**Exhibit99.1**

 

***Orange County - Poughkeepsie Limited Partnership***

* *

***Report of Independent Registered Public Accounting Firm***

* *

* *

***Financial Statements***

*YearsEnded December 31, 2005, 2004 and 2003*

 

----

 

**ORANGECOUNTY**-

**POUGHKEEPSIELIMITED PARTNERSHIP**

 

**TABLE OF CONTENTS**

 
| ** **                                              | **Page**                                                     |
|---------------------------------------------------------|--------------------------------------------------------------|
| REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | 1                                                            |
|                                                    |                                                         |
|                                                    | Balance Sheets                                               | 2 |
| * *                                                | *December 31, 2005 and 2004*                            |   |
|                                                    |                                                         |   |
|                                                    | Statements of Operations                                     | 3 |
| * *                                                | *For the years ended December 31, 2005,  2004 and 2003* |   |
|                                                    |                                                         |   |
|                                                    | Statements of Changes in Partners’ Capital              | 4 |
| * *                                                | *For the years ended December 31, 2005,  2004 and 2003* |   |
|                                                    |                                                         |   |
|                                                    | Statements of Cash Flows                                     | 5 |
| * *                                                | *For the years ended December 31, 2005,  2004 and 2003* |   |
|                                                    |                                                         |   |
|                                                    | Notes to Financial Statements                                | 6-13 |

 

----

 

**REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

 

To the Partners of Orange County-PoughkeepsieLimited Partnership:

 

We have audited the accompanying consolidatedbalance sheets of Orange County-Poughkeepsie Limited Partnership (the“Partnership”), a majority owned partnership of Cellco Partnership d/b/a VerizonWireless, as of December 31, 2005 and 2004, and the related consolidatedstatements of operations, changes in partners’ capital, and cash flows for eachof the three years in the period ended December 31, 2005.  These financialstatements are the responsibility of the Partnership’s management.  Ourresponsibility is to express an opinion on these financial statements based onour audits.

 

We conducted our audits in accordance withthe standards of the Public Company Accounting Oversight Board (UnitedStates).  Those standards require that we plan and perform the audit toobtain reasonable assurance about whether the financial statements are free ofmaterial misstatement.  The Partnership is not required to have, nor werewe engaged to perform, an audit of its internal control over financialreporting. Our audits included consideration of internal control over financialreporting as a basis for designing audit procedures that are appropriate in thecircumstances, but not for the purpose of expressing an opinion on theeffectiveness of the Partnership’s internal control over financial reporting.Accordingly, we express no such opinion. An audit also includes examining, on atest basis, evidence supporting the amounts and disclosures in the financial statements,assessing the accounting principles used and significant estimates made bymanagement, as well as evaluating the overall financial statementpresentation.  We believe that our audits provide a reasonable basis forour opinion.

 

In our opinion, such consolidated financialstatements present fairly, in all material respects, the financial position ofthe Partnership as of December 31, 2005 and 2004, and the results of itsoperations and its cash flows for each of the three years in the period ended December31, 2005, in conformity with accounting principles generally accepted in theUnited States of America.

 

As discussed in Notes 2 and 4 to thefinancial statements, approximately 98% of the Partnership’s revenue in each ofthe three years in the period ended December 31, 2005 is affiliate revenue.

 

/s/ Deloitte & Touche LLP

New York, New YorkMarch13, 2006

 

2

----

 

**ORANGECOUNTY - POUGHKEEPSIE LIMITED PARTNERSHIP**

 

