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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

Commission File Numbers 333-117942; 333-117944

iPCS, INC.
(Exact Name of Registrant as Specified in Its Charter)

        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 ý    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. ý

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

        The aggregate market value of the voting and non-voting common equity held by non-affiliates as of March 31, 2004 was $0, as all of common equity was owned by an affiliate at such time, a liquidating trust for the benefit of the stockholders of AirGate PCS, Inc., our former parent.

        Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ý    No o

        As of December 24, 2004, there were 8,744,164 shares of common stock, $0.01 par value per share, outstanding.

TABLE OF CONTENTS

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THIS ANNUAL REPORT CONTAINS FORWARD-LOOKING STATEMENTS

This annual report contains statements about future events and expectations that are "forward-looking statements." These statements relate to future events or our future financial performance, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "expects," "intends," "plans," "anticipates," "believes," "estimates," "predicts," "potential," or the negative use of these terms or other comparable terminology. Any statement in this report that is not a statement of historical fact may be deemed to be a forward-looking statement. These forward-looking statements include:

•

statements regarding our anticipated revenues, expense levels, liquidity and capital resources and operating losses; and



•

statements regarding expectations or projections about markets in our territory.

        Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Important factors with respect to any such forward-looking statements, including certain risks and uncertainties that could cause actual results to differ materially from our expectations, include, but are not limited to:

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our dependence on our affiliation with Sprint;



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the ability of Sprint PCS to alter the terms of our affiliation agreements with it, including fees paid or charged to us and other program requirements;



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our dependence on back office services, such as billing and customer care, provided by Sprint PCS;



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potential fluctuations in our operating results;



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changes or advances in technology in general, or specifically related to Sprint and its affiliates;



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competition in the industry and markets in which we operate;



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our ability to attract and retain skilled personnel;



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our potential need for additional capital or the need for refinancing any existing indebtedness;



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our potential inability to expand our services and related products in the event of substantial increases in demand for these services and related products;



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the potential impact of wireless local number portability;



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changes in government regulation;



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future acquisitions;



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the competitiveness and impact of Sprint PCS' pricing plans and PCS products and services on us;



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our subscriber credit quality;



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the potential for us to experience a continued high rate of subscriber turnover;



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inaccuracies in our financial information provided to us by Sprint PCS;



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our rates of penetration in the wireless industry and in our territories;

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•

our significant level of indebtedness;



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the impact and outcome of legal proceedings between other PCS Affiliates of Sprint and Sprint PCS;



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adequacy of bad debt and other reserves;



•

our anticipated future losses;



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our subscriber purchasing patterns;



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subscriber satisfaction with our network and operations;



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an adequate supply of subscriber equipment to Sprint PCS and to us specifically;



•

risks related to future growth and expansion, including subscriber growth;



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general economic and business conditions; and



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effects of mergers and consolidations within the wireless telecommunications industry, particularly business combinations involving Sprint or affiliates of Sprint, and unexpected announcements or developments from others in the wireless telecommunications industry.

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PART I

ITEM 1.  BUSINESS

As used in this annual report on Form 10-K, unless the context otherwise requires: (i) "Sprint PCS" refers to Sprint Communications Company, L.P., Sprint Spectrum L.P. and WirelessCo, L.P.; (ii) "Sprint" refers to Sprint Corporation and its affiliates; (iii) a "PCS Affiliate of Sprint" is an entity whose sole or predominant business is operating (directly or through one or more subsidiaries) a personal communications service business pursuant to affiliation agreements with Sprint Spectrum L.P. and/or its affiliates or their successors; (iv) "Sprint PCS products and services" refers to digital wireless personal communications services, including wireless voice and data services, and related retail products, including handsets, in any case, offered under the Sprint brand name; and (v) "our subscribers" refers to Sprint PCS subscribers who reside in our territory.

        Statements in this annual report on Form 10-K regarding Sprint or Sprint PCS are derived from information contained in our affiliation agreements with Sprint PCS, periodic reports and other documents filed by Sprint with the SEC or press releases issued by Sprint or Sprint PCS.

        Market data and other statistical information used throughout this annual report on Form 10-K are based on independent industry publications, government publications, reports by market research firms and other published independent sources, as well as information provided to us by Sprint PCS. Some data is also based on our good faith estimates, which estimates are derived from our review of internal surveys and independent sources, including information provided to us by Sprint, the U.S. Census Bureau and Kagan World Media. Although we believe these sources are reliable, we have not independently verified the information.

        This annual report on Form 10-K contains trademarks, service marks and trade names of companies and organizations other than us. Other than with respect to Sprint PCS, our use or display of other parties' trade names, trademarks or products is not intended to and does not imply a relationship with, or endorsement or sponsorship of us by, the trade name or trademark owners.

Business

        We are an affiliate of Sprint PCS, the operator of a 100% digital personal communications service or PCS wireless network with licenses to provide voice and data service to the entire United States population using a single frequency band and a single technology. We are the exclusive provider of wireless voice and data products and services under the Sprint brand throughout the territory licensed to us by Sprint PCS. Our licensed territory includes 40 basic trading areas, or markets, located in Illinois, Michigan, Iowa and eastern Nebraska. Based on the 2000 population counts compiled by the U.S. Census Bureau adjusted by estimated growth rates from third party proprietary demographic databases, at September 30, 2004, our licensed territory had a total population of approximately 7.8 million residents, of which our wireless network covered approximately 5.9 million residents. At September 30, 2004, we had approximately 240,500 subscribers in all our markets.

        We sell Sprint PCS products and services through distribution outlets located in our territory which are comprised of our own retail stores, major national distributors, including RadioShack and Best Buy, and local third-party distributors. We also own and are responsible for building, operating and managing the portion of the Sprint PCS wireless network located in our territory. Our portion of the Sprint PCS wireless network uses the same technology as Sprint PCS to transmit wireless calls, called code division multiple access or CDMA, and is designed to offer a seamless connection with the Sprint PCS wireless network. As we do not own any licenses to operate a wireless network, our operations and revenues are substantially dependent on the continuation of our affiliation with Sprint PCS. Additionally, our affiliation agreements with Sprint PCS give Sprint PCS a substantial amount of control over factors that significantly affect the conduct of our business.

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Reorganization

        iPCS, Inc. ("iPCS") was formed as a Delaware corporation in March 2000 as the holding company of iPCS Wireless, Inc. ("iPCS Wireless") the successor of Illinois PCS, LLC, which is the party to our affiliation agreements with Sprint PCS. In July 2000 we issued $300 million aggregate face amount of 14% senior discount notes and guaranteed iPCS Wireless' $140.0 million senior secured credit facility. On November 30, 2001, AirGate PCS, Inc. ("AirGate") acquired 100% of the shares of iPCS by means of a stock-for-stock merger. iPCS was designated as an unrestricted subsidiary of AirGate and both companies operated as separate business entities. In connection with the merger, Timothy M. Yager, iPCS' Chief Executive Officer until the time of the merger, was appointed to the Board of Directors of AirGate pursuant to a provision in the merger agreement that required AirGate to appoint directors designated by iPCS. Mr. Yager served on the Board of Directors of AirGate until December 2002, although he and other senior management of iPCS resigned as officers at the closing of the merger.

        In late January 2003, with the support of iPCS' secured lenders and the holders of iPCS' senior discount notes, Mr. Yager was appointed our Chief Restructuring Officer. On February 23, 2003, we and our wholly owned subsidiaries filed voluntary petitions seeking relief from our creditors pursuant to Chapter 11 of the Bankruptcy Code in the Bankruptcy Court. Our decision to file was based on a combination of factors including weakness in the wireless telecommunications industry and the economy generally. During the year ended September 30, 2002, we incurred costs to acquire an increased percentage of sub-prime (or credit challenged) subscribers than we had in the past. As the economy slowed and the wireless industry became more competitive, our churn percentage from these sub-prime (or credit challenged) subscribers increased significantly which had a negative impact on our liquidity as we had not even recouped our costs to acquire these subscribers. However, we believe the primary reason for our decline in liquidity was caused by actions of Sprint PCS. We believe that actions taken by Sprint PCS, such as decreasing the roaming rate and imposing new and higher fees on us under our affiliation agreements, made it difficult for us to comply with our debt service obligations, because our cash flow decreased. Our default resulted in our lenders accelerating our indebtedness on our senior secured credit facility consequently forcing us to file for protection in order to preserve, protect and maximize assets while restructuring our business and financial obligations and addressing issues with Sprint PCS. Accordingly, in connection with our bankruptcy filing, we filed a complaint against Sprint Corporation and certain of its affiliates alleging that Sprint PCS breached its affiliation agreements with us. On October 17, 2003, AirGate irrevocably transferred all of its shares of iPCS common stock to a trust organized under Delaware law. The beneficial owners of AirGate common stock at the date of transfer were beneficiaries of the trust and AirGate retained no interest in the trust. Upon the effective date of the plan of reorganization, the common stock of iPCS, Inc. held by the trust was cancelled and the trust terminated by its terms. On April 21, 2004, as part of our plan of reorganization, iPCS Escrow Holding Company and iPCS Escrow Company were formed. iPCS Escrow Company was formed solely as a special purpose entity whose sole purpose was to issue $165.0 million of senior notes. On April 30, 2004, the proceeds of this note offering closed into escrow. On July 9, 2004, the Bankruptcy Court confirmed our plan of reorganization. The effective date of the plan of reorganization was July 20, 2004. On the effective date, iPCS Escrow Holding Company and iPCS Escrow Company merged with and into iPCS, Inc. and the senior notes became senior unsecured obligations of iPCS, Inc. that are jointly and severally guaranteed by all of its existing and future domestic restricted subsidiaries.

        From the date of our filing through the effective date of the plan of reorganization, we operated our businesses and managed our assets as debtors-in-possession, subject to the supervision of the Bankruptcy Court, without obtaining debtor-in-possession financing. This relief has provided us the time necessary to reorganize our business, which included slowing subscriber growth to reduce our acquisition costs, increasing our focus on prime subscribers and aligning our operations through cost reductions to compete in our marketplace and to improve our financial results.

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        We were required to file periodic reports under the Securities Exchange Act of 1934 (the "Exchange Act") in connection with our registration statements related to our previously outstanding senior discount notes and our previously outstanding warrants to purchase our common stock. We failed to file our Form 10-K for fiscal year ended September 30, 2002. Prior to the due date for filing the Form 10-K in December 2002, and in anticipation of our forthcoming bankruptcy filing, we requested relief from the SEC from the obligation to file that Form 10-K because of the substantial costs of compliance with such requirement. Then, in February 2003, we declared bankruptcy. Subsequent to our bankruptcy filing, the SEC advised us that it would not grant us relief from filing the Form 10-K. As we were then in bankruptcy and were committing our management and economic resources to our efforts to emerge from bankruptcy, we did not file the Form 10-K after the SEC's denial of our request for relief from filing. For reporting periods beginning October 1, 2002, our obligation to file periodic reports under the Exchange Act were automatically suspended because we had fewer than 300 holders of record of our securities.

        Pursuant to the terms of the confirmed plan of reorganization, on the effective date we paid a portion of the net proceeds from the senior notes to satisfy in full in cash obligations to each of the lenders under our then existing senior secured credit facility and to permanently retire the loans thereunder. The remaining net proceeds from the senior notes was used to satisfy all other secured claims, administrative and other priority claims and unsecured convenience claims and to pay fees and expenses related to the reorganization, as well as for general corporate purposes. Additionally, all of our subordinated claims were discharged and all of our then existing capital stock was cancelled.

        The plan of reorganization authorized us to issue ten million shares of our common stock upon our emergence from bankruptcy. On the effective date of the plan of reorganization, we issued 8.6 million shares of common stock to our general unsecured creditors who held undisputed claims, including holders of our then existing senior discount notes, in satisfaction and retirement of their claims. We also reserved 400,002 shares of our common stock for future issuances to our general unsecured creditors upon resolution of their disputed claims, which claims total approximately $9.7 million at September 30, 2004. Accordingly, our former general unsecured creditors are our principal equity holders. The remaining one million shares were reserved for issuance to certain members of our management, directors and other employees through our 2004 Long-Term Incentive Plan.

        With respect to Sprint, the plan of reorganization provided for the following:

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the assumption of our affiliation agreements with Sprint PCS, as amended to provide us a number of benefits;



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the settlement of all claims by and between us and Sprint which resulted in our write-off of all prepetition claims, as set forth in the settlement agreement and mutual release; and



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the payment to Sprint, in cash, of approximately $5.1 million in full and complete satisfaction of our obligation to cure defaults under our affiliation agreements with Sprint PCS.

        The plan of reorganization also provided for various other matters relating to our operations post-reorganization, including the following:

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our assumption of all contracts and leases that have not been previously rejected;



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the appointment of Timothy M. Yager as president and chief executive officer and director;



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the appointment of four new directors to iPCS, Inc.'s board of directors designated by the committee of unsecured creditors pursuant to which Timothy C. Babich, James J. Gaffney and Kevin M. Roe were appointed as of the effective date and Eugene I. Davis was appointed in August 2004; and

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•

our release of any and all claims against: (i) all of our officers, directors and employees, in each case, as of the date of the commencement of the hearing on the disclosure statement; (ii) our creditors' committee and all of its members, in their respective capacities as such; (iii) trustee under the indenture for our existing senior discount notes, in its capacity as such; (iv) the lenders under our senior secured credit facility, in their capacities as such; (v) the agent for the lenders under our senior secured credit facility, in its capacity as such; (vi) the holders of the new notes offered hereby, in their capacity as such; and (vii) with respect to each of the above-named persons, such person's present affiliates, principals, employees, agents, officers, directors, financial advisors, attorneys and other professionals, in their capacities as such.

        As a result of the consummation of the reorganization, our senior secured credit facility has been repaid in full in cash and terminated, and our senior discount notes have been cancelled and the holders have received shares of our common stock. Subject to our ability to manage subscriber growth and achieve operating efficiencies, cash and cash equivalents, combined with cash flows from operations, are expected to be sufficient to fund any operating losses and working capital and to meet capital expenditure needs and debt service requirements for the foreseeable future.

Our Relationship With Sprint

        Sprint directly operates its PCS network which utilizes code division multiple access (CDMA) technology in major markets throughout the United States and has entered into independent agreements with various companies such as us, under which each has become a PCS Affiliate of Sprint and has agreed to construct and manage PCS networks which utilize CDMA in smaller metropolitan areas and along major highways designed to operate seamlessly with the PCS network of Sprint. CDMA is a digital spread-spectrum wireless technology that allows a large number of users to access a single frequency band by assigning a code to all speech bits, sending a scrambled transmission of the encoded speech over the air and reassembling the speech into its original format. Sprint PCS, together with its affiliates, operates PCS systems in over 300 metropolitan markets, including the 100 largest U.S. metropolitan areas. Sprint PCS' service, including third party affiliates like us, reaches approximately a quarter billion people.

        Pursuant to our affiliation agreements with Sprint PCS, we agreed to offer PCS services using Sprint's spectrum under the Sprint brand name on a wireless network built and operated at our own expense. A network build-out consists of installing radio base stations, switches and other PCS transmission equipment and software in order to operate a wireless network in accordance with the requirements of our affiliation agreements with Sprint PCS. We also agreed to provide network coverage to a minimum percentage of the population in our territory within specified time periods. Sprint PCS has notified us that, based on the information we have provided to Sprint PCS, as of March 26, 2004, we have completed the required build-out of our network, including those aspects of the build-out that were not required to be completed until a future date, and we are in compliance with all applicable build-out requirements. The build-out of our territory has significantly extended Sprint PCS wireless coverage in the midwestern regions of the United States.

        We believe that our strategic relationship with Sprint PCS provides significant competitive advantages. In particular, we believe that our affiliation agreements with Sprint PCS allow us to offer high quality, nationally branded wireless voice and data services for lower cost and lower capital requirements than would otherwise be possible. For example, we benefit from our relationship with Sprint PCS in the following ways:

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Strong brand recognition and nationwide advertising.    We believe that we benefit from Sprint PCS' national and regional television, radio, print, outdoor and other advertising campaigns.

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•

National retailer sales.    National retailers with existing distribution relationships with Sprint PCS market Sprint PCS products and services under the highly recognizable Sprint and Sprint PCS brand names in their stores in our territory.



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Sprint PCS network.    Our subscribers can immediately access PCS systems in over 300 major metropolitan markets, including the 100 largest U.S. metropolitan areas.



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Advanced technology.    We believe that the CDMA technology used by Sprint PCS offers advantages in capacity and voice quality, as well as access to advanced features, such as Sprint PCS' suite of PCS Vision products.



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Handset availability and pricing.    Sprint PCS' purchasing leverage allows us to acquire the latest innovative handsets more quickly and at a lower cost than we could without our affiliation with Sprint PCS.



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National reseller agreements.    We receive additional revenue as a result of Sprint PCS' relationships with wireless resellers, such as Virgin Mobile, when subscribers of those resellers use our portion of the Sprint PCS network.

Markets

        We believe we operate in attractive markets with favorable roaming and travel characteristics. Our territory is located near or around several large U.S. urban centers, including Chicago, Illinois, Detroit, Michigan, Des Moines, Iowa, Indianapolis, Indiana, Omaha, Nebraska, and St. Louis, Missouri. Our territory includes significant distances of interstate highways comprising the principal travel corridors between these large urban centers. As a result of our extensive network coverage of the major and secondary highways in our territory, we have consistently received significant roaming revenue from wireless subscribers using our portion of the Sprint PCS network. In addition, our markets include approximately 40 colleges and universities with a total enrollment of approximately 200,000 students. We believe that colleges and universities in our markets result in additional subscribers and increased roaming revenue from wireless subscribers using our portion of the Sprint PCS network. These market characteristics have led to a favorable ratio of Sprint PCS subscribers from outside our territory and subscribers of other wireless service providers using our portion of the Sprint PCS network as compared to our subscribers using wireless communications networks outside our territory.

        The following table lists the location, basic trading area number, megahertz of spectrum licensed and estimated total residents for each of the basic trading areas that comprise our territory under our affiliation agreements with Sprint PCS as of September 30, 2004. The number of estimated covered residents for each basic trading area does not represent the number of our subscribers in such basic trading area, nor does it represent the number of subscribers that we expect to be based in such basic trading area. At September 30, 2004, we had approximately 240,500 subscribers in all our markets.

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(1)

BTA No. refers to the Basic Trading Area number assigned to that market by the FCC for the purposes of issuing licenses for wireless services.

(2)

Estimated Total Population is based on the 2000 population counts compiled by the U.S. Census Bureau adjusted by estimated growth rates from third party proprietary demographic databases.

(3)

Estimated Covered Population is based on our actual network coverage measured by third party proprietary mapping software using the 2000 population counts compiled by the U.S. Census Bureau adjusted by estimated growth rates from third party proprietary demographic databases.

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Network Operations

        The effective operation of our network requires:

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public switched and long distance interconnection;



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the implementation of roaming arrangements; and



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the development of network monitoring systems.

        Our network connects to the public switched telephone network to facilitate the origination and termination of traffic between the wireless network and both local exchange and long distance carriers. Through our arrangements with Sprint PCS and Sprint PCS' arrangements with other wireless service providers, our subscribers have roaming capabilities on certain other PCS networks utilizing similar CDMA technology. We monitor our network during normal business hours. For after-hours monitoring, the PCS Network Operating Centers of Sprint PCS provide 24-hour, seven-day-a-week monitoring of the Sprint PCS network in our territory and real-time notification to our designated personnel.

        As of September 30, 2004, the Sprint PCS network in our territory included 669 base stations and two switching centers. In June 2004, we decommissioned one of our original three switches to increase operating efficiencies, leaving us with two switches as of September 30, 2004.

Products and Services

        We offer wireless voice and data products and services throughout our territory under the Sprint brand name. Our services are typically designed to align with the service offerings of Sprint PCS and to integrate with the PCS network of Sprint PCS. The PCS service packages we currently offer include the following:

        100% digital wireless network.    We are part of the 100% digital PCS wireless network of Sprint PCS. Sprint PCS has licenses to provide service to the entire United States population, including Puerto Rico and the U.S. Virgin Islands, using a single frequency band and a single technology. Sprint PCS, together with third party affiliates like us, operates PCS systems in over 300 metropolitan markets, including the 100 largest U.S. metropolitan areas. Sprint PCS' service, including third party affiliates, reaches a quarter billion people. Sprint PCS provides service through a combination of:

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operating its own digital network in major U.S. metropolitan areas using CDMA digital spread-spectrum wireless technology;



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affiliating with other companies, such as us, that use CDMA, mainly in and around smaller U.S. metropolitan areas;



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roaming on other providers' digital networks that use CDMA; and



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roaming on other providers' analog cellular networks using multi-mode and multi-band handsets.

        Sprint PCS customers can use their phones through roaming agreements in countries other than the United States, including areas of:

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Asia Pacific, including China, Guam, Hong Kong and New Zealand;



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Canada and Mexico;



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Central and South America, including Argentina, Bolivia, Chile, Colombia, Ecuador, Guatemala, Paraguay and Uruguay; and



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Most major Caribbean Islands.

        Third generation services.    We believe CDMA technology allows existing CDMA networks to be upgraded to the next generation in a timely and cost-efficient manner. We, along with Sprint PCS,

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launched third generation (3G) capability in our territory in the third quarter of 2002. This capability allows more efficient utilization of our network when voice calls are made using 3G-enabled handsets, which are handsets with increased capacity. It also enables the provision of enhanced data services. The service, marketed as "PCS Vision," allows our subscribers to use their PCS Vision-enabled devices to check e-mail, take and receive pictures, play games with full-color graphics and polyphonic sounds and browse the Internet wirelessly with speeds of up to 144 kilobytes per second with average throughput speeds in the range of 50-70 kilobits per second. Sprint has announced its plan to deploy Evolution Data Optimized ("EV-DO") technology across its network. With average user speeds of 300 to 500 kilobits per second and peak rates of up to 2.4 Megabits per second for downloads, EV-DO will accelerate mobile-device data speeds by up to ten times faster than on the current network. Sprint expects to design, deploy, and launch its EV-DO service in the majority of the top metropolitan markets in 2005. We are still evaluating in which markets we may deploy EV-DO and the timing of any such deployment.

        Clear Pay/account spending limit.    Under the PCS service plans of Sprint PCS, subscribers who do not meet certain credit criteria can nevertheless select any plan offered subject to an account spending limit to control credit exposure. Prior to May 2001, these subscribers were required to make a deposit generally ranging from $125 to $250 that could be credited against future billings. In May 2001, the deposit requirement was eliminated on certain credit classes, under the no deposit account spending limit (NDASL) program which was subsequently renamed "Clear Pay". From May 2001 to February 2002, a majority of our subscriber additions were under the Clear Pay/NDASL program. On February 24, 2002, along with certain other PCS Affiliates of Sprint, we reinstated the $125 deposit requirement for certain credit classes that was in place prior to May 2001 in an effort to limit our exposure to bad debt relative to these credit classes. This new program is referred to as "Clear Pay II" and is not a national Sprint PCS program. In February 2003, we increased our deposit requirement for Clear Pay II from $125 to $250. Since the implementation of Clear Pay II in February 2002, we have experienced a significant decline in subscriber additions, but the credit quality of those additions has improved. In December 2003, we implemented a new credit matrix which requires the majority of the sub-prime subscribers to deposit a minimum of $125 when activating service.

        Other services.    We may also offer wireless local loop services in our territory, but only where Sprint PCS is not a local exchange carrier. Wireless local loop service is a wireless substitute for the landline-based telephones in homes and businesses whereby subscribers are connected to the public switched telephone network using radio signals rather than copper wire for part or all of the connection between the subscriber and the switch. We also believe that new features and services will be developed on the PCS network of Sprint PCS to take advantage of CDMA technology. Sprint PCS conducts ongoing research and development to produce innovative services that are intended to give Sprint and PCS Affiliates of Sprint a competitive advantage. We may incur additional expenses in modifying our technology to provide these additional features and services.

Roaming

        Sprint PCS roaming.    Sprint PCS roaming includes both inbound roaming, when Sprint PCS wireless subscribers based outside of our territory use our network, and outbound roaming, when our subscribers use the PCS network of Sprint outside of our territory. We have a reciprocal per minute fee with Sprint PCS for inbound and outbound Sprint PCS roaming. Effective as of April 1, 2004, which date was the effective date of the amendments to our affiliation agreements with Sprint PCS, the reciprocal rate is $0.058 per minute through December 31, 2006. Immediately prior to the amendments to our affiliation agreements with Sprint PCS, the reciprocal rate was $0.041 per minute. Our ratio of inbound to outbound roaming with Sprint PCS for the period ended September 30, 2004 and the period ended July 1, 2004 was 1.6 to 1 and 1.3 to 1, respectively, and is expected to decline over time. Sprint PCS roaming revenue is not subject to the 8% affiliation fee.

