<PAGE>
================================================================================

                                    FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

(MARK ONE)

[X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934.

         FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2002

                                       OR

[ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES
         EXCHANGE ACT OF 1934

         FOR THE TRANSITION PERIOD FROM ________ TO _________

         COMMISSION FILE NUMBER: 000-25207


                           DAVEL COMMUNICATIONS, INC.
             (Exact name of registrant as specified in its charter)


              DELAWARE                                       59-3538257
              --------                                       ----------
   (State or other jurisdiction of                        (I.R.S. Employer)
   incorporation or organization)                            I.D. No.)


                      10120 WINDHORST ROAD, TAMPA, FL 33619
               (Address of principal executive offices) (Zip Code)

                  Registrant's telephone number: (813) 628-8000


Indicate by check mark whether the Registrant has (1) 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
                                      ---

As of May 10, 2002, there were 11,169,440 shares of the Registrant's Common
Stock outstanding.


================================================================================

<PAGE>


                   DAVEL COMMUNICATIONS, INC. AND SUBSIDIARIES
                           FORM 10-Q QUARTERLY REPORT
                                TABLE OF CONTENTS

<TABLE>

<S>                                                                                                                  <C>
RECENT DEVELOPMENTS...............................................................................................     1

PART I   FINANCIAL INFORMATION

ITEM 1

Financial Statements:

Consolidated Balance Sheets.......................................................................................     2

Consolidated Statements of Operations.............................................................................     3

Consolidated Statements of Cash Flows.............................................................................     4

Notes to Consolidated Financial Statements........................................................................     5

ITEM 2

Management's Discussion and Analysis of Financial Condition and Results of Operations.............................    12

Liquidity and Capital Resources...................................................................................    16

ITEM 3

Quantitative and Qualitative Disclosures about Market Risk........................................................    23

PART II OTHER INFORMATION

ITEM 1

Legal Proceedings.................................................................................................    24


ITEM 6

Exhibits and Reports on Form 8-K..................................................................................    25
</TABLE>




<PAGE>

                               RECENT DEVELOPMENTS


ANNOUNCEMENTS RELATING TO PHONETEL MERGER
-----------------------------------------

         On May 9, 2002, Davel Communications, Inc. ("Davel" or the "Company")
announced that it had filed a Registration Statement on Form S-4 with the
Securities and Exchange Commission (the "SEC"), which includes a joint proxy
statement/prospectus of Davel and PhoneTel Technologies, Inc. ("PhoneTel").
Davel and PhoneTel have previously announced the execution of a merger agreement
and related agreements under which (1) indebtedness of Davel in an aggregate
amount of approximately $218.8 million (plus interest accrued after June 30,
2002) will be exchanged for 380,612,730 shares of Davel common stock; (2)
indebtedness of PhoneTel in an aggregate amount of approximately $33.2 million
(plus interest accrued after June 30, 2002) will be exchanged for 112,246,511
shares of PhoneTel common stock; and (3) a wholly owned subsidiary of Davel will
merge with and into PhoneTel, with each share of PhoneTel common stock
(including the shares issued in exchange for PhoneTel indebtedness) being
converted into the right to receive 1.8233 shares of Davel common stock and
PhoneTel surviving as wholly owned subsidiary of Davel. The registration
statement filed on May 9, 2002 with the SEC seeks to register the 223,238,000
Davel shares being delivered to PhoneTel stockholders in the merger.

         In connection with the filing of the registration statement, Davel and
PhoneTel also announced that Cleveland, Ohio has been selected as Davel's
corporate headquarters post-merger. The companies determined that Cleveland
would best serve the combined organizations' business objectives and most
effectively facilitate the anticipated back-office synergies. The closing of
Davel's Tampa, Florida headquarters, which is expected to occur in the third or
fourth quarter of 2002, should result in significant cost savings due to the
elimination of redundant general and administrative functions. The companies
also announced the composition of the proposed Board of Directors for the
combined entity. Bruce W. Renard, who joined Davel in December 1998 as Senior
Vice President of Regulatory and External Affairs and Associate General Counsel
and was named President in July 2001, will step down as President of Davel
following the merger and join the new board of directors. Davel expects to
negotiate a consulting arrangement with Mr. Renard pursuant to which Mr. Renard
will provide regulatory and industry advisory services post-merger.

         In addition to Mr. Renard, the following individuals were nominated to
the post-merger Board of Directors: John D. Chichester, currently President and
Chief Executive Officer of PhoneTel who will become President and Chief
Executive Officer of the combined company; Andrew C. Barrett, a former
commissioner with the Federal Communications Commission and the Illinois
Commerce Commission and currently a managing director of the Barrett Group, a
company providing consulting services to the telephone, media and cable
industries; James N. Chapman, an independent capital markets and strategic
planning consultant for private and public companies across a broad range of
industries; and Kevin P. Genda, a Managing Director of Cerberus Capital
Management, L.P. and Senior Vice President-Chief Credit Officer of Ableco
Finance LLC, both affiliates of Cerberus Partners, L.P., a lender to Davel.


FIRST AMENDMENT TO SENIOR CREDIT FACILITY
-----------------------------------------

         On May 14, 2002, the Company entered into a First Amendment to the
Credit Agreement, dated as of February 19, 2002 (the "New Senior Credit
Facility"), among the Company, Davel Financing Company, L.L.C., all of their
domestic subsidiaries, PhoneTel, Cherokee Communications, Inc., Madeline L.L.C.
and ARK-CLO 2000-1 Limited. Pursuant to Amendment No. 1, which is effective as
of February 19, 2002, the Minimum Adjusted EBITDA and Minimum EBITDA covenants
were loosened through June 30, 2002.  See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and Capital
Resources--New Senior Credit Facility--First Amendment."



                                       1
<PAGE>

PART I FINANCIAL INFORMATION
----------------------------

ITEM 1 FINANCIAL STATEMENTS

                   DAVEL COMMUNICATIONS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                        (IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                                                            MARCH 31,      DECEMBER 31,
                                                                                              2002             2001
                                                                                              ----             ----
                                                                                           (Unaudited)       (Audited)
<S>                                                                                     <C>                <C>
                                                           ASSETS
CURRENT ASSETS
Cash and cash equivalents                                                               $        5,288     $      5,333
Trade accounts receivable                                                                        9,317           11,757
Other current assets                                                                             2,522              629
                                                                                        --------------     ------------

        TOTAL CURRENT ASSETS                                                                    17,127           17,719

Property and equipment, net                                                                     43,107           47,448
Location contracts, net                                                                          1,618            1,983
Other assets                                                                                     1,549            1,175
                                                                                        --------------     ------------

        TOTAL ASSETS                                                                    $       63,401     $     68,325
                                                                                        ==============     ============

                                            LIABILITIES AND SHAREHOLDERS' DEFICIT

CURRENT LIABILITIES
   Current maturities of long-term debt and
      obligations under capital leases                                                  $      241,342     $    237,726
   Accrued interest                                                                             40,585           36,320
   Accounts payable and other accrued expenses                                                  17,585           23,784
                                                                                        --------------     ------------
        TOTAL CURRENT LIABILITIES                                                              299,512          297,830
                                                                                        --------------     ------------

Long-term debt and obligations under capital leases                                              1,536              308
                                                                                        --------------     ------------

        TOTAL LIABILITIES                                                                      301,048          298,138
                                                                                        --------------     ------------

Shareholders' Deficit
      Common stock - $.01 par value, 50,000,000
      shares authorized, 11,169,440 shares
      issued and outstanding                                                                       112              112
   Additional paid-in capital                                                                  128,503          128,503
   Accumulated other comprehensive loss                                                              -               (7)
   Accumulated deficit                                                                        (366,262)        (358,421)
                                                                                        ---------------    -------------
        TOTAL SHAREHOLDERS' DEFICIT                                                           (237,647)        (229,813)
                                                                                        ---------------    -------------
        TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT                                     $       63,401     $     68,325
                                                                                        ==============     ============
</TABLE>


                  The accompanying Notes are an integral part
                  of these consolidated financial statements.




                                       2
<PAGE>

                   DAVEL COMMUNICATIONS, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
                       FOR THE THREE MONTHS ENDED MARCH 31
                        (IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
                                                                     2002                   2001
                                                                 ------------           ------------

<S>                                                              <C>                    <C>
REVENUES:
   Coin calls                                                    $     12,222           $     15,574
   Non-coin calls                                                       5,040                  7,661
                                                                 ------------           ------------

         Total revenues                                                17,262                 23,235
                                                                 ------------           ------------

COSTS AND EXPENSES:
   Telephone charges                                                    4,080                  8,960
   Commissions                                                          3,887                  5,264
   Service, maintenance and network costs                               4,846                  6,221
   Depreciation and amortization                                        4,969                  4,632
   Selling, general and administrative                                  2,772                  3,073
                                                                 ------------           ------------

         Total operating costs and expenses                            20,554                 28,150
                                                                 ------------           ------------

         Operating loss                                                (3,292)                (4,915)

OTHER INCOME (EXPENSE):
   Interest expense, net                                               (4,553)                (7,813)
   Other                                                                    4                    100
                                                                 ------------           ------------

LOSS BEFORE INCOME TAXES                                               (7,841)               (12,628)

   Income tax expense                                                       -                      -
                                                                 ------------           ------------

NET LOSS                                                         $     (7,841)          $    (12,628)
                                                                 ============           ============

BASIC AND DILUTED LOSS PER SHARE                                 $      (0.70)          $      (1.13)
                                                                 ============           ============

WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC AND DILUTED            11,169,440             11,169,540
                                                                 ============           ============
</TABLE>





                   The accompanying Notes are an integral part
                   of these consolidated financial statements.





                                       3
<PAGE>

                   DAVEL COMMUNICATIONS, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
                       FOR THE THREE MONTHS ENDED MARCH 31
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                         2002               2001
                                                                       --------           --------

<S>                                                                    <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss                                                            $ (7,841)          $(12,628)
   Adjustments to reconcile net loss to cash flows
      from operating activities:
         Depreciation and amortization                                    4,969              4,632
         Amortization of deferred financing charges                          15                885
         Payment for certain location contracts                             (84)               (71)
         Write-off of fixed assets/asset valuation charge                     7                 24
      Changes in assets and liabilities:
         Accounts receivable                                              2,440              2,297
         Other assets                                                    (2,187)              (452)
         Accounts payable and accrued liabilities                        (6,158)            (3,477)
         Accrued interest                                                 4,265              6,807
         Deferred revenue                                                   (41)             2,494
                                                                       --------           --------

         Net cash from operating activities                              (4,615)               511
                                                                       --------           --------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Capital expenditures                                                     (88)               (95)
                                                                       --------           --------


         Net cash from investing activities                                 (88)               (95)
                                                                       --------           --------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Net proceeds of Term Loan from Senior Lenders                          5,000                 --
   Debt issuance costs                                                     (186)                --
   Principal payments under capital leases                                 (156)              (185)
                                                                       --------           --------

         Net cash from financing activities                               4,658               (185)
                                                                       --------           --------

         NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS               (45)               231

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                            5,333              6,104
                                                                       --------           --------
CASH AND CASH EQUIVALENTS, END OF PERIOD                               $  5,288           $  6,335
                                                                       ========           ========

CASH PAID FOR INTEREST                                                 $     83           $      -
                                                                       ========           ========
</TABLE>



                   The accompanying Notes are an integral part
                   of these consolidated financial statements.




                                       4
<PAGE>

                   DAVEL COMMUNICATIONS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                    (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)


1.   BASIS OF PRESENTATION

         The accompanying consolidated balance sheet of Davel and its
subsidiaries as of March 31, 2002 and the related consolidated statements of
operations for the three-month periods ended March 31, 2002 and 2001 and of cash
flows for the three-month periods ended March 31, 2002 and 2001 are unaudited.
In the opinion of management, all adjustments necessary for a fair presentation
of such consolidated financial statements have been included. Such adjustments
consist only of normal, recurring items. Certain information and footnote
disclosures normally included in audited financial statements have been omitted,
in accordance with generally accepted accounting principles for interim
financial reporting. These interim consolidated financial statements should be
read in conjunction with Management's Discussion and Analysis of Financial
Condition and Results of Operations appearing elsewhere in this Form 10-Q and
with the Company's audited consolidated financial statements and the notes
thereto in the Company's Form 10-K for the year ended December 31, 2001. The
results of operations for the three-month period ended March 31, 2002 are not
necessarily indicative of the results for the full year.

         The Company was incorporated on June 9, 1998 under the laws of the
State of Delaware. The Company is the largest independent payphone service
provider in the United States. The Company operates in a single business segment
within the telecommunications industry, operating, servicing, and maintaining a
system of approximately 52,000 payphones in 44 states and the District of
Columbia. The Company's headquarters is located in Tampa, Florida, with
divisional facilities in 17 geographically dispersed locations.

2.  LIQUIDITY

         The accompanying consolidated financial statements have been prepared
on a going concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The Company has
incurred losses of approximately $43.4 million and $7.8 million for the year
ended December 31, 2001 and quarter ended March 31, 2002, respectively. These
losses were primarily attributable to increased competition from providers of
wireless communication services and the impact on the Company's revenue of
certain regulatory changes. In addition, the Company was unable to make debt
payments of approximately $237.7 million and interest payments of approximately
$36.3 million, which became due and payable on January 11, 2002 to the lenders
(the "Junior Lenders") that are party to the Company's secured credit facility,
dated December 23, 1998 (as amended, the "Old Credit Facility"). However,
effective February 19, 2002, the Company signed a Seventh Amendment to the Old
Credit Facility that waived the payment default as of January 11, 2002 and
extended the due date of all payment obligations to August 31, 2002.

         Effective February 19, 2002, the Company and PhoneTel entered into an
agreement and plan of reorganization and merger that will provide for the
issuance of the Company's common stock to acquire the issued and outstanding
common stock of PhoneTel (the "PhoneTel Merger"). PhoneTel is a payphone service
provider ("PSP") that maintains and operates a payphone system of 30,000
payphones in 44 states and the District of Columbia. The Company and PhoneTel
had entered into a shared services agreement for the administration and
operation of certain of the Company's and PhoneTel's branch offices across the
United States in June 2001. The effect of the Servicing Agreement has been to
reduce monthly operating costs substantially. Management believes this merger
will result in expansion of its market presence and further reduce its operating
costs by leveraging the combined infrastructure.

         In order to pursue this strategy, the Company and PhoneTel jointly
entered into the New Senior Credit Facility with Madeline L.L.C. and ARK-CLO
2000-1 Limited and agreed to a substantial debt-for-equity exchange with the
Junior Lenders. The New Senior Credit Facility, which became effective February
19, 2002, provides for a combined $10 million line of credit which the Company
and PhoneTel share $5 million each. The Company and PhoneTel each drew their
available amounts under the line on February 20, 2002. In addition to interest
payments due monthly at the rate of 15%


                                       5
<PAGE>

                   DAVEL COMMUNICATIONS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                    (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
                                   (CONTINUED)

per year on the unpaid balance, the line is repayable in twelve equal monthly
installments commencing July 31, 2002. The debt-for-equity exchange with the
Company's current Junior Lenders will immediately precede the merger with
PhoneTel and provides for the exchange of that amount of indebtedness that will
result in $63.5 million of debt remaining ($100 million on a merged basis) for
380,612,730 shares of common stock. The terms of the remaining combined debt
will be modified and extended. Following the exchange of debt and immediately
prior to the merger, the Company's lenders will own 93% of the issued and
outstanding common stock of the Company. Following the exchange and the merger,
the combined creditors of the Company and PhoneTel will own 90.81% of the issued
and outstanding common stock of the Company.

         As of March 31, 2002, the Company had a working capital deficit of
$282.4 million and its liabilities exceeded it assets by $237.6 million.
Notwithstanding the New Senior Credit Facility and the debt-for-equity exchange,
the Company may face liquidity shortfalls and, as a result, might be required to
dispose of assets or operations to fund its operations, to make capital
expenditures and to meet its debt service and other obligations. There can be no
assurances as to the Company's ability to execute such dispositions, or the
timing thereof, or the amount of proceeds that the Company could realize from
such sales. The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.