**BALANCESHEETS**

**DECEMBER 31,2005 AND 2004**

**(Dollars in Thousands)**

 
| ** **                                          | ** ** | **2005**   | ** ** | **2004**   | ** ** |
|-----------------------------------------------------|------------|------------|------------|------------|------------|
|                                                |       |       |       |       |       |
| **ASSETS**                                          |       |       |       |       |       |
| ** **                                          |       |       |       |       |       |
| CURRENT ASSETS:                                     |       |       |       |       |       |
| Accounts receivable, net of allowance of $0  and $0 |       | $          | 254        |       | $          | 244 |   |
| Unbilled affiliate revenue                          |       | 1,599      |       | 1,249      |       |
| Due from general partner                            |       | 7,802      |       | —     |       |
| Prepaid expenses and other current assets           |       | 157        |       | 52         |       |
|                                                |       |       |       |       |       |
| Total current assets                                |       | 9,812      |       | 1,545      |       |
|                                                |       |       |       |       |       |
| PROPERTY, PLANT AND EQUIPMENT - Net                 |       | 37,516     |       | 34,525     |       |
|                                                |       |       |       |       |       |
| TOTAL ASSETS                                        |       | $          | 47,328     |       | $          | 36,070 |   |
|                                                |       |       |       |       |       |
| **LIABILITIES  AND PARTNERS’ CAPITAL**         | ** ** | ** ** | ** ** | ** ** | ** ** |
|                                                |       |       |       |       |       |
| CURRENT LIABILITIES:                                |       |       |       |       |       |
| Accounts payable and accrued liabilities            |       | $          | 171        |       | $          | 436 |   |
| Advance billings                                    |       | 261        |       | 144        |       |
| Due to general partner                              |       | —     |       | 3,102      |       |
|                                                |       |       |       |       |       |
| Total current liabilities                           |       | 432        |       | 3,682      |       |
|                                                |       |       |       |       |       |
| COMMITMENTS AND CONTINGENCIES (NOTES 5 and  7)      |       |       |       |       |       |
|                                                |       |       |       |       |       |
| PARTNERS’ CAPITAL                              |       | 46,896     |       | 32,388     |       |
|                                                |       |       |       |       |       |
| TOTAL LIABILITIES AND PARTNERS’ CAPITAL        |       | $          | 47,328     |       | $          | 36,070 |   |

 

See notes to financial statements.

 

3

----

 

**ORANGECOUNTY - POUGHKEEPSIE LIMITED PARTNERSHIP**

 

**STATEMENTSOF OPERATIONS**

**YEARS ENDEDDECEMBER 31, 2005, 2004 AND 2003**

**(Dollars inThousands)**

 
| ** **                                                                                          | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
|-----------------------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
|                                                                                                |       |     |       |     |       |     |       |
| OPERATING REVENUE (NOTES 2 and 4):                                                                  |       |     |       |     |       |     |       |
| Service revenues                                                                                    |       | $        | 180,508    |     | $          | 163,367  |       | $ | 144,643 |   |
|                                                                                                |       |     |       |     |       |     |       |
| OPERATING COSTS AND EXPENSES (NOTE 4):                                                              |       |     |       |     |       |     |       |
| Cost of service (excluding depreciation and  amortization related to network assets included below) |       | 25,292   |       | 16,854   |       | 17,248   |       |
| General and administrative                                                                          |       | 2,142    |       | 2,242    |       | 2,123    |       |
| Depreciation and amortization                                                                       |       | 6,347    |       | 5,521    |       | 5,179    |       |
| Net loss (gain) on sale of property, plant  and equipment                                           |       | 1        |       | 60       |       | (3       | )          |
|                                                                                                |       |     |       |     |       |     |       |
| Total operating costs and expenses                                                                  |       | 33,782   |       | 24,677   |       | 24,547   |       |
|                                                                                                |       |     |       |     |       |     |       |
| OPERATING INCOME                                                                                    |       | 146,726  |       | 138,690  |       | 120,096  |       |
|                                                                                                |       |     |       |     |       |     |       |
| INTEREST AND OTHER INCOME - Net                                                                     |       | 782      |       | 980      |       | 1,472    |       |
|                                                                                                |       |     |       |     |       |     |       |
| NET INCOME                                                                                          |       | $        | 147,508    |     | $          | 139,670  |       | $ | 121,568 |   |
|                                                                                                |       |     |       |     |       |     |       |
| Allocation of Net Income:                                                                           |       |     |       |     |       |     |       |
| Limited partners                                                                                    |       | $        | 22,126     |     | $          | 20,950   |       | $ | 18,236 |   |
| General partners                                                                                    |       | 125,382  |       | 118,720  |       | 103,332  |       |

 

See notes to financial statements.

 

4

----

 

**ORANGE COUNTY - POUGHKEEPSIE LIMITED PARTNERSHIP**

 

