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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Form 10-Q

Commission File Number 001-31673

Cingular Wireless LLC

Formed under the laws of the State of Delaware

5565 Glenridge Connector, Atlanta, Georgia 30342

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 þ          No o

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

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CINGULAR WIRELESS LLC

CONSOLIDATED STATEMENTS OF INCOME

See accompanying notes.

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CONSOLIDATED BALANCE SHEETS

See accompanying notes.

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CONSOLIDATED STATEMENTS OF CASH FLOWS

See accompanying notes.

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CONSOLIDATED STATEMENT OF CHANGES IN MEMBERS’ CAPITAL

See accompanying notes.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Cingular Wireless LLC (the Company) is a Delaware limited liability company formed by SBC Communications Inc. (SBC) and BellSouth Corporation (BellSouth) as the operating company for their U.S. wireless joint venture. The parties entered into an agreement to form the Company in April 2000, subject to regulatory approvals. Cingular Wireless Corporation acts as the Company’s manager and controls the Company’s management and operations. The Company provides Cingular-branded wireless voice and data communications services, including local, long-distance, and roaming services using both cellular and personal communications services (PCS), and equipment to customers in 36 states. In addition, the Company provides enhanced and interactive data services over a proprietary “Mobitex” network utilizing base stations and satellite transmission facilities. All of the Company’s operations, which serve customers in 50 states, the District of Columbia, Puerto Rico and the U.S. Virgin Islands, are conducted through subsidiaries or ventures.

On October 2, 2000, SBC and BellSouth (the members) and certain of their subsidiaries contributed to the Company substantially all of their U.S. wireless assets in exchange for approximately 60% and 40% economic interests, respectively, in the Company, and the Company began doing business under the “Cingular” brand name in January 2001. SBC and BellSouth share joint voting control of the Company’s operations by virtue of their 50/50 ownership of, and the terms of the stockholders’ agreement pertaining to, Cingular Wireless Corporation. All assets and liabilities contributed to the venture have been recorded at their historical basis of accounting. The Company recorded estimated receivables for wireless operations to be contributed to the Company after the formation date.

The consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) that permit reduced disclosure for interim periods. Management believes that the consolidated financial statements include all adjustments (consisting only of normal recurring accruals) necessary to present fairly the results for the interim periods shown. The results for the interim periods are not necessarily indicative of results for the full year. These interim financial statements should be read in conjunction with the consolidated financial statements of the Company and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2003.

In June 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 143, Accounting for Asset Retirement Obligations (SFAS 143). This statement requires the Company to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred and capitalize that amount as part of the book value of the long-lived asset. Over time, the liability is accreted to its present value each period, and the capitalized cost is depreciated over the useful life of the related asset. Upon settlement of the liability, the Company either settles the obligation for its recorded amount or incurs a gain or loss. This statement is effective for financial statements for fiscal years beginning after June 15, 2002. The Company adopted this new pronouncement effective January 1, 2003.

The Company has certain legal obligations related to network infrastructure, principally tower assets, which fall within the scope of SFAS 143. These legal obligations include conditional obligations to remediate leased land on which the Company’s network infrastructure assets are located.

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The significant assumptions used in estimating the Company’s asset retirement obligations include the following: a 50% probability that the Company’s network infrastructure assets with asset retirement obligations will be remediated at the lessor’s directive, expected settlement dates that coincide with lease expiration dates plus estimates of lease extensions, remediation costs that are indicative of what third party vendors would charge the Company to remediate the sites, expected inflation rates that are consistent with historical inflation rates and credit-adjusted risk-free rates that approximate the Company’s incremental borrowing rates. The adoption of SFAS 143 did not have a material impact on the Company’s individual financial statement line items or its consolidated financial statements taken as a whole.

Comprehensive income for the Company approximates net income for all periods presented. There are no significant components of other comprehensive income.

The income statement for the three and six months ended June 30, 2003 has been reclassified to reflect billings to the Company’s customers for the Universal Service Fund (USF) and other regulatory fees as “Service revenues” and the related payments into the associated regulatory funds as “Cost of services” expenses. Operating income and net income for all prior periods have been unaffected. The amounts reclassified for the three and six months ended June 30, 2003 were $88 and $136, respectively.

2.     Intangible Assets

Summarized below are the carrying values for the major classes of intangible assets that are amortized under SFAS No. 142, Goodwill and Other Intangible Assets (SFAS 142), as well as the carrying values of those intangible assets that are not amortized.

