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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

FOR ANNUAL AND TRANSITION REPORTS

PURSUANT TO SECTIONS 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

(Mark One)

For the fiscal year ended December 31, 2003

OR

For the transition period from              to             

Commission file number 333-39746

IWO Holdings, Inc.

(Exact Name of Registrant as Specified in Its Charter)

(337) 436-9000

(Registrant’s telephone number, including area code)

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

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

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

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

DOCUMENTS INCORPORATED BY REFERENCE

None.

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IWO HOLDINGS, INC.

ANNUAL REPORT ON FORM 10-K

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Cautionary Note Regarding Forward-Looking Statements

This report contains forward-looking statements, which are statements about future business strategy, operations and capabilities, construction plans, construction schedules, financial projections, plans and objectives of management, expected actions of third parties and other matters. Forward-looking statements often include words like believes, belief, expects, plans, anticipates, intends, projects, estimates, may, might, would or similar words. Forward-looking statements speak only as of the date of this report. They involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different. In addition to the risk factors described elsewhere, specific factors that might cause such a difference include, but are not limited to (i) our ability to finance future growth opportunities; (ii) our dependence on Sprint PCS; (iii) our ability to expand our Sprint PCS network or to upgrade the Sprint PCS network to accommodate new technologies; (iv) limited operating history in the PCS market and anticipation of future losses; (v) potential fluctuations in operating results; (vi) changes or advances in technology; (vii) changes in law or government regulation; (viii) competition in the industry and markets in which we operate; (ix) future acquisitions; (x) our ability to attract and retain skilled personnel; (xi) our dependence on contractor and consultant services, network implementation and information technology support; (xii) our potential inability to expand the services and related products we provide in the event of substantial increases in demand in excess of supply for network and handset equipment and related services and products; (xiii) the availability at acceptable terms of sufficient funds to pay for our business plans; (xiv) changes in labor, equipment and capital costs; (xv) any inability to comply with the indentures that govern our senior notes or credit agreements; (xvi) changes in management; and (xvii) general economic and business conditions.

You should not rely too heavily on any forward-looking statement. We cannot assure you that our forward-looking statements will prove to be correct. We have no obligation to update or revise publicly any forward-looking statement based on new information, future events or otherwise.

PART I

Item 1. Business

Overview

Through our wholly owned subsidiary, Independent Wireless One Corporation, we provide wireless personal communication services, commonly referred to as PCS, in upstate New York, New Hampshire (other than the Nashua market), Vermont and portions of Massachusetts and Pennsylvania. We are a network partner of Sprint PCS, the personal communications services group of Sprint Corporation. Sprint PCS, directly and through network partners like us, provides wireless services in more than 4,000 cities and communities across the country. We have the exclusive right to provide digital PCS services under the Sprint^® and Sprint PCS^® brand names in service areas that had approximately 6.3 million residents as of December 31, 2003.

At December 31, 2003, we were providing PCS service to approximately 216,300 subscribers and network coverage to approximately 4.6 million residents or 73% out of approximately 6.3 million total residents. The number of residents in our service area does not represent the number of Sprint PCS subscribers that we expect to have in our service area.

Our Background

In April 2002, we were acquired by US Unwired Inc. (“US Unwired”). US Unwired provides PCS services and related products to customers in the southeastern United States as part of Sprint PCS’s network.

Recent Developments

For a discussion of recent developments in 2003 including our operating results, liquidity and relationship with Sprint PCS, please refer to Recent Developments in Item 7. Management’s Discussion and Analysis of Financial Condition And Results of Operations.

Our Affiliation with Sprint PCS

Sprint PCS adopted a strategy to extend its 100% digital, 100% PCS network by entering into agreements with independent wireless companies such as us to construct and manage Sprint PCS markets and market Sprint PCS services. Through these affiliations, Sprint PCS services are available in key areas contiguous to Sprint PCS markets.

Under our agreement with Sprint PCS, we market Sprint PCS products and services in our service area using licenses that Sprint PCS acquired from the FCC in 1994 and 1996. We are the only provider of Sprint PCS products and services in our service area. Some key points about this agreement are:

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In addition, through our service agreement, we pay Sprint PCS service fees for certain administrative or ‘back office’ functions performed by Sprint PCS for us. We pay service fees to Sprint PCS for new subscribers activations as well recurring monthly fees for services performed for existing subscribers such as billing and customer service.

We also purchase other goods and services, such as handsets, from Sprint PCS where Sprint PCS has contracted with third party vendors. Sprint PCS has entered into agreements with national retailers that sell handsets and service to new subscribers in our markets. Sprint PCS pays these national retailers a new subscriber commission and provides handsets to them below cost. For new subscribers added in our markets by these national retailers, Sprint PCS passes the costs of commissions and handset subsidies to us.

We believe that our service area is important to the Sprint PCS network. To date, Sprint PCS has made considerable investments in the licenses covering our service area.

Our Service Area

Our Sprint PCS service area includes all or portions of 20 markets spanning over 57,600 square miles with a population of approximately 6.3 million people in upstate New York, New Hampshire (other than the Nashua market), Vermont and portions of Massachusetts and Pennsylvania. The number of residents in our service area does not represent the number of Sprint PCS subscribers that we expect to have in our service area.

PCS Services and Features

We offer Sprint PCS products and services in our service area. Our products and services are designed to mirror those of Sprint PCS and to be a part of the Sprint PCS nationwide network. Sprint PCS subscribers in our service area may use Sprint PCS services throughout our contiguous markets and seamlessly throughout the Sprint PCS network.

We support Sprint PCS’s newest technology, PCS Vision^™, throughout our service area. PCS Vision^™ allows subscribers that purchase handsets with the appropriate features the ability to access the Internet, receive and send email, download pictures and sounds, and take digital pictures either with a built-in or attachable camera.

We offer Code Division Multiple Access (CDMA) handsets that weigh 2.7 to 7.0 ounces and can offer up to 16 days of standby time and up to 3.8 hours of talk time. Many of these models are dual-mode handsets that allow subscribers to make and receive calls on both PCS and cellular frequency bands. All handsets are equipped with preprogrammed features and are sold under the Sprint PCS brand name.

We provide roaming service to both Sprint PCS subscribers that are traveling through our service area as well as certain non-Sprint PCS subscribers traveling through our service area. Sprint PCS and other affiliates provide a similar service to our subscribers traveling outside of our market area. Roaming allows a person to make a phone call outside the service are where they purchased the service.

PCS Marketing Strategy

We benefit from the recognizable Sprint PCS brand names and logos and from Sprint PCS’s technological developments. We enhance the national effort with local marketing managers and coordinators who develop strategies specifically tailored to our local markets. They assist the sales force in driving traffic to the stores through promotions, contests and community relations programs and assist the outside sales force in targeting business sales.

Pricing

We use the Sprint PCS pricing strategy to offer our subscribers a menu of service plans typically structured with monthly recurring charges, large local calling areas, bundles of minutes and options and features such as voicemail, enhanced caller identification, call waiting, three-way calling and wireless web. In order to meet the competitive needs of our specific local markets, we occasionally alter Sprint PCS’s pricing plans. In addition, we offer a pre-paid service called Chat Pak in certain markets where we believe that it will provide a competitive advantage.

Advertising

We capitalize on the Sprint PCS name and reputation to attract subscribers. We benefit from Sprint PCS’s national advertising campaign at no additional cost. Sprint PCS also runs numerous promotional campaigns that provide subscribers with benefits such as additional features at the same rate or free services. We direct our media and promotional efforts at the community level by advertising Sprint PCS’s products and services through radio, print, outdoor, billing inserts, direct mail and promotional displays in our retail stores.

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Sponsorships

Sprint PCS sponsors numerous national and regional events. These sponsorships provide Sprint PCS with brand name and product awareness. Our regional marketing teams sponsor local events, teams and projects to increase consumer awareness of the Sprint PCS brand in the local community and to provide occasions to develop positive community relationships in our markets.

Sales and Distribution

We target a broad range of consumer and business markets through a sales and distribution plan. We use traditional sales channels, like our retail stores, mass merchandisers and other national retail outlets, independent agents and an outside sales force. We also use lower-cost methods like direct marketing and a corporate website.

Retail stores

We have 16 retail outlets. Our retail outlets are located in principal retail districts in each market, designed in accordance with Sprint PCS specifications and branded as Sprint stores. We use our stores for the distribution and sale of our handsets and services. Sales representatives in these outlets receive in-depth training that allows them to explain our service in an informed manner. We believe that these representatives foster effective and enduring customer relationships.

Mass merchandisers and outlets

We target subscribers through our mass-market retail outlets through Sprint PCS negotiated distribution agreements with national and regional mass merchandisers and consumer electronic retailers, including Radio Shack, Wal-Mart, Best Buy and Office Depot and have a presence in 266 national retail outlet locations in our service area.

Independent agents

We have a contracted network of independent agents with 68 outlets that creates additional opportunities for local distribution. Most of these businesses are family-owned consumer electronics dealers and wireless telecommunication retailers.

Other Sprint PCS initiatives

We participate in Sprint PCS’s national accounts program, which targets Fortune 1000 companies. This allows us to take advantage of Sprint PCS’s inbound telemarketing sales program and Sprint PCS’s internet site that allows subscribers in our service area who purchase products and services over the Sprint PCS internet site become subscribers of our PCS network.

Resellers

Effective July 2002, we agreed to participate in a reseller program in our service area through Sprint PCS as part of the partnership between Sprint PCS and Virgin Mobile USA, LLC (“Virgin”). The agreement allows Virgin to sell prepaid wireless services and pay us for use of our network on a per minute basis. Virgin targets the 15- to 30-year-old consumer market to purchase pay-as-you-go wireless communications services while eliminating the responsibilities of monthly bills and credit requirements.

No single manufacturer has accounted for more than 10% of our sales in the current reporting period or in the past three years.

Suppliers and Equipment Vendors

We do not manufacture any of the handsets that we use in our operations. We purchase our handsets directly from Sprint PCS and our accessories from certain other third party vendors.

Competition

We face significant competition in our service area from a number of competitors. There are five other national mobile telephony operators that offer service in at least some portion of our service area – AT&T Wireless, Verizon, Cingular, Nextel and T-Mobile. In addition, there are many local and regional carriers that offer PCS and cellular services in our service area. According to the FCC’s Eighth Annual Commercial Mobile Services Competition (“CDMR”) Report, released July 14, 2003, “…270 million people, or 95% of the total population, have three or more different operators offering mobile telephone service in the counties in which they live.”

Wireless local number portability (“WLNP”) was introduced in a portion of our markets in November 2003. WNLP allows customers to retain existing telephone numbers when switching from one wireless carrier to another. The introduction to WLNP in all of our markets in May 2004 may result in higher customer turnover, lower revenues and increased operating costs. We are closely monitoring it but cannot state with any certainty the impact that it will have on our future operations.

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In order to attract new subscribers, we have offer discounts on handsets and service plans that include more minutes and/or more anytime time minutes and other enhancements such as complimentary periods of free data usage. Based upon increased competition, we anticipate that market prices for two-way wireless services will continue to decline in the future. We compete to attract and retain subscribers principally on the basis of services and features, the size and location of our service areas, network coverage and reliability, customer care and pricing. Our ability to compete successfully depends, in part, on our ability to anticipate and respond to various competitive factors affecting the industry, including new services that may be introduced, changes in consumer preferences, demographic trends, economic conditions and discount pricing strategies by competitors.

We believe that our ability to compete effectively with other PCS providers will depend on:

The main wireless technologies used in the United States are: Code Division Multiple Access (“CDMA”), Global System Mobile Communications (“GSM”) and Time Division Multiple Access (“TDMA”).

Sprint PCS has chosen CDMA technology, which we believe offers significant advantages in the marketplace.

CDMA offers superior call quality and clarity. CDMA also offers the highest capacity of the three standards. This means that more simultaneous calls can be handled on a CDMA network than on equivalent TDMA or GSM networks. CDMA also offers a high level of security, giving subscribers confidence that their calls remain private. CDMA offers many advanced features such as short text messaging, Internet access, call waiting, call forwarding and three way calling. Several providers in the United States, including Sprint PCS and Verizon use CDMA technology.

TDMA is generally less expensive to deploy if a carrier seeks to overlay an analog network, like a cellular carrier would be required to do. TDMA also offers increased call security and advanced features like those available on a CDMA network. Several providers in the United States, including AT&T and Cingular use TDMA but have announced intentions to overlay their existing TDMA networks with GSM technology.

GSM is the most widely adopted standard around the world. It originated in Europe, where it continues to be the dominant standard. It has been widely deployed for over ten years, which means that economies of scale for network and handset equipment have been achieved. This has lowered the cost of purchasing the equipment for a GSM system. GSM also offers increased call security and advanced features like those available on a CDMA network. T-Mobile uses GSM technology.

We do not currently face significant competition from resellers on our facilities and believe our relationship with Virgin compliments our other distribution channels. We expect to continue to be subject to the FCC rule that requires cellular and PCS licensees to permit resale of carrier service.

Network Operations

The Sprint PCS management agreement requires us to provide network coverage to 65% of the resident population in our service area. While we have completed a substantial portion of our initial network build out plan for our service area, due to liquidity issues, it does not appear that we will have sufficient financial resources to complete our build out. As noted below, included in our asset abandonment charge are cell sites that we are required to construct to meet the build out requirements under our Sprint PCS management agreement. Failure to complete the build out of our service area will place us in violation of our Sprint management agreement. As a result, Sprint PCS could declare us in default and take action up to and including termination of our Sprint management agreement.

Cell sites

Our preference is to selectively add cell sites through co-location, which is leasing available space on a tower owned by another company. When we co-locate, we generally have lower construction costs, and it is likely that any zoning difficulties have been resolved. As of December 31, 2003, we had 681 PCS cell sites, of which approximately 97% were co-locations and 3% owned with network coverage of approximately 4.7 million residents out of approximately 6.3 million total residents. The number of people in our service area does not represent the number of Sprint PCS subscribers that we expect to have in our service area.

Microwave relocation

Fixed microwave operators previously used the frequencies that are now allocated for PCS licenses. The FCC has established procedures for PCS licensees to relocate these existing microwave paths, generally at the PCS licensee’s expense. With Sprint PCS’s assistance, we have relocated all microwave paths for the PCS licenses that we own.

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Switching centers

We own or lease property for our three switching centers in Albany, New York and Londonderry, New Hampshire. Each switching center serves several purposes, including subscriber validation, call routing, managing call hand off and managing access to landlines and access to Sprint PCS national platforms.

Interconnection

We connect our digital PCS network to the landline telephone system through interconnection agreements with local exchange carriers. Through our agreements with Sprint PCS, we benefit from the interconnection agreements that Sprint PCS negotiates.

Network monitoring systems

We use Sprint PCS’s Network Operations Control to provide monitoring and maintenance of our entire network, including the constant monitoring for blocked or dropped calls, call clarity and signs of tampering, cloning or fraud, the recording of network traffic statistics and the overseeing of customer usage, data collected at switch facilities and billing.

Government Regulation

The FCC and other federal, state and local regulatory agencies regulate our PCS system.

Licensing of PCS systems

A broadband PCS system operates under a service area license granted by the FCC for a particular market. These licenses operate on one of six frequency blocks allocated for broadband PCS service. Narrowband PCS is for non-voice applications such as paging and data service and is separately licensed. The FCC awards all PCS licenses by auction.

All PCS licenses have a 10-year term and must be renewed at the end of this term. The FCC generally will renew a PCS license if the licensee provided substantial service during the past license term and substantially complied with applicable law. The FCC may revoke a license for serious violations of FCC rules. All PCS licensees must satisfy coverage requirements. Licensees that fail to meet the coverage requirements may lose the service area that is not covered, or the license.

For up to five years after a PCS license is granted, the licensee must share spectrum with existing licensees that operate fixed microwave systems within its license area. To operate our PCS systems efficiently and with adequate population coverage, we must relocate many of these existing licensees. The FCC has adopted a transition plan to relocate microwave operators and a cost-sharing plan for relocation that benefits more than one PCS licensee. These plans expire on April 4, 2005.

Other regulatory requirements

The Communications Act preempts state and local regulation of the entry of, or the rates charged by, any provider of private mobile radio service or of commercial mobile radio service (“CMRS”), which includes PCS and cellular service. The FCC does not regulate CMRS or private mobile radio service rates. However, CMRS providers are common carriers and are required under the Communications Act to offer their services to the public without unreasonable discrimination.

The FCC imposes additional regulatory requirements on all CMRS, operators, which include PCS and cellular systems as well as some specialized mobile radio systems. These requirements may change. Some of the current requirements include:

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Transfers and assignments of PCS licenses

The FCC must approve the assignment or transfer of control of a license for a PCS system. In addition, the FCC requires licensees who transfer control of a PCS license within the first three years of their license term to disclose the total consideration received for the transfer. FCC approval is not required for the sale of an interest that does not transfer control of a license. Any acquisition or sale of a PCS interest may also require the prior approval of the Federal Trade Commission, the Department of Justice and state or local regulatory authorities.

State and Local Regulation

State governments can regulate terms and conditions of wireless service. Several states have imposed, or have proposed legislation that will impose, various consumer protection regulations on the wireless industry. States also may impose their own universal service support fees on wireless carriers, similar to the requirements that have been established by the FCC. At the local level, wireless facilities typically are subject to zoning and land use regulation, although the Communications Act preempts both state and local governments from categorically prohibiting the construction of wireless facilities in any community or unreasonably discriminating against a carrier. Numerous state and local jurisdictions have considered imposing conditions on a driver’s use of wireless technology while operating a motor vehicle, and a few have actually done so.

Foreign ownership

The Communications Act of 1934 limits the non-U.S. ownership of licensees. If foreign ownership exceeds the permitted level, the FCC may revoke the PCS licenses or require an ownership restructuring.

Additional spectrum

From time to time, the FCC conducts auctions of additional spectrum. We have no way of knowing whether the new spectrum in our service area will be used to compete with our PCS systems.

Intellectual Property

The Sprint® and Sprint PCS® brand names and logos are registered service trademarks owned by Sprint. We have license agreements with Sprint that allow us to use, without payment and only in our service area, the Sprint design logo and diamond symbol and other Sprint service marks, like Vision^™. We can use some of Sprint’s licensed trademarks on some wireless telephone handsets. The license agreements have many restrictions on our use of their licensed marks. We are the only person entitled to market Sprint PCS products and services in our service area, except for the Sprint PCS national marketing programs.

Employees

As of December 31, 2003, we had approximately 187 employees. No union represents our employees. We believe that we have good relations with our employees.

Seasonality

Like the wireless communications industry in general, our subscribers increase in the fourth quarter due to the holiday season. A greater number of phones sold at holiday promotional prices increases our losses on merchandise sales. Our sales and marketing expenses increase also with holiday promotional activities. We generally have the most use and revenue per subscriber in the summer because of an increase in revenues from fees charged to non-IWO, non-Sprint PCS subscribers who use our network while traveling in our service area. We believe that the increased traffic in our service area comes from people traveling during summer vacation. We expect these trends to continue based on historical operating results.

ITEM 2. Properties

We own property that house our switching centers in Albany, New York. We lease property in a number of locations, primarily for administrative office space, our retail outlets, cell sites and a third switching center. We have leased approximately 38,000 square feet for a regional headquarters in Albany, New York. This lease expires on October 14, 2006. As of December 31, 2003, we had 681 PCS cell sites, of which approximately 97% were co-locations and 3% owned. We own property that houses switching equipment that supports our markets.

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ITEM 3. Legal Proceedings

We have been from time to time involved in litigation that we believe ordinarily accompanies the communications business. We do not believe that any of our pending or threatened litigation will have a material adverse effect on our business or financial situation.

On July 11, 2003, US Unwired and two of its subsidiaries, Louisiana Unwired, LLC and Texas Unwired (“US Unwired”), filed suit in the U.S. District Court for the Western District of Louisiana, against Sprint Corporation, Sprint Spectrum, L.P., Wireless, L.P. and Sprintcom, Inc. (collectively, “Sprint”). The suit alleges violations of the Racketeer Influenced and Corrupt Organizations Act, breach of fiduciary duty and fraud arising out of Sprint’s conduct in its dealings with the plaintiff companies. It seeks treble actual damages in unspecified amounts and appointment of a receiver over property and assets controlled by Sprint in Louisiana. On September 25, 2003, US Unwired filed an amended complaint to include contractual claims. IWO is not a plaintiff in the original or the amended suit. On October 20, 2003, Sprint submitted their Answer, Defenses, and Counterclaim of Defendants seeking dismissal of US Unwired’s First Amended Complaint and filing a counter-claim for approximately $13.3 million related primarily to contractual disputes as discussed above. IWO is not a defendant in this suit. On October 21, 2003, Sprint filed a Defendants’ Partial Motion for Judgment on the Proceedings seeking partial dismissal of claims filed in the First Amended Complaint. On October 21, 2003, Sprint filed Defendant’s Motion to Strike Plaintiffs’ Jury Demand from the First Amended Complaint. On February 3, 2004, the U.S. District Court denied in all respects Sprint’s request to dismiss U.S. Unwired’s lawsuit. US Unwired and Sprint have submitted to the District Court an agreed upon schedule to complete the discovery process by and anticipate a late-2004 trial by jury in the State of Louisiana.

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 and Related Stockholder Matters

Not applicable

Item 6. Selected Financial Data

The following selected financial data are derived from the consolidated financial statements of IWO Holdings, Inc. and subsidiaries. The data should be read in conjunction with the consolidated financial statements, related notes and other financial information included herein.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the consolidated financial statements and the related notes included elsewhere in this Report. The discussion contains forward-looking statements that involve risks and uncertainties. For a detailed discussion on this topic, refer to our opening comments at the beginning of this Form 10-K.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to Sprint PCS disputes, bad debts, activation fee revenues and related expense, determination of fair value of separate units for the application of EITF 00-21, revenue

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recognition for contract cancellation and late fees, inventory reserves, intangible assets and contingencies. We base our estimates on our historical experience, the historical experience of Sprint PCS and the historical experience of other Sprint PCS affiliates and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may vary from these estimates under different assumptions or conditions.

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

Reliance on Sprint PCS Processing

We rely on Sprint PCS for much of our financial reporting information including: revenues; commissions paid to national retailers; fees paid for customer care and billing; travel revenue and travel expense on the Sprint PCS and Sprint PCS affiliate network; and, the maintenance of accounts receivable, including cash collections and the write off of customer balances that are not collectible and the accuracy of our accounts receivable balance. Where uncertainty exists regarding revenues, we do not record these revenues until substantive information has been provided to ensure that such revenues have been earned. Based upon the timing of the information received from Sprint PCS, we make certain assumptions that the information is accurate and that it is consistent with historical trends. We also rely upon the evaluation of internal controls as performed by Sprint PCS’s external auditors that were performed in accordance with AICPA Statement on Auditing Standards (SAS) No. 70.