**STATEMENTS OF CHANGES IN PARTNERS’ CAPITAL**

**YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003**

**(Dollars in Thousands)**

 
| ** **                      |       | **General Partner** |       | **Limited Partners** |       |          |   |
|---------------------------------|------------|--------------------------|------------|---------------------------|------------|---------------|--------|
| ** **                      |       |                     |       |                      |       | **Warwick**   |   |   |   |
| ** **                      | ** ** | **Verizon**              | ** ** | **Taconic**               | ** ** | **Valley**    |   | **Total** |   |
| ** **                      | ** ** | **Wireless**             | ** ** | **Telephone**             | ** ** | **Telephone** |   | **Partners’** |   |
| ** **                      | ** ** | **of the East LP**       | ** ** | **Corporation**           | ** ** | **Company**   |   | **Capital** |   |
|                            |       |                     |       |                      |       |          |   |   |   |
| BALANCE, JANUARY 1, 2003   |       | $                        | 53,678     |                      | $          | 4,736         |   | $ | 4,736 |   | $ | 63,150 |   |
|                            |       |                     |       |                      |       |          |   |   |   |
| Net income                      |       | 103,332                  |       | 9,118                     |       | 9,118         |   | 121,568 |   |
|                            |       |                     |       |                      |       |          |   |   |   |
| Distribution to partners        |       | (114,750                 | )          | (10,125                   | )          | (10,125       | )      | (135,000 | ) |
|                            |       |                     |       |                      |       |          |   |   |   |
| BALANCE, DECEMBER 31, 2003 |       | 42,260                   |       | 3,729                     |       | 3,729         |   | 49,718 |   |
|                            |       |                     |       |                      |       |          |   |   |   |
| Net income                      |       | 118,720                  |       | 10,475                    |       | 10,475        |   | 139,670 |   |
|                            |       |                     |       |                      |       |          |   |   |   |
| Distribution to partners        |       | (133,450                 | )          | (11,775                   | )          | (11,775       | )      | (157,000 | ) |
|                            |       |                     |       |                      |       |          |   |   |   |
| BALANCE, DECEMBER 31, 2004 |       | 27,530                   |       | 2,429                     |       | 2,429         |   | 32,388 |   |
|                            |       |                     |       |                      |       |          |   |   |   |
| Net income                      |       | 125,382                  |       | 11,063                    |       | 11,063        |   | 147,508 |   |
|                            |       |                     |       |                      |       |          |   |   |   |
| Distribution to partners        |       | (113,050                 | )          | (9,975                    | )          | (9,975        | )      | (133,000 | ) |
|                            |       |                     |       |                      |       |          |   |   |   |
| BALANCE, DECEMBER 31, 2005 |       | $                        | 39,862     |                      | $          | 3,517         |   | $ | 3,517 |   | $ | 46,896 |   |

 

Seenotes to financial statements.

 

5

----

 

**ORANGE COUNTY - POUGHKEEPSIELIMITED PARTNERSHIP**

 

**STATEMENTSOF CASH FLOWS**

**YEARS ENDEDDECEMBER 31, 2005, 2004 AND 2003**

**(Dollars in Thousands)**

 
| ** **                                                                         | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
|------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
|                                                                               |       |     |       |     |       |     |       |
| CASH FLOWS FROM OPERATING ACTIVITIES:                                              |       |     |       |     |       |     |       |
| Net income                                                                         |       | $        | 147,508    |     | $          | 139,670  |       | $ | 121,568 |   |
| Adjustments to reconcile net income to net  cash provided by operating activities: |       |     |       |     |       |     |       |
| Provision for losses on accounts receivable                                        |       | —   |       | —   |       | 30       |       |
| Depreciation and amortization                                                      |       | 6,347    |       | 5,521    |       | 5,179    |       |
| Net loss / (gain) on sale of property,  plant and equipment                        |       | 1        |       | 60       |       | (3       | )          |
| Changes in certain assets and liabilities:                                         |       |     |       |     |       |     |       |
| Accounts receivable                                                                |       | (10      | )          | (171     | )          | 14       |       |
| Unbilled revenue                                                                   |       | (350     | )          | (383     | )          | 259      |       |
| Prepaid expenses and other current assets                                          |       | (105     | )          | (3       | )          | (13      | )          |
| Accounts payable and accrued liabilities                                           |       | (5       | )          | 88       |       | (887     | )          |
| Advance billings and other current  liabilities                                    |       | 117      |       | (166     | )          | 63       |       |
|                                                                               |       |     |       |     |       |     |       |
| Net cash provided by operating activities                                          |       | 153,503  |       | 144,616  |       | 126,210  |       |
|                                                                               |       |     |       |     |       |     |       |
| CASH FLOWS FROM INVESTING ACTIVITIES:                                              |       |     |       |     |       |     |       |
| Capital expenditures, including purchases  from affiliates, net                    |       | (9,599   | )          | (10,484  | )          | (5,325   | )          |
| Change in due from General Partner                                                 |       | (7,802   | )          | 19,766   |       | 14,115   |       |
|                                                                               |       |     |       |     |       |     |       |
| Net cash used in / (provided by) investing  activities                             |       | (17,401  | )          | 9,282    |       | 8,790    |       |
|                                                                               |       |     |       |     |       |     |       |
| CASH FLOWS FROM FINANCING ACTIVITIES:                                              |       |     |       |     |       |     |       |
| Change in due to General Partner                                                   |       | (3,102   | )          | 3,102    |       | —   |       |
| Distribution to partners                                                           |       | (133,000 | )          | (157,000 | )          | (135,000 | )          |
|                                                                               |       |     |       |     |       |     |       |
| Net cash used in financing activities                                              |       | (136,102 | )          | (153,898 | )          | (135,000 | )          |
|                                                                               |       |     |       |     |       |     |       |
| INCREASE IN CASH                                                                   |       | —   |       | —   |       | —   |       |
|                                                                               |       |     |       |     |       |     |       |
| CASH, BEGINNING OF YEAR                                                            |       | —   |       | —   |       | —   |       |
|                                                                               |       |     |       |     |       |     |       |
| CASH, END OF YEAR                                                                  |       | $        | —     |     | $          | —   |       | $ | — |   |

 

See notes to financial statements.

 

6

----

 

**ORANGECOUNTY - POUGHKEEPSIE LIMITED PARTNERSHIP**

 

**NOTES TO FINANCIAL STATEMENTS**

**YEARS ENDED DECEMBER 31, 2005, 2004, AND 2003**

**(Dollars in Thousands)**

 

**1.**              ORGANIZATIONAND MANAGEMENT

 

***OrangeCounty - Poughkeepsie Limited Partnership***- Orange County - Poughkeepsie Limited****Partnership(the “Partnership”) was formed in 1987. The principal activity of thePartnership is providing wholesale cellular service to resellers who operateprincipally in the Orange County and Poughkeepsie, New York metropolitanservice areas.

 

The partners and their respective ownershippercentages as of December 31, 2005, 2004 and 2003 are as follows:

 
| Managing and general partner:                           | ** ** | ** ** | ** ** |
|---------------------------------------------------------|------------|------------|------------|
| ** **                                              | ** ** | ** ** | ** ** |
| Verizon Wireless of the East LP*                        |       | 85.0       | %          |
| ** **                                              | ** ** | ** ** | ** ** |
| Limited partners:                                       |       |       |       |
|                                                    |       |       |       |
| Taconic Telephone Corporation (“Taconic”)     |       | 7.5        | %          |
| Warwick Valley Telephone Company  (“Warwick”) |       | 7.5        | %          |

 

----

*  Verizon Wireless of the East LP(the “General Partner”) is a partnership between Verizon Wireless of GeorgiaLLC and Verizon Wireless Acquisition South LLC, which hold a controllinginterest, and Price Communications which has a preferred interest. VerizonWireless of the East LP is a partnership which is consolidated by CellcoPartnership (d/b/a Verizon Wireless) (“Cellco”).

 

**2.**              SUMMARYOF SIGNIFICANT ACCOUNTING POLICIES

 

***Useof Estimates*** - Thepreparation of financial statements in conformity with accounting principlesgenerally accepted in the United States of America requires management to makeestimates and assumptions that affect the reported amounts of assets andliabilities and the disclosure of contingent assets and liabilities at the dateof the financial statements and the reported amounts of revenues and expensesduring the reporting period. Actual results could differ from those estimates. Estimatesare used for, but not limited to, the accounting for: allocations, allowancefor uncollectible accounts receivable, unbilled revenue, fair value offinancial instruments, depreciation and amortization, useful lives andimpairment of assets, accrued expenses, taxes, and contingencies. Estimates andassumptions are periodically reviewed and the effects of any material revisionsare reflected in the financial statements in the period that they aredetermined to be necessary.

 

***RevenueRecognition*** - ThePartnership earns revenue by providing access to the network (access revenue)and for usage of the network (airtime/usage revenue), which includes roamingand long distance revenue. In general, access revenue is billed one month inadvance and is recognized when earned; the unearned portion is classified inadvance billings. Airtime/usage revenue, roaming revenue and long distancerevenue are recognized when service is rendered and included in unbilledrevenue until billed. The roaming rates charged by the Partnership toCellco do not necessarily reflect current market rates.

 

7

----

 

The Partnership will continue to re-evaluatethe rates on a periodic basis (see Note 4).The Partnership’s revenue recognition policies are in accordance with theSecurities and Exchange Commission’s (“SEC”) Staff Accounting Bulletin (“SAB”) No. 101,*Revenue Recognition in Financial Statements*and Staff Accounting Bulletin (“SAB”) No. 104, *Revenue Recognition.*

 

Approximately98% of the Partnership’s 2005, 2004 and 2003 revenue is affiliate revenue dueto the fact that Cellco is the Partnership’s primary reseller. The wholesalerates charged to Cellco do not necessarily reflect current market rates. ThePartnership continues to re-evaluate the rates and expects these rates to bereduced in the future consistent with market trends and the terms of thelimited partnership agreement (See Note 4).

 

Cellular servicerevenues resulting from a cellsite agreement with Cellco are recognized basedupon an allocation of airtime minutes (See Note 4).

 

***OperatingCosts and Expenses*** - Operating costs and expensesinclude costs and expenses incurred directly by the Partnership, as well as anallocation of certain administrative and operating costs incurred by theGeneral Partner or its affiliates on behalf of the Partnership. Servicesperformed on behalf of the Partnership are provided by employees of Cellco. Theseemployees are not employees of the Partnership and therefore, operatingexpenses include direct and allocated charges of salary and employee benefitcosts for the services provided to the Partnership. The Partnership believessuch allocations, principally based on the Partnership’s percentage of totalcustomers, customer gross additions, or minutes-of-use, are reasonable.

 

***Property,Plant and Equipment*** - Property, plant andequipment primarily represents costs incurred to construct and expand capacityand network coverage on Mobile Telephone Switching Offices (“MTSOs”) and cellsites. The cost of property, plant and equipment is depreciated over itsestimated useful life using the straight-line method of accounting. Leaseholdimprovements are amortized over the shorter of their estimated useful lives orthe term of the related lease. Major improvements to existing plant andequipment are capitalized. Routine maintenance and repairs that do not extendthe life of the plant and equipment are charged to expense as incurred.

 

Upon the sale orretirement of property, plant and equipment, the cost and related accumulateddepreciation or amortization is eliminated from the accounts and any relatedgain or loss is reflected in the Statements of Operations.

 

Networkengineering costs incurred during the construction phase of the Partnership’snetwork and real estate properties under development are capitalized as part ofproperty, plant and equipment and recorded as construction in progress untilthe projects are completed and placed into service.

 

***FCCLicenses*** - The Federal Communications Commission (“FCC”)issues licenses that authorize cellular carriers to provide service in specificcellular geographic service areas. The FCC grants licenses for terms of up toten years. In 1993 the FCC adopted specific standards to apply to cellularrenewals, concluding it will reward a license renewal to a cellular licenseethat meets certain standards of past performance. Historically, the FCC hasgranted license renewals routinely. All wireless licenses issued by the FCCthat authorize the Partnership to provide cellular services are recorded on thebooks of Cellco. The current term of the Partnership’s FCC licenses expire in January 2008.Cellco believes it will be able to meet all requirements necessary to securerenewal of the Partnership’s wireless licenses.

 

***Valuationof Assets*** – Long-lived assets, including property,plant and equipment, are reviewed for impairment whenever events or changes incircumstances indicate that the carrying amount of the asset may not berecoverable. The carrying amount of a long-lived asset is not recoverable if itexceeds the sum of the undiscounted cash flows expected to result from the useand eventual disposition of the asset.

 

8

----

 

The impairment loss, if determined to benecessary, would be measured as the amount by which the carrying amount of theasset exceeds the fair value of the asset.

 

As discussed above, the FCC license underwhich the Partnership operates is recorded on the books of Cellco. Cellco doesnot charge the Partnership for the use of any FCC license recorded on itsbooks. However, Cellco believes that under the Partnership agreement it has theright to allocate, based on a reasonable methodology, any impairment lossrecognized by Cellco for all licenses included in Cellco’s national footprint. Accordingly,the FCC licenses, including the license under which the Partnership operates,recorded on the books of Cellco are evaluated for impairment by Cellco, underthe guidance set forth in Statement of Financial Accounting Standards (“SFAS”) No. 142,“Goodwill and Other Intangible Assets.”

 

The FCC licenses are treated as an indefinitelife intangible asset on the books of Cellco under the provisions of SFAS No. 142and are not amortized, but rather are tested for impairment annually or betweenannual dates, if events or circumstances warrant. All of the licenses in Cellco’snationwide footprint are tested in the aggregate for impairment under SFAS No. 142.When testing the carrying value of the wireless licenses in 2004 and 2003 forimpairment, Cellco determined the fair value of the aggregated wirelesslicenses by subtracting from enterprise discounted cash flows (net of debt) thefair value of all of the other net tangible and intangible assets of Cellco,including previously unrecognized intangible assets. This approach is generallyreferred to as the residual method. In addition, the fair value of theaggregated wireless licenses was then subjected to a reasonableness analysisusing public information of comparable wireless carriers. If the fair value ofthe aggregated wireless licenses as determined above was less than theaggregated carrying amount of the licenses, an impairment would have beenrecognized by Cellco and then may have been allocated to the Partnership. During2004 and 2003, tests for impairment were performed with no impairmentrecognized.

