the fourth quarter of 2001, but new analog handsets remained available from various distribution channels through most of 2002. We believe that dual-mode and tri-mode handsets (handsets that contain both digital and analog capabilities) will continue to be available from multiple manufacturers in the foreseeable future. We currently offer handsets manufactured by Audiovox, Inc., Kyocera Wireless Corp., Motorola, Inc., and Nokia Telecommunications, Inc. (“Nokia”) and purchase cell site and switching equipment primarily from Lucent Technologies, Inc. and Nortel Networks, Inc.

Intellectual Property

     CellularONE is a service mark registered with the United States Patent and Trademark Office and owned by us.

     We hold a federal trademark registration of the mark “Western Wireless” and have registered or applied for various other trade and service marks with the United States Patent and Trademark Office.

Regulatory Environment

     The FCC regulates the licensing, construction, operation, acquisition, sale and resale of cellular systems in the United States, pursuant to the Communications Act of 1934, as amended (the “Communications Act”), and the rules, regulations and policies promulgated by the FCC thereunder. FCC regulations distinguish, in part, between “cellular” licenses which are for 800 MHz frequency, and PCS licenses, which are for 1900 MHz frequency. The Communications Act preempts state and local regulation of the entry of, or the rates charged by, any provider of commercial mobile radio service (“CMRS”), such as a cellular service provider. State governments, however, can regulate certain other terms and conditions of cellular service offerings and some states have imposed or are considering the imposition of consumer protection regulations on the wireless industry.

Licensing of Wireless Communications Systems

     A cellular communications system operates under a license granted by the FCC for a particular market or geographic area on one of two 25 MHz frequency blocks allocated for cellular radio service. Cellular authorizations are issued for a 10-year license term beginning on the date of the initial notification to the FCC of the completion of construction by a cellular carrier. Under FCC rules, the authorized service area of a cellular provider in each of its markets is referred to as the Cellular Geographic Service Area (“CGSA”).

     At the end of the 10-year initial term for cellular licenses, licensees must file applications for renewal of licenses. The FCC has adopted specific standards governing cellular license renewals. Under these standards, a cellular license will generally be renewed for additional 10 year terms if a cellular licensee has provided substantial service during its past license term and has substantially complied with applicable FCC rules and policies and the Communications Act.

     The Communications Act and FCC rules require the FCC’s prior approval of any assignments of cellular licenses, including construction permits, or transfers of control of cellular licensees. Non-controlling interests in an entity that holds a cellular license generally may be bought or sold without prior FCC approval. If the transaction is over a certain size, any acquisition or sale of cellular interests may also require the prior approval of the Federal Trade Commission and the Department of Justice as well as approval from any state or local regulatory authorities having competent jurisdiction.

     As of January 1, 2003, there is no longer a limit on the amount of CMRS spectrum (i.e., cellular, PCS, and SMR) that a carrier can hold in a market. However, there remains a cellular cross-interest rule that prohibits a carrier from owning an attributable interest in both cellular licenses in a single RSA market. Although the FCC retained the cellular cross-interest rule in RSAs, it will consider waivers of the rule for RSAs that exhibit market conditions under which cellular cross-interest may be permissible without significant likelihood of substantial competitive harm. Notwithstanding the removal of the spectrum cap and partial removal of the cross-interest restriction, the FCC has indicated that it will engage in a case by case review of any anticompetitive effects of CMRS spectrum acquisitions, although it is not clear what criteria the FCC will use in such review.

Regulatory Developments

     E911 Service — The FCC has adopted rules governing the provision of emergency 911 services by cellular, PCS and other mobile service providers, including enhanced 911 (“E911”) services that provide the caller’s telephone number, location, and other useful information. Cellular and PCS providers must be able to process and transmit 911 calls (without call validation), including those from callers with speech or hearing disabilities.

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     Under Phase I of the FCC’s E911 rules, if a Public Service Answering Point (“PSAP”) requests and is capable of processing the caller’s telephone number and location information, then cellular, PCS, and other mobile service providers must relay a caller’s automatic number identification and the location of the cell site or base station receiving a 911 call. Wireless carriers must transmit all 911 calls without regard to validation procedures intended to identify and intercept calls from non-subscribers. The FCC’s rules require that analog cellular phones include a separate capability for processing 911 calls that permit these calls to be handled, where necessary, by either cellular carrier in the area. This rule applies only to new analog cellular handsets and not to existing handsets or to PCS or SMR services.

     Under Phase II of the FCC’s E911 rules, CMRS carriers are allowed to choose a handset-based or network-based approach for identifying the location of an E911 caller. In areas where we have received valid requests for Phase II service, we will implement a handset-based approach which requires that the PSAP be able to identify the location of a 911 caller within 50 meters for 67% of all calls and within 150 meters for 95% of all calls. To date, we have received nine requests for Phase II service and are working with each PSAP to assess their readiness and schedule deployment plans to meet the FCC’s requirements. Under a waiver granted by the FCC, we were required to begin selling and activating handsets with automatic location identification capability by March 1, 2003. We have complied with this requirement. Additionally, under the waiver, we are required to meet the following benchmarks: (i) by May 31, 2003, 25% of new handset sales must be Phase II compliant; (ii) by November 30, 2003, 50% of new handset sales must be Phase II compliant; (iii) by May 31, 2004, 100% of new handset sales must be Phase II compliant. In addition, by December 31, 2005, 95% of all subscriber handsets must be Phase II compliant. Under the FCC rules, carriers must begin providing Phase II service within six months of the latter of receiving a valid request for service from a PSAP or March 1, 2003.

     Universal Service — In its implementation of the Communications Act, the FCC established new federal universal service rules, under which wireless service providers are eligible, for the first time, to receive universal service subsidies, and are also required to contribute to both federal and state USFs. For the first and second quarters of 2003, the FCC’s universal service contribution factor amounted to 7.3 percent and 9.1 percent, respectively, of a wireless service provider’s interstate and international telecommunications revenues. This contribution factor is subject to quarterly review and possible revision. Under the FCC rules, a wireless service provider may receive universal service support for providing telephone service in rural high-cost areas, provided that the wireless service provider has been designated as an ETC by a state commission or the FCC. Some states have conditioned ETC status on the service provider meeting certain consumer protection and service quality requirements. In an effort to maintain sufficient funding, the FCC adopted interim rules for determining the amount of interstate and international telecommunication revenues subject to the federal universal service contribution factor for wireless carriers. Under these new rules, wireless carriers can either use a proxy percentage to determine the amount of the carrier’s total subscriber revenue subject to the universal service contribution factor or calculate the amount of actual subscriber revenue which is interstate or international. The FCC increased the proxy percentage from 15 to 28.5 percent effective April 1, 2003. Many states have also established state USF programs that require all telecommunications carriers, including CMRS carriers, to contribute to the fund. Under some of these state USFs, CMRS carriers are also eligible to receive universal service support. Both federal and state USFs are subject to change based upon pending regulatory proceedings, court challenges, and marketplace conditions.

     Local Number Portability — The FCC has adopted rules on telephone number portability and number pooling in an effort to achieve more efficient number utilization. The FCC established November 24, 2003 as the extended deadline for CMRS carriers to implement service provider number portability in the top 100 Combined Metropolitan Service Areas (“CMSAs”). For markets outside of the top 100 CMSAs, the number portability requirement is triggered only upon receipt of a request by another carrier to port a customer’s telephone number. In such cases, carriers have six months to comply with these requests. Our McAllen, Texas MSA market falls within the top 100 CMSAs. We have filed a request with the FCC to waive the local number portability requirement as it applies to our McAllen MSA or, in the alternative, reinstate the prior rule that imposed number portability only in the top 100 MSAs (not CMSAs). In addition to our McAllen MSA market, we have 7 RSA markets which include counties, all or a portion of which have been designated as within the top 100 CMSAs. We have asked the FCC to rule that such markets not be considered within the top 100 CMSA markets and not be subject to local number portability requirements or, in the alternative, waive the number portability requirements for such markets. Both these requests are currently pending before the FCC. The number portability requirements are subject to change based upon regulatory proceedings and court challenges.

     Number Pooling — Wireless carriers are also subject to requirements governing number pooling, which provide for the assignment and use of available numbers. The FCC has imposed what is referred to as “thousand block pooling,” meaning carriers may only request and will only be assigned numbers in blocks of one thousand numbers rather than the previous blocks of ten thousand numbers. The number pooling requirements apply only to carriers operating within the top 100 CMSAs. Under the current rules, the implementation date for number pooling in most of these markets is June 10, 2003. We have filed a request with the FCC to waive the requirement to implement number pooling in our McAllen MSA and CMSA overlap markets, similar to our local number portability rules waiver request, which is currently pending. Implementation of the number portability and pooling requirements will cause significant network upgrade costs for all wireless carriers.

