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UNITED STATES

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, 2003

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

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

     As of March 1, 2004, there were 114,318,003 shares of registrant’s $.001 par value Class A common stock outstanding and 19,418,021 shares of the registrant’s $.001 par value Class B common stock outstanding. Based upon the closing price for the registrant’s Class A common stock on the Nasdaq National Market as of June 30, 2003, (the last business day of the registrant’s most recently completed second fiscal quarter), the aggregate market value of 30,034,999 shares of Class A common stock held by non-affiliates of the registrant was approximately $158,284,445.

     Documents incorporated by reference: The information called for by Part III is incorporated by reference to the definitive proxy statement for the registrant’s 2004 annual meeting of stockholders, which will be filed with the Securities and Exchange Commission not later than 120 days after December 31, 2003.

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DOBSON COMMUNICATIONS CORPORATION

FOR THE YEAR ENDED DECEMBER 31, 2003

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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, 2003, our wireless telephone systems covered a total population of 10.6 million and we had approximately 1,552,100 subscribers with an aggregate market penetration of 14.6%. 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 and through the internal growth of our business. We offer digital voice and digital feature services to all of our covered population through our existing Time Division Multiple Access, or TDMA, digital network. We are currently in the process of updating our digital network to Global System for Mobile Communications, or GSM, and General Packet Radio Service, or GPRS, with an evolution towards Enhanced Data for GSM Evolution, or EDGE, technology which will enable us to offer enhanced data services to our subscribers and roaming partners. For the year ended December 31, 2003, we had total revenue of $735.8 million, net income applicable to common stockholders of $151.0 million and net income applicable to common stockholders per common share of $1.42. At December 31, 2003, on a consolidated basis, we had $2.4 billion of indebtedness and stockholders’ equity of $113.5 million.

      We focus on acquiring and operating a mix of rural and suburban wireless systems because we believe these wireless systems provide strong growth opportunities due to lower penetration rates, higher subscriber growth rates and less competition for subscribers than wireless systems located in larger metropolitan areas.

      We formed ACC Escrow Corp. on June 23, 2003 as our wholly-owned subsidiary. ACC Escrow Corp. began operations on August 8, 2003, when it completed the sale of $900.0 million of its 10% senior notes, the proceeds of which were used in American Cellular’s restructuring. Prior to August 19, 2003, American Cellular was owned by a joint venture, which was equally owned by AT&T Wireless Services, Inc. and us. On August 19, 2003, ACC Escrow Corp. was merged into American Cellular and American Cellular completed an exchange offer for its existing 9.5% senior notes due 2009. In the exchange offer, the holders of $681.9 million of the $700 million outstanding principal amount of American Cellular’s existing notes exchanged those existing notes and received 43.9 million shares of our Class A common stock, 681,900 shares of our Series F convertible preferred stock having an aggregate liquidation preference of $121.8 million and convertible into a maximum of 13.9 million shares of our Class A common stock, and $48.7 million in cash. In addition, we issued 4,301 shares of our Series F convertible preferred stock and 276,848 shares of our Class A common stock in payment of certain fees. American Cellular used a portion of the proceeds from the sale of ACC Escrow Corp.’s 10% senior notes to fully repay its existing credit facility. Upon consummation of the restructuring, American Cellular became our indirect wholly-owned subsidiary. On December 31, 2003, all of American Cellular’s subsidiaries, except ACC Lease Co., Inc. and Alton CellTelCo Partnership, were merged into American Cellular. As of December 31, 2003, American Cellular’s systems covered a total population of 5.0 million and had approximately 709,200 subscribers, giving American Cellular an aggregate market penetration of 14.2%. We discuss other acquisitions, and discontinued operations, below under the caption “Acquisitions and Discontinued Operations.”

Competitive Strengths

We believe our competitive strengths include the following.

      Substantial Cash Flow. We have significantly improved the efficiency of our operations during the past twelve months, in part through decreases in our off-network roaming expense and reductions in the churn of our subscriber base. Our ability to generate substantial cash flow enhances our debt service capacity and enables us to invest in incremental network equipment and technology, which we believe will enhance the level of service we can provide to our own subscribers and to the subscribers of our roaming partners.

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      Strong Current Market Position. We have achieved significant market share in each of our markets, distinguishing 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 roaming relationships, advanced technologies, local sales channels and diverse service offerings, which include national, regional and local rate plans.

      Attractive Markets. Our markets have demonstrated positive demographic growth trends and generally have maintained a high population density relative to other rural and suburban markets (but significantly lower than urban markets), which we believe enables us to deploy and operate our network more efficiently. In addition, our markets generally have fewer competitors than metropolitan markets and are located near major metropolitan areas, with wireless systems operated by our primary roaming partners, AT&T Wireless and Cingular Wireless. We also benefit from the relatively high density of highway and other traffic corridors in most of our markets, which typically generate high roaming activity. Substantially all of our wireless licenses are 850 MHz licenses, which we believe generally provide the most cost-effective platform for delivering service to the end user in our rural and suburban markets.

      Advanced Digital Technology. We continue to increase the capacity and capabilities of our systems to attract additional subscribers, increase the use of our systems by existing subscribers, increase roaming activity and further enhance the overall efficiency of our network. Although our primary technology is TDMA, we are in the process of overlaying GSM/ GPRS/ EDGE technology on our existing network, which will enable us to offer enhanced voice and data service plans to our own subscriber base and meet the needs of our roaming partners who have already begun utilizing GSM/ GPRS/ EDGE technology.

      Experienced Management Team. With more than 50 years of telecommunications experience on a combined basis, our senior management team, consisting of Everett R. Dobson, Douglas B. Stephens and Bruce R. Knooihuizen, is extremely knowledgeable and well regarded in the telecommunications industry.

      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 population of 10.6 million as of December 31, 2003. 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 have integrated the operations of acquired wireless systems into our existing operations to achieve economies of scale. We have generated efficiencies from the consolidation and centralized control of pricing, customer service and marketing, system design, engineering, purchasing, financial and administrative functions and billing functions. Our increased scale has enabled us to negotiate prices and services from third party service providers and equipment vendors on terms that we believe are more favorable than we could otherwise obtain.

Strategy

      Our strategy is to capitalize on our competitive strengths and acquire, develop and operate rural and suburban wireless systems. We have developed organizational, marketing and operational programs designed to increase the number of our subscribers, promote superior customer service, enhance roaming revenue, control operating costs and improve the profitability of our operations.

      Locally-Focused Management. Our local management teams have day-to-day operating authority with the flexibility to respond to individual market requirements. We believe that our marketing and customer service functions are more effective when tailored to the local market population. We distribute our products primarily through retail outlets, a direct sales force and independent dealers, all of which foster a strong community presence for our products and operations.

      Strategic Roaming Relationships. We have developed strategic relationships with AT&T Wireless and Cingular Wireless, each of which operates wireless systems in major metropolitan statistical areas, or MSAs, near our wireless systems. These relationships include roaming agreements to allow our subscribers and the subscribers of our roaming partners to roam on each other’s networks at favorable rates. Our roaming

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      Deployment of GSM/ GPRS/ EDGE Technology. We recently accelerated the deployment of GSM/ GPRS/ EDGE technology over the entirety of our network. We expect to deploy GSM/ GPRS/ EDGE technology over our entire coverage area by the end of second quarter of 2004. GSM/ GPRS/ EDGE technology is the digital technology being used by our primary roaming partners, AT&T Wireless and Cingular Wireless, and will enable us to provide faster data services and provide our customers with smaller, more functional handsets. We expect that the deployment of GSM/ GPRS/ EDGE technology will enhance our service offering and allow us to continue to grow our subscriber base. In addition, we will continue to have the ability to provide roaming service for AT&T Wireless and Cingular Wireless as they each continue to upgrade the technology of their respective networks.