 

On September 29, 2004, the SEC issued aStaff Announcement No. D-108, “Use of the Residual Method to ValueAcquired Assets other than Goodwill.” This Staff Announcement requires SECregistrants to adopt a direct value method of assigning value to intangibleassets, including wireless licenses, acquired in a business combination underSFAS No. 141, “Business Combinations,” effective for all businesscombinations completed after September 29, 2004. Further, all intangibleassets, including wireless licenses, valued under the residual method prior tothis adoption are required to be tested for impairment using a direct valuemethod no later than the beginning of 2005. Any impairment of intangible assetsrecognized upon application of a direct value method by entities previouslyapplying the residual method should be reported as a cumulative effect of achange in accounting principle. Under this Staff Announcement, the reclassificationof recorded balances from wireless licenses to goodwill prior to the adoptionof this Staff Announcement is prohibited.

 

Cellco evaluated its wireless licenses forpotential impairment using a direct value methodology as of January 1,2005 and December 15, 2005 in accordance with SEC Staff Announcement No. D-108.The valuation and analyses prepared in connection with the adoption of a directvalue method and subsequent revaluation resulted in no adjustment to thecarrying value of Cellco’s wireless licenses and, accordingly, had no effect onits financial statements. Future tests for impairment will be performed atleast annually and more often if events or circumstances warrant.

 

***Concentrations***- To the extent the Partnership’s customer receivables become delinquent,collection activities commence. The General Partner accounts for 83.8% and80.4% of the accounts receivable balance at December 31, 2005, and 2004respectively. The Partnership maintains an allowance for losses, as necessary,based on the expected collectibility of accounts receivable.

 

Approximately98% of the Partnership’s 2005, 2004 and 2003 revenue is affiliate revenue.

 

The GeneralPartner relies on local and long-distance telephone companies, some of whom arerelated parties, and other companies to provide certain communication services.Although management believes

 

9

----

 

alternativetelecommunications facilities could be found in a timely manner, any disruptionof these services could potentially have an adverse impact on the Partnership’soperating results.

 

Although theGeneral Partner attempts to maintain multiple vendors for equipment, which areimportant components of its operations, they are currently acquired from only afew sources. Certain of these products are in turn utilized by the Partnershipand are important components of the Partnership’s operations. If the suppliersare unable to meet the General Partner’s needs as it builds out its networkinfrastructure and sells service, delays and increased costs in the expansionof the Partnership’s network infrastructure or losses of potential customerscould result, which would adversely affect operating results.

 

***FinancialInstruments*** - The Partnership’s trade receivablesand payables are short-term in nature, and accordingly, their carrying valueapproximates fair value.

 

***IncomeTaxes*** - ThePartnership is not a taxable entity for Federal and state income tax purposes. Anytaxable income or loss is apportioned to the partners based on their respectivepartnership interests and is reported by them individually.

 

***Segments–*** ThePartnership has one reportable business segment and operates domestically only.The Partnership’s products and services are materially comprised of wirelesstelecommunications services.

 

***Dueto/from General Partner*** - Due to/from General Partner principally represents the Partnership’s cashposition. The General Partner manages all cash, investing and financingactivities of the Partnership. As such, the change in Due from General Partners is reflectedas an investing activity in the Statements of Cash Flows while the change inDue to General Partner is reflected as a financing activity. The Partnershipreclassified its 2004 and 2003 Statements of Cash Flows to conform to the 2005presentation. Additionally,administrative and operating costs incurred by the General Partner on behalf ofthe Partnership are charged to the Partnership through this account. Interestexpense/income is based on the average monthly outstanding balance in thisaccount and is calculated by applying Cellco’s average cost of borrowing fromVerizon Global Funding, a wholly owned subsidiary of Verizon Communications.The cost of borrowing was approximately 4.8%, 5.9%, and 5.0% for the yearsended December 31, 2005, 2004 and 2003, respectively. Included in Interestand Other Income, Net is net interest income related to the Due from GeneralPartner balance of $782, $980 and $1,472 for the years ended December 31,2005, 2004 and 2003, respectively.

 

***RecentlyIssued Accounting Pronouncements*** - In March 2005,the FASB issued FASB Interpretation No. 47, “Accounting for ConditionalAsset Retirement Obligations – an interpretation of SFAS No. 143.” Thisinterpretation clarifies that the term “conditional asset retirement obligation”refers to a legal obligation to perform a future asset retirement whenuncertainty exists about the timing and/or method of settlement of theobligation. Uncertainty about the timing and/or method of settlement of aconditional asset retirement obligation should be factored into the measurementof the liability when sufficient information exists, as defined by theinterpretation. An entity is required to recognize a liability for the fairvalue of the obligation if the fair value of the liability can be reasonablyestimated. The Partnership adopted the interpretation on December 31,2005. The adoption of this interpretation of SFAS No. 143 did not have amaterial impact on the Partnership’s financial statements.

 

***Distributions–*** ThePartnership is required to make distributions to its partners on a quarterlybasis based upon the Partnership’s operating results, cash availability andfinancing needs as determined by the General Partner at the date of thedistribution.

 

10

----

 

**3.**              PROPERTY,PLANT AND EQUIPMENT, NET

 

Property, plant and equipment, net, consistsof the following as of December 31, 2005 and 2004:

 
| ** **                         | ** ** | **Useful Lives** | ** ** | **2005**   | ** ** | **2004**   | ** ** |
|------------------------------------|------------|-----------------------|------------|------------|------------|------------|------------|
| ** **                         | ** ** | ** **            | ** ** | ** ** | ** ** | ** ** | ** ** |
| Buildings                          |       | 10-40 years           |       | $          | 13,408     |       | $          | 11,223 |   |
| Wireless plant equipment           |       | 3-15 years            |       | 58,087     |       | 51,940     |       |
| Furniture, fixtures and equipment  |       | 2-5 years             |       | 303        |       | 361        |       |
| Leasehold Improvements             |       | 5 years               |       | 2,149      |       | 1,725      |       |
|                               |       |                  |       |       |       |       |       |
|                               |       |                  |       | 73,947     |       | 65,249     |       |
|                               |       |                  |       |       |       |       |       |
| Less accumulated depreciation      |       |                  |       | (36,431    | )          | (30,724    | )          |
|                               |       |                  |       |       |       |       |       |
| Property, plant and equipment, net |       |                  |       | $          | 37,516     |       | $          | 34,525 |   |

 

Capitalizednetwork engineering costs of $406 and $245 were recorded during the years endedDecember 31, 2005 and 2004, respectively. Construction-in-progress includedin certain of the classifications shown above, principally wireless plantequipment, amounted to $2,368 and $1,767 at December 31, 2005 and 2004,respectively. Depreciation expense for the years ended December 31, 2005,2004 and 2003 was $6,347, $5,521 and $5,179, respectively.

 

**4.**              TRANSACTIONSWITH AFFILIATES

 

Significant transactions with affiliates(Cellco and its related entities), including allocations and direct charges,are summarized as follows for the years ended December 31, 2005, 2004 and2003:

 
| ** **                                                     | ** ** | **2005**   | ** ** | **2004**   | ** ** | **2003**   | ** ** |
|----------------------------------------------------------------|------------|------------|------------|------------|------------|------------|------------|
| **Revenue:**                                                   | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Operating revenues (b)                                         |       | $          | 176,310    |       | $          | 158,571    |       | $ | 138,796 |   |
| Cellsite allocated revenues (c)                                |       | 1,377      |       | 1,506      |       | 2,963      |       |
| **Cost of Service:**                                           |       |       |       |       |       |       |       |
| Direct telecommunication charges (a)                           |       | 6,355      |       | 1,697      |       | 274        |       |
| Long distance charges                                          |       | 8,208      |       | 5,580      |       | 4,971      |       |
| Allocation of cost of service (a)                              |       | 3,364      |       | 3,360      |       | 3,315      |       |
| Allocation of switch usage cost (a)                            |       | 5,519      |       | 4,705      |       | 7,256      |       |
| **Selling, General and Administrative:**                       |       |       |       |       |       |       |       |
| Allocation of certain general and  administrative expenses (a) |       | 1,672      |       | 2,198      |       | 1,797      |       |
|                                                                |            |            |            |            |            |            |            |  |  |  |

 

----

(a) Expenseswere allocated based on the Partnership’s percentage of total customers,customer gross additions or minutes-of-use where applicable. The Partnershipbelieves the allocations are reasonable.

(b) Affiliateoperating revenues primarily represent revenues generated from transactionswith Cellco, the Partnership’s primary reseller. The wholesale rates charged toCellco do not necessarily reflect current market rates. The Partnershipcontinues to re-evaluate the rates and expects these rates to be reduced in thefuture consistent with market trends and the terms of the limited partnershipagreement.

(c) Cellsiteallocated revenues, based on the Partnership’s percentage of minutes of use,result from the Partnership sharing a cell site with the Catskills RSA LimitedPartnership, an affiliate entity.

 

All affiliate transactions captured above arebased on actual amounts directly incurred by Cellco on behalf of thePartnership and/or allocations from Cellco. Revenues and expenses wereallocated based on the Partnership’s percentage of total customers, grosscustomer additions or minutes of use where

 

11

----

 

applicable. The General Partner believes theallocations are reasonable. The affiliate transactions are not necessarilyconducted at arm’s length.

 

The Partnership had net purchases of plant,property, and equipment with affiliates of $4,738, $7,245 and $3,935 in 2005,2004 and 2003, respectively.

 

**5.**              COMMITMENTS

** **

The General Partner, on behalf of thePartnership, and the Partnershipitself have entered into operating leases for facilities and equipment used inits operations. Lease contracts include renewal options that include rentexpense adjustments based on the Consumer Price Index as well as annual andend-of-lease term adjustments. Rent expense is recorded on astraight-line basis. The noncancellable lease term used to calculate the amountof the straight-line rent expense is generally determined to be the initiallease term, including any optional renewal terms that are reasonably assured. Leaseholdimprovements related to these operating leases are amortized over the shorterof their estimated useful lives or the noncancellable lease term. Forthe years ended December 31, 2005, 2004 and 2003, the Partnershiprecognized a total of $1,845, $1,446 and $1,234, respectively, as rent expenserelated to payments under these operating leases, which was included in cost ofservice and general and administrative expenses in the accompanying Statementsof Operations.

 

Aggregate futureminimum rental commitmentsunder noncancelable operating leases, excluding renewal options that are notreasonably assured, for the years shown are as follows:

 
| **Years**              | ** ** | **Amount** | ** ** |
|------------------------|------------|------------|------------|
| ** **             | ** ** | ** ** | ** ** |
| 2006                   |       | $          | 1,612      |   |
| 2007                   |       | 1,468      |       |
| 2008                   |       | 1,370      |       |
| 2009                   |       | 798        |       |
| 2010                   |       | 186        |       |
| 2011 and thereafter    |       | 372        |       |
|                   |       |       |       |
| Total minimum payments |       | $          | 5,806      |   |

 

From time to time the General Partner entersinto purchase commitments, primarily for network equipment, on behalf of thePartnership.

 

**6.**              VALUATIONAND QUALIFYING ACCOUNTS

 
| ** **                      | ** ** | **Balance at**       | ** ** | **Additions**       | ** ** | **Write-offs**  | ** ** | **Balance at**       | ** ** |
|---------------------------------|------------|---------------------------|------------|---------------------|------------|-----------------|------------|---------------------------|------------|
| ** **                      | ** ** | **Beginning**             | ** ** | **Charged to** | ** ** | **Net of** | ** ** | **End**                   | ** ** |
| ** **                      | ** ** | **of the Year** | ** ** | **Operations**      | ** ** | **Recoveries**  | ** ** | **of the Year** | ** ** |
| ** **                      | ** ** | ** **                | ** ** | ** **          | ** ** | ** **      | ** ** | ** **                | ** ** |
| Accounts Receivable Allowances: |       |                      |       |                |       |            |       |                      |       |
| 2005                            |       | $                         | —     |                | $          | —          |       | $                         | —     |   | $ | — |   |
| 2004                            |       | $                         | 20         |                | $          | —          |       | $                         | (20        | ) | $ | — |   |
| 2003                            |       | 1                         |       | 49                  |       | (30             | )          | 20                        |       |

 

**7.**              CONTINGENCIES

 

Cellco issubject to various lawsuits and other claims including class actions, productliability, patent infringement, antitrust, partnership disputes, and claimsinvolving  relations withresellers and agents.

 

12

----

 

Cellco is alsodefending lawsuits filed against itself and other participants in the wirelessindustry alleging various adverse effects as a result of wireless phone usage. Variousconsumer class action lawsuits allege that Cellco breached contracts withconsumers, violated certain state consumer protection laws and other statutesand defrauded customers through concealed or misleading billing practices.Certain of these lawsuits and other claims may impact the Partnership. Theselitigation matters may involve indemnification obligations by third partiesand/or affiliated parties covering all or part of any potential damage awards againstCellco and the Partnership and/or insurance coverage. Attorney Generals in a number of states also are investigating certainsales, marketing and advertising practices. All of the above matters aresubject to many uncertainties, and outcomes are not predictable with assurance.

 

The Partnership may be allocated a portion ofthe damages that may result upon adjudication of these matters if the claimantsprevail in their actions. Consequently, the ultimate liability with respect tothese matters at December 31, 2005 cannot be ascertained. The potentialeffect, if any, on the financial condition and results of operations of thePartnership, in the period in which these matters are resolved, may bematerial.

 

In addition tothe aforementioned matters, Cellco is subject to various other legal actionsand claims in the normal course of business. While Cellco’s legal counsel cannot giveassurance as to the outcome of each of these matters, in management’s opinion,based on the advice of such legal counsel, the ultimate liability with respectto any of these actions, or all of them combined, will not materially affectthe financial statements of the Partnership.

 

******

 

13

----