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        In addition to the reciprocal per minute fee for the Sprint PCS roaming discussed above, we also recognize roaming revenue and expense related to data usage from PCS Vision services when wireless subscribers are using such services outside of their home territory. We recognize revenue when a wireless subscriber based outside of our territory uses PCS Vision data services in our territory and we recognize expense when our subscribers use such services on the PCS network of Sprint outside of our territory. This roaming activity is settled on a per kilobyte ("Kb") basis. For 2003, the rate was approximately $0.0013 per Kb, and for 2004 the rate is $0.0020 per Kb. Pursuant to the amendments to our affiliation agreements with Sprint PCS, the current rate of $0.0020 per Kb is fixed through December 31, 2006.

        Non-Sprint PCS roaming.    Non-Sprint PCS roaming includes both inbound non-Sprint PCS roaming, when non-Sprint PCS subscribers use our network, and outbound non-Sprint PCS roaming, when our subscribers use a non-Sprint PCS network. Pursuant to roaming agreements between Sprint PCS and other wireless service providers, when another wireless service provider's subscriber uses our network, we earn inbound non-Sprint PCS roaming revenue. These wireless service providers must pay fees for their subscribers' use of our network, and as part of our collected revenues, we are entitled to 92% of these fees. Currently, pursuant to our services agreements with Sprint PCS, Sprint bills these wireless service providers for these roaming fees and passes our portion of the fees to us. When another wireless service provider provides service to one of our subscribers, we pay outbound non-Sprint PCS roaming fees. Sprint PCS then bills our subscriber for use of that provider's network at rates specified in their contract and pays us 100% of this outbound non-Sprint PCS roaming revenue collected from that subscriber on a monthly basis. We bear the collection risk for all service.

        Reseller agreements.    We also recognize revenue from subscribers of various wholesale resellers of personal communications service when those subscribers use our network. These reseller agreements are negotiated by Sprint PCS, and we receive a per minute rate for each minute that the subscribers of these resellers use our network. These subscribers may be based within or outside our territory. In March 2004, we entered into a resale agreement with Virgin Mobile under the terms of an agreement between Sprint PCS and Virgin Mobile. Our resale agreement allows Virgin Mobile to sell prepaid wireless services in our markets, from which we will receive wholesale revenue from Virgin Mobile. On November 1, 2004, we amended our affiliation agreements with Sprint PCS to provide for our participation in all resale arrangements between Sprint PCS and resellers that are entered into, renewed or extended by Sprint PCS prior to December 31, 2006 (including the resale arrangement between Sprint PCS and AT&T Corp. entered into in May, 2004), provided the terms and conditions of such resale arrangement are at least as favorable to us as the terms and conditions of the AT&T resale arrangement. Additionally, our obligation to participate in such a resale arrangement is subject to a minimum pricing floor for voice minutes of use.

Marketing Strategy

        Our marketing strategy is to complement Sprint's national marketing strategies with techniques tailored to each of the specific markets in our territory.

        Use of Sprint's brand.    We feature exclusively and prominently the nationally recognized Sprint brand name in our marketing and sales efforts. From the subscribers' point of view, they use our network and the rest of the PCS network of Sprint as a unified network.

        Advertising and promotions.    Sprint promotes its products through the use of national as well as regional television, radio, print, outdoor and other advertising campaigns. In addition to Sprint's national advertising campaigns, we advertise and promote Sprint PCS products and services on a local level in our markets at our cost. We have the right to use any promotional or advertising materials developed by Sprint and only have to pay the incremental cost of using those materials, such as the cost of local radio and television advertisement placements, and material costs and incremental printing

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costs. We also benefit from any advertising or promotion of Sprint PCS products and services by third party retailers in our territory, such as RadioShack and Best Buy. We must pay the cost of specialized Sprint print advertising by third party retailers. Sprint also runs numerous promotional campaigns which provide subscribers with benefits such as additional features at the same rate or free minutes or kilobytes of use for limited time periods. We offer these promotional campaigns to potential subscribers in our territory.

        Sales force with local presence.    We have established local sales forces to execute our marketing strategy through our company-owned retail stores, local distributors, direct business-to-business contacts and other channels.

Sales and Distribution

        Our sales and distribution plan is designed to mirror Sprint's multiple channel sales and distribution plan and to enhance it through the development of local distribution channels. Key elements of our sales and distribution plan consist of the following:

        Sprint PCS retail stores.    As of September 30, 2004, we operated twelve Sprint PCS stores at various locations within our territory. These stores provide us with a local presence and visibility in certain markets within our territory. Following the Sprint PCS model, these stores are designed to facilitate retail sales, subscriber activation, bill collection and customer service. In addition to retail stores that we operate, we began in 2003 to enter into agreements with exclusive agents which operate Sprint PCS stores in our territory to further expand our distribution channels. These "branded stores" function similarly to our company-owned stores but are operated by a third party. These third parties purchase equipment from us, resell it to the consumer and receive compensation from us in the form of commission. As of September 30, 2004, we had nine of these branded stores and kiosks operating in our territory. In fiscal year 2005, we plan to add ten company-owned Sprint PCS retail stores and to re-emphasize obtaining new subscribers from our retail stores and local third party distributors in our territory.

        National third party retail stores.    Sprint PCS has national distribution agreements with various national retailers such as RadioShack and Best Buy for such retailers to sell Sprint PCS products. These national agreements cover retailers' stores in our territory, and as of September 30, 2004, these retailers had approximately 230 locations in our territory.

        Local third party distributors.    We contract directly with local third party distributors in our territory. These retailers are typically local businesses that have a presence in our markets. Local third party distributors purchase handsets and other PCS retail equipment from us and market Sprint PCS services on our behalf. We are responsible for managing this distribution channel and as of September 30, 2004, these local third party distributors had approximately 123 locations within our licensed territory. We compensate local third party distributors through commissions for subscriber activations.

        Electronic commerce.    Sprint PCS maintains an Internet site, www.sprintpcs.com, which contains information on Sprint PCS products and services. A visitor to the Sprint PCS Internet site can order and pay for a handset and select a rate plan. Sprint PCS wireless subscribers visiting the site can review the status of their account, including the number of minutes used in the current billing cycle. We recognize the revenues generated by wireless subscribers in our territory who purchase Sprint PCS products and services over the Sprint PCS Internet site.

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        Distribution mix.    During the period from October 1, 2003 through July 1, 2004 and the period from July 2, 2004 through September 30, 2004, the approximate percentage of our new subscribers that originated from each of our distribution channels is as follows:

Seasonality

        Our business is subject to seasonality because the wireless telecommunications industry historically has been heavily dependent on fourth calendar quarter results. Among other things, the industry relies on significantly higher subscriber additions and handset sales in the fourth calendar quarter as compared to the other three calendar quarters. A number of factors contribute to this trend, including:

•

the use of retail distribution, which is dependent upon the year-end holiday shopping season;



•

the timing of new product and service announcements and introductions;



•

competitive pricing pressures; and



•

aggressive marketing and promotions.

Technology

        General.    In 1993, the FCC allocated the 1900 MHz frequency block of the radio spectrum for wireless personal communications services. Wireless personal communications services differ from original analog cellular telephone service principally in that wireless personal communications services networks operate at a higher frequency and employ advanced digital technology. Analog-based networks send signals in which the transmitted signal resembles the input signal, the caller's voice. Digital networks convert voice or data signals into a stream of digits that permit a single radio channel to carry multiple simultaneous transmissions. Digital networks also achieve greater frequency reuse than analog networks, resulting in greater capacity than analog networks. This enhanced capacity, along with enhancements in digital protocols, allows digital-based wireless technologies, whether using wireless personal communications services or cellular frequencies, to offer new and enhanced services, including greater call privacy and more robust data transmission, such as facsimile, electronic mail and connecting notebook computers with computer/data networks.

        Wireless digital signal transmission is accomplished through the use of various forms of frequency management technology or "air interface protocols." The FCC has not mandated a universal air interface protocol for digital wireless personal communications services networks. Digital wireless personal communications networks operate under one of three principal air interface protocols: CDMA, time division multiple access ("TDMA") or global systems for mobile communications ("GSM"). TDMA and GSM communications are both time division multiple access networks but are incompatible with each other. CDMA is incompatible with both GSM and TDMA networks. Accordingly, a subscriber of a network that utilizes CDMA technology is unable to use a CDMA handset when traveling in an area not served by CDMA-based wireless personal communications services operators unless he or she is carrying a dual-band/dual-mode handset that permits use of the analog cellular network in that area. The same issue would apply to users of TDMA or GSM networks. All of the wireless personal communications services operators now have dual-mode or tri-mode

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handsets available to their subscribers. Because digital networks do not cover all areas in the country, these handsets will remain necessary for segments of the subscriber base.

        Benefits of CDMA technology.    The PCS network of Sprint and the networks of PCS Affiliates of Sprint all use digital CDMA technology, which is a digital spread-spectrum wireless technology that allows a large number of users to access a single frequency band by assigning a code to all speech bits, sending a scrambled transmission of the encoded speech over the air and reassembling the speech into its original format. We believe that CDMA provides important network performance benefits such as:

•

Greater capacity.    We believe, based on studies by CDMA manufacturers and our experience since our inception, that CDMA networks can provide network capacity that is approximately seven to ten times greater than that of analog technology and approximately three times greater than TDMA and GSM digital networks;



•

Privacy and security.    CDMA technology combines a constantly changing coding scheme with a low power signal to enhance call security and privacy;



•

Soft hand-off.    CDMA networks transfer calls throughout the CDMA network using a technique referred to as a soft hand-off, which connects a mobile subscriber's call with a new base station while maintaining a connection with the base station currently in use. CDMA networks monitor the quality of the transmission received by multiple base stations simultaneously to select a better transmission path and to ensure that the network does not disconnect the call in one cell unless replaced by a stronger signal from another base station. Analog, TDMA and GSM networks use a "hard hand-off" and disconnect the call from the current base station as it connects with a new one without any simultaneous connection to both base stations;



•

Simplified frequency planning.    Frequency planning is the process used to analyze and test alternative patterns of frequency used within a wireless network to minimize interference and maximize capacity. Unlike TDMA- and GSM-based networks, CDMA-based networks can reuse the same subset of allocated frequencies in every cell, substantially reducing the need for costly frequency reuse patterning and constant frequency plan management;



•

Longer battery life.    Due to their greater efficiency in power consumption, CDMA handsets can provide longer standby time and more talk time availability when used in the digital mode than handsets using alternative digital or analog technologies; and



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Efficient migration path.    We believe that CDMA technology has an efficient and incremental migration path to next generation voice and data services. Unlike technologies that require essentially a replacement investment to upgrade, CDMA upgrades can be completed incrementally. As of September 30, 2004, we have completed the first step which is conversion to 1xRTT on approximately 98% of our covered population. Additional steps beyond 1xRTT can be taken as demand for more robust data services or need for additional capacity develops for similar capital investment levels. Sprint recently announced its plan to deploy EV-DO technology across its network which is the next upgrade from 1xRTT.

Competition

        Competition in the wireless telecommunications industry is intense. We compete with a number of wireless service providers in our markets. We believe that our primary competition is with national and regional wireless service providers such as ALLTEL, Cingular Wireless, U.S. Cellular, Nextel Communications, Nextel Partners, T-Mobile and Verizon Wireless. We are not certain of the impact in our markets of the purchase of AT&T Wireless by Cingular Wireless. While we compete with one or more wireless carriers in each of the markets in our territory, none of these wireless service providers provide services in all of the markets in our territory.

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        We also face competition from resellers, which provide wireless services to customers but do not hold FCC licenses or own facilities. Instead, the resellers buy blocks of wireless telephone numbers and capacity from a licensed carrier and resell services through their own distribution network to the public.

        In addition, we compete with providers of existing communications technologies, such as paging, enhanced specialized mobile radio service dispatch and conventional landline telephone companies, in our markets. Potential users of wireless personal communications services networks may find their communications needs satisfied by other current and developing technologies. One or two-way paging or beeper services that feature voice messaging and data display as well as tone-only service may be adequate for potential customers who do not need to speak to the caller.

        In the future, we expect to face increased competition from entities providing similar services using other communications technologies, including satellite based telecommunications and wireless cable networks. While some of these technologies and services are currently operational, others are being developed or may be developed in the future.

        Many of our competitors have significantly greater financial and technical resources and larger subscriber bases than we do. In addition, some of our competitors may be able to offer regional coverage in areas not served by the PCS network of Sprint, or, because of their calling volumes or relationships with other wireless providers, may be able to offer regional roaming rates that are lower than those that we offer. Wireless personal communications service operators will likely compete with us in providing some or all of the services available through our network and may provide services that we do not. Additionally, we expect that existing cellular providers will continue to upgrade their networks to provide digital wireless communication services competitive with Sprint. Currently, there are five national wireless providers who are generally all present in major markets across the country. In January 2003, the FCC rule imposing limits on the amount of spectrum that can be held by one provider in a specific market was lifted, which may facilitate the consolidation of some national providers.

        The FCC's mandate that wireless carriers provide for wireless local number portability (WLNP) went into effect on November 24, 2003. WLNP allows subscribers to keep their wireless phone numbers when switching to a different service provider, which could make it easier for competing providers to market their services to our existing users. WLNP makes subscriber churn more likely, and we may be required to increase subsidies for product upgrades and/or reduce pricing to match competitors' initiatives in an effort to retain subscribers or replace those who switch to other carriers.

        Over the past several years, the FCC has auctioned and will continue to auction large amounts of wireless spectrum that could be used to compete with PCS services from Sprint. Based upon increased competition, we anticipate that market prices for two-way wireless services generally will decline in the future. We will compete to attract and retain subscribers principally on the basis of:

•

the strength of the Sprint brand name, services and features;



•

Sprint PCS' network;



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our network coverage and reliability; and



•

the benefits of CDMA technology.

        Our ability to compete successfully will also depend, in part, on our ability to anticipate and respond to various competitive factors affecting the industry, including:

•

new services and technologies that may be introduced;



•

changes in consumer preferences;



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demographic trends;



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economic conditions; and



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discount pricing strategies by competitors.

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Intellectual Property

        The Sprint diamond design logo is a service mark registered with the United States Patent and Trademark Office. The service mark is owned by Sprint. We use the Sprint brand name, the Sprint diamond design logo and other service marks of Sprint in connection with marketing and providing wireless services within our territory. Under the terms of our trademark and service mark license agreements with Sprint PCS, we do not pay a royalty fee for the use of the Sprint brand name and Sprint service marks.

        Except in certain instances and other than in connection with the national distribution agreements, Sprint has agreed not to grant to any other person a right or license to use the licensed marks in our territory. In all other instances, Sprint reserves the right to use the licensed marks in providing its services within or outside our territory.

        Our trademark license and service mark agreements with Sprint PCS contain numerous restrictions with respect to the use and modification of any of the licensed marks. See "Our Affiliation Agreements with Sprint PCS—The trademark and service mark license agreements" for more information on this topic.

Environmental Compliance

        Our environmental compliance expenditures primarily result from the operation of standby power generators for our telecommunications equipment and compliance with various environmental rules during network build-out and operations. The expenditures arise in connection with standards compliance or permits which are usually related to generators, batteries or fuel storage. Our environmental compliance expenditures have not been material to our financial statements or to our operations and are not expected to be material in the future.

Employees

        As of September 30, 2004, we employed 211 employees. Our employees are not represented by any labor union. We believe that our relationship with our employees is good.

Affiliation Agreements with Sprint PCS

        Each PCS Affiliate of Sprint, including us, enters into four major affiliation agreements with Sprint PCS:

•

a management agreement;



•

a services agreement; and



•

two trademark and service mark license agreements with different Sprint entities.

        Under our affiliation agreements with Sprint PCS, we have the exclusive right to provide wireless mobility communications services using the 1900 MHz frequency block under the Sprint brand name in our territory. Sprint PCS holds the spectrum licenses. Our affiliation agreements with Sprint PCS require us to interface with the PCS network of Sprint PCS by building our network to operate on the 10, 20 or 30 MHz wireless personal communications services frequencies licensed to Sprint in the 1900 MHz range.

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        The following is a description of the material terms and provisions of our affiliation agreements with Sprint PCS.

        The management agreement.    Under our management agreement with Sprint PCS, we have agreed to:

•

own, construct and manage a wireless personal communications services network in our territory in compliance with FCC license requirements and other technical requirements contained in our management agreement;



•

distribute Sprint PCS products and services;



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use Sprint PCS' and our own distribution channels in our territory;



•

conduct advertising and promotion activities in our territory; and



•

manage that portion of the wireless subscriber base assigned to our territory.

        Sprint PCS has the right to supervise our wireless personal communications services network operations and the right to unconditional access to our network, including the right to test and monitor any of our facilities and equipment.

•

Exclusivity.    We are designated as the only person or entity that can manage or operate a wireless mobility communications network using the 1900 MHz frequency block for Sprint PCS in our territory. Sprint PCS is prohibited from owning, operating, building or managing another wireless mobility communications network in our territory while our management agreements are in place and no event has occurred that would permit such agreements to terminate. Sprint PCS is permitted to make national sales to companies in our territory and to permit resale of the Sprint PCS products and services in our territory.



•

Network build-out.    Our management agreement specifies the terms of the Sprint PCS affiliation, including the required network build-out plan. We have agreed by specified dates to cover a specified percentage of the population within each of the markets that comprise our territory. Our management agreement also requires us to reimburse Sprint PCS one-half of the microwave clearing costs incurred by Sprint PCS for our territory; provided, however, that Sprint PCS will reimburse us in proportion to the amount we paid to clear spectrum if Sprint PCS receives any reimbursement from a third party for the cost of clearing spectrum. Sprint PCS has notified us that, based on the information we have provided to Sprint PCS, as of March 26, 2004, we have completed the required build-out of our network, including those aspects of the build-out that were not required to be completed until a future date, and we are in compliance with all applicable build-out requirements. If Sprint PCS decides to expand our territory, Sprint PCS must provide us with written notice of the proposed expansion. We have 90 days to determine whether we will build-out the proposed area. If we do not exercise this right, then Sprint PCS may build-out the coverage itself, or it may allow another PCS Affiliate of Sprint or another third party to do so on terms and conditions that are no more favorable than those that were offered to and rejected by us. Sprint PCS has the right, in new coverage that it constructs, or that is constructed by another PCS Affiliate of Sprint or another third party, to manage the network or hire another PCS Affiliate of Sprint to manage the network in the new coverage. We exercised an option which, as of June 15, 2004, added the Mackinac Island, Michigan market, consisting of two basic trading areas with a total population of approximately 168,000, to our territory. We may choose to build-out additional coverage in our territory that is not required by Sprint PCS; provided, however, that we may not elect to build-out additional coverage for areas with respect to which we previously declined to build.



•

Products and services.    Our management agreement identifies the products and services that we can offer in our territory. These services include, but are not limited to, PCS consumer and

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business products and services from Sprint PCS available as of the date of the agreement, or as modified by Sprint PCS. Sprint PCS will use commercially reasonable efforts to provide adequate quantities of any equipment necessary for us to offer, sell, promote and support the Sprint PCS products and services. We are allowed to sell wireless products and services that are not PCS products and services from Sprint PCS if those additional products and services do not violate our obligations under our affiliation agreements with Sprint PCS, cause distribution channel conflicts or materially impede the development of the Sprint PCS network. We must provide Sprint PCS with notice that we intend to offer such products or services and Sprint PCS may object if it believes that such products or services are confusingly similar to Sprint PCS products or services, or if Sprint PCS plans to introduce such products or services as Sprint PCS products or services within the following six months. We may also sell services such as specified types of long distance service, Internet access, handsets and prepaid phone cards with Sprint and other PCS Affiliates of Sprint. If we decide to use third parties to provide these services, we must give Sprint PCS an opportunity to provide the services on the same terms and conditions. We cannot offer traditional telephone services based on wireless technology specifically designed for the competitive local exchange market in areas where Sprint owns the local telephone company unless we name the Sprint-owned local telephone company as the exclusive distributor or Sprint PCS approves the terms and conditions.

•

National sales programs.    We are required to participate in the Sprint PCS wireless sales programs for sales to Sprint PCS' corporate accounts and will pay the expenses and receive the compensation from Sprint PCS relative to sales to customers of those accounts located in our territory. We are also required to use Sprint's long distance service for calls made from within designated portions of our territory to areas outside those designated portions and to connect our network to the national platforms Sprint PCS uses to provide services under our management agreement and services agreement. Sprint PCS will purchase such long distance service from Sprint Corporation on our behalf at a price and terms at least as favorable to Sprint PCS as the best prices and terms Sprint Corporation offers to any similarly situated wholesaler. We must pay Sprint PCS the same price for this service that Sprint PCS pays to Sprint Corporation, along with an additional administrative fee. However, we may purchase private line capacity for call routing directly from Sprint Corporation, if we can obtain more favorable terms, and Sprint Corporation has agreed to provide us with such capacity at the best price offered to similarly situated third parties. Under our management agreement, we are prohibited from reselling long distance service to other carriers; however, we may (1) transport long distance calls for customers, (2) transport long distance calls for resellers when such resale is subject to FCC mandate or when Sprint chooses to make such resale available, or (3) transport long distance calls for purposes of roaming.



•

Service pricing, roaming and fees.    We are required to offer PCS subscriber pricing plans from Sprint PCS designated for regional or national offerings, including "Fair & Flexible" plans, "Free & Clear" plans and "PCS Vision" plans. We are permitted to establish our own local price plans for PCS products and services offered only in our territory, subject to Sprint PCS' approval. We are entitled to receive a weekly fee from Sprint PCS equal to 92% of net "billed revenues" related to subscriber activity less applicable write-offs, net of deposits applied and net of recoveries. Sprint PCS determines the write-offs for any given time period. Outbound non-Sprint PCS roaming billed to subscribers based in our territory, proceeds from the sales of handsets and accessories, amounts collected with respect to taxes and surcharges for enhanced 911 and WLNP and universal service fund charges are not considered "billed revenues." Billed revenues generally include all other subscriber account activity for Sprint PCS products and services in our territory, which includes such activities billed to, attributed to or otherwise reflected in subscribers' accounts. We are generally entitled to 100% of the proceeds from customers for equipment and accessories sold and 81.36% of fees for enhanced 911 attributable

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to subscribers based in our markets less applicable write-offs. We also are entitled to 100% of the universal service funds from the Universal Service Administrative Company associated with subscribers in our markets.

Many Sprint PCS wireless subscribers purchase bundled pricing plans that allow roaming anywhere on the PCS network of Sprint PCS without incremental PCS roaming charges. However, we will earn Sprint PCS roaming revenue for every minute that a Sprint PCS wireless subscriber from outside our territory enters our territory and uses our services, which is offset against amounts we owe as expenses for every minute that our subscribers use services outside our territory. The analog roaming rate for use on a non-Sprint PCS provider's network is set under Sprint PCS's third party roaming agreements. The reciprocal roaming rate for voice subscribers who roam into the other party's or another PCS Affiliate's network is fixed through December 31, 2006 at $0.058 per minute, plus the actual long distance charges incurred. Beginning on January 1, 2007, the reciprocal roaming rate will change annually to equal 90% of Sprint PCS' retail yield for voice usage from the prior year. Sprint PCS' retail yield for voice usage is defined as Sprint PCS' average revenue per user for voice services divided by the average minutes of use per user.

In addition to the reciprocal per minute fee for the Sprint PCS roaming discussed above, we also recognize roaming revenue and expense related to data usage from PCS Vision services, known as "3G data," when wireless subscribers are using such services outside of their home territory. We recognize revenue when a wireless subscriber based outside of our markets uses PCS Vision data services on our network and we recognize expense when our subscribers use such services on the Sprint PCS network or network of another PCS Affiliate of Sprint outside of our markets. The reciprocal rate for this service is $0.0020 per kilobyte through December 31, 2006. Beginning on January 1, 2007, the rate for this service will change annually to equal 90% of Sprint PCS' retail yield for 3G data usage from the prior calendar year; provided that such amount will not be less than our network costs (including a reasonable return using our weighted average cost of capital applied against our net investment in our service area network) to provide such services. Sprint PCS's retail yield for 3G data usage is defined as Sprint PCS' average revenue per user for 3G data usage divided by the average kilobytes of use per user.

•

Vendor purchase agreements.    We may participate in discounted volume-based pricing on wireless-related products and warranties Sprint PCS receives from its vendors. Sprint PCS will use commercially reasonable efforts to obtain for us the same prices as Sprint PCS receives from its vendors.