      Targeted Sales Efforts. We seek to attract subscribers who will generate high monthly revenue. Our local management designs marketing programs to target these subscribers and tailors distinctive rate plans to emphasize the quality and value of our services.

      Superior Customer Service. We support local customer service through retail stores, a direct sales force and regional customer service call centers that offer 24-hour services. 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.

Operations

      These tables set forth information with respect to our existing wireless markets. Information with respect to populations in licensed areas is as of December 31, 2003 and is our estimate based upon the Claritas 2000 Bureau of Census results, adjusted to exclude those portions of rural service areas, or RSAs, and MSAs not covered by our licenses, as well as discontinued operations. Net population represents total population less minority ownership interests in these licenses. Information with respect to subscribers is as of December 31, 2003. We determine market penetration by dividing the total number of subscribers in each of our Federal Communications Commission, or FCC, wireless licensed areas at the end of the period by the estimated total population covered by the applicable wireless license.

      The following table sets forth information with respect to our existing markets as of December 31, 2003.

	*	Denotes the American Cellular markets.

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      On February 17, 2004, we transferred our Maryland RSA 2 wireless property in exchange for Cingular Wireless’ Michigan RSA 5 wireless property, $22.0 million in cash and its one-percent ownership interests in Texas RSA 2 and Oklahoma RSAs 5 and 7. We are the majority owner of these three markets. The Maryland RSA 2 property has a total population of approximately 470,700, including the cities of Ocean City, Salisbury, Easton and Cambridge. The Michigan property covers a population of approximately 169,400, including the cities of Cadillac, Manistee, and Ludington. The exchange resulted in a net loss of approximately 15,500 subscribers for us. As a result of a definitive agreement that was entered into prior to December 31, 2003, and closed on February 17, 2004, we have reclassified our historical financial statements to reflect the operations of the Maryland RSA 2 property as discontinued operations.

      On December 23, 2003, we entered into a definitive agreement to acquire the assets of NPI-Omnipoint Wireless, LLC, or NPI, for approximately $28 million. NPI owns PCS licenses covering a total population of 1.2 million. Its GSM network currently covers a total population of 1.0 million in northern Michigan. NPI has approximately 35,000 subscribers. The transaction is expected to close in the second quarter of 2004 and is subject to regulatory approvals and other customary closing conditions.

Services and Features

      We solidify our commitment to our customers by placing a high priority on offering the latest products, services and competitive rate plans. We have completed the deployment of a fully digital network and have introduced a wireless Internet product in an on-going effort to consistently deliver advanced services and technologies to our customers. We attempt to maximize the choices available to our customers by offering the latest lines of hand-held wireless phones from a wide variety of manufacturers. We design our rate plans to fit the specific needs of our customers, which we balance with our on-going objective to increase profitability.

      The following are key components of our service offerings:

      Wireless Calling. Our primary service offering is wireless telephone service. We currently offer digital service using the TDMA digital standard, 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. We expect to complete the deployment of GSM/GPRS/EDGE

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      Digital Handsets. As of December 31, 2003, approximately 95% of our subscribers utilized digital technology. Our digital subscribers use dual-mode, dual-band handsets. 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 wireless carriers, including Cingular Wireless.

Marketing

      The following are key components of our marketing strategy:

      Branding. We offer wireless service under the CELLULAR ONE® trademark. We believe the national support offered by the Cellular One Group has enhanced our advertising exposure. 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® trademark pursuant to licensing agreements with the Cellular One Group. We pay licensing and advertising fees based upon the population of the licensed areas. Our licensing agreements with the Cellular One Group 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® trademark, we use and own the service mark DOBSON CELLULAR SYSTEMS®, in connection with our wireless telephone systems in western Oklahoma and the Texas Panhandle.

      Advertising. 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.

      We focus our marketing programs on attracting subscribers whom we believe are likely to generate high monthly revenue. 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 market our service offerings primarily through our direct sales force and company-owned retail stores. We also market our service offerings through a network of dealers, 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 direct mail programs.

      Segmented Rate Plans. We offer our subscribers a diverse array of rate plans, so that each subscriber can choose the plan that best fits that subscriber’s expected calling needs. Our offerings include our Clear Across America™ national rate plans, which use our networks, and those of AT&T Wireless and Cingular Wireless, plus regional and local rate plans at a variety of pricing tiers. The majority of our new digital subscribers are on our local rate plans, which generally include only areas covered by our network as the “home” area. Our rate plans generally combine a fixed monthly access charge, a designated number of minutes-of-use, per minute usage charges for minutes in excess of the included amount and additional charges for certain custom-calling features. Most of our plans include some features such as voice mail, caller ID, call forwarding and call waiting. These plans offer value to the customer while enhancing airtime usage and revenue. In the future, we will be focusing our offers to take advantage of our GSM/GPRS/EDGE network that will be fully deployed in 2004. Our focus on offering plans that best fit our subscriber’s needs will remain our main objective.

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Sales and Distribution

      We sell and distribute our wireless services, phones and accessories primarily through three distribution channels; retail stores, direct sales and independent dealers. For the year ended December 31, 2003, almost 65% of our gross subscriber additions were added through our retail stores, while our direct sales force was responsible for approximately 10% and our independent dealers added almost 25%.

      As of December 31, 2003, we had 228 retail stores and outlets, most of which are fully equipped to handle customer service. Some of these stores are also authorized warranty repair centers. Our stores and our well-trained sales staff provide customer-friendly retail environments through extended hours, and by offering a large selection of products and services at convenient locations, which are designed to make the sales process quick and easy for the subscriber.

      We train and compensate our sales force in a manner designed to stress the importance of customer satisfaction. We believe that our direct sales force is able to select and screen new subscribers and select pricing plans that realistically match subscriber needs. As a result, we believe that our direct sales force reduces our marketing costs because our subscriber retention rate is higher than when we use independent dealers. As of December 31, 2003, we had approximately 160 employees in our direct sales force.

      As of December 31, 2003, we had relationships with approximately 320 independent dealers, or agents. Those agents operate approximately 600 retail outlets in our markets. These agents allow us a third distribution channel by offering our services and equipment through retail outlets, such as electronics stores, national retail chains and independent contractors.

      We have developed an after-sale telemarketing program which we believe helps to reduce our churn rates and enhance customer loyalty. This program, which is conducted by our sales force and customer service personnel, includes courtesy calls to our new customers and allows our sales staff to check customer satisfaction and offer our customers additional calling features.

Customer Service

      Customer service is an essential element of our marketing and operating philosophy. We seek to attract new subscribers and retain existing subscribers by providing high-quality customer service. Our customers benefit from a local staff, including an area 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, 2003, we managed six call centers, which service our markets. 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 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 frequently contact our subscribers 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 operate many systems that are adjacent to major metropolitan areas and include a high concentration of expressway corridors. These systems tend to have a significant amount of roaming activity.

      Our two most significant roaming partners are AT&T Wireless and Cingular Wireless, which accounted for almost 90% of our roaming traffic in 2003. We have entered into long-term roaming agreements with both AT&T Wireless and Cingular Wireless to provide their subscribers with TDMA and GSM services when they

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      Our most significant roaming partner is AT&T Wireless. For the year ended December 31, 2003, AT&T Wireless’ customers accounted for approximately 44% of our roaming revenue, or approximately 12% of our total operating revenue. In early 2004, Cingular Wireless announced its intention to acquire AT&T Wireless. As we discussed in our 2004 Investor’s Conference held on February 18, 2004, the acquisition of AT&T Wireless by Cingular Wireless should not have a material impact on the effectiveness of our roaming contracts with each of AT&T Wireless and Cingular Wireless described below.