In addition to the SFAS 142 intangible assets noted above, the Company recorded $1 in 2003 of intangible assets in connection with the recognition of an additional minimum liability for its Supplemental Retirement Plans, as required by SFAS No. 87, Employers’ Accounting for Pensions.

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The following table presents current and estimated amortization expense for each of the following periods:

The Company has investments in affiliates which do not meet the criteria for consolidation under FASB Interpretation No. 46, Consolidation of Variable Interest Entities (FIN 46), nor for which the Company has a controlling interest. These investments are accounted for under the equity method of accounting. The most significant of these investments is GSM Facilities, LLC (GSMF), a jointly-controlled infrastructure venture with T-Mobile USA, Inc. (T-Mobile) for networks in the New York City metropolitan area, California and Nevada.

Investments in and advances to equity affiliates consist of the following:

The Company and T-Mobile jointly fund capital expenditures of GSMF. Pursuant to the operating agreements, the Company and T-Mobile procure services and network equipment on behalf of GSMF in the respective markets. Network equipment is sold to GSMF at prices that are mutually agreed upon by the parties and that approximate fair value. The Company defers any resulting profits and records them as part of the Company’s investments in and advances to equity affiliates. The Company recognizes the intercompany profit over the estimated useful lives of the related assets as a reduction of equity in net loss of affiliates.

Capital contributions to GSMF are generally determined by the Company’s proportionate share of the annual capital expenditure requirements based on each party’s incremental growth in network usage, and such contributions are accounted for as an increase to the Company’s investment. For the three months ended June 30, 2003 and 2004, the Company made net capital contributions to GSMF of $101 and $44, respectively. For the six months ended June 30, 2003 and 2004, the Company made net capital

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contributions to GSMF of $102 and $138, respectively. The Company had a contractual commitment to contribute cash of $225 to GSMF in 2003, which was made by the Company in the second half of 2003.

The Company incurs and charges to GSMF certain network operating costs. The monthly operating expenses of GSMF, including monthly cash payments made on tower capital lease obligations, are then charged back to the Company and T-Mobile based upon each party’s proportionate share of licensed spectrum in each market. Through a separate reciprocal home roaming agreement, the Company and T-Mobile charge each other for usage that is not in the same proportion as the spectrum-based allocations. This usage charge is primarily based upon the Company’s and T-Mobile’s share of the total minutes of use on the respective networks. These charges for network services are included in “Cost of services” in the consolidated statements of income. These transactions are summarized as follows:

GSMF incurs net losses due to depreciation and interest expense, which are not reimbursed by the Company or T-Mobile. For the three months ended June 30, 2003 and 2004, the Company recorded equity in the net loss of GSMF of $77 and $90, respectively. For the six months ended June 30, 2003 and 2004, the Company recorded equity in the net loss of GSMF of $149 and $196, respectively. At June 30, 2004, the Company’s economic interest in GSMF approximated 70%.

Summarized financial information with respect to GSMF is as follows:

In May 2004, the Company and T-Mobile agreed to end their GSMF network infrastructure joint venture contingent upon the closing of the Company’s acquisition of AT&T Wireless Services, Inc. (AT&T Wireless). See Note 6 for further details of the agreement.

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In addition to the affiliate transactions with equity investees described elsewhere in these consolidated financial statements, other significant transactions with related parties, principally the Company’s members, are as follows:

(1)	See Note 11 to the Company’s audited consolidated financial statements included in Item 8 in the Company’s Annual Report on Form 10-K for the year ended December 31, 2003 for a further description of services.
(2)	See Note 8 to the Company’s audited consolidated financial statements included in Item 8 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2003 for further discussion related to interest expense on debt due to affiliates.

The Company had receivables from affiliates of $81 and $295 and payables to affiliates of $135 and $161 at December 31, 2003 and June 30, 2004, respectively, primarily with SBC, BellSouth and GSMF (see also Note 3).

The Cingular Wireless Long-Term Compensation Plan (the Plan), as amended, provides for incentive compensation to eligible participants over periods that are two years or longer in the form of performance units, stock appreciation units and restricted stock units. Awards granted in any particular year may be comprised of any combination of award type provided for under the Plan as approved by the plan administrator. All awards are ultimately settled in cash. Grants are made in April of the award year.

Performance units are tied to the achievement of specified financial objectives over a three-year performance period. The units have a stated value of $50 (whole dollars). Performance units granted at inception of a three-year performance period are payable in the first quarter following the performance period, with payouts ranging from 0% to 200% of the stated value of the performance units for years prior to 2004 and 0% to 150% for 2004 grants. The number of performance units granted under the Plan total approximately 1.2 million units in 2002 and 540,000 units in 2003. During the six months ended June 30, 2004, the Company granted approximately 729,000 performance units. As of June 30, 2004, the Company has approximately 2.1 million outstanding performance units. Expense is accrued ratably throughout the performance period based upon management’s estimate of the compensation that will ultimately be earned under the Plan. As performance is monitored against the financial objectives that have been established throughout the respective three-year performance periods, management may revise its estimate of the compensation that will ultimately be earned under the Plan and adjust its accrual accordingly.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Stock appreciation units granted under the Plan, which approximate 3.3 million in total, are indexed to an underlying share of BellSouth or SBC common stock. Each stock appreciation unit has a grant price equal to the closing price of BellSouth or SBC stock, as the case may be, based on the closing New York Stock Exchange price on the grant date. Stock appreciation units were granted to eligible employees on April 1, 2003, 50% of which vest two years after the grant date and the remaining 50% of which vest three years following the grant date. As of June 30, 2004, the Company had approximately 3.0 million outstanding stock appreciation units. The units expire 10 years from the grant date. Compensation cost is recognized over the vesting period based upon the increase in the fair value of the stock appreciation units at the end of each reporting period.

Restricted stock units granted under the Plan are indexed to an underlying share of BellSouth or SBC common stock. The value of the restricted stock units will be paid in cash to holders in March 2007 based on the average of the closing stock prices of BellSouth and SBC common stock for the last ten trading days of February 2007. Dividend equivalents will be paid annually at the same rate as the dividend received by all SBC and BellSouth shareholders, respectively. During the six months ended June 30, 2004, the Company granted approximately 342,000 BellSouth restricted stock units and 381,000 SBC restricted stock units with an aggregate value on the grant date of approximately $19. As of June 30, 2004, the Company had approximately 700,000 outstanding restricted stock units. The value of the restricted stock units, adjusted for changes in the value of the underlying BellSouth and SBC common stock, is recognized as compensation expense over the three year vesting period.

The impact of these units to results of operations was not material for the three and six months ended June 30, 2003 and 2004, respectively.

On February 17, 2004, the Company entered into an Agreement and Plan of Merger to acquire AT&T Wireless for an aggregate consideration of approximately $41,000 in cash. The closing of the acquisition is expected to occur in the fourth quarter of 2004 and is subject to Federal Communications Commission (FCC) and Hart-Scott-Rodino approvals and customary closing conditions. In May 2004, AT&T Wireless shareholders approved the transaction. SBC and BellSouth have committed to provide equity funding for the purchase. Proportionate equity ownership and management control of Cingular will remain unchanged after the acquisition. This transaction will be accounted for as a purchase in accordance with SFAS No. 141, Business Combinations.

In August 2003, the Company executed an agreement with NextWave Telecom, Inc. and certain of its affiliates, pursuant to which the Company would purchase FCC licenses for wireless spectrum in 34 markets for $1,400 in cash. The transaction closed in April 2004, and the Company recorded this cost as additional FCC licenses in the accompanying balance sheet. The funding for this transaction consisted of $900 in existing cash on hand and $500 from commercial paper.

In May 2004, the Company and T-Mobile entered into an agreement, subject to regulatory and other customary closing conditions and the closing of the Company’s acquisition of AT&T Wireless, to dissolve

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GSMF and distribute the related network assets. Under the terms of the agreement, the Company will sell its ownership of the California/Nevada network assets to T-Mobile for $2,300 in cash, which is net of cash payments required by the dissolution. The ownership of the New York City network assets will return to T-Mobile. The transaction is expected to close no later than the first quarter of 2005. The Company will retain the right to utilize the California/Nevada and New York City networks during a four year transition period and will guarantee to purchase a minimum number of minutes over this term. The Company and T-Mobile will retain all respective customers in each market.

In connection with the dissolution of the venture, the Company and T-Mobile will exchange spectrum at a future date. As agreed to as part of the original joint venture agreement, the Company will receive 10 megahertz (MHz) of spectrum in New York City and T-Mobile will receive 5 MHz of spectrum in nine basic trading areas (BTAs) in California and Nevada, the largest of which is San Diego. The Company also agreed to sell 10 MHz of spectrum to T-Mobile in each of the San Francisco, Sacramento and Las Vegas BTAs for $180. T-Mobile will also have the option to purchase an additional 10 MHz of spectrum in the Los Angeles and San Diego BTAs from the Company within two years, under certain circumstances.

The Company has not yet determined the amount of the gain from these transactions. The determination of the amount of the gain is subject to valuation of the spectrum received in the spectrum exchange and determination of the carrying amount of the Company’s investment in GSMF at the date of closing. The closing of the transactions is contingent upon the closing of the Company’s acquisition of AT&T Wireless.