Bad Debt Expense

We maintain allowances for doubtful accounts for estimated losses resulting from the inability of subscribers to make payments. If the financial conditions of our subscribers deteriorate, resulting in the subscribers’ inability to make payments, additional allowances will be required.

We estimate our allowance by examining the components of our revenue. We establish a general reserve of all accounts receivable that are estimated to be uncollectible. In addition, we do not recognize 100% of our late fees or cancellation fees as revenue because of high uncertainty of the collectibility of these amounts. Reserves for these amounts are recorded to our allowance for doubtful accounts. Our evaluation of the adequacy of these amounts includes our own historical experience and discussions with Sprint PCS and other Sprint PCS affiliates.

Revenue Recognition

We recognize only a portion of contract cancellation fees billed to subscribers that disconnect service prior to fulfilling the contractual length of service, as there is significant uncertainty that all contract cancellation fees that are billed will be collected. We have very limited information at a detail level sufficient to perform our own evaluation and rely on discussions with Sprint PCS and other Sprint PCS affiliates to make our estimates. If the collections on contract cancellation fees are less than that recognized, additional allowances may be required.

We recognize only a portion of late fees billed to subscribers that fail to pay their bills within the required payment period, as there is no assurance that all late fees that are billed will be collected. We have very limited information at a detail level sufficient to perform our own evaluation and rely on discussions with Sprint PCS and other Sprint PCS affiliates to make our estimates. If the collections on late fees are less than that recognized, additional allowances may be required.

For sales channels other than our retail outlets, we defer revenues collected for activation fees over the estimated life of the subscriber relationship, which we believe to be up to 32 months, based upon our historical trends of average customer lives and discussions with Sprint PCS and other Sprint PCS affiliates. For these same sales channels, we also defer an activation expense in an amount equal to the activation fee revenue and amortize this expense in an amount equal to the activation fee revenue over the life of the subscriber relationship. If the estimated life of the subscriber relationship increases or decreases, the amounts of deferred revenue and deferred expense will be adjusted over the revised estimated life of the subscriber relationship. For our retail sales channels, the sale of handsets and future service under contract are accounted for as separate units under EITF 00-21. As a result, the total consideration under these arrangements, including any related activation fees, is allocated between these separate units based upon their relative fair values. The determination of fair values for these separate units can vary depending upon market conditions.

Inventory Reserves

We review our inventory semi-annually and write down our inventory for estimated obsolescence or unmarketable inventory equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions. If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be necessary.

Accrued Commissions

We accrue commissions and other costs related to national retailers based upon their sales to new subscribers. The national retailers receive both a commission and, because the handset is typically sold below cost, a reimbursement for the difference between the sales price and the

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cost. We base our accruals on information provided by Sprint PCS on subscriber additions and recognize that there are typically timing differences between the point of subscriber activation and the time that we are invoiced for commissions by Sprint PCS. We periodically and annually evaluate the adequacy of our accruals through analysis of historical information and discussions with Sprint PCS. Depending on the level of sales and other factors, our estimates of the amounts accrued for commissions and other costs owed to such retailers may require modification of our previous estimates.

Goodwill and Intangible Assets Impairment Analysis

We perform impairment tests of goodwill and long lived assets, including intangible assets, as required by Statements of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets(SFAS 142) and No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS 144). The impairment analysis requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell the asset. SFAS No. 142 requires annual tests for impairment of goodwill and intangible assets that have indefinite useful lives and interim tests when an event has occurred that more likely than not has reduced the fair value of such assets.

We determined that US Unwired and IWO are to be considered separate reporting units under SFAS No. 142, as each constitutes a separate business for which discrete financial information is available and management regularly reviews the operating results of each of these businesses. This determination is further supported as each has separate senior bank credit facilities and separate senior subordinated discount notes (US Unwired) or senior notes (IWO). Under the terms of these debt instruments, funds available under the US Unwired debt can only be used by US Unwired, and funds available under the IWO debt can only be used by IWO. US Unwired is not obligated for the payment of IWO’s debt, and IWO is not obligated for the payment of US Unwired’s debt.

The abovementioned impairment analyses require numerous subjective assumptions and estimates to determine future undiscounted cash flows and fair values of each of the respective reporting units. Changes in these subjective assumptions and estimates that may be caused by future changes in the levels of revenues, liquidity, or other factors, may result in the recognition of impairment charges in the future. Based upon valuation analyses performed by an independent third-party as of October 31, 2003, there was no impairment of intangible assets as of October 31, 2003.

Overview

Through our wholly owned subsidiary, Independent Wireless One Corporation (“IWO”), we provide wireless personal communication services, commonly referred to as PCS, to an area containing 6.3 million residents in the northeastern United States. Our territory extends from suburban New York City (Orange and Sullivan Counties) north to the Canadian border and reaches from the eastern suburbs of Rochester to Syracuse, Ithaca, Binghamton and Elmira in central New York State (and extending into a small portion of north central Pennsylvania), east to include all of Vermont and New Hampshire (except Nashua, New Hampshire) and a portion of western Massachusetts. We are a network partner of Sprint PCS, the personal communications services group of Sprint Corporation. Sprint PCS, directly and through affiliates like us, provides wireless services in more than 4,000 cities and communities across the country. We have the exclusive right to provide digital PCS services under the Sprint^® and Sprint PCS^® brand names in our service area.

Recent Developments

Our operating results continue to be impacted by our highly leveraged capital structure, our relationship with Sprint PCS and a highly competitive marketplace.

Our Highly Leveraged Capital Structures

We have been unable to develop a business plan that provides sufficient cash to fund operations, debt service and capital requirements in 2004. We have been in discussions with our banking group to arrive at an acceptable restructuring to preserve liquidity but have been unable to arrive at an acceptable plan. We anticipate seeking protection under bankruptcy in 2004.

During 2003, we have failed to make $9.5 million in interest payments on our senior bank credit facility and were not in compliance with the restrictive covenants under our senior bank credit facility at December 31, 2003. As a result of our failure to make scheduled interest payments and the covenant violations, we were in default of our senior bank credit facility at December 31, 2003 and the holders of the senior bank credit facility have denied us access to the remaining $25.2 million of availability. As a result, we have classified all outstanding indebtedness of both the senior bank credit facility and the senior notes as a current liability.

As of December 31, 2003, we had $32.3 million in cash and cash equivalents and $19.4 million in restricted cash; and indebtedness that consisted of $213.2 million related to our senior bank credit facility and $138.5 million related to our senior notes for a total of $351.7 million. A portion of the original proceeds of the senior notes offering was set aside as restricted cash to make the first six scheduled semi-annual interest payments on the senior notes through January 2004. Principal repayment of the senior bank credit facility commences in March 2004.

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As a result of liquidity challenges, we have made the decision to reduce capital expenditures for network expansion and abandon the construction of cell sites that do not provide a sufficient level of enhanced coverage. We recorded an asset abandonment charge of $12.1 million during 2003 for these abandoned cell sites and related property leases. Included in this asset abandonment charge are cell sites that we are required to construct to meet the build out requirements under our Sprint PCS management agreement. Failure to complete the build out of our service area will place us in violation of our Sprint PCS management agreement. As a result, Sprint PCS could declare us in default and take action up to and including termination of our Sprint PCS management agreement. At December 31, 2003, construction in progress included $6.0 million primarily related to cell sites that we plan to complete, and we estimate that completion of these cell sites will require approximately $11.4 million in additional costs to complete construction and place these sites in operation.

Due to restrictions in the US Unwired debt instruments, US Unwired cannot provide any capital or other financial support to us. Further, our creditors, lenders and note holders cannot place any liens or encumbrances on the assets of US Unwired. Should the holders of our senior bank credit facility place us in default, US Unwired’s relationship with us may change and several alternatives exist ranging from working for the holders of our senior bank credit facility and the holders of our senior notes as a manager of our territory, possibly subject to the approval by Sprint PCS, to no involvement with us at all.

Considering our default of the loan agreements and our liquidity as discussed above, there is substantial doubt about our ability to continue as a going concern.

Our Relationship with Sprint PCS

We have been in discussions with Sprint PCS in an attempt to modify certain components of our Sprint PCS management agreement, including certain build-out requirements, and settle our outstanding disputes, but no definitive agreement has been reached at this time.

We are dependent on Sprint PCS for a significant portion of our financial information as a result of our contractual relationship with Sprint PCS as a service bureau provider for billing, cash collections and other back office functions such as customer service. We also purchase certain goods and services through Sprint PCS, such as handsets, network maintenance and access to national retail chain sales channels in our markets, where Sprint PCS has negotiated contracts and allows us to operate under those contractual arrangements.

We do not always agree with the validity of charges assessed by Sprint PCS and as of December 31, 2003, had disputed approximately $9.3 million of charges to us. Based upon the information provided to us by Sprint PCS to date, we believe the accompanying consolidated balance sheet adequately reflects our obligation that may be due to Sprint PCS for these charges. However, our cash flow would be adversely affected should these disputes not be settled in our favor.

On July 11, 2003, US Unwired, Louisiana Unwired and its wholly owned subsidiary, Texas Unwired (“US Unwired”), filed suit in the U.S. District Court for the Western District of Louisiana, against Sprint Corporation, Sprint Spectrum, L.P., Wireless, L.P. and Sprintcom, Inc. (collectively, “Sprint”). The suit alleges violations of the Racketeer Influenced and Corrupt Organizations Act, breach of fiduciary duty and fraud arising out of Sprint’s conduct in its dealings with the plaintiff companies. It seeks treble actual damages in unspecified amounts and appointment of a receiver over property and assets controlled by Sprint in Louisiana. We are not a plaintiff in the original or the amended suit. On September 25, 2003, US Unwired filed an amended complaint to include contractual claims. IWO is not a plaintiff in the original or the amended lawsuit. On October 20, 2003, Sprint submitted their Answer, Defenses, and Counterclaim of Defendants seeking dismissal of US Unwired’s First Amended Complaint and filing a counter-claim for approximately $13.3 million related primarily to contractual disputes as discussed above. We are not a defendant in this suit. On October 21, 2003, Sprint filed a Defendants’ Partial Motion for Judgment on the Proceedings seeking partial dismissal of claims filed in the First Amended Complaint. On October 21, 2003, Sprint filed Defendant’s Motion to Strike Plaintiffs’ Jury Demand from the First Amended Complaint. On February 3, 2004, the U.S. District Court denied in all respects Sprint’s request to dismiss U.S. Unwired’s lawsuit. US Unwired and Sprint have submitted to the District Court an agreed upon schedule to complete the discovery process by and anticipate a late-2004 trial by jury in the State of Louisiana. We do not believe that a negative outcome of the US Unwired lawsuit will have a material adverse effect on the Company.

Our agreement with Sprint PCS stipulates a reciprocal travel rate. Sprint PCS travel revenue is generated on a per minute basis when a Sprint PCS subscriber outside of our markets uses our service when traveling through our markets. Sprint PCS travel expense is generated on a per minute basis when our subscribers travel outside our market area and use the Sprint PCS network. Historically, our Sprint PCS travel revenue exceeds our Sprint PCS travel expense. Effective January 1, 2003, Sprint PCS reduced the reciprocal travel rate from $0.10 per minute in 2002 to $0.058. On December 4, 2003, Sprint PCS notified us that it intends to reduce the reciprocal travel rate to $0.041 per minute of use in 2004.

See “Our Affiliation with Sprint PCS” for additional information on our Sprint PCS Management Agreement.

Competitive Market Place

We face significant competition in our service area. In order to attract new subscribers, we offer steep discounts on handsets and generous service plans that include more minutes and/or more anytime minutes and other ancillary enhancements such as free long distance. Based upon increased competition, we anticipate that market prices for two-way wireless services will continue to decline in the future. Wireless local number portability (“WLNP”), which allows subscribers to change carriers and retain their existing phone numbers, was introduced into a portion of our marketplace in November 2003. Given the limited time that we have had to evaluate WLNP, we are uncertain of the future impact. For more detail, see the “Competition” discussion in Item 1 Business.

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Our Business Strategy

We have undertaken a number of key initiatives designed to preserve IWO liquidity. We have:

While we believe that these initiatives have had a positive impact on our operating results, we cannot state with certainty that these initiatives will result in our ability to sustain operations or liquidity in 2004, given the information as discussed above.

Cash Flows

Cash used in operating activities was $11.3 million in 2003. This primarily consisted of our net loss of $95.6 million offset by a $13.4 million increase in working capital and non-cash charges of $57.3 million in depreciation and amortization, $12.1 million charge related to the abandonment of assets and $1.5 million in debt discount accretion. Cash used in operations was $47.6 million for 2002 and $44.6 million for 2001.

Cash provided by investing activities was $8.6 million for 2003. This primarily consisted of $21.9 million in proceeds from restricted cash offset by $13.4 million in equipment purchases. Cash provided by investing activities was $11.0 million in 2002 and cash used by investing activities was $206.2 million in 2001.

Cash flow provided by financing activities was $0 million in 2003. Net cash provided by financing activities was $68.2 million in 2002 and $217.9 million in 2001.

Contractual Obligations

Our future contractual obligations related to long-term debt and non-cancelable operating leases at December 31, 2003 were as follows assuming acceleration of our obligations in 2004:

During 2003, we failed to make $9.5 million in interest payments on our senior bank credit facility and were not in compliance with the restrictive covenants under our senior bank credit facility at December 31, 2003. As a result of our failure to make scheduled interest payments and the covenant violations, we were in default of our senior bank credit facility at December 31, 2003 and the holders of the senior bank credit facility have denied us access to the remaining $25.2 million of availability. As a result, we have classified all outstanding indebtedness of both the senior bank credit facility and the senior notes as a current liability.

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PCS Performance Measurements and Metrics (Non-GAAP Terms)

The wireless telecommunications industry uses terms such as subscriber additions, average revenue per user, churn and cost per gross addition as performance measurements or metrics. None of these terms are measures of financial performance under accounting principles generally accepted in the United States (“GAAP”). When we use these terms, they may not be comparable to similar terms used by other wireless telecommunications companies.

Subscribers

We refer to our customers as “subscribers”. Gross additions refer to the total number of new subscribers added during the period. Net subscribers refer to the total number of new subscriber additions during the period reduced by any subscribers that have cancelled or terminated their service with us during this same period.

The number of gross additions decreased for 2003 as compared to 2002 primarily as a result of our marketing efforts to target customers of good credit quality and the re-institution and increase of deposits for certain credit challenged subscribers.

The number of net additions decreased for 2003 as compared to 2002 primarily as a result of a reduction in gross additions that was partially offset by an improvement in subscriber churn, as discussed below.

Churn

Churn is the monthly rate of customer turnover expressed as a percentage of our overall average customers for the reporting period. Customer turnover includes both customers that elected voluntarily to not continue using our service and customers that were involuntarily terminated from using our service because of non-payment. Churn is calculated by dividing the sum of (i) the number of customers that discontinue service; (ii) less those customers discontinuing their service within 30 days of their original activation date; (iii) adding back those customers that reactivate their service, by our overall average customers for the reporting period; and, (iv) dividing by the number of months in the period. Churn decreased for 2003 as compared to 2002 primarily as a result of a continuing improvement in the credit quality of our subscriber base.

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Subscriber and Roaming Revenue

Subscriber or service revenue consists primarily of a basic service plan (where the customer purchases a pre-allotted number of minutes for voice and/or data transmission); airtime (which consists of billings for minutes that either exceed or are not covered by the basic service plan); long distance; and charges associated with travel outside our service area.

Roaming revenue consists primarily of Sprint PCS travel revenue, foreign roaming and reseller revenue. Sprint PCS travel revenue is generated on a per minute basis when a Sprint PCS subscriber outside of our markets uses our service when traveling through our markets. Sprint PCS travel expense is generated on a per minute basis when our subscribers travel outside our market area and use the Sprint PCS network. Historically, our Sprint PCS travel revenue exceeds our Sprint PCS travel expense. Foreign roaming revenue is generated when a non-Sprint PCS customer uses our service when traveling through our markets. Reseller revenue is generated when Virgin subscribers use our network. Reseller revenue is generated from our agreement with Virgin and is classified as foreign roaming because they pay on a per minute basis for usage of our network.

Effective January 1, 2003, Sprint PCS reduced the reciprocal travel rate for IWO from $0.10 per minute in 2002 to $0.058 per minute in 2003. For 2003, the reduction in the travel rate has resulted in a decrease to our revenues of approximately $18.4 million, a reduction to our expenses of approximately $16.2 million and a reduction to our cash flow of approximately $3.2 million.

Average Revenue per User

Average revenue per user (“ARPU”) is the average monthly service revenue per subscriber and is calculated by dividing total subscriber revenue for the period by the average number of subscribers during the period. We present ARPU excluding and including roaming revenue. The decrease in ARPU excluding roaming for 2003 as compared to 2002 was primarily as a result of more competitive plans that offer more generous allotment of minutes partially offset by an increase in data revenues. The decrease in ARPU including roaming for 2003 as compared to 2002 was primarily as a result of the reduction in the reciprocal travel rate as discussed above.

Cost per Gross Addition

Cost per gross addition (“CPGA”) summarizes the average cost to acquire new customers during the reporting period. CPGA is computed by adding selling and marketing expenses and cost of equipment and reducing the amount by the revenue from handset and accessory sales. The net amount is divided by the number of total new subscribers added for the period. The increase in CPGA for 2003 as compared to 2002 was primarily as a result of increased advertising and other expenses to attract subscribers with better credit status offset by fewer subscriber additions.

Average Monthly Minutes of Use per Subscriber

We calculate average monthly minutes of use (“MOUs) per subscriber to provide us with an indication of the effectiveness of our basic service plans. We calculate average monthly MOUs per subscriber by dividing total subscriber minutes with and without roaming by the average number of our subscribers. Our average subscriber MOUs with and without roaming are increasing primarily as a result of more generous allotments of minutes in our basic service plans.

System Minutes of Use

System minutes of Use (“MOUs”) provide an indication of total network (“system”) usage. We track and evaluate system usage for our subscribers as well as other Sprint PCS, Sprint PCS affiliates and non-Sprint PCS subscribers using our system in order to assess network capacity. Our overall system minutes are increasing primarily as a result of increases in subscribers and increases in minutes allotted to subscriber plans.

Resident Population/ Service Area

Our service area comprises a population (“Licensed POPs”) of approximately 6.3 million residents. When we use the term “Covered POPs”, we refer to that portion of residents in our service area that have service available as a result of our network build out. The number of people in our service area does not represent the number of Sprint PCS subscribers that we expect to have in our service area. The increase in Covered POPs is the result of additional cell site towers (“towers”) that either we have constructed and own or where we have leased space on cell site towers owned by others.

Cumulative Capital Expenditures Per Covered POP

Cumulative Capital Expenditures Per Covered POP (“Cum CapEx Per Covered POP”) is calculated by dividing our capital expenditures since inception by our ending Covered POPs.

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Results of Operations

For discussion purposes, we have combined the nine-month period of April 1, 2002 to December 31, 2002 (post-acquisition period) and the three-month period of January 1, 2002 to March 31, 2002 (pre-acquisition period) for comparison to the years ended December 31, 2003 and December 31, 2001.

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2003 compared to 2002

Revenues

Subscriber revenues

Total subscriber revenues were $128.7 million for 2003 as compared to $113.1 million for 2002, representing an increase of $15.6 million and was primarily the result of an increase in subscribers.

Roaming revenues

Roaming revenues were $35.6 million 2003 as compared to $39.0 million for 2002, representing a decrease of $3.4 million and was primarily the result of an increase of $14.2 million related to a higher volume of Sprint PCS subscribers traveling through our service area and $1.2 million generated by Virgin usage offset by a decrease of $18.7 million related to our decrease in the reciprocal travel rate as discussed in Subscriber and Roaming Revenue above.

Merchandise sales

Merchandise sales were $7.0 million for 2003 as compared to $8.3 million for 2002, representing a decrease of $1.3 million and was primarily the result of fewer subscriber additions and higher discounts offered to new subscribers. The cost of handsets typically exceeds the amount received from our subscribers because we subsidize the price of handsets to remain competitive in the marketplace.

Operating Expenses

Cost of service

Cost of service was $69.5 million for 2003 as compared to $73.8 million for 2002, representing a decrease of $4.3 million, and was primarily the result of a $1.5 million decrease in wages, a $1.7 million decrease in circuit and interconnect expenses, a $1.8 million decrease in property taxes and a $3.4 million decrease in roaming expense offset by a $1.2 million increase in new cell site lease expenses and escalators of existing leases and a $1.8 million increase in other network related expenses. The overall decrease in roaming expense consisted of an increase of $12.5 million related to a higher volume of our subscribers traveling though other Sprint PCS offset by a decrease of $16.1 million related to our decrease in the reciprocal travel rate as discussed in Subscriber and Roaming Revenue above.

Merchandise cost of sales

Merchandise cost of sales was $13.4 million for 2003 as compared to $13.1 million for 2002, representing an increase of $0.3 million that was

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primarily the result of adoption of EITF 00-21 partially offset by a lower number of handset sales due to fewer subscriber additions. The cost of handsets typically exceeds the amount received from our subscribers because we subsidize the price of handsets to remain competitive in the marketplace.

General and administrative expenses

General and administrative expenses were $46.1 million for 2003 as compared to $58.1 million for 2002, representing a decrease of $12.0 million that was primarily the result of a $5.6 million decrease in bad debt expense, a $2.5 million decrease in payroll and other general and administrative functions as a result of the acquisition by US Unwired offset by a $.8 million increase in retail handset returns and an increase of $4.1 million in professional services related to debt restructuring as discussed in Liquidity above. 2002 also included $7.7 million of merger related expenses.

Sales and marketing expenses

Sales and marketing expenses were $31.6 million for 2003 as compared to $38.4 million for 2002, representing a decrease of $6.8 million that was primarily the result of a $2.4 million decrease in advertising expense, a $2.9 million decrease in employee commissions and independent agent commissions and handset subsidies and a $1.9 million decrease in payroll offset by an increase of $.4 million in other selling and marketing expenses.

Depreciation and amortization expense

Depreciation and amortization expense was $54.6 million for 2003 as compared to $50.0 million for 2002, representing an increase of $4.6 million and was primarily the result of a $.3 million increase in the amortization of intangible assets and a $4.3 million increase in depreciation expense. Property and equipment increased to $206.2 million at December 31, 2003 from $205.5 million at December 31, 2002. Intangibles assets were unchanged at $77.3 million at December 31, 2003 and December 31, 2002.

As discussed above, we recorded a $12.1 million write off of construction in progress and related lease expense due to abandoned cell site construction.

Impairment of Goodwill and Intangible Assets

In 2002, we recorded impairment charges totaling $402.5 million for the impairment of goodwill and an intangible asset that resulted from our acquisition by US Unwired. See our comparison of 2002 to 2001 below for a detailed discussion of this topic.

Other Income/(Expense)

Interest expense was $41.0 million for 2003 as compared to $36.1 million for 2002, representing an increase of $4.9 million. Our outstanding debt was $351.7 million at December 31, 2003 as compared to $350.2 million at December 31, 2002. The increase in interest expense results from all loans under the senior bank credit facility, effective with the date of the default as discussed above, bearing interest at a rate of 4.25-4.75 percent above the agent bank’s prime rate.

Interest income was $.8 million for 2003 as compared to $3.3 million for 2002, representing a decrease of $2.5 million. The decrease was primarily due to less cash and cash equivalents available for investment.

2002 compared to 2001

Revenues

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Subscriber revenues

Total subscriber revenues were $113.1 million for 2002 as compared to $70.9 million for 2001, representing an increase of $42.2 million and was primarily the result of an increase in subscribers.

Roaming revenues

Roaming revenues were $39.0 million 2002 as compared to $32.6 million for 2001, representing an increase of $6.4 million and was primarily the result of a higher volume of Sprint PCS subscribers traveling through our markets and the expansion of our network coverage that included the build out a significant portion of the markets in our service area. We provided service in most or all our 20 markets at December 31, 2003 as compared to 13 markets at December 31, 2002.

Merchandise sales

Merchandise sales were $8.3 million for 2002 as compared to $7.9 million for 2001, representing an increase of $.4 million and was primarily the result of steeper discounts on handsets sold to new subscribers due to more competition in our service area. Due to increased competition, our average handset selling price decreased approximately 25% in 2002 when compared to 2001. We face significant competition in our marketplace and typically sell handsets below cost to new subscribers in order to remain competitive in the market place through steep discounts and instant rebates.

Operating Expenses

Cost of service

Cost of service was $73.8 million for 2002 as compared to $64.2 million for 2001, representing an increase of $9.6 million and was primarily the result of an increase of $2.0 million in carrier roaming expenses, an increase of $2.9 million in circuit and usage costs and a $4.6 million increase cell site leases as a result of our larger subscriber base and market coverage.

Merchandise cost of sales

Merchandise cost of sales was $13.1 million for 2002 as compared to $15.3 million for 2001, representing a decrease of $2.2 million. A portion of our 2000 merchandise cost of sales related to a selective group of existing subscribers that returned handsets and were provided new models at no charge. In 2002, we identified these transactions, which amounted to $4.9 million, and recognized the cost in our 2002 General and Administrative expenses. We view these transactions as a customer retention expense due to our highly competitive market. We are unable to quantify this cost for 2001 as they were not identified when the transaction occurred. In order to compare 2002 to 2001, 2002 merchandise cost of sales should be increased by $4.9 million. The cost of handsets typically exceeds the amount received from our subscribers because we subsidize the price of handsets to remain competitive in the marketplace. This subsidy continues to increase to remain competitive.

General and administrative expenses

General and administrative expenses were $58.1 million for 2002 as compared to $35.7 million for 2001, representing an increase of $22.4 million and was primarily the result of a $9.3 million in increases for billing, customer service costs and Sprint PCS management fees associated with our subscriber base increase; $3.4 million in increased bad debts associated primarily with Sprint PCS rate plans that extended credit to credit challenged subscribers; $5.3 million in acquisition related expenses that we incurred prior to the acquisition and $4.9 million in expenses associated with handset upgrades provided to existing subscribers in subscriber retention initiatives.

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Sales and marketing expenses

Sales and marketing expenses were $38.4 million for 2002 as compared to $31.6 million for 2001, representing an increase of $6.8 million and was primarily the result of an increase in subscribers as well as launching markets within our service area. We provided service in most of our 20 markets at December 31, 2003 as compared to 13 markets at December 31, 2002.

Non-cash stock compensation

Non-cash compensation was $0 for 2002 as compared to $334,000 for 2001. The non-cash stock compensation consists of compensation expense related to the granting of certain stock options for our stock with exercise prices less than the market value of the our stock at the date of the grant. As a result of our acquisition by US Unwired in April 2002, all option grants were converted to US Unwired common stock.

Depreciation and amortization expense

Depreciation and amortization expense was $50.0 million for 2002 as compared to $19.1 million for 2001, representing an increase of $30.9 million and was primarily the result of the amortization of intangible assets. Net property and equipment increased to $189.9 million at December 31, 2002 from $176.2 million at December 31, 2001. As a result of the US Unwired acquisition and the application of push down accounting that resulted, we adjusted the basis of our assets, liabilities and shareholders’ equity to reflect fair value on the closing date of the acquisition and assigned $215.0 million in intangible assets to our Sprint PCS management agreement and $57.5 million in intangible assets to our subscriber base. We incurred approximately $28.7 million in intangible asset amortization expense in 2002 as compared to $0 in 2001.

Impairment of Goodwill and Intangible Assets

As a result of the purchase accounting related to our acquisition by US Unwired, we recorded the following intangible assets:

During the fourth quarter of 2002, we engaged a nationally recognized valuation firm to assist us in performing a fair value assessment of our goodwill and other long-lived assets. Based on the results of the impairment analysis, we recorded impairment charges totaling $402.5 million for the impairment of goodwill and an intangible asset that resulted from the acquisition of IWO.

We determined that IWO is to be considered a separate reporting unit under SFAS No. 142 as it constitutes a separate business for which discrete financial information is available and management regularly reviews the operating results of this businesses. This determination is further supported as IWO has a separate senior bank credit facility and separate senior notes (collectively referred to as “debt instruments”). Under the terms of these debt instruments, funds available under the IWO debt instruments can only be used to finance the operations of IWO, and the funds available under the US Unwired debt instruments can only be used to finance the operations of US Unwired.

The results of these impairment valuations indicated that both goodwill and a significant portion of IWO’s intangible assets were impaired. As a result, we recorded a goodwill impairment of approximately $214.2 million and an impairment of the IWO Sprint PCS Management Agreement intangible asset of $188.3 million during the quarter ended December 31, 2002. The IWO Sprint Management Agreement was originally assigned a value of $215.0 million and was being amortized using the straight-line method over 218 months. The valuation analysis determined that carrying amount of the IWO subscriber base was not impaired.

Other Income/(Expense)

Interest expense was $36.1 million for 2002 as compared to $29.6 million for 2001, representing an increase of $6.5 million. The increase in interest expense was primarily the result of an increase in debt. Our outstanding debt was $350.2 million at December 31, 2002 as compared to $297.4 million at December 31, 2002.

Interest income was $3.3 million for 2002 as compared to $7.6 million for 2001, representing a decrease of $4.3 million. The decrease was primarily the result of less cash and cash equivalents available for investment.

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Inflation

We believe that inflation has not impaired, and will not impair, our results of operations.

ITEM 7A. Quantitative and Qualitative Disclosure About Market Risk

Quantitative and Qualitative Disclosure about Market Risk

In the normal course of business, the Company’s operations are exposed to interest rate risk on its credit facility and any future financing requirements.

At December 31, 2003, our outstanding debt instruments consisted of $160 million in senior notes and a $213.2 million draw against the $240 million senior credit facility. Interest on the senior notes is fixed at 14% and is payable semi-annually on January 15 and July 15 of each year. At December 31, 2003, the market value of the IWO senior notes was approximately $25 million.

Borrowings under the IWO senior credit facility totaled $213.2 million at December 31, 2003. These borrowings bear interest at a variable rate. A 1% increase in interest rates in 2003 would have resulted in a $2.3 million increase in interest expense for the year ended December 31, 2003.

Item 8. Financial Statements and Supplementary Data

Our financial statements are listed under Item 15(a) of this annual report and are filed as part of this report on the pages indicated.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None

Item 9A. Controls and Procedures

The Company’s principal executive officer and principal financial officer evaluated the effectiveness of the Company’s disclosure controls and procedures as of December 31, 2003. Based on the evaluation, the Company’s principal executive officer and principal financial officer believe that:

Changes in Internal Controls

There have been no significant changes in the Company’s internal controls or in other factors that could significantly affect the Company’s internal controls subsequent to their evaluation, nor have there been any corrective actions with regard to significant deficiencies or material weaknesses.

PART III

Item 10. Directors and Executive Officers of the Registrant

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

Robert W. Piper has been our President since our acquisition by US Unwired on April 1, 2002. He was named chief executive officer of US Unwired in 2000. He has been the President and a member of the Board of Directors of US Unwired since 1995.

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Thomas G. Henning has been our Board of Director’s Secretary and our Secretary and General Counsel since our acquisition by US Unwired on April 1, 2002. He has been Secretary and General Counsel for US Unwired since 1994.

George J. Mack has been a Board Member since our acquisition by US Unwired on April 1, 2002. He has been employed by Cameron Communications LLC (“Cameron”), a local exchange carrier, since 1994 in various positions and has been President and General Manager of Cameron since 1998. Mr. Mack is a certified public accountant, chairman of the Louisiana Telecommunications Association and serves on the committee of the National Telephone Cooperative Association.

Jerry E. Vaughn has been our Chief Financial Officer since our acquisition by US Unwired on April 1, 2002. He has been the Chief Financial Officer of US Unwired since June 1999. He has over 20 years of diversified financial management experience and focused the last 11 of these years in the telecommunications industry. From 1994 until he joined US Unwired, Mr. Vaughn was President of NTFC Capital Corporation, a subsidiary of GE Capital. Before that, he was Treasurer of Northern Telecom Finance Corporation and Vice President of Mellon Bank Corporation.

Michael E. Cusack has been our Assistant Secretary since our acquisition by US Unwired on April 1, 2002. He joined IWO in 2000 as a Vice President of Legal and currently serves as Assistant General Counsel for US Unwired. Prior to joining IWO, Mr. Cusack was employed by the law firm of Cooper, Erving, Savage, Nolan & Heller, LLP for seven years where he was managing partner of the firm’s municipal and telecommunications practice groups.

Code of Ethics

US Unwired Inc. has adopted a code of ethics that applies to its President and Chief Executive Officer (principal executive officer) and its Chief Financial Officer (principal financial officer), who concurrently serve in these capacities at IWO. This code of ethics, which is entitled Standards of Business, is posted at US Unwired’s website, www.usunwired.com. We intend to satisfy the disclosure requirement under Item 10 of Form 8-K regarding an amendment to, or waiver from, a provision of this code of ethics by posting such information on our website, a the address, and location previously specified.

IWO’s full board of directors constitutes its Audit Committee. The Company has not appointed a financial expert to its Audit Committee. The Company is a wholly owned subsidiary of US Unwired and relies upon the US Unwired Audit Committee for guidance in financial and audit related matters.

Item 11. Executive Compensation

Our executives and board members receive no compensation from us.

Item 12. Security Ownership of Certain Beneficial Owners and Management

IWO Holdings, Inc. is a 100% owned subsidiary of US Unwired Inc.

Item 13. Certain Relationships and Related Transactions

On December 20, 1999, the Company and an affiliate of a stockholder entered into a five-year advisory agreement whereby the Company will receive consulting services from the affiliate for a $5,000,000 fee. The $5,000,000 fee, which was prepaid on December 20, 1999 was included in prepaid expenses and was being amortized over the term of the agreement. On March 31, 2002 in connection with the acquisition by US Unwired, Inc., the remaining balance of $2.8 million was written-off as an operating expense.

On December 12, 2001, the Company entered into a financial advisory agreement with certain investment banking firms (of which certain principals are stockholders of the Company) for a period of three months whereby such firms would advise the Company with respect to the sale, recapitalization, merger, consolidation or other business combination of the Company. The fee for the successful completion of these services is 1.125% of the Enterprise Value of the Company as defined in the agreement. The Company incurred expenses under this agreement for the year ended December 31, 2001 amounting to $250,000. There were no such charges for the year ended December 31, 2003, the nine months ended December 31, 2002 and the three months ended March 31, 2002.

In connection with the Company’s senior credit facility, two participating financial institutions are also shareholders of the Company. Interest expense incurred on their portion of debt outstanding for the year ended December 31, 2002, the nine months ended December 31, 2002, the three months ended March 31, 2002, for the year ended December 31, 2002 amounted to $1.7 million, $1.4 million, $0.4 million and $1.5 million, respectively.

The Company utilizes the services of a law firm in which a partner of the law firm is a stockholder of IWO. On December 20, 1999, the Company entered into a three-year professional services agreement with its outside General Counsel/stockholder, whereby the General Counsel/stockholder will provide legal services annually up to $400,000 and participate in the Company’s stock option program. On September 17, 2000 the Company terminated the professional services agreement and replaced it with a one-year consulting agreement that provides for monthly payments of $10,000 and a bonus up to $250,000. Legal fees incurred under the professional services agreement/consulting agreement for three months ended March 31, 2002 and the year ended December 31, 2001 were approximately $0.2 million and $0.9 million, respectively. There were no such charges for the year ended December 31, 2003 and the nine months ended December 31, 2002.

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Item 14. Principal Accounting Fees and Services

The following is a summary of the fees billed to IWO Holdings, Inc. (“IWO”) by Ernst & Young for professional services rendered.

Fees for audit services include fees associated with the annual audit and the reviews of the Company’s quarterly reports on Form 10-Q, including the required annual audit and reviews of quarterly reports of Form 10-Q for IWO, and services that are normally provided by the independent auditor in connection with statutory and regulatory filings or engagements. Audit-related fees principally include due diligence in connection with acquisitions, restructuring plans, accounting consultations, and employee benefit plan audits. Tax fees include tax compliance, tax advice and tax planning, including property tax compliance services.

Policy on Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors

All audit and permissible non-audit services provided by the independent auditors are pre-approved by US Unwired’s Audit Committee. These services may include audit services, audit-related services, tax services and other services. Pre-approval is generally provided for up to one year and any pre-approval is detailed as to the particular service or category of services and is generally subject to a specific budget. The independent auditors and management are required to periodically report to the Audit Committee regarding the extent of services provided by the independent auditors in accordance with this pre-approval, and the fees for the services performed to date. The Audit Committee may also pre-approve particular services on a case-by-case basis.

PART IV

Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

a. Financial Statements

Listed in the Index to Consolidated Financial Statements provided in response to Item 8 hereof (see page F-1 for Index).

b. Financial Statement schedule

Listed in the Index to Financial Statements provide in response to item 8 hereof (see page F-1 for Index).

All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and therefore have been omitted.

c. Reports on Form 8-K

None

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d. Exhibits

The following exhibits are filed herewith or are incorporated by reference to exhibits previously filed with the Securities and Exchange Commission:

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