      Dobson Cellular Systems’, or DCS’, roaming agreements with AT&T Wireless for both TDMA and GSM/ GPRS/ EDGE expire on June 30, 2008, subject to earlier termination under certain circumstances, including the technical or commercial impracticability of using a party’s roaming network, the occurrence of an unacceptable level of unauthorized use, or the revocation or nonrenewal of a party’s GSM license.

      The roaming agreements provide for negotiated roaming rates for TDMA and GSM/ GPRS/ EDGE in the respective markets of DCS and AT&T Wireless. The rates are non-reciprocal. The TDMA rates are set through June 30, 2008. For GSM/ GPRS/ EDGE the rates are fixed through June 30, 2006, subject to modification in limited circumstances. The rates in years 2007 and 2008 could decrease to a limited extent based on the average revenue per minute earned by AT&T Wireless from its subscribers.

      Subject to certain exceptions, through June 30, 2006, AT&T Wireless and its controlled affiliates have agreed not to expand their current GSM/ GPRS/ EDGE or TDMA footprint to directly or indirectly engage in a business that provides or resells, or grants a license that facilitates or enables the provision or resale of, facilities-based mobile wireless telecommunications services using GSM/GPRS/EDGE or TDMA on any spectrum in any of DCS’ markets. Subject to the provisions of the roaming agreements, DCS may elect to extend the exclusivity period for 2007 and 2008. AT&T Wireless’ current GSM/ GPRS/ EDGE footprint overlaps with approximately 2.0 million of the population covered by DCS’ wireless licenses.

      AT&T Wireless may engage in investments, asset sales or other business combination transactions involving markets overlapping with DCS if the overlap is less than 25% of the total markets in the transaction (measured by population). In such event, AT&T Wireless customers would no longer need to roam on DCS’ systems in these markets.

      AT&T Wireless has agreed that its customers, when roaming in virtually all of DCS’ markets, will seek GSM/ GPRS/ EDGE roaming service from DCS prior to seeking such service from another carrier other than Cingular so long as DCS is in compliance with the construction, operational and other requirements under the agreements.

      AT&T Wireless may terminate the preferred GSM roaming provider and limited exclusivity provisions of the agreement if DCS ceases to be in compliance with the construction, operational and other requirements under the agreement, or if a major competitor of AT&T Wireless acquires DCS.

      AT&T Wireless has agreed that its customers, when roaming in virtually all of DCS’ markets, will seek TDMA roaming service from DCS prior to seeking such service from another carrier so long as DCS is in compliance with the construction, operational and other requirements under the agreement.

      American Cellular’s roaming agreement with AT&T Wireless for TDMA expires in 2007. Non-reciprocal rates for TDMA are set forth through the end of the term of the agreement. The roaming agreement for GSM/ GPRS/ EDGE expires on June 30, 2008, subject to earlier termination under certain circumstances, including the technical or commercial impracticability of using either party’s roaming network,

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      Subject to certain exceptions, through June 30, 2006, AT&T Wireless and its controlled affiliates have agreed not to expand their current GSM/ GPRS/ EDGE or TDMA footprint to directly or indirectly, engage in a business that provides or resells, or grants a license that facilitates or enables the provision or resale of, facilities-based mobile wireless telecommunications services using GSM/ GPRS/ EDGE or TDMA on any spectrum in any of American Cellular’s markets. Subject to the provisions of the roaming agreements, American Cellular may elect to extend the exclusivity period for 2007 and 2008. AT&T Wireless’ current GSM/ GPRS/ EDGE footprint overlaps with approximately 0.4 million of the population covered by American Cellular’s wireless licenses.

      AT&T Wireless may engage in investments, asset sales or other business combination transactions involving markets overlapping with American Cellular if the overlap is less than 25% of the total markets in the transaction (measured by population); however, in such event, American Cellular will have the right to purchase from AT&T Wireless and its affiliates, the markets constituting the overlap.

      AT&T Wireless has agreed that its customers, when roaming in any of American Cellular’s markets, will seek TDMA or GSM/ GPRS/ EDGE roaming service from American Cellular prior to seeking such service from another carrier so long as American Cellular is in compliance with the construction, operational and other requirements under the agreements.

      AT&T Wireless may terminate the preferred GSM roaming provider and limited exclusivity provisions of the agreements if American Cellular ceases to be in compliance with the construction, operational and other requirements under the agreements, or if a major competitor of AT&T Wireless acquires American Cellular.

      For the year ended December 31, 2003, Cingular Wireless’ customers accounted for approximately 36% of our roaming revenue, or approximately 10% of our total operating revenue. Under our Cingular Wireless roaming agreement, Cingular Wireless and we charge each other favorable roaming rates for usage of both TDMA and GSM in our respective markets. These rates have decreased over time through December 16, 2003, when the rates reached a floor that made them a fixed rate until December 31, 2008. Subject to certain limitations, we are the preferred roaming partner for GSM and TDMA services for substantially all of Cingular’s customers that roam in our markets. Our roaming agreement with Cingular Wireless requires that we maintain and provide certain call features and related services to roaming customers, such as call waiting, call forwarding, three-way calling, caller ID and voice mail. This roaming agreement may be terminated or suspended by either party if the FCC revokes a license covering a material portion of either party’s markets, or if either party fails to control subscriber fraud, fails to adhere to system technical requirements and upgrades or breaches any of the material terms of the roaming agreement. The roaming agreement expires on December 31, 2011.

North American Cellular Network

      We are included in the North American Cellular Network, or 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.

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Billing System

      In November 2002, we signed a five year contract with Convergys Corporation for use of their billing and customer care systems under a service bureau arrangement. During the last half of 2003, we completed the conversion from previous billing vendor, Verisign Telecommunications Services, or VTS, to the Convergys Atlys® billing and customer care systems operating in a Convergys data center to support wireless voice and data services as well as emerging technology offerings. Consistent with the billing services previously offered by VTS, Convergys provides billing for all our subscribers in all our markets. Convergys handles all the administration and maintenance of the Atlys® application and the associated infrastructure. Convergys and their partners are responsible for the processing and printing of all customer invoices.

Network Operations

      Network Communications Equipment. Our network communications equipment is provided by a variety of leading network suppliers, including Nortel Networks and Ericsson.

      Connection Agreements. Our wireless network connects to the public switched telephone network system through local exchange carriers. We have interconnection agreements with BellSouth, SBC (Ameritech, Southwestern Bell), Verizon (Bell Atlantic, GTE), Sprint, and Qwest (U S West) and other local exchange carriers within our markets. The expiration dates of these agreements vary from one to three years. Upon expiration, the agreements automatically renew for six months to one year and can terminate with the mutual written consent by either party.

      Network Operations. Our network operations are monitored by regional network personnel, who provide monitoring on a real-time basis for items including alarm monitoring, power outages, tower lighting problems and traffic patterns.

      Cell Sites and Transmission Towers. As of December 31, 2003, on a consolidated basis, we operated 1,687 cell sites, of which 442 were on towers owned by us.

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 network 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 TDMA digital technology 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.