Employees and Labor Relations

     We consider our labor relations to be good and none of our employees are covered by a collective bargaining agreement. As of December 31, 2002, we employed domestically a total of 2,347 people in the following areas:

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The Business of WWI

Overview

     WWI, through its consolidated subsidiaries and other operating companies, is a provider of mobile communications services in Slovenia, Austria, Ireland, Bolivia, Ghana, Haiti, Côte d’Ivoire, Croatia and Georgia. These companies are licensed to provide wireless services to a geographic population of over 75 million people. At December 31, 2002, the Company owned approximately 98% of WWI and the balance was owned by Bradley Horwitz, Executive Vice President of the Company and President of WWI. In November 2002, WWI sold its ownership interest in its Icelandic subsidiary.

     The primary business of WWI is the delivery of mobile telecommunications services in markets outside of the United States. In certain markets, WWI’s operating companies also provide other telecommunications services, including fixed line services, wireless local loop, international long distance and Internet access. WWI’s largest non-mobile business is its fixed-line operations in Austria.

     In 2002, 82% of WWI’s consolidated service revenues were generated by its European subsidiaries in Ireland, Austria and Slovenia. Of these European service revenues, mobile telecommunications services accounted for approximately 77% of these revenues.

International Business and Strategy

     WWI’s strategy is to build a portfolio of wireless asset investments and opportunistically exit them as individual businesses mature and appropriate valuations can be realized. We believe the key elements in executing this strategy are:

	•		Low acquisition costs
	•		Potential for rapid growth
	•		An ability to partially fund operations by securing debt financing at the operating company level

     WWI provides management expertise to all of its operating companies, particularly in the early stages of development, and it exercises significant control over management decisions in all of its consolidated markets.

     WWI provides telecommunications services primarily in two types of markets. Historically, WWI focused investments in markets characterized by a substantial unmet demand for communications services offering the potential of rapid subscriber growth. Our markets that meet this profile include: Bolivia, Ghana, Haiti, Côte d’Ivoire, Croatia and Georgia. These markets are often characterized by inadequate local landline telephone service, which is unavailable to the majority of the population. WWI believes that wireless technology is a more economic medium to deliver telecommunications services in these markets. By introducing competition and providing customers with a high-quality alternative, WWI has succeeded in expanding the size and service offerings of the telecommunications sector in these markets. These markets tend to have limited competition in the wireless sector and generally have wireless penetration rates below 20%.

     In addition to investments in underserved markets, WWI has increasingly focused its investment in countries with more developed telecommunications infrastructure and substantial wireless competition, but where the entry costs are sufficiently low and the growth potential is sufficient to present an attractive investment opportunity. These markets generally have wireless penetration rates of 70% or higher and include Ireland, Austria and Slovenia.

     In 2002, WWI’s consolidated subsidiaries grew their mobile subscriber base by 51%.

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Markets and Operations

     Each of WWI’s operating companies operate cellular communications systems over radio frequencies licensed by the telecommunications regulatory body of its respective country.

     Each of WWI’s operating companies that provide wireless mobile services utilize GSM technology operating at the 900-MHz, 1800-MHz or 1900-MHz frequencies, with the exception of WWI’s operating company in Haiti, which utilizes TDMA technology at the 800-MHz frequency. GSM is the most widely used wireless technology in the world, serving over 800 million customers. GSM offers an open system architecture, is supported by a variety of vendors and allows operators to achieve cost economies in infrastructure and mobile terminal equipment. GSM also provides the benefit of a single phone number and transparent services on a global roaming basis. Further, GSM has high capacity, high voice quality and utilizes industry-leading encryption and authentication technology that provides customers with a high level of subscription and conversation privacy. GSM has always supported wireless data and currently supports high-speed packet-based data transmission. This allows GSM operators to provide customers with enhanced Internet and mobile data services.

     WWI’s operating company in Austria operates a 5,300-km fiber-optic network that provides fixed-line communications services to customers as well as backhaul transmission for its mobile network.

     The following table sets forth the countries in which WWI provides communications services, the populations of such country and the beneficial ownership of WWI in the operating entity providing such services. Population data related to WWI markets is included in the following table as of July 2002 as reported by the Central Intelligence Agency World Fact book.

     Those operating entities in which we have a beneficial ownership interest of greater than 50%, as noted in the table above, are consolidated as part of our financial results. Others are accounted for as an equity investment.

     Slovenia — WWI’s operating company in Slovenia, Western Wireless International d.o.o. (“WWI d.o.o.”), provides GSM mobile communications services in the 1800-MHz band. WWI d.o.o. launched commercial services in December 2001, under the brand name Vega.

     Austria — WWI’s operating company in Austria, tele.ring Telekom Services GmbH (“tele.ring”), provides GSM mobile communications, fixed-line and Internet services. tele.ring launched commercial GSM mobile services in the 1800-MHz band in May 2000. In addition, an affiliate of tele.ring owns a third generation license. It is anticipated we will begin limited build-out of a third generation network in 2003. We acquired tele.ring at the end of June 2001.

     Ireland — WWI’s operating company in Ireland, Meteor Mobile Communications Limited (“Meteor”), provides GSM mobile communications services in the 900-MHz and 1800-MHz bands. Meteor’s dual-band network launched commercial services in February 2001.

     Bolivia — WWI’s operating company in Bolivia, NuevaTel S.A. (“NuevaTel”), provides GSM mobile communications services in the 1900-MHz band. NuevaTel launched commercial services in November 2000 under the brand name Viva. In 2002, Viva also began operating a long distance business.

     Ghana — WWI’s operating company in Ghana, Western Telesystems (Ghana), Ltd. (“Westel”), is licensed to provide fixed and wireless telecommunications services, including basic phone service, cellular, paging, international long distance, pay phones, data communications, private networks and satellite communications. Westel has operated a wireless local loop network and international gateway since February 1998.

     Haiti — WWI’s operating company in Haiti, Communication Cellulaire d’Haiti S.A. (“COMCEL”), provides TDMA mobile communications services in the 800-MHz band. Additionally, COMCEL carries international long distance traffic to and from Haiti. COMCEL launched commercial mobile services in September 1999.

     Côte d’Ivoire — WWI’s operating company in Côte d’Ivoire, Cora de Comstar S.A. (“Comstar”), provides GSM mobile communications services in the 900-MHz band. After WWI’s acquisition of its interest in Comstar, Comstar relaunched commercial services under the new brand name CORA de Comstar (“Cora”) in September 2000. Since September 2002, Côte d’Ivoire has undergone sustained political instability, including an attempted coup and continued rioting. Although Cora continues to operate, its revenues and cash flows have been severely impacted. As a result, we have fully written off our investment in Cora.

     Croatia — WWI’s operating company in Croatia, VIP-Net d.o.o. (“VIP-Net”) provides GSM mobile communications services in Croatia in the 900-MHz band. VIP-Net launched commercial service in July 1999.

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     Georgia — WWI’s operating company in the Republic of Georgia, MagtiCom GSM, Ltd. (“MagtiCom”), provides GSM mobile communications services in the 900-MHz band. MagtiCom launched commercial services in September 1997.

Products and Services

     Basic Services — WWI’s operating companies provide a variety of wireless products and services designed to match a range of needs for business and personal use. Calling features that WWI’s operating companies provide include short message services (“SMS”), voicemail, message alert, caller ID, call waiting, call hold and conference calling. WWI’s operating companies offer services to WWI’s customers through both “postpaid” and “prepaid” payment plans. Postpaid contracts consist of a fixed monthly charge (with varying allotments of included minutes) plus variable charges for additional use. Prepaid plans require advance payment for airtime in specific currency denominations. Once the available airtime is consumed, the customer must “replenish” or prepay for additional airtime in order to continue using the service. At the end of 2002, 68% of our customers were on prepaid plans and 32% were on postpaid plans.

     Roaming — Customers of WWI’s European operations are able to roam throughout Europe and worldwide, either on other GSM-based networks utilizing the same spectrum band or through the use of multi-band handsets that can be used on GSM systems utilizing a different spectrum band. Additionally, WWI’s European operations generate revenues by allowing customers of other GSM operators to roam on their networks.

     Data Services — WWI’s operating companies offer a variety of data services that enable users to access information, send and receive e-mail, play games, and download ringtones and icons to their handsets. In Austria, WWI operates a GPRS-enabled (General Packet Radio Service) network that provides for a high capacity, “always-on” Internet connection, and services that include color web browsing, e-mail, information services, and location-based services. In Ireland and Slovenia, WWI offers an array of data services that are delivered over a SMS-based platform. These data services enable users to access information (i.e.: news, sports, weather, stocks, and film times) and receive customized information alerts, as well as participate in interactive games.

     Fixed-Line Services — WWI’s Austrian operating company offers three distinct fixed communications services: residential voice service, dial-up Internet access, and high-speed data access for corporate clients. It also provides value-added and carrier services, leased line services and data services such as intranet and VPN.

Marketing, Sales and Customer Service

     WWI’s sales and marketing strategy is to seek to generate rapid net subscriber growth and increased subscriber revenues in each of its markets.

     Marketing — Each of WWI’s operating companies markets its products and services under its own brand name and develops its own marketing strategy to address the local market conditions. The focus of each operating company’s marketing efforts is dependent upon a number of factors, including overall market penetration, number of competitors and network coverage.

     Sales — WWI’s operating companies sell their products and services through a distribution network including company-owned stores, exclusive and non-exclusive dealers, national and local retailers, and direct sales forces targeting corporate accounts. Each operating company uses a combination of direct and indirect sales channels, the mix of which is dependent on the local conditions of the market. The retail channel (including retail stores, mini-stores, and kiosks) uses personnel that are trained to educate new customers on products and services and to provide basic customer service. WWI believes this channel provides the physical presence in local markets necessary to position each operating company as a quality local service provider, while providing greater control over both costs and the sales process. The indirect channel consists of extensive dealer networks of national and local merchants, specialty retailers, and alternative direct-marketing firms.

     WWI’s operating companies also act as retail distributors of handsets and maintain inventories of handsets. Although customers generally are responsible for purchasing or otherwise obtaining their own handsets, WWI’s operating companies have historically sold handsets below cost to respond to competition for new subscribers. We expect these handset subsidies to remain common industry practice for the foreseeable future.

     Customer Service — WWI considers customer service a key element of its operating philosophy and is committed to attracting and retaining subscribers by seeking to provide consistently superior customer care. Each of WWI’s European operating companies operates full-service, 24-hour call centers, where customer inquiries are addressed by well-trained customer service personnel and technical staff using sophisticated monitoring and control systems.

Competition

     In each of the markets where WWI’s operating companies operate, they compete with other communications services providers including landline telephone companies and other wireless communications companies. In each European market, WWI generally competes with two or three other GSM operators. Most of these competitors are well-established companies or subsidiaries of well-established companies such as Vodafone plc, Telekom Austria, T-Mobile and mm02. Such companies have substantially greater financial and marketing resources, larger subscriber bases, better name recognition and in some cases, larger coverage areas than those of WWI’s operating companies.

     In the future, we expect to face new competition from entities licensed to provide similar services using other communications technologies, including so-called “third generation” technology. In WWI’s European markets, existing wireless operators as well as new entrants have been awarded third generation licenses and in some cases they have announced their intention to launch third generation services in 2003.

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Suppliers and Equipment Vendors

     WWI’s operating companies do not manufacture any of the handsets, cell site or switching equipment used in their operations. The high degree of compatibility among different manufacturers’ models of handsets with cell site and switching equipment allows WWI’s operating companies to design, supply and operate their systems without being dependent upon any single source of such equipment. The handsets and cell site equipment used in our operations are available for purchase from multiple sources. The largest handset manufacturers of WWI’s European operations are Nokia and Siemens AG. WWI purchases cell site and switching equipment primarily from Alcatel, Lucent Technologies, Inc. and Siemens AG.

Governmental Regulation

     The licensing, construction, operation and ownership of communications systems, and the granting and renewal of applicable licenses and radio frequency allocations, are regulated by governmental entities in each of the countries in which WWI’s operating companies conduct business. In Europe, the licenses which allow WWI’s operating companies to provide wireless licenses were initially granted for terms of 15 or 20 years and in some cases there are not explicit provisions in the licenses which allow for renewal.

     Under the terms of the Ghana license, Westel was required to meet certain customer levels and build-out requirements by February 2002. Westel was unable to meet the required customer levels due to the inability of the regulator to provide spectrum and enforce interconnection with the incumbent telephone company and all development has been stifled. The National Communication Authority of Ghana (“NCA”) has assessed a penalty claim of $71 million for not meeting these build-out requirements. Westel has contested this fine on the basis that the government and the NCA failed to deliver the key commitments of spectrum and interconnection and does not believe the enforcement of these penalties is probable.

Employees and Labor Relations

     WWI considers its labor relations to be good. As of December 31, 2002, WWI’s consolidated operating companies employed a total of 1,497 people in the following areas:

RISK FACTORS

We have a significant amount of debt, which may limit our ability to raise additional capital to meet our future funding and debt service requirements

     As of December 31, 2002, our total long-term indebtedness was $2.5 billion, including a current portion of $144 million. Of such indebtedness, $1.8 billion was outstanding under our $2.1 billion Credit Facility (the “Credit Facility”) and $383 million was outstanding under our Senior Subordinated Notes due 2006 and 2007 (the “Senior Subordinated Notes”). Effective March 31, 2003, we begin making principal payments under the Credit Facility. The amount of required principal payments in 2003 is $106 million based on outstanding borrowings at December 31, 2002 under the Credit Facility. Indebtedness under the Credit Facility matures on September 30, 2008. Substantially all our domestic assets are pledged as security for the indebtedness under the Credit Facility. The Credit Facility and the Indentures for our Senior Subordinated Notes contain, and any additional financing agreements may contain, certain restrictive covenants. The restrictions in the Credit Facility and the Senior Subordinated Notes affect, and in some cases significantly limit or prohibit, among other things, our ability to incur indebtedness, sell assets, make investments and acquisitions, pay dividends, and engage in mergers and consolidations. Additionally, the Credit Facility and the Senior Subordinated Notes require us to comply with certain financial and operational performance covenants, and, while we expect to remain in compliance with such covenants, there can be no assurance to that effect. An event of default under the Credit Facility or the Senior Subordinated Notes would allow the lenders to accelerate the maturity of the indebtedness thereunder. In such event, it is likely that all of our indebtedness would become immediately due and payable.

     The continued growth and operation of our business will require additional funding for working capital, debt service, the enhancement and upgrade of our network, the build-out of infrastructure to expand our coverage and possible acquisitions of spectrum licenses. The current levels of our debt could limit our ability to obtain future debt or equity financing on terms favorable to us or at all. Our sources of additional capital may include public or private equity and debt financings, including vendor financing. The availability of additional financing is dependent upon the condition of the capital markets and the extent of the additional financing that we may require will depend on the success of our operations. In addition, we must use a substantial portion of our cash flows from operations to make payments of principal and interest on our debt, thereby reducing funds that could be available for working capital, the enhancement and upgrade of our network, the buildout of infrastructure to expand our coverage and possible acquisitions. Additionally, competitive factors, future declines in the U.S. economy, unforeseen construction delays, cost overruns, regulatory changes, engineering and technological changes and other factors may result in funding requirements in excess of current estimates or an inability to generate sufficient cash flow to service our debt. The unavailability of such funding could cause us to delay or abandon some of our planned growth and development or to seek to sell assets to raise additional funds, either of which could have a material adverse effect on our business, strategy, operations and financial condition. Given that a substantial portion of our assets consists of intangible assets, principally licenses granted by the FCC, the value of which will depend upon a variety of factors (including the success of our business and the wireless communications industry in general), there can be no assurance that our assets could be sold quickly enough, or for sufficient amounts, to enable us to meet our obligations.

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     Additionally, a number of our consolidated international subsidiaries and other international operating companies have credit facilities to finance their operations. At December 31, 2002, the total long-term indebtedness of our consolidated international subsidiaries to third parties was $278 million. At December 31, 2002, our Slovenian entity had borrowed $71.4 million under its credit facility (the “Slovenian Credit Facility”). At December 31, 2002, our Bolivian subsidiary had a bridge loan of $34.7 million, which is due on March 31, 2003. An extension of the bridge loan, as well as the terms of a refinancing of the loan, is currently being negotiated. In January 2003, the Overseas Private Investment Corporation approved a $50 million loan guarantee for the refinancing. There can be no assurance that such an extension will be granted or that the refinancing of such loan can be obtained on terms acceptable to us, if at all.

     The debt facilities of our international operating companies contain certain restrictive covenants and financial covenants. The Slovenian Credit Facility contains certain borrowing conditions and restrictive covenants, including: minimum subscribers; population coverage; certain cash flow requirements; minimum contributed capital and debt service coverage. Western Wireless International Corporation (“WWIC”), a subsidiary of WWI, has guaranteed the Slovenian Credit Facility under certain circumstances. Additionally, WWIC has agreed not to sell or dispose of any majority owned subsidiary without the approval of the Slovenian lenders. Based on current operating conditions, Vega believes that it is necessary to amend certain terms and conditions of the Slovenian Credit Facility in 2003 in order to avoid future revenue shortfalls or other covenant breaches, some of which cannot be remedied. In March 2003, WWI met with the lead arranger bank of the Slovenian Credit Facility and believes that an agreement can be reached amending the Slovenian Credit Facility and that no further borrowings will be permitted. We believe no action will be taken to accelerate the loan during the pending negotiations to finalize the amendment. We can offer no assurance that the participating banks will grant an amendment. In the event that Vega breaches one of the covenants that cannot be cured, measured each June 30 and December 31, and does not obtain the amendment, the outstanding balance under the Slovenian Credit Facility could become payable upon demand.