In July 2004, the Company, AT&T Wireless, and Triton PCS signed a non-binding letter of intent providing for the acquisition by the Company of wireless properties in Virginia in exchange for AT&T Wireless properties in North Carolina and Puerto Rico. In addition, the Company would pay Triton PCS $175 in cash.

Additionally, AT&T Wireless and Triton PCS have agreed to terminate their stockholders’ agreement, which includes termination of an exclusivity arrangement in return for the surrender of AT&T Wireless’ equity in Triton PCS. With this agreement, the Company will be able to provide continuing service, after the closing of the Company’s acquisition of AT&T Wireless, in areas where Triton PCS currently has operations.

The closings of these transactions would be contingent upon closing of the Company’s acquisition of AT&T Wireless.

In August 2004, the Company and Cincinnati Bell signed a definitive agreement which will allow the Company the right to put to Cincinnati Bell, any time after September 30, 2005, AT&T Wireless’ 19.9% equity in Cincinnati Bell’s wireless subsidiary, Cincinnati Bell Wireless, for $83. The definitive agreement will also allow Cincinnati Bell the right to call the equity, any time between the close of the Company’s acquisition of AT&T Wireless and September 30, 2005, for $85 plus interest. After September 30, 2005, Cincinnati Bell has the right to call the equity for $83 plus interest.

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Additionally, the Company, AT&T Wireless and Cincinnati Bell agreed to amend the Cincinnati Bell Wireless Operating Agreement to remove the exclusivity arrangement applicable to AT&T Wireless, which will allow the Company to provide continuing service, after the closing of the Company’s acquisition of AT&T Wireless, in areas where Cincinnati Bell Wireless currently has operations.

The closing of this transaction would be contingent upon closing of the Company’s acquisition of AT&T Wireless.

Effective August 1, 2004, the Company entered into a revolving credit agreement with SBC and BellSouth for them to provide short-term financing on a pro rata basis at an interest rate of LIBOR plus .05% for the Company’s ordinary course operations. The initial term of the agreement expires in July 2005.

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The following should be read in conjunction with the December 31, 2003 Cingular Wireless LLC audited consolidated financial statements and accompanying notes, related information and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2003 and with our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2004.

Overview

We earn revenues and generate cash primarily through offering a comprehensive variety of high-quality wireless voice and data communications services and products. Our services are available in a variety of postpaid pricing plans and prepaid service arrangements. Our voice and data offerings are tailored to meet the communications needs of targeted customer segments, including youth, family, active professionals, local and regional businesses and major national corporate accounts.

We serve approximately 25.8 million voice and data customers, including customers served over our cellular, PCS and Mobitex networks, and are the second-largest provider of wireless voice and data communications services in the United States, based on the number of wireless customers. We have access to Federal Communications Commission (FCC) licenses to provide cellular or PCS wireless communications services covering an aggregate population (POPs) of 243 million, or approximately 83% of the U.S. population, including in 45 of the 50 largest U.S. metropolitan areas. We provide cellular or PCS services in 43 of the 50 largest U.S. metropolitan areas. We have entered into a definitive agreement to acquire AT&T Wireless Services, Inc. (AT&T Wireless) and a non-binding letter of intent to swap wireless properties with Triton PCS, which would expand our coverage to all of the 100 largest U.S. metropolitan markets and give us access to licenses covering POPs of over 260 million. See Notes 6 and 7 to our consolidated financial statements included in Item 1, Financial Statements.

We compete for customers based principally on price, service offerings, call quality, coverage area and customer service. We face substantial and increasing competition in all aspects of our business. Our competitors are principally five national (Verizon Wireless, AT&T Wireless, Sprint PCS, Nextel Communications and T-Mobile) and a large number of regional providers of cellular, PCS and other wireless communications services, resellers and wireline service providers. In addition, we may experience significant competition from companies that provide similar services using other current or future communications technologies and services. Our management focuses on the key wireless industry drivers of customer penetration, average revenue per user (ARPU), operating income and reputation within the wireless industry to evaluate our performance.