      By the end of the second quarter of 2004, we expect to complete the deployment of our GSM/ GPRS/ EDGE network. With this enhanced data network, we will offer 28Kb to 36Kb GPRS data speeds and 100Kb to 120Kb EDGE data speeds to our subscribers and to subscribers of our roaming partners. GSM/ GPRS/ EDGE is the network technology choice for our two largest roaming partners, AT&T Wireless and Cingular Wireless.

Competition

      We compete with one or more companies in our markets throughout our regions. In various markets, these companies include Alltel, AT&T Wireless, Cingular Wireless, Nextel, Rural Cellular, Sprint PCS, T-Mobile, US Cellular, Verizon Wireless, ACS (Alaska) and Western Wireless.

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      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. In addition, the FCC has required all wireless carriers to provide for wireless number portability for their customers. Once number portability is fully implemented, wireless customers will have the ability to change wireless carriers and retain their wireless telephone numbers. Number portability may result in an increase in churn throughout the industry. Some competitors have begun to market enhanced data services, such as single carrier radio transmission technology, or 1XRTT. We are currently in the process of upgrading our networks to GSM/ GPRS/ EDGE technology.

      We compete against other facilities-based cellular carriers, PCS carriers and enhanced specialized mobile radio, or ESMR 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.

      In early 2004, Cingular Wireless announced its intention to acquire AT&T Wireless. We expect a limited impact from this transaction because of the terms of our existing roaming agreements with Cingular Wireless and AT&T Wireless. We are the preferred roaming provider to Cingular Wireless and AT&T Wireless in substantially all of our TDMA markets. In addition, our subsidiary, American Cellular, is the preferred roaming provider to AT&T Wireless in its GSM markets. DCS’ GSM roaming agreement with AT&T Wireless presently permits AT&T Wireless to prefer Cingular Wireless over DCS, while our Cingular Wireless roaming agreement presently permits Cingular Wireless to prefer AT&T Wireless over us in GSM markets. While we expect to obtain some benefits as a result of the acquisition of AT&T Wireless by Cingular Wireless, we expect the acquisition will result in a minor reduction of our roaming revenue beginning in 2005.

      The FCC has created potential sources of new competition by auctioning additional PCS 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 allocated an additional 90 MHz of spectrum (in the 1.7 GHz and 2.1 GHz bands) for advanced wireless services, and adopted service and auction rules for these bands. The FCC has also initiated a number of rule making proceedings to allocate additional spectrum to wireless use, much of which can be licensed for commercial wireless purposes. In the future, we may also compete more directly with traditional landline telephone service providers.

      We also face, to a lesser extent, competition from mobile satellite service, or MSS, providers, as well as from resellers of these services and wireless service. The FCC has granted MSS providers the flexibility to deploy an ancillary terrestrial component to their satellite services. This added flexibility may enhance MSS providers’ ability to offer more competitive mobile services.

      Continuing technological advances in telecommunications make it impossible to predict the extent of future competition. However, due to the depth and breadth of the competitive services offered by operators using these other technologies, future competition from these operators could be intense.

Acquisitions and Discontinued Operations

      Verizon Sales. On February 8, 2002, we sold 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 February 28, 2002, we sold our 75% ownership interest in Arizona 5 RSA to Verizon Wireless for a total purchase price of $85.0 million. On February 8, 2002, American Cellular sold Tennessee 4 RSA to Verizon Wireless for a total purchase price of $202.0 million. As a result of these sales, the results of

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      California/ Alaska Swap. On June 17, 2003, we transferred our two remaining wireless properties in California to AT&T Wireless in exchange for its two wireless properties in Alaska, and all of the outstanding shares of our Series AA preferred stock that it previously held, which we then cancelled. We have reclassified our historical financial statements to reflect the operations of our California properties as discontinued operations. As a result of the completion of this transaction, our financial statements include the operating results from June 17, 2003 through December 31, 2003 and the assets and liabilities as of December 31, 2003 of the two Alaska properties.

      Maryland/ Michigan Swap. On February 17, 2004, we transferred our Maryland RSA 2 wireless property in exchange for Cingular Wireless’ Michigan RSA 5 wireless property, $22.0 million in cash and its one-percent ownership interests in Texas RSA 2 and Oklahoma RSAs 5 and 7. We are the majority owner of these three markets. The Maryland RSA 2 property has a total population of approximately 470,700, including the cities of Ocean City, Salisbury, Easton and Cambridge. The Michigan RSA 5 property covers a population of approximately 169,400, including the cities of Cadillac, Manistee, and Ludington. The exchange resulted in a net loss of approximately 15,500 subscribers for us. As a result of a definitive agreement that was entered into prior to December 31, 2003, we have reclassified our historical financial statements to reflect the operations of the Maryland RSA 2 property as discontinued operations. We expect to recognize a loss of $12.7 million, net of tax, in connection with this exchange transaction.

      Acquisition of NPI. On December 23, 2003, we entered into a definitive agreement to acquire the assets of NPI for approximately $28 million. NPI owns PCS licenses covering a total population of 1.2 million. Its GSM network currently covers a total population of 1.0 million in northern Michigan. NPI has approximately 35,000 subscribers. The transaction is expected to close in the second quarter of 2004 and is subject to regulatory approvals and other customary closing conditions.

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.

      The licensing, construction, modification, operation, ownership and acquisition of wireless telephone systems are subject to regulations and policies adopted by the FCC under the Communications Act of 1934, as amended (the Communications Act). These regulations and policies govern, among other things, applications for licenses to construct and operate wireless communications systems, ownership of wireless licenses and the transfer of control or assignment of such licenses, and the ongoing technical and operational requirements under which wireless licensees must operate.

      The FCC licenses cellular systems in accordance with 734 geographically defined market areas comprised of 306 MSAs and 428 RSAs. In each market, the FCC licenses two cellular systems operating on different 25 MHz frequency blocks designated as Block A and Block B. Apart from the different frequency blocks, there is no technical difference between the two cellular systems and the operational requirements imposed on each by the FCC are the same. Under FCC rules, the authorized service area of a cellular provider in each of its markets is referred to as the cellular geographic service area. The cellular geographic service area may conform exactly to the boundaries of the FCC-designated MSA or RSA, or it may be smaller if a licensee has chosen not to provide services to certain areas. A cellular licensee has the exclusive right to expand its cellular geographic service area boundaries within the licensee’s MSA or RSA for a period of five years after grant of

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      PCS licenses are awarded by the FCC for protected geographic service areas called major trading areas, or MTAs, and basic trading areas, or BTAs, which are defined by Rand McNally & Company. Under this scheme, the United States and its possessions and territories are divided into 493 BTAs, all of which are included within 51 MTAs. Each PCS license authorizes operation on one of six frequency blocks allocated for broadband PCS. The FCC has allocated 120 MHz of radio spectrum in the 1.9 GHz band for licensed broadband PCS. The FCC divided the 120 MHz of spectrum into two 30 MHz blocks (A and B Blocks) licensed for each of the 51 MTAs, one 30 MHz block (C Block) licensed for each of the 493 BTAs, and three 10 MHz blocks (D, E and F Blocks) licensed for each of the 493 BTAs, for a total of more than 2,000 licenses.

      The FCC has adopted construction benchmarks 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. We are in compliance with the applicable construction requirements that have arisen for the PCS licenses we currently hold. We expect to meet all future construction requirements as well.

      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 for a new ten-year term each of our licenses for which a renewal application was required. 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.

      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 this 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 in which we hold a controlling interest or us that would warrant such a finding by the FCC.