3.  RECENT ACCOUNTING PRONOUNCEMENTS

         In June 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 141, "Business Combinations"
("SFAS No. 141" ) and No. 142, "Goodwill and Other Intangible Assets" ("SFAS No.
142"). SFAS No. 141, which eliminated the use of the pooling-of-interests method
of accounting for business combinations initiated after June 30, 2001, is
effective for any business combination accounted for by the purchase method that
is completed after June 30, 2001. SFAS No. 142, which includes the requirements
to test for impairment goodwill and intangible assets of indefinite life rather
than amortize them, is effective for fiscal years beginning after December 15,
2001. The Company has entered into a merger agreement with PhoneTel
Technologies, Inc. that provides for the exchange of common stock.. Pursuant to
SFAS No. 141, the merger will be accounted for as a purchase business
combination. The effects on the accounting for the initial recognition and
determining carrying value of goodwill, if any, that arise from the purchase
have not yet been determined by management. Davel performed the first of the
required impairment tests of goodwill as of January 1, 2002, and has determined
that there is no material effect to the Company's financial statements.

         In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets". SFAS No. 144 replaces SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of". SFAS No. 144 retains the fundamental provisions of
SFAS 121 for the recognition and measurement of the impairment of long-lived
assets to be held and used and the measurement of long-lived assets to be
disposed of by sale. Under SFAS No. 144, long-lived assets are measured at the
lower of carrying amount or fair value less cost to sell. The Company adopted
this statement on January 1, 2002. The Company assessed the impact of this
statement on its results of operations, financial position and cash flows as of
March, 31, 2002 and determined that no material impairment adjustment was
required.

         In April 2002, the FASB issued SFAS No. 145 covering, among other
things, the rescission of SFAS No. 4 "Reporting Gains and Losses from
Extinguishment of Debt." Under SFAS No. 4, all gains and losses from the
extinguishment of debt were required to be aggregated and, if material,
classified as an extraordinary item in the statement of operations. By
rescinding SFAS 4, SFAS No. 145 eliminates the requirement for treatment of
extinguishments as extraordinary items. The new standard is effective for
companies with fiscal years beginning after May 15, 2002. However, early
application of the provision is encouraged. As discussed in Note 2, the Company
is currently contemplating a series of transactions that will include the
extinguishment of debt. As a result of the recent issuance of this standard,
management of the Company has not determined the effects, if any, that it may
have on the related accounting or whether the standard will be adopted early.

4.   DIAL-AROUND COMPENSATION

         On September 20, 1996, the Federal Communications Commission (the
"FCC") adopted rules in a docket entitled In the Matter of Implementation of the
Payphone Reclassification and Compensation Provisions of the Telecommunications
Act of 1996, FCC 96-388 (the "1996 Payphone Order"), implementing the payphone
provisions of Section 276 of the Telecommunications Act of 1996 (the "Telecom
Act"). The 1996 Payphone Order, which became effective November 7, 1996,
initially mandated dial-around compensation for both access code calls and 800
subscriber calls at a flat rate of $45.85 per payphone per


                                       6
<PAGE>
                   DAVEL COMMUNICATIONS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                    (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
                                   (CONTINUED)

month (131 calls multiplied by $0.35 per call). Commencing October 7, 1997, and
ending October 6, 1998, the $45.85 per payphone per month rate was to transition
to a per-call system at the rate of $0.35 per call. Several parties filed
petitions for judicial review of certain of the FCC regulations including the
dial-around compensation rate. On July 1, 1997, the U.S. Court of Appeals for
the District of Columbia Circuit (the "Court") responded to appeals related to
the 1996 Payphone Order by remanding certain issues to the FCC for
reconsideration. These issues included, among other things, the manner in which
the FCC established the dial-around compensation for 800 subscriber and access
code calls, the manner in which the FCC established the interim dial-around
compensation plan and the basis upon which interexchange carriers (the "IXCs")
would be required to compensate PSPs. The Court remanded the issue to the FCC
for further consideration, and clarified on September 16, 1997 that it had
vacated certain portions of the FCC's 1996 Payphone Order, including the
dial-around compensation rate. Specifically, the Court determined that the FCC
did not adequately justify (i) the per-call compensation rate for 800 subscriber
and access code calls at the deregulated local coin rate of $0.35 because it did
not sufficiently explain its conclusion that the costs to provide local coin
calls are similar to those of 800 subscriber and access code calls and (ii) the
allocation of the dial-around payment obligations among the IXCs for the period
November 7, 1996 to October 6, 1997.

         In accordance with the Court's mandate, on October 9, 1997 the FCC
adopted and released its Second Report and Order in the same docket, FCC 97-371
(the "1997 Payphone Order"). This order addressed the per-call compensation rate
for 800 subscriber and access code calls that originate from payphones in light
of the decision of the Court which vacated and remanded certain portions of the
FCC's 1996 Payphone Order. The FCC concluded that the rate for per-call
compensation for 800 subscriber and access code calls from payphones is the
deregulated local coin rate adjusted for certain cost differences. Accordingly,
the FCC established a rate of $0.284 ($0.35 - $0.066) per call for the first two
years of per-call compensation (October 7, 1997 to October 6, 1999). The IXCs
were required to pay this per-call amount to PSPs, including the Company,
beginning October 7, 1997. Based on the FCC's tentative conclusion in the 1997
Payphone Order, the Company during 1997 adjusted the amounts of dial-around
compensation previously recorded for the period November 7, 1996 to June 30,
1997 from the initial $45.85 rate to $37.20 ($0.284 per call multiplied by 131
calls). As a result of this adjustment, the provision recorded for the year
ended December 31, 1997 for reduced dial-around compensation was approximately
$3.3 million.

         On March 9, 1998, the FCC issued a Memorandum Opinion and Order, FCC
98-481, which extended and waived certain requirements concerning the provision
by the local exchange carriers ("LECs") of payphone-specific coding digits,
which identify a call as originating from a payphone. Without the transmission
of payphone-specific coding digits, some of the IXCs have claimed they are
unable to identify a call as a payphone call eligible for dial-around
compensation. With the stated purpose of ensuring the continued payment of
dial-around compensation, the FCC, by Memorandum and Order issued on April 3,
1998, left in place the requirement for payment of per-call compensation for
payphones on lines that do not transmit the requisite payphone-specific coding
digits, but gave the IXCs a choice for computing the amount of compensation for
payphones on LEC lines not transmitting the payphone-specific coding digits of
either accurately computing per-call compensation from their databases or paying
per-phone, flat-rate compensation computed by multiplying the $0.284 per call
rate by the nationwide average number of 800 subscriber and access code calls
placed from RBOC payphones for corresponding payment periods. Accurate payments
made at the flat rate are not subject to subsequent adjustment for actual call
counts from the applicable payphone.

         On May 15, 1998, the Court again remanded the per-call compensation
rate to the FCC for further explanation without vacating the $0.284 per call
rate. The Court determined that the FCC had failed to explain adequately its
derivation of the $0.284 default rate. The Court stated that any resulting
overpayment may be subject to refund and directed the FCC to conclude its
proceedings within a six-month period from the effective date of the Court's
decision.


                                       7
<PAGE>
                   DAVEL COMMUNICATIONS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                    (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
                                   (CONTINUED)

         In response to the Court's second remand, the FCC conducted further
proceedings and sought additional comment from interested parties to address the
relevant issues posed by the Court. On February 4, 1999, the FCC released the
Third Report and Order and Order on Reconsideration of the Second Report and
Order (the "1999 Payphone Order"), in which the FCC abandoned its efforts to
derive a "market-based" default dial-around compensation rate and instead
adopted a "cost-based" rate of $0.24 per dial-around call, which was adjusted to
$.238 effective April 21, 2002. Both PSPs and IXCs petitioned the Court for
review of the 1999 Payphone Order's determination of the dial-around
compensation rate. On June 16, 2000, the Court affirmed the 1999 Payphone Order
setting a 24-cent dial-around compensation rate. On all the issues, including
those raised by the IXCs and the payphone providers, the Court applied the
"arbitrary and capricious" standard of review, and found that the FCC's rulings
were lawful and sustainable under that standard. The FCC has stated its
intention to conduct a third-year review of the rate, but no review has yet been
commenced. There is pending a Petition for Reconsideration of the 1999 Payphone
Order filed with the FCC by the independent payphone providers (the "IPPs"),
which has yet to be ruled on by the FCC. In view of the Court's affirmation of
the 1999 Payphone Order, it is unlikely that the FCC will adopt material changes
to the key components of the Order (other than the pending retroactive
application issue, discussed below) pursuant to the pending Reconsideration
Petition, although no assurances can be given.

         On April 5, 2001, the FCC released an order that is expected to have a
significant impact on the obligations of telecommunications carriers to pay
dial-around compensation to PSPs. The effect of the decision is to require that
the first long distance carrier to handle a dial-around call originating from a
payphone has the obligation to track and pay compensation on the call,
regardless of whether other carriers may subsequently transport or complete the
call. This modified rule became effective on November 23, 2001. The Company
believes that this modification to the dial-around compensation system will
result in a significant increase to the number of calls for which the Company is
able to collect such compensation. Because, however, the FCC ruling is subject
to a pending petition for court review and the system modification is as yet
untested, no assurances can be given as to the precise timing or magnitude of
revenue impact that may flow from the decision.

         The 24-cent rate that became effective April 21, 1999 will be applied
retroactively to the period beginning on October 7, 1997 and ending on April 20,
1999 (the "intermediate period"), less a $0.002 amount to account for FLEX ANI
payphone tracking costs, for a net compensation of $0.238. There is, however, a
pending petition for reconsideration of this retroactive application of the
rate. The 1999 Payphone Order deferred a final ruling on the treatment of the
period beginning on November 7, 1996 and ending on October 6, 1997 (the "interim
period") to a later order. The FCC further ruled that, after the establishment
of an interim period compensation rate and an allocation of the rate among
carriers, a true-up may be made for all payments or credits (with applicable
interest) due and owing between the IXCs and the PSPs, including Davel, for both
the interim and intermediate periods. Based on the reduction in the per-call
compensation rate in the 1999 Payphone Order, the Company further reduced
non-coin revenues by $9.0 million during 1998. The adjustment included
approximately $6.0 million to adjust revenue recorded during the period November
7, 1996 to October 6, 1997 from $37.20 per phone per month to $31.18 per phone
per month ($0.238 per call multiplied by 131 calls). The Company recorded
dial-around compensation revenue, net of adjustments from the 1997 Payphone
Order and the 1999 Payphone Order, of approximately $22.9 million and $35.9
million for 2000 and 1999, respectively.

         In a decision released January 31, 2002, which remains subject to
reconsideration, the FCC partially addressed the remaining issues concerning
interim and intermediate period compensation. The FCC adjusted the per-call rate
to $.229, for the interim period only, to reflect a different method of
calculating the delay in IXC payments to PSPs for the interim period, and
determined that the total interim period compensation rate should be $33.89 per
payphone per month ($.229 times an average of 148 calls per payphone per month).
The FCC deferred to a later, as yet unreleased, order its determination of the
allocation of this total compensation rate among the various carriers required
to pay compensation for the interim period. It is possible that the final


                                       8
<PAGE>

                   DAVEL COMMUNICATIONS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                    (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
                                   (CONTINUED)

resolution of the timing and other issues relating to these retroactive
adjustments and the outcome of any related administrative or judicial review of
such adjustments could have a material adverse effect on the Company.

         Market forces and factors outside the Company's control could
significantly affect the Company's dial-around compensation revenues. These
factors include the following: (i) the final resolution by the FCC of the "true
up" of the initial interim period flat-rate and "per call" assessment periods,
(ii) the possibility of administrative proceedings or litigation seeking to
modify the dial-around compensation rate, and (iii) ongoing technical or other
difficulties in the responsible carriers' ability and willingness to properly
track or pay for dial-around calls actually delivered to them.

5.       EARNINGS PER SHARE

         The treasury stock method was used to determine the dilutive effect of
the options and warrants on earnings per share data. Diluted loss per share is
equal to basic loss per share since the exercise of the 680,000 outstanding
options and the 427,323 warrants outstanding would be anti-dilutive for all
periods presented. In accordance with SFAS No. 128 and the requirement to report
"Earnings Per Share" data, the basic and diluted loss from continuing operations
per weighted average common shares outstanding were $(0.70) and $(1.13) for the
three months ended March 31, 2002 and 2001, respectively.

6.       COMMITMENTS & CONTINGENCIES

Litigation

         On September 29, 1998, the Company announced that it was exercising its
contractual rights to terminate a merger agreement (the "Davel/PhoneTel Merger
Agreement") with PhoneTel, based on breaches of representations, warranties and
covenants by PhoneTel. On October 1, 1998, the Company filed a lawsuit in
Delaware Chancery Court seeking damages, rescission of the Davel/PhoneTel Merger
Agreement and a declaratory judgment that such breaches occurred. On October 27,
1998, PhoneTel answered the complaint and filed a counterclaim against the
Company alleging that the Davel/PhoneTel Merger Agreement had been wrongfully
terminated. At the same time, PhoneTel also filed a third party claim against
Peoples Telephone Company (acquired by the Company on December 23, 1998)
alleging that Peoples Telephone wrongfully caused the termination of the
Davel/PhoneTel Merger Agreement. The counterclaim and third party claim seek
specific performance by the Company of the transactions contemplated by the
Davel/PhoneTel Merger Agreement and damages and other equitable relief from the
Company and Peoples Telephone. Effective February 19, 2002, the parties to the
lawsuit signed a Settlement Agreement and Mutual Release ("Settlement
Agreement"). The Settlement Agreement provides that, upon the closing of the
PhoneTel Merger, all parties to the lawsuit will release and discharge all
claims and liability against all other parties, without an admission of
liability by any party. The Settlement Agreement further provides that as
promptly as possible after the closing of the PhoneTel Merger, the parties will
execute a Joint Stipulation and Order for Dismissal with Prejudice requesting
that the Delaware Chancery Court dismiss the lawsuit in its entirety, with
prejudice.

                                       9
<PAGE>

                   DAVEL COMMUNICATIONS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                    (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
                                   (CONTINUED)

         In December 1999, the Company and its wholly owned subsidiary
Telaleasing Enterprises, Inc. were sued in the United States District Court,
Central District of California, by Telecommunications Consultant Group, Inc.
("TCG") and U.S. Telebrokers, Inc. ("UST"), two payphone consulting companies
which allege to have assisted the Company in obtaining a telephone placement
agreement with CSK Auto, Inc. ("CSK"). The suit alleged that the Company
breached its commission agreement with the plaintiffs based on the Company's
alleged wrongful rescission of its agreement with CSK. Plaintiffs' amended
complaint alleged damages in excess of $700,000. The Company moved to dismiss
the complaint, and, on August 24, 2000, the Court denied the Company's motion.
The Company subsequently answered the complaint and asserted a counterclaim,
seeking declaratory relief. On October 13, 2000, plaintiffs answered the
counterclaim, denying its material allegations. The Company, during a mediation
conference held on October 29, 2001, agreed to a confidential settlement of this
case, pursuant to which the case was dismissed with prejudice in exchange for
payments to the plaintiffs, the sum of which was not material to the Company and
was recorded in the third quarter of 2001.

         In March 2000, the Company and its wholly owned subsidiary Telaleasing
Enterprises, Inc. were sued in a related action in Maricopa County, Arizona
Superior Court by CSK. The suit alleges that the Company breached a location
agreement between the parties. CSK's complaint alleges damages in excess of $5
million. The Company removed the case to the U.S. District Court for Arizona and
moved to have the matter transferred to facilitate consolidation with the
related case in California brought by TCG and UST. On October 16, 2000, the U.S.
District Court for Arizona denied the Company's transfer motion and ordered the
case remanded back to Arizona state court. On November 13, 2000, the Company
filed its Notice of Appeal of the remand order with the United States Court of
Appeals for the Ninth Circuit. The appeal and underlying suit are in their
initial stages, and discovery is underway. The Company intends to vigorously
defend itself in the case.

         In February 2001, Picus Communications, LLC ("Picus"), a debtor in
Chapter 11 bankruptcy, filed suit against the Company and its wholly owned
subsidiary Telaleasing Enterprises, Inc. claiming unpaid invoices of over
$600,000 for local telephone services in Virginia, Maryland and the District of
Columbia. The Company denied the material allegations of Picus' complaint. On or
about April 2, 2001, Picus voluntarily dismissed its case, indicating that it
may refile its claim against the Company in the bankruptcy court. On May 10,
2001, the district court entered an order dismissing Picus' complaint without
prejudice. On March 13, 2001, the Company filed a proof of claim in the
bankruptcy court to recover damages based on Picus' breach of contract and
failure to secure and pay the Company federally mandated dial-around
compensation. On September 21, 2001, the Company filed an application for
administrative payment with the bankruptcy court seeking approximately $1.5
million in post-petition damages sustained by the Company as a result of Picus's
actions. On or about May 9, 2002, Picus filed a response to the Company's claim
for administrative payment as well as an objection to the Company's proof