The wireless telecommunications industry is continuing to grow; however, a high degree of competition exists among the six national carriers, their affiliates and the smaller regional carriers. This competition and other factors, such as the implementation of wireless local number portability, will continue to put pressure upon pricing, margins and customer churn (see Note 4 to “Selected Financial and Operating Data” for a definition of customer churn) as the carriers compete for potential customers. Future carrier revenue growth is highly dependent upon the number of net customer additions a carrier can achieve and the ARPU derived from its customers. The effective management of customer churn is also paramount in minimizing customer acquisition costs and maintaining and improving margins. Improved marketing and sales execution and promotion of service offerings such as FamilyTalk®, a shared minutes plan, and our “Rollover^SM” minutes feature, which allows our customers to carry over any unused “anytime” minutes

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from month to month for up to one year, have contributed to our continued strong growth in customer gross additions. During the second quarter of 2004, our cellular/PCS customer gross additions totaled over 2.4 million, marking our fourth consecutive quarter with cellular/PCS customer gross additions at or above 2.4 million. A continued emphasis on our affiliation with our members, SBC Communications Inc. (SBC) and BellSouth Corporation (BellSouth), through co-branding of our services with their offerings in areas where our wireless markets overlap with their wireline markets, has also increased our sales channels and the number of customer gross additions contributed by our member companies’ sales channels since early last year.

Although our operating margin (i.e., operating income divided by operating revenues) in the second quarter of 2004 was lower than in the second quarter of 2003, it improved over the last three quarters due to continued improvement in revenue growth and operational efficiencies. Also, the last two quarters of 2003 included costs related to extensive customer retention and customer service initiatives in anticipation of wireless local number portability, effective November 2003, and incremental costs related to our Global System for Mobile Communication (GSM)/General Packet Radio Service (GPRS) network system overlay. In June of this year, we reached final completion of the GSM/GPRS network overlay, six months ahead of our original schedule.

Competition and slowing wireless service penetration will continue to adversely impact revenue growth and margins. We expect cost of services increases to continue due to higher network system usage and, to a lesser extent, redundant expenses related to operating dual networks as our customer base transitions from our Time Division Multiple Access (TDMA) network to our GSM network. We also expect higher depreciation expense due to our ongoing capital spending. If we are successful in accelerating the growth of our customer base, our customer acquisition costs will increase. We also expect increased costs to maintain and support our growing customer base, including customer care initiatives to improve our level of service, retain existing customers and support wireless local number portability. We expect these and other cost increases to be partially offset by ongoing efforts to reduce general and administrative expenses as well as decreased roaming costs as a result of lower negotiated roaming rates with other carriers.

We expect that our costs for the remainder of 2004 will increase, in part as a result of the preparation to complete the acquisition, and integrate the operations, of AT&T Wireless and that the integration of and accounting for the transaction will result in continuing higher costs for the next few years, principally due to non-cash amortization expense associated with intangible assets. Assuming this transaction is completed in the fourth quarter of 2004, we expect merger synergy cost savings to begin in 2005, resulting from the elimination of redundant facilities, advertising costs, staff, functions, capital expenditures and other resources. We expect these synergy savings to partially offset merger integration costs in the first two years and then contribute to higher operating margins, beginning during 2007.

As we face the many challenges and opportunities in the future, we are focused on the following key initiatives:

•	successfully completing the merger with AT&T Wireless as soon as possible and quickly integrating its business operations with ours;
•	growing our customer base profitably by offering wireless voice and data products and rate plans that provide both customer value and favorable economics;
•	increasing the capacity, speed and functionality of our network and improving overall network coverage and performance;
•	increasing wireless data penetration and usage through the development and promotion of advanced wireless data applications and interfaces;

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•	improving the Cingular customer experience and our reputation in the industry by focusing on all customer-impacting aspects of our business including network performance, sales, billing and customer service; and
•	maintaining effective cost controls by continually evaluating the cost structure of our business and driving efficiencies through our large size and national scope.

Selected Financial and Operating Data

(1)	Capital expenditures do not include capital expenditures and cash contributions related to our infrastructure venture, GSM Facilities, LLC (GSMF). See also Note 3, Investments in and Advances to Equity Affiliates, to our consolidated financial statements included in Item 1, Financial Statements.
(2)	Licensed POPs refers to the number of people residing in areas where we have licenses to provide cellular or PCS service.
(3)	Cellular/PCS customers include customers served through reseller agreements.
(4)	Cellular/PCS customer churn is calculated by dividing the aggregate number of cellular/PCS customers who cancel service during each month in a period by the total number of cellular/PCS customers at the beginning of each month in that period.
(5)	ARPU is defined as cellular/PCS service revenues during the period divided by average cellular/PCS customers during the period. This metric is used to compare the recurring revenue amounts generated on our network to prior periods and internal targets. We believe that this metric provides useful information concerning the performance of our initiatives to attract and retain high value customers and the use of our network.

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Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations (Unaudited)

Consolidated Results of Operations