      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. In a pending proceeding, the FCC is

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      In September 2002, the Commission adopted a Report and Order that removed or significantly reduced the impact of many outdated cellular rules, eliminated a number of technical requirements and granted additional technical and operational flexibility. Among the changes is a phase-out over a five-year period of the requirement that all cellular carriers provide analog service throughout their territory. These new rule changes became effective on February 18, 2003, and have enabled us to operate more efficiently and to utilize our licensed spectrum more effectively in providing services that meet our customers’ requirements. The phase-out of cellular analog service is tied to accommodating the needs of the hearing impaired and their ability to utilize hearing aids with digital wireless phone service. In this regard, the FCC adopted another Report and Order in August 2003 requiring digital wireless phone manufacturers and providers of digital wireless services such as ourselves to take steps to develop and offer digital wireless handsets that are compatible with hearing aid devices. This order will increase our costs by requiring us to train our sales force on compatible digital handsets, comply with related reporting requirements, and engage in outreach efforts, and may increase the price of wireless handsets for consumers.

      The FCC also regulates a number of other aspects of the cellular business. Federal legislation enacted in 1993 requires the FCC to reduce the disparities in the regulatory treatment of similar mobile services, such as cellular, PCS and ESMR services. Under this regulatory structure, all of our cellular and PCS licenses are classified as CMRS licenses. As a CMRS provider, the FCC regulates us as a common carrier. The FCC, however, has exempted cellular and PCS offerings from some typical common carrier regulations, such as tariff and interstate certification filings, thereby allowing us to respond more quickly to our competition in the marketplace. The 1993 federal legislation also preempted state rate and entry regulation.

      The FCC permits cellular, broadband PCS, paging and ESMR 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 ESMR licensees, although the extent of lawful state regulation of such “wireless local loop” service is undetermined. While we do not presently have a fixed service offering, our network is fully capable of accommodating such a service. We continue to evaluate our service offerings which may include a fixed service plan at some point in the future.

      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. In an effort to balance the competing interests of existing microwave users and newly authorized PCS licensees, the FCC adopted a transition plan to relocate such microwave operators to other spectrum blocks and a cost sharing plan so that if the relocation of an incumbent benefits more than one PCS licensee, the benefiting PCS licensees will share the cost of the relocation. The transition and cost sharing plans expire on April 4, 2005, at which time remaining incumbents in the PCS spectrum will be responsible for their costs to relocate to alternate spectrum locations. We have completed all of our relocation obligations (and related payments) for our PCS markets.

      Pursuant to a Report and Order adopted on November 8, 2001, while the FCC no longer restricts an entity’s ability to own interests in both cellular frequency blocks in an MSA market (the so-called cellular cross interest rule), the FCC continues to apply the cross interest rule to ownership interests in RSAs. We have joined with three other carriers to request reconsideration of the FCC’s decision to retain the cellular cross interest restriction with respect to ownership interests in RSAs, as we believe the record does not provide any support for distinguishing between interests in RSAs and similar interests in MSAs. In a Notice of Proposed Rulemaking released on October 6, 2003, the FCC proposed rule changes to discontinue the cellular cross-interest restriction where there are more than three competitors in a particular RSA. The FCC is also

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      Also pursuant to that Report and Order, as of January 1, 2003, the FCC no longer enforces a particular limit on the amount of CMRS spectrum in which an entity may hold an attributable interest (formerly known as the “spectrum cap”). The FCC now engages in a case-by case review of transactions that would raise concerns similar to those that the spectrum cap was designed to address. By eliminating a hard cap in favor of the more flexible analysis, we believe the changes adopted by the FCC in the November 8, 2001 Report and Order could further increase the ability of wireless operators to attract capital or to make investments in other wireless operators.

      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 of any rights thereunder. Although we cannot ensure 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. In a Report and Order released October 6, 2003, the FCC adopted a streamlined transfer and assignment process that will be instituted beginning April 5, 2004. Under this new process, certain assignment or transfer of control applications may be granted within a timeframe shorter than the current rules allow.

      FCC rules restrict the voluntary assignments or transfers of control of certain PCS licenses in the C and F Blocks (the so-called “Entrepreneurs’ Blocks”), which were awarded in auctions in which bidding was limited to entities below a certain size and in which certain bidding enhancements (i.e., bidding credits and installment payment plans) were offered. We previously qualified for and presently hold some Entrepreneurs’ Block licenses. During the first five years of the license term (or until the licensee satisfies the five-year construction benchmark), assignments or transfers affecting control of such licenses are permitted only to assignees or transferees that meet the eligibility criteria for participation in the Entrepreneurs’ 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 the C or F Block, met the same eligibility criteria at the time of receipt of such licenses. The FCC also requires that “entrepreneurs” make “unjust enrichment payments” if they seek to transfer control of or assign an Entrepreneurs’ Block license to an entity that does not qualify for the same level of benefits. During the entire ten-year initial license term, if a license is being paid for in installments, the FCC will condition its approval of a transfer or assignment on remittance of all unpaid principal and accrued interest on the license if the proposed transferee or assignee does not qualify for the installment payment plan. In addition, during the first five years of the license term, an entrepreneur seeking to transfer control of or assign a license must repay to the government all or part of any bidding credit it benefited from in the auction if the proposed transferee or assignee does not qualify for the same level of bidding credit. These rules could restrict our ability to assign or transfer control of our Entrepreneurs’ Block licenses or acquire such licenses from other entities.

      The Communications Act includes provisions that authorize the FCC to restrict the level of ownership that foreign nationals or their representatives, a foreign government or its representative or any corporation organized under the laws of a foreign country may have in us. The law permits indirect ownership of as much as 25 percent of our equity without the need for any action by the FCC. If the FCC determines that the public interest would be so served, it may revoke licenses or require an ownership restructuring in the event that such ownership exceeds the statutory 25 percent benchmark. The FCC generally permits, however, 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.

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      The Communications Act and the FCC’s rules impose a number of requirements upon cellular and PCS licensees. These requirements could increase our costs of doing business.

      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.

      The FCC has adopted requirements for cellular, PCS and other CMRS providers to implement basic and enhanced 911, or E-911, services. These services provide state and local 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 stages, and on a market-by-market basis as emergency service providers request the implementation of E-911 services within their locales. In June 2002, the FCC extended the deadlines for meeting certain of these 911 requirements — the “Phase II” capabilities whereby emergency service providers receive the 911 caller’s geographic location — to March 1, 2003, at the earliest (the actual date for implementing this capability in any given locale will be based on the readiness of public safety agencies to participate in E-911 services). We are currently constructing facilities to implement these capabilities in several markets, although we cannot state at this time whether we will be able to meet all of the requirements imposed by the FCC, whether some additional relief from these regulations will be required, or whether the FCC would grant such relief if we request that it do so. The extent to which we are required to deploy E-911 services 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 E-911 services. Federal legislation enacted in 1999 may limit our liability for uncompleted 911 calls to a degree commensurate with wireline carriers in our markets.

      Under certain circumstances, federal law also requires cellular and PCS carriers to provide law enforcement agencies with capacity to support lawful wiretaps and technical capabilities for wiretaps. We obtained an interim waiver of these requirements through the period that ended November 19, 2003 for packet-mode services and requested an additional two-year extension of this waiver through November 19, 2005, and have obtained an interim waiver and for certain other capabilities associated with voice services through June 30, 2004. Federal law also requires compliance 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 upgrades.

      Because the availability of telephone numbers is dwindling, the FCC has changed the way that telephone numbers generally are allocated through “number pooling” rules. Number pooling is only mandatory at this point within the wireline rate centers in which we have drawn numbers and which are located in counties that are included in the “Top 100 MSAs” as defined by the FCC’s rules. A number of our markets may be partially or wholly contained within the Top 100 MSAs. We have expended capital preparing for number pooling in these markets as well as preparing to support the roaming of pooled numbers into our markets. The FCC also has authorized states to initiate limited numbering administration to supplement federal requirements. Some of the states in which we provide service have been so authorized.

      In addition, the FCC has ordered all carriers, including wireless carriers, to adopt a method for providing customers with telephone number portability, i.e., the ability to keep their telephone numbers when they change telecommunications carriers, either wireless to wireless or, in some instances, wireline to wireless, and vice versa. Under the local number portability rules, since November 24, 2003, CMRS carriers serving areas located in one of the Top 100 MSAs have been required to port their telephone numbers, provided that they received a request by February 24, 2003 from another carrier to do so. Outside of the Top 100 MSAs, CMRS carriers that receive a request to allow end users to port their telephone numbers must be capable of doing so within six months after receiving the request or by May 24, 2004, whichever is later. In addition, all CMRS carriers have been required since November 24, 2003 to support roaming nationwide for customers with ported or pooled numbers. These number portability requirements have resulted in added capital expenditures for us

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      The FCC has 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/or limit the manner in which we bill for services.

      The FCC is required to implement policies that mandate local exchange carriers to pay reciprocal compensation for the exchange of traffic with other carriers, including CMRS carriers such as us, at rates more closely related to cost. In a rulemaking proceeding pertaining to interconnection between local exchange carriers, or LECs, and CMRS providers such as us, the FCC concluded that LECs are required to compensate CMRS providers for the reasonable costs incurred by these providers in terminating traffic that originates on LEC facilities, and vice versa. The FCC is currently considering changes to LEC-CMRS interconnection and other so-called “intercarrier compensation” schemes, and the outcome of the proceeding may affect the manner in which CMRS carriers are charged or compensated for such traffic. In a Report and Order adopted on February 20, 2003 and released in August 2003, the FCC ruled that CMRS carriers such as ourselves cannot order “dedicated transport” facilities and at unbundled network element, or UNE, prices from LECs for connections from our wireless base stations and switches to the LEC’s telephone network. Furthermore, our ability to order transport between LEC facilities on an unbundled basis at UNE prices is limited by the extent to which alternative non-LEC transport facilities are available over certain routes (which can eliminate the LECs’ obligation to unbundle dedicated transport on those routes).

      The FCC has adopted rules that require interstate communications carriers, including cellular and PCS 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. The FCC initiated a rule making proceeding in which it solicited 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. Effective April 1, 2003, the FCC prospectively forbade carriers from recovering their administrative costs associated with administering the universal service assessments that carriers are required to pay. The FCC’s new rules require that carriers’ USF recovery charges to customers may not exceed the assessment rate that the carrier pays times the proportion of interstate telecommunications revenue on the bill. We have complied with these new requirements. They have had and will continue to have an impact on our ability to recover our administrative costs for administering our participation in the program.

      Wireless carriers may be designated as “Eligible Telecommunications Carriers,” or ETC, and may receive universal service support for providing service to consumers that use wireless service in high cost areas as their only phone service, as well as to consumers in these areas who also maintain wireline service. Other wireless carriers operating in states where we operate have obtained or applied for ETC status. Such other carriers’ receipt of universal service support funds may affect our competitive status in a particular market. We are currently applying for this designation in certain states in which we provide wireless service to qualifying high cost areas, and are contemplating whether and where else to apply. If we are successful in obtaining ETC status in the states in which we are applying and such payments are thus made available to us, they would be an additional source of revenue to us that could be used to support the service we provide in the high cost areas.

      Cellular and PCS carriers are exempt from the obligation to provide equal access to interstate long distance carriers. However, the FCC has 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. Our customers have access to alternative long distance carriers using toll-free numbers.

      There are restrictions on a telecommunications carrier’s use of customer proprietary network information without prior customer approval. FCC rules implementing these restrictions have been revised. Given our

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      Telecommunications carriers are required 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, we could be subject to the imposition of costly new requirements and, if found to have violated the rules, be subject to fines as well.

      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 rural and high cost areas and urban areas. 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 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 ensure 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.

      From time to time, federal or state legislators propose legislation that could affect us, either beneficially or adversely. We cannot ensure that federal or state legislation will not be enacted, or that regulations will not

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Employees and Dealers

      As of December 31, 2003, we had approximately 2,500 full time employees. We consider our employee relations to be good. In addition, as of that date, we had relationships with approximately 320 independent dealers, or agents. Those agents operate approximately 600 retail outlets in our markets. These agents allow us a third distribution channel by offering our services and equipment through retail outlets, such as car dealerships, electronics stores, paging service companies and independent contractors.

Available Information

      Copies of our Annual Report on Form 10-K, Quarterly reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, are available free of charge through our website (www.dobson.net) as soon as reasonably practicable after we electronically file the material with, or furnish it to, the Securities and Exchange Commission.

      We maintain our corporate headquarters in Oklahoma City, Oklahoma in a building we lease from an affiliate of DCCLP. We own or lease six regional call centers, which are located in Oklahoma City, Oklahoma, Frederick, Maryland, LaGrangeville, New York, Boardman, Ohio, Duluth, Minnesota and Fairbanks, Alaska. As of December 31, 2003, our wireless operations operated 228 retail stores and outlets and approximately 10 administrative offices, most of which are leased. 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.

      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 consolidated financial condition, results of operations or cash flows.

      Not applicable

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PART II

      Our Class A common stock is traded over-the-counter and is currently quoted on the Nasdaq National Market under the ticker symbol “DCEL.” Each share of our Class A common stock is entitled to one vote per share.

      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 is entitled to ten votes per share. Each share of our Class C common stock and Class D common stock, if issued, will be convertible into 111.44 shares of our Class A common stock, and will not be entitled to vote.

      The following table sets forth the range of high and low close prices for our Class A common stock for each quarter of 2002 and 2003:

      As of March 1, 2004, there were 196 holders of record of our Class A common stock and three holders of record of our Class B common stock. The closing price of our Class A common stock on March 1, 2004 was $4.21 per share. No shares of our Class C common stock and Class D common stock were outstanding as of March 1, 2004.

      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, our senior notes and our outstanding preferred stock limit our ability to pay cash dividends on our common stock.

      This table gives information about our common stock that may be issued upon the exercise of options, warrants or rights under our existing equity compensation plans. The table also includes information with respect to our outstanding restricted stock that has not vested and restricted stock available for issuance under our existing equity compensation plans. The information in this table is as of December 31, 2003.

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(1)	For purposes of the calculation of the weighted average exercise price, all shares of restricted stock granted under our existing equity compensation plans were deemed to have an exercise price of $0.00. Shares of stock purchased by our employees pursuant to the 2002 Employee Stock Purchase Plan are not included in this calculation.
(2)	We have reserved 1,000,000 shares of Class A common stock presently for issuance under our 2002 Employee Stock Purchase Plan. As of December 31, 2003, 141,059 shares of Class A common stock have been purchased by employees upon the exercise of options granted pursuant to this plan.
(3)	Includes our:

	•	1996 Stock Option Plan
	•	2000 Stock Incentive Plan
	•	2002 Stock Incentive Plan
	•	2002 Employee Stock Purchase Plan

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      The following table sets forth certain historical consolidated financial data with respect to each of the five years in the period ended December 31, 2003. The consolidated financial data has been derived from our consolidated financial statements and have been reclassified to reflect the sale of the properties we sold to Verizon Wireless in 2002, the exchange of the properties with AT&T Wireless in June 2003 and the exchange of Maryland RSA 2 with Cingular Wireless, announced in October 2003 and consummated in February 2004, as discontinued operations. The table also includes consolidated financial data from American Cellular Corporation from August 19, 2003 through December 31, 2003. 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)	Mandatorily redeemable preferred stock is shown net of any discounts or deferred financing costs.
(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 number of subscribers during such period. Churn is calculated and reported based on post-paid subscriber information.
(5)	Calculated and reported based on post-paid subscriber information and 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. Also see Item 6 for related financial information.

Overview

      Dobson Communications. 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 we believe have a significant number of potential customers with substantial needs for wireless communications. On August 19, 2003, American Cellular Corporation became our wholly-owned subsidiary. At December 31, 2003, American Cellular’s systems covered a total population of 5.0 million and had approximately 709,200 subscribers, giving American Cellular an aggregate market penetration of 14.2%. At December 31, 2003, our wireless systems covered a population of 10.6 million and we had approximately 1,552,100 subscribers, with an aggregate market penetration of 14.6%.

      Concurrently with the August 19, 2003 acquisition and restructuring of American Cellular described below, we merged our indirect, wholly owned subsidiaries, Dobson/ Sygnet Communications Company, Sygnet Wireless, Inc., and Sygnet Communications, Inc. with and into our wholly-owned subsidiary, DCS. As a result of these mergers, and the acquisition and restructuring of American Cellular, our operations are encompassed in our two primary subsidiaries, DCS and American Cellular. American Cellular does not guarantee any debt or other obligations of DCS or us, and DCS and we do not guarantee any debt or other obligations of American Cellular.

      As part of the American Cellular acquisition and restructuring, we agreed to appoint to our Board of Directors two persons who were recommended by the former holders of American Cellular’s 9.5% senior subordinated notes, and who were acceptable to us and our principal shareholder, Dobson CC Limited Partnership. We also agreed to limit the size of our board of Directors to seven persons. Accordingly, on February 18, 2004, Messrs. Mark S. Feighner and Robert A. Schriesheim became members of our Board, and Russell L. Dobson, one of our founders and a long-time director, withdrew as a director. Mr. Feighner is an experienced, strategic, customer-focused wireless services executive. Mr. Schriesheim is a highly qualified finance executive with significant experience in maximizing shareholder value through operational and financial improvements.

      American Cellular. Until August 18, 2003, we owned a 50% interest in a joint venture that owned American Cellular. We accounted for our interest using the equity method of accounting. As a result, through August 18, 2003, we reflected our equity share of the American Cellular joint venture in a single line item entitled “Investment in joint venture” in our balance sheet and our share of the American Cellular joint venture’s net income or loss in a single line item entitled “Loss from investment in joint venture” in our statement of operations.

      At June 30, 2002 and continuing through August 2003, American Cellular was not in compliance with its total debt leverage ratio covenant contained in its credit facility. Due to this and other factors and circumstances in existence in 2002, American Cellular re-evaluated the carrying value of its goodwill and indefinite life intangible assets in accordance with Statements of Financial Accounting Standards, or SFAS, No. 142. These re-evaluations resulted in American Cellular’s recognition of impairment losses totaling $377.0 million at June 30, 2002 and $423.9 million at December 31, 2002. After recognizing our portion of the impairment at June 30, 2002, our investment in the American Cellular joint venture was written down to zero. Therefore, the December 31, 2002 impairment loss of $423.9 million did not impact our results of operations or financial condition.

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      On August 19, 2003, we completed the restructuring of American Cellular’s indebtedness and equity ownership. Pursuant to this restructuring, we completed an exchange offer for American Cellular’s then outstanding 9.5% senior subordinated notes due 2009 (the “existing notes”). Holders of $681.9 million of the existing notes exchanged their notes for 43.9 million shares of our Class A common stock, 681,900 shares of our Series F convertible preferred stock with an aggregate liquidation preference of $121.8 million, convertible into a maximum of 13.9 million shares of our Class A common stock, and $48.7 million in cash. We also issued 4,301 shares of our Series F convertible preferred stock and 276,848 shares of our Class A common stock in payment of certain fees. Upon consummation of the restructuring, American Cellular became our wholly-owned subsidiary. Subsequently, all significant subsidiaries of American Cellular were merged into American Cellular.

      On August 8, 2003, ACC Escrow Corp., our newly formed, wholly-owned, indirect subsidiary, completed an offering of $900 million aggregate principal amount of 10% senior notes due 2011. The senior notes were issued at par and were assumed by American Cellular when ACC Escrow Corp. merged into American Cellular as part of the restructuring. The net proceeds from the offering were used to fully repay American Cellular’s existing bank credit facility and to pay expenses of the restructuring.

      American Cellular has filed with the Securities and Exchange Commission an Annual Report on Form 10-K for the year ended December 31, 2003. While we provide you with much of American Cellular’s financial and operational information for 2003, we refer you to American Cellular’s Annual Report to ensure you have a complete understanding of American Cellular’s financial and operational results.

Acquisitions and Discontinued Operations

      Maryland/ Michigan Swap. On February 17, 2004, we transferred our Maryland RSA 2 wireless property in exchange for Cingular Wireless’ Michigan RSA 5 wireless property, $22.0 million in cash and its one-percent ownership interests in Texas RSA 2 and Oklahoma RSAs 5 and 7. We are the majority owner of these three markets. As a result of a definitive agreement that was entered into prior to December 31, 2003 and closed on February 17, 2004, we have reclassified our historical financial statements to reflect the operations of our Maryland RSA 2 property as discontinued operations as of December 31, 2003.

      Acquisition of NPI. On December 23, 2003, we entered into a definitive agreement to acquire the assets of NPI for approximately $28 million. NPI owns PCS licenses covering a total population of 1.2 million. Its GSM network currently covers a total population of 1.0 million in northern Michigan. NPI has approximately 35,000 subscribers. The transaction is expected to close in the second quarter of 2004, subject to regulatory approvals and other customary closing conditions.

      California/ Alaska Swap. On June 17, 2003, we transferred our two remaining wireless properties in California to AT&T Wireless in exchange for its two wireless properties in Alaska, and all of the outstanding shares of our Series AA preferred stock that it previously held, which we then cancelled. We have reclassified our historical financial statements to reflect the operations of our California properties as discontinued operations. As a result of the completion of this transaction, our financial statements include the operating results from June 17, 2003 through December 31, 2003 and the assets and liabilities as of December 31, 2003 of the two Alaska properties.

      Verizon Sales. On February 8, 2002, we sold three of our wireless properties to Verizon Wireless for a total purchase price of $263.0 million. These properties included California 7 RSA, Ohio 2 RSA and Georgia 1 RSA, which covered a total population of approximately 659,000. On February 28, 2002, we sold our 75% ownership interest in Arizona 5 RSA to Verizon Wireless for a total purchase price of $85.0 million. Arizona 5 RSA covered a total population of approximately 199,200. On February 8, 2002, American Cellular sold Tennessee 4 RSA to Verizon Wireless for a total purchase price of $202.0 million. Tennessee 4 RSA covered a total population of approximately 290,800. As a result of these sales, the results of operations, assets and liabilities of these markets during the periods presented are included as discontinued operations in our consolidated financial statements. American Cellular and we used the proceeds from the sale of these properties primarily to pay down bank debt under our respective credit facilities.

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Trends and Guidance

      On February 18, 2004, we held an investor’s conference regarding our fourth quarter 2003 results of operations, certain trends in our roaming operations and business plans and guidance for 2004. We believe that the information provided during the investor’s conference is important to an understanding of us, trends in our business and our future operating expectations. While we summarize below much of the information provided at the conference, we refer you to our Form 8-K filed with the Commission on February 18, 2004, as well as to our website to obtain a copy of the presentation used in the conference, as well as to listen to the rebroadcast of the conference.

Subscribers

      Our subscriber base contains three types of subscribers; post-paid, reseller and pre-paid. At December 31, 2003, post-paid subscribers accounted for 93.5% of our subscriber base. These subscribers pay a monthly access fee for a wireless service plan that generally includes a fixed amount of minutes and certain service features. In addition to the monthly access fee, these subscribers are typically billed in arrears for long-distance charges, roaming charges and rate plan overages. Our reseller subscribers are similar to our post-paid subscribers in that they pay monthly fees to utilize our network and services. However, these subscribers are billed by a third party (reseller), who has effectively resold our service to the end user (subscriber). We in turn bill the third party (reseller) for the monthly usage of the end user (subscriber). At December 31, 2003, the reseller base accounted for 4.6% of our total subscriber base. Our pre-paid subscribers, which at December 31, 2003 accounted for 1.9% of our subscriber base, are subscribers that pre-pay for an agreed upon amount of usage.

      Our average monthly revenue per subscriber, discussed below under “Revenue”, and our total gross additions are calculated and reported based only on post-paid subscriber information. We have experienced a decline in our post-paid gross additions as a result of increased competition attributable to an accelerating pace of improvements in quality of digital technology, and increased products offered to the consumer. Many of our competitors already provide market enhanced data services, such as 1XRTT. Currently, we are in the process of upgrading our network to GSM/ GPRS/ EDGE and expect our gross subscriber additions to increase during 2004, as a result of new services that will be available with GSM/ GPRS/ EDGE. Post-paid gross subscriber additions from our continuing operations were 232,500, for the year ended December 31, 2003. This included 78,400 from our recent acquisitions, from the date of their respective acquisition. Post-paid gross subscriber additions were 204,700 for the year ended December 31, 2002 and 214,800, for the year ended December 31, 2001.

Revenue

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

      We derive service revenue by providing wireless services to our subscribers. The wireless industry has experienced declining average revenue per minute as competition among wireless service providers has led to reductions in rates for airtime. These declines have generally been offset by significant increases in average minutes-of-use per subscriber. As a result, our average monthly revenue per post-paid subscriber has remained constant, amounting to $42 for the year ended December 31, 2003, ($44 excluding the impact of our 2003 acquisitions), $44 for the year ended December 31, 2002, and $44 for the year ended December 31, 2001. We believe there is an opportunity in 2004 for our average monthly revenue per post-paid subscriber to increase from current levels primarily due to additional voice and data services available as a result of our providing GSM/ GPRS/ EDGE technology.

      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 revenues have traditionally had 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, our roaming margins are declining and are becoming more comparable to margins from our subscribers due to increased

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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. Equipment revenue is recognized when the equipment is delivered to the customer.

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, referred to as “roaming” costs. Consistent with the trend of declining roaming revenue per minute, our roaming expense per minute has declined as well. As a result, our cash cost per user has continued to decline. Our cash cost per user was $22 for the year ended December 31, 2003, $25 for the year ended December 31, 2002, and $26 for the year ended December 31, 2001. This decline in expense per minute has contributed significantly to the recent trend of declining cost of service.

      Our cost of equipment represents the costs associated with wireless equipment and accessories sold to customers. In recent years, we and other wireless providers have continued 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. 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 dealers for new business generated.

      Our general and administrative costs include all infrastructure costs, including costs for customer support, billing, collections, and corporate administration.

      Our depreciation and amortization expense represents the costs associated with the depreciation of our fixed assets and the amortization of certain intangible assets.

Critical Accounting Policies and Practices

      It is necessary that we 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 share our

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      We depreciate our property, plant and equipment and amortize our customer lists and certain other intangible assets over their useful lives. These useful lives are based on our estimates of the period that the assets will generate revenue. With the implementation of SFAS No. 142, “Goodwill and Other Intangible Assets,” which requires companies to cease the amortization of existing goodwill and intangible assets with indefinite lives, we reassessed the useful lives of our intangible assets. A significant portion of our intangible assets is classified as “Wireless license acquisition costs,” which represents our costs associated with acquiring our FCC licenses. These licenses allow us to provide wireless services by giving us the exclusive right to utilize certain radio frequency spectrum. Although the FCC licenses are issued for only a fixed time, generally ten years, these licenses are renewed by the FCC on a routine basis and for a nominal fee. In addition, we have determined that there are no legal, regulatory, contractual, competitive, economic or other factors that limit the useful life of these FCC licenses. As a result, our wireless license acquisition costs are treated as indefinite life intangible assets. Therefore, upon implementing SFAS No. 142 in its entirety, we ceased the amortization of both goodwill and wireless license acquisition costs and now test for impairment of goodwill and wireless license acquisition costs at least annually and only adjust the carrying amount of these intangible assets upon an impairment of the goodwill and wireless license acquisition costs. We also determine on an annual basis whether facts and circumstances continue to support an indefinite useful life.

      This change in policy has and may continue to have a significant impact on our results of operations and financial position. For the year ended December 31, 2001, the aggregate amount of amortization expense, net of income tax benefit, attributable to our wireless license acquisition costs was $64.9 million. Without this amortization and before considering the impact of this change on American Cellular, our 2001 operating results would have been:

      In addition, for the year ended December 31, 2001, American Cellular, recorded $58.3 million of amortization expense related to its goodwill and $34.5 million of amortization expense, net of income tax benefit, related to its wireless license acquisition costs. Without this amortization, American Cellular’s 2001 operating results would have been:

      As stated above, through December 31, 2001, our accounting policy for impairment of long-lived assets was to review the carrying value of our long-lived assets and certain identifiable intangible assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable. If such circumstances were deemed to exist, the carrying value of the asset would be compared to the estimated undiscounted future cash flows generated by the asset. Our definite life assets will continue to be amortized over their estimated useful lives and are subject to the same impairment criteria. As a result of fully implementing SFAS No. 142 on January 1, 2002, we are required to evaluate the carrying value of our indefinite life intangible assets at least annually, using their fair values. To complete this evaluation, we compare the carrying amount of our wireless license acquisition costs to the fair value of those assets. For purposes of this comparison, it is our policy to aggregate our wireless license acquisition costs. We determine the fair value of our wireless license acquisition costs based on their estimated future discounted cash flows.

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      We believe it is necessary for an understanding of our significant accounting policies to read the above in conjunction with Note 2, “Significant Accounting Policies,” to our financial statements included in Item 8 of this Form 10-K. These other significant accounting policies, while not involving the same level of measurement uncertainties as those discussed above, are nevertheless important to an understanding of our financial statements. Policies related to revenue recognition, financial instruments and business combinations require judgments on complex matters that are often subject to multiple sources of authoritative guidance. Certain of these matters are among topics currently under re-examination by accounting standard setters and regulatory authorities. Although no specific conclusions reached by these standard setters or regulatory authorities appear likely to cause a material change in our accounting policies, we cannot predict the outcomes with certainty.

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, 2003, our total operating revenue increased $219.0 million, or 42.4%, to $735.8 million from $516.8 million for the comparable period in 2002. The following table sets forth the components of our operating revenue for the periods indicated: