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UNITED STATES

FORM 10-K

(Mark One)

x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended May 31, 2002

or

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                          to

Commission File Number 0-19603

CENTENNIAL COMMUNICATIONS CORP.

Registrant’s telephone number, including area code:     (732) 556-2200

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

Securities registered pursuant to Section 12(g) of the Act:

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

      Indicate by check mark 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.  x

      As of August 2, 2002, there were 95,611,428 shares of common stock outstanding. The aggregate market value of the common stock held by non-affiliates of the Company, based upon the last reported sale price on The Nasdaq Stock Market on August 2, 2002 of $2.65 per share, was $29,830,642.

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DOCUMENTS INCORPORATED BY REFERENCE

      Certain portions of the Company’s Proxy Statement to be filed with the Commission pursuant to Rule 14a-6 under the Securities Exchange Act of 1934 in connection with the Company’s 2002 Annual Meeting of Stockholders are incorporated by reference in Part III, Items 10-13 of this Annual Report on Form 10-K.

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CAUTIONARY STATEMENT FOR PURPOSES OF THE “SAFE HARBOR”

      This report contains or incorporates by reference forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Statements in this document that are not historical facts are hereby identified as “forward looking statements”. Where, in any forward-looking statement, we or our management expresses an expectation or belief as to future results or actions, there can be no assurance that the statement of expectation or belief will result or be achieved or accomplished. Our actual results may differ significantly from our expectations, plans or projections. Forward-looking statements can be identified by the use of the words “believe”, “expect”, “estimate”, “anticipate”, “project”, “intend”, “may”, “will”, and similar expressions, or by discussion of competitive strengths or strategy that involve risks and uncertainties. We warn you that these forward-looking statements are only predictions and estimates, which are inherently subject to risks and uncertainties.

      Important factors (“Risk Factors”) that could cause actual results to differ materially from those expressed in any forward-looking statement made by, or on behalf of us, include, but are not limited to:

	•	our substantial debt obligations;
	•	the availability and cost of additional capital to fund our operations, including the need to refinance and/or amend existing indebtedness;
	•	restrictive covenants and consequences of default contained in our financing arrangements, which limit how we conduct business;
	•	the competitive nature of the telecommunications industry in the areas in which we operate, including, without limitation, the affect of existing and new competitors, including competitors that may have greater resources than we do, competitors that may offer less expensive products than we do and competitors that may offer more technologically advanced products than we do;
	•	market prices for wireless services may continue to decline in the future;
	•	general economic, business, political and social conditions in the areas in which we operate, including the less developed Caribbean region;
	•	continued overbuilding by personal communications service providers in our U.S. wireless markets and the effects of increased competition in our markets, which may cause a reduction in roaming revenues, increased subscriber cancellations, a continued reduction of prices charged and lower average revenue per subscriber;
	•	our dependence on roaming agreements for a material portion of our U.S. wireless revenues and the continued price declines in roaming rates and potential reduction of roaming minutes of use;
	•	the ability to attract and retain qualified personnel;
	•	that our coverage areas are not as extensive as those of other wireless operators which may limit our ability to attract and retain customers;
	•	the effects of consolidation in the wireless communications industry;
	•	the effects of governmental regulation of the telecommunications industry;
	•	the capital intensity of the telecommunications industry, including our plans to make significant capital expenditures during the coming year and future years to continue to build out and upgrade our networks and the availability of additional capital to fund these capital expenditures;
	•	declining rates for international long distance traffic;
	•	opportunities for growth through acquisitions and investments and our ability to manage this growth;
	•	changes and developments in technology, including our ability to upgrade our networks to remain competitive and our ability to anticipate and react to frequent and significant technological changes;

(ii)

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	•	the ability to effectively manage subscriber cancellations;
	•	local operating hazards and risks in the areas in which we operate, including without limitation, hurricanes, tornadoes, windstorms and other natural disasters;
	•	our ability to manage and monitor billing and operational support systems;
	•	potential litigation relating to using wireless telephones while operating an automobile and the potential reduction of wireless usage due to legislation restricting usage while driving;
	•	potential litigation relating to possible health effects of radio frequency transmission;
	•	the relative illiquidity and corresponding volatility of our common stock;
	•	control by certain of our stockholders and anti-takeover provisions; and
	•	other factors referenced in our filings with the Securities and Exchange Commission.

      Given these uncertainties, readers are cautioned not to place undue reliance on these forward-looking statements. We undertake no obligation to update or revise these forward-looking statements to reflect events, developments or circumstances after the date hereof.

CERTAIN DEFINITIONS

      As used in this Form 10-K, the terms “Centennial”, the “Company”, “our”, “we” and “us” refer to Centennial Communications Corp., a Delaware corporation, and its subsidiaries on a consolidated basis. The term “Pops” refers to the population of a market, derived from the 2001 Kagan’s Wireless Telecom Atlas and Database or the 1999 Kagan’s Latin American Wireless Telecommunications, and the term “Net Pops” refers to a market’s Pops multiplied by the percentage interest that we own in an entity licensed to construct or operate a wireless telephone system in that market.

(iii)

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PART I

Item 1.  Business

General

      We are a leading regional telecommunications service provider serving markets with a population of approximately 19.3 million in the Caribbean and the United States. In the Caribbean, we are a facilities based, fully integrated communications service provider offering both wireless and broadband services to business and residential customers. In the United States, we are a regional wireless service provider in small city and rural areas. At May 31, 2002, we owned wireless licenses covering over 18.5 million Net Pops, served 906,800 wireless customers, provided 190,200 lines of voice, data and Internet services and had approximately 91,600 video customers.

      Our Caribbean operations cover a population of approximately 12.9 million and serve Puerto Rico, the Dominican Republic and the U.S. Virgin Islands. We provide digital wireless and broadband services over our own fiber optic, coaxial and microwave network in the Caribbean. These services include switched and dedicated voice and data telephony, video and Internet. We believe we have the widest seamless wireless coverage, most extensive broadband fiber optic network, and the widest array of services among telecommunications operators in the Caribbean. We believe our scale and scope is a significant competitive advantage in the Caribbean. We began operations in the Caribbean in December 1996 with our launch of wireless service in Puerto Rico.

      In the U.S., we provide digital wireless service to over 540,000 subscribers in six states in two clusters of small cities and rural areas covering a population of approximately 6.0 million: Indiana, Michigan and Ohio; and Louisiana, Mississippi and Texas. These clusters are near major metropolitan markets and have benefited from the traffic generated by subscribers roaming into our coverage areas. We believe we have the highest quality network coverage and most extensive retail distribution of any wireless provider in our service area. We believe our focus on these geographic areas that are not as critical to national and global wireless operators and less penetrated than the major metropolitan markets provides a competitive advantage.

      Centennial was organized in 1988. Our principal corporate office is located at 3349 Route 138, Wall, New Jersey 07719. Our phone number is (732) 556-2200.

Centennial’s Operations

  Caribbean Wireless

      We provide wireless services in the Caribbean throughout an area covering a population of approximately 12.9 million. We use the same digital technology, called CDMA 1XRTT (code division multiple access upgraded for faster data speeds), throughout the region. Our wireless network is supported by our terrestrial and undersea fiber optic network. Our Caribbean operations were established first in Puerto Rico (3.9 million Pops), where we provide wireless personal communications services (“PCS”) pursuant to a 30 megahertz (“MHz”) Federal Communications Commission (“FCC”) license that operates at the 1900 MHz frequency band and also covers the U.S. Virgin Islands. Puerto Rico is strategically located as a major center of Caribbean commerce and serves as a gateway for businesses operating in Latin America and the Caribbean.

      In Puerto Rico, our wireless communications services share a sophisticated 1,407 mile fiber optic network with our broadband operation. The CDMA digital wireless network covers most areas of Puerto Rico using its established base of 183 wireless cell sites to transmit and receive calls. We offer postpaid (contracts) and prepaid (no contracts) mobile wireless services and residential and business fixed wireless services utilizing our high capacity digital wireless and fiber optic network. We target intensive users of service: the average usage of our postpaid wireless customers is about 900 minutes per month or about twice the average usage in the United States. We believe a portion of our customers have only our wireless service and do not have wireline service.

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      In the Dominican Republic, we own 80% of All America Cables and Radio, Inc. (“AACR” or “Centennial Dominicana”), which holds a 30 MHz PCS license operating at the 1900 MHz band. We launched wireless service in the Dominican Republic in October 2000 with coverage in and around Santo Domingo. After the initial launch, we expanded coverage to other major cities and now provide coverage to a substantial portion of the island’s 8.9 million inhabitants.

      Unlike the United States and Puerto Rico, carriers in the Dominican Republic bill for wireless service using a “calling party pays” system (i.e., the wireless customer only pays for outgoing phone calls and not for incoming calls). This system is different from the approach in the United States, where carriers generally charge the wireless customer for both outgoing and incoming calls.

      In August 2002, we sold our 51% interest in Centennial Digital Jamaica, a Jamaican company that provides mobile telecommunications services in Jamaica, to Oceanic Digital Communications, the 49% shareholder of Centennial Digital Jamaica. Accordingly, we no longer hold any interest in the Jamaica wireless operations.

      At May 31, 2002, our Caribbean wireless operations (including Jamaica) had 366,500 subscribers.

  Caribbean Broadband

     Puerto Rico

      In Puerto Rico, we are a facilities-based integrated communications service provider offering a full range of services. We have built a fully integrated communications company over the past five years and are the only significant fiber-based competitive local exchange carrier (“CLEC”) on the island. Our Puerto Rico broadband business provides a full range of services to commercial, Internet service providers (“ISP”), carrier and government customers over our fiber optic network. Our range of product offerings and extensive fiber backbone enable us to provide end-to-end broadband connectivity to many of the island’s largest companies and numerous Fortune 500 companies, including Wal-Mart, Exxon Mobil, Ford Motor, General Electric and IBM. We are the backhaul provider for most of the island’s wireless carriers and recently were awarded large, multi-year contracts for broadband capacity by the University of Puerto Rico for the next generation Internet2 network and a multi-year contract with America Online to bring its Internet services to Puerto Rico.

	•	Competitive Local Exchange Services. We offer a variety of wireline services, including switched voice, private line services, international long distance, data, toll free and Internet related services, to business and residential customers over our own fiber optic, coaxial and microwave network.
	•	Video Services. We operate a digital cable television system serving southern and western Puerto Rico. This digital cable system enables us to bring last mile broadband services to these less densely populated areas of Puerto Rico. We recently completed conversion of the cable network to digital with capacity to support up to 392 channels. At May 31, 2002, these cable systems passed approximately 300,000 homes and had approximately 91,600 subscribers. We recently announced that we terminated our formal process to explore strategic alternatives for our cable television properties and intend to continue to operate these systems.
	•	Internet Services. We maintain a server that provides customers direct high-speed and dial-up access to the Internet. We also offer customers web page design, hosting, web casting, integration services and a variety of e-commerce design and related services.

     Dominican Republic

      In the Dominican Republic, we offer long distance capability and provide long distance calling centers for Dominican customers. We act as the network provider for other call center operators. Centennial Dominicana accepts traffic from other carriers for termination in the Dominican Republic. Centennial Dominicana’s license allows it to expand its wireline services to local loop, ISP and similar services. Centennial Dominicana has constructed a terrestrial fiber optic network in Santo Domingo, the capital of the Dominican Republic, and has begun offering broadband services there.

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     Jamaica

      In Jamaica, we offer dial-up Internet service through our 60% interest in Infochannel Limited, a leading Jamaican ISP with over 10,780 subscribers. In August 2002, we entered into a definitive agreement to sell our 60% interest in Infochannel. The transaction is expected to close in August or September of 2002.

     Fiber Optic Undersea Cables

      To complement our terrestrial fiber networks, we recently acquired significant undersea fiber optic capacity connecting key markets in the Caribbean with our international gateway switch in Miami, Florida on the Global Crossing and Emergia networks. We also own undersea capacity on Americas II and ARCOS I undersea cables linking Puerto Rico, the United States mainland and Latin America. In addition, we own capacity on the TAT-14 undersea cable that connects the U.S. and Europe and the Japan-U.S. undersea cable that connects the U.S. and Japan. We believe this capacity will relieve the bottleneck for voice communications created by inadequate undersea cable capacity in the Caribbean. This fiber network provides for two key opportunities: first, it allows us to offer end-to-end broadband solutions for customers in the Caribbean, and second, it allows us to utilize the fiber for our own operations, thereby reducing our network costs.

     U.S. Wireless

      We operate our U.S. wireless telephone systems pursuant to 30 cellular licenses that operate in the 800 MHz frequency band. We hold licenses for 25 MHz of spectrum in all of our markets. We have strategically assembled a portfolio of cellular systems clustered in two distinct small city and rural areas. We market our cellular service under the registered name “Centennial Wireless” using both analog and digital technology (time division multiple access or “TDMA”). We have upgraded our U.S. systems to digital technology and now offer digital voice and digital features (voice mail, caller ID, call waiting, conference calling and text messaging). Digital technology increases system capacity and offers other advantages over analog technology, including improved overall signal quality, longer battery life, improved call security, lower incremental costs for additional capacity and the ability to provide enhanced data transmission services. Our rapid conversion to digital technology has allowed us to dramatically improve pricing for both our retail customers and roaming partners. A customer achieves the benefits of digital radio channels only if he or she purchases cellular telephones that are capable of transmitting and receiving digital signals. We intend to overlay our networks with GSM (global system for mobile communications) technology that will support GPRS (general packet radio service) advanced data technology. We expect to begin deploying GSM technology in our serving areas no later than the first quarter of fiscal year 2004. AT&T Wireless, Cingular Wireless and Voicestream Wireless each uses GSM/ GPRS technology. As of May 31, 2002, our U.S. wireless operations had 540,300 wireless subscribers, of which approximately 80% were using digital phones. During the past fiscal year, we constructed 57 cell sites and now have 691 cell sites.

      Our U.S. wireless interests consist primarily of two operating clusters:

	•	Michiana Cluster covers a population of approximately 3.7 million in Michigan, Ohio and Indiana, covering portions of three major interstate highways (Interstate 69, Interstate 94 and 80/90 Toll Road) that connect Chicago, Detroit and Indianapolis.
	•	Southeast Cluster covers a population of approximately 2.3 million, covering portions of interstate highway I-10, as well as sections of Texas, Louisiana and Mississippi in proximity to Houston, New Orleans, Shreveport and Baton Rouge.

      By concentrating our cellular development in clusters contiguous to metropolitan markets, we have become an attractive roaming partner to many of the largest regional and nationwide wireless operators. In addition, through clustering, we believe we are able to achieve critical mass and operating efficiencies while developing a respected brand image within our service areas. We focus on small city and rural areas that generally have lower penetration levels, higher proportion of roaming revenues and less competition for subscribers than wireless systems in major metropolitan areas. Because of these characteristics, we believe our service areas have greater capacity for future subscriber growth than the major metropolitan markets.

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Recent Developments

	•	Sale of Jamaica wireless operations. In August 2002, we sold our 51% equity interest in Centennial Digital Jamaica Limited, our Jamaican subsidiary that provided mobile telecommunications services in Jamaica using CDMA technology and an 800 MHz license covering a population of 2.6 million.
	•	Agreement to sell Jamaica Internet Business. In August 2002, we entered into a definitive agreement to sell our 60% interest in Infochannel Limited, a leading Jamaican ISP. The transaction is expected to close in August or September of 2002.
	•	Cable TV Digital Upgrade and Financing. We recently completed conversion of our Puerto Rico cable network to digital technology with capacity to support up to 392 channels and are currently converting our customers to a digital offering. In January 2002, we entered into a $15 million credit agreement with Banco Popular de Puerto Rico to fund the digital conversion, including the purchase of the digital set-top boxes and headend equipment. We recently announced that we terminated our formal process to explore strategic alternatives for our cable television properties and intend to continue to operate these systems.
	•	3G 1XRTT Services in Puerto Rico. In April 2002, we were the first carrier in Puerto Rico to launch next generation wireless services. These services provide the capacity to transmit data in the form of text, images and videos with a speed of up 10 times faster than regular dial-up connection.
	•	Sale of Towers. In May 2002, we entered into an agreement with AAT Communications to sell to AAT 186 telecommunications towers in our U.S. Wireless serving areas for approximately $34.1 million, subject to adjustment. Under the terms of the agreement, we will leaseback space on the towers from AAT. The agreement is subject to customary closing conditions and is expected to close on a rolling basis in the second and third quarters of fiscal 2003.
	•	Global Crossing Undersea Cable. In December 2001 and March 2002, we restructured our agreements with Global Crossing to significantly reduce our commitment to Global Crossing. We have received significant undersea fiber optic capacity from Global Crossing connecting key markets in the Caribbean with the United States.
	•	Dominican Republic. In November 2001, we increased our equity ownership interest in AACR to 80% from 70%. Our 20% minority shareholder in AACR, Abraham Selman, has the right through November 2002 to contribute additional funds to AACR to purchase additional equity in AACR and restore his 30% equity interest.
	•	Financing. In September 2001, we amended our senior credit facility to add an additional $50 million to the Tranche-C term loan.

January 1999 Recapitalization

      On January 7, 1999, we merged with CCW Acquisition Corp., a new Delaware corporation organized by Welsh, Carson, Anderson & Stowe VIII, L.P. As a result of the merger, a new group of equity investors acquired an ownership interest (at the time 92.9%) in Centennial. The remaining 7.1% interest was owned by public stockholders. In connection with the merger, at that time we entered into a $1.05 billion senior term loan and revolving credit facility, issued $370 million of senior subordinated notes and issued $180 million subordinated notes (mezzanine debt) to an affiliate of Welsh, Carson, Anderson & Stowe VIII, L.P. The merger was accounted for as a recapitalization in which the historical basis of our assets and liabilities was not affected and no new goodwill related to the merger was created.

Competitive Strengths

  Widest Seamless Coverage in the Caribbean

      We have wireless licenses to serve Puerto Rico (3.9 million Pops), the Dominican Republic (8.9 million Pops) and the U.S. Virgin Islands (0.1 million Pops), which have a combined population of approximately

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  Most Extensive Broadband Fiber Network in the Caribbean

      We believe our terrestrial and undersea broadband fiber network is the most extensive in the Caribbean. We own over 1,407 route miles of fiber in the Caribbean. We own significant undersea fiber optic capacity on various cables that connect our serving areas in the Caribbean with each other and the rest of the world. We are the only significant CLEC in Puerto Rico and have constructed a terrestrial fiber optic ring network in Santo Domingo, the capital of the Dominican Republic.

      We anticipate that our extensive fiber network will accelerate the growth of the broadband Internet market in the Caribbean, as well as reduce our costs for all of our services. Historically, the growth of telecommunications services in the Caribbean has been constrained by lack of satellite and undersea capacity to carry communications traffic off of the islands. We expect this new undersea capacity will relieve the bottleneck created by inadequate capacity and facilitate overall market growth. As the operator with the most extensive combination of both undersea and terrestrial broadband capacity in the Caribbean, we believe we are best positioned to offer customers a single vendor solution for broadband connectivity to the United States and the rest of the world.

  Low Cost Structure in the Caribbean

      Due to our wide, single technology wireless coverage, our extensive broadband network and our broad array of services, we are able to create significant cost advantages. We further reduce our cost to provide service by targeting intensive users of telecommunications services. For example, our average postpaid wireless customer in Puerto Rico uses approximately 900 minutes per month (as compared to an average of 450 minutes per month for U.S. wireless carriers, according to Legg Mason Wireless Industry Scorecard for 2001). We use the latest technology in our wireless and broadband networks. This gives us a significant cost advantage when competing for high usage customers. In addition, our complement of wireless, copper, fiber and coaxial last mile mediums permits us to offer the most cost effective solution for customers.

  Market Opportunity in the Caribbean

      We believe the Caribbean is a large market with substantial unfulfilled demand for both wireless and broadband telecommunications services. We believe that economic and market statistics for our Caribbean serving areas present a compelling market opportunity:

	•	2000 real GNP growth in Puerto Rico and real GDP growth in the Dominican Republic was 3.1% and 7.6%, respectively, according to the 2002 Economist Intelligence Report.
	•	Puerto Rico and the Dominican Republic have the first and third largest gross domestic products, respectively, in the Caribbean region, according to the 2001 Economist Intelligence Report.
	•	Market penetration for wireless services for 2001 was approximately 31% in Puerto Rico and 15% in the Dominican Republic, compared to approximately 44% for existing wireless providers in the United States, according to the International Telecommunications Union — 2001.
	•	Teledensity levels (lines of telephone service per 100 people) for 2001 in Puerto Rico and the Dominican Republic were approximately 33 and 29, respectively, compared to approximately 70 in the U.S. according to the International Telecommunications Union — 2001.
	•	Internet penetration rates for 2001 in Puerto Rico and the Dominican Republic were 15% and 2%, respectively, as compared to 50% in the United States according to the International Telecommunications Union — 2001.

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  Superior Network Coverage and Distribution in the U.S.

      In the U.S., we have 691 cell sites and 139 retail distribution points in our service territory, both, to our knowledge, greater than those of any other single competitor in our markets. In addition, we have more employees in our serving area. We believe the low population density of the more rural portions of our U.S. wireless serving areas inhibits additional competitors from matching our network and distribution coverage.

     Geographic Focus

      We carefully choose our markets. We believe we can give our Caribbean and U.S. serving areas more focused attention than the national and global telecommunications operators. These areas are not large enough to be of critical importance to national and global players, nor can national and global players afford to compromise their larger strategies by tailoring strategies to these specific regions. At May 31, 2002, we had over 1,150 employees in our U.S. serving areas and over 2,100 employees in the Caribbean (including Jamaica).

  Strong Financial Performance

      We have recorded five-year compounded annual growth rates for revenue and EBITDA of 32% and 35%, respectively. The Caribbean operation turned EBITDA positive within its first year of operation.

  Strong Management Team and Equity Investors

      We have assembled our management team from several of the world’s leading telecommunications operators, including SBC, Sprint, Alltel/360Communications, BellSouth, Bell Atlantic (now Verizon) and Motorola. Two leading private equity investors, Welsh, Carson, Anderson & Stowe and The Blackstone Group, are controlling shareholders of Centennial. Approximately 9% of our outstanding common stock is traded on the Nasdaq under the symbol CYCL.

Strategies

  Grow Wireless Customers

      We will participate in the industry-wide growth of wireless customers in both our Caribbean and U.S. markets. Our digital networks provide the capacity and cost structure to provide customers with more airtime minutes per dollar. We anticipate increased minutes, value-added services such as the wireless Internet and wireline replacement will fuel wireless customer growth rates in all of our markets. Our launch of wireless service in the Dominican Republic and the U.S. Virgin Islands creates a large footprint and more market opportunity to further bolster our wireless customer growth rate. We believe that our Caribbean wireless service areas are generally in the early stages of their wireless growth cycles and afford significant growth potential, as the penetration levels in these regions approach those of the more mature markets and as wireline replacement becomes more prevalent. We believe that many of our customers in the Caribbean already use their wireless phone as their only phone.

  Bring the Internet to the Caribbean

      The development of the Internet in the Caribbean is several years behind the United States. Our extensive broadband network provides us with a cost and quality advantage in the provision of a wide range of Internet and data services. We are capturing a dominant percentage of large capacity services in Puerto Rico today because we offer end-to-end connectivity from the customer’s location to our switch in Miami. This switch offers direct connections to all the major international broadband carriers. Our fiber backbone also will facilitate the growth of our wireless and cable television Internet services.

  Leverage our Fiber Network to Create Cost Advantages

      We share infrastructure and target intensive users of telecommunications services to create cost advantages in the Caribbean. Our backbone fiber network and switches have been our biggest shared cost to

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  Remain Roaming Partner of Choice

      In the U.S., we carefully choose service areas of lower population density that are situated between major metropolitan areas containing well-traveled roadways. Our Michiana cluster is situated in the vicinity of Chicago, Indianapolis and Detroit and our Southeast cluster lies in the vicinity of Houston and New Orleans. Customers of other wireless operators who travel into our service areas and use their wireless telephones generate significant roaming revenues for us. We have lowered our roaming rates and signed multi-year contracts with several national carriers in an effort to continue to capture these carriers’ roaming traffic.

  Pursue Selective Acquisitions

      We will continue to pursue strategic acquisitions that complement and leverage our existing operations, infrastructure and experience in the U.S. and Caribbean.

Risk Factors

      You should carefully consider the Risk Factors on pages (ii) and (iii) of this Form 10-K which may affect our business, future operating results and financial condition.

Wireless Telephone Markets and Interests

      The chart below sets forth certain information regarding our wireless operations as of May 31, 2002 as reported in the Kagan’s Wireless Telecom Atlas & Database 2001 and 1999 Kagan’s Latin American Wireless Telecommunications. Those U.S. wireless telephone systems and the investment interests which are in Metropolitan Statistical Areas (“MSAs”) are asterisked; the remainder are in Rural Service Areas (“RSAs”). As of May 31, 2002, our Caribbean and U.S. wireless telephone systems had 906,800 wireless subscribers in the markets listed below, and at the end of fiscal 2001, 2000, 1999 and 1998 we had 763,100, 626,800, 454,100 and 322,200 subscribers, respectively.

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Products and Services

  Wireless

      The nature of the products and services we offer varies depending on the market. Our principal source of revenue is derived from providing network access and airtime minutes of use to wireless telephone subscribers. We offer primarily postpaid (contracts) and, to a lesser extent, prepaid (no contracts) wireless services. Other value-added services available to wireless telephone subscribers are similar to those provided by conventional landline telephone systems, including custom calling features such as voice mail, caller ID, call forwarding, call waiting and conference calling. In the U.S., we also offer our customers short messaging services and access to the Internet through their wireless phones. In Puerto Rico, our recently-upgraded 3G networks give

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      We offer our wireless customers a variety of handsets employing CDMA technology in the Caribbean and TDMA technology in the U.S. We offer for sale a variety of handsets and accessories incorporating the latest in digital technology and a variety of rate plans designed to meet the varied needs of our customers. Most rate plans consist of a fixed monthly charge (with varying allotments of included minutes), plus variable charges for additional minutes of use. These handsets allow, among other things, our customers to roam onto other carriers’ digital or analog networks. We offer handsets primarily from Nokia, Audiovox, Kyocera, Motorola and Samsung.

  Broadband

      In the Caribbean, we offer a broad range of communications services including ATM (asynchronous transfer mode), frame relay, dedicated access, dedicated Internet ports, international long distance, switched access, video, high-speed Internet access, dial-up Internet access and private line services. All services are provided over our own fiber optic, coaxial and microwave network. We also offer customers web page design, development, hosting, and web casting, integration services and a variety of e-commerce design and related services.

Roaming

      In the U.S., we generate significant revenue from subscribers of other wireless operators when they place or receive calls while traveling in our markets. We have negotiated agreements with our roaming partners that allow both companies’ customers to make and receive calls outside of their home calling areas. During the last several years, we significantly lowered the prices for our roaming partners to discourage them from building networks in our service areas and moving roaming minutes off our network. Our roaming revenue in fiscal 2002 was $92.5 million, or approximately 13% of our total consolidated revenues.

      We expect roaming revenues in fiscal 2003 to be significantly less than in fiscal 2002. Our three largest roaming partners during the last fiscal year were AT&T Wireless, Cingular Wireless and Verizon Wireless. Given Verizon’s roaming relationship with Alltel Corp., which recently acquired CenturyTel, we expect to lose a substantial portion of the roaming revenue from Verizon.

Sales and Marketing

      In Puerto Rico, we market our wireless services and products under the name “Centennial de Puerto Rico”, and in the Dominican Republic, we market our services and products under the name “Centennial Dominicana”. In the U.S., we market our services and products under the name “Centennial Wireless”. Over the past year, we introduced branding campaigns named “Trusted Advisor” in the United States and “En Confianza” in the Caribbean to convey our strategy based on delivering superior service. Our marketing objective is to increase our customer base, increase usage and reduce subscriber cancellations. Our current marketing strategy emphasizes continued net subscriber growth and targets customers who are likely to generate higher monthly revenues and low churn rates. In marketing our services, we stress the quality of our service, competitive prices, technologically advanced features and the local presence of our customer service representatives and technical staff. In the Dominican Republic, we expect a higher percentage of prepaid customers and a lower revenue per customer. In the U.S., we focus on customers who live and work in our licensed serving areas in an effort to keep a significant portion of the minutes of use on our own network.

      We believe we have the largest distribution network of any wireless operator in our U.S. wireless service areas. As of May 31, 2002, we operated 139 retail locations in the U.S., including a kiosk program in shopping malls and larger retail centers, and 132 retail locations in the Caribbean. In Puerto Rico and the U.S. Virgin Islands, we have a store or kiosk presence in almost every major shopping center. We use a variety of

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      In both our Caribbean and U.S. wireless operations, we use both our own internal sales force and, to a lesser extent, independent agents and dealers to obtain customers for our services. We believe we rely less on outside agents and dealers than other carriers. As of May 31, 2002, we had an internal sales force of approximately 1,400. These employees are generally paid on a salary plus commission basis. Sales commissions are structured to take into account the rate plan selected and the length of the subscriber’s contract and the type of wireless telephone sold. We also maintain an ongoing training program to improve the effectiveness of our internal sales force. Our dealers are independent contractors paid solely on a commission basis.

Customer Service

      We are committed to assuring consistently high quality customer service. Each of our Caribbean integrated communications systems and U.S. wireless telephone systems has a local staff, including a manager, customer service representatives and technical engineering staff. We have established local customer support facilities in all of the U.S. wireless telephone systems and the Caribbean integrated communication system. We believe that by having local offices and customer support facilities, we are better able to service customers and monitor the technical quality of our telecommunications services. In the U.S., we have a centralized customer service center located in Fort Wayne, Indiana. In the Caribbean, we have centralized customer service centers located in San Juan, Puerto Rico and Santo Domingo, Dominican Republic, as well as customer service support located in our retail stores.

System Construction, Operation and Development

      Wireless telephone technology is based upon the radio coverage of a given geographic area by a number of overlapping “cells.” Each cell contains a transmitter-receiver at a “base station” or “cell site” that communicates by radio signal with wireless telephones located in the cell and is connected to a mobile telephone switching office (the “switch”), which is connected to the local landline telephone network. Since wireless telephone systems are fully interconnected with the landline telephone network and long distance networks, subscribers can receive and originate both local and long distance calls from their wireless telephones. If a wireless telephone user leaves the service area of the wireless telephone system during a call, the call is generally continued and carried through a technical interface established with an adjacent system through intersystem networking arrangements. Such an arrangement is referred to as roaming.

      Construction of wireless telephone systems is capital intensive, requiring a substantial investment for land and improvements, buildings, towers, switches, cell site equipment, microwave equipment, engineering and installation. Until technological limitations on maximum capacity are approached, additional wireless telephone system capacity can normally be added in increments that closely match demand after the initial construction phase is complete. We use CDMA technology in our Caribbean wireless markets. During the past fiscal year, we added 55 cell sites in our Caribbean wireless operations, and, as of May 31, 2002, our Caribbean wireless operations had 309 cell sites. Substantially all of our U.S. wireless systems were upgraded to offer TDMA digital services beginning in the summer of 1999. During the past fiscal year, we constructed 57 cell sites in our U.S. wireless operations, and, as of May 31, 2002, our U.S. wireless operations had 691 cell sites. We expect continued network investment to support customer growth, increased usage per customer, and new services.

      In accordance with our strategy of developing market clusters, we have selected wireless switching systems that are capable of serving multiple markets with a single switch. Where we have deemed it appropriate, we have implemented microwave links and fiber connections in the U.S. wireless telephone systems and Caribbean integrated communication system, which provide ongoing cost efficiency and generally improve system reliability.

      Our Puerto Rico network is recognized as a leader in the deployment of CDMA technology. We were the first operator in the world to deploy a fifth CDMA carrier on our network (a process to increase channel capacity). We were also the first wireless operator in Puerto Rico to launch next generation (3G 1XRTT)

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      Our cable network in Puerto Rico recently underwent digitization of its primary headend and transport equipment and is currently converting its customers to digital service. Our cable systems consist of three headends, 229 nodes and a total of 578 route miles of fiber optic cable and 3,124 miles of coaxial cable. The outside plant consists of a mix of 450 MHz to 870 MHz plant.

      Our U.S. wireless systems are served by five technologically advanced Nortel supernode switches in Fort Wayne, Indiana(2), Alexandria, Louisiana; Vidor, Texas; and Lafayette, Louisiana. For our U.S. wireless operations, we intend to deploy a GSM network over our existing TDMA network that will support GPRS advanced data technology. This technology will maintain technological compatibility with our major roaming partners and provide the speed and capacity to support a variety of innovative mobile data applications, including e-mail, e-commerce and web-browsing.

Billing and Operational Support Systems

      We operate management information systems to handle customer care, billing, network management and financial and administrative services. We have outsourced with Alltel Information Systems, a network management and operations support systems provider, to provide billing services and to facilitate network fault detection, correction and management, performance and usage monitoring and security for our wireless operations company-wide. We maintain stringent controls for both voluntary and involuntary deactivations. We attempt to minimize subscriber disconnects by preactivation screening to identify any prior fraudulent or bad debt activity, credit review and call pattern profiling to identify needed activation and termination policy adjustments.

      In the Caribbean, we are investing in operations support systems to facilitate billing for our broadband services. We have contracted with ADC Telecommunications to provide the framework, software and technical support for the deployment of our broadband operational support systems. Our cable television systems in Puerto Rico recently converted to a CSG Systems billing system which was installed in February 2002.

Competition

  Wireless Competition

      In the U.S. and Puerto Rico, the FCC can grant Commercial Mobile Radio Service (“CMRS”) licenses to up to eight companies to provide different types of wireless telephone services in each of our service areas. The FCC licenses cellular systems in 734 geographically defined market areas, which are comprised of 306 MSAs and 428 RSAs. In each market, cellular frequencies are divided into two equal 25 MHz blocks, which are designated as non-wireline (Block A) and wireline (Block B). The FCC also grants two 30 MHz licenses to operate broadband PCS systems in each of 51 defined Major Trading Areas (“MTAs”) and one 30 MHz and three 10 MHz licenses in each of 493 Basic Trading Areas (“BTAs”), which are component parts of MTAs. However, the FCC also allows CMRS carriers to subdivide and assign their spectrum allocations and/or their geographic market areas to other carriers. This creates the (unlikely) possibility of more than eight CMRS carriers having the ability to serve a single market.

      We currently control cellular licenses in 30 MSAs and RSAs in the U.S., one broadband PCS license in the Puerto Rico MTA (which includes the U.S. Virgin Islands) and a 30 MHz PCS license in the Dominican Republic. Our wireless systems compete directly with both cellular and broadband PCS licensees in each market on the basis of, among others, quality, price, area served, network coverage, services offered and responsiveness of customer service. The telecommunications industry is experiencing rapid technological

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      In the U.S., we compete against one other cellular carrier in each of our markets and a number of PCS providers and Enhanced Specialized Mobile Radio (“ESMR”) service providers, such as Nextel Communications. In general, in our U.S. wireless markets, we have between three and five competitors in each of our markets. PCS operators have continued to build out their networks in our service areas. We expect this trend to continue. Our primary competitors in our U.S. wireless markets are Verizon, CenturyTel (now Alltel), AT&T Wireless, Cingular, Sprint PCS (and Sprint affiliates), Voicestream and Nextel. We also compete to a lesser extent with paging, dispatch services and resellers. As wireless service is becoming a viable alternative to traditional landline phone service, we are increasingly competing directly with the traditional landline telephone companies for customers.

      The Puerto Rico wireless market is also highly competitive. In Puerto Rico, we compete with five other wireless carriers: Cingular, Verizon, AT&T Wireless, Movistar (partially owned by Telephonica de Espana) and Sprint PCS, which entered the market during the past year.

      The telecommunications market in the Dominican Republic is also highly competitive. We compete with three other wireless carriers: Compania Dominicana de Telefonos C. por A., a subsidiary of Verizon that is doing business as “Codetel”; Tricom, S.A. (controlled by GFN Corporation, Ltd., one of the Dominican Republic’s largest private holding companies and Motorola); and France Telecom, which does business under the name “Orange”.

      Most of our competitors have greater financial resources than we do. We expect competition for wireless subscribers in our markets to remain highly competitive.

  Broadband Competition

      Our Caribbean operations hold an authorization to provide broadband services in Puerto Rico, a concession to provide a variety of telecommunications services in the Dominican Republic and authorization to provide facilities based international long distance service in the U.S. Our main competitor for our broadband services in Puerto Rico is the Puerto Rico Telephone Company (“PRTC”), the incumbent telephone company. There are no other competitive local exchange carriers with significant operations at this time, but we cannot assure that other CLECs will not emerge in Puerto Rico in the future. We are the only cable television operator in our franchise areas. Liberty Media and Adelphia Communications also operate cable television companies in Puerto Rico, but not in our franchise areas. Our cable television company in Puerto Rico competes primarily against the direct broadcast satellite companies, namely DirectTV, Echostar (the Dish) and USNET.

      In the Dominican Republic, we compete primarily against the incumbent provider, Codetel, which has a substantial market share, and Tricom, which provides both wireline and fixed-wireless service.

      In the future, we may also compete against emerging wireless technologies, including satellite based mobile voice and data services and 3G wireless technologies.

Regulation

  U.S. Federal Regulation

      Pursuant to the Communications Act of 1934, as amended, the cellular, PCS, paging and conventional mobile telephone systems we operate are licensed and regulated by the FCC. The FCC regulates the licensing, construction, operation, acquisition and sale of CMRS systems. Currently, FCC rules prohibit licensees from controlling more than 55 MHz of licensed CMRS spectrum in any MSA or RSA. The FCC intends to eliminate this spectrum cap in January 2003.

      The FCC generally issues CMRS licenses for a term of up to ten years, after which they must be renewed. CMRS licenses may be revoked and license renewal applications denied by the FCC for cause. Under present rules, there may be competition for a CMRS license upon the expiration of its initial license

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      The FCC also regulates other aspects of the operation and ownership of CMRS systems. Operational regulations include the cellular rules requiring coordination of proposed frequency usage with adjacent cellular licensees to avoid electrical interference between adjacent systems. In addition, the height and power of base station transmitting facilities and the type of signals they emit must fall within specified parameters. The FCC’s rules also prohibit CMRS licensees from imposing restrictions on the resale of CMRS service by parties who purchase blocks of telephone numbers from an operational system (such as ours) and then resell them to the public. This resale restriction prohibition is scheduled to expire on November 24, 2002. The FCC also imposes radio frequency (“RF”) radiation limitation requirements on CMRS licensees.

      Ownership regulations include the requirement to obtain prior FCC approval before completing most types of acquisitions and assignments of FCC licenses. Acquisitions of minority interests generally do not require FCC approval. Whenever FCC approval is required, any interested party may file a petition to dismiss or deny the application for approval of the proposed transfer or assignment.

      In addition to regulation by the FCC, wireless systems are also subject to certain Federal Aviation Administration (“FAA”) regulations regarding the siting and construction of wireless transmitter towers and antennas, as well as local zoning requirements. The FCC also requires that all licensees register and obtain FCC registration numbers for all of their antennas and/or towers that require prior FAA clearance. All new towers must be registered at the time of construction. Failure to properly register a tower could lead to enforcement action, such as the imposition of a penalty. We believe that we are in compliance with the tower registration requirements. There can be no assurance that any FCC requirements currently applicable to our CMRS system will not be changed in the future.

      The amendments to the Communications Act of 1934, made by the Telecommunications Act of 1996 (the “1996 Act”) were aimed at opening local telecommunications markets to competition. As amended, the 1996 Act governs, among other telecommunications matters, the removal of barriers to market entry and imposes on incumbent local exchange carriers, or ILECs, duties to negotiate, in good faith, reasonable and nondiscriminatory interconnection agreements and access to unbundled network elements at any technically feasible point within the carrier’s network. The law encourages competition through these provisions and others governing resale, number portability, dialing parity, access to rights-of-way and numbering administration.

      The overall effect of the amendments made by the 1996 Act on our business continues to be unclear since the FCC continues to promulgate rules to implement it. We have, however, benefited from reduced costs in acquiring required communications services, such as ILEC interconnection, and we have benefited from the right to receive reciprocal compensation for the termination of traffic (discussed below). However, provisions relating to interconnection, telephone number portability, equal access and resale could subject us to increased competition and additional economic and regulatory burdens. The Communications Act of 1934 applies to our operations in the U.S., Puerto Rico, and the U.S. Virgin Islands.

      The issue of reciprocal compensation has been and remains controversial. Reciprocal compensation refers to payments that one carrier makes when it sends traffic to another carrier for completion. Reciprocal compensation applies to calls between landline networks and between a landline and a CMRS network. We both send and receive traffic to and from landline networks and so both pay and receive reciprocal compensation. The treatment of compensation for calls to ISPs, which affects us in Puerto Rico, has been particularly controversial. The FCC has established rules generally intended to reduce and, possibly, eventually eliminate the compensation paid by incumbent telephone companies to new companies like Centennial for ISP-bound calls. This lower compensation, however, only applies where the incumbent telephone company also agrees to receive lower compensation for calls it receives. The courts have confirmed

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      The 1996 Act imposes interconnection obligations on all telecommunications carriers to facilitate the entry of new telecommunications providers. This requirement creates benefits for our CMRS and other telecommunications businesses. The FCC has issued comprehensive rules regarding the introduction of competition into the local telephone market. These rules address most aspects of the provision of competitive local telephone services from both facilities-based and non-facilities-based competitors, including wireless and paging operators. The rules also address the process by which potential competitors negotiate with incumbent telephone companies for interconnection, the facilities that must be available for interconnection, the use of components of the incumbents’ networks, the resale of services of others, and the pricing of interconnection and other services and facilities used for offering competitive local telephone services. The rules also provide that ILECs must begin paying us and other wireless providers immediately for terminating landline-originated traffic on the wireless facilities. The FCC continues to refine its rules to respond to developments in the market and changes in that agency’s policies. While some of the FCC’s rules have been set aside by the courts, the FCC’s rules have generally been sustained, including by the U.S. Supreme Court in major decisions issued in January 1999 and May 2002.

State and Local Regulation

      Under the Communications Act, no state may regulate the entry of CMRS providers or the rates charged for CMRS service. However, states can regulate other terms and conditions of service. The siting and construction of CMRS facilities, including transmission towers, antennas and equipment shelters, may be subject to state or local zoning, land use and other local regulations. Before a system can be put into commercial operation, the holder of a FCC CMRS license must obtain all necessary zoning and building permit approvals for the transmitter sites and switching locations. Local jurisdictions control access to the right of ways and have the right to set customer service related rules. Recently, several states and local communities have enacted ordinances restricting the use of wireless phones while driving a motor vehicle. Several other state and local legislative bodies have proposed legislation to adopt similar laws. These laws could reduce subscriber usage and lead to potential litigation against wireless carriers. For purposes of regulation of our activities, both Puerto Rico and the U.S. Virgin Islands are treated as “states.”

Other Regulatory Requirements

      911. The FCC has adopted requirements for CMRS providers to implement basic and enhanced 911 services (“E911”). E911 is being rolled out in phases. E911 capabilities will enable CMRS systems to determine the location of persons making emergency calls. The FCC’s rules require CMRS carriers to work with local public safety officials to process the 911 calls, including those made from analog mobile telephones that are not registered with the carrier’s cellular system. Since April 1998, CMRS carriers have been required to be able to identify the cell from which the call has been made as well as the identification of the calling party number (Phase I). The rules also require CMRS systems to continue to improve their ability to locate wireless 911 callers within a cell. FCC rules require CMRS carriers to be able to provide location information with a greater degree of accuracy in accordance with standards set by the FCC (Phase II) by October 1, 2001. These standards vary according to the location technology chosen by a carrier. Due to the delay in developing technologies that meet the FCC requirements, many carriers, such as ourselves, have filed waiver request with the FCC requesting an extension of the October 1, 2001 deadline. Centennial’s waivers are pending. The FCC recently amended its E911 requirements to provide that the costs associated with the various phases of E911

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      CALEA. Under a 1994 federal law, the Communications Assistance to Law Enforcement Act (“CALEA”), all telecommunications carriers, including Centennial and other CMRS licensees, are required to implement certain equipment changes necessary to assist law enforcement authorities in achieving enhanced ability to conduct electronic surveillance of those suspected of criminal activity. The FCC has established varying deadlines for different aspects of CALEA. In August 1999, the FCC added certain additional surveillance capability requirements, which carriers were required to meet by September 30, 2001. However, on August 15, 2000, a federal circuit court of appeals vacated and remanded certain of these requirements. The FCC has recently reexamined and reissued these requirements which are commonly referred to as the “punchlist” items. The FCC also extended the September 30, 2001 punchlist compliance deadline to June 30, 2002. Due to Centennial’s network upgrade schedule, Centennial did not meet certain of the compliance deadlines. However, Centennial currently has waivers on file with the FCC requesting an extension of the applicable compliance deadlines. Issues relating to when and how carriers may obtain reimbursement from the federal government for equipment upgrades associated with such requirements are still unresolved.

      Universal Service. Centennial’s U.S. and Puerto Rico wireless and wireline operations are required to contribute to the Federal Universal Service Fund and to any state implemented Universal Service Fund. In general, these funds are created to subsidize telecommunications services in rural and high cost areas of the United States. Centennial is currently receiving Federal Universal Service Non-rural High Cost Support for its operations in Puerto Rico pursuant to the interim hold harmless provisions of the FCC rules in this regard. Under the FCC current regulations and nationwide benchmark costing model, Puerto Rico was found to be below the national benchmark for receiving high cost support. As a consequence, the federal funds available to Puerto Rico will be reduced gradually over the next several years. Under the current scheme, support for Puerto Rico would be totally phased out by 2011. However, support is distributed by wire center and thus support for lower cost wire centers in Puerto Rico could be phased out prior to 2011. The Tenth Circuit has remanded the FCC’s order establishing federal high-cost universal service support for non-rural carriers to the FCC for further consideration and explanation of its decision. The FCC proceeding to review these issues is currently pending. Thus, Centennial’s future ability to receive universal service support is unclear.

      Rate Integration. Rate integration is the averaging of interstate long distance rates throughout a provider’s customer base. The FCC is currently examining the applicability of current rate integration requirements on CMRS offerings, particularly to wide area calling plans. Until this process is concluded it will be uncertain what obligations, if any, CMRS providers will have in this regard. However, implementation of rate integration requirements could have an effect on our current service offerings and rate plans and hinder our pricing flexibility, making it harder for us to compete in our markets.

      Number Pooling. The telecommunications industry has been faced with a shortage of available telephone numbers. As a consequence, the FCC and state regulators have become concerned with promoting the efficient use of the available numbers. The FCC has imposed what is referred to as “thousand block pooling”. Beginning on November 24, 2002, 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. To request additional blocks, carriers must meet utilization thresholds set by the FCC. This more restrictive pooling requirement will force carriers to more closely track their number utilization, imposing greater administrative burdens and increased pressure to implement number portability, which may require possible equipment upgrades.

      Number Portability. Number portability allows a CMRS carrier’s customer who moves to another carrier to take along, or “port”, his or her phone number. The original CMRS carrier must be able to transmit calls to the ported number. Until July 16, 2002, CMRS carriers were required to provide number portability by November 24, 2002. On July 16, 2002, the FCC voted to extend this deadline to November 24, 2003. The implementation of number portability will increase competition and require equipment and network upgrades. In contrast, number portability has been in place for broadband services for some time.

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Puerto Rico

      Comprehensive telecommunications reform legislation was enacted in 1996 by the Commonwealth of Puerto Rico. This legislation, titled the Puerto Rico Telecommunications Act of 1996 (the “Puerto Rico Act”), is intended to open the Puerto Rico telecommunications market to competition. Among other things, it established the Puerto Rico Telecommunications Regulatory Board (“TRB”), which was given primary regulatory jurisdiction in Puerto Rico over all telecommunications services, all service providers, and all persons with a direct or indirect interest in said services or providers.

      Increased competition in Puerto Rico has put pressure on our operation to become more aggressive in its pricing plans and product offerings, which in turn has added to our interconnection requirements. We recently concluded the arbitration of our new interconnection agreement with PRTC. The new agreement recently took effect. The arbitrator agreed with our view that our local calling areas should determine whether a landline call between us and PRTC is rated as local or toll for purposes of intercarrier compensation. Because our local calling areas are larger, fewer calls will cross local calling area boundaries, thereby lowering our costs by reducing the amount of access charges we might owe to PRTC. In addition, the arbitrator affirmed our right to our extensive physical interconnections with PRTC’s network to provide direct connections to business customers seeking to shift some or all of their business to us. However, the arbitrator’s order also affirmed certain PRTC proposed traffic classifications that PRTC will argue relieve it of its obligation to compensate us for certain ISP-bound calls. We believe this aspect of the arbitrator’s ruling is inconsistent with applicable FCC rules and plan to appeal this aspect of the ruling. Once the TRB formally approves the arbitrator’s ruling, PRTC and Centennial will each have the right to seek reconsideration of that ruling and to appeal the ruling to federal court. There can be no assurance that we will prevail in any such appeal. Several long distance providers have requested that we provide equal access for our wireline customers. Equal access would allow customers to reach their long distance providers by dialing one plus the number. We implemented equal access in Puerto Rico during fiscal year 2002. The implementation of equal access could have an impact on our long distance business by increasing competition.

Dominican Republic

      The telecommunications regulatory framework in the Dominican Republic consists of General Telecommunications Law No. 153-98, enacted on May 27, 1998, resolutions promulgated pursuant to such law, the Dominican Republic’s reference document filed with the World Trade Organization (“WTO”), and concession agreements entered into by the Dominican government with individual service providers. None of the outstanding concession agreements contains an exclusive arrangement with any wireless carrier, and the Dominican government has announced a policy of encouraging growth through competition in the telecommunications industry.

      To substantially broaden the number of its citizens with access to a telephone and to allow for the establishment and growth of other modern telecommunications services, the Dominican government adopted a policy of liberalization of the telecommunications sector beginning in the late 1980’s. In 1994, the Dominican government enacted a series of interconnection resolutions that required all service providers in the Dominican Republic to interconnect with all other service providers pursuant to contracts between them, under guidelines articulated in the resolutions.

      The new telecommunications law establishes a basic framework to regulate the installation, maintenance and operation of telecommunications networks and the provision of telecommunications services and equipment in the country. The law ratifies the Universal Service principle, by guaranteeing the access of telecommunications services at affordable prices in low-income rural and urban areas, to be achieved through market conditions and through the development of the telecommunications sector. It creates a fund for the development of the telecommunications sector that will be supported by a levy on industry participants of 2% of all telecommunications services billings. Such levy will be passed on to customers.

      In addition, the law created a governing body to regulate telecommunications activities. This body is referred to as the Dominican Institute of Telecommunications (Instituto Dominicano de las Telecommunicaciones or “Indotel”). Indotel is headed by a five-member council, which includes a representative from the telecommunications industry. Law 153-98 grants Indotel control over all frequency bands and channels of

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      Our greatest challenge in the Dominican Republic is negotiating interconnection agreements with fair and non-discriminatory terms, as well as pushing for the implementation of several regulatory standards in the market, such as equal access and equipment co-location. To date, we have interconnection agreements with France Telecom, Tricom and Codetel. Recently, Indotel issued its interconnection regulation, which sets forth the terms by which all existing interconnection agreements are to be renegotiated. This decision favors the new entrants, such as Centennial, since it incorporates the obligation to unbundle network elements and co-location on the property of other carriers.

      To date, we have started discussions and negotiations with Codetel to incorporate the changes introduced by the regulation in its agreement. The parties are contemplating changing the access charge regime, to move from a compensation system based on the nature of traffic to one based on the point of termination and type of technology employed. This could result in considerable savings for our Dominican operations.

      Indotel has also issued a ruling which fixes the termination rate for traffic originating outside the Dominican Republic and terminated within the Dominican Republic. The termination rate is now fixed at $0.08 per minute. This rate is an increase over the current termination rate that was determined by the carriers pursuant to arms-length negotiations. In the same order, Indotel also increased the access charges applicable to these calls to $0.05 per minute. These increases could affect the volume of calls made to the Dominican Republic that in turn could affect our long distance revenue. As a result of the objections made by the industry, Indotel is reviewing this order.

      The Dominican government has recently made changes to the tax regime governing telecommunications carriers. Beginning January 1, 2003, telecommunication providers will have to adopt the Income Tax system established by the Dominican Republic’s Tax Code. Since 1995, all telecommunications companies have been operating under the Canon Tax, which imposes a 10% tax on the difference between Centennial’s revenues and its interconnection costs. The Income Tax regime will relieve us of the obligation to pay this tax. The Income Tax regime is 25% on taxable profits with a minimum tax of 1.5% on revenue.

      Centennial operates in the Dominican Republic pursuant to a concession previously belonging to International Telephone & Telegraph (“ITT”) and dating back over 100 years. After several modifications, the Concession’s latest version dates to 1996, when a new twenty-year term was awarded to All America Cables & Radio, Inc. Dominican Republic (“AACR”). The concession contract also provides that AACR could construct, operate and exploit all types of telecommunications services in the Dominican Republic.

U.S. Virgin Islands

      Our FCC license for Puerto Rico covers the U.S. Virgin Islands. As stated above, the U.S. Virgin Islands are part of the U.S., so our operations there are subject to the Communications Act of 1934 (including the Telecommunications Act of 1996), and, for purposes of regulating our operations, the government of the U.S. Virgin Islands is the equivalent of a state.

Cable Television Regulation

      Centennial’s cable television operation in Puerto Rico is subject to both Federal and local regulation. Federally, Centennial is subject to the FCC cable regulations contained in the Communications Act of 1934, as amended. Those regulations cover our obligations with regard to signal carriage requirements, leased access to channels, political advertising, signal leakage and a number of other matters that affect our operations including access to poles, conduits and rights of way controlled by utilities. Locally, we are regulated by the TRB. The TRB has franchising authority. In order to provide cable services, an operator must obtain a franchise that gives the operator access to the right of ways. Centennial holds six franchises in Puerto Rico covering the southern and western parts of the island.

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      A franchise is an agreement whereby the franchising authority (the TRB) allows the cable provider (Centennial) access to the right of ways for the installation of its cable network. In exchange, we agree to certain conditions which vary from franchise to franchise given that franchise agreements are subject to negotiation.

      Franchises are effective for a defined term, which vary among franchises. Our six franchises expire between 2007 and 2012. Upon expiration, franchises may be renewed. Franchise renewals are subject to negotiation between the franchising authority and the provider. Whether a renewal is granted depends on various factors including, among other things, our financial standing, the quality of the service provided and whether we complied with our obligations under the franchise agreement. The TRB may also seek to impose additional terms and conditions, such as build out and upgrade requirements.

      The local franchising authority may also have the right to regulate rates when a provider is not subject to effective competition. A provider is assumed not to be subject to effective competition unless there has been a finding by the FCC to the contrary. Centennial’s markets have been found by the FCC to be subject to effective competition. As such, our rates are not subject to rate regulation.

Employees

      We had approximately 3,324 employees as of May 31, 2002 (including Jamaica). Our employees are not represented by a labor organization. We consider our relationship with our employees to be good.

      Our corporate headquarters is located at 3349 Route 138, Wall Township, New Jersey 07719, where we lease approximately 31,000 square feet of office space. In addition, our U.S. Wireless headquarters is based in Ft. Wayne, Indiana where we lease approximately 15,188 square feet of office space. Our Puerto Rico operations are headquartered in the greater San Juan, Puerto Rico area, where we lease an office building with approximately 95,000 square feet of office space. In the Dominican Republic we lease approximately 10,600 square feet of office space. In addition, we lease and own locations for customer call centers, switching offices, retail stores, local administrative offices, microwave sites and cell sites. We consider our owned and leased properties to be suitable and adequate for our business operations.

      In April 2002, WHTV Broadcasting Corp. and Sala Foundation Inc., operators of a wireless cable system in Puerto Rico, filed an action against us in the United States District Court for the District of Puerto Rico. The complaint alleges that we breached the terms of a November 2000 letter of intent to purchase the wireless cable system for $30 million. The complaint seeks specific performance of the letter of intent or not less than $15 million in damages. While it is not possible to determine the ultimate disposition of this matter, we believe that the outcome will not have a material adverse effect on our financial condition or results of operations. To our knowledge, there are no other material pending legal proceedings to which we or our subsidiaries are a party or of which any of our property is subject that is likely to have a material adverse effect on our business or results of operations.

      There were no matters submitted to a vote of our shareholders during the fiscal quarter ended May 31, 2002.

Directors and Executive Officers of Centennial

      The names, ages and positions of our executive officers and directors are listed below along with their business experience during at least the past five years.

      Our executive officers are elected annually by the board of directors and serve until their successors are duly elected and qualified. Each director is elected annually and serves until his or her successor is duly

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      Michael J. Small, 44, has been Chief Executive Officer and a director of Centennial since January 1999. He joined Centennial upon the consummation of the merger in January 1999. Prior to joining Centennial, Mr. Small served as Executive Vice President and Chief Financial Officer of 360° Communications Company (now a subsidiary of ALLTEL Corporation) from 1995 to 1998. Prior to 1995, he served as President of Lynch Corporation, a diversified acquisition-oriented company with operations in telecommunications, manufacturing and transportation services.

      Paget L. Alves, 48, has been President and Chief Operating Officer of Centennial since March 2002. Prior to joining Centennial, Mr. Alves was President and Chief Executive Officer of PointOne Telecommunications, Inc. a provider of voice over internet protocol services to telecommunications carriers, from June 2000 to December 2001. Prior to that, Mr. Alves spent four years at Sprint Communications Corporation where he rose to President, Sales and Support — Business Services Group.

      Phillip H. Mayberry, 49, has been President — U.S. Wireless Operations of Centennial since January 1999 and was Senior Vice President — Operations since December 1994. He served as Vice President, Operations of Centennial from April 1990 to December 1994. From March 1989 to April 1990, Mr. Mayberry was a Vice President and General Manager of Metro Mobile CTS, Inc., a cellular telephone company.

      Peter W. Chehayl, 54, has been Senior Vice President, Treasurer and Chief Financial Officer of Centennial since January 1999. He joined Centennial upon the consummation of the merger in January 1999. Prior to joining Centennial, Mr. Chehayl was the Vice President and Treasurer of 360° Communications Company (now a subsidiary of ALLTEL Corporation) from 1996 to 1998. From 1991 to 1996, he served as Vice President — Capital Markets at Sprint Corporation. Mr. Chehayl intends to resign from Centennial effective August 31, 2002 and is being succeeded by Thomas J. Fitzpatrick.

      Thomas J. Fitzpatrick, 44, was named our Executive Vice President and Chief Financial Officer, effective August 31, 2002. Prior to joining Centennial, from October 2001 to August 2002, Mr. Fitzpatrick was Senior Vice President and Chief Financial Officer of ICG Commerce, a privately held Internet procurement services provider. From September 2000 until May 2001, he was Chief Financial Officer of Digital Access Inc., a broadband services provider. From November 1999 to September 2000, Mr. Fitzpatrick was Chief Financial Officer of Inacom Corporation, a publicly-traded computer hardware distributor and information technology service provider. From August 1996 to September 1999, Mr. Fitzpatrick was Chief Operating Officer and Chief Financial Officer at DecisionOne Corporation, a large computer services firm. Prior to August 1996, Mr. Fitzpatrick worked for Bell Atlantic Corporation (now part of Verizon).

      Thomas E. Bucks, 46, has been Senior Vice President, Controller of Centennial since March 1995. Prior to joining Centennial, Mr. Bucks was employed by Southwestern Bell Corporation in various financial capacities, most recently as District Manager — Financial Analysis and Planning.

      Thomas R. Cogar, Jr., 45, has been Executive Vice President — Engineering, Chief Technology Officer — Caribbean Operations since April 2002. Prior to that, he served as Senior Vice President, Chief Technology Officer — U.S. Wireless Operations of Centennial since March 1999. He joined Centennial in September 1990 as Director of Engineering and was appointed Vice President, Engineering in August 1991. From May 1987 to September 1990, Mr. Cogar was employed by Metro Mobile CTS, Inc., a cellular telephone company, in various technical capacities.

      Richard W. Gasink, 53, has been Executive Vice President, Office of the President for Caribbean Operations since August 2002. Prior to that, he served as Senior Vice President, Chief Financial Officer — Caribbean Operations of Centennial from December 1999 to August 2002. Since January 2002, Mr. Gasink has also served as interim General Manager of our cable television operations in Puerto Rico. Before joining Centennial, he was associated with Motorola since 1982, most recently as Senior Group Controller, Network Management Group. Prior to joining Motorola, Mr. Gasink was with International Components Corp. and what is now Accenture.

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      Thomas E. McInerney, 60, has been a director and Chairman of the board of directors of Centennial since January 1999. He joined Welsh, Carson, Anderson & Stowe in 1986 and is a managing member or general partner of the respective sole general partners of Welsh, Carson, Anderson & Stowe VIII, L.P. and other associated investment partnerships. He is a director of The BISYS Group, Inc., Attachmate Corp., Global Knowledge Network, BTI Telecom Corp., Savvis Communications Corporation, SpectraSite Holdings Inc. and several private companies.

      Carmen Ana Culpeper, 57, has been a director of Centennial since July 2000. Since 1999, Ms. Culpeper has served as President of C. Culpeper & Associates, a financial advisory and management consulting firm. She was President of the Puerto Rico Chamber of Commerce from June 1999 to June 2000 and continues to serve on its Council of Past Presidents. She was President of the Puerto Rico Telephone Company from April 1997 to March 1999 and from October 1996 to March 1997 she was President of Finapri, Inc., an insurance finance company. From October 1995 to March 1997, Ms. Culpeper was an independent broker at Clark Melvin Securities and prior to that held various positions in corporate finance at, among others, Donaldson, Lufkin & Jenrette and Citibank. Ms. Culpeper is a director of Santander Bancorp, the third largest bank in Puerto Rico.

      Anthony J. de Nicola, 38, has been a director of Centennial since January 1999. He joined Welsh, Carson, Anderson & Stowe in 1994 and is a managing member or general partner of the respective sole general partners of Welsh, Carson, Anderson & Stowe VIII, L.P. and other associated investment partnerships. Previously, he worked for William Blair & Co. for four years in the merchant banking area. He is a director of BTI Telecom Corp., NTELOS Inc., Valor Telecommunications, LLC, Alliance Data Systems Corporation and several private companies.

      Mark T. Gallogly, 45, has been a director of Centennial since January 1999. He is a member of the limited liability company which acts as the general partner of Blackstone CCC Capital Partners L.P. and its affiliates. He is a Senior Managing Director of The Blackstone Group L.P. and has been with Blackstone since 1989. Mr. Gallogly is a director of several private companies.

      James R. Matthews, 35, has been a director of Centennial since July 2001. He joined Welsh, Carson, Anderson & Stowe in 2000 and is a managing member or general partner of the respective sole general partners of Welsh, Carson, Anderson & Stowe VIII, L.P. and other associated investment partnerships. Previously, he was a General Partner at J. H. Whitney & Co., a private equity firm where he worked for six years. He is a director of SpectraSite Holdings Inc., Headstrong, Inc. and several private companies.

      David M. Tolley, 35, has been a director of Centennial since July 2001. He is a Principal of The Blackstone Group L.P. and has been with Blackstone since May 2000. From 1995 to 2000, he was with Morgan Stanley, most recently as Vice President, where he worked with a variety of clients in the telecommunications industry.

      J. Stephen Vanderwoude, 58, has been a director of Centennial since October 1999. He has been Chairman and Chief Executive Officer of Madison River Communications LLC, an integrated communications provider, since 1996. Previously, he was President, Chief Executive Officer and a director of Powerhouse Technologies, Inc. and a director of V-Band Corporation. He is currently a director of First Midwest Bancorp. He formerly was President and Chief Operating Officer and a director of Centel Corporation and President of the local telecommunications division of Sprint Corporation.

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PART II

Item 5.  Market for Registrant’s Common Equity and Related Stockholder Matters

Market Information and Holders

      Our common stock has been traded on The Nasdaq Stock Market (“Nasdaq”) under the symbol CYCL since December 3, 1991. The following table lists the high and low closing prices of the common stock reported on Nasdaq for the fiscal quarters indicated.

      As of August 2, 2002, there were approximately 118 record holders of our common stock. Such number does not include persons whose shares are held of record by a bank, brokerage house or clearing agency, but does include such banks, brokerage houses and clearing agencies.

      On July 29, 2002, we received a letter from Nasdaq advising us that for thirty consecutive trading days our common stock had traded below the minimum $3.00 per share bid price requirement for continued listing on the Nasdaq National Market under Nasdaq Marketplace rule 4450(b)(4). We have until October 28, 2002 to regain compliance with the $3.00 bid price requirement which can be accomplished if the bid price of our common stock closes at $3.00 per share or more for 10 consecutive trading days. If we fail to meet this requirement by October 28, 2002, Nasdaq will notify us that our common stock will be delisted from the Nasdaq National Market. At such time, we may appeal Nasdaq’s determination to a Listing Qualifications Panel, apply to transfer our common stock to the Nasdaq SmallCap Market which has a $1.00 bid price requirement or take other action to cure the $3.00 per share minimum bid price requirement.

Dividend Policy

      We have not paid any cash dividends on our common stock and currently intend for the foreseeable future to retain all cash inflows generated for use in our business. We are effectively prohibited from paying cash dividends on our common stock by the provisions of our credit facility.

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Item 6.  Selected Consolidated Financial Data

      The selected consolidated financial data set forth below for each of the five years in the period ended May 31, 2002 was derived from our audited Consolidated Financial Statements. The following information should be read in conjunction with Management’s Discussion and Analysis of Results of Operations and Financial Condition and the Consolidated Financial Statements and notes thereto included elsewhere herein.

      See Note 1 of the fiscal 2002 consolidated financial statements regarding a change in our presentation of incollect cost during the year ended May 31, 2001 and a fiscal 2001 change in accounting principle for the adoption of SAB No. 101. See Note 3 of the fiscal 2002 consolidated financial statements regarding recent acquisitions and the effect of such acquisitions on the comparability of the historical financial statements of the Company.

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Overview

      We are a leading regional communications service provider. In the Caribbean, we are a fully integrated communications service provider offering both wireless and broadband services, and in the United States, we are a regional wireless service provider in small city and rural areas. As of May 31, 2002, our Caribbean operations owned licenses that serve a population of approximately 15.5 million (with approximately 12.4 million Net Pops) in Puerto Rico, the Dominican Republic, Jamaica, and the U.S. Virgin Islands. We provide wireless (“Caribbean Wireless”) and several broadband services including switched voice, dedicated (private line), video and other services (“Caribbean Broadband”) over our own fiber optic, coaxial and microwave network in the Caribbean. In the United States, we own and operate wireless systems and provide wireless service in six states in two clusters of small cities and rural areas covering a population of approximately 6.0 million as of May 31, 2002: Indiana/ Michigan/ Ohio and Texas/ Louisiana/ Mississippi (“U.S. Wireless”). These clusters are adjacent to major metropolitan markets and have benefited from the traffic generated by subscribers roaming into our coverage areas. Collectively, our wireless licenses cover a total of 18.5 million Net Pops as of May 31, 2002.

      See the “Subsequent Events” section below for a discussion of the sale of our Jamaican wireless operation and agreement to sell our Jamaican Internet service provider operation.

Critical Accounting Policies

      The following discussion and analysis is based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of our financial statements requires management to make estimates and assumptions that affect reported amounts and disclosures. Actual results could differ from those estimates.

      We believe that the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements:

     Revenue Recognition

      Wireless Revenue — We recognize wireless service revenue in the period the service is provided to our customers. Services billed in advance are recognized as income when earned. We have multiple billing cycles, all of which span our quarter-ends. As a result of our billing cycle cut-off times, we are required to make estimates for service revenue earned but not yet billed at the end of each quarter. These estimates are based primarily on the actual results of the immediately preceding comparable billing cycle. Actual billing cycle results and related revenue may vary, depending on subscriber usage and rate plan mix, from the results estimated at the end of each quarter. Revenues from activation fees are recognized over the expected customer service period, ranging from 26 to 48 months. Revenues from prepaid calling cards are recognized as the customer uses the minutes on the cards. Revenues from other services are recognized when earned. Revenues from sales of handsets and accessories are recognized in the period these products are sold to the customer.

      Broadband Revenue — We recognize revenues from cable television installation fees to the extent of direct selling costs in the period the installation is provided to the customer. Revenues from prepaid long distance cards are recognized as the customer uses the minutes on the cards. Revenues from other services are recognized when earned. Revenues from equipment sales are recognized in the period these products are sold to the customer.

     Valuation of Long-Lived Assets

      Long-lived assets such as property, plant and equipment, license costs, goodwill and franchise license costs are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. In our valuation, we consider current market values of properties similar to our own, competition, prevailing economic conditions, government policy including taxation and the historical and current growth patterns of both the Company and the industry. We also consider the recoverability of the

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      During the fourth quarter of the year ended May 31, 2002, we recorded a pre-tax loss on impairment of assets of $34.0 million related to a write-down of our Jamaica operations and certain non-Caribbean undersea fiber optic cables. These write-downs were taken due to a decrease in the estimated future cash flows of these assets. Fair value was determined based on current market values of similar assets. The loss on impairment of assets included $24.4 million and $9.6 million related to assets included in the Caribbean Wireless and Caribbean Broadband segments, respectively.

     Derivative Financial Instruments

      We use financial derivatives as part of our overall risk management strategy. These instruments are used to manage risk related to changes in interest rates. Our portfolio of derivative financial instruments primarily consists of interest rate swap and collar agreements. We use interest rate swap agreements to modify variable rate obligations to fixed rate obligations, thereby reducing our exposure to higher interest rates. We use interest rate collar agreements to lock in a maximum interest rate if interest rates rise, but allow us to otherwise pay lower market rates, subject to a floor. Amounts paid or received under interest rate swap agreements are accrued as interest rates change with the offset recorded in interest expense.

      On June 1, 2001, we adopted Financial Accounting Standards Board (“FASB”) Statement of Financial Accounting Standards (“SFAS”) No. 133, “Accounting for Derivative Instruments and Hedging Activities”. Under SFAS No. 133, our interest rate swaps and collar qualify for cash flow hedge accounting. We recorded a transition adjustment of $4.5 million, net of tax, in other comprehensive loss attributable to fair value adjustments of interest rate swap and collar agreements. In connection with the adoption of SFAS No. 133, we recorded a liability of $7.6 million as a result of adjusting the carrying amounts of our derivatives to reflect their fair values on June 1, 2001.

      During the year ended May 31, 2002, we recorded an additional $3.0 million, net of tax, in other comprehensive loss attributable to fair value adjustments of interest rate swap and collar agreements. We also increased our liabilities by an additional $5.3 million as a result of adjusting the carrying amounts of our derivatives to reflect their fair values at May 31, 2002.

Year Ended May 31, 2002 Compared to Year Ended May 31, 2001

Results of Operations

      We had 906,800 wireless subscribers at May 31, 2002, as compared to 763,100 at May 31, 2001, an increase of 19%. The net loss for the year ended May 31, 2002 was $77.5 million, as compared to net income of $182.9 million for the year ended May 31, 2001. Included in the net loss for the year ended May 31, 2002 was a pre-tax, non-cash loss on impairment of assets of $34.0 million related to a write-down of our Jamaica operations and certain non-Caribbean undersea fiber optic cables. Included in net income for the year ended May 31, 2001 were pre-tax gains of $369.3 million ($217.9 million after-tax) recognized on the sale of our Southwest properties and the sale of our interests in Sacramento-Valley Limited Partnership, the Modoc, California Partnership, and the Pennsylvania RSA No. 6 (II) Partnership in Lawrence, Pennsylvania and the redemption of our interest in the GTE Mobilnet partnership serving the San Francisco Bay area. Net income for the year ended May 31, 2001 was also affected by an after-tax, non-cash charge of $3.7 million for the cumulative effect of a change in accounting principle related to the adoption of the Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin No. 101 “Revenue Recognition in Financial Statements” (“SAB No. 101”). Basic and diluted loss per share for the year ended May 31, 2002 was $0.81 as compared to basic and diluted earnings per share of $1.93 and $1.89, respectively, for the year ended May 31, 2001. Excluding the effect of the sales and redemption noted above as well as the adoption of SAB No. 101, basic and diluted loss per common share would have been $0.33 for the year ended May 31, 2001.

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      The table below summarizes the consolidated results of operations for each period:

     Caribbean Wireless Operations

     Revenue

      In May 2001, we changed our presentation of incollect cost (the cost associated with our subscribers roaming in other markets, which was previously netted against the related revenue). The change was a reclassification from revenue to cost of services. The amount reclassified for Caribbean Wireless for the year ended May 31, 2001 was $2.1 million.

      Caribbean Wireless service revenue increased $38.8 million, or 21%, to $223.4 million. This increase was primarily due to the addition of 103,500 new customers during the year ended May 31, 2002.

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      The decrease in equipment sales of wireless telephones and accessories to subscribers was primarily related to an increase in our handset subsidy due to competitive pressures, partially offset by equipment sales associated with the launch of operations in the Kingston, Jamaica metropolitan area in November 2001.

      Our Caribbean Wireless operations had approximately 366,500 subscribers at May 31, 2002, an increase of 39% from the 263,000 subscribers at May 31, 2001. Increases from new activations of 251,100 were offset by subscriber cancellations of 147,600. The monthly prepaid and postpaid churn rate was 3.8% for the year ended May 31, 2002 as compared to 3.7% for the same period a year ago. The cancellations experienced by our Caribbean Wireless operations were primarily the result of competitive factors and non-payment.

      Caribbean Wireless revenue per subscriber per month, based upon an average number of subscribers, was $61 for the year ended May 31, 2002, as compared to $76 for the year ended May 31, 2001. The decrease in revenue per subscriber was primarily due to new prepaid subscribers in the Dominican Republic and Jamaica. The average customer used 544 minutes of airtime per month during the year ended May 31, 2002 versus 486 minutes of use per month during fiscal 2001.

     Costs and expenses

      Cost of equipment sold increased during the year ended May 31, 2002, due to the sale of phones under certain low-end postpaid rate plans and an increase in prepaid activations in the Dominican Republic and Jamaica.

      Cost of services increased during the year ended May 31, 2002, primarily due to the variable costs associated with a larger subscription base and increased wireless coverage areas resulting from the continued expansion of our wireless network in the Caribbean. In addition, cost of services decreased during the year ended May 31, 2001 by an adjustment to estimated property tax expense in Puerto Rico.

      Sales and marketing expenses rose during the year ended May 31, 2002, primarily due to the increase in gross subscriber additions as well as marketing expenses related to the Dominican Republic and Jamaica.

      General and administrative expenses increased during the year ended May 31, 2002, primarily due to increased costs to support the expanding subscriber base and the initiation of service in the Dominican Republic in September 2000 and Jamaica in November 2001.

      Adjusted EBITDA for the Caribbean Wireless operations for the year ended May 31, 2002 was $78.5 million, a decrease of $0.6 million, or 1%, from the same period a year ago. The decrease was primarily due to start up losses in Jamaica and, to a lesser extent, the U.S. Virgin Islands, partially offset by improved margins in the Dominican Republic and Puerto Rico.

      The loss on impairment of assets of $24.4 million for the year ended May 31, 2002 was related to a non-cash write-down of our Jamaica wireless operations.

      Depreciation and amortization for the year ended May 31, 2002 was $58.9 million, an increase of $14.9 million, or 34%, over the prior year. Depreciation increased due to capital expenditures made during fiscal 2002 and 2001 in connection with the development and network expansion of our Caribbean wireless telephone systems and the commencement of wireless operations in Jamaica in November 2001.

      Operating loss for the year ended May 31, 2002 was $4.8 million, a decrease of $39.8 million from operating income of $35.0 million for the year ended May 31, 2001.

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     Caribbean Broadband Operations

     Revenue

      Caribbean Broadband revenue increased $48.8 million, or 55%, to $137.8 million for the year ended May 31, 2002.

      Switched revenue increased $7.6 million, or 42%, to $25.8 million. The increase was primarily due to a 47% increase in switched access lines to 33,063 and a corresponding growth in minutes of use.

      Dedicated revenue increased $11.2 million, or 56%, to $31.3 million. The increase in revenue was primarily the result of a 42% rise in dedicated access line equivalents to 157,185.

      Video services generated revenues of $47.8 million for the fiscal year ended May 31, 2002, reflecting our first full year of revenue from the two cable acquisitions completed during fiscal 2001.

      Other revenue increased $4.6 million, or 16%, to $32.8 million for the year ended May 31, 2002.

     Costs and expenses

      Cost of services increased during the year ended May 31, 2002, primarily due to higher costs to support the expanding Broadband business and expenses related to the video services businesses.

      Sales and marketing expenses rose during the year primarily due to increased advertising as well as expenses related to the video services businesses.

      General and administrative expenses increased during the year ended May 31, 2002, primarily due to additional expenses associated with the video services acquisitions and increased costs to support the growing customer base.

      Adjusted EBITDA for the Caribbean Broadband operations for the year ended May 31, 2002 was $25.2 million, an increase of $1.4 million, or 6%, over the year ended May 31, 2001.

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      The loss on impairment of assets of $9.6 million for the year ended May 31, 2002 was related to a non-cash write-down of our Jamaica Internet service provider operations and certain non-Caribbean undersea fiber optic cables.

      Depreciation and amortization for the year ended May 31, 2002 was $54.3 million, an increase of $27.1 million, or 100%, over the year ended May 31, 2001. This increase was primarily due to depreciation and amortization related to the video services acquisitions as well as additional depreciation associated with the expansion of our network.

      Operating loss for the year ended May 31, 2002 was $39.2 million, an increase of $35.7 million as compared to the operating loss of $3.5 million for the year ended May 31, 2001.

     U.S. Wireless Operations