•

Advertising and promotions.    Sprint PCS uses national as well as regional television, radio, print, outdoor and other advertising campaigns to promote its products. We benefit from the national advertising. In addition to Sprint PCS's national advertising campaigns, we advertise and promote Sprint PCS products and services on a local level in our markets at our cost. We have the right to use any promotion or advertising materials developed by Sprint PCS and only have to pay the incremental cost of using those materials, such as the cost of local radio and television advertisement placements and incremental printing costs. Sprint PCS also runs numerous promotional campaigns that provide subscribers with benefits such as additional features at the same rate or free minutes of use for limited time periods. We offer these promotional campaigns to potential subscribers in our territory.



•

Resale of Products and Services.    Sprint PCS may choose to offer a resale product under which third party resellers will resell Sprint PCS products and services under brand names other than "Sprint PCS." Our management agreement provides that we will participate in all resale arrangements between Sprint PCS and resellers that are entered into, renewed or extended by Sprint PCS prior to December 31, 2006 (including the resale arrangement between Sprint PCS and AT&T Corp. entered into in May 2004), provided the terms and conditions of such resale

21

arrangement are at least as favorable to us as the terms and conditions of the AT&T resale arrangement. Additionally, our obligation to participate in such a resale arrangement is subject to a minimum pricing floor for voice minutes of use. With respect to resale arrangements entered into prior to April 1, 2004, we will be paid the reciprocal roaming rate for voice and data usage of the Sprint PCS network in our territory by customers of such resellers, which rates are fixed until December 31, 2006 at $0.058 per minute and $0.0020 per kilobyte, respectively. With respect to all resale arrangements entered into, renewed or extended by Sprint PCS between April 1, 2004 and December 31, 2006, we will receive the amount of fees collected by Sprint PCS from such resellers on a pass-through basis as payment for the use of the Sprint PCS network in our territory by customers of such resellers. We may elect to discontinue our participation in any resale arrangement on the later to occur of (1) December 31, 2006, and (2) expiration of the then remaining term of such resale arrangement, giving effect to any renewals or extensions occurring prior to December 31, 2006. For purposes of determining renewals and extensions of resale arrangements, if an arrangement does not expressly state an initial term, then the arrangement will be deemed to have a five-year initial term, and if an arrangement states an initial term in excess of ten years, then the arrangement shall be deemed to have a ten-year initial term.

•

Program requirements.    We must comply with the Sprint PCS program requirements for technical standards, customer service standards, roaming coverage and national and regional distribution and national accounts programs. Some of the technical standards relate to network up-time, dropped calls, blocked call attempts and call origination and termination failures. Our management agreement provides that Sprint PCS intends that any change to the program requirements will be in the best interests of Sprint PCS and us. Sprint PCS can change the program requirements at its discretion and we must implement such changes within a commercially reasonable period of time; provided, however, that we can decline to implement certain changes that we determine will have a material adverse effect on us and meet certain parameters. We can decline to implement a "capital" program requirement change, defined as change that would require us to make a capital expenditure that is greater than 5% of our capital budget, if such change would have a negative net present value applying a five-year discounted cash flow model. Additionally, we can decline to implement a "non-capital" program requirement change, defined as change that would not require us to make a capital expenditure in excess of 5% of our capital budget, if such change would either (i) cause our combined peak negative cash flow to be an amount greater than 3% of our "enterprise value" (defined as the combined book value of our outstanding debt and equity less cash) when considered individually, or an amount greater than 5% of our enterprise value when combined with all other program requirement changes within the prior twelve months or (ii) cause a decrease in our forecasted five-year discounted cash flow of more than 3% on a combined net present value basis when considered individually, or more than 5% on a combined net present value basis when combined with all other program requirement changes within the prior twelve months. Notwithstanding the foregoing, we are required to implement certain program requirement changes, regardless of whether we determine that such changes will have a material adverse effect on us. We must implement a capital program requirement change if the capital requirement associated with such change is necessary to comply with the network performance standards required under our management agreement. Additionally, we must implement any program requirement change if the change relates to a pricing plan or a roaming program and Sprint PCS reasonably determines that the change must be implemented immediately to respond to competitive market forces. Finally, Sprint PCS may require us to implement any program requirement change if Sprint PCS compensates us the amount necessary to prevent us from exceeding all of the applicable above-referenced parameters.

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•

Non-competition.    We may not offer Sprint PCS products and services outside our territory without the prior written approval of Sprint PCS. We may offer, market or promote telecommunications products and services within our territory only under the Sprint PCS brand, our own brand, brands of our related parties or other products and services approved under our management agreements, except that no brand of a significant competitor of Sprint PCS or its related parties may be used for those products and services. To the extent we have or will obtain licenses to provide wireless personal communications services outside our territory, we may not use the spectrum to offer Sprint PCS products and services without prior written consent from Sprint PCS. Additionally, if subscribers in our markets travel to other geographic areas, we must route those subscribers' incoming and outgoing calls according to Sprint PCS' roaming and inter-service area requirements, without regard to any wireless networks that we or our affiliates operate.



•

Inability to use non-Sprint brand.    We may not market, promote, advertise, distribute, lease or sell any of the Sprint PCS products and services on a non-branded, "private label" basis or under any brand, trademark or trade name other than the Sprint PCS brand, except for sales to resellers or as otherwise permitted under the trademark and service mark license agreements.



•

Transfer of the PCS network.    In conjunction with the sale of its wireless PCS network, Sprint PCS can sell, transfer or assign its wireless PCS network and any of its FCC licenses to a third party if the third party agrees to be bound by the terms of our management agreement and our services agreement.



•

Change in control.    Sprint PCS has the right to withhold its consent to any transaction pursuant to which the "ultimate parent" of iPCS Wireless, Inc. changes, but this consent cannot be unreasonably withheld.



•

Rights of first refusal.    Sprint PCS has rights of first refusal, without stockholder approval, to buy our assets upon a proposed sale of all or substantially all of our assets used in the operation of our network.



•

Term.    The initial term of our management agreement commenced on January 22, 1999 and continues for a period of 20 years. Following expiration of the initial term, our management agreement will automatically renew for three successive 10-year renewal periods (for a maximum of 50 years including the initial term), unless at least two years prior to the commencement of any renewal period either party notifies the other party that it does not wish to renew this agreement or unless we are in material default of our obligations under such agreement.



•

Termination of our management agreement.    Our management agreement can be terminated as a result of the following events:



•

termination of Sprint PCS' spectrum licenses;



•

an uncured breach under our management agreement;



•

our management agreement not complying with any applicable law in any material respect; or



•

the termination of any of our trademark and service mark license agreements.

The termination or non-renewal of our management agreement triggers some of our rights and some rights of Sprint PCS. The right of either party to require the other party to purchase or sell the operating assets is discussed below.

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If we have the right to terminate our management agreement because of an event of termination caused by Sprint PCS, generally we may:

•

require Sprint PCS to purchase all of our operating assets used in connection with our network for an amount equal to at least 88% of our "entire business value," (as defined below); provided, however, that if Sprint PCS is the licensee of 20 Mhz or more of PCS spectrum in our territory, then the amount must be equal to at least 80% of our "entire business value";



•

in all areas in our territory where Sprint PCS is the licensee for 20 MHz or more of the spectrum on the date it terminates our management agreement, require Sprint PCS to assign to us, subject to governmental approval, up to 10 MHz of licensed spectrum for an amount equal to the greater of either (i) the original cost to Sprint PCS of the license plus any microwave clearing costs paid by Sprint PCS and (ii) 9% of our "entire business value"; or



•

choose not to terminate our management agreement and sue Sprint PCS for damages or submit the matter to arbitration.

If Sprint PCS has the right to terminate our management agreement because of an event of termination caused by us, generally Sprint PCS may:

•

require us, without stockholder approval, to sell our operating assets to Sprint PCS for an amount equal to 72% of our "entire business value";



•

require us to purchase, subject to governmental approval, the licensed spectrum in our territory for an amount equal to the greater of either (i) the original cost to Sprint PCS of the license plus any microwave relocation costs paid by Sprint PCS and (ii) 10% of our "entire business value";



•

take any action as Sprint PCS deems necessary to cure the breach of our management agreement, including assuming responsibility for, and operating, our network; or



•

choose not to terminate our management agreement and sue us for damages or submit the matter to arbitration.



•

Non-renewal of our management agreement.    If Sprint PCS gives us timely notice that it does not intend to renew our management agreement, we may:



•

require Sprint PCS to purchase all of our operating assets used in connection with our network for an amount equal to 80% of our "entire business value";



•

or in all areas in our territory where Sprint PCS is the licensee for 20 MHz or more of the spectrum on the date it terminates our management agreement, require Sprint PCS to assign to us, subject to governmental approval, up to 10 MHz of licensed spectrum for an amount equal to the greater of either (i) the original cost to Sprint PCS of the license plus any microwave relocation costs paid by Sprint PCS and (ii) 10% of our "entire business value."

If we give Sprint PCS timely notice of non-renewal, or we and Sprint PCS both give notice of non-renewal, or our management agreement expires with neither party giving a written notice of non-renewal, or if our management agreement can be terminated for failure to comply with legal requirements or regulatory considerations, Sprint PCS may:

•

purchase all of our operating assets, without stockholder approval, for an amount equal to 80% of our "entire business value"; or

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•

require us to purchase, subject to governmental approval, the licensed spectrum in our territory for an amount equal to the greater of either (i) the original cost to Sprint PCS of the license plus any microwave clearing costs paid by Sprint PCS and (ii) 10% of our "entire business value."



•

Determination of entire business value.    If our "entire business value" is to be determined, Sprint PCS and we will each select one independent appraiser and the two appraisers will select a third appraiser. The three appraisers will determine our "entire business value" on a going concern basis using the following principles:



•

the "entire business value" is based on the price a willing buyer would pay a willing seller for the entire on-going business;



•

the entire business value will not be calculated in a manner that double counts the operating assets of one or more of our affiliates;



•

the then-current customary means of valuing a wireless telecommunications business will be used;



•

the business is conducted under the Sprint PCS brand and our affiliation agreements with Sprint PCS;



•

we are deemed to own the spectrum and frequencies presently owned by Sprint PCS subject to our affiliation agreements with Sprint PCS; and



•

the valuation will not include any value for businesses not directly related to the Sprint PCS products and services, and those businesses will not be included in the sale.



•

Insurance.    We are required to obtain and maintain with financially reputable insurers who are licensed to do business in all jurisdictions where any work is performed under our management agreement, and who are reasonably acceptable to Sprint PCS, workers' compensation insurance, commercial general liability insurance, business automobile insurance, umbrella excess liability insurance and "all risk" property insurance.



•

Indemnification.    We have agreed to indemnify Sprint PCS and its directors, employees and agents and related parties of Sprint PCS and their directors, employees and agents against any and all claims against any of the foregoing arising from our violation of any law, a breach by us of any representation, warranty or covenant contained in our management agreement or any other agreement between us and Sprint PCS, our ownership of the operating assets or the actions or the failure to act of anyone employed or hired by us in the performance of any work under such agreement, except that we will not be obligated to indemnify Sprint PCS for any claims arising solely from the negligence or willful misconduct of Sprint PCS. Sprint PCS has agreed to indemnify us and our directors, employees and agents against all claims against any of the foregoing arising from Sprint PCS's violation of any law and from Sprint PCS's breach of any representation, warranty or covenant contained in our management agreement or any other agreement between us and Sprint PCS, except Sprint PCS will not be obligated to indemnify us for any claims arising solely from our negligence or willful misconduct.



•

Dispute resolution.    If the parties cannot resolve any dispute between themselves and our management agreement does not provide a remedy, then our management agreement provides that the parties will continue to operate under our affiliation agreements with Sprint PCS and that either party may file suit in a court of competent jurisdiction or commence an arbitration proceeding. Absent our express agreement with Sprint PCS to submit an issue or dispute to arbitration, neither party can be compelled to submit a dispute to arbitration.



•

Most favored nation clause.    We generally have the right to amend our management agreement or services agreement to obtain the most favorable terms provided under a management

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agreement or services agreement between Sprint PCS and another Sprint PCS affiliate of similar size (defined as having at least three million covered persons) if, prior to December 31, 2006, Sprint PCS amends the terms of any of those agreements of another Sprint PCS affiliate of similar size in a manner that is more favorable than the terms of our agreements. This right is only effective, however, if we agree to accept all of the terms and conditions set forth in the other agreements agreed to after April 1, 2004; provided, however, that no specific changes will be made to our agreements if such changes were made to the other Sprint PCS Affiliates' agreements (1) solely because the affiliate owns the spectrum on which its network operates (unless such PCS Affiliate of Sprint acquired the spectrum from Sprint PCS after April 1, 2004), (2) such changes were compelled by a law or regulation inapplicable to us, (3) such changes were due solely to a change in a build-out plan, or (4) such changes relate to unique terms or conditions.

        The services agreements.    Our services agreement outlines various back office services provided by Sprint PCS and available to us for an additional fee.

        Pursuant to the most recent amendments to our services agreement, Sprint PCS consolidated support services relating to billing, customer care, collections, network operations control center monitoring, national platform, information technology, interconnectivity, voice mail, directory assistance, operator services and roaming clearinghouse services into one back office service referred to in the amendments as "Sprint CCPU service," or "cash cost per user service", all of which support services we had been purchasing prior to the consolidation. The term "Sprint CCPU service" refers to certain support services that we purchase from Sprint PCS. We have agreed to continue to purchase the Sprint CCPU service from Sprint PCS through December 2006 at a monthly rate per subscriber of $7.25 until December 31, 2004, $7.00 from January 1, 2005 until December 31, 2005 and $6.75 from January 1, 2006 until December 31, 2006. Beginning in 2007, the monthly rate for the next three years for Sprint CCPU service will be reset to a mutually acceptable amount based on the amount necessary to recover Sprint PCS' reasonable costs for providing Sprint CCPU service; provided, however that the monthly rate will not exceed $8.50 per subscriber. If we and Sprint PCS cannot agree to a new rate for any future three-year period beyond 2006, we have the option to continue to purchase the Sprint CCPU service and have an arbitrator determine the new rate or self-provision or procure those services elsewhere, subject to certain rights and procedures relating to our ability to transition only customer care and collection services beginning in 2008.

        Sprint PCS also consolidated services relating to subscriber activation, credit verification, handset logistics and handset carrying and obsolescence costs into one category referred to in the amendments as Sprint CPGA service—or "cost per gross addition service"—all of which services and /or costs, prior to the consolidation, we had been purchasing in the case of the services or bearing in the case of the costs. The term "Sprint CPGA service" refers to certain support services that we purchase from Sprint PCS. The cost for "Sprint CPGA service" is included as a part of our total costs that we use to calculate the non-GAAP financial measure that we use called "CPGA." We have agreed to continue to purchase the Sprint CPGA service from Sprint PCS through December 2006 at a monthly rate of $23.00 per gross subscriber addition in our service area. Beginning in 2007, the monthly rate for the next three years for Sprint CPGA service will be reset to a mutually acceptable amount based on the amount necessary to recover Sprint PCS' reasonable costs for providing Sprint CPGA service. If we and Sprint PCS cannot agree to a new rate for any future three-year period beyond 2006, we have the option to continue to purchase the Sprint CPGA service and have an arbitrator determine the new rate or self-provision or procure those services elsewhere.

        Sprint PCS may contract with third parties to provide expertise and services identical or similar to those to be made available or provided to us. We have agreed not to use the services performed by Sprint PCS in connection with any other business or outside our markets. Sprint PCS must give us nine months' notice if it discontinues a significant service, including customer service, billing or collections, if

26

we wish to continue to receive that service, Sprint PCS will use commercially reasonable efforts to help us provide the service ourselves or find another vendor to provide the service and to facilitate any transition.

        We may elect to outsource all (but not less than all) of our customer care services, which consist primarily of call center support, by providing notice to Sprint PCS during the six-month period beginning on January 1, 2006 and ending on June 30, 2006, together with payment of a $3 million election fee. After making the election, Sprint PCS will continue to provide services to us, other than the customer care services that have been outsourced, and the services agreement shall be amended to provide that the fees we pay to Sprint PCS for the Sprint CCPU service and the Sprint CPGA service will be the then-current cost to Sprint PCS of such services; provided, however, that the fee for the Sprint CPGA service through December 31, 2006, shall be $15.00 multiplied by the number of gross customer additions in our territory.

        We have agreed with Sprint PCS to indemnify each other as well as affiliates, officers, directors and employees for violations of law or the services agreement except for any liabilities resulting from the negligence or willful misconduct of the person seeking to be indemnified or its representatives. Our services agreement also provides that no party will be liable to the other party for special, indirect, incidental, exemplary, consequential or punitive damages, or loss of profits arising from the relationship of the parties or the conduct of business under, or breach of, such services agreement except as may otherwise be required by the indemnification provisions. Our services agreement automatically terminates upon termination of our management agreement, and neither party may terminate the services agreement for any reason other than the termination of the management agreement.

        The trademark and service mark license agreements.    We have a non-transferable license to use, at no additional cost to us, the Sprint brand name and "diamond" symbol, and several other U.S. trademarks and service marks such as "The Clear Alternative to Cellular" and "Clear Across the Nation" on Sprint PCS products and services. We believe that the Sprint brand name and symbols enjoy a high degree of recognition, providing us an immediate benefit in the marketplace. Our use of the licensed marks is subject to our adherence to quality standards determined by Sprint and use of the licensed marks in a manner that would not reflect adversely on the image of quality symbolized by the licensed marks. We have agreed to promptly notify Sprint and Sprint PCS of any infringement of any of the licensed marks within our territory of which we become aware and to provide assistance to Sprint and Sprint PCS in connection with Sprint's enforcement of its rights. We have agreed with Sprint and Sprint PCS that we will indemnify the other for losses incurred in connection with a material breach of the trademark license agreements between Sprint PCS and us. In addition, we have agreed to indemnify Sprint and Sprint PCS from any loss suffered by reason of our use of the licensed marks or marketing, promotion, advertisement, distribution, lease or sale of any Sprint PCS products and services other than losses arising solely out of our use of the licensed marks in compliance with certain guidelines.

        Sprint and Sprint PCS can terminate our trademark and service mark license agreements if we file for bankruptcy or materially breach our agreement or if our management agreement is terminated. We can terminate our trademark and service mark license agreements upon Sprint's or Sprint PCS' abandonment of the licensed marks or if Sprint or Sprint PCS files for bankruptcy or our management agreement is terminated. However, Sprint can assign its interests in the licensed marks to a third party if that third party agrees to be bound by the terms of our trademark and service mark license agreements.

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Regulatory Environment

Regulation of the wireless telecommunications industry

        The FCC can have a substantial impact upon entities that manage wireless personal communications service networks and/or provide wireless personal communications services because the FCC regulates the licensing, construction, operation, acquisition and interconnection arrangements of wireless telecommunications networks in the United States.

        The FCC has promulgated a series of rules, regulations and policies to, among other things:

•

grant or deny licenses for wireless personal communications service frequencies;



•

grant or deny wireless personal communications service license renewals;



•

rule on assignments and/or transfers of control of wireless personal communications service licenses;



•

govern the interconnection of wireless personal communications service networks with other wireless and wireline service providers;



•

establish access and universal service funding provisions;



•

establish service requirements such as enhanced 911 service;



•

impose fines and forfeitures for violations of any of the FCC's rules;



•

regulate the technical standards of wireless personal communications services networks; and



•

govern certain aspects of the relationships between carriers and customers, such as the use of personal information and number portability.

        Through rules that became fully effective on January 1, 2003, the FCC eliminated its spectrum cap for Commercial Mobile Radio Service, or CMRS, which includes broadband wireless personal communications services, cellular and SMR. The cap previously had limited CMRS providers to 55 MHz in any geographic area. The FCC also eliminated its rule which prohibited a party from owning interests in both cellular networks in the same MSAs, though it retained the cross-interest prohibition for less populous Rural Service Areas ("RSAs"). The FCC's new rules blur the "bright line" of spectrum caps, however, and require a case-by-case analysis to determine that any proposed CMRS spectrum combination will not have an anticompetitive effect.

Transfers and assignments of wireless personal communications services licenses

        The FCC must give prior approval to the assignment of, or transfers involving, substantial changes in ownership or control of a wireless personal communications service license. This means that we will receive advance notice of any and all transactions involved in transferring control of Sprint or the assignment of some or all of the wireless personal communications service licenses held by Sprint. The FCC proceedings afford us an opportunity to evaluate proposed transactions well in advance of closing, and to take actions necessary to protect our interests. Non-controlling interests in an entity that holds a wireless personal communications service license or operates wireless personal communications service networks generally may be bought or sold without prior FCC approval. In addition, the FCC requires only post-consummation notification of pro forma assignments or transfers of control of certain commercial mobile radio service licenses.

Conditions of wireless personal communications services licenses

        All wireless personal communications service licenses are granted for ten-year terms conditioned upon timely compliance with the FCC's build-out requirements. Pursuant to the FCC's build-out requirements, all 30 MHz broadband wireless personal communications service licensees must construct

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facilities that offer coverage to one-third of the population in their licensed areas within five years and to two-thirds of the population in such areas within ten years, and all 10 MHz broadband wireless personal communications services licensees must construct facilities that offer coverage to at least one-quarter of the population in their licensed areas within five years or make a showing of "substantial service" within that five-year period.

        If the build-out requirements are not met, wireless personal communications service licenses could be forfeited. The FCC also requires licensees to maintain control over their licenses. Our affiliation agreements with Sprint PCS include a management agreement that the parties believe meet the FCC requirements for licensee control of licensed spectrum.

        If the FCC were to determine that our affiliation agreements with Sprint PCS need to be modified to increase the level of licensee control, we have agreed with Sprint PCS to use our best efforts to modify the agreements to the extent necessary to cause the agreements to comply with applicable law and to preserve to the extent possible the economic arrangements set forth in the agreements. If the agreements cannot be so modified, the agreements may be terminated pursuant to their terms. The FCC could also impose monetary penalties on Sprint, and possibly revoke one or more of the Sprint licenses.

Wireless personal communications services license renewal

        Wireless personal communications service licensees can renew their licenses for additional ten-year terms. Wireless personal communications service renewal applications are not subject to auctions. However, under the FCC's rules, third parties may oppose renewal applications and/or file competing applications. If one or more competing applications are filed, a renewal application will be subject to a comparative renewal hearing. The FCC's rules afford wireless personal communications services renewal applicants involved in comparative renewal hearings with a "renewal expectancy." The renewal expectancy is the most important comparative factor in a comparative renewal hearing and is applicable if the wireless personal communications service renewal applicant has:

•

provided "substantial service" during its license term; and



•

substantially complied with all applicable laws and FCC rules and policies.

        The FCC's rules define "substantial service" in this context as service that is sound, favorable and substantially above the level of mediocre service that might minimally warrant renewal. The FCC's renewal expectancy and procedures make it very likely that Sprint will retain the wireless personal communications service licenses that we manage for the foreseeable future.

Interconnection

        The FCC has the authority to order interconnection between commercial mobile radio services, commonly referred to as CMRS, providers and incumbent local exchange carriers. The FCC has ordered local exchange carriers to provide reciprocal compensation to commercial mobile radio service providers for the termination of traffic. Interconnection agreements are negotiated on a statewide basis and are subject to state approval.

        The FCC rules and rulings, as well as state proceedings, and a review by courts of such rules and rulings directly impact the nature and cost of the facilities necessary for interconnection of the PCS networks of Sprint with local, national and international telecommunications networks. They also determine the nature and amount of revenues that we and Sprint can receive for terminating calls originating on the networks of local exchange and other telecommunications carriers.

        Other FCC requirements.    CMRS providers, including Sprint, are required to permit manual roaming on their networks. With manual roaming, any user whose mobile phone is technically capable of connecting with a carrier's network must be able to make a call by providing a credit card number

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or making some other arrangement for payment. Since October 2000, the FCC has been considering changes in its rules that may terminate the manual roaming requirement and may impose automatic roaming obligations, under which users with capable equipment would be permitted to originate or terminate calls without taking action other than turning on the mobile phone.

        FCC rules require that local exchange and most commercial mobile radio services providers allow subscribers to change service providers without changing telephone numbers, which, for wireless service providers, is referred to as wireless local number portability, or WLNP. FCC regulations requiring that most commercial mobile radio service providers implement WLNP in the 100 largest metropolitan areas in the United States went into effect on November 24, 2003. FCC regulations require most commercial mobile radio service providers to be able to deliver calls from their networks to ported numbers anywhere in the country and contribute to the Local Number Portability Fund. We may be liable to Sprint for any penalties that Sprint may be subject to if we are unable to comply with the FCC's WLNP regulations within a reasonable period of time. Implementation of WLNP has required wireless personal communications service providers like us and Sprint to purchase more expensive switches and switch upgrades. However, it has also enabled existing cellular subscribers to change to wireless personal communications services without losing their existing wireless telephone numbers, which has made it easier for wireless personal communications service providers to market their services to existing cellular users. The existence of WLNP could adversely impact our business since it makes subscriber defections more likely and we may not be able to replace subscribers who have switched to other carriers.

        FCC rules permit broadband wireless personal communications service and other commercial mobile radio service providers to provide wireless local loop and other fixed services that would directly compete with the wireline services of local exchange carriers. This may create new markets and revenue opportunities for Sprint and its PCS Affiliates and other wireless providers.

        FCC rules require broadband personal communications services and other commercial mobile radio services providers to implement enhanced emergency 911 capabilities that provide the location of wireless 911 callers to "Public Safety Answering Points." The FCC has approved a plan proposed and amended by Sprint under which Sprint began selling specially equipped telephone handsets in 2001, with a rollout of such handsets that continued until June 30, 2003, when all new handsets activated nationwide were to be specially equipped. Sprint's plan requires that by December 31, 2005, 95% of Sprint wireless subscriber handsets in service must be equipped for the Sprint wireless enhanced 911 service. Moreover, Sprint completed its PCS network upgrade to support enhanced 911 service by December 31, 2002 and began providing a specified level of enhanced 911 service by June 30, 2002. As the required equipment becomes more functional and less expensive, emergency 911 services may afford wireless carriers substantial and attractive new service and marketing opportunities.

        FCC rules include several measures designed to remove obstacles to competitive access to customers and facilities in commercial multiple tenant environments, including the following:

•

Telecommunications carriers in commercial settings may not enter into exclusive contracts with building owners, including contracts that effectively restrict premises owners or their agents from permitting access to other telecommunications service providers; and



•

Utilities, including local exchange carriers, must afford telecommunications carriers and cable service providers reasonable and nondiscriminatory access to poles, conduits and rights-of-way owned or controlled by the utility.

        The FCC has also issued a further notice of proposed rulemaking seeking comment on whether it should adopt additional rules in this area, including extending certain regulations to include residential as well as commercial buildings. The final result of this proceeding could affect the availability and pricing of sites for our antennae and those of our competitors.

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        Communications assistance for law enforcement.    The Communications Assistance for Law Enforcement Act ("CALEA") enacted in 1994, requires wireless personal communications service and other telecommunications service providers to ensure that their facilities, equipment and services are able to comply with authorized electronic surveillance by federal, state and local law enforcement personnel. Wireless personal communications service providers were generally required to comply with the current industry CALEA capability standard, known as J-STD-025, by June 30, 2000, and with certain additional standards by September 30, 2001. Wireless personal communications service providers who sought extensions of compliance deadlines, including Sprint, are also required to implement a "packet-mode" capability by January 30, 2004 unless the FCC acts on petitions seeking changes in its rules. Providers had to meet various other capability requirements established by the Department of Justice and Federal Bureau of Investigation as of June 30, 2002. Most wireless personal communications service providers are ineligible for federal reimbursement for the software and hardware upgrades necessary to comply with the CALEA capability and capacity requirements. In addition, the FCC is considering petitions from numerous parties to establish and implement technical compliance standards pursuant to CALEA requirements. In sum, CALEA capability and capacity requirements are likely to impose some additional switching and network costs upon Sprint and its PCS Affiliates and other wireless entities.

        The USA PATRIOT Act of 2001 included certain provisions that enable law enforcement agencies and other branches of the government to more easily acquire records and information regarding certain uses of communications facilities from telecommunications carriers, including PCS carriers.

        Other federal regulations.    Sprint and its PCS Affiliates must bear the expense of compliance with FCC and Federal Aviation Administration regulations regarding the siting, lighting and construction of transmitter towers and antennas. In addition, FCC environmental regulations may cause some of our base station locations to become subject to the additional expense of regulation under the National Environmental Policy Act or NEPA. The FCC is required to implement NEPA by requiring service providers to meet land use and radio emissions standards.

        Review of universal service requirements.    The FCC and certain states have established "universal service" programs to ensure that affordable, quality telecommunications services are available to all Americans. Sprint is required to contribute to the federal universal service program as well as existing state programs. The FCC has determined that Sprint's "contribution" to the federal universal service program is a variable percentage of "end-user telecommunications revenues." Although many states are likely to adopt a similar assessment methodology, the states are free to calculate telecommunications service provider contributions in any manner they choose as long as the process is not inconsistent with the FCC's rules. At the present time it is not possible to predict the extent of the Sprint total federal and state universal service assessments or its ability to recover from the universal service fund. However, some wireless entities are seeking state commission designation as "eligible telecommunications carriers," enabling them to receive federal and state universal service support, and are preparing to compete aggressively with wireline telephone companies for universal service revenue. Because we manage substantial rural areas for the PCS Group of Sprint, it is possible that we will receive revenues in the future from federal and state universal service support funds that are much greater than the reductions in our revenues due to universal service contributions paid by Sprint.

        Partitioning; disaggregation.    FCC rules allow broadband wireless personal communications services licensees to partition their market areas and/or to disaggregate their assigned spectrum and to transfer partial market areas or spectrum assignments to eligible third parties. These rules may enable us to purchase wireless personal communications service spectrum from Sprint and other wireless personal communications services licensees as a supplement or alternative to the existing management arrangements.

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        Wireless facilities siting.    States and localities are not permitted to regulate the placement of wireless facilities so as to "prohibit" the provision of wireless services or to "discriminate" among providers of those services. In addition, so long as a wireless network complies with the FCC's rules, states and localities are prohibited from using radio frequency health effects as a basis to regulate the placement, construction or operation of wireless facilities. These rules are designed to make it possible for Sprint and its PCS Affiliates and other wireless entities to acquire necessary tower sites in the face of local zoning opposition and delays.

        Equal access.    Wireless providers are not required to provide long distance carriers with equal access to wireless subscribers for the provision of toll services. This enables us and Sprint to generate additional revenues by reselling the toll services of Sprint PCS and other interexchange carriers from whom we can obtain favorable volume discounts. However, the FCC is authorized to require unblocked access to toll service providers subject to certain conditions.

        State regulation of wireless service.    Section 332 of the Communications Act preempts states from regulating the rates and entry of commercial mobile radio service providers. Section 332 does not prohibit a state from regulating the other terms and conditions of commercial mobile services, including consumer billing information and practices, billing disputes and other consumer protection matters. However, states may petition the FCC to regulate those providers and the FCC may grant that petition if the state demonstrates that:

•

market conditions fail to protect subscribers from unjust and unreasonable rates or rates that are unjustly or unreasonably discriminatory; or



•

such market conditions exist and commercial mobile radio service is a replacement for a substantial portion of the landline telephone service within the state.

        To date, the FCC has granted no such petition. To the extent Sprint and its PCS Affiliates provide fixed wireless service, we may be subject to additional state regulation. These standards and rulings have prevented states from delaying the entry of wireless personal communications services and other wireless carriers into their jurisdictions via certification and similar requirements, and from delaying or inhibiting aggressive or flexible wireless price competition after entry.

        Interference temperature.    In November 2003, the FCC launched an inquiry aimed at establishing a new paradigm for the determination of interference to wireless services. Currently, interference measurements are based on transmitter operations. The proposed "interference temperature" would take into account interactions between transmitters and receivers, as well as all other elements of the radio frequency environment. One goal of this proceeding is to create opportunities for other transmitters, whether licensed or unlicensed, to operate in bands that are now exclusively reserved for licensees, such as the personal communications service frequencies used by Sprint. It is too early in this proceeding to determine what effect, if any, this inquiry by the FCC will have on our business.

ITEM 2.  PROPERTIES

        Our headquarters are located in Schaumburg, Illinois, and we lease office space for our headquarters and other parts of our operations, primarily for our retail stores, base stations and switching centers, in a number of locations. As of September 30, 2004, we leased twelve retail stores and two switching centers. As of such date, we also leased space on 577 wireless towers and owned 92 wireless towers. On September 8, 2004, we signed an agreement with TCP Communications, LLC whereby we agreed to sell up to 92 of our owned towers to TCP, and after the sale we would lease space on the towers sold to TCP. We closed on the sale of 51 towers on November 9, 2004 and we expect the closings for the remaining towers to occur through the first half of 2005. We co-locate with other wireless service providers on approximately 86% of our wireless towers. We believe that our

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facilities are adequate for our current operations and that additional leased space can be obtained if needed on commercially reasonable terms.

ITEM 3.  LEGAL PROCEEDINGS

        On February 23, 2003, we and our wholly owned subsidiaries iPCS Wireless, Inc. and iPCS Equipment, Inc. filed a Chapter 11 bankruptcy petition in the United States Bankruptcy Court for the Northern District of Georgia for the purpose of effecting a court-administered reorganization. In connection with our bankruptcy filing, we also filed a complaint against Sprint Corporation and certain of its affiliates alleging that Sprint breached its affiliation agreements with us. Following the filing of our litigation against Sprint, related cases were filed. The unsecured creditors committee (which included holders of our senior discount notes) filed a separate complaint against Sprint, repeating many of our allegations and essentially adding claims that Sprint should be held liable for all of our outstanding debts, by reason (among other things) of Sprint's domination and control over aspects of our business. A group of our secured creditors filed a complaint in a Georgia state court, essentially seeking a determination that Sprint is obliged to remit 96% rather than 92% of our actual cash receipts (as defined in our affiliation agreements with Sprint), by reason of the filing of our bankruptcy petition. As part of our reorganization each of these lawsuits was settled. Our plan of reorganization was confirmed by the Bankruptcy Court on July 9, 2004 and declared effective on July 20, 2004.

        On October 1, 2003, AT&T filed an administrative proof of claim in the amount of $5.1 million for services provided to us from February 23, 2003 through June 24, 2003, and a pre-petition proof of claim in the amount of $1.7 million for services provided to us prior to our Chapter 11 filing, both of which claims we dispute. In connection with our plan of reorganization, we agreed to deposit $0.7 million in escrow pending resolution of both of these disputed claims.

        On August 31, 2004, AT&T filed a cure claim for $4.1 million, contending that $1.5 million of the amount set forth in the pre-petition proof of claim, and $2.5 million of the amount set forth in the administrative proof of claim are presently due in cash as cure amounts resulting from an alleged assumption arising from the confirmation of our plan of reorganization, which we also dispute. Also on August 31, 2004, AT&T amended its administrative proof of claim originally filed on October 1, 2003, by reducing it from $5.1 million to $2.6 million. If AT&T's claims are allowed as valid, AT&T would have a $0.2 million pre-petition claim payable in stock under our plan of reorganization, with the remaining claims (both cure and administrative) payable in $6.6 million of cash.

        Both the administrative and pre-petition claims between AT&T and us have been consolidated in claims proceedings pending before the Bankruptcy Court. On September 30, 2004, we filed a response to the cure claim requesting that our dispute on the cure claim be consolidated with the administrative and pre-petition claim dispute. We are currently in the discovery stage of the proceedings with respect to the administrative and pre-petition claims. If we cannot reach a settlement regarding these disputes after discovery, the Bankruptcy Court will determine the outcome. In the event that our response to the cure claim is denied or that the Bankruptcy Court does not find in our favor if a settlement is not reached with AT&T, we believe we will have sufficient resources to fund any potential claim. We believe the consolidated financial statements included elsewhere in this report adequately reflect our obligations to AT&T for these services provided.

        In addition to the foregoing, from time to time, we are involved in various legal proceedings relating to claims arising in the ordinary course of business and in connection with our bankruptcy petition. We are not currently a party to any such legal proceedings, the adverse outcome to which, individually or in the aggregate, is expected to have a material adverse effect on our business, financial condition or results of operations.

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

        None.

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PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

        Pursuant to our plan of reorganization that became effective on July 20, 2004, our previously outstanding common stock was cancelled and we issued 8.6 million shares of new common stock to our general unsecured creditors pursuant to an exemption provided by Section 1145 of the U.S. Bankruptcy Code. An additional 0.4 million shares are reserved and will be distributed under this same exemption upon resolution of the remaining disputed unsecured creditors' claims.

        On August 3, 2004, our common stock began trading on the National Quotation Bureau's Pink Sheets under the symbol "IPCX".

        The following table sets forth on a per share basis the high and low closing sales prices for our common stock as reported on the National Quotation Bureau's Pink Sheets for the periods indicated.

        As of December 24, 2004, there were approximately 47 holders of record of our common stock, including record holders which hold shares on behalf of an indeterminate number of beneficial owners. On December 23, 2004, the last reported sale price of our common stock price was $28.00.

        We intend to retain our future earnings, if any, to fund the development and growth of our business and, therefore, do not anticipate paying any cash dividends in the foreseeable future. Our future decisions concerning the payment of dividends on the common stock will depend upon our results of operations, financial condition and capital expenditure plans and will be subject to limitations under the indenture governing our senior notes, as well as such other factors that the board of directors, in its sole discretion, may consider relevant.

        The equity compensation plan information required by Item 201(d) of Regulation S-K is set forth in Item 12 below.

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ITEM 6.  SELECTED FINANCIAL DATA:

        We derived the following statement of operations and balance sheet data as of September 30, 2004 and 2003 and for the periods ended September 30, 2004 and July 1, 2004, each of the years ended September 30, 2003 and 2002 from our audited consolidated financial statements, included elsewhere in this report. We derived the following statement of operations and balance sheet data as of September 30, 2001 and December 31, 2000 and for the nine months ended September 30, 2001, and for the year ended December 31, 2000 from our audited consolidated financial statements, which are not included in this report.

        In accordance with the American Institute of Certified Public Accountants Statement of Position 90-7, "Financial Reporting by Entities in Reorganization under the Bankruptcy Code", we adopted fresh start accounting as of July 1, 2004, and our emergence from Chapter 11 resulted in a new reporting entity. The periods as of and prior to July 1, 2004 have been designated "Predecessor Company" and the periods subsequent to July 1, 2004 have been designated as "Successor Company". Under fresh start accounting, our reorganization equity value was allocated to the assets and liabilities based on their respective fair values and was in conformity with SFAS No. 141 "Business Combinations". As a result of the implementation of fresh start accounting, our financial statements after the effective date are not comparable to our financial statements for prior periods.

        Our consolidated financial statements included in this report have been prepared on the assumption that we will continue as a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. Our financial statements as of September 30, 2004 and September 30, 2003, and for the periods ended September 30, 2004 and July 1, 2004, the year ended September 30, 2003 and for the nine months ended September 30, 2001 were audited by Deloitte & Touche LLP, independent registered public accounting firm. Our financial statements as of September 30, 2002 and for the year then ended were audited by KPMG LLP, independent registered public accounting firm. The report from KPMG includes an explanatory paragraph which states that there is substantial doubt about our ability to continue as a going concern. We believe that the issues that caused our independent registered public accounting firm to doubt our ability to continue as a going concern, as well as the uncertainty related to the bankruptcy proceedings, were addressed by our reorganization.

        It is important that you also read "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our audited and unaudited consolidated financial statements and, in each case, any related notes thereto included elsewhere in this report.

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(a)

General and administrative expenses for the nine months ended September 30, 2001 and the year ended September 30, 2002 included approximately $2.4 million and $18.4 million, respectively, of expenses related to AirGate's acquisition of us.

(b)

Reorganization income (expense) relate to costs and adjustments that relate to our Chapter 11 filing and the related fresh start accounting adjustments to revalue our assets and liabilities to their fair value. Other costs included in reorganization expense include professional fees, adjustments to carrying value of debt, employee severance payments, employee retention payments and lease termination accruals. See our notes to our consolidated financial statements included elsewhere in this report for further information.

(c)

In 2002, we recorded an impairment charge of approximately $8.1 million as a result of our annual impairment testing of goodwill as required by SFAS No. 142. In addition, we recorded impairment charges of approximately $53.0 million under SFAS No. 144, which consisted of approximately $23.6 million of intangible assets and $29.4 million of property and equipment.

(d)

As of the effective date of our plan of reorganization, we recognized income of approximately $132.0 million on the cancellation of debt related to the discharge of certain of our liabilities subject to compromise as required under our plan of reorganization.

(e)

In July 2000, in connection with the refinancing of our Nortel credit facility with our then existing senior secured credit facility, we recorded a loss on the early extinguishment of debt of approximately $1.5 million that related to the write-off of the unamortized deferred financing costs. As required under SFAS No. 145, the loss previously reported as an extraordinary item has been reclassified as a non-operating loss.

(f)

In connection with AirGate's acquisition of us, we changed our method of recognizing interest expense on our then existing senior discount notes effective as of October 1, 2001. The cumulative effect of this change in accounting for the periods through September 30, 2001, was a reduction in the carrying value of the senior discount notes by approximately $4.3 million along with a corresponding decrease in our net loss.

(g)

Basic and diluted loss per share for the Successor Company are calculated by dividing the net loss available to common stockholders by the weighted average number of shares of our common stock. Pursuant to our plan of reorganization, 8.6 million shares were distributed to our unsecured creditors on the effective date and the remaining 0.4 million shares held in reserve will be distributed upon resolution of disputed claims. The full nine million shares were used in the calculation of weighted average shares. The calculation was made in accordance with SFAS No. 128, "Earnings Per Share". The basic and diluted loss per share are the same because the inclusion of the incremental potential shares from any assumed exercise of stock options is antidilutive. Per share information is not presented for the Predecessor Company as it is not meaningful.

(h)

Amount includes approximately $206.7 million related to our senior discount notes and other amounts owed to Sprint and other creditors. See notes to our consolidated financial statements included elsewhere in this report for further information.

(i)

In connection with AirGate's acquisition of us, all shares of preferred stock were converted into common shares.

(j)

As part of our plan of reorganization, our previously issued common stock was cancelled and new equity was issued to our general unsecured creditors in satisfaction and retirement of their claims.

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

iPCS, Inc. History

        On January 22, 1999, we entered into our affiliation agreements with Sprint PCS whereby we became a PCS Affiliate of Sprint with the exclusive right to market and provide Sprint PCS products and services under the Sprint and Sprint PCS brand names in 16 markets in Illinois and Iowa. Our affiliation agreements with Sprint PCS were amended in March 2000 to add 20 additional markets. On February 28, 2001, our affiliation agreements with Sprint PCS were amended to add the Iowa City and Cedar Rapids, Iowa markets to our territory. On March 26, 2004, our affiliation agreements with Sprint PCS were amended to add one partial market to which we had already been providing services. On July 26, 2004, we amended our affiliation agreements to add the Mackinac Island, Michigan market consisting of two basic trading areas to our territory. With these amendments, the size of our territory was increased from a total population of 2.8 million residents to 7.8 million residents, based on the 2000 population counts compiled by the U.S. Census Bureau adjusted by estimated growth rates from third party proprietary demographic databases, at September 30, 2004.

        On November 30, 2001, AirGate, a PCS Affiliate of Sprint providing service in North Carolina, South Carolina and Georgia, acquired us in a tax-free stock for stock transaction. In connection with the merger, Timothy M. Yager, iPCS' Chief Executive Officer until the time of the merger, and other senior management of iPCS resigned as officers at the closing of the merger. We were designated as an unrestricted subsidiary of AirGate and we operated as a separate business entity. Due to restrictions in AirGate's indenture governing its outstanding notes, AirGate could not provide funding or financial support to us. On February 23, 2003, we and our subsidiaries filed for Chapter 11 bankruptcy protection in the Bankruptcy Court. Also on this date, we filed a lawsuit against Sprint alleging that Sprint PCS had breached its agreements with us, causing us severe financial damage. On October 17, 2003, AirGate irrevocably transferred all of its shares of our common stock to a trust organized under Delaware law. The beneficial owners of AirGate common stock at the date of transfer were beneficiaries of the trust. AirGate had no interest in the trust. Upon the effective date of the plan of reorganization, our common stock held by the trust was cancelled and the trust terminated by its terms.

        As a result of the Chapter 11 filing, there was uncertainty about our ability to continue as a going concern. The continuation of our business as a going concern was contingent upon, among other things, our ability: (1) to formulate a Plan of Reorganization that would be confirmed by the Bankruptcy Court; (2) to achieve satisfactory growth and successfully manage operations to generate enough cash from operations to meet future obligations; and (3) to resolve our litigation against Sprint. During our reorganization, we limited our new subscriber activation volume and subscriber growth to ensure adequate liquidity to meet our financial obligations. In order to reorganize our business, our Plan of Reorganization, which was confirmed by the Bankruptcy Court on July 9, 2004 and was effective on July 20, 2004, provided for the following:

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the assumption of our affiliation agreements with Sprint PCS, as amended to provide us a number of benefits, principally higher roaming revenue and lower fixed costs;



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the settlement of all claims by and between us and Sprint which resulted in our write-off of all prepetition claims, as set forth in the settlement agreement and mutual release;



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the payment to Sprint, in cash, of approximately $5.1 million in full and complete satisfaction of our obligation to cure defaults under our affiliation agreements with Sprint PCS;



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our assumption of all contracts and leases that had not been previously rejected; and



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the appointment of Timothy M. Yager as president and chief executive officer and appointment of seven directors to our board of directors.

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Business Overview

        As a PCS Affiliate of Sprint, the pricing of services and handsets to our subscribers are generally established by Sprint PCS. In addition, the cost payable by us to Sprint PCS for our subscriber processing, customer care and customer billing is also established by Sprint PCS. As such, we attempt to manage our results of operations largely by determining within parameters established by Sprint PCS the credit quality of the subscribers for whom we activate service and the number of our company-owned stores and local third party distributors in our territory with which we enter into agreements to sell Sprint PCS services and handsets. As our network build-out is substantially complete, the amount of capital expenditures that Sprint PCS can require us to incur for network operations is relatively small and relates primarily to upgrading our network to new technologies in order to maintain its compatibility with Sprint PCS' network and providing additional coverage within our territory at our discretion.

        A significant part of our subscriber acquisition costs relates to costs that we pay, as allocated to us by Sprint PCS, to subsidize the cost of the handsets purchased by our subscribers. Accordingly, we attempt to manage the rate at which we add new subscribers. We carefully monitor the credit worthiness of our subscribers as we bear the risk of the collectibility of their bills for Sprint PCS services and impose deposits where warranted by their credit profiles. Our results of operations are based on the collectibility of our subscribers' monthly recurring charges and the charges for minutes of use on our network by our subscribers who exceed the minutes in their plan; and payments we receive from Sprint PCS for minutes of use on our network by Sprint PCS subscribers and non-Sprint PCS subscribers who are not based in our territory.

        The primary metrics that we use to manage our business are set below.

Definitions of Operating Metrics

        In this "Management's Discussion and Analysis of Financial Condition and Results of Operations" section, we provide certain financial measures that are calculated in accordance with accounting principles generally accepted in the United States ("GAAP") and as adjusted to GAAP ("non-GAAP") to assess our financial performance. In addition, we use certain non-financial terms that are not measures of financial performance under GAAP. Terms such as subscriber additions and churn are terms used in the wireless telecommunications industry. The non-GAAP financial measures of average revenue per user ("ARPU") and cost per gross addition ("CPGA") reflect standard measures of liquidity, profitability or performance commonly used in the wireless telecommunications industry. The non-financial terms and the non-GAAP measures reflect wireless telecommunications industry conventions and are commonly used by the investment community for comparability purposes. The non-GAAP measures included in this "Management's Discussion and Analysis of Financial Condition and Results of Operations" are reconciled below in "—Liquidity and Capital Resources—Reconciliation of Non-GAAP Financial Measures" and are summarized as follows:

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Average monthly churn is a measure of the rate at which subscribers based in our territory deactivate service on a voluntary or involuntary basis. We calculate average monthly churn based on the number of subscribers deactivated during the period (net of transfers out of our territory and those who deactivated within 30 days of activation) as a percentage of our average monthly subscriber base during the period divided by the number of months during the period.



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ARPU, or average revenue per user, is a measure of the average monthly service revenue earned from subscribers based in our territory, excluding roaming revenue. This measure is calculated by dividing subscriber revenues in our consolidated statement of operations by the number of our average monthly subscribers during the period divided by the number of months in the period.

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•

CPGA, or cost per gross addition, is a measure of the average cost we incur to add a new subscriber in our territory. These costs include handset subsidies on new subscriber activations, commissions, rebates and other selling and marketing costs. We calculate CPGA by dividing (a) the sum of cost of products sold and selling and marketing expenses associated with transactions with new subscribers during the measurement period, less product sales revenues associated with transactions with new subscribers during the measurement period, by (b) the total number of subscribers activated in our territory during the period.



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Licensed population represents the number of residents in the markets in our territory for which we have an exclusive right to provide wireless mobility communications services under the Sprint brand name. The number of residents located in our territory does not represent the number of wireless subscribers that we serve or expect to serve in our territory.



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Covered population represent the number of residents covered by our network in our territory. The number of residents covered by our network does not represent the number of wireless subscribers that we serve or expect to serve in our territory.

General

        As a PCS Affiliate of Sprint, we have the exclusive right to provide digital wireless personal communications services, or PCS, under the Sprint brand name in our licensed territory, which includes portions of Illinois, Michigan, Iowa and eastern Nebraska. We own and are responsible for building, operating and managing the portion of the 100% digital, 100% PCS wireless network of Sprint PCS located in our territory. We offer national calling plans designed by Sprint PCS as well as local plans tailored to our markets. Our portion of the PCS network of Sprint PCS is designed to offer a seamless connection with the wireless network of Sprint PCS. We market Sprint PCS products and services through a number of distribution outlets located in our territory, including our company-owned retail stores, major national retailers and local third party distributors. At September 30, 2004, we had a total licensed population of over 7.8 million, covered population of approximately 5.9 million and total subscribers of approximately 240,500 in all our markets.

        We recognize revenues from our subscribers for the provision of wireless telecommunications services, proceeds from the sale of handsets and accessories through channels controlled by us and fees from Sprint PCS and other wireless service providers and resellers when their subscribers roam onto our network. Sprint PCS retains 8% of all service revenue collected from our subscribers (not including product sales or roaming charges billed to our subscribers) and 8% of all fees collected from other wireless service providers and resellers when their subscribers roam onto our network. We report the amount retained by Sprint PCS as an operating expense. In addition, Sprint PCS bills our subscribers for taxes, handset insurance and Universal Service Fund charges which we do not record. Sprint collects these amounts from the subscribers and remits them to the appropriate entity.

        As part of our affiliation agreements with Sprint PCS, we have contracted with Sprint PCS to receive back-office services such as subscriber activation, handset logistics, billing, customer care and network monitoring services. We initially elected to delegate the performance of these services to Sprint PCS to take advantage of its economies of scale, to accelerate our build-out and market launches and to lower our initial capital requirements. Under the terms of the amendment to our affiliation agreements we have contracted with Sprint PCS for these services through December 31, 2006. The cost for these services is primarily on a per subscriber or per transaction basis and is recorded as an operating expense.

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Critical Accounting Policies

        The fundamental objective of financial reporting is to provide useful information that allows a reader to comprehend the business activities of an entity. To aid in that understanding, we have identified our "critical accounting policies." These policies have the potential to have a significant impact on our consolidated financial statements, either because of the significance of the financial statement item to which they relate or because they require judgment and estimation due to the uncertainty involved in measuring, at a specific point in time, events which are continuous in nature.

        Revenue recognition.    We recognize revenues when persuasive evidence of an arrangement exists, services have been rendered, the price to the buyer is fixed or determinable, and collectibility is reasonably assured. We recognize service revenue from our subscribers as they use the service. We pro-rate monthly subscriber revenue over the billing period and record airtime usage in excess of the pre-subscribed usage plan. Our subscribers pay an activation fee when they initiate service. We reduce recorded service revenue for billing adjustments, and estimated uncollectible fees for late payments and early cancellation. We also reduce service revenue for rebates and discounts given to subscribers on wireless handset sales in accordance with the Emerging Issues Task Force ("EITF"), EITF 01-9 "Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor's Products)." Effective July 1, 2003, we adopted EITF No. 00-21, "Accounting for Revenue Arrangements with Multiple Deliverables." This EITF guidance addresses accounting for arrangements that involve multiple revenue-generating activities. In applying this guidance, separate contracts with the same party, entered into at or near the same time, will be presumed to be a bundled transaction, and the consideration will be measured and allocated to the separate units of the arrangement based on their relative fair values. The guidance in EITF 00-21 became effective for revenue arrangements entered into for quarters beginning after June 15, 2003. We have elected to apply this guidance prospectively from July 1, 2003. Prior to the adoption of EITF 00-21, under the provisions of SAB No. 101, we accounted for the sale of our handsets and our subsequent service to the customer as a single unit of accounting because our wireless service is essential to the functionality of our handsets. Accordingly, we deferred all activation fee revenue and its associated direct costs and amortized these revenues and costs over the average life of our subscribers which we estimate to be 30 months. Under EITF 00-21 we no longer need to consider whether customers can use their handsets without our wireless service provided to them. Because we meet the criteria stipulated in EITF 00-21, the adoption of EITF 00-21 requires us to account for the sale of the handset as a separate unit of accounting from the subsequent service to the customer. With the adoption of EITF 00-21, we now recognize activation fee revenue generated from our retail stores as equipment revenue. In addition, we recognize the portion of the direct activation fee costs related to the handsets sold in our retail stores. Subsequent to July 1, 2003, we have continued to apply the provisions of SAB No. 101 and have deferred and amortized activation fee revenue and costs generated by subscribers activated other than through our retail stores.

        We participate in the Sprint PCS national and regional distribution program in which national retailers such as RadioShack and Best Buy sell Sprint PCS products and services. In order to facilitate the sale of Sprint PCS products and services, national retailers purchase wireless handsets from Sprint for resale and receive compensation from Sprint PCS for products and services sold. For industry competitive reasons, Sprint PCS subsidizes the price of these handsets by selling the handsets at a price below cost. Under our affiliation agreements with Sprint PCS, when a national retailer sells a handset purchased from Sprint PCS to a subscriber in our territory, we are obligated to reimburse Sprint PCS for the handset subsidy that Sprint originally incurred. The national retailers sell Sprint wireless services under the Sprint and Sprint PCS brands and marks. We do not receive any revenues from the sale of wireless handsets by national retailers. We classify these Sprint PCS wireless handset subsidy charges as a sales and marketing expense for a wireless handset sale to a new subscriber and classify these subsidies as a cost of service for a wireless handset upgrade to an existing subscriber.

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        Sprint PCS retains 8% of service revenues collected from our subscribers and from non-Sprint subscribers who roam onto our network. The amount retained by Sprint PCS is recorded as cost of service and roaming. Revenues generated from the sale of handsets and accessories and from roaming services provided to Sprint PCS and other Sprint PCS affiliate subscribers who are not based in our markets are not subject to the 8% affiliation fee for Sprint PCS.

        Allowance for doubtful accounts.    Estimates are used in determining our allowance for doubtful accounts and are based on our historical write-off experience, and the uncollectibility of accounts receivable by aging category, as well as current information regarding the credit quality of our subscribers. Using this historical information, which is somewhat limited due to the changes made to our historical credit policies for deposit on certain activations, we estimate allowances for uncollectibility relative to the aging categories. If our estimates are insufficient for any reason, our operating losses and available cash would be negatively impacted.

        Under PCS service plans offered by Sprint PCS, subscribers who do not meet certain credit criteria can nevertheless select any plan offered, subject to an account spending limit, or ASL, which serves to control our credit exposure. ASLs generally range from $125 to $250 per subscriber and generally require deposits in the amount of the limit that could be credited against future billings. In May 2001, the deposit requirement was eliminated on certain, but not all, credit classes. As a result, a significant amount of our subscriber additions during 2001 were under the no-deposit account spending limit program, or "NDASL" program. The NDASL program was replaced by the "Clear Pay" program in November 2001, which reinstated the deposit requirement for certain of the lowest credit class subscribers and featured increased back-office controls with respect to collection efforts. We reinstated a $125 deposit for subscribers in other credit classes of the Clear Pay program in February 2002, and in February 2003, we increased our deposit requirement to $250. In December 2003, we implemented a new credit matrix which would require the majority of sub-prime subscribers to deposit $125 when activating service.

        Long-lived asset recovery.    Long-lived assets, consisting primarily of property and equipment and intangibles, comprise approximately 68% of our total assets, at September 30, 2004. Changes in technology or in our intended use of these assets may cause the estimated period of use or the value of these assets to be reduced. In addition, changes in general industry conditions could cause the value of certain of these assets to be reduced. We monitor the appropriateness of the estimated useful lives of these assets. Whenever events or changes in circumstances indicate that the carrying amounts of these assets may not be recoverable, we review the respective assets for impairment. As part of our reorganization, our assets and liabilities were revalued to their fair value. Estimates and assumptions used in both the estimated useful life and evaluating potential impairment issues require a significant amount of judgment.

        Income taxes.    As part of the process of preparing our consolidated financial statements we are required to estimate our taxes in each of the jurisdictions of our operations. This process involves management estimating the actual current tax expense together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within the consolidated balance sheets. We must then assess the likelihood that the deferred tax assets will be recovered from future taxable income and to the extent recovery is not likely, we must establish a valuation allowance. Future taxable income depends on the ability to generate income in excess of allowable deductions. To the extent we establish a valuation allowance or increase this allowance in a period, an expense is recorded within the tax provision in the consolidated statement of operations. Significant management judgment is required in determining our provision for income taxes, our deferred tax assets and liabilities and any valuation allowance recorded against net deferred tax assets. In the event that actual results differ from these

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estimates or we adjust these estimates in future periods, we may need to establish an additional valuation allowance that could materially impact our financial condition and results of operations.

Implementation of Fresh-Start Accounting

        Pursuant to American Institute of Certified Public Accountants, or "AICPA," Statement of Position 90-7 "Financial Reporting by Entities in Reorganization under the Bankruptcy Code," or "SOP 90-7," the accounting for the effects of the reorganization occurs once the Plan of Reorganization is confirmed by the Bankruptcy Court and there are no remaining contingencies material to completing the implementation of the plan. There were no material conditions precedent to the effectiveness of the plan of reorganization existing as of the July 9, 2004 confirmation date. For financial reporting purposes, we applied fresh-start accounting as of July 1, 2004 because the results of operations for the eight days through July 9, 2004 did not have a material impact on the reorganized company's financial position, results of operations and cash flows. The fresh-start accounting principles pursuant to SOP 90-7 provide, among other things, for us to determine the value to be assigned to the assets of reorganized iPCS, Inc. as of the confirmation date, assuming no significant contingencies precedent to emergence.

        Under fresh-start accounting, our reorganization equity value was allocated to our assets and liabilities based on their respective fair values in conformity with the purchase method of accounting for business combinations.

Recent Accounting Pronouncements

        In December 2004, the FASB issued SFAS No. 123 (Revised 2004) "Share-Based Payment" ("SFAS No. 123R") that addresses the accounting for share-based payment transactions in which a Company receives employee services in exchange for (a) equity instruments of the Company or (b) liabilities that are based on the fair value of the Company's equity instruments or that may be settled by the issuance of such equity instruments. SFAS No. 123R addresses all forms of share-based payment awards, including shares issued under employee stock purchase plans, stock options, restricted stock and stock appreciation rights. SFAS No. 123R eliminates the ability to account for share-based compensation transactions using APB Opinion No. 25, "Accounting for Stock Issued to Employees", that was provided in Statement 123 as originally issued. Under SFAS No. 123R companies are required to record compensation expense for all share based payment award transactions measured at fair value. This statement is effective for quarters ending after June 15, 2005. We have not yet determined the impact of applying the various provisions of SFAS No. 123R.

        In May 2003, the Financial Accounting Standards Board ("FASB") issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of Liabilities and Equity," which is effective at the beginning of the first interim period beginning after June 15, 2003, although certain aspects of SFAS No. 150 have been deferred. SFAS No. 150 establishes standards for how certain financial instruments with characteristics of both liabilities and equity must be classified and measured. SFAS No. 150 requires that a financial instrument that is within its scope be classified as a liability, or an asset in some circumstances. The adoption of the applicable aspects of SFAS No. 150 did not have a material impact on our financial position, results of operations, or cash flows.

        In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement of 133 on Derivative Instruments and Hedging Activities," which amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities under SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." This statement is effective for hedging of contracts entered into or modified after June 30, 2003 and for hedging relationships designated after June 30, 2003 and did not have a material impact on our results of operations, financial position or cash flows.

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        In January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51," which was amended as of December 31, 2003. This interpretation addresses the consolidation by business enterprises of variable interest entities as defined in the interpretation. This interpretation applies immediately to variable interests in variable interest entities created after January 31, 2003, and to variable interests in variable interest entities obtained after January 31, 2003. The interpretation is generally effective for interim periods ending after December 15, 2003 for all variable interests in variable interest entities created prior to January 31, 2003. The adoption of Interpretation No. 46 did not have a material impact on our financial position, results of operations or cash flows.

        In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others," which addresses the disclosure to be made by a guarantor in its interim and annual financial statements about its obligations under guarantees. This interpretation also requires the recognition of a liability by a guarantor at the inception of certain guarantees. Interpretation No. 45 requires the guarantor to recognize a liability for the non-contingent component of the guarantee, which is the obligation to stand ready to perform in the event that specified triggering events or conditions occur. The initial measurement of this liability is the fair value of the guarantee at inception. The recognition of the liability is required even if it is not probable that payments will be required under the guarantee or if the guarantee was issued with a premium payment or as part of a transaction with multiple elements. The initial recognition and measurement provisions of Interpretation No. 45 are effective for guarantees issued or modified after December 31, 2002. The recognition of a liability does not apply for guarantees issued between either a parent and its subsidiaries or corporations under common control. However, the disclosure provisions of Interpretation No. 45 do apply. iPCS Wireless, Inc. which is a wholly owned subsidiary of iPCS, Inc. and iPCS Equipment, Inc., which is a wholly owned indirect subsidiary of iPCS, Inc., have unconditionally and joint and severally guaranteed the senior notes. The adoption of Interpretation No. 45 did not have a material impact on our financial position, results of operations, or cash flows.

        In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." SFAS No. 146 provides new guidance on the recognition of costs associated with exit or disposal activities. SFAS No. 146 requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of commitment to an exit or disposal plan. SFAS No. 146 supercedes previous accounting guidance provided by EITF No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (Including Certain Costs Incurred in a Restructuring)." EITF No. 94-3 required recognition of costs at the date of commitment to an exit or disposal plan. SFAS No. 146 is to be applied prospectively to exit or disposal activities initiated after December 31, 2002. We adopted SFAS No. 146 on October 1, 2002. There was no material impact on adoption.

Consolidated Results of Operations

For the Period Ended September 30, 2004, the Period Ended July 1, 2004 and the Year Ended September 30, 2003

        In accordance with the American Institute of Certified Public Accountants Statement of Position 90-7, "Financial Reporting by Entities in Reorganization under the Bankruptcy Code", we adopted fresh start accounting as of July 1, 2004, and our emergence from Chapter 11 resulted in a new reporting entity. The periods as of and prior to July 1, 2004 have been designated "Predecessor Company" and the periods subsequent to July 1, 2004 have been designated as "Successor Company". Under fresh start accounting, our reorganization equity value was allocated to the assets and liabilities based on their respective fair values and was in conformity with SFAS No. 141 "Business

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Combinations". As a result of the implementation of fresh start accounting, our financial statements after the effective date are not comparable to our financial statements for prior periods.

        Subscriber Additions.    For the period ended September 30, 2004 and the period ended July 1, 2004, we provided personal communication services to approximately 240,500 and 233,000 subscribers in all our markets, respectively. For the year ended September 30, 2003, we provided personal communication services to approximately 220,100 subscribers. For the period ended September 30, 2004, the period ended July 1, 2004, and the year ended September 30, 2003, we added approximately 7,500, 12,900, and 4,400 net subscribers, respectively, in all our markets. After our Chapter 11 bankruptcy filing in February 2003, we closed stores and cancelled distribution agreements with local agents in order to limit new activations as a means to conserve cash. Throughout 2004, we have been slowly ramping up our growth in new subscriber additions.

        Churn.    Churn for the periods ended September 30, 2004 and July 1, 2004, was 2.9% and 2.7%, respectively. Churn for the year ended September 30, 2003 was 3.4%. The higher churn rate in 2003 was due to a higher percentage of sub-prime customers we were adding prior to our Chapter 11 bankruptcy filing in February 2003.

        Average Revenue Per User.    ARPU was $53.43 and $53.04 for the period ended September 30, 2004 and the period ended July 1, 2004, respectively. ARPU was $53.36 for the year ended September 30, 2003. Our overall ARPU has remained relatively constant in 2004 although the components are changing. For the year ended September 30, 2003, our minutes over plan revenue per user was $8.71 and our data revenue was $1.17. For the periods ended July 1, 2004 and September 30, 2004, minutes over plan revenue per user was $6.10 and $6.08, respectively, and data revenue per user was $2.86 and $4.38, respectively, for these same periods. We expect this trend of growth in data revenues offset with lower minutes over plan revenue to continue in the future.

        Cost Per Gross Addition.    For the period ended September 30, 2004, the period end July 1, 2004, and the year ended September 30, 2003, CPGA was $368, $378 and $345, respectively. The increased CPGA in 2004 was due to higher costs we incurred as we started to ramp up our growth of new additions.

Revenues.

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Service Revenue.    Service revenue is comprised of the monthly recurring charges for voice and data usage and the monthly non-recurring charges for voice and data minutes over plan, long distance, travel and roaming usage charges, other feature revenues and late payment fee and early cancellation fee revenues. Deductions for billing adjustments and promotional credits are recorded as a reduction to service revenue. For the period ended September 30, 2004 and the period ended July 1, 2004, service revenue totaled $37.9 million and $107.1 million, respectively. For the year ended September 30, 2003, service revenue totaled $145.2 million.



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Roaming Revenue.    Roaming revenue is comprised of revenue we receive from Sprint PCS and other wireless subscribers that roam onto our network. We receive revenue on a per minute basis for voice traffic and per kilobyte basis for data traffic when subscribers other than ours use our network. We also receive toll revenue for any roaming long distance calls made on our network. The reciprocal roaming rate arrangement we have with Sprint PCS for inbound and outbound roaming relative to Sprint PCS subscribers was $0.10 per minute for voice charges effective January 1, 2002, which dropped to $0.058 effective January 1, 2003 and to $0.041 per minute effective January 1, 2004. Pursuant to the most recent amendment of our affiliation agreements with Sprint PCS that was effective April 1, 2004, this rate increased to $0.058 per minute. For data traffic, this rate was $0.0055 per kilobyte in 2002, $0.0013 in 2003 and $0.0020 in 2004. For the periods ended September 30, 2004 and July 1, 2004, and the year ended

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September 30, 2003, roaming revenue from Sprint PCS and the other PCS Affiliates of Sprint totaled $14.4 million, $29.7 million, and $35.8 million, respectively. Roaming revenue from other wireless subscribers, including reseller revenue, was $1.4 million and $4.8 million for the periods ended September 30, 2004 and July 1, 2004, respectively. Roaming revenue from other wireless subscribers was $8.5 million for the year ended September 30, 2003.

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Equipment and Other Revenue.    Equipment revenue is derived from the sale of handsets and accessories to new customers and current customers who want to upgrade their handsets from our retail and local distribution channels, net of sales incentives, rebates and an allowance for returns. Our handset return policy allows customers to return their handsets for a full refund within 14 days after the date of purchase. When handsets are returned to us, we may be able to reissue the handsets to customers at little additional cost to us; however, when used handsets are returned to Sprint PCS for refurbishing, we receive a credit from Sprint PCS which is less than what we originally paid for the handset. Handset revenue was $1.5 million and $3.8 million for the period ended September 30, 2004 and the period ended July 1, 2004 respectively. For the year ended September 30, 2003, handset revenue was $4.4 million. Other revenue which consists mostly of tower leasing revenue was $0.2 million, $0.4 million and $0.4 million for the period ended September 30, 2004, the period ended July 1, 2004, and the year ended September 30, 2003, respectively.

        Cost of Service and Roaming.    Cost of service and roaming includes network operations expense, roaming expense relating to when our subscribers roam either on other Sprint PCS networks or other wireless carriers' networks, back-office customer services provided by Sprint PCS, the provision for doubtful accounts, long distance expense and the 8% affiliation fee due to Sprint PCS for collected revenues. Network operations expenses include salaries and benefits for network personnel, cell site rent, utilities and maintenance expenses, fees relating to the connection of our cell sites to our switches and other transport and facility expenses. Roaming expense is our cost of our subscribers using Sprint PCS and other wireless carriers' networks. Roaming expense on the Sprint PCS network is at the reciprocal rates as described above under "—Roaming Revenue." Roaming expense when our subscribers use other wireless carriers networks is at rates as determined by the roaming agreements signed by Sprint PCS with these other wireless carriers. For the period ended September 30, 2004, the period ended July 1, 2004, and the year ended September 30, 2003, cost of service and roaming was $29.1 million, $83.2 million, and $130.1 million, respectively. We decommissioned one of our switches and completed a least-cost routing analysis and redesign of our transport and facility infrastructure in June 2004. These two initiatives will result in savings that will reduce our comparable network operating costs in the future.

        At September 30, 2004 and July 1, 2004, our network consisted of 669 and 662 cell sites, respectively. As of July 1, 2004 and September 30, 2004, we had two switches in operation. For the year ended September 30, 2003, our network consisted of 646 cell sites and three switches. We had 56 employees performing network operations at both September 30, 2004 and July 1, 2004, and 55 employees performing network operations at September 30, 2003.

        Cost of Equipment.    Cost of equipment includes the cost of handsets and accessories sold or upgraded from our retail and local distribution channels. Cost of equipment for the periods ended September 30, 2004 and July 1, 2004, was $5.6 million and $12.8 million, respectively. Cost of equipment for the fiscal year ended September 30, 2003 was $11.8 million. In 2004, we incurred additional costs for equipment as we implemented an upgrade policy for our current customers to help to reduce churn.

        Selling and Marketing.    Selling and marketing costs include the costs to operate our retail stores, advertising and promotional expenses, commissions and equipment subsidies and rebate expenses relating to new subscriber additions from national third parties and other Sprint controlled channels.

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Selling and marketing expenses for period ended September 30, 2004 and the period ended July 1, 2004 were $8.0 million and $21.0 million respectively. Selling and marketing expenses for the fiscal year ended September 30, 2003 was $27.3 million. Subsequent to our Chapter 11 filing in February 2003, as a means to conserve cash, we limited the amount of advertising costs we incurred to acquire new customers. In 2004, we have increased our advertising expense as we are slowly returning to a subscriber growth mode.

        General and Administrative.    For the periods ended September 30, 2004 and July 1, 2004, general and administrative expenses were $1.7 million and $3.6 million, respectively. For the year ended September 30, 2003, general and administrative expenses were $5.5 million. General and administrative expenses include administrative salaries and benefits, legal fees, insurance expense and other professional expenses. In 2003, general and administrative expenses also included fees totaling $1.1 million for services provided by AirGate Service Company. By September 30, 2003, we had cancelled all services provided by AirGate Service Company and had hired additional personnel to handle these responsibilities.

        Reorganization Income (Expense).    Reorganization income for the period ended July 1, 2004 totaled $60.8 million. Reorganization income or expense consists of those items incurred as a direct result of our Chapter 11 filing as well as the effects of fresh-start accounting adopted on July 1, 2004. Included in reorganization income for the period ended July 1, 2004 was the following:

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$2.3 million of expense for the write-off of the unamortized financing fees related the senior credit facility paid in full as part of the approved Plan of Reorganization,



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$2.6 million of compensation expense related to the grant of stock and stock unit awards to the Chief Restructuring Officer in compensation for his successful completion of the reorganization,



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$1.4 million of costs related to the disposal of assets and lease rejection damages,



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$12.8 million of professional fee and other expenses related to the reorganization, and



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$79.9 million of restructuring income which was the result of fresh-start accounting and the revaluation of our assets and liabilities to their fair value

For the year ended September 30, 2003, reorganization expense totaled $31.1 million. Included in this total was $15.2 million to adjust the senior discount notes to their estimated claim value and $5.5 million for the write-off of remaining deferred financing costs related to the senior discount notes. In addition in fiscal 2003, $8.4 million of professional fees related to the reorganization were recorded and $2.0 million was recorded for lease rejection damages, severance and property write-offs.

        Non-cash stock compensation expense.    For the period ended September 30, 2004, we recorded $22,000 of non-cash stock compensation expense related to the restricted stock grants to employees as part of the one million shares reserved for employees and directors under a long-term incentive plan as part of our plan of reorganization. There was no non-cash stock compensation expense for the period ended July 1, 2004 or the year ended September 30, 2003.

        Depreciation and Amortization.    For the period ended September 30, 2004, the period ended July 1, 2004, and the year ended September 30, 2003, depreciation and amortization expense totaled $11.8 million, $28.6 million, and $40.5 million, respectively. Of these amounts, amortization of intangibles totaled $3.1 million, $0.0 million, and $3.3 million for these same periods respectively. At September 30, 2003, the remaining value of our intangible assets was fully amortized. As a result of fresh-start accounting, all our assets were revalued and we recorded $81.9 million of new intangibles that are being amortized over their remaining lives.

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        Interest Income.    For the period ended September 30, 2004, the period ended July 1, 2004 and the year ended September 30, 2003, interest income totaled $0.3 million, $0.3 million, and $0.1 million, respectively.

        Interest Expense.    For the period ended September 30, 2004 and the period ended July 1, 2004, interest expense was $5.4 million and $10.1 million respectively. For the fiscal year ended September 30, 2003, interest expense was $20.3 million. Interest expense in 2003 included interest on our senior credit facility and interest on senior discount notes through our Chapter 11 filing in February 2003. For the periods ended July 1, 2004, and September 30, 2004, we recorded interest expense on our outstanding balance of our senior credit facility that was paid off in full as part of our plan of reorganization and on the $165.0 million of senior notes that were issued in April 2004.

        Cancellation of Debt    For the period ended July 1, 2004, we recorded income of $132.0 million for the cancellation of debt that resulted from the discharge of our unsecured creditor claims in exchange for equity in the reorganized company upon our emergence from bankruptcy.

        Net Income (Loss).    Net loss for the period ended September 30, 2004 was $6.0 million. For the period ended July 1, 2004, we recorded net income of $179.6 million as a result of $60.8 million of reorganization income and $132.0 million of cancellation of debt income as mentioned above. For the year ended September 30, 2003, our net loss was $72.9 million.

For the Year Ended September 30, 2003 compared to the Year Ended September 30, 2002

        Subscriber Additions.    As of September 30, 2003, we had approximately 220,100 subscribers compared to approximately 215,700 subscribers as of September 30, 2002. During the year ended September 30, 2003, we added approximately 4,400 net subscribers in all our markets compared to approximately 85,300 during the year ended September 30, 2002. The decrease in net subscribers acquired during the year ended September 30, 2003 was due to increased competition from other wireless carriers and a reduced number of retail stores and local third party distributors due to the closing of stores and canceling of agreements with under-performing distributors during 2003. In addition, to improve the credit quality of our subscriber base, in February 2003 we reinstituted a $250 subscriber deposit requirement for credit-challenged subscribers.

        Churn.    Churn for the year ended September 30, 2003 was 3.4% versus 3.0% for the year ended September 30, 2002. Increased competition in the wireless sector and the decreased credit quality of our subscribers that were added during 2002 were the principal reasons for the increase in our churn rate.

        Average Revenue Per User.    ARPU was $53.36 for the year ended September 30, 2003 compared to $54.95 for the year ended September 30, 2002. The decrease was attributable to lower minutes over plan revenues.

        Cost Per Gross Addition.    CPGA was $345 for the year ended September 30, 2003, a decrease of $36 from the $381 for the year ended September 30, 2002. The closing of 15 retail stores, and a reduction in advertising expenses were the principal reasons for the decrease in CPGA.

Revenues.

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Service Revenue.    For the year ended September 30, 2003, service revenue totaled $145.2 million compared to $116.2 million for the same period in 2002. A higher average subscriber base accounted for most of the service revenue increase in 2003. Offsetting the increase in revenue from the higher subscriber base was a decrease in our minutes over plan revenue of $1.4 million. In late 2002, Sprint introduced a PCS to PCS plan feature in which

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subscribers received unlimited quantities of minutes for little or no additional cost for any calls made from one Sprint PCS subscriber to another.

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Roaming Revenue.    For the year ended September 30, 2003, roaming revenue from Sprint PCS totaled $35.8 million compared to $42.7 million in the year ended September 30, 2002. Despite the decrease in the roaming rate from Sprint PCS from 2002 to 2003, roaming minutes from Sprint PCS increased from 316.1 million for the year ended September 30, 2002 to 459.0 million for the year ended September 30, 2003. The increase in minutes is the result of a larger subscriber base for Sprint PCS and its other PCS Affiliates using our network as well as a larger coverage area in our markets in 2003 compared to 2002. Roaming revenue from non-Sprint subscribers was $8.5 million for the year ended September 30, 2003 compared to $4.6 million in the same period in 2002. The increase in revenue was due to increased roaming traffic on our network as a result of our roaming agreement signed by Sprint with Verizon Wireless, which benefited our network in our Michigan markets. Roaming minutes for the year ended September 30, 2003 were 56.1 million minutes compared to 26.4 million minutes in the year ended September 30, 2002. The average per minute roaming rate decreased from $0.18 for the year ended September 30, 2002 versus $0.15 for the same period in 2003.



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Equipment and Other Revenue.    For the year ended September 30, 2003 and 2002, equipment and other revenue was $4.8 million and $6.9 million, respectively. The decrease in equipment revenue in the year ended September 30, 2003 was due to lower sales of equipment related to fewer subscriber activations compared to the same period in 2002.

        Cost of Service and Roaming.    For the year ended September 30, 2003, cost of service and roaming was $130.1 million compared to $128.5 million for the year ended September 30, 2002. The increase in cost of service was offset by reduced roaming expenses of $4.4 million due to the reduction of rates as described previously in "—Roaming Revenue" and reduced bad debt expenses of $4.2 million which were the result of a tighter credit policy for new subscribers. In addition, customer service expenses were $7.2 million higher in the year ended September 30, 2003 compared to September 30, 2002 due principally to the increase in additional back office fees charged by Sprint and subscriber retention costs for handset upgrades in Sprint-controlled channels such as RadioShack and Best Buy.

        At September 30, 2003, our network consisted of 646 cell sites and three switches compared to 633 cell sites and three switches at September 30, 2002. We had 55 employees performing network operations at September 30, 2003 and at September 30, 2002.

        Cost of Equipment.    Cost of equipment decreased $8.7 million to $11.8 million for the year ended September 30, 2003 compared to $20.5 million for the year ended September 30, 2002. The decrease was in part due to lower average handset costs in 2003 as well as lower gross adds.

        Selling and Marketing.    Selling and marketing expenses for the year ended September 30, 2003 were $27.3 million compared to $44.7 million in the year ended September 30, 2002, a reduction of $17.4 million. The decrease was due to lower gross additions in 2003 that resulted in lower sales commissions of $3.8 million and lower handset subsidies and rebates from Sprint-controlled channels of distribution being paid of $2.0 million. In addition, due to the closing of 15 stores and other personnel reductions that occurred earlier in 2003, salaries and retail store-related operating costs resulted in reduced selling and marketing expenses of $2.6 million. Advertising and promotion costs were also $7.5 million lower in the year ended September 30, 2003 compared to September 30, 2002.

        General and Administrative.    For the year ended September 30, 2003 general and administrative expenses were $5.5 million compared to $24.9 million in the year ended September 30, 2002. The largest reduction of general and administrative costs in 2003 compared to 2002 was due to $18.4 million of costs incurred related to our acquisition by AirGate in November 2001. In addition, in fiscal year 2002 compared to fiscal year 2003, we incurred higher consulting expenses of $0.6 million, higher

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office-related expenses of $0.7 million, and higher legal, audit, tax and other fees of $0.7 million. These increases were offset with lower insurance expense of $0.7 million and lower AirGate Service Company expenses of $0.4 million in fiscal year 2002 compared to fiscal year 2003.

        Reorganization Expenses.    Reorganization expenses for the year ended September 30, 2003 totaled $31.1 million. Reorganization expenses consist of expenses incurred or accrued as a direct result of our Chapter 11 filing, $8.4 million related to professional fees and other costs related to the reorganization, $2.0 million related to the closing of 15 of our retail stores, and $20.7 related to the write-off of unamortized discounts and debt financing costs of our existing senior discount notes.

        Non-cash Stock Compensation Expense.    Non-cash stock compensation expense was $4.0 million for the year ended September 30, 2002. We applied the provisions of APB Opinion No. 25 and related interpretations in accounting for our stock option plans. Unearned stock compensation was recorded for the difference between the exercise price and the fair market value of our common stock at the date of the grant and was recognized as non-cash stock compensation expense in the period in which the related services were rendered. All stock options became fully vested at the time of our acquisition by AirGate and, therefore, all unearned stock compensation at November 30, 2001 was recognized as expense.

        Depreciation and Amortization.    For the year ended September 30, 2003, depreciation and amortization expense totaled $40.5 million compared to $37.6 million for the year ended September 30, 2002. The increase was due to additional fixed assets placed in service in fiscal year 2003.

        Loss on Disposal of Equipment.    As a result of our acquisition by AirGate on November 30, 2001, AirGate's management proposed changes to our business plan with respect to our network build-out and retail stores. Accordingly, the carrying value of the property and equipment associated with identified locations affected by the new business plan were adjusted to their fair value. These adjustments resulted in a loss on the disposal of equipment of $6.3 million for the year ended September 30, 2002.

        Impairment of Goodwill.    In accordance with the provisions of SFAS No. 142, we performed our first annual assessment of goodwill impairment as of September 30, 2002. The results of this assessment indicated that goodwill was impaired and we recorded an impairment charge of $8.1 million at September 30, 2002. This impairment charge reduced the carrying value of goodwill to zero.

        Impairment of Property and Equipment.    For the year ended September 30, 2002, we recorded an asset impairment of $29.4 million due to a significant reduction in the value of our business as well as a generally weak secondary market for telecommunications equipment.

        Impairment of Intangible Assets.    For the year ended September 30, 2002, we recorded an impairment of intangible assets of $23.6 million for the assets related to our right to provide services under affiliation agreements and the subscriber base we acquired from Sprint in January 2001 in the Iowa City and Cedar Rapids, Iowa markets.

        Interest Expense.    For the years ended September 30, 2003 and 2002, interest expense was $20.3 million and $26.2 million, respectively. Due to the discontinuation of the accretion of the discount and interest relating to our existing senior discount notes as of the date of our Chapter 11 filing on February 23, 2003, interest expense on our existing senior discount notes decreased by $8.9 million in the year ended September 30, 2003, compared to the year ended September 30, 2002. Offsetting this decrease was higher interest expense of $3.0 million on our senior secured credit facility in the year ended September 30, 2003, due to higher interest rates and a higher average balance outstanding throughout fiscal year 2003.

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        Cumulative Effect of a Change in Accounting Principle.    In connection with our acquisition by AirGate, we changed our method of amortizing interest expense on our existing senior discount notes effective as of October 1, 2001. While our previous method of accounting was in accordance with GAAP, we believed it was preferable to use the same methodology as AirGate which was also in accordance with GAAP. The cumulative effect of this change in accounting for the periods through September 30, 2001, was a reduction in the carrying value of our existing senior discount notes of $4.3 million along with a corresponding decrease in our net loss. In accordance with Accounting Principles Board Opinion No. 20, "Accounting Changes," the change in accounting principle has been reflected as a cumulative change in accounting principle effective as of October 1, 2001.

        Net Loss.    Our net loss for the year ended September 30, 2003 of $72.9 million was $105.5 million lower than our net loss of $178.4 million for the year ended September 30, 2002. In 2002, we recorded $61.1 million of property, goodwill and intangible asset impairments. In addition, 2002 included $4.0 million of non-cash stock compensation expense and $6.3 million of loss on disposals related to changes to our business plan as a result of our acquisition by AirGate in November 2001. Lower subscriber growth in 2003 also contributed to lower selling and marketing expenses and cost of equipment totaling $25.8 million in the year ended September 30, 2003, compared to the year ended September 30, 2002.

Reconciliation of Non-GAAP Financial Measures (All Revenues and Expenses in Thousands)

        We utilize certain financial measures that are not calculated in accordance with GAAP to assess our financial performance. A non-GAAP financial measure is defined as a numerical measure of financial performance that (a) excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the comparable measure calculated and presented in accordance with GAAP in the statement of income or statement of cash flows; or (b) includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the comparable measure so calculated and presented. The non-GAAP financial measures discussed in "—Consolidated Results of Operations" are ARPU and CPGA. A description of each of these non-GAAP financial measures is provided in "—Definition of Operating Metrics." The following tables reconcile the non-GAAP financial measures with our consolidated financial statements presented in accordance with GAAP, excluding subscriber data.

        ARPU, which is utilized by most wireless companies to determine recurring monthly revenue on a per subscriber basis, is used by analysts and investors to compare relative subscriber revenue across the

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wireless industry. We use ARPU to assist in evaluating past selling performance and the success of specific rate plan promotions. We also use ARPU as a basis to forecast future service revenues.

        CPGA is utilized by most wireless companies to determine their cost to acquire a new subscriber. CPGA is used by analysts and investors to compare us to other wireless companies. We use CPGA to evaluate past selling performance, the success of specific promotions and as a basis to determine the amount of time we must retain a new subscriber before we recover this cost. In addition, we use CPGA as a basis for budgeting.

Liquidity and Capital Resources

        As of September 30, 2004, we had $57.8 million in cash and cash equivalents compared to $17.7 million at September 30, 2003.

        With the net proceeds from the offering of the senior notes and subject to our ability to manage subscriber growth and achieve operating efficiencies, cash and cash equivalents, combined with cash flows from operations, are expected to be sufficient to fund any operating losses and working capital and to meet capital expenditure needs and debt service requirements for the foreseeable future.

Net Cash Flows from Operating Activities

        For the periods ended September 30, 2004 and July 1, 2004, we generated $2.4 million and $18.9 million, respectively, in operating cash flow. The net cash flows generated from operating activities for the period ended September 30, 2004 were due to lower net losses offset with an unfavorable change in working capital. For the period ended July 1, 2004 the net cash flows generated

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from operating activities were due to favorable changes in working capital coupled with a lower net loss excluding cancellation of debt income and non-cash reorganization expenses.

        For the year ended September 30, 2003, we generated $5.7 million in operating cash flows. The generation of operating cash flows was primarily due to lower net operating losses after adjustments for non-cash items coupled with a favorable adjustment related to the provisions for bad debts offset with unfavorable working capital adjustments.

Net Cash Flows from Investing Activities

        Cash flows used for investing activities for the period ended September 30, 2004 totaled $3.2 million and included capital expenditures of $0.6 million for new site construction, $1.8 million for 1xRTT capacity and upgrade equipment, $0.9 million for switch and site capacity equipment and $0.1 million for computer and IT related capital purchases. Offsetting the $3.4 million of capital expenditures was $0.2 million of receipts from the sale of assets.

        For the period ended July 1, 2004, cash flows used for investing activities totaled $8.5 million and included $4.1 million in switch capital expenditures mainly for the purchase and installation of equipment for our switching center at the Davenport, Iowa switch location. This additional equipment was necessary to add capacity in order to accommodate the movement of cell traffic away from our Gridley, Illinois switch which we decommissioned in June, 2004. We also incurred $2.3 million of capital expenditures to upgrade and add capacity to portions of our network to 1xRTT and we incurred $2.1 million of capital expenditures to add fifteen additional cell sites to our network.

        Cash flows used for investing activities totaled $13.3 million for the year ended September 30, 2003 and related primarily to capital expenditures made to increase coverage and capacity of our network as well as to upgrade portions of our network to 1xRTT.

Net Cash Flows from Financing Activities

        For the period ended September 30, 2004, cash flows used for financing activities totaled $131.8 million and included $126.6 million for the payoff of the remaining balance of our senior credit facility. In addition we incurred costs of $5.3 million related to the new senior notes issued as part of our plan of reorganization.

        For the period ended July 1, 2004, cash flows from financing activities totaled $162.4 million. Proceeds from the new senior notes offering in April, 2004 totaled $165.0 million. Offsetting this were issuance costs related to these notes of $1.5 million and $1.1 million of additional principal payments made to our senior secured lenders under the cash collateral order.

        For the year ended September 30, 2003, cash flows used for financing activities was $2.3 million, which was mainly principal reduction payments made to our senior secured lenders under the cash collateral order.

Tower Sale Leasebacks

        On September 8, 2004, we signed an agreement with TCP Communications, LLC whereby we agreed to sell up to 92 of our owned towers to TCP Communications. The towers are priced individually and the sale of all 92 towers would provide us with gross proceeds of approximately $16.5 million. After the sale, we will lease space on the towers sold to TCP Communications at rates and terms consistent with that of our existing leases with our landlords. The transaction is expected to close in several installments during calendar year 2004 and the first half of 2005 and is subject to exclusion of towers by TCP Communications based on its due diligence and other customary closing conditions. On November 9, 2004, we had the initial closing of 51 tower sites which provided gross proceeds of approximately $9.0 million.

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Off-Balance Sheet Arrangements

        Other than operating lease commitments discussed in the notes to our audited consolidated financial statements included as a separate section of this annual report on Form 10-K, we have no off-balance sheet arrangements that would have a current or future effect on the financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Commitments and Contingencies

        On October 1, 2003, AT&T filed an administrative proof of claim in the amount of $5.1 million for services provided to us from February 23, 2003 through June 24, 2003, and a pre-petition proof of claim in the amount of $1.7 million for services provided to us prior to our Chapter 11 filing, both of which claims we dispute. In connection with our Plan of Reorganization, we agreed to deposit $0.7 million in escrow pending resolution of both of these disputed claims.

        On August 31, 2004, AT&T filed a cure claim for $4.1 million, contending that $1.5 million of the amount set forth in the pre-petition proof of claim, and $2.5 million of the amount set forth in the administrative proof of claim are presently due in cash as cure amounts resulting from an alleged assumption arising from the confirmation of our Plan of Reorganization, which we also dispute. Also on August 31, 2004, AT&T amended its administrative proof of claim originally filed on October 1, 2003, by reducing it from $5.1 million to $2.6 million. If AT&T's claims are allowed as valid, AT&T would have a $0.2 million pre-petition claim payable in stock under our Plan of Reorganization, with the remaining claims (both cure and administrative) payable in $6.6 million of cash.

        Both the administrative and pre-petition claims between AT&T and us have been consolidated in claims proceedings pending before the Bankruptcy Court. On September 30, 2004, we filed a response to the cure claim requesting that our dispute on the cure claim be consolidated with the administrative and pre-petition claim dispute. We are currently in the discovery stage of the proceedings with respect to the administrative and pre-petition claims. If we cannot reach a settlement regarding these disputes after discovery, the Bankruptcy Court will determine the outcome. In the event that our response to the cure claim is denied or that the Bankruptcy Court does not find in our favor if a settlement is not reached with AT&T we believe we will have sufficient resources to fund any potential claim. We believe the accompanying consolidated financial statements adequately reflect our obligations to AT&T for these services provided.

        The costs for the services provided by Sprint PCS under our service agreements with Sprint PCS relative to billing, customer care and other back-office functions for the periods ended September 30, 2004 and July 1, 2004 totaled approximately $5.3 million and $12.9 million, respectively. Because we incur the majority of these costs on a per subscriber basis which is fixed until the end of December 2006 and after which will be adjusted by Sprint PCS based on a formula related to Sprint PCS' costs to provide the services, we expect the aggregate cost for such services to increase as the number of our subscribers increases after December 2006. Sprint PCS may terminate any service provided under such agreements upon nine months' prior written notice, but if we would like to continue receiving such service, Sprint PCS has agreed that it will assist us in developing that function internally or locating a third-party vendor that will provide that service. Although Sprint PCS has agreed in such an event to reimburse us for expenses we incur in transitioning to any service internally or to a third-party, if Sprint PCS terminates a service for which we have not developed or are unable to develop a cost-effective alternative, our operating costs may increase beyond our expectations and our operations may be interrupted or restricted. We do not currently have a contingency plan if Sprint PCS terminates a service we currently receive from it.

        We operate with negative working capital related to amounts owed to Sprint PCS. Each month we pay Sprint PCS amounts relating to: (i) roaming expense, (ii) the 8% affiliation fee, (iii) costs for

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customer support and billing, (iv) handsets purchased from Sprint PCS, (v) reimbursements for commissions paid to national third party retailers such as RadioShack and Best Buy, (vi) reimbursement for subsidies related to handsets sold by national third party retailers, and (vii) wholesale long distance expense that we incur when either our customers, other Sprint PCS customers or another wireless service provider's customers make long distance calls on our network. A reduction in the amounts we owe Sprint PCS may result in a greater use of cash for working capital purposes than our business plan currently projects.

        We may not be able to access the credit or equity markets for additional capital if the liquidity discussed above is not sufficient for the cash needs of our business. We continually evaluate options for additional sources of capital to supplement our liquidity position and maintain maximum financial flexibility. If the need for additional capital arises due to our actual results differing significantly from our business plan or for any other reason, we may be unable to raise additional capital.

Contractual Obligations

        We are obligated to make future payments under various contracts we have entered into, including amounts pursuant to the senior notes, capital leases and non-cancelable operating lease agreements for office space, cell sites, vehicles and office equipment. Future minimum contractual cash obligations for the next five years and in the aggregate at September 30, 2004, are as follows (dollars in thousands):

(1)

Does not include interest payment obligations.

(2)

Does not include payments due under renewals to the original lease terms.

        The senior notes contain covenants which restrict our ability to incur additional indebtedness, merge, pay dividends, dispose of our assets, and certain other matters as defined in the indenture. In addition, the senior notes:

•

rank pari passu in right of payment with all our existing and future unsecured senior indebtedness;



•

rank senior in right of payment to all our future subordinated indebtedness; and



•

are unconditionally guaranteed by iPCS Wireless, Inc., iPCS Equipment, Inc. and any new domestic restricted subsidiaries of ours.

        However, the senior notes are subordinated to all our secured indebtedness to the extent of the assets securing such indebtedness, and to any indebtedness of our subsidiaries that do not guarantee the new senior notes.

        Interest is payable semi-annually in arrears on May 1 and November 1, commencing on November 1, 2004 to the holders of record on the immediately preceding April 15 and October 15. At any time prior to May 1, 2007, we may redeem up to 35% of the aggregate principal amount of the senior notes at a redemption price of 111.50% of the principal amount thereof, plus accrued and unpaid interest, and liquidated damages (as defined in the indenture), if applicable, to the redemption

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date with the net cash proceeds of a sale of our equity interests or a contribution to our common equity capital; provided that:

•

at least 65% of aggregate principal amount of senior notes originally issued remains outstanding immediately after the redemption; and



•

the redemption occurs within 45 days of the date of the closing of such sale of equity interests or contribution.

        Except pursuant to the preceding paragraph, the senior notes will not be redeemable at our option prior to May 1, 2008.

        On or after May 1, 2008, we may redeem all or a part of the senior notes issued under the indenture upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of principal amount) set forth below plus accrued and unpaid interest and liquidated damages, if any, on the senior notes redeemed, to the applicable redemption date, if redeemed during the twelve-month period beginning on May 1 of the years indicated below, subject to the rights of holders of senior notes on the relevant record date to receive interest on the relevant interest payment date:

        Upon a change of control as defined in the indenture, we will be required to make an offer to purchase the senior notes at a price equal to 101% of the aggregate principal amount of senior notes repurchased plus accrued and unpaid interest and liquidated damages, if any, to the date of purchase.

        In addition, on November 22, 2004, we signed a letter of agreement with Nortel Networks to replace our Lucent network equipment currently deployed in our Michigan markets with Nortel equipment including one switch, 232 base stations, various additional capacity growth and network equipment. Under the terms of the agreement, we have agreed to purchase equipment totaling $15.2 million and will receive special pricing on future purchases through December 31, 2007.

Seasonality

        Our business is subject to seasonality because the wireless telecommunications industry historically has been heavily dependent on fourth calendar quarter results. Among other things, the industry relies on significantly higher subscriber additions and handset sales in the fourth calendar quarter as compared to the other three calendar quarters. A number of factors contribute to this trend, including: the use of retail distribution, which is heavily dependent upon the year-end holiday shopping season; the timing of new product and service announcements and introductions; competitive pricing pressures; and aggressive marketing and promotions. The increased level of activity requires a greater use of available financial resources during this period.

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Inflation

        We believe that inflation has not had a significant impact in the past and is not likely to have a significant impact in the foreseeable future on our results of operations.

Future Trends That May Affect Operating Results, Liquidity and Capital Resources

        During 2004 and 2003, we experienced overall declining net subscriber growth compared to previous periods. This trend is attributable to increased competition and slowing aggregate subscriber growth in the wireless telecommunications industry as well as the implementation of a tighter credit policy that decreased the number of sub-prime activations. In addition, as a means to conserve cash in 2003, we closed 15 company-owned retail stores and cancelled 21 agreements with local third party distributors, thereby reducing our retail presence in a number of our markets.

        We may continue to experience higher costs to acquire subscribers. For the period ended September 30, 2004 and the period ended July 1, 2004, our CPGA was $368 and $378 respectively per activation compared to $345 per activation for the year ended September 30, 2003. In fiscal 2003, as a means to conserve cash, we spent less per new subscriber in advertising and equipment subsidies than we spent in 2004. To accelerate our subscriber growth, we are offering more aggressive handset promotions and spending more in advertising to acquire new customers than we did in 2003. With a higher CPGA, subscribers must remain our subscribers for a longer period of time at a stable ARPU for us to recover those acquisition costs.

        As we seek to accelerate our subscriber growth, we will incur significant upfront subscriber acquisition expenses (including the customer handset subsidy, commissions and promotional expenses) that initially will result in increased losses and reduced levels of cash flows from operating activities as compared to our most recent prior periods. Alternatively, we may not be able to sustain our planned growth in subscribers or obtain sufficient revenue to achieve and sustain profitability. Net subscriber growth was approximately 7,500 and 12,900 subscribers in all our markets for the periods ended September 30, 2004 and July 1, 2004 respectively. For the fiscal year ended September 30, 2003 we added 4,400 net subscribers in all our markets. If the current trend of net subscriber growth does not improve and we are not able to achieve our planned subscriber growth, it will lengthen the amount of time it will take for us to reach a sufficient number of subscribers to achieve positive free cash flow, which in turn will have a negative effect on capital resources. In addition, to the extent our subscriber growth includes a higher percentage of sub-prime credit subscribers, our churn and bad debt expense may increase.

        We may experience a higher churn rate. Our average subscriber monthly churn (net of deactivations that take place within 30 days of the activation date) for the period ended September 30, 2004 was 2.9% compared to 2.7% for the period ended July 1, 2004 and 3.4% for the year ended September 30, 2003. In 2003, our churn rate was the highest we had experienced to date due to a significantly higher number of involuntary deactivations relating to sub-prime credit subscribers. A tighter credit policy implemented in mid-2003 decreased the number of sub-prime activations which helped to reduce churn but it also contributed to the overall smaller subscriber growth than we had experienced in the past. If churn increases over the long-term, we would lose the cash flows attributable to these subscribers and have greater-than-projected losses.

        We may incur significant wireless handset subsidy costs for existing subscribers who upgrade to a new handset. As our subscriber base matures and technological innovations occur, more existing subscribers will begin to upgrade to new wireless handsets for which we subsidize the cost to the subscriber. We incurred net upgrade costs of approximately $1.1 million, $3.6 million and $4.7 million associated with wireless handset upgrade costs for the periods ended September 30, 2004, July 1, 2004, and the year ended September 30, 2003, respectively. We have limited historical experience regarding

57

the adoption rate for wireless handset upgrades. If more subscribers upgrade to new wireless handsets than we project, near term EBITDA and cash flows would be lower than projected.

Risks Related to Our Business, Strategy and Operations

Our substantial leverage could adversely affect our ability to incur additional indebtedness if needed and could negatively affect our ability to service our debt.

        We are highly leveraged. As of September 30, 2004, our total outstanding debt, including capital lease obligations, was approximately $165.4 million. Such indebtedness represented approximately 65.0% of our total capitalization. The indenture that governs our senior notes permits us and our subsidiaries to incur additional indebtedness subject to certain limitations, which could further exacerbate the risks associated with our leverage. If we incur additional indebtedness that ranks equally with the senior notes, the holders of that debt will be entitled to share ratably with the holders of the senior notes, respectively, in any proceeds distributed in connection with any insolvency, liquidation, reorganization, dissolution or other winding-up of us.

        Our substantial indebtedness could adversely affect our financial health by, among other things:

•

increasing our vulnerability to adverse economic conditions;



•

limiting our ability to obtain any additional financing we may need to operate, develop and expand our business;



•

limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;



•

requiring us to dedicate a substantial portion of any cash flow from our operating activities to service our debt, which reduces the funds available for operations and future business opportunities; and



•

potentially making us more highly leveraged than our competitors, which could decrease our ability to compete in our industry.

        The ability to make payments on our debt will depend upon our future operating performance, which is subject to general economic and competitive conditions and to financial, business and other factors, many of which we cannot control. If the cash flow from our operating activities is insufficient, we may take actions, such as delaying or reducing capital expenditures, attempting to restructure or refinance our debt, selling assets or operations or seeking additional equity capital. Any or all of these actions may not be sufficient to allow us to service our debt obligations. Further, we may be unable to take any of these actions on satisfactory terms in a timely manner or at all. The indenture that governs the senior notes limits our ability to take several of these actions. Our failure to generate sufficient funds to pay our debts or to successfully undertake any of these actions could, among other things, materially adversely affect the market value of the senior notes and our ability to repay our obligations under such notes.

We recently emerged from bankruptcy and we have a history of net losses. We may incur additional losses in the future, and our operating results could fluctuate significantly on a quarterly and annual basis which could negatively affect our stock price.

        We emerged from bankruptcy on July 20, 2004. Prior to our emergence from bankruptcy and the implementation of fresh-start accounting, we had a net accumulated deficiency of $393.5 million. Our future operating profitability and cash flows from operating activities will depend upon many factors, including, among others, our ability to market Sprint PCS products and services, achieve projected market penetration and manage subscriber turnover rates. If we do not achieve and maintain operating profitability and positive cash flows from operating activities, we may be unable to make interest or

58

principal payments on the senior notes. Our inability to satisfy our obligations may result in our restructuring or bankruptcy, in which case you could lose all or part of your investment.

        In addition, our future operating results and cash flows will be subject to quarterly and annual fluctuations due to many factors, some of which are outside our control. These factors include increased costs we may incur in connection with the further development, expansion and upgrade of our wireless network and fluctuations in the demands for our services. We may not achieve or sustain profitability. To the extent our quarterly or annual results of operations fluctuate significantly, we may be unable to pay amounts due under the senior notes. Our inability to satisfy our obligations may result in a future restructuring or bankruptcy.

It is our strategy to accelerate our subscriber growth, which may negatively affect our near term profitability.

        During the year ended September 30, 2003 and the periods ended July 1, 2004 and September 30, 2004, we experienced overall declining net subscriber growth compared to periods prior to fiscal year 2003. We limited new subscriber activation volume to ensure adequate liquidity to meet our financial obligations. As a means to conserve cash in fiscal 2003, we closed 15 company-owned retail stores and cancelled 21 agreements with local third-party distributors, thereby reducing our retail presence in a number of our markets. Now that we have completed the reorganization, we intend to accelerate the growth of our subscriber base by expanding our sales distribution channels, particularly the number of local third-party distributors and our company-owned retail stores, and by increasing our sales and marketing activities in order to maximize revenues from our third generation network and advanced product offerings. As we seek to accelerate our subscriber growth, we will incur significant up-front subscriber acquisition expenses, which initially will result in reduced levels of cash flows from operating activities as compared to our most recent prior periods. In addition, to the extent our subscriber growth includes a higher percentage of sub-prime credit subscribers, our churn and bad debt expense may increase, which would impair our ability to maintain and increase our revenues and cause a deterioration in our operating margin.

Potential mergers and acquisitions or territory expansions may require us to incur substantial additional debt and integrate new technologies, operations and services, which may be costly, time consuming and negatively affect our operating results.

        We may evaluate expansion opportunities and, subject to the availability of financing, may strategically expand our territory. In addition, a number of similarly situated PCS Affiliates of Sprint may benefit from combined operations. Accordingly, we expect to continually evaluate opportunities for mergers or the acquisition of businesses that are intended to complement or extend our existing operations. If we acquire additional businesses or territories the market value of our common stock may be adversely affected and we may encounter difficulties that may be costly and time-consuming and slow our growth. For example, we may have to:

•

assume and/or incur substantial additional debt to finance the acquisitions and fund the ongoing operations of the acquired companies;



•

integrate new operations with our existing operations; or



•

divert the attention of our management from other business concerns.

        Our ability to obtain any additional financing that we may need in order to finance any such acquisitions or fund the ongoing operations of such acquired companies or integrate such new operations could be limited by our substantial existing indebtedness, as well as our recent emergence from bankruptcy which would negatively affect our liquidity.

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Our financial condition or results of operations are not comparable to the financial condition or results of operations reflected in our historical financial statements which may negatively affect our share price.

        As a result of our emergence from bankruptcy, we are operating our business with a new capital structure and we applied fresh-start accounting as of July 1, 2004 as prescribed by generally accepted accounting principles. In accordance with fresh-start accounting, assets and liabilities were recorded at fair value, with the enterprise value that was determined in connection with the reorganization. Accordingly, our financial condition and results of operations for the period from July 2, 2004 through September 30, 2004 are not comparable to the financial condition or results of operations for periods prior to July 2, 2004 reflected in our historical consolidated financial statements included elsewhere in this report.

The bankruptcy proceeding may adversely affect our ability to engage in transactions.

        Our past inability to meet our obligations that resulted in our bankruptcy filing, or the perception that we may not be able to meet our obligations following the reorganization, could adversely affect our relationships with third parties, as well as our ability to retain or attract high-quality employees. For example, we may have difficulty entering into leases and other agreements related to our operations because of our bankruptcy filing which may negatively affect our operating results.

If we receive lower revenues or incur more fees than we anticipate for PCS roaming from Sprint PCS, our results of operations may be negatively affected.

        We are paid a fee from Sprint PCS or a PCS Affiliate of Sprint for every minute and kilobyte that Sprint PCS or that affiliate's subscribers use the Sprint PCS network in our territory. Similarly, we pay a fee to Sprint or another PCS Affiliate of Sprint for every minute and kilobyte that our subscribers use the Sprint PCS network outside our territory. The per-minute and per-kilobyte rates that we receive from Sprint PCS and that we pay to Sprint PCS or another PCS Affiliate of Sprint are the same and are fixed until the end of December 2006. Thereafter, the rate will change, based on an agreed-upon formula that may have an adverse effect on us. In addition, Sprint PCS subscribers based in our territory may spend more time outside our territory than we anticipate, and wireless subscribers from outside our territory may spend less time in our territory or may use our services less than we anticipate. Our ratio of inbound to outbound roaming with Sprint PCS for the periods ended September 30, 2004 and July 1, 2004 was approximately 1.6 to 1 and 1.3 to 1, respectively. We expect this ratio to decline over time as our subscriber base continues to grow, resulting in us receiving less Sprint PCS roaming revenue and/or having to pay more in Sprint PCS roaming fees than we collect in Sprint PCS roaming revenue which will negatively affect our operating results.

Roaming revenue from subscribers of wireless communications providers other than Sprint PCS and PCS Affiliates of Sprint may decline in the future which may negatively affect our operating results.

        We derive a significant amount of roaming revenue from wireless communications providers other than Sprint PCS and PCS Affiliates of Sprint for permitting their subscribers to roam on our network when they are in our territory. For the periods ended September 30, 2004 and July 1, 2004, approximately 8% and 13%, respectively, of our roaming revenue was attributable to revenue derived from these other wireless communications providers. We do not have agreements directly with these providers. Instead, we rely on roaming arrangements that Sprint PCS has negotiated. Sprint PCS may negotiate roaming arrangements with other wireless communications providers at rates that are lower than current rates, resulting in a decrease in our roaming revenue. If the rates offered by Sprint PCS are not attractive, these other wireless communications providers may decide to build out their own networks in our territory and compete with us directly or enter into roaming arrangements with our competitors who also already have networks in our territory, resulting in a decrease in our roaming revenue. Roaming revenue from subscribers of wireless communications providers other than Sprint

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PCS and PCS Affiliates of Sprint may also decline as a result of decreased roaming traffic in our territory if our quality of service does not continue to meet designated technical and quality standards or if we are unable to control fraudulent use.

Our roaming arrangements may not be competitive with other wireless communications providers, which may restrict our ability to attract and retain subscribers which may negatively affect our operating results.

        We do not have agreements directly with other wireless service providers for roaming coverage outside our territory. Instead, we rely on roaming arrangements that Sprint PCS has negotiated with other wireless communications providers for coverage in these areas. Some risks related to these arrangements are as follows:

•

the arrangements may not benefit us in the same manner that they benefit Sprint PCS;



•

the quality of the service provided by another provider during a roaming call may not approximate the quality of the service provided by Sprint PCS;



•

the price of a roaming call may not be competitive with prices charged by other wireless companies for roaming calls;



•

customers must end a call in progress and initiate a new call when leaving the Sprint PCS network and entering another wireless network;



•

Sprint PCS subscribers may not be able to use advanced PCS features from Sprint PCS, such as PCS Vision, while roaming;



•

Sprint PCS or the carriers providing the service may not be able to provide us with accurate billing information on a timely basis; and



•

if Sprint PCS subscribers do not have a similar wireless experience as when they are on the PCS network of Sprint PCS, we may lose current subscribers and Sprint PCS products and services may be less attractive to potential new subscribers.

        If we are unable to attract and retain customers for any reason, our ability to maintain and increase revenues will be impaired and our operating margin will deteriorate.

Unauthorized use of, or interference with, the Sprint PCS network in our territory could disrupt our service and increase our costs.

        We may incur costs associated with the unauthorized use of the Sprint PCS network in our territory, including administrative and capital costs associated with detecting, monitoring and reducing the incidence of fraud. Fraudulent use of the Sprint PCS network in our territory may impact interconnection costs, capacity costs, administrative costs, fraud prevention costs and payments to other carriers for fraudulent roaming. As these costs increase, our operating performance may decline which could adversely affect our ability to make payments on our debt and operate our business.

If we lose the right to install our equipment on wireless towers or are unable to renew expiring leases for wireless towers on favorable terms or at all, our business and results of operations could be adversely impacted.

        Approximately 94% of our base stations are installed on leased tower facilities that may be shared with one or more other wireless communications providers. We expect this percentage to increase to nearly 100% if we are successful in selling our remaining currently owned towers for which we have entered into a sale agreement. In addition, a large portion of these leased tower sites are owned by a few tower companies. If a master agreement with one of these tower companies were to terminate, or if one of these tower companies were unable to support the use of its tower sites by us, we would have

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to find new sites or may be required to rebuild the affected portion of our network. In addition, the concentration of our tower leases with a limited number of tower companies could adversely affect our results of operations and financial condition if any of our operating subsidiaries is unable to renew its expiring leases with these tower companies either on favorable terms or at all. If any of the tower leasing companies that we do business with should experience severe financial difficulties, or file for bankruptcy protection, our ability to use our towers could be adversely affected. That, in turn, would adversely affect our revenues and financial condition if a material number of towers were involved.

The technology that we use may become obsolete, which would limit our ability to compete effectively within the wireless telecommunications industry which would negatively affect our operating results and share price.

        The wireless telecommunications industry is experiencing significant technological change. We employ CDMA (a digital spread-spectrum wireless technology that allows a large number of users to access a single frequency band by assigning a code to all transmission bits, sending a scrambled transmission of the encoded information over the air and reassembling the speech and data into its original format), the digital wireless communications technology selected by Sprint PCS and certain other carriers for their nationwide networks. Other carriers employ other technologies, such as TDMA (time division multiple access, a technology used in digital cellular telephone communication that divides each cellular channel into three time slots in order to increase the amount of data that can be carried), GSM (global system for mobile communication, a technology that digitizes and compresses data, then sends it down a channel with two other streams of user data, each in its own time slot) and iDEN (integrated digital enhanced network, a technology containing the capabilities of a digital cellular telephone, two-way radio, alphanumeric pager, and data/fax modem in a single network), for their nationwide networks. If another technology becomes the preferred industry standard, we would be at a competitive disadvantage and competitive pressures may require Sprint PCS to change its digital technology, which in turn could require us to make changes to our network at substantial cost. We may be unable to respond to these pressures and implement new technology on a timely basis or at an acceptable cost. Additionally, our substantial indebtedness, coupled with our recent emergence from bankruptcy, could limit our ability to obtain any additional financing that we may need in order to make changes to our network, which may require us to dedicate a substantial portion of any cash flow from our operating activities to make such changes, thereby reducing funds available for future marketing activities and debt repayment. We may also lose subscribers if we fail to implement significant technological changes evidenced by the development and commercial acceptance of advanced wireless data services, shorter development cycles for new products and enhancements and changes in end-user requirements and preferences. If we lose subscribers, our ability to maintain and increase revenues will be impaired and our operating margin will deteriorate.

The loss of the officers and skilled employees upon whom we depend to operate our business could adversely affect our operating results and share price.

        Our business is managed by a small number of executive officers on whom we depend to operate our business. We believe that our future success will depend in part on our continued ability to retain these executive officers and to attract and retain other highly qualified technical and management personnel. Notwithstanding our employment agreements with certain of our executives, we may not be successful in retaining key personnel or in attracting and retaining other highly qualified technical and management personnel. Moreover, our past inability to meet our obligations that resulted in our bankruptcy filing, or the perception that we may not be able to meet our obligations following the reorganization, could adversely affect our ability to retain or attract high-quality personnel. The loss of the officers and skilled employees upon whom we depend to operate our business could adversely affect operating results and share price.

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Risks Related to Our Relationship with Sprint PCS

Our ability to conduct our business would be severely restricted if Sprint PCS terminates our affiliation agreements and our share price would be negatively affected.

        Our relationship with Sprint PCS is governed by our affiliation agreements with it. As we do not own any licenses to operate a wireless network, our business depends on the continued effectiveness of these affiliation agreements. Sprint PCS may be able to terminate our affiliation agreements with it if we materially breach the terms of the agreements. These terms include operational and network requirements that are extremely technical and detailed and apply to each retail store, cell site and switch site. Many of these operational and network requirements can be changed by Sprint PCS, in certain cases, with little notice. As a result, we may not always be in compliance with all requirements of our affiliation agreements with Sprint PCS. Sprint PCS conducts periodic audits of compliance with various aspects of its program guidelines and identifies issues it believes need to be addressed. We may need to incur substantial costs to remedy any noncompliance. The fact that we are not in compliance with our affiliation agreements could limit our ability to obtain any additional financing that we may need in order to remedy such noncompliance. Additionally, our substantial indebtedness and our recent emergence from bankruptcy could further limit our ability to obtain additional financing. If we cannot obtain additional financing, we may be unable to remedy such noncompliance, thereby resulting in a material breach of our affiliation agreements which could lead to their termination by Sprint. If Sprint PCS terminates or fails to renew our affiliation agreements or fails to perform its obligations under those agreements, our ability to conduct business would be severely restricted and our share price would be negatively affected.

If we materially breach our affiliation agreements with Sprint PCS, Sprint PCS may have the right to purchase our operating assets at a discount to market value.

        Our affiliation agreements with Sprint PCS require that we provide network coverage to a minimum network coverage area within specified time frames and that we meet and maintain Sprint PCS' technical and customer service requirements. A failure by us to meet Sprint PCS' technical or customer service requirements contained in the affiliation agreements, among other things, would constitute a material breach of the agreements, which could lead to their termination by Sprint PCS. We may amend our affiliation agreements with Sprint PCS in the future to expand our network coverage. Our affiliation agreements with Sprint PCS provide that upon the occurrence of an event of termination caused by our breach of such agreements, Sprint PCS has the right to, among other things, purchase our operating assets without stockholder approval and for a price equal to 72% of our "entire business value," which is our appraised value determined using certain principles set forth in our affiliation agreements with Sprint PCS and based on the price a willing buyer would pay a willing seller for our entire business as a going concern. See "Business—Our Affiliation Agreements with Sprint PCS" for a description of how we calculate our entire business value.

Sprint PCS may make decisions that could increase our expenses and/or our capital expenditure requirements, reduce our revenues or make our affiliate relationships with Sprint PCS less advantageous than expected.

        Under our affiliation agreements with Sprint PCS, Sprint PCS has a substantial amount of control over factors that significantly affect the conduct of our business. Accordingly, subject to newly established limits set forth in the amendments to our affiliation agreements with Sprint PCS, Sprint PCS may make decisions that adversely affect our business, such as the following:

•

Sprint PCS prices its national calling plans based on its own objectives and could set price levels or change other characteristics of its plans in a way that may not be economically advantageous for our business; and

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•

Sprint PCS may alter its network and technical requirements or request that we build out additional areas within our territory, which could result in increased equipment and build-out costs or in Sprint PCS building out that area itself or assigning it to another PCS Affiliate of Sprint.

Certain provisions of our affiliation agreements with Sprint PCS may diminish our value and restrict the sale of our business which may negatively affect our share price.

        Under specific circumstances and without stockholder approval, Sprint PCS may purchase our operating assets or capital stock at a discount. In addition, Sprint PCS has the right to withhold its consent to any transaction in which the "ultimate parent" of iPCS Wireless, Inc., our operating subsidiary that is the party to the affiliation agreements with Sprint PCS, changes. We must obtain the consent of Sprint PCS prior to any assignment by us of our affiliation agreements with it. Sprint PCS also has a right of first refusal if we decide to sell our operating assets to a third party. We are also subject to a number of restrictions on the transfer of our business, including a prohibition on the sale of our operating assets to competitors of Sprint. These restrictions and the other restrictions contained in our affiliation agreements with Sprint PCS restrict our ability to sell our business, may reduce the value a buyer would be willing to pay for our business, and may reduce our "entire business value," which is our appraised value determined using principles set forth in our affiliation agreements with Sprint PCS and based on the price a willing buyer would pay a willing seller for our entire business as a going concern.

Problems with Sprint PCS' internal support systems could lead to customer dissatisfaction or increase our costs.

        We rely on Sprint PCS' internal support systems, including customer care, billing and back office support. Sprint PCS has entered into business process outsourcing agreements with third parties to provide these services. Sprint PCS may not be able to successfully add system capacity, its internal support systems may not be adequate and the third parties that Sprint PCS has contracted with may not perform their obligations. Problems with Sprint PCS' internal support systems could cause:

•

delays or problems in our operations or services;



•

delays or difficulty in gaining access to subscriber and financial information;



•

a loss of subscribers; and



•

an increase in the costs of customer care, billing and back-office services.

        Should Sprint PCS fail to deliver timely and accurate information, this may lead to adverse short-term decisions and inaccurate assumptions in our business plan. It could also adversely affect our cash flows, because Sprint PCS collects our receivables and remits to us a net amount that is based on the financial information it produces for us.

Our costs for internal support systems may increase if Sprint PCS terminates all or part of our service agreements with it.

        The costs for the services provided by Sprint PCS under our affiliation agreements with Sprint PCS relative to billing, customer care and other back-office functions for the periods ended September 30, 2004 and July 1, 2004 were approximately $5.3 million and $12.9 million, respectively. Because we incur the majority of these costs on a per-subscriber basis, which is fixed until the end of December 2006 and after which will be adjusted by Sprint PCS based on a formula related to Sprint PCS' costs to provide the services, we expect the aggregate cost for such services to increase as the number of our subscribers increases after December 2006. Sprint PCS may terminate any service provided under such agreements upon nine months' prior written notice, but if we desire to continue receiving such service, Sprint PCS

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has agreed that it will assist us in developing that function internally or locating a third party vendor that will provide that service. Although Sprint PCS has agreed in such an event to reimburse us for expenses we incur in transitioning to any service internally or to a third party, if Sprint PCS terminates a service for which we have not developed or are unable to develop a cost-effective alternative, our operating costs may increase beyond our expectations and our operations may be interrupted or restricted. We do not currently have a contingency plan if Sprint PCS terminates a service we currently receive from it.

If Sprint PCS does not maintain control over its licensed spectrum, our affiliation agreements with Sprint PCS may be terminated which will negatively affect our operating results.

        Sprint PCS, not us, owns the licenses necessary to provide wireless services in our territory. The FCC requires that licensees like Sprint PCS maintain control of their licensed systems and not delegate control to third party operators or managers without the FCC's consent. Our affiliation agreements with Sprint PCS reflect an arrangement that the parties believe meets the FCC requirements for licensee control of licensed spectrum. However, if the FCC were to determine that any of our affiliation agreements with Sprint PCS need to be modified to increase the level of licensee control, we have agreed with Sprint PCS to use our best efforts to modify the agreements to comply with applicable law. If we cannot agree with Sprint PCS to modify the agreements, those agreements may be terminated. If the agreements are terminated, we would no longer be a part of the PCS network of Sprint PCS and we would not be able to conduct our business.

The FCC may fail to renew the Sprint PCS wireless licenses under certain circumstances, which would prevent us from providing wireless services.

        Sprint PCS' wireless licenses are subject to renewal and revocation by the FCC. The Sprint PCS wireless licenses in our territory will expire in 2005 and 2007, but may be renewed for additional ten-year terms. The FCC has adopted specific standards that apply to wireless personal communications services license renewals. Any failure by Sprint PCS or us to comply with these standards could result in the non-renewal of the Sprint PCS licenses for our territory. Additionally, if Sprint PCS does not demonstrate to the FCC that Sprint PCS has met the construction requirements for each of its wireless personal communications services licenses, it can lose those licenses. If Sprint PCS loses its licenses in our territory for any of these reasons, we and our subsidiaries would not be able to provide wireless services without obtaining rights to other licenses. If Sprint PCS loses its licenses in another territory, Sprint PCS or the applicable PCS Affiliate of Sprint would not be able to provide wireless services without obtaining rights to other licenses and our ability to offer nationwide calling plans would be diminished and potentially more costly.

We rely on Sprint PCS for a substantial amount of our financial information. If that information is not accurate, our ability to accurately report our financial data could be adversely affected, and the investment community could lose confidence in us.

        Under our affiliation agreements, Sprint performs our billing, customer care and collections, PCS network systems support, inventory logistics, long distance transport and national third party sales support. The data provided by Sprint related to these functions they perform for us is the primary source for our service revenue and for a significant portion of our cost of service and roaming, and selling and marketing expenses included in our statement of operations. We use this data to record our financial results and prepare our financial statements. If Sprint fails to deliver timely and accurate information, this may lead us to make adverse decisions and inaccurate assumptions for future business plans and could also negatively affect our cash flows as Sprint collects our receivables and remits a net amount to us that is based on the financial information it provides. In addition, delays and inaccuracies which are material could adversely affect the effectiveness of our disclosure controls and procedures

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and if we later identify material errors in that data provided to us, we may be required to restate our financial statements. If that occurs to us or any other PCS Affiliate of Sprint, investors and securities analysts may lose confidence in us.

If Sprint PCS does not succeed, our business may not succeed.

        If Sprint has a significant disruption to its business plan or network, fails to operate its business in an efficient manner or suffers a weakening of its brand name, our operations and profitability would likely be negatively impacted. If Sprint should have significant financial problems, including bankruptcy, our business would suffer material adverse consequences, which could include termination or revision of our affiliation agreements with Sprint PCS.

A business combination involving Sprint may have an adverse effect on us in ways that would be beyond our control.

        On December 15, 2004, Sprint announced that it had agreed to merge with Nextel Communications, Inc., subject to obtaining all necessary approvals. The announcement and closing of the Nextel merger, or the announcement and closing of any other business combination involving Sprint, may give rise to a negative reaction by our customers, which may have an adverse effect on our revenues. Any diminution in brand recognition or loyalty as a result of the pending Nextel merger, or any other business combination involving Sprint, could also cause a decrease in our revenues and we may incur significant costs associated with minimizing any such negative reaction or customer confusion. In the event that the Nextel merger, or any other business combination involving Sprint, is consummated, we may also incur significant costs associated with integrating Sprint's merger partner onto our network. In addition, the proposed Nextel merger, or any other such business combination involving Sprint, imposes a degree of uncertainty on the future of our business and operations insofar as it may lead to a change in Sprint PCS' affiliate strategy, which may have an adverse effect on our share price.

If other PCS Affiliates of Sprint have financial difficulties, the PCS network of Sprint PCS could be disrupted which may negatively affect our operating results.

        The PCS network of Sprint PCS is a combination of networks. The large metropolitan areas are operated by Sprint, and the areas in between them are operated by PCS Affiliates of Sprint, all of which are independent companies like us. We believe that most, if not all, of these companies have incurred substantial debt to pay the large cost of building out their networks. If other PCS Affiliates of Sprint experience financial difficulties, the PCS network of Sprint could be disrupted in the territories of those PCS Affiliates of Sprint. Material disruptions in the PCS network of Sprint PCS could have a material adverse effect on our ability to attract and retain subscribers. If the affiliation agreements of those PCS Affiliates of Sprint are like ours, Sprint PCS would have the right to step in and operate the affected territory. However, this right could be delayed or hindered by legal proceedings, including any bankruptcy proceeding related to the affected PCS Affiliate of Sprint. In addition to us, another PCS Affiliate of Sprint has declared bankruptcy, alleging that Sprint violated its agreements with the PCS Affiliate, and others have experienced financial difficulties which have led to the reorganization of their debt obligations.

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We may have difficulty in obtaining an adequate supply of certain handsets from Sprint PCS, which could adversely affect our results of operations.

        We depend on our relationship with Sprint PCS to obtain handsets and other wireless devices. Sprint PCS orders handsets and other wireless devices from various manufacturers. We could have difficulty obtaining specific types of handsets in a timely manner if:

•

Sprint PCS does not adequately project the need for handsets for itself, its PCS Affiliates and its other third-party distribution channels, particularly in transition to new technologies, such as 3G technology;



•

Sprint PCS gives preference to other distribution channels, which has occurred in the past, most recently in 2000;



•

we do not adequately project our need for handsets or other wireless devices;



•

Sprint PCS modifies its handset logistics and delivery plan in a manner that restricts or delays our access to handsets; or



•

there is an adverse development in the relationship between Sprint PCS and its suppliers or vendors.

        The occurrence of any of the foregoing could disrupt our customer service and/or result in a decrease in our subscribers. If we lose subscribers, our ability to maintain and increase revenues will be impaired and our operating margin will deteriorate.

Risks Related to the Wireless Telecommunications Industry

We may experience a high rate of subscriber turnover, which would adversely affect our financial performance.

        Significant competition in our industry and general economic conditions may cause our future churn rate to be higher than our historical rate. Factors that may contribute to higher churn include:

•

inability or unwillingness of subscribers to pay, resulting in involuntary deactivations, which accounted for over 36% of our subscriber deactivations for both the periods ended September 30, 2004 and July 1, 2004;



•

subscriber mix and credit class, particularly sub-prime credit subscribers, which accounted for over 39% and 37% of our gross subscriber additions for the period ended September 30, 2004 and July 1, 2004, respectively and for approximately 25% of our subscriber base as of September 30, 2004;



•

attractiveness of our competitors' products, services and pricing;



•

network performance and coverage relative to our competitors;



•

customer service;



•

any increased prices for services in the future; and



•

any future changes by us in the products and services we offer or in the terms under which we offer our products or services, especially to sub-prime credit subscribers.

        An additional factor that may contribute to a higher churn rate is the FCC's wireless local number portability ("WLNP") requirement. The FCC regulations relating to WLNP enable wireless subscribers to keep their telephone numbers when switching to another carrier. As of May 24, 2004, all covered Commercial Mobile Radio Service ("CMRS") providers, including broadband PCS, cellular and certain specialized mobile radio ("SMR") licensees, must allow customers to retain, subject to certain geographic limitations, their existing telephone number when switching from one telecommunications

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carrier to another. We anticipate that the WLNP mandate will impose increased operating costs on all CMRS providers, including us, and may result in higher churn rates and subscriber acquisition and retention costs. To date, WLNP has had a slight negative impact on our operations but the ultimate impact is uncertain.

        A high rate of subscriber turnover could adversely affect our competitive position, liquidity, financial position, results of operations and our costs of, or losses incurred in, obtaining new subscribers, especially because we subsidize most of the costs of initial purchases of handsets by subscribers.

Regulation by government agencies and taxing authorities may increase our costs of providing service or require us to change our services.

        Our operations and those of Sprint PCS are subject to varying degrees of regulation by the FCC, the Federal Trade Commission, the Federal Aviation Administration, the Environmental Protection Agency, the Occupational Safety and Health Administration, and state and local regulatory agencies and legislative bodies. Adverse decisions or regulations of these regulatory bodies could negatively impact our operations and those of Sprint PCS thereby increasing our costs of doing business. For example, changes in tax laws or the interpretation of existing tax laws by state and local authorities could subject us to increased income, sales, gross receipts or other tax costs or require us to alter the structure of our current relationship with Sprint PCS.

Concerns over health risks and safety posed by the use of wireless handsets may reduce consumer demand for our services.

        Media reports have suggested that radio frequency emissions from wireless handsets may:

•

be linked to various health problems resulting from continued or excessive use, including cancer;



•

interfere with various electronic medical devices, including hearing aids and pacemakers; and



•

cause explosions if used while fueling an automobile.

        Widespread concerns over radio frequency emissions may expose us to potential litigation, discourage the use of wireless handsets or result in additional regulation imposing restrictions or increasing requirements on the location and operation of cell sites or the use or design of wireless handsets. Any resulting decrease in demand for these services or increase in the cost of complying with additional regulations could impair our ability to profitably operate our business. Such concerns may result in the loss of subscribers, which may impair our ability to maintain and increase revenues and lower our operating margin. In addition, we may need to dedicate a larger portion of any cash flow from our operating activities to comply with such additional regulations.

        Due to safety concerns, some state and local legislatures have passed or are considering legislation restricting the use of wireless telephones while driving automobiles. Concerns over safety risks and the effect of future legislation, if adopted in the areas we serve, could limit our ability to market and sell our wireless services. In addition, it may discourage use of our wireless devices and decrease our revenues from subscribers who now use their wireless telephones while driving. Further, litigation relating to accidents, deaths or serious bodily injuries allegedly incurred as a result of wireless telephone use while driving could result in damage awards, adverse publicity and further governmental regulation.

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Significant competition in the wireless telecommunications industry may result in our competitors offering new services or lower prices, which could prevent us from operating profitably and may cause prices for our services to continue to decline in the future.

        Competition in the wireless telecommunications industry is intense. Competition has caused, and we anticipate that competition will continue to cause, the market prices for two-way wireless products and services to decline. Our ability to compete will depend, in part, on our ability to anticipate and respond to various competitive factors affecting the wireless telecommunications industry. While we try to maintain and increase our ARPU, we cannot assure you that we will be able to do so. If prices for our services continue to decline, it could adversely affect our ability to increase revenue, which would have a material adverse effect on our financial condition, our results of operations and our ability to repay the senior notes. In addition, the viability of our business depends upon, among other things, our ability to compete with other wireless providers on reliability, quality of service, availability of voice and data features and customer care. In addition, the pricing of our services may be affected by competition, including the entry of new service providers into our markets. Furthermore, there has been a recent trend in the wireless telecommunications industry toward consolidation of wireless service providers, which we expect to lead to larger competitors over time.

        Our dependence on Sprint PCS to develop competitive products and services and the requirement that we obtain Sprint PCS' consent to sell non-Sprint approved equipment may limit our ability to keep pace with our competitors on the introduction of new products, services and equipment. Some of our competitors are larger than us, possess greater resources and more extensive coverage areas, and may market other services, such as landline telephone service, cable television and Internet access, along with their wireless communications services. In addition, we may be at a competitive disadvantage because we may be more highly leveraged than some of our competitors.

        We also face competition from paging, dispatch and conventional mobile radio operations, enhanced specialized mobile radio ("ESMR") and mobile satellite services. In addition, future FCC regulation or Congressional legislation may create additional spectrum allocations that would have the effect of adding new entrants (and thus additional competitors) into the mobile telecommunications market.

Market saturation could limit or decrease our rate of new subscriber additions and increase costs to keep our current subscribers.

        Intense competition in the wireless telecommunications industry could cause prices for wireless products and services to continue to decline. If prices drop, our rate of net subscriber additions will take on greater significance in improving our financial condition and results of operations. However, as our and our competitors' penetration rates in our markets increase over time, our rate of adding net subscribers could decrease further. In addition, we may incur additional costs through equipment upgrades and other retention costs to keep our current subscribers from switching to our competitors. If this decrease were to happen, it could materially adversely affect our liquidity, financial condition and results of operations.

Alternative technologies and current uncertainties in the wireless market may reduce demand for PCS products and services.

        The wireless telecommunications industry is experiencing significant and rapid technological change, as evidenced by the increasing pace of digital upgrades in existing analog wireless systems, evolving industry standards, ongoing improvements in the capacity and quality of digital technology, shorter development cycles for new products and enhancements and changes in end-user requirements and preferences. Technological advances and industry changes could cause the technology used in our network to become obsolete. We rely on Sprint PCS for research and development efforts with respect

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to Sprint PCS products and services and with respect to the technology used on our network. Sprint PCS may not be able to respond to such changes and implement new technology on a timely basis, or at an acceptable cost.

        If Sprint PCS is unable to keep pace with these technological changes or other changes in the wireless communications market, the technology used on our network or our business strategy may become obsolete. In addition, other carriers are in the process of completing, or have completed, upgrades to 1xRTT or other 3G technologies. 1xRTT is the name for the first phase in CDMA's evolution to 3G technology. 3G technology provides high-speed, always-on Internet connectivity and high-quality video and audio. We have upgraded our network to CDMA 1xRTT, and as of September 30, 2004, are offering PCS Vision services, in markets representing approximately 98% of the covered population in our territory.

We are a consumer business and an economic downturn in the United States involving significantly lowered consumer spending could negatively affect our results of operations.

        Our primary subscriber base is composed of individual consumers, and in the event that the economic downturn that the United States and other countries have recently experienced becomes more pronounced or lasts longer than currently expected and spending by individual consumers drops significantly, our business may be negatively affected.

Risks Related to Our Common Stock

The ability to influence corporate matters will be limited because a small number of stockholders beneficially own a substantial amount of our common stock.

        Entities that are investment advised by AIG Global Investment Corp. (a subsidiary of American International Group) own approximately 2,623,500 shares or 30.1% of our common stock and funds managed by affiliates of Silver Point Capital, L.P. ("Silver Point") own approximately 2,208,700 shares or 25.3% of our common stock. As a result, AIG Global Investment Corp. and Silver Point can exert significant influence over our management and policies until such time as they sell a substantial portion of their shares and may have interests that are different from yours.

There is not, and there may never be, an established active trading market for our common stock.

        There is no established active trading market for our common stock and such a trading market may never develop. Our common stock is currently quoted on the National Quotation Bureau's Pink Sheets. If an established active trading market does develop, it may not be sustained and a high degree of price volatility may continue to exist in any such market. We intend to apply for listing of our common stock on The Nasdaq National Market, but we may not be able to satisfy the listing requirements to do so, in particular, the requirements for a minimum number of round lot holders. If for any reason our common stock is not eligible for initial or continued listing on The Nasdaq Stock Market, or if a public trading market does not develop, purchasers of our common stock may have difficulty selling their shares.

The price of our common stock may be more volatile than the equity securities of established companies and such volatility may disproportionately reduce the market value of our common stock at certain times.

        The market price of our common stock could be subject to significant fluctuations in response to various factors, including:

•

variations in our, or Sprint PCS', quarterly operating results;



•

our or Sprint PCS' failure to achieve operating results consistent with securities analysts' projections;

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•

the operating and stock price performance of other companies that investors may deem comparable to us or Sprint PCS;



•

announcements of technological innovations or new products and services by us, Sprint PCS or our competitors;



•

announcements by us or Sprint PCS of joint development efforts or corporate partnerships in the wireless telecommunications market;



•

market conditions in the technology, telecommunications and other growth sectors; and



•

rumors relating to us, Sprint PCS or our competitors.

        The stock market has experienced extreme price volatility. Under these market conditions, stock prices of many growth stage companies have often fluctuated in a manner unrelated or disproportionate to the operating performance of such companies. As we are a growth stage company, our common stock may be subject to greater price volatility than the stock market as a whole.

Risks Related to Our Senior Notes

The terms of our debt place restrictions on us and our subsidiaries, which may limit our operating flexibility.

        The indenture that governs our senior notes imposes material operating and financial restrictions on us and our subsidiaries. These restrictions may limit our ability and the ability of our subsidiaries to, among other things:

•

incur additional debt or, in the case of our restricted subsidiaries, issue capital stock to a third party;



•

pay dividends, redeem capital stock or make other restricted payments or investments;



•

create liens on assets;



•

merge, consolidate or dispose of assets;



•

enter into transactions with affiliates;



•

place restrictions on the ability of our restricted subsidiaries to pay dividends or make other payments to us; and



•

change lines of business.

        These restrictions could limit our ability to obtain debt financing, repurchase stock, refinance or pay principal or interest on our outstanding debt, complete acquisitions for cash or debt or react to changes in our operating environment. Any future debt that we incur may contain similar or more restrictive covenants.

We are a holding company and conduct all of our operations through our subsidiaries.

        Our senior notes are unsecured obligations of ours. We are a holding company that derives all of our operating income from our subsidiaries. We are dependent on the earnings and cash flows of our subsidiaries to meet our obligations with respect to our senior notes. The terms of future indebtedness of our subsidiaries and the laws of the jurisdictions under which those subsidiaries are organized may limit the payment of dividends and other distributions to us.

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Federal and state statutes may allow courts, under specific circumstances, to void the guarantees of our senior notes by our subsidiaries, and thus holders may not have the right to receive any money pursuant to the guarantees.

        Although the subsidiary guarantees of our senior notes provide holders thereof with a claim against the assets of the applicable subsidiary guarantor, creditors of a bankrupt subsidiary guarantor may challenge the guarantee. If a challenge were upheld, then the applicable guarantee would be invalid, unenforceable and junior to all creditors, including trade creditors, of that subsidiary guarantor.

        The creditors of a bankrupt subsidiary guarantor could challenge a guarantee on the ground that the guarantee constituted a fraudulent conveyance under bankruptcy laws. If a court were to rule that the guarantee constituted a fraudulent conveyance, then the court could void the obligations under the guarantee or subordinate the guarantee to other debt of the subsidiary guarantor or take other action detrimental to holders of our senior notes. In addition, any of the guarantees could be subject to the claim that, since the guarantee was incurred for our benefit, and only indirectly for the benefit of our subsidiary that provided the guarantee, the obligations of the applicable subsidiary guarantor were incurred for less than fair consideration.

We may be unable to repurchase our senior notes upon a change of control.

        Upon the occurrence of a change of control event, as defined in the indenture governing our senior notes, we would be required to offer to repurchase our senior notes for cash at a price equal to 101% of their aggregate principal amount, plus accrued and unpaid interest, if any. We may not have sufficient funds to repurchase our senior notes and satisfy other payment obligations that could be triggered upon a change of control. If we do not have sufficient financial resources to effect a change of control offer, we would be required to seek additional financing from outside sources to repurchase our senior notes. Financing may not be available to us on satisfactory terms or at all. The change of control provisions of the indenture governing our senior notes will not protect holders of our senior notes if we engage in a reorganization, restructuring, merger or similar transaction, including a highly leveraged transaction, unless that transaction constitutes a change of control for purposes of the indenture, even if such transaction could adversely affect the holders of our senior notes.

        Debt that we may incur in the future may contain provisions prohibiting transactions that would constitute a change of control or requiring such debt to be repurchased upon a change of control. Moreover, the exercise by holders of our senior notes of their right to require us to repurchase their notes could cause a default under other debt, even if the change of control itself does not result in a default under such debt, due to the financial effect of such repurchase on us.

The market price for our senior notes may be volatile.

        There is currently no established trading market for our senior notes. Future trading prices of our senior notes will depend on many factors, including our operating performance and financial condition, prevailing interest rates and the market for similar securities. If a market for our senior notes does not develop, holders thereof will not be able to resell their senior notes for an extended period of time.

        Historically, the market for non-investment grade debt has been subject to disruptions that have caused substantial volatility in the prices of securities similar to our senior notes. The market for our senior notes, if any, may be subject to similar disruptions. Any such disruptions may adversely affect the value of our senior notes.

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ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

        We do not engage in commodity futures trading activities and do not enter into derivative financial instrument transactions for trading or other speculative purposes. We also do not engage in transactions in foreign currencies that could expose us to market risk.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

        Our financial statements required by this item are submitted as a separate section of this annual report on Form 10-K. See "Index to Consolidated Financial Statements," commencing on page F-1 hereof.

ITEM 9.  CHANGE IN INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

        Deloitte & Touche had been our independent registered public accounting firm from our formation until our acquisition by AirGate as of November 30, 2001. Because KPMG was AirGate's independent registered public accounting firm, Deloitte & Touche was dismissed as our independent registered public accounting firm on November 30, 2001. We had no disagreements with Deloitte & Touche on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreement, if not resolved to the satisfaction of Deloitte & Touche, would have caused it to make reference to the subject matter of the disagreement in connection with a report on our financial statements. The report of Deloitte & Touche on the financial statements for the fiscal year ended December 31, 2000, and the nine months ended September 30, 2001, did not contain an adverse opinion or a disclaimer of opinion and was not qualified or modified as to uncertainty, audit scope or accounting principles. During the two most recent fiscal years and the subsequent interim period preceding the dismissal of Deloitte & Touche, there were no disagreements with Deloitte & Touche on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreement, if not resolved to the satisfaction of Deloitte & Touche, would have caused it to make reference to the subject matter of the disagreement in connection with its report.

        On November 30, 2001, our then sole stockholder approved our engagement of KPMG as our independent registered public accounting firm for our fiscal year ended September 30, 2002. Our financial results were included in AirGate's consolidated financial statements for fiscal year ended September 30, 2002. During the two most recent fiscal years and the subsequent interim period preceding the engagement of KPMG, we did not consult with KPMG regarding either: (1) the application of accounting principles to a specified transaction, either completed or proposed; or the type of opinion that might be rendered on our financial statements, and neither a written report or oral advice was provided to us by KPMG; or (2) any matter that was the subject of a disagreement (as defined in paragraph (a)(1)(iv) of Item 304 Regulation S-K) with our previous auditors or constituted a reportable event.

        On December 16, 2003, we engaged Deloitte & Touche as our independent registered public accounting firm for our fiscal year ended September 30, 2003, and dismissed KPMG subject to the completion of the audit of the fiscal year ended September 30, 2002. In February 2004 we sought the approval of the Bankruptcy Court to retain KPMG for the completion of the audit engagement with respect to our fiscal year ended September 30, 2002. On March 31, 2004, KPMG issued their report on the consolidated financial statements as of and for the year ended September 30, 2002, and therefore the auditor-client relationship ceased. In connection with the audit of the fiscal year ended September 30, 2002, and the subsequent interim period through March 31, 2004, we had no disagreements with KPMG on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreement, if not resolved to the satisfaction of KPMG would have caused it to make reference to the subject matter of the disagreement in

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connection with a report on our financial statements. In connection with the audit of the fiscal year ended September 30, 2002, there were no reportable events under Item 304(a)(1)(v) of Regulation S-K, except that KPMG informed us of a matter it considered to be a reportable condition identified during the audit of the financial statements as of and for the year ended September 30, 2002, relating to insufficient internal controls over our processes for validating and reconciling our subscriber accounts receivable balances and activity necessary to ensure that our subscriber accounts receivable balances were properly reflected in our consolidated financial statements. The report of KPMG on the financial statements for the fiscal year ended September 30, 2002 did not contain an adverse opinion or a disclaimer of opinion and was not qualified or modified as to uncertainty, audit scope or accounting principles, except that the report included an explanatory paragraph indicating that there was substantial doubt about our ability to continue as a going concern.

        As a result of our Bankruptcy Court filing in February 2003, our financial results for periods following the date of our petition are not included in the consolidated financial statements of AirGate. During the period preceding this engagement of Deloitte & Touche, we did not consult with Deloitte & Touche regarding either: (1) the application of accounting principles to a specified transaction, either completed or proposed; or the type of opinion that might be rendered on our financial statements, and neither a written report or oral advice was provided to us by Deloitte & Touche that Deloitte & Touche concluded was an important factor considered by us in reaching a decision as to the auditing, accounting or financial reporting issue; or (2) any matter that was the subject of a disagreement (as defined in paragraph (a)(1)(iv) of Item 304 of Regulation S-K) with our previous accountants or constituted a reportable event.

ITEM 9A.  CONTROLS AND PROCEDURES

        (a)   Evaluation of Disclosure Controls and Procedures. Each of our Chief Executive Officer and Chief Financial Officer has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-14(c) and 15d-14(c) under the Exchange Act) as of the end of the period covered by this annual report. Based on such evaluation, such officers have concluded that, as of the end of the period covered by this annual report, our disclosure controls and procedures are effective in alerting them on a timely basis to material information relating to us (including our consolidated subsidiaries) required to be included in our reports filed or submitted under the Exchange Act.

        (b)   Changes in Internal Controls over Financial Reporting. There have not been any changes in our internal controls over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the period ended September 30, 2004 that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

        We place reliance on Sprint PCS to adequately design its internal controls with respect to the processes established to provide financial information and other information to us and the other PCS Affiliates of Sprint. To address this issue, Sprint engages an independent registered public accounting firm to perform a periodic evaluation of these controls and to provide a "Report on Controls Placed in Operation and Tests of Operating Effectiveness for Affiliates" under guidance provided in Statement of Auditing Standards No. 70. This report is provided bi-annually to us.

ITEM 9B.  OTHER INFORMATION

        None.

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PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Directors and Executive Officers

        The following table presents information with respect to our directors and executive officers: