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SECURITIES AND EXCHANGE COMMISSION

FORM 10-K

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

For the fiscal year ended December 31, 2001

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 no. 000-29225

DOBSON COMMUNICATIONS CORPORATION

(405) 529-8500

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. o

     As of March 22, 2002, there were 35,896,137 shares of registrant’s $.001 par value Class A Common Stock outstanding and 54,977,481 shares of the registrant’s $.001 par value Class B Common Stock outstanding. Based upon the closing price for the common stock on the NASDAQ National Market on March 22, 2002, the aggregate market value of common stock held by non-affiliates of the registrant as of March 22, 2002 was approximately $65,230,422.

     Documents incorporated by reference: The information called for by Part III is incorporated by reference to the definitive proxy statement for our 2002 annual meeting of stockholders, which will be filed with the Securities and Exchange Commission not later than 120 days after December 31, 2001.

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DOBSON COMMUNICATIONS CORPORATION

FOR THE YEAR ENDED DECEMBER 31, 2001

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PART I

Item 1. Business

Overview

      We are one of the largest providers of rural and suburban wireless communications services in the United States. At December 31, 2001, our wireless telephone systems covered a total population of approximately 6.4 million and we had approximately 700,200 subscribers with an aggregate market penetration of approximately 11.0%. We began providing wireless telephone service in 1990 in Oklahoma and the Texas Panhandle. We have expanded our wireless operations rapidly since then, primarily through the acquisition of rural and suburban wireless systems. Since 1996, we have completed 23 acquisitions of wireless licenses and systems, thus, expanding the geographic scope of our operations. We have upgraded all of our systems to digital technology, and we offer digital voice and digital feature service to all of our covered population. During the fourth quarter of 2001, we entered into definitive agreements to sell five markets to Verizon Wireless for a total purchase price of $550.0 million, one of which was owned by our 50% owned subsidiary, American Cellular. As a result of these agreements, the results of operations for these markets during the years presented are included as discontinued operations in our consolidated financial statements. For the year ended December 31, 2001, we had total revenues of $599.4 million, a net loss applicable to common stockholders of $214.6 million and a net loss applicable to common stockholders per common share of $2.28. At December 31, 2001, on a consolidated basis, we had approximately $1.6 billion of indebtedness and stockholders’ deficit of approximately $157.0 million. We expect to incur significant additional indebtedness to fund our capital needs in the future as we continue to acquire, develop and construct our wireless systems and grow our subscriber base.

      We believe that owning and operating a mix of rural and suburban wireless systems provides strong growth opportunities because we believe these systems currently have lower penetration rates, higher subscriber growth rates, a higher proportion of roaming revenues and less competition for subscribers than wireless systems located in larger metropolitan areas. We focus on acquiring and operating underdeveloped wireless systems that are adjacent to major metropolitan areas, which include a high concentration of expressway corridors and roaming activity.

      We have strategic relationships with AT&T Wireless Services, Inc., which is one of our stockholders, and Cingular Wireless. Through these relationships, we have coast-to-coast preferred roaming agreements that allow our customers to utilize wireless systems owned by both AT&T Wireless and Cingular Wireless, and customers of AT&T Wireless and Cingular Wireless to utilize our wireless systems.

      On February 25, 2000, we and AT&T Wireless, through our equally-owned joint venture, acquired American Cellular Corporation for approximately $2.5 billion, including fees and expenses. American Cellular’s systems cover a total population of approximately 5.0 million, and as of December 31, 2001 it had approximately 632,100 subscribers with an aggregate market penetration of approximately 12.6%. American Cellular serves markets in portions of Illinois, Kansas, Kentucky, Michigan, Minnesota, New York, Ohio, Oklahoma, Pennsylvania, West Virginia and Wisconsin. Since completing this acquisition, we have been operating American Cellular’s systems. American Cellular’s management organization, billing system, network infrastructure and marketing programs are substantially similar to ours.

      On January 26, 2001, the Federal Communications Commission concluded an auction of 10MHz and 15 MHz PCS licenses in the C and F blocks in a number of markets. Through one of our wholly-owned subsidiaries we were the winning bidder for 14 of the auctioned licenses representing an estimated total population of 19.8 million. The FCC is currently considering our post-auction application for a grant of those licenses, as well as legal challenges to this application. If our subsidiary is granted all 14 licenses, our total cost will be $546.1 million. However, in June 2001, the United States Court of Appeals for the District of Columbia Circuit ruled that the FCC did not have the authority to auction certain of those licenses, including 11 of the 14 licenses, which constitutes $536.5 million of total amount that we bid. The Circuit Court’s decision was appealed to the United States Supreme Court which, on March 4, 2002, granted certiorari and

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Strategy

      We have developed organizational, marketing and operational programs designed to increase the number of our subscribers, promote superior customer service, control subscriber acquisition costs and enhance operating cash flow in our markets. We intend to apply these programs to the properties we acquire.

      Our strategy is to capitalize on our competitive strengths and acquire, develop and operate rural and suburban wireless systems.

Competitive Strengths

      Strong Current Market Position. We have significant market share in virtually all of our wireless markets. We distinguish ourselves from our competition by emphasizing digital technology, customer care and a commitment to the local community. We plan to attract additional subscribers by leveraging our strategic relationships, digital technologies, local sales channels and diverse service offerings, including national, regional and local rate plans.

      Attractive Markets. Our markets are attractive for providing wireless communications services, due in part, to their proximity to markets operated by AT&T Wireless and major metropolitan areas. Our markets have a relatively high density of highway and other traffic corridors and strong tourist activity due to seasonal attractions. Additionally, our markets have demonstrated positive demographic growth trends and generally maintain a high population density relative to other rural service providers.

      Advanced Digital Technology. We believe that increasing capacity and upgrading our systems will attract additional subscribers, increase the use of our systems by existing subscribers, increase roaming activity and further enhance the overall efficiency of our network. We have upgraded all of our systems to digital technology and now offer digital voice and digital feature services to 100% of our covered population. We completed the upgrade of our wireless systems to digital technology to enable us to increase roaming, serve the increasing number of digital subscribers and personal communications service subscribers with multimode phones, and provide value-added, high margin, enhanced capabilities, including caller ID, longer battery life and zone billing.

      Strategic Roaming Relationships. We intend to maintain and expand strategic relationships with operators of wireless systems in major MSAs near our wireless systems. These relationships include roaming agreements that allow our subscribers to use the wireless systems of operators in neighboring MSAs and RSAs at favorable rates. Under these agreements, similar benefits are available to the MSA operators’ subscribers roaming in our areas. In addition, we deploy digital technology in our system area that is the same as that selected by our roaming partners in the neighboring MSA. We believe these strategic relationships and agreements enable us to increase our roaming revenues, offer our subscribers larger “home rate” areas and leverage the recognized brand names of our roaming partners and their extensive marketing efforts.

      Aggressively Market and Promote Our Wireless Services In Our Local Markets. Our marketing objective is to continue our service quality, local sales presence and commitment to the community. Our sales efforts are conducted primarily through our retail outlets, our direct sales force and our independent agents. Our local management teams have day-to-day operating authority with the flexibility to respond to individual market requirements. Their presence fosters a sense of customer service and community spirit. In addition, we believe that our marketing and customer service functions are more effective when tailored to the local market population.

      Use Highly Targeted Sales Efforts. We seek to attract subscribers who we believe are likely to generate high monthly revenues and low churn rates. Local management conducts market research to identify and design marketing programs to attract these subscribers and tailor distinctive rate plans to emphasize the quality, value and advantage of our services.

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      Provide Superior Customer Service. We intend to maintain a high level of customer satisfaction through a variety of techniques, including the maintenance of 24-hour customer service call centers. We support local customer service through our direct sales force, our retail stores and regional customer service centers. The regional presence of our call centers enhances our knowledge of local markets, which improves our ability to provide customer service, credit and collection and order activation.

      Experienced Management Team. With over 50 years of telecommunications experience on a combined basis, our senior management team, consisting of Everett R. Dobson, Doug Stephens and Bruce Knooihuizen, is extremely knowledgeable and well regarded in the telecommunications industry. Since 1993, we have acquired licenses covering a combined population of more than 10.7 million.

      AT&T Wireless Relationship. We have a strategic relationship with AT&T Wireless, which is also one of our stockholders. Through this relationship, we have a coast-to-coast roaming agreement that enables our customers to use AT&T Wireless’ systems, and AT&T Wireless’ customers to use our systems, each at favorable rates. AT&T Wireless customers accounted for approximately 52% of our roaming revenues, or approximately 21% of our total revenues, for the year ended December 31, 2001. In addition, we entered into a joint venture with AT&T Wireless, which acquired American Cellular on February 25, 2000, and on February 8, 2001, we issued 200,000 shares of Series AA Preferred Stock to AT&T Wireless for proceeds of $200.0 million, which has further expanded the scope of our relationship with AT&T Wireless.

      Established Operating History in Rural and Suburban Markets. We began providing wireless telephone service in 1990 in Oklahoma and the Texas Panhandle and since then have rapidly expanded our wireless operations to include systems in rural and suburban markets covering a total managed population of approximately 11.4 million (6.4 million for us alone as of December 31, 2001). We believe that during this time we have gained substantial experience as an operator of wireless systems in rural and suburban markets.

      Proven Acquisition and Integration Capabilities. We intend to integrate the operations of wireless systems we acquire with our existing operations to achieve economies of scale. We believe that these increased efficiencies will come from the consolidation and centralized control of pricing, customer service and marketing, system design, engineering, purchasing, financial and administrative functions and billing functions. We intend to use our increased leverage in negotiating prices and services from third party service providers and equipment vendors. Since 1996, we have successfully completed 23 acquisitions of wireless licenses and systems, significantly expanding the geographic scope of our operations. As a result, our total subscribers have increased from approximately 26,600 as of December 31, 1995 to approximately 700,200 as of December 31, 2001 (1,332,000 on a managed basis).

Operations

      The following information relates to both American Cellular and us since we manage 100% of American Cellular, thus, offering substantially identical products and services and providing substantially identical customer service and marketing. These tables set forth information with respect to our and American Cellular’s existing wireless markets. Information with respect to populations in our licensed areas are as of December 31, 2001 and are management’s estimates based upon the Claritas 2000 Bureau of Census results adjusted to exclude those portions of our RSAs and MSAs not covered by our licenses. Net population represents total population less minority ownership interests in our licenses. Information with respect to subscribers are management’s estimates as of December 31, 2001 and exclude the markets we sold to Verizon Wireless in February 2002. We determine market penetration by dividing total subscribers in each of our FCC wireless licensed areas at the end of the period by the estimated total population covered by the applicable wireless license or authorization.

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Markets and Systems — Dobson Communications

      The following table sets forth information with respect to our existing markets.

      The FCC completed an auction of 10 MHz and 15 MHz PCS licenses in the C and F Blocks in a number of markets, and our subsidiary was a winning bidder on 14 of those licenses. During the FCC’s consideration of our post-auction application for a grant of those licenses, the United States Court of Appeals for the District of Columbia Circuit ruled that the FCC did not have the authority to auction certain of those licenses, including 11 of the 14 licenses with respect to which we were a winning bidder. If our subsidiary is granted all of the licenses, the total population covered by our licenses will increase by approximately 19.8 million.

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Markets and Systems — American Cellular

      The following table sets forth information with respect to American Cellular’s existing markets.

Services and Features

      We develop and deploy some of the most advanced wireless products and services. From a fully digital network to the introduction of a wireless internet product, we strive to consistently deliver cutting-edge

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      The following are key components of our service offering:

      Wireless Calling. Our primary service offering is wireless telephone service. We offer digital service in all of our markets using the TDMA digital standard, as well as analog service in all of our wireless markets. In addition, we offer various custom-calling features, including voice mail, call forwarding, call waiting, three-way calling, no answer transfer, caller ID, message waiting indicator, sleep mode for longer battery life, voice activated dialing, and mobile originated and mobile terminated short message service.

      Voice Privacy and Call Security. Digital technology is inherently more secure than analog technologies. This security provides increased voice privacy and enhanced fraud protection for our customers.

      Data and Internet Services. We currently offer wireless data service and access to the Internet on some digital handsets, which we have deployed in certain of our cellular markets using our Cellular Digital Packet Data (“CDPD”) network. This product offers unlimited access to our wireless Internet portal for a monthly fee. We also provide two-way short-messaging services in some of our markets.

      Tri-Mode Handsets. As of December 31, 2001, approximately 75% of our subscribers utilize digital service and use a tri-mode, dual-band handset. These handsets are compatible with analog cellular, digital cellular and digital PCS service, allowing our subscribers access to AT&T Wireless’ national footprint, as well as the extensive coverage areas of our other roaming partners, including Cingular Wireless.

Marketing

      The following are key components of our marketing strategy:

      Branding. We offer wireless service under the CELLULAR ONE® brand name. We believe the national advertising campaign conducted by the Cellular One Group has enhanced our advertising exposure at a lower cost than could have been achieved alone. We also believe that we have obtained significant marketing benefits from the high name recognition associated with this widely used service mark.

      We use the CELLULAR ONE® brand name pursuant to licensing agreements with Cellular One Group. We pay licensing and advertising fees based upon the population of the licensed areas. The licensing agreements require us to provide high-quality wireless telephone service to our customers and to maintain a certain minimum overall customer satisfaction rating in surveys commissioned by the Cellular One Group. The licensing agreements, which we have entered into, are for five-year terms expiring on various dates. These agreements may be renewed at our option for three additional five-year terms. From time-to-time, we may consider alternative brand name strategies and service marks.

      In addition to the CELLULAR ONE® brand name, we own the service mark Dobson Cellular^TM, which we use in our wireless telephone systems in western Oklahoma and the Texas Panhandle. While we have not attempted to federally register the brand name “Dobson Cellular,” we believe that our prior use of this brand name in the limited areas where it is used will enable us to effectively police against any infringing uses of our brand name.

      Advertising. In addition to the national advertising campaign conducted by the Cellular One Group, our advertising strategy is focused on establishing a strong local presence in each of our markets. We direct our media efforts at the market level by advertising in local publications and sponsoring local and regional events. We also use mass media outlets such as television, radio, newspaper, magazine and outdoor advertising, as well as direct marketing, to augment our efforts at the community level.

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      We focus our marketing program on attracting subscribers who we believe are likely to generate high monthly revenues and low churn rates. We undertake extensive market research to identify and design marketing programs to attract these subscribers and tailor distinctive rate plans and roaming rates to emphasize the quality, value and advantage of our wireless service. We have established marketing alliances with neighboring wireless systems to create larger home rate areas in order to increase our roaming revenues and to attract new subscribers. We market our service offerings primarily through our direct sales force and company-owned retail stores. We also use a network of dealers and other agents, such as electronics stores, car dealerships and department stores. In addition to these traditional channels, our marketing team continuously evaluates other, less traditional, methods of distributing our services and products, such as targeted telemarketing and direct mail programs.

Sales and Distribution

      We train and compensate our sales force in a manner designed to stress the importance of customer service, high penetration levels and minimum acquisition costs per subscriber. We believe that our direct sales force is able to select and screen new subscribers and select pricing plans that realistically match subscriber means and needs better than our independent agents. As a result, we believe that our use of a direct sales force keeps marketing costs low both directly, because commissions are lower, and indirectly, because subscriber retention is higher than when we use independent agents. We and American Cellular had approximately 110 and 100 direct sales representatives, respectively, as of December 31, 2001.

      We believe that our after-sale telemarketing program, which includes courtesy calls to our new customers and is conducted by our sales force and customer service personnel, helps to reduce our churn rates. This program enhances customer loyalty and allows our sales staff to check customer satisfaction as well as to offer additional calling features, such as voicemail, call waiting and call forwarding.

      We and American Cellular operated approximately 180 and 85 retail stores and outlets, respectively, as of December 31, 2001. Most of our retail stores are fully equipped to handle customer service and telephone maintenance. Some of these stores are also authorized warranty repair centers. Our stores provide subscriber-friendly retail environments, including extended hours, a large selection of products and services, a well-trained sales staff and convenient locations, which are designed to make the sales process quick and easy for the subscriber.

Customer Service

      Customer service is an essential element of our marketing and operating philosophy. We attract new subscribers and retain existing subscribers by providing high-quality customer service. Our customers benefit from a local staff, including a market manager, customer service field representatives, technical and engineering staff, sales representatives and installation and repair facilities. Local offices and installation and repair facilities allow us to better service our customers, schedule installations and make repairs. As of December 31, 2001, we managed a total of seven call centers, which service both American Cellular’s and our markets. These call centers, in aggregate, employed approximately 450 customer care representatives. The regional presence of these call centers enhances our knowledge of the local markets, which improves our ability to provide customer service, credit and collection and order activation.

      In addition, our customers are able to report wireless telephone service or account problems 24 hours a day to our regional customer service centers on a toll-free access number with no airtime charge. We believe that our emphasis on customer service affords us a competitive advantage over our larger competitors. We contact our subscribers frequently in order to evaluate and measure, on an ongoing basis, the quality and competitiveness of our services.

Roaming

      Roaming is an important service component for our business. Accordingly, where possible, we attempt to arrange roaming agreements that allow customers to roam at competitive prices. We believe this increases usage on all wireless systems, including our own. We focus on systems that are adjacent to major metropolitan

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      Our most significant roaming partner is AT&T Wireless. For the year ended December 31, 2001, AT&T Wireless’ customers accounted for approximately 52% of our roaming revenue and approximately 43% of American Cellular’s roaming revenue, or approximately 21% of our total operating revenue and approximately 14% of American Cellular’s operating revenue. Under our roaming agreement with AT&T Wireless, we and AT&T Wireless charge each other favorable roaming rates for each of our respective markets. This rate will decrease over time. The agreement provides for the maintenance by us of certain call features and related services to roaming customers, such as call waiting, call forwarding, three-way calling, caller ID and voice mail. The roaming agreement may be terminated or suspended by either party if the FCC revokes a license covering a material portion of our or AT&T Wireless’s markets, either party fails to control subscriber fraud, either party fails to adhere to system technical requirements and upgrades or either party breaches any of the material terms of the roaming agreement. The agreement expires in January 2003 although the rate provision extends until June 2004.

      We are included in the North American Cellular Network (“NACN”), which is the largest wireless telephone network system in the world linking wireless operators throughout the United States and Canada and enabling customers to use their wireless phones to place and receive calls in these areas as easily as they do in their home areas. Through this network, customers are able to receive calls automatically without the use of complicated roaming codes as they roam in more than 5,000 cities and towns in the United States and Canada. In addition, the NACN enables special services such as call forwarding and call waiting to automatically follow subscribers as they travel.

Billing System

      H.O. Systems, Inc. provides the billing function for all of our wireless operations. Proprietary software furnished by H.O. Systems serves all functions of billing for corporate and retail locations. All administrative and customer maintenance functions are handled in-house. H.O. Systems prints and processes all of our customer invoices. We use software that complements this billing system, allowing the use of credit, collection and switch interfaces.

System Development and Technology

      System Development. We develop or build out our service areas in response to projected subscriber demand and competitive factors by adding voice circuits to existing cell sites and by building new cell sites to increase capacity with an emphasis on improving coverage for hand-held phones in high-traffic areas. We develop projected subscriber service demand for each market area on a cell-by-cell basis.

      We expect our cell site expansion to enable us to continue to add and retain subscribers, enhance subscriber use of our systems, increase roaming traffic due to the large geographic area covered by our network and further enhance the overall efficiency of our systems. We believe that the increased coverage and capacity will continue to have a positive impact on market penetration and subscriber usage.

      Digital Technology. Our digital technology is Time Division Multiple Access (“TDMA”), which divides each channel into three voice circuits providing service to three simultaneous users instead of using the same spectrum for one analog voice circuit. Our digital services include digital voice circuits, short messaging services, message waiting indicator, increased battery life and caller ID services.

      During the second half of 2002, we intend to overlay selected markets with the Global System for Mobile Communications (“GSM”) voice network. This network will also support the General Packet Radio Service (“GPRS”) 2.5G data technology. With this data network, we expect to be able to offer 40Kb to 60Kb individual data speeds to subscribers and roamers. We plan to complete a full GSM/ GPRS overlay by the end of 2003. GSM/GPRS is the 2.5G technology choice of both AT&T Wireless and Cingular Wireless.

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Competition

      We compete with various companies in each of our markets. The following table lists the principal competitors in each of our regions:

      The telecommunications industry is experiencing significant technological changes, as evidenced by the increasing pace of improvements in the capacity and quality of digital technology, shorter cycles for new products and enhancements and changes in consumer preferences and expectations. Accordingly, we expect competition in the wireless telecommunications industry to be dynamic and intense as a result of competitors and the development of new technologies, products and services. Many of our competitors have been operating for a number of years, operate nationwide systems, currently serve a substantial subscriber base and have significantly greater financial, personnel, technical, marketing, sales and distribution resources than we do. Some competitors are expected to market other services, such as long distance, landline local exchange and internet access service, with their wireless telecommunication service offerings.

      We compete against other facilities-based cellular carriers, personal communications service carriers and enhanced specialized mobile radio carriers in each of our markets. We compete for customers based principally upon price, the services and enhancements offered, the quality of our system, customer service, system coverage and capacity. This competition may increase to the extent that licenses are transferred from smaller, stand-alone operators to larger, better-capitalized and more experienced wireless operators that may be able to offer consumers certain network advantages.

      AT&T Wireless, Cingular Wireless, Verizon Wireless, Nextel Communications, Sprint PCS, and VoiceStream operate substantially nationwide networks. If any of our roaming partners, including AT&T Wireless, were to build out personal communications service in any of our markets to provide their customers

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      We also face, to a lesser extent, competition from mobile satellite service providers, as well as from resellers of these services and wireless service. In the future, we may also compete more directly with traditional landline telephone service providers. The FCC has created potential sources of new competition by auctioning additional personal communications service licenses, as well as licenses for wireless communications services, local multipoint distribution service, 39 GHz service and 220 to 222 MHz service. Further, the FCC has announced plans to auction licenses in the 4.9 GHz, 24 GHz and 700 MHz bands that may be usable for mobile services. The FCC has also recently initiated a rule making proceeding to allocate approximately 200 MHz of additional spectrum to wireless use, much of which can be licensed for commercial wireless purposes. Continuing technological advances in telecommunications make it impossible to predict the extent of future competition. However, due to the depth and breadth of these competitive services offered by operators using these other technologies, future competition from these operators could be intense.

Discontinued Operations

      On October 29, 2001, we entered into a definitive agreement to sell three wireless properties to Verizon Wireless for a total purchase price of $263.0 million. These properties include California 7 RSA, Ohio 2 RSA and Georgia 1 RSA. On December 6, 2001, we entered into another definitive agreement with Verizon Wireless to sell our 75% ownership interest in Arizona 5 RSA for a total purchase price of $85.0 million. On October 30, 2001, two wholly-owned, indirect subsidiaries of our 50% owned joint venture, American Cellular, entered into an additional definitive agreement with Verizon Wireless to sell Tennessee 4 RSA for a total purchase price of $202.0 million. As a result of these agreements, the results of operations, assets and liabilities of these markets during the years presented are included as discontinued operations in our consolidated financial statements. These transactions closed during February 2002, and the proceeds were primarily used to pay down bank debt.

      Our former wholly-owned subsidiary, Logix, provides integrated local, long distance, data and other telecommunications services to small and medium-sized business customers throughout the Southwestern United States. We distributed the stock of Logix to certain of our stockholders on January 24, 2000. Logix is accounted for as a discontinued operation in our consolidated financial statements during 1999.

Regulation

      The wireless telecommunications industry is subject to extensive governmental regulation on the federal level and to varying degrees on the state level. The enactment of the Telecommunications Act of 1996 has had an impact on many aspects of this regulation. In addition, this regulation currently is the subject of administrative rulemakings and judicial proceedings that are significant to us.

Federal Regulation

      The licensing, construction, modification, operation, ownership and acquisition of wireless telephone systems are subject to regulations and policies of the FCC under the Communications Act of 1934, as amended. The FCC has promulgated rules and regulations governing, among other things, applications to construct and operate wireless communications systems, applications to transfer control of or assign wireless licenses and technical and operational standards for the operation of wireless systems (such as maximum power and antenna height).

      The FCC licenses cellular systems in accordance with 734 geographically defined market areas comprised of 306 Metropolitan Statistical Areas, or MSAs and 428 Rural Service Areas, or RSAs. In each market, the

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      The FCC has in the past restricted an entity’s ability to own interests in both cellular frequency blocks in a market (the so-called cellular cross interest rule) and further restricted the amount of commercial mobile radio service (“CMRS”) spectrum in which an entity may hold an attributable interest (the so-called spectrum cap rule). On November 8, 2001, the FCC adopted a Report and Order in which it (1) repealed the cellular cross interest restriction as applied to ownership interests in MSAs, but retained the rule as applied to ownership interests in RSAs; and (2) increased the amount of attributable CMRS spectrum that may be held to 55 MHz throughout all MSAs and RSAs. The FCC will sunset the CMRS spectrum cap rule by eliminating it effective January 1, 2003. Starting January 1, 2003, the FCC will engage in a case-by case review of transactions that would raise concerns similar to those that the spectrum cap was designed to address. The transition period prior to January 1, 2003 is intended to provide the FCC and transacting parties an opportunity to prepare for the case-by-case approach. The changes adopted by the FCC in the November 8, 2001 Report and Order could further increase our ability to attract capital or to make investments in other wireless operators.

      Cellular and PCS providers also must satisfy a variety of FCC requirements relating to technical and reporting matters. One requirement of cellular providers is the coordination of proposed frequency usage with adjacent cellular users, permittees and licensees in order to avoid interference between adjacent systems. In addition, the height and power of cellular base station transmitting facilities and the type of signals they emit must fall within specified parameters. PCS providers may not exceed a certain field strength limit at the market boundary without the consent of the neighboring PCS licensee. We are obligated to pay annual regulatory fees and assessments to support the FCC’s regulation of the cellular and PCS industries, as well as fees necessary to support federal universal service programs, number portability regional database costs, centralized administration of telephone numbering, telecommunications relay service for the hearing-impaired and application filing fees. These regulatory payment obligations increase our costs of doing business.

      The FCC may prohibit or impose conditions on transfers of licenses. The Communications Act requires prior FCC approval for substantive, non pro forma transfers or assignments to or from us of a controlling interest in any license or construction permit, or any rights thereunder. Although we cannot assure you that the FCC will approve or act in a timely fashion upon any future requests for approval of applications that we file, we have no reason to believe that the FCC would not approve or grant such requests or applications in due course. Because an FCC license is necessary to lawfully provide cellular or PCS service, if the FCC were to disapprove any such filing our business plans would be adversely affected.

      The FCC also regulates a number of other aspects of the cellular business. For example, the FCC regulates cellular resale practices and currently also applies such cellular resale requirements to A and B Block (and A/ B Block controlled) broadband PCS and enhanced specialized mobile radio licensees. These cellular, PCS and enhanced specialized mobile radio providers may not restrict any customer’s resale of their services or unreasonably discriminate against resellers of their services. All resale obligations for cellular, broadband PCS and enhanced specialized mobile radio operators are currently scheduled to terminate on November 24, 2002. Moreover, federal legislation enacted in 1993 requires the FCC to reduce the disparities in the regulatory treatment of similar mobile services, such as cellular services, PCS and enhanced specialized mobile radio services. Under this regulatory structure, all of our cellular and PCS licenses are classified as

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      The FCC has also adopted requirements for cellular and other CMRS providers to implement basic and enhanced 911 services. These services provide emergency service providers with the ability to better identify and locate callers using wireless services, including callers using special devices for the hearing impaired. Our obligations to implement these services occur in several stages, and on a market-by-market basis. We and virtually all other CMRS providers have requested that the FCC extend the deadlines for meeting these 911 requirements. Our request remains pending, during which time the FCC will not enforce these requirements. The extent to which the FCC grants our requested relief will affect our capital spending obligations. The FCC in 1999 amended its rules to eliminate a requirement that carriers be compensated for enhanced 911 costs and expand the circumstances under which wireless carriers may be required to offer enhanced 911 services. Federal legislation enacted in 1999 may limit our liability relative to incomplete 911 calls to a degree commensurate with wireline carriers in our markets. Under certain circumstance, federal law also requires cellular and PCS carriers to provide law enforcement agencies with capacity to support lawful wiretaps and technical capabilities for wiretaps beginning June 30, 2000 for voice services and November 19, 2001 for packet-mode services, and to comply with wiretap-related record-keeping and personnel-related obligations. Maintaining compliance with these wireless 911 and law enforcement wiretap requirements may create additional capital obligations for us to make necessary system changes.

      In addition, the FCC regulates the ancillary service offerings that cellular and PCS licensees can provide and permits cellular, broadband PCS, paging and enhanced specialized mobile radio licensees to offer fixed services on a co-primary basis along with mobile services. This rule may facilitate the provision of wireless local loop service, which involves the use of wireless links to provide local telephone service by cellular licensees, as well as broadband PCS and enhanced specialized mobile radio licensees, although the extent of lawful state regulation of such “wireless local loop” service is undetermined. In this regard, the FCC has also adopted telephone number portability rules for local exchange carriers, as well as cellular, PCS and enhanced specialized mobile radio licensees that could facilitate the development of local exchange competition, including wireless local loop service. The number portability rules generally require cellular, PCS and enhanced specialized mobile radio licensees, to have the capability to deliver calls from their systems to ported numbers effective December 31, 1998 and offer number portability in a manner that supports roaming to ported numbers by November 24, 2002. These requirements may result in added capital expenditures for us to make necessary system changes, although we currently have no plans for any such expenditures.

      The FCC generally grants cellular and PCS licenses for terms of ten years that are renewable upon application to the FCC. Near the conclusion of the license term, we must file applications for renewal of licenses to obtain authority to operate for an additional 10-year term. To date, the FCC has renewed each of our licenses for which a renewal application was required for a new ten-year term. The FCC may revoke our licenses and may deny our license renewal applications for cause after appropriate notice and hearing. The FCC will award a renewal expectancy to us if we meet certain standards of past performance. If we receive a renewal expectancy, it is very likely that the FCC will renew our existing cellular and PCS licenses so that they will not become subject to competing applications. To receive a renewal expectancy, we must show that we have provided “substantial” service during our past license term, and have substantially complied with applicable FCC rules and policies and the Communications Act. The FCC defines “substantial” service as service, which is sound, favorable and substantially above a level of mediocre service that might only minimally warrant renewal. If a licensee does not receive a renewal expectancy, then the FCC will accept competing applications for the license, subject to a comparative hearing, and the FCC may award the license to another entity.

      A PCS system operates under a protected geographic service area license granted by the FCC for either a major trading area, or MTA, or a basic trading area, or BTA, on one of six frequency blocks allocated for broadband PCS. The FCC has divided the United States and its possessions and territories into PCS markets based upon Rand McNally’s 493 BTAs, all of which are included in the 51 MTAs. The FCC has allocated

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      Holders of C Block licenses were initially allowed to pay for their licenses in installments over ten years, but many were unable to meet their payment obligations. In 1997, the FCC afforded financially-troubled C Block licensees several debt relief options, including returning all or half of their spectrum to the FCC for reauction in return for a reduction or elimination of their debt obligations. On January 26, 2001, the FCC completed a reauction for C and F Block licenses. Bidders won a total of 422 licenses (312 10 MHz C Block, 43 15 MHz C Block, and 67 10 MHz F Block). Most of the spectrum that was auctioned had been reclaimed by the FCC from NextWave, which is currently engaged in bankruptcy reorganization proceedings under Chapter 11 of the United States Bankruptcy Code, and from other licensees that had not paid amounts due to the FCC for their licenses. In June 2001, the United States Court of Appeals for the District of Columbia Circuit ruled that the FCC violated the Bankruptcy Code when it canceled NextWave’s license. On August 31, 2001, pursuant to a mandate of the United States Court of Appeals for the District of Columbia Circuit, the FCC reinstated NextWave’s licenses to active status, but the FCC and other interested parties filed a petition for a writ of certiorari with the United States Supreme Court. On March 4, 2002, the Supreme Court granted the petition for a writ of certiorari. Oral arguments will occur during the Court’s October 2002 term. A subsidiary of the Company was the winning bidder for 14 licenses. None of these licenses has been granted to date, and give the uncertainties surrounding the NextWave litigation, it is not certain if or when those grants may be made.

      The FCC has adopted construction standards for PCS licenses. All 30 MHz broadband PCS licensees must construct facilities that offer coverage to one-third of the population of their service area within five years, and two-thirds of the population within ten years, of their initial license grants. All 10 MHz and 15 MHz Block licensees must provide service to 25% of the service area within five years of their initial license, or make a showing of substantial service. While the FCC has granted limited extensions and waivers of these requirements, licensees that fail to meet the coverage requirements may be subject to forfeiture of the license.

      FCC rules restrict the voluntary assignments or transfers of control of certain C and F Block licenses awarded to “small businesses” with bidding enhancements in the C Block and F Block auctions. During the first five years of the license term, assignments or transfers affecting control are permitted only to assignees or transferees that meet the eligibility criteria for participation in the entrepreneur block auction at the time the application for assignment or transfer of control is filed or, if the proposed assignee or transferee holds other licenses for C Block and F Block, met the same eligibility criteria at the time of receipt of such licenses, or to any qualified entity only if the original licensee has met the applicable five-year construction requirement for the license. Any transfers or assignments by licensees that qualified for installment payments during the entire ten-year initial license terms are subject to unjust enrichment penalties; i.e., acceleration of any installment payment plans should the assignee or transferee not qualify for the same benefits. Any transfers or assignments by licensees that qualified for bidding credits during the first five years of the license term are subject to unjust enrichment penalties; i.e., forfeiture of any bidding credit based upon the amount of time the initial license has been held should the assignee or transferee not qualify for these same benefits. In the case of the C and F Block licenses, the FCC will conduct random audits to ensure that licensees are in compliance with the FCC’s eligibility rules. Violations of the Communications Act or the FCC’s rules could result in license revocations, forfeitures or fines.

      Until April 4, 2005, the FCC prohibits a PCS licensee from interfering with existing licensees that operate certain fixed microwave systems within its license area. To secure a sufficient amount of unencumbered spectrum to operate our PCS systems efficiently and with adequate population coverage, we may need to relocate many of these incumbent licensees, at our expense, to other frequencies or to reimburse other previously-licensed PCS licensees for expenses they have incurred in relocating incumbent licensees that we might otherwise have been required to relocate. In an effort to balance the competing interests of existing microwave users and newly authorized PCS licensees, the FCC has adopted a transition plan to relocate such

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      The FCC has also adopted rules to govern customer billing by CMRS providers and is considering whether to extend billing rules currently applicable to landline carriers to CMRS carriers. Adoption of some of the FCC’s proposals could increase the complexity and costs of our billing processes and limit the manner in which we bill for services.

      The FCC may deny applications for FCC authority, and in extreme cases revoke licenses, if it finds that an entity lacks the requisite “character” qualifications to be a licensee. In making the determination, the FCC considers whether an applicant or licensee has been the subject of adverse findings in a judicial or administrative proceeding involving felonies, the possession or sale of unlawful drugs, fraud, antitrust violations or unfair competition, employment discrimination, misrepresentations to the FCC or other government agencies, or serious violations of the Communications Act or FCC regulations. To our knowledge, there are no activities and no judicial or administrative proceedings involving either the licensees, or us in which we hold a controlling interest that would warrant such a finding by the FCC.

      If foreign nationals or their representatives, a foreign government or its representative or any corporation organized under the laws of a foreign country own of record or vote greater than 25 percent of our equity and the FCC determines that the public interest would be so served, it may revoke our cellular licenses or require an ownership restructuring. The FCC will generally permit additional indirect ownership in excess of the statutory 25 percent benchmark where that interest is to be held by an entity or entities from member countries of the World Trade Organization. For investors from countries that are not members of the World Trade Organization, the FCC will determine whether the home country of the foreign investor extends reciprocal treatment called “equivalent competitive opportunities” to U.S. entities. If these opportunities do not exist, the FCC may not permit investment beyond the 25 percent benchmark. These restrictions could adversely affect our ability to attract additional equity financing. We have no knowledge that any foreign entity directly or indirectly owns a significant percentage of our capital stock.

      The Telecommunications Act of 1996, which made significant changes to the Communications Act, requires state public utilities commissions and/or the FCC to implement policies that mandate reciprocal compensation between local exchange carriers, a category that will, for these purposes, include cellular carriers, for interconnection services at rates more closely related to cost. In a rulemaking proceeding pertaining to interconnection between local exchange carriers and CMRS providers such as us, the FCC concluded that local exchange carriers are required to compensate CMRS providers for the reasonable costs incurred by these providers in terminating traffic that originates on local exchange carrier facilities, and vice versa. Consistent with this ruling, the FCC has determined that local exchange carriers may not charge a CMRS provider or other carrier for terminating local exchange carrier-originated traffic and that local exchange carriers may not charge CMRS providers for number activation and usage fees. Depending on further FCC disposition of these issues, we may or may not be successful in securing refunds, future relief or both, with respect to charges for termination of local exchange carrier-originated local traffic. If the FCC ultimately resolves these issues in favor of CMRS providers, then we will pursue relief through settlement

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      The Telecommunications Act requires, and the FCC has adopted, rules that require interstate communications carriers, including cellular carriers, to “make an equitable and non-discriminatory contribution” to a universal service fund that reimburses communications carriers that provide basic communications services to users who receive services at subsidized rates. We have made such payments as the FCC has required. We may also seek to qualify for payments from these federal and state programs in high cost areas where we provide wireless communications services, although we are not certain of the extent to which such payments will be available to cellular carriers. If such payments are made available to us, they would be an additional source of revenue to us that could be used to subsidize service we provide in the high cost areas. The FCC recently initiated a rule making proceeding in which it solicits public comment on ways of reforming both the manner by which it assesses carrier contributions to the Universal Service Fund and the way in which carriers may recover their costs from customers. Reforms adopted in this proceeding may have an impact on carriers’ operating expenses and on their ability to recover universal service contributions from customers.

      The Telecommunications Act also eases the restrictions on the provision of interexchange telephone services by wireless carriers affiliated with regional Bell operating companies. Regional Bell operating company-affiliated wireless carriers have interpreted the legislation to permit immediate provision of in region long distance call delivery for their cellular customers, thus presenting an additional source of competition to us.

      Additionally, the Telecommunications Act specifically exempts all cellular carriers from the obligation to provide equal access to interstate long distance carriers. However, the Telecommunications Act gives the FCC the authority to impose rules to require unblocked access through carrier identification codes or 800/888 numbers, so that cellular subscribers are not denied access to the long distance carrier of their choosing, if the FCC determines that the public interest so requires. We currently provide “dial around” equal access to all of our customers.

      The Telecommunications Act also imposes restrictions on a telecommunications carrier’s use of customer proprietary network information without prior customer approval. FCC rules implementing these restrictions are being revised but have the potential to impose upon us new costly obligations and impose burdens on our current marketing activities. The FCC’s rules implementing the Telecommunications Act’s customer proprietary network information provisions were vacated by the United States Court of Appeals for the Tenth Circuit on First Amendment grounds and the Supreme Court declined to review the Tenth Circuit’s decision. The FCC has sought public comment on whether to modify its rules to address the court’s concerns, and imposition of rules similar to those vacated by the court could impose additional costs on us and inhibit our marketing efforts.

      The Telecommunications Act also requires telecommunications carriers to make their services accessible to persons with disabilities and the FCC’s rules implementing these requirements are in effect. These rules generally require service providers to offer equipment and services that are accessible to and usable by persons with disabilities, if readily achievable, and to comply with complaint/grievance procedures for violations of these provisions. These rules are largely untested and are subject to interpretation through the FCC’s complaint process. While much of the focus of these rules is on the manufacture of equipment, carriers such as us could, if found to have violated the rules, be subject to fines and/or the imposition of costly new requirements. As a related matter, the FCC has proposed requiring wireless handsets to be compatible with hearing aids, which may increase the price of handsets for customers.

      In addition, the FCC has adopted rules to promote the conservation of numbering resources and is considering additional rules in this area. These rules require wireless carriers to participate in number pooling (whereby phone numbers are allocated in blocks of 1,000 rather than 10,000) when they have implemented

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      The FCC has determined that interexchange (long distance) service offerings of CMRS providers are subject to rate averaging and rate integration requirements of the Telecommunications Act. Rate averaging requires us to average our intrastate long distance CMRS rates between high cost and urban costs. The FCC has delayed implementation of the rate integration requirements with respect to wide area rate plans pending further reconsideration of its rules, and has delayed the requirement that CMRS carriers integrate their rates among CMRS affiliates. Other aspects of the FCC’s rules have been vacated by the United States Court of Appeals for the District of Columbia, and are subject to further consideration by the FCC. There is a pending proceeding in which the FCC will determine how integration requirements apply to CMRS offerings, including single rate plans. To the extent that we offer services subject to these requirements, our pricing flexibility is reduced, and there is no assurance that the FCC will decline to impose these requirements on us and/or across our various CMRS affiliates.

      The overall impact of the Telecommunications Act on our business is unclear and will likely remain so for the foreseeable future. For example, limitations on local zoning requirements imposed by the Telecommunications Act may facilitate the construction of new cell sites and related facilities. However, these restrictions on zoning authority may provide only limited assistance to cellular carriers. On the other hand, other provisions of the new statute relating to interconnection, telephone number portability, universal service, equal access, use of customer proprietary network information and resale could subject us to additional costs and increased competition.

State, Local and Other Regulation

      The Communications Act preempts state or local regulation of the market entry of, or the rates charged by, any CMRS provider, which include cellular telephone service and PCS providers. The FCC denied the petitions of eight states to continue their rate regulation authority, including authority over cellular operators. As a practical matter, we are free to establish rates and offer new products and service with a minimum of regulatory requirements. The states in which we operate maintain nominal oversight jurisdiction, primarily focusing upon prior approval of acquisitions and transfers of licenses and resolution of customer complaints. However, states may continue to regulate “other terms and conditions” of wireless service, and a number of state authorities have initiated actions or investigations of various wireless carrier practices. The outcome of these proceedings is uncertain and could require us to change certain of our marketing practices and ultimately increase state regulatory authority over the wireless industry.

      The location and construction of our cellular and PCS transmitter towers and antennas are subject to FCC and Federal Aviation Administration regulations and are subject to federal, state and local environmental regulation, as well as state or local zoning, land use and other regulation. Before we can put a system into commercial operation, we must obtain all necessary zoning and building permit approvals for the cell site and microwave tower locations. The time needed to obtain zoning approvals and requisite state permits varies from market to market and state to state. Likewise, variations exist in local zoning processes. Additionally, any proposed site must comply with the FCC’s environmental rules. If zoning approval or requisite state permits cannot be obtained, or if environmental rules make construction impossible or infeasible on a particular site, our network design might be adversely affected, network design costs could increase and the service provided to our customers might be reduced.

      We cannot assure you that any state or local regulatory requirements currently applicable to our systems will not be changed in the future or that regulatory requirements will not be adopted in those states and localities, which currently have none. Such changes could impose new obligations on us that would adversely affect our operating results.

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Future Regulation

      From time to time, federal or state legislators propose legislation that could affect us, either beneficially or adversely. We cannot assure you that federal or state legislation will not be enacted, or that regulations will not be adopted or actions taken by the FCC or state regulatory authorities that might adversely affect our business. Changes such as the allocation by the FCC of radio spectrum for services that compete with our business could adversely affect our operating results.

Employees and Agents

      As of December 31, 2001, we had approximately 2,300 full time employees. In addition, as of that date, we and American Cellular had agreements with approximately 200 and 175 independent sales agents, including car dealerships, electronics stores, paging service companies and independent contractors, respectively. We consider our employee relations to be good.

Item 2. Properties

      We maintain our corporate headquarters in Oklahoma City, Oklahoma and own or lease four regional call centers throughout the United States. During the second quarter of 2001, we relocated our corporate headquarters within Oklahoma City, Oklahoma to a larger facility to accommodate our growth in employees. As of December 31, 2001, our wireless operations and American Cellular’s operations leased approximately 180 and 85 retail stores and outlets and approximately 10 and 5 administrative offices, respectively. We review these leases from time-to-time and, in the future, may lease or acquire new facilities as needed. We do not anticipate encountering any material difficulties in meeting our future needs for leased space.

Item 3. Legal Proceedings

      We are not currently aware of any pending or threatened litigation against us or our subsidiaries that could have a material adverse effect on our financial condition, results of operations or cash flows.

Item 4. Submission of Matters to a Vote of Security Holders

      Not applicable

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PART II

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

      On February 9, 2000, we completed the initial public offering of 25,000,000 shares of our Class A common stock and the additional sale of 1,500,000 shares of our Class A common stock. Our Class A common stock is traded over-the-counter and is quoted on the Nasdaq National Market System under the ticker symbol “DCEL”. There currently is no established public trading market for our Class B common stock, Class C common stock or Class D common stock. Each share of our Class B common stock is convertible into one share of our Class A common stock and each share of Class B common stock is entitled to ten votes per share. Each share of our Class C common stock and Class D common stock is convertible into 111.44 shares of our Class A common stock, and is not entitled to vote.

      The following table sets forth the range of high and low prices for our Class A common stock from our first day of trading on February 9, 2000 through March 22, 2002:

      As of March 22, 2002, there were 98 holders of record for our Class A common stock and three shareholders of record of our Class B common stock. The closing price of our Class A common stock on March 22, 2002 was $3.09 per share. No shares of our Class C common stock and Class D common stock were outstanding as of March 22, 2002.

      Since 1997, we have not paid any cash dividends to our common stockholders. We currently intend to retain all of our earnings to finance our operations, repay indebtedness and fund future growth. We do not expect to pay any dividends on our common stock for the foreseeable future. In addition, covenants contained in the instruments governing our bank credit facilities and our outstanding preferred stock limit our ability to pay cash dividends on our common stock.

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Item 6. Selected Financial Data

      The following table sets forth certain historical consolidated financial data with respect to each of the five years ended December 31, 2001. The consolidated financial data has been derived from our consolidated financial statements and have been restated to reflect the sale of the properties we sold to Verizon Wireless as discontinued operations. The historical consolidated financial data should be read in conjunction with Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations and our audited consolidated financial statements and the related notes thereto included in Item 8, Financial Statements and Supplementary Data.

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(1)	Reflects minority interests in partnerships in which we own the majority interests.
(2)	Extraordinary items reflect losses related to early extinguishment of debt.
(3)	Determined by dividing our total ending subscribers for the period by the estimated total population covered by applicable FCC licenses.
(4)	Churn means the number of subscriber cancellations per period as a percentage of the weighted average total subscribers during such period.
(5)	Excludes roaming and equipment and other revenue.

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      The following discussion and analysis presents factors, which we believe are relevant to an assessment and understanding of our consolidated financial position and results of operations. This financial and business analysis should be read in conjunction with our consolidated financial statements and the related notes included in Item 8.

Overview

      We are one of the largest providers of rural and suburban wireless communications systems in the United States. We began providing wireless telephone services in 1990 in Oklahoma and the Texas Panhandle. We have rapidly expanded our wireless operations with an acquisition strategy targeting underdeveloped rural and suburban areas, which have a significant number of potential customers with substantial needs for wireless communications. At December 31, 2001, our wireless systems covered a population of approximately 6.4 million and we had approximately 700,200 subscribers, with an aggregate market penetration of approximately 11.0%. We serve markets in portions of Alaska, Arizona, California, Kansas, Maryland, Michigan, Missouri, New York, Ohio, Oklahoma, Pennsylvania, Texas and West Virginia.

      On February 25, 2000, we and AT&T Wireless Services, Inc., through our equally-owned joint venture, acquired American Cellular for approximately $2.5 billion, including fees and expenses. As of December 31, 2001, American Cellular’s systems covered a total population of approximately 5.0 million and had approximately 632,100 subscribers, giving American Cellular an aggregate market penetration of approximately 12.6%. We manage American Cellular, whose markets have demographic characteristics similar to ours in portions of Illinois, Kansas, Kentucky, Michigan, Minnesota, New York, Ohio, Oklahoma, Pennsylvania, West Virginia and Wisconsin.

      We account for our interest in the American Cellular joint venture using the equity method of accounting. As a result, we have reflected our 50% share of the joint venture’s equity in a single line item entitled “Investment in joint venture” in our balance sheet and we have reflected our 50% share of the joint venture’s net income or losses in a single line item entitled “Loss from investment in joint venture” in our statement of operations. To the extent that the joint venture incurs losses in the future, our “Investment in joint venture” will be reduced.

      From 1996 through 2000, we completed 23 acquisitions of wireless licenses and systems and related assets, excluding American Cellular, for an aggregate purchase price of $2.5 billion, increasing the total proportionate population served by our systems and expanding the geographical scope of our operations. Although our cash flow from operations increased as a result of these acquisitions, the increased amortization of FCC licenses and related assets, and our acquisition costs, together with the increased interest expense and dividend requirements associated with our outstanding indebtedness and preferred stock, resulted in increased losses applicable to common stockholders for 2000 and 1999. During 2001, we did not acquire new wireless licenses and systems through acquisitions, therefore our growth in revenues and operating income reflect our internally generated growth in our subscriber base. However, our interest in the American Cellular joint venture has resulted in an immediate increase in our net losses. We expect our net losses to continue until we further expand our acquired systems and increase our subscriber base. Our acquisitions affect the comparability of our historical results of operations for the periods discussed; therefore, these results may not be indicative of future performance.

      On January 26, 2001, the Federal Communications Commission concluded an auction of 10MHz and 15 MHz PCS licenses in the C and F blocks in a number of markets. Through one of our wholly-owned subsidiaries we were the winning bidder for 14 of the auctioned licenses representing an estimated total population of 19.8 million. The FCC is currently considering our post-auction application for a grant of those licenses, as well as legal challenges to this application. If our subsidiary is granted all 14 licenses, our total cost will be $546.1 million. However, in June 2001, the United States Court of Appeals for the District of Columbia Circuit ruled that the FCC did not have the authority to auction certain of those licenses, including 11 of the 14 licenses, which constitutes $536.5 million of total amount that we bid. The Circuit Court decision was appealed to the United States Supreme Court which, on March 4, 2002, granted certiorari and agreed to

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Discontinued Operations

      On October 29, 2001, we entered into a definitive agreement for the sale of three of our wireless properties to Verizon Wireless for a total purchase price of $263.0 million. These properties include California 7 RSA, Ohio 2 RSA and Georgia 1 RSA, which cover a total population of approximately 659,000. On December 6, 2001, we entered into another definitive agreement with Verizon Wireless to sell our 75% ownership interest in Arizona 5 RSA for a total purchase price of $85.0 million. Arizona 5 RSA covers a total population of approximately 199,200. On October 30, 2001, two wholly-owned, indirect subsidiaries of our 50% owned joint venture, American Cellular, entered into an additional definitive agreement with Verizon Wireless to sell Tennessee 4 RSA for a total purchase price of $202.0 million, which covers a total population of approximately 290,800. As a result of these agreements, the results of operations, assets and liabilities of these markets during the years presented are included as discontinued operations in our consolidated financial statements. We completed these transactions during February 2002, and we used the proceeds from the sale of these properties primarily to pay down bank debt under the respective credit facilities.

      On January 24, 2000, we distributed the stock of our former subsidiary, Logix Communications Enterprises, Inc. to certain of our shareholders. Logix is accounted for as a discontinued operation in our consolidated financial statements during 1999.

Revenue

      Our operating revenue consists of service revenue, roaming revenue and equipment and other revenue.

      We primarily derive service revenue by providing wireless services to our subscribers. The industry has experienced declining average revenue per minute as competition among wireless service providers has led to reductions in rates for airtime. The yield on our service revenue (service revenue divided by subscriber minutes of use) was $.26, $.29 and $.39 per minute for the years ended December 31, 2001, 2000 and 1999, respectively. These declines have been generally offset by significant increases in average minutes of use per subscriber. We believe that the industry trend toward increasing minutes of use per subscriber will continue to offset declining revenues per minute of use due to the continued popularity of single rate calling plans and the enhanced service capacity of recently developed digital networks.

      Our service revenue also includes charges to our subscribers when those subscribers roam into other wireless providers’ markets. Through 1999, our accounting practice was to net those revenues against the associated expenses charged to us by third-party wireless providers (that is, the fees we pay the other wireless providers for carrying our subscribers’ calls on their network) and to record the net expense as cost of service. Historically, we have been able to pass through to our subscribers the majority of the costs charged to us by third-party wireless providers. Recently, the industry has been increasing the use of pricing plans that include flat rate pricing and larger home areas. Under these types of plans, amounts charged to us by other wireless providers may not necessarily be passed through to our subscribers. Therefore, effective January 1, 2000, we changed our accounting procedures to report these revenues and expenses separately in our statements of operations and have reclassified prior year amounts to reflect this change in accounting practice.

      We derive roaming revenue by providing service to subscribers of other wireless providers when those subscribers “roam” into our markets and use our systems to carry their calls. Roaming accounted for 41.3%, 41.8% and 39.4% of our operating revenue for the years ended December 31, 2001, 2000 and 1999, respectively. Roaming revenues typically yield higher average per minute rates and higher margins than revenues from our subscribers. We achieve these higher margins because we incur relatively lower incremental costs related to network operations, billing, customer service and collections in servicing roaming customers as compared to our home subscribers. However, even though roaming revenue yields have offered higher margins than revenue from our subscribers, the yields are declining and are becoming more comparable to yields from our subscribers due to increased market pressures and competition between wireless providers. Our roaming yield (roaming service revenues, which includes airtime, toll charges and surcharges, divided by roaming

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      We include long-distance revenue in service revenue and roaming revenue. Equipment revenue is revenue from selling wireless equipment to our subscribers.

      Our overall penetration rates increased in 2001 compared to 2000, and in 2000 compared to 1999 due to the incremental penetration gains in existing markets. We believe that, as our penetration rates increase, the increase in new subscriber revenue will exceed the loss of revenue attributable to our churn rates.

Costs and Expenses

      Our primary operating expense categories include cost of service, cost of equipment, marketing and selling costs, general and administrative costs and depreciation and amortization.

      Our cost of service consists primarily of costs to operate and maintain our facilities utilized in providing service to customers and amounts paid to third-party wireless providers for providing service to our subscribers when our subscribers roam into their markets. As discussed above with regard to service revenue, there is a continuing trend toward increasing minutes-of-use per subscriber. This includes minutes used by our subscribers when they roam into other providers’ markets. Consistent with this trend, our roaming expense per minute has declined. This decline in expense per minute has helped offset the increased expense from growth in minutes-of-use per subscriber.

      Our cost of equipment represents the cost associated with telephone equipment and accessories sold to customers. In recent years, we and other wireless providers have increased the use of discounts on phone equipment and free phone promotions, as competition between service providers has intensified. As a result, we have incurred, and expect to continue to incur, losses on equipment sales, which have resulted in increased marketing and selling costs per gross subscriber addition. While we expect to continue these discounts and promotions, we believe that these promotions will result in increased revenue from increases in the number of wireless subscribers.

      Our marketing and selling costs include advertising, compensation paid to sales personnel and independent agents and all other costs to market and sell wireless products and services. We pay commissions to sales personnel and independent sales agents for new business generated.

      Our general and administrative costs include all infrastructure costs, including costs for customer support, billing, collections, and corporate administration. We provide management and certain other services to our 50% owned subsidiary, American Cellular, in accordance with a management agreement. Therefore, our corporate and shared call center costs incurred by American Cellular and us are shared and allocated primarily based on our estimated subscribers and the populations in our respective licensed areas.

      Our depreciation and amortization expense represents the costs associated with the depreciation of our fixed assets and the amortization of our intangible assets; primarily wireless license acquisition costs and customer lists.

Critical Accounting Policies and Practices

      We must necessarily use estimates in the presentation of our financial statements with respect to the effect of matters that are inherently uncertain. Our use of estimates and assumptions affects the reported amounts of assets, liabilities, and the amount of revenues and expenses we recognize for and during the reporting period.

      Our general and administrative expenses and certain other operating expenses include all infrastructure costs, including costs for customer support, billing, collections and corporate administration. We provide management and certain other services to all of our subsidiaries, including our 50% owned subsidiary,

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      We amortize and depreciate our property, plant and equipment, wireless licenses, customer lists and certain other long-lived assets over their useful lives. These useful lives are based on our estimates of the period that the assets will generate revenue. We review our intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. With the implementation of Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets,” which requires companies to stop amortizing existing goodwill and intangible assets with indefinite lives, we would treat our wireless licenses as indefinite life intangibles. As a result, effective January 1, 2002, we will no longer amortize wireless licenses. Instead, we will test these licenses for impairment at least annually. This change in policy will have a significant impact to our results of operations and financial position. During 2001, the aggregate amount of amortization expense, net of income tax, attributable to our wireless licenses was approximately $64.9 million. In addition, during 2001, our 50% owned unconsolidated subsidiary, American Cellular, recorded approximately $58.3 million and approximately $34.5 million of amortization expense, net of income tax, related to their goodwill and wireless license acquisition costs, respectively. Through December 31, 2001, our accounting policy was to evaluate the carrying value of our intangible assets based on our undiscounted cash flows. However, as a result of implementing SFAS 142, we are now required to evaluate the carrying value of our indefinite life intangibles using their fair values. Upon implementation of this new pronouncement, we expect to record a charge, net of income tax, of approximately $33 million to reflect the write-down of our wireless license acquisition costs to their fair value and a charge of approximately $141 million to reflect our equity in the write-down of the wireless license acquisition costs of our 50% owned subsidiary, American Cellular, to their fair value.

      We believe it is necessary for an understanding of our significant accounting policies to read the above in conjunction with Note 2 of Item 8, “Significant Accounting Policies,” of this Form 10-K.

Results of Operations

      The financial statement numbers have been rounded; however, the percentage changes are based on the actual financial statement numbers.

      Operating revenue. For the year ended December 31, 2001, our total operating revenue increased $123.5 million, or 25.9%, to $599.4 million from $475.9 million for the comparable period in 2000. Our total service revenue, roaming revenue and equipment and other revenue represented 54.9%, 41.3% and 3.8%, respectively, of total operating revenue during the year ended December 31, 2001 and 53.2%, 41.8% and 5.0%, respectively, of total operating revenue during the year ended December 31, 2000.

      The following table sets forth the components of our revenue for the periods indicated:

      For the year ended December 31, 2001, our service revenue increased $75.8 million, or 29.9%, to $329.0 million from $253.2 million for the year ended December 31, 2000. Of the increase, $14.3 million was attributable to markets acquired during 2000. The remaining increase of $61.5 million was primarily

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      For the year ended December 31, 2001, our roaming revenue increased $48.6 million, or 24.4%, to $247.6 million from $199.0 million for the year ended December 31, 2000. Of the increase, $16.3 million was attributable to markets acquired during 2000. The remaining increase of $32.3 million was attributable to a 49.5% increase in roaming minutes in our existing markets due to expanded coverage areas and usage in these markets, offset by a 17.5% decline in our roaming revenue per minute-of-use.

      For the year ended December 31, 2001, our equipment and other revenue decreased $1.0 million, or 3.9%, to $22.7 million from $23.7 million for the year ended December 31, 2000 due to increased discounts on sales of equipment as a result of market competition.

      Cost of service. For the year ended December 31, 2001, our total cost of service increased $50.7 million, or 44.7%, to $164.2 million from $113.5 million for the comparable period in 2000. Of this increase, $9.4 million was attributed to markets acquired during 2000. As described with our service revenue above, on average, our digital subscribers use more minutes than our analog subscribers. This increased usage also increases the minutes used by our subscribers outside of our markets, thus increasing the expenses we are charged by third-party wireless providers. Our cost of service increased approximately $26.4 million due to increased charges by third party wireless providers. The remaining increase of $14.9 million was primarily the result of increased networking costs associated with our increased build-out of cell sites and continual upgrades to our digital network.

      Cost of equipment. For the year ended December 31, 2001, our cost of equipment increased $2.7 million, or 5.5%, to $50.8 million during 2001 from $48.1 million in 2000, primarily from an increase in the volume of equipment sold due to the growth in subscriber additions and the migration of subscribers from analog to digital service.

      Marketing and selling costs. For the year ended December 31, 2001, our marketing and selling costs increased $7.4 million, or 10.9%, to $74.8 million from $67.4 million for the year ended December 31, 2000. This was a result of an increase in gross subscriber additions. We had 264,600 gross subscriber additions during the year ended December 31, 2001 compared to 226,000 gross subscriber additions during the year ended December 31, 2000, which is an increase of 17.1%. Gross subscriber additions do not include subscribers acquired through business acquisitions.

      General and administrative costs. For the year ended December 31, 2001, our general and administrative costs increased $9.1 million, or 14.0%, to $74.5 million from $65.4 million for the year ended December 31, 2000. For the year ended December 31, 2001, general and administrative costs of $3.7 million were attributable to markets acquired in 2000. The remaining increase of $5.4 million was the result of increased infrastructure costs, including customer service, billing, collections and administrative costs as a result of the overall growth of our business. Our average monthly general and administrative costs per average subscriber decreased 9.1% to $10 for 2001 compared to $11 for 2000. This decrease in general and administrative costs per subscriber was primarily from efficiencies gained from the integration of acquired companies.

      Depreciation and amortization expense. For the year ended December 31, 2001, our depreciation and amortization expense increased $27.4 million, or 17.5%, to $184.4 million from $157.0 million for 2000. The increase is a result of additional depreciation on fixed assets acquired in 2001 and 2000 and intangible assets acquired in 2000.

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      Interest expense. For the year ended December 31, 2001, our interest expense increased $6.4 million, or 4.7%, to $143.0 million from $136.6 million for the year ended December 31, 2000. The increase resulted primarily from our increased interest rates incurred as a result of our interest rate hedge on our credit facility.

      Other income, net. For the year ended December 31, 2001, our other income decreased by $3.7 million to $1.8 million from $5.5 million for the year ended December 31, 2000.

      Minority interests in income of subsidiaries. For the year ended December 31, 2001, our minority interests in income of subsidiaries increased $1.7 million, or 39.9%, to $5.9 million from $4.2 million in 2000. This increase was attributable to the increased income earned from our subsidiaries in established markets in which we do not own a 100% interest.

      Loss from investment in joint venture. For the year ended December 31, 2001, we incurred a loss, net of income tax benefits, from our American Cellular joint venture totaling $69.2 million compared to a net loss of $50.3 million for the year ended December 31, 2000. These losses represent our proportionate loss in American Cellular.

      Income (loss) from discontinued operations. For the year ended December 31, 2001, we had income from discontinued operations of $1.3 million, compared to a loss of $5.9 million for the year ended December 31, 2000. This increase of $7.2 million in our income from discontinued operations is primarily due to an increase in operating income of $10.2 million, offset by an increase in interest expense of $2.3 million relating to the markets which we sold to Verizon Wireless during February 2002.

      (Loss) income from discontinued operations from investment in joint venture. For the year ended December 31, 2001, we had a loss from discontinued operations from investment in joint venture of $0.7 million, compared to income of $0.7 million for the year ended December 31, 2000. This increase of $1.4 million in our loss from discontinued operations from investment in joint venture reflects our 50% share of the increased losses from the Tennessee 4 market, which was sold to Verizon Wireless on February 8, 2002.

      Extraordinary expense. For the year ended December 31, 2000, we incurred an extraordinary pretax loss of approximately $32.9 million. This loss was a result of a tender premium paid on the early redemption of our 11.75% senior notes and the writing off of previously capitalized financing costs associated with the 11.75% senior notes and the previous DOC and DCOC credit facilities, which were refinanced in January 2000.

      Net loss. For the year ended December 31, 2001, our net loss was $128.3 million. Our net loss decreased $16.5 million, or 11.4%, from $144.8 million for the year ended December 31, 2000. The decrease in our net loss was primarily attributable to an increase in operating income of $26.2 million, offset by an increase in interest expense of $6.4 million during 2001 and the extraordinary expense of $20.4 million for the year ended December 31, 2000.

      Dividends on preferred stock. For the year ended December 31, 2001, our dividends on preferred stock decreased $40.4 million, or 31.9%, to $86.3 million from $126.7 million for the year ended December 31, 2000. This decrease was primarily the result of a $60.4 million dividend recognized upon the conversion of our Class D Preferred Stock into Class E Preferred Stock and old Class A Common Stock, which occurred in the first quarter of 2000, offset by dividends related to our issuance of 200,000 shares of our Series AA Preferred Stock on February 8, 2001.

Year Ended December 31, 2000 Compared to Year Ended December 31, 1999

      Operating revenue. For the year ended December 31, 2000, our total operating revenue increased $144.5 million, or 43.6%, to $475.9 million from $331.4 million for the comparable period in 1999. Our total service revenue, roaming revenue and equipment and other revenue represented 53.2%, 41.8% and 5.0%, respectively, of total operating revenue during the year ended December 31, 2000 and 56.7%, 39.4% and 3.9%, respectively, of total operating revenue during the year ended December 31, 1999.

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      The following table sets forth the components of our revenue for the periods indicated:

      For the year ended December 31, 2000, our service revenue increased $65.2 million, or 34.7%, to $253.2 million from $188.0 million for the year ended December 31, 1999. Of the increase, $33.1 million was attributable to the service revenue earned by markets acquired during 2000 and 1999 acquisitions. The remaining increase of $32.1 million was due to increased penetration and usage in our markets. Our subscriber base increased 45.3% to approximately 599,700 at December 31, 2000 from 412,700 at December 31, 1999. Approximately 94,200 subscribers were added since December 31, 1999 as a result of acquisitions. Our average monthly service revenue per subscriber remained constant at $42 for the year ended December 31, 2000 compared to the year ended December 31, 1999.

      For the year ended December 31, 2000, our roaming revenue increased $68.6 million, or 52.6%, to $199.0 million from $130.4 million for the year ended December 31, 1999. Of the increase, $34.6 million was attributable to the roaming revenue earned by markets acquired during 2000 and 1999 acquisitions. The remaining increase of $34.0 million was attributable to a 78.8% increase in roaming minutes in our markets due to expanded coverage areas and increased usage in these markets, offset by a 14.9% decline in our roaming revenue per minute-of-use.

      For the year ended December 31, 2000, our equipment and other revenue increased $10.7 million, or 82.7%, to $23.7 million from $13.0 million for the year ended December 31, 1999. Of this increase, $3.3 million was due to equipment and other revenue earned from markets we acquired during 2000 and 1999, the remaining increase of $7.4 million was due to increased sales of equipment as a result of growth in gross subscriber additions.

      Cost of service. For the year ended December 31, 2000, our total cost of service increased $32.9 million, or 40.9%, to $113.5 million from $80.6 million for the comparable period in 1999. Of this increase, $20.8 million was due to markets we acquired during 2000 and 1999. The remaining increase of $12.1 million was primarily attributable to increased subscribers and minutes of use in our markets and markets owned by third party wireless providers.

      Cost of equipment. For the year ended December 31, 2000, our cost of equipment increased $23.0 million, or 91.8%, to $48.1 million from $25.1 million in 1999, primarily as a result of increases in the volume of equipment we sold due to the growth in gross subscriber additions.

      Marketing and selling costs. For the year ended December 31, 2000, our marketing and selling costs increased $20.0 million, or 42.3%, to $67.4 million from $47.4 million for the year ended December 31, 1999 due to growth in gross subscriber additions. We added 226,000 gross subscribers during the year ended December 31, 2000 compared to 162,700 gross subscribers during the year ended December 31, 1999. Gross subscriber additions do not include subscribers acquired through business acquisitions.

      General and administrative costs. For the year ended December 31, 2000, our general and administrative costs increased $14.9 million, or 29.3%, to $65.4 million from $50.5 million for the year ended December 31, 1999. General and administrative costs increased $7.9 million due to markets we acquired during 2000 and 1999. The remaining increase of $7.0 million was the result of increased infrastructure costs, including customer service, billing, collections and administrative costs as a result of overall growth in our business. Our average monthly general and administrative costs per average subscriber remained constant at $11 for 2000 and 1999.

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      Depreciation and amortization expense. For the year ended December 31, 2000, our depreciation and amortization expense increased $39.9 million, or 34.1%, to $157.0 million from $117.1 million for 1999. Depreciation and amortization on assets acquired during our 2000 and 1999 acquisitions accounted for $34.0 million of this increase. The remainder of this increase was from additional depreciation on fixed assets acquired during 2000 and 1999.

      Interest expense. For the year ended December 31, 2000, our interest expense increased $33.3 million, or 32.3%, to $136.6 million from $103.3 million for the year ended December 31, 1999. The increase resulted primarily from our increased borrowings during 2000 to finance our acquisitions.

      Other income, net. For the year ended December 31, 2000, our other income increased $3.2 million, or 144.3%, to $5.5 million from $2.3 million for the year ended December 31, 1999. This increase was the result of increased interest income earned on our increased cash and cash equivalents balances throughout 2000.

      Minority interests in income of subsidiaries. For the year ended December 31, 2000, our minority interests in income of subsidiaries increased $1.2 million, or 41.7%, to $4.2 million from $3.0 million in 1999. This increase was attributable to the increased income earned from our subsidiaries in which we do not own a 100% interest.

      Loss from investment in joint venture. For the year ended December 31, 2000, we incurred a loss, net of its income tax benefits, from our American Cellular joint venture totaling $50.3 million. This loss represents our proportionate loss in American Cellular for the year ended December 31, 2000.

      Loss from discontinued operations. For the year ended December 31, 2000, our loss from discontinued operations totaled $5.9 million compared to $51.5 million for the year ended December 31, 1999. The decrease in our loss from discontinued operations of $45.6 million was primarily due to the loss from Logix, which was disposed of in early 2000.

      Income from discontinued operations from investment in joint venture. For the year ended December 31, 2000, our income from discontinued operations from investment in joint venture totaled $0.7 million. This reflects our 50% share of the income from the Tennessee 4 market, which was sold to Verizon Wireless on February 8, 2002.

      Loss from disposal of discontinued operations. For the year ended December 31, 1999, we incurred a loss of approximately $18.2 million resulting from our loss on the disposition of Logix. This loss represents Logix’ loss from November 10, 1999 (the date we adopted a plan to distribute the stock of Logix) through January 24, 2000 (the date of disposition), net of income taxes.

      Extraordinary expense. For the year ended December 31, 2000, we incurred an extraordinary pretax loss of approximately $32.9 million. This loss was a result of a tender premium paid on the early redemption of our 11.75% senior notes and the writing off of previously capitalized financing costs associated with the 11.75% senior notes and the previous DOC and DCOC credit facilities which were refinanced in January 2000.

      Net loss. For the year ended December 31, 2000, our net loss was $144.8 million. Our net loss increased $17.2 million, or 13.5%, from $127.6 million for the year ended December 31, 1999. The increase in our net loss was primarily attributable to our loss from investment in our joint venture and our increase in interest expense resulting from our 2000 and 1999 business acquisitions and financings offset by the increase in operating income and the spin-off of our discontinued operations.

      Dividends on preferred stock. For the year ended December 31, 2000, our dividends on preferred stock increased $57.2 million, or 82.3%, to $126.7 million from $69.5 million for the year ended December 31, 1999. The increase was primarily the result of a $60.4 million dividend recognized upon the conversion of our Class D preferred stock into Class E preferred stock and old Class A common stock and the redemption of all of our Class E preferred stock.

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Liquidity and Capital Resources

      We have required, and will likely continue to require, substantial capital to further develop, expand and upgrade our wireless systems and those we may acquire. We have financed our operations through cash flows from operating activities, bank debt and the sale of debt and equity securities.

Net Cash Flow

      At December 31, 2001, we had working capital of $181.9 million, a ratio of current assets to current liabilities of 1.9:1 and an unrestricted cash balance of $161.6 million, which compares to working capital of $104.1 million, a ratio of current assets to current liabilities of 1.6:1 and an unrestricted cash balance of $145.4 million at December 31, 2000.

      Our net cash provided by operating activities totaled $65.0 million for 2001 compared to $58.5 million for 2000 and $19.8 million for 1999. The increase of $6.5 million from 2000 to 2001 was primarily due to an increase in depreciation and amortization and our increase in net loss from investment in joint venture, which was offset by an increase in net loss from continuing operations.

      Our net cash used in investing activities totaled $185.2 million, $998.3 million and $116.9 million for the years ended December 31, 2001, 2000 and 1999, respectively. The net cash used in investing activities for the year ended December 31, 2000 was higher compared to 2001 and 1999 due to the purchase of wireless license and properties of $368.7 million and investment in joint venture of $382.5 million. Capital expenditures were $93.0 million, $119.4 million and $75.4 million for the years ended December 31, 2001, 2000 and 1999, respectively.

      Net cash provided by financing activities was $136.3 million for the year ended December 31, 2001 compared to $1.1 billion and $78.8 million for 2000 and 1999, respectively. Financing activity sources for the year ended December 31, 2001 consisted primarily of proceeds from long-term debt of $630.0 million and proceeds from issuance of preferred stock of $200.0 million, which was offset by repayments of long-term debt totaling $699.4 million. For the year ended December 31, 2000, net cash provided by financing was considerably higher compared to 2001, due to proceeds from long-term debt of $1.5 billion and proceeds from our equity offering of $545.4 million, which was offset by repayments of long-term debt of $920.6 million.

Capital Resources

Dobson Operating Co., L.L.C.

      On January 14, 2000, we obtained an $800.0 million credit facility and increased it by $125.0 million to $925.0 million on May 1, 2000. The original proceeds from the $800.0 million credit facility were used primarily to:

	•	consolidate the indebtedness of our Dobson Cellular Operations Company subsidiary under a $160.0 million credit facility and our Dobson Operating Company subsidiary under a $250.0 million senior secured credit facility;
	•	repurchase $159.7 million outstanding principal amount of our 11.75% senior notes due 2007; and
	•	pay the cash portion of the costs of certain of our pending acquisitions.

      The increase of $125.0 million was used to fund the acquisition of Texas 9 RSA on May 1, 2000.

      At December 31, 2001, this credit facility included a $300.0 million revolving credit facility and $604.8 million remaining of term loan facilities consisting of a Term A Facility of $335.0 million, a Term B Facility of $147.0 million and an additional Term B Facility of $122.8 million. These loans begin to mature in 2007. As of December 31, 2001, we had $822.3 million outstanding under this credit facility and we had $82.5 million of availability.

      This credit facility is structured as a loan to our subsidiary, Dobson Operating Co. LLC. (“DOC LLC”), the successor by merger to Dobson Cellular Operating Company and Dobson Operating Company, with

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	•	a pledge of the membership interests in the borrower;
	•	stock and partnership interests of certain of the borrower’s subsidiaries; and
	•	liens on substantially all of the assets of the borrower and the borrower’s restricted subsidiaries including FCC licenses, but only to the extent such licenses can be pledged under applicable law.

      We are required to amortize the Term A Facility with quarterly principal payments of $5.0 million, which began on June 30, 2001, increasing over the term of the loan to quarterly principal payments of $25.0 million. We are required to amortize the Term B Facility with quarterly principal payments of $375,000 from March 31, 2000 through December 31, 2006 and with quarterly principal payments of $34.9 million during 2007. The company began amortizing the additional $125.0 million portion of the Term B Facility with quarterly principal payments of $312,500 on June 30, 2000, and will continue through March 31, 2007. These quarterly principal payments will increase to $29.1 million from June 30, 2007 through March 31, 2008. Under certain circumstances, we are required to make prepayments of proceeds received from significant asset sales, new borrowings and sales of equity and a portion of excess cash flow. Therefore, when we completed the sale of four markets to Verizon Wireless for a total purchase price of $348.0 million during February 2002, we permanently prepaid approximately $248.4 million towards this credit facility. In addition, we have the right to prepay the credit facility in whole or in part at any time. As of December 31, 2001, we had $822.3 million outstanding under the credit facility.

      Our credit facility imposes a number of restrictive covenants that, among other things, limit our ability to incur additional indebtedness, create liens, make capital expenditures and pay dividends. In addition, we are required to maintain certain financial ratios with respect to the borrower and certain of its subsidiaries, including, but not limited to:

	•	a ratio of senior indebtedness to operating cash flow of initially not more than 7.75 to 1, decreasing over time to 5.00 to 1;
	•	a ratio of operating cash flow to debt service requirements of initially not less than 1.15 to 1, increasing over time to 1.50 to 1;
	•	a ratio of operating cash flow to interest expense of initially not less than 1.40 to 1, increasing over time to 2.25 to 1;
	•	on or after June 30, 2002, a ratio of operating cash flow minus capital expenditures to the sum of debt service requirements and cash distributions of initially not less than 1.05 to 1, increasing over time to 1.15 to 1; and
	•	a limitation of capital expenditures.

      At December 31, 2001, we were in compliance with all required financial ratios and expect to continue to be in compliance throughout 2002.

Dobson/ Sygnet

      Our subsidiary, Dobson/ Sygnet Communications Company, has outstanding $200.0 million aggregate principal amount of senior notes that mature in 2008. The Dobson/ Sygnet notes bear interest at an annual rate of 12.25%, payable semi-annually on each June 15 and December 15. The Dobson/ Sygnet note indenture contains restrictive covenants that, among other things, limit the ability of Dobson/Sygnet and its subsidiaries to incur additional indebtedness, create liens, pay dividends or make distributions in respect of their capital stock, make investments or certain other restricted payments, sell assets, redeem capital stock, issue or sell stock of restricted subsidiaries, enter into transactions with stockholders or affiliates or effect a consolidation or merger.

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Sygnet Wireless

      Our indirect subsidiary, Sygnet Wireless, is a party to a secured credit agreement for an aggregate of $336.0 million, consisting of a $40.4 million revolving credit facility and $295.6 million of term loan facilities. Interest on the revolving credit facility and the term loan facilities is based on a prime rate or a LIBOR formula, and has ranged between 5.0% and 10.5% since inception. As of December 31, 2001, we had $300.1 million outstanding under the Sygnet credit facility and we had $26.9 million of availability under the Sygnet credit facility.

      The obligations under the Sygnet credit facility are secured by a pledge of the capital stock of Dobson/ Sygnet’s operating subsidiary as well as a lien on substantially all of the assets of Dobson/ Sygnet and its operating subsidiary. The Sygnet credit facilities require that Dobson/ Sygnet and we maintain certain financial ratios. The failure to maintain these ratios would constitute an event of default, notwithstanding Dobson/ Sygnet’s ability to meet its debt service obligations. The Sygnet credit facilities amortize quarterly. The $40.4 million revolving credit facility terminates on September 23, 2006. The $295.6 million term loans terminate on December 23, 2007. The weighted average interest rate on the Dobson/ Sygnet credit facilities was 7.8% for the year ended December 31, 2001.

American Cellular

      The American Cellular joint venture has a bank credit facility of $1.34 billion with Bank of America N.A., as Administrative Agent and a group of participating lenders. American Cellular has required, and will likely continue to require, substantial capital to further develop, expand and upgrade its wireless systems. The American Cellular joint venture has budgeted approximately $50.0 million to $55.0 million for American Cellular capital expenditures in 2002, of which, approximately $5.0 million to $10.0 million will be used to begin their GSM/ GPRS overlay. If American Cellular does not generate sufficient cash flows from operations or otherwise have sufficient access to capital to meet all of its debt service, capital expenditure, working capital or other operating needs, we may be required to fund our 50% share of any capital needs of the American Cellular joint venture in order to protect our substantial investment in it.

      At December 31, 2000, American Cellular was in violation of their interest coverage ratio covenant. American Cellular received a waiver from their lenders for this covenant violation. This credit facility was amended effective March 14, 2001, when American Cellular permanently repaid $200.0 million of the term loan. American Cellular used proceeds from the issuance of $450.0 million Senior Subordinated Notes due 2009 (described below), to reduce their credit facility to $1.55 billion. This credit facility was further amended effective June 4, 2001, when American Cellular permanently repaid $201.3 million of the term notes under the credit facility with proceeds from the issuance of $250.0 million Senior Subordinated Notes due 2009 (described below) and their credit facility was reduced to $1.34 billion. On September 27, 2001, American Cellular and their lenders agreed to a third amendment to the credit facility, which modifies certain financial covenants (described below). In addition to their financial covenants, American Cellular is required to make prepayments of proceeds received from significant asset sales, new borrowings and a portion of excess cash flow. Therefore, when American Cellular completed the sale of Tennessee 4 to Verizon Wireless for a total purchase price of $202.0 million during February 2002, they permanently prepaid approximately $190.0 million of their credit facility. The maximum availability of American Cellular’s credit facility is limited by restrictions, such as certain financial ratios. The maximum availability subject to these restrictions is $1,145.8 million. As of December 31, 2001, American Cellular had outstanding borrowings under their credit facility of $1,113.6 million and there was approximately $32.2 million available under this credit facility.

      American Cellular’s amended credit facility imposes a number of restrictive covenants that, among other things, limit American Cellular’s ability to incur additional indebtedness, create liens and pay dividends. In addition, American Cellular is required to maintain certain financial ratios including, but not limited to:

	•	a ratio of senior indebtedness to operating cash flow of 7.00 to 1 at December 31, 2001, decreasing to 5.75 to 1 at December 31, 2002 and decreasing over time to 2.50 to 1;

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	•	a ratio of total indebtedness to operating cash flow of 10.10 to 1 at December 31, 2001, decreasing to 7.75 to 1 at December 31, 2002 and decreasing over time to 4.00 to 1;
	•	a ratio of operating cash flow to debt service requirements of 1.20 to 1 at December 31, 2001, increasing to 1.35 to 1 at December 31, 2002 and decreasing over time to 1.20 to 1;
	•	a ratio of operating cash flow to interest expense requirement of 1.45 to 1 at December 31, 2001, increasing to 1.80 to 1 at December 31, 2002 and increasing over time to 2.50 to 1;
	•	beginning on December 31, 2002, a ratio of operating cash flow minus capital expenditures to the sum of debt service requirements and cash distributions of 1.00 to 1 and continuing over time at 1.00 to 1; and
	•	a limitation on capital expenditures.

      On March 14, 2001, American Cellular sold $450.0 million principal amount of Senior Subordinated Notes at a discount of $3.3 million that carry an interest rate of 9.5%. The discount will be amortized over the life of the notes. On June 4, 2001, American Cellular sold $250.0 million principal amount of Senior Subordinated Notes at a discount of $3.6 million that carry an interest rate of 9.5%. The discount will be amortized over the life of the notes. The proceeds were used to repay outstanding indebtedness under the American Cellular credit facility and to deposit funds into an interest reserve account to fund the first four scheduled interest payments on the notes.

Dobson Communications

      On January 14, 2000, we repurchased $159.7 million principal amount of our outstanding $160.0 million aggregate principal amount of senior notes. The notes mature in April 2007 and accrue interest at an annual rate of 11.75%, payable semi-annually on each April 15 and October 15. We repurchased our outstanding Senior Notes with funds available under our credit facility described above.

      On June 15, 2000, we completed the private placement of $300.0 million principal amount of our 10.875% Senior Notes due 2010. The offering resulted in net proceeds totaling $290.2 million. We used $207.0 million of the proceeds to repay indebtedness under the revolving credit facility of our subsidiary, DOC LLC, and will continue using the remaining balance for working capital and other general corporate purposes.