     If we do not achieve planned domestic operating cash flow targets, we may be required to curtail capital spending, reduce expenses, or otherwise modify our planned operations or seek additional debt or equity at the domestic or international level or restructure our existing financing arrangements. There can be no assurance that such funds or refinancing will be available to us on acceptable terms, if at all.

We have substantial losses from continuing operations and we may not become profitable in the future

     We sustained losses from continuing operations of approximately $215.3 million in fiscal 2002 and $143.6 million in 2001 and had income from continuing operations of $65.4 million in fiscal 2000. At December 31, 2002, we had an accumulated deficit of $1.1 billion and a net capital deficiency of $486.4 million. We may continue to incur significant losses during the next several years, and there can be no assurance that we will be able to service our debt requirements and other financial needs.

We face substantial competition in all aspects of our business

     We operate in highly competitive markets and there is substantial and increasing competition in all aspects of the wireless communication business. Competition for subscribers among wireless communications providers is based principally upon the services and features offered, the technical quality of the wireless system, customer service, system coverage, capacity and price.

     Many of our competitors operate in the national market and provide services comparable to ours and have the advantages of greater geographical coverage and more customers and the ability to offer no or low cost roaming and toll calls in wider areas. If the wireless communications industry continues to consolidate and we do not participate in that consolidation, even stronger competitors may be created. Effective January 1, 2003, the FCC eliminated the spectrum cap and the cellular cross-interest restriction in the larger, urban cellular markets which also may facilitate the creation of larger and more formidable competitors. Several of our competitors also operate in multiple segments of the industry. In the future, we expect to face increased competition from entities providing similar services using other communications technologies. The auctioning and subsequent deployment of technology in additional spectrum and the disaggregation of spectrum could also generate new competition for us. While some of these technologies and services are currently operational, others are being developed or may be developed in the future. With so many companies targeting many of the same customers, we may not be able to successfully attract and retain customers and grow our customer base and revenues, and as a result, our profit margins may decrease.

A significant portion of our revenues are derived from roaming and our failure to maintain favorable roaming arrangements could materially adversely affect our future operating results

     Roaming revenues accounted for approximately 22% of our total revenues for the fiscal year ended December 31, 2002. We have roaming agreements with most of the wireless carriers in North America, including AT&T Wireless, Cingular, and Verizon. When these agreements expire or are terminated, we may be unable to renegotiate these roaming agreements or to obtain roaming agreements with other wireless providers upon acceptable terms. Further, some competitors may be able to obtain roaming rates and terms that are more favorable than those obtained by us. AT&T Wireless, our largest roaming partner, and Cingular have announced their intention to transition their customer bases to a GSM platform. If we are not able to add a GSM platform to our network, maintain and expand our roaming footprint or maintain favorable roaming arrangements with other wireless carriers, our coverage area or pricing we offer relative to our competitors may not be as attractive. Such inability would have a material adverse affect on our business, operations and financial condition.

     While our roaming agreements generally require other carriers’ customers to use our network when roaming, our roaming agreements generally do not prevent our roaming partners from acquiring licenses to provide competing services in our markets. Further, our roaming partners could negotiate a roaming agreement in all or portions of our markets with another wireless carrier. If any of our roaming partners were to acquire the required licenses and build networks in our markets or enter into roaming agreements with other wireless carriers that provide competing services in our markets and permit our roaming partners to roam on that other carrier’s network, we could lose a substantial portion of our roaming revenues in those markets, which could have a material adverse effect on our business, operations and financial condition.

Failure to develop future business opportunities, such as wireless data services and to improve network coverage, quality and capacity within the markets that we currently serve may limit our ability to compete effectively and grow our business

     An important element of our strategy is to bring new telecommunications services, such as wireless data services, to rural America. In general, the development of new services in our industry requires us to anticipate and respond to varied and rapidly changing customer demand. In order to compete successfully against the other participants in the United States wireless industry, we will need to commercialize and introduce new services on a timely basis. The ability to deploy and deliver these services relies, in many instances, on new and unproven technology that will demand substantial capital outlays and spectrum capacity. Our available capital and spectrum may not be sufficient to support these services. We cannot guarantee that devices for such new services or applications for such devices will be commercially available or accepted in the marketplace, and we cannot assure that we will be able to offer these new services profitably. In addition, there could be legal or regulatory restraints on wireless data services as the applicable laws and rules evolve. If these services are not successful or if costs associated with implementation and completion of the introduction of these services materially exceed those currently estimated, our ability to retain and attract customers and our operations and financial condition could be materially adversely affected.

     We essentially completed the network build-out of the markets for which we hold licenses, and are now primarily focused on improving network coverage, quality and capacity within and around the markets we currently serve and completing the expansion of digital CDMA technology throughout our markets. We cannot guarantee that we will be able to do so in a time frame that will permit us to remain competitive at the cost we expect or at all. Failure or delay in improving network coverage, quality and capacity on a timely basis or at all, or increased costs to accomplish such improvement, could have a material adverse effect on our business, strategy, operations and financial condition.

Our FCC licenses are subject to renewal and potential revocation in the event that we violate applicable laws. The loss of any of such licenses could materially and adversely affect our ability to service our customers

     Our licenses are subject to renewal upon the expiration of the ten-year period for which they are granted. Although the FCC has routinely renewed wireless licenses in the past, we cannot provide assurance that no challenges will be brought against our licenses in the future. Violations of the Communications Act or the

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FCC’s rules could result in license revocations, forfeitures, fines or non-renewal of licenses. We have five cellular licenses that are subject to the renewal process over the next three years. While we believe that each of our cellular licenses will be renewed, there can be no assurance that all of the licenses will be renewed. If any of our licenses are forfeited, revoked or not renewed, we would not be able to provide service in that area unless we contract to resell wireless services of another provider or enter into roaming agreements.

Government regulations determine how we operate, which could increase our costs and limit our growth, revenue and strategy plans

     The FCC regulates the licensing, construction, operation, acquisition and sale of our business, and we are subject to laws and regulations of other federal, state and local government bodies. Future changes in regulation or legislation could impose significant additional costs on us, either in the form of direct out of pocket costs or additional compliance obligations, or subject us to sanctions, which may have a material adverse effect on our business. Additionally, Congress’ and the FCC’s continued allocation of additional spectrum for CMRS, which includes cellular and personal communication services and specialized mobile radio, could significantly increase competition.

     The rapid growth and penetration of wireless services has prompted the interest of the FCC, state legislatures and state public utility commissions (“PUC”) to oversee certain practices by the wireless industry. These practices are generally in the form of efforts to regulate customer billing, termination of service arrangements, advertising, filing of “informational” tariffs, certification of operation, and other areas. While the Communications Act generally preempts state and local governments from regulating the entry of, or the rates charged by, wireless carriers, a state has authority to regulate “other terms and conditions” of service offerings by CMRS providers. They may also petition the FCC to allow it to regulate the rates of CMRS providers. No state has yet petitioned the FCC, but such action by the states in the future cannot be precluded. Several states have also proposed or imposed consumer protection regulations on CMRS providers. For example, the California PUC has proposed extensive consumer protection and privacy regulations for all telecommunications carriers. If adopted, the rules will significantly alter our business practices in California with respect to nearly every aspect of the carrier-customer relationship, including solicitations, marketing, activations, billing and customer care. The California PUC is also contemplating rules to address other service quality issues, including service repair, service outages and toll operator answering time that could apply to CMRS providers. At the local level, wireless facilities typically are subject to zoning and land use regulation, and may be subject to fees for use of public rights of way. Although local and state governments cannot categorically prohibit the construction of wireless facilities in any community, or take actions that have the effect of prohibiting construction, securing state and local government approvals for new tower sites may become a more difficult and lengthy process. Such regulations, if approved, could expose carriers to increased legal responsibility for state’s varying standards of service quality and may materially impact our operating costs.

     Cellular licensees are subject to certain Federal Aviation Administration (“FAA”) regulations regarding the location, marking/lighting, and construction of towers. Each tower requiring FAA notification also requires tower registration with the FCC. In addition, our facilities may be subject to regulation by the Environmental Protection Agency (“EPA”) and the environmental regulations of the FCC under the National Environmental Policy Act and of certain states and localities. State or local zoning and land use regulations may also apply to our activities.

     The FCC does not presently specify the rates CMRS carriers may charge for their services, nor does it require the filing of tariffs for wireless operations. However, the FCC has the authority to regulate the rates, terms and conditions under which wireless carriers provide service because CMRS carriers are statutorily considered to be common carriers and thus are required to charge just and reasonable rates and are not allowed to engage in unreasonable discrimination. The FCC has adopted rules governing charges for long distance service (e.g., rate integration) and use of customer proprietary network information, but these rules have been vacated by the courts and are now subject to further FCC review. Additionally, the FCC has adopted rules governing billing practices and access to wireless services by the disabled. While none of these existing requirements have a material impact on our operations, there is no assurance that future regulatory changes may not materially impact us. The FCC has determined that the Communications Act does not preempt state damage claims as a matter of law, but whether a specific damage award is prohibited would depend upon the facts of a particular case. This ruling may affect the number of class action suits brought against CMRS providers and the amount of damages awarded by courts.

Concerns about health and safety risks may discourage use of wireless services, result in liability issues and materially adversely affect our business

     Media reports have suggested that radio frequency emissions from wireless handsets may be linked to various health concerns, including cancer, and may interfere with various electronic medical devices, including hearing aids and pacemakers. Concerns over radio frequency emissions may have the effect of discouraging the use of wireless handsets, and thus decrease demand for wireless products and services. In recent years, the FCC and foreign regulatory agencies have updated the guidelines and methods they use for evaluating radio frequency emissions from radio equipment, including wireless handsets. In addition, interest groups have requested that the FCC investigate claims that wireless technologies pose health concerns and cause interference with airbags, hearing aids and medical devices. The FDA has issued guidelines for the use of wireless phones by pacemaker wearers. Safety concerns have also been raised with respect to the use of wireless handsets while driving. Federal, state and local legislation has been proposed in response to these concerns. The FCC’s safety limits for human exposure to radio frequency emissions went into effect September 1, 2000. After September 1, 2000 if any facility, operation or device is found to be non-compliant with radio frequency emissions guidelines, and if any required environmental assessment has not been filed, penalties ranging from fines to license forfeiture may be imposed. Several lawsuits have been filed against us, other wireless carriers and other participants in the wireless industry, asserting product liability, breach of warranty, adverse health effects and other claims relating to radio frequency transmissions to and from handsets and wireless data devices. Some of these lawsuits allege other related claims, including negligence, strict liability, conspiracy and the misrepresentation of or failure to disclose these alleged health risks. The complaints seek substantial monetary damages as well as injunctive relief. The defense of these lawsuits may divert our management’s attention, we may incur significant expenses in defending these lawsuits, and we may be required to pay significant awards or settlements.

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     Additional studies of health effects of wireless services are ongoing and new studies are anticipated. If such further research establishes any link between the use of handsets and health problems, such as brain cancer, then usage of, and demand for our services may be significantly reduced, and we could be required to pay significant expenses in defending lawsuits and significant awards or settlements, any or all of which could have a material adverse effect on our business, operations and financial condition.

     We may also be subject to potential litigation relating to the use of handsets and wireless data devices while driving. Some studies have indicated that using these devices while driving may impair drivers’ attention. Legislation has been proposed in the United States Congress and many state and local legislative bodies to restrict or prohibit the use of wireless phones while driving motor vehicles. To date, New York State and some localities in the United States have passed laws restricting the use of handsets, and similar laws have been enacted in other countries. Additionally, some jurisdictions have passed laws restricting the use of handsets by persons such as school bus drivers and novice drivers. These laws or, if passed, other laws prohibiting or restricting the use of wireless handsets while driving, could reduce sales, usage and revenues, any or all of which could have a material adverse effect on our operations and financial condition.

     Finally, we cannot be certain that we or the wireless industry in general may not be subject to litigation should a situation arise in which damage or harm occurs as a result of interference between a CMRS carrier such as us and a public safety licensee, such as a “911” emergency operator, or any failure of any such “911” emergency call while using our network.

Control by management may discourage potential acquisitions of our business and may have a depressive effect on the market price for our Class A Common Stock

     Holders of our Class A Common Stock are entitled to one vote per share and holders of our Class B Common Stock are entitled to ten votes per share. Each share of Class B Common Stock is convertible at any time into one share of Class A Common Stock. John W. Stanton and Theresa E. Gillespie, our Chairman and Chief Executive Officer and our Vice Chairman, respectively, are husband and wife and beneficially represent 47.1% of the combined voting power of Common Stock. Such voting control by such holders and certain provisions of Washington law affecting acquisitions and business combinations, which we have incorporated into our articles of incorporation, may discourage certain transactions involving an actual or potential change of control of the Company, including transactions in which the holders of Class A Common Stock might receive a premium for their shares over the then-prevailing market price, and may have a depressive effect on the market price for Class A Common Stock.

WWI operates in certain countries with significant political, social and economic uncertainties which could have a material adverse effect on its operations in these countries

     We operate in countries in Eastern Europe, a republic of the former Soviet Union, Africa, the Caribbean and South America. These countries face significant political, social and/or economic uncertainties which could have a material adverse effect on our operations in these areas. These uncertainties include:

	•		possible internal military conflicts and/or civil unrest fueled by economic and social crises in those countries,
	•		political instability and bureaucratic infighting between government agencies with unclear and overlapping jurisdictions,
	•		pervasive regulatory control of the state over the telecommunications industry, and
	•		the failure by government entities to meet their outstanding foreign debt repayment obligations.

     We cannot assure you that the pursuit of economic reforms by the governments of any of these countries will continue or prove to be ultimately effective, especially in the event of a change in leadership, social or political disruption or other circumstances affecting economic, political or social conditions.

WWI encounters enhanced economic, legal and physical risks by operating abroad

     WWI runs a number of risks by investing in foreign countries including:

	•		loss of revenue, property and equipment from expropriation, nationalization, war, insurrection, terrorism and other political risks,
	•		involuntary changes to the licenses issued by foreign governments,
	•		changes in foreign and domestic laws and policies that govern operations of overseas-based companies,
	•		amendments to, or different interpretations or implementations of, foreign tax laws and regulations that could adversely affect the profitability after tax of our joint ventures and subsidiaries,
	•		criminal organizations in certain of the countries in which we operate that could threaten and intimidate our businesses, and
	•		high levels of corruption and non-compliance with the law exist in many of the countries in which we operate businesses.

Certain of the government licenses on which WWI depends could be canceled or revoked, impairing the development of WWI’s operations in these countries, and making WWI liable for substantial penalties

     The licensing, construction, operation and ownership of communications systems, and the granting and renewal of applicable licenses and radio frequency allocations, are regulated by governmental entities in each of the countries in which WWI’s operating companies conduct business. Our failure or inability to renew these licenses may have a material adverse effect on our operations. In Europe, the licenses which allow WWI’s operating companies to provide wireless licenses were initially granted for terms of 15 or 20 years and in some cases there are not explicit provisions in the licenses which allow for renewal. Under the terms of the Ghana license, WWI’s operating company was required to meet certain customer levels and build-out requirements by February 2002. This company was unable to meet the required customer levels due to the inability of the regulator to provide spectrum and enforce interconnection with the incumbent telephone company and the National Communication Authority of Ghana (“NCA”) has assessed a penalty claim of $71 million for not meeting these build-out requirements. WWI has contested this fine on the basis that the government and the NCA failed to deliver the key commitments of spectrum and interconnection and does not believe the enforcement of these penalties is probable, although there can be no assurance as to what actions the government may take.

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WWI’s operating results will be impacted by foreign currency fluctuations

     WWI is exposed to risk from fluctuations in international economic conditions and foreign currency rate fluctuations which could have a material impact on its results of operations and financial condition.

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Item 2. PROPERTIES

     In addition to the direct and attributable interests in cellular licenses, paging licenses and other similar assets discussed previously, we lease our principal executive offices located in Bellevue, Washington. Our domestic subsidiaries also lease and own locations for inventory storage, microwave, cell site and switching equipment and local sales and administrative offices. We currently lease our domestic customer call center in Issaquah, Washington and own our domestic call center in Manhattan, Kansas. We consider our domestic owned and leased facilities to be suitable and adequate for business operations.

     Our international operations typically lease their headquarters, customer call centers, warehouses and cell sites and switching equipment sites. We consider our international leased facilities to be suitable and adequate for business operations.

Item 3. LEGAL PROCEEDINGS

     There are no material, pending legal proceedings to which the Company or any of its subsidiaries is a party or to which any of their property is subject which, if adversely decided, would have a material adverse effect on the Company or any of its subsidiaries or affiliates.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     None.

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EXECUTIVE OFFICERS OF THE REGISTRANT

     The names, ages and positions of our executive officers and key personnel are listed below along with their business experience during the past five years. The business address of all officers of the Company is 3650 131st Avenue SE, Bellevue, Washington 98006. All of these individuals are citizens of the United States. Executive officers of the Company are appointed by the Board of Directors. As Vice President and Controller, Mr. Soley, although not an executive officer, is a key employee and our chief accounting officer. No family relationships exist among any of the executive officers or key personnel of the Company, except for Mr. Stanton and Ms. Gillespie, who are married to each other.

     John W. Stanton has been Chairman of the Board, a Director and Chief Executive Officer of the Company and its predecessors since 1992. Mr. Stanton has been Chairman and a Director of T-Mobile USA, formerly VoiceStream Wireless Corporation (“VoiceStream”), a former subsidiary of the Company, since 1994, and was Chief Executive Officer of VoiceStream and T-Mobile USA from February 1998 to March 2003. Mr. Stanton served as a director of McCaw Cellular Communications Corporation (“McCaw Cellular”) from 1986 to 1994, and as a director of LIN Broadcasting from 1990 to 1994, during which time it was a publicly traded company. From 1983 to 1991, Mr. Stanton served in various capacities with McCaw Cellular, serving as Vice Chairman of the Board of McCaw Cellular from 1988 to September 1991 and as Chief Operating Officer of McCaw Cellular from 1985 to 1988. Mr. Stanton is a member of the board of directors of Advanced Digital Information Corporation, and Columbia Sportswear, Inc., and a trustee of Whitman College, a private college.

     Donald Guthrie has been Vice Chairman of the Company since November 1995. Mr. Guthrie also served as Chief Financial Officer of the Company from February 1997 to May 1999. Mr. Guthrie served as Vice Chairman of T-Mobile USA, a former subsidiary of the Company, from 1995 through 2002. From 1986 to 1995, he served as Senior Vice President and Treasurer of McCaw Cellular and, from 1990 to 1995, he served as Senior Vice President — Finance of LIN Broadcasting.

     Theresa E. Gillespie has been Vice Chairman of the Company since February 2003 and has been Director of the Company since October 2000. Prior to being elected Vice Chairman, Ms. Gillespie served as Executive Vice President of the Company from May 1999 until February 2003, Senior Vice President of the Company from May 1997 until May 1999, and Chief Financial Officer of the Company and one of its predecessors from 1991 to 1997. Ms. Gillespie was Chief Financial Officer of certain entities controlled by Mr. Stanton and Ms. Gillespie since 1988. From 1986 to 1987, Ms. Gillespie was Senior Vice President and Controller of McCaw Cellular. From 1976 to 1986 she was employed by a national public accounting firm.

     Mikal J. Thomsen has been President of the Company since May 1999 and was Chief Operating Officer of the Company and one of its predecessors from 1991 to May 2002. In his capacity as Chief Operating Officer, Mr. Thomsen was responsible for all domestic cellular operations. He has served as Director since October 2000. He was also a director of its predecessor from 1991 until the Company was formed in 1994. From 1983 to 1991, Mr. Thomsen held various positions at McCaw Cellular, serving as General Manager of its International Division from 1990 to 1991 and as General Manager of its West Florida Region from 1987 to 1990.

     Eric Hertz has been Chief Operating Officer for the Company since May 2002. Before joining the Company, Mr. Hertz served as Regional President for the Wireless Digital Broadband division of AT&T Wireless from May 2001 through April 2002. From 1991 through December 2000, Mr. Hertz held various domestic and international positions with BellSouth Corporation, serving as General Manager – Wisconsin and Northern Illinois for BellSouth Cellular from 1991 through 1995; Regional Vice President – Wisconsin and Northern Illinois from 1995 through 1997; President and General Manager – Ecuador for BellSouth International from July 1997 through August 2000; and Regional COO – Central America and Panama from August 2000 through December 2000. From 1989 to 1991, Mr. Hertz was a Regional Manager for McCaw Cellular Communications. Mr. Hertz has worked in the telecommunications industry for 25 years in local and long distance, as well as fixed and mobile wireless.

     M. Wayne Wisehart has been Executive Vice President and Chief Financial Officer for the Company since January 2003. Before joining the Company, Mr. Wisehart served as Chief Financial Officer for iNNERHOST, Inc., a Web hosting services company, from October 2000 through February 2002, and President and CEO for Teledirect International, Inc., a marketing automation software company, from February 1999 through October 2000. From April 1998 through August 1998, Mr. Wisehart served as President and CEO of Price Communications Wireless, Inc. From June 1982 through April 1998, Mr. Wisehart served as Chief Financial Officer for Palmer Communications, Inc. and its subsidiary, Palmer Wireless, Inc., and subsequently for Price Communications Wireless, Inc. after it acquired Palmer Wireless, Inc. in 1997.

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     Bradley J. Horwitz has been Executive Vice President of the Company since March 2000, and President of Western Wireless International Holding Corporation (“WWI”), a subsidiary of the Company, since 1995. Mr. Horwitz was Vice President — International of the Company from 1995 to March 2000, and held various positions at McCaw Cellular, serving as Vice President — International Operations from 1992 to 1995, Director — Business Development from 1990 to 1992 and Director of Paging Operations from 1986 to 1990.

     Gerald J. “Jerry” Baker has been Senior Vice President of Engineering and Technical Operations for the Company since January 2001, after spending almost four years as Vice President of Engineering and Technology for WWI. Prior to joining WWI in 1997, Mr. Baker was Chief Technical Officer for GTE Mobilnet’s California operations for three years. Between 1988 and 1994, he spent six years in various senior technical management positions with US West Cellular. Mr. Baker held senior technical management positions at McCaw Cellular between 1984 and 1988.

     Jeffrey A. Christianson has been Senior Vice President and General Counsel of the Company since February 2000 and Corporate Secretary since July 2000. From 1996 to January 2000, Mr. Christianson served as Senior Vice President, Business Development, General Counsel and Corporate Secretary of Wizards of the Coast, Inc., a game and software company. From 1993 to 1996, Mr. Christianson served as General Counsel and Corporate Secretary of Heart Technology, Inc., a medical device company. Mr. Christianson is a member of the board of directors of the Northwest Children’s Fund, a Seattle-based non-profit community foundation.

     Thorpe M. “Chip” Kelly, Jr. has been Senior Vice President for the Company since September 2000. Prior to being elected Senior Vice President, Mr. Kelly served as Vice President of Sales from April 1999 and Executive Director of Sales from 1998. Mr. Kelly has worked with the Company and its predecessors since 1989 in a variety of field and corporate sales management positions.

     Scott A. Soley has been Vice President and Controller of the Company since July 2001, and has been a key employee as the chief accounting officer since August 1999. From 1995 to 1999, Mr. Soley held various accounting positions with the Company. Prior to 1995, Mr. Soley held various accounting positions with Egghead Software, Inc. and gained two years of experience at a local public accounting firm in the Seattle area.

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PART II

Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     We commenced our initial public offering on May 22, 1996, at a price to the public of $23.50 per share. Since that date, our Class A Common Stock has been traded on the NASDAQ Stock Market under the symbol WWCA. There currently is no established public trading market for our Class B Common Stock; however, such shares generally convert automatically into shares of Class A Common Stock on a share-for-share basis immediately upon any transfer of the Class B Common Stock. The following table sets forth the quarterly high and low bid quotations for the Class A Common Stock on the NASDAQ Stock Market. These quotations reflect the inter-dealer prices, without retail mark-up, markdown or commission and may not necessarily represent actual transactions.

     We have never declared or paid dividends on our Common Stock and we do not anticipate paying dividends in the foreseeable future. In addition, certain provisions of the Senior Secured Facilities (as described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Consolidated Liquidity and Capital Resources”) and the indentures of our senior notes contain restrictions on our ability to declare and pay dividends on our Common Stock.

     As of March 21, 2003 there were approximately 199 and 45 shareholders of record of our Class A and Class B Common Stock, respectively.

     There were no sales of unregistered securities made by the Company in 2002.

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Item 6. SELECTED FINANCIAL DATA

     The following table sets forth certain selected financial and operating data for us as of and for each of the five years in the period ended December 31, 2002, which was derived from our consolidated financial statements and notes thereto that have been audited. All of the data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and notes thereto.

Consolidated Financial Data⁽¹⁾

(1)		Certain amounts in 2002 and 2001 consolidated financial data have been reclassified to properly reflect the discontinued operations of TAL, our Icelandic subsidiary. Certain amounts in 1999 and 1998 consolidated financial data have been reclassified to properly reflect the discontinued operations of T-Mobile USA, formerly VoiceStream.
(2)		Earnings per share and the number of shares outstanding have been calculated based on the requirements of Statement of Financial Accounting Standards No. 128. For the loss years presented, all options outstanding are anti-dilutive, thus basic and diluted loss per share are equal.

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(3)		EBITDA represents total revenues less total operating expenses exclusive of depreciation, amortization, asset dispositions and stock-based compensation for our operations. We believe EBITDA provides meaningful additional information on our performance and on our ability to service our long-term debt and other fixed obligations, and to fund our continued growth. EBITDA is considered by many financial analysts to be a meaningful indicator of an entity’s ability to meet its future financial obligations, and growth in EBITDA is considered to be an indicator of future profitability, especially in a capital-intensive industry such as wireless telecommunications. EBITDA should not be construed as an alternative to operating income (loss), as determined in accordance with United States generally accepted accounting principles (“GAAP”), as an alternate to cash flows from operating activities (as determined in accordance with GAAP) or as a measure of liquidity. Since all companies do not calculate EBITDA in the same manner, our presentation may not be comparable to other similarly titled measures of other companies.
(4)		Domestic subscribers include postpaid and reseller subscribers, and exclude prepaid subscribers.
(5)		International consolidated subscribers include prepaid and postpaid mobile subscribers, and exclude fixed lines.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     Unless the context requires otherwise, “Western Wireless,” “the Company,” “we,” “our” and “us” include us and our subsidiaries.

Overview

     We provide cellular communications services in 19 western states under the CellularONE^® (“CellularONE”) and Western Wireless^® brand names principally through the ownership and operation of cellular wireless systems. The operations are primarily in rural areas due to our belief that there are certain strategic advantages to operating in these areas. We provide wireless services in 18 Metropolitan Service Areas (“MSA”) and 88 Rural Service Areas (“RSA”). Additionally, we own 10 MHz personal communication services (“PCS”) licenses for three Basic Trading Areas (“BTAs”).

     Historically, we have provided analog service to our customers and had deployed TDMA digital voice channels throughout our network to support our roaming partners. During 2001 we began deploying Code Division Multiple Access (“CDMA”) throughout our network, which allows us to economically expand the minutes of use (“MOU”) available to our customers and introduce a wide range of consumer-based wireless internet-related services. At December 31, 2002, we covered approximately 50% of our licensed population with CDMA digital technology.

     We own approximately 98% of Western Wireless International Holding Corporation (“WWI”). The balance is owned by Bradley Horwitz, Executive Vice President of the Company and President of WWI. WWI, through its consolidated subsidiaries and equity investments, is a provider of wireless communications services in nine countries. WWI owns controlling interests in six of these countries: Slovenia, Austria, Ireland, Bolivia, Haiti and Ghana. These six entities are consolidated into our financial results. Operations in Côte d’Ivoire, Croatia and Georgia are accounted for using the equity method. In the fourth quarter of 2002, WWI sold its majority ownership interest in its Icelandic subsidiary and wrote off its investment in Côte d’Ivoire.

     U.S. headquarter functions of WWI and majority owned European, South American and Caribbean consolidated subsidiaries are recorded as of the date of the financial statements. Our consolidated Ghanaian entity and entities accounted for using the equity method are presented on a one-quarter lag.

     Revenues consist primarily of subscriber revenues, roamer revenues, fixed-line revenues and equipment sales. The majority of revenues are derived from subscriber revenues. Subscriber revenues include monthly access charges, charges for airtime used in excess of plan minutes, Universal Service Fund (“USF”) subsidy revenues, long distance revenues derived from calls placed by our customers, international prepaid revenues, international interconnect revenues and other charges, such as: activations, voice mail, call waiting and call forwarding.

     Roamer revenues result from providing service to subscribers of other wireless carriers when those subscribers “roam” into our markets and use our systems to carry their calls. Roaming revenues have historically yielded higher average per minute rates and higher margins than subscriber revenues. The per minute rate paid by a roamer is established by an agreement between us and the roamer’s wireless provider.

     Fixed line revenues represent non-wireless revenues mainly from our fixed-line business in Austria.

     “Service revenues” include subscriber, roamer, fixed-line and other revenue. Other revenues consist primarily of revenue related to international long distance and revenue from the licensees of the CellularONE Group name.

     Equipment sales consist of wireless handset and accessory sales to customers. We sell both digital and analog handsets below cost and regard these losses as a cost of building our subscriber base.

     Cost of service consists mainly of the cost of: (i) providing access to local exchange and long distance carrier facilities; (ii) maintaining the wireless network; and (iii) off-network roaming costs.

     Cost of equipment sales consists of the costs related to handset and accessory sales to customers. Cost of equipment sales also includes the cost of handsets related to migrating customers to digital service on a free or discounted basis and the cost of handsets associated with customer retention that occurs with the signing of an extended service agreement.

     General and administrative expenses are principally variable costs. General and administrative costs include administrative costs associated with maintaining subscribers, including: customer service and other centralized support functions. General and administrative expenses also include billing costs, subscriber bad debt, insurance and property taxes.

     Sales and marketing costs include costs associated with acquiring a subscriber, including: direct and indirect sales commissions, salaries, all costs of retail locations and advertising and promotional expenses. Sales and marketing costs do not include the revenue or costs of handset sales. However, when sales and marketing costs per gross addition are discussed, the revenue and costs from handset sales are included because such measure is commonly used in the wireless industry.

     Depreciation and amortization expense primarily includes depreciation expense associated with the property and equipment in service and amortization associated with our international wireless licenses.

     Interest and financing expense includes interest on our consolidated debt. Intercompany interest has been eliminated for consolidation purposes.

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     EBITDA represents total revenues less total operating expenses exclusive of depreciation, amortization, asset dispositions and stock-based compensation for our operations. We believe EBITDA provides meaningful additional information on our performance and on our ability to service our long-term debt and other fixed obligations, and to fund our continued growth. EBITDA is considered by many financial analysts to be a meaningful indicator of an entity’s ability to meet its future financial obligations, and growth in EBITDA is considered to be an indicator of future profitability, especially in a capital-intensive industry such as wireless telecommunications. EBITDA should not be construed as an alternative to operating income (loss), as determined in accordance with United States generally accepted accounting principles (“GAAP”), as an alternate to cash flows from operating activities (as determined in accordance with GAAP) or as a measure of liquidity. Since all companies do not calculate EBITDA in the same manner, our presentation may not be comparable to other similarly titled measures of other companies.

Critical Accounting Policies and Estimates

     Our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. On an on-going basis, we evaluate our estimates. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making assumptions about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates.

     We have multiple billing cycles all of which span our year-end. This requires management to estimate the amount of subscriber revenue associated with a portion of each bill cycle up to the end of the year. We follow this method since reasonably dependable estimates of the revenue can be made. Actual bill cycle results and related revenue may vary, depending on subscriber usage and rate plan mix, from the results estimated at the end of the year.

     Roamer revenues and incollect cost information is provided to us primarily through a third party centralized clearinghouse. We receive data from a clearinghouse the middle of each month. This requires management to estimate roamer revenue and incollect expense up to the end of the year. Management analyzes the most recently available information from the clearinghouse and historical trends to determine the revenue and expense estimates. We follow this method since reasonably dependable estimates of the roamer revenue and incollect cost can be made. Actual clearinghouse results and the associated roamer revenue and incollect costs may vary, depending on usage, from the results estimated at the end of the year.

     We are invoiced for our access to and usage of local exchange and long distance carrier facilities on multiple billing cycles, which span our year-end. This requires management to estimate the expenses associated with a portion of each bill cycle up to the end of the year. We use this method since reasonably dependable estimates of these costs can be made. Actual local and long distance expenses may vary, depending on customer usage, from those estimated at the end of the year.

     We must make estimates of the collectability of our subscriber accounts receivable. Management analyzes historical write-offs, changes in our internal credit policies and customer concentrations when evaluating the adequacy of our allowance for doubtful accounts. Differences may result in the amount and timing of expenses for any period if management made different judgments or utilized different estimates or if actual experience differs from estimates.

     We assess the impairment of our long-lived assets whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. Factors we consider which could trigger an impairment review include significant underperformance relative to anticipated minimum future operating results and a significant change in the manner of use of the assets or the strategy for our overall business. When we determine that the carrying value of certain long-lived assets may not be recoverable based upon the existence of one or more of the above indicators of impairment, we then measure any impairment based on a projected discounted cash flow method using a discount rate determined by us to be commensurate with the risk inherent in our current business model.

     Upon adoption of Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets” (“SFAS No. 142”), on January 1, 2002, we ceased amortization of our domestic licenses as we determined that these assets meet the definition of indefinite life intangible assets. The fair value of our domestic licenses was estimated using the discounted present value of expected future cash flows. This assessment is performed by combining our individual domestic licenses as a single unit as they are operated in aggregate in such a manner that represents their highest and best use. In addition, it is unlikely that a significant portion of our individual RSAs or MSAs would be sold on a stand-alone basis. The determination of fair value is a complex consideration that involves significant assumptions and estimates. Assumptions and estimates made by us were based on our best judgments and included among other things: (i) an assessment of market and economic conditions including discount rates; (ii) future operating strategy and performance; (iii) competition and market share; and (iv) the nature and cost of technology utilized. Under SFAS No. 142, impairment must be assessed at least annually, or when indications of impairment exist, on our domestic licenses.

     We have investments in consolidated subsidiaries and unconsolidated equity investments that are in foreign countries. These investments are subject to the laws and regulations governing telecommunications services in effect in each of the countries in which they operate. These laws and regulations can have a significant influence on the results of operations and the value of our investment in these affiliates. Laws and regulations are subject to change by the responsible governmental agencies. We cannot predict what future laws and regulations might be passed that could have a material effect on our results of operations. Further, certain of the countries in which we have investments have experienced or may experience political instability. We assess the impact of significant changes in laws, regulations and political stability on a regular basis and update the assumptions and estimates used to prepare our financial statements when deemed necessary. In addition, we assess the impairment of our investments whenever major events or changes in circumstances indicate that the carrying value of the investment may not be recoverable. Factors we consider which could trigger an impairment review include significant under performance relative to expected operating results, a significant change in the strategy for our overall business or the impact of future laws and regulations of foreign government agencies.

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     Our subsidiary, WWI, has a Stock Appreciation Rights Plan (the “SAR Plan”). Under the SAR Plan, selected key employees and agents of WWI may receive performance units, which are “rights” to receive an amount based upon 7% of the fair market value of WWI. Fair market value is based upon management’s estimates at the time, considering various factors and is approved by the board of WWI. Differences may result in the amount and timing of related SAR Plan expenses if management made different judgments or utilized different estimates.

     As part of the process of preparing our consolidated financial statements, we are required to estimate our income taxes in each of the countries in which we operate. This process involves estimating our current tax exposure together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities. We must then assess the likelihood that our deferred tax assets will be recovered from future taxable income, and, to the extent we believe that recovery is not likely, we must establish a valuation allowance. Significant management judgment is required in determining our provision for income taxes, deferred tax assets and liabilities and any valuation allowance recorded against our net deferred tax assets. We believe that, based on a number of factors, there is uncertainty regarding the realization of our domestic and foreign net operating loss (“NOL”) carryforwards.

     In the ordinary course of business, we are subject to litigation and contingencies. We must use our best judgment and estimates of probable outcomes when determining the impact to us and our financial results. We assess the impact of claims and litigation on a regular basis and update the assumptions and estimates used to prepare our financial statements when deemed necessary.

Recently Issued Accounting Standards

     In January 2003, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 46, “Consolidation of Variable Interest Entities” (“FIN No. 46”), which clarifies the application of Accounting Research Bulletin No. 51, “Consolidated Financial Statements”, relating to consolidation of certain entities. First, FIN No. 46 will require identification of our participation in variable interests entities (“VIE”), which are defined as entities with a level of invested equity that is not sufficient to fund future activities to permit them to operate on a standalone basis, or whose equity holders lack certain characteristics of a controlling financial interest. Then, for entities identified as VIE, FIN No. 46 sets forth a model to evaluate potential consolidation based on an assessment of which party to the VIE, if any, bears a majority of the exposure to its expected losses, or stands to gain from a majority of its expected returns. FIN No. 46 also sets forth certain disclosures regarding interests in VIE that are deemed significant, even if consolidation is not required. We are currently evaluating the impact this statement will have on our future consolidated financial results.

     In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation - Transition and Disclosure” (“SFAS No. 148”), which amends SFAS No. 123, “Accounting for Stock-Based Compensation” (“SFAS No. 123”). SFAS No. 148 provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation (under the fair value based method, compensation cost for stock options is measured when options are issued.) In addition, SFAS No. 148 amends the disclosure requirements of SFAS No. 123 to require more prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The transition guidance and annual disclosure provisions of SFAS No. 148 are effective for us starting with the year ended December 31, 2002. We intend to continue to account for stock-based employee compensation under Accounting Principles Board Opinion No. 25, “Accounting for Stock Issues to Employees,” and will provide the additional SFAS No. 123 disclosures required under SFAS No. 148. The interim disclosure provisions are effective for us starting with the quarter ending March 31, 2003.

     In November 2002, the FASB issued Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness to Others” (“FIN No. 45”). FIN No. 45 requires the disclosure by the guarantor of certain guarantees that it has issued. FIN No. 45 also clarifies that a guarantor is required to recognize at the inception of the guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. FIN No. 45 does not prescribe a specific approach for subsequently measuring the guarantor’s recognized liability over the term of the related guarantee. FIN No. 45 incorporates, without change, the guidance in FASB Interpretation No. 34, “Disclosure of Indirect Guarantees of Indebtedness of Others,” which is being superceded. FIN No. 45 is to be applied prospectively to guarantees issued or modified after December 31, 2002. We do not anticipate the adoption of FIN No. 45 will have a material effect on our financial position or results of operations.

     In November 2002, the Emerging Issues Task Force (“EITF”) reached a consensus on Issue No. 02-16, “Accounting by a Customer (Including a Reseller) for Certain Consideration Received from a Vendor” (“EITF No. 02-16”), addressing the accounting for cash consideration received by a customer from a vendor, including vendor rebates and refunds. The consensus reached states that consideration received should be presumed to be a reduction of the prices of the vendor’s products or services and should therefore be shown as a reduction of cost of sales in the income statement of the customer. The provisions of this consensus are applied prospectively and are consistent with our existing accounting policy.

     In October 2002, the FASB reached a consensus on EITF Issue No. 00-21, “Revenue Arrangements with Multiple Deliverables” (“EITF No. 00-21”). EITF No. 00-21 addresses arrangements with multiple deliverables specifying how the arrangement consideration should be measured, whether the arrangement should be divided into separate units of accounting and how the arrangement should be allocated among the separate units of accounting. EITF No. 00-21 is applicable to an arrangement in which some, but not all of its deliverables are within the scope of other existing higher-level authoritative literature that does not provide guidance with respect to determining separate units of accounting. EITF No. 00-21 indicates a need for Staff Accounting Bulletin (“SAB”) No 101, “Revenue Recognition in Financial Statements” (“SAB No. 101”), to be modified. EITF No. 00-21 is effective for revenue arrangements entered into in fiscal periods beginning after June 15, 2003. We are currently evaluating the impact this statement, along with any changes to SAB No. 101, will have on our future consolidated financial results.

     In July 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities” (SFAS No. 146”). SFAS No. 146 requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. SFAS No. 146 supersedes EITF Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring).” SFAS No. 146 is to be applied prospectively to exit or disposal activities initiated after December 31, 2002.

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     In April 2002, the FASB issued SFAS No. 145, “Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections” (“SFAS No. 145”). SFAS No. 145 requires that gains and losses from the extinguishment of debt be classified as extraordinary items only if they meet the criteria in Accounting Principles Board (“APB”) Opinion No. 30, (“Opinion No. 30”). Applying the provisions of Opinion No. 30 distinguishes transactions that are part of an entity’s recurring operations from those that are unusual and infrequent that meet criteria for classification as an extraordinary item. We adopted the provisions of SFAS No. 145 during the second quarter of 2002 and recognized a gain of $1.3 million in other income on the repurchase of approximately $17 million of our 10 1/2% Senior Subordinated Notes due in 2006 and 2007. The extraordinary loss of $12.4 million on early extinguishment of debt in 2000 has been reclassified to other income to conform with SFAS No. 145.

     In June 2001, the FASB issued SFAS No. 143, “Accounting for Asset Retirement Obligations” (“SFAS No. 143”). This statement deals with the costs of closing facilities and removing assets. SFAS No. 143 requires entities to record the fair value of a legal liability for an asset retirement obligation in the period it is incurred if a reasonable estimate of fair value can be made. This cost is initially capitalized and amortized over the remaining life of the underlying asset. Once the obligation is ultimately settled, any difference between the final cost and the recorded liability is recognized as a gain or loss on disposition. SFAS No. 143 is effective for us beginning January 1, 2003. We do not anticipate that the adoption of SFAS No. 143 will have a material effect on our financial position or results of operations.

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Results of Domestic Operations for the Years Ended December 31, 2002, 2001 and 2000

     We had 1,197,800 domestic subscribers at December 31, 2002, a 1.8% increase during 2002. We had 1,176,500 domestic subscribers at December 31, 2001, a 12.1% increase during 2001. We had 1,049,500 domestic subscribers at December 31, 2000, a 25.7% increase in 2000. The net number of domestic subscribers added through system acquisitions was approximately 30,000 in 2000.

     The following table sets forth certain financial data as it relates to our 2002, 2001 and 2000 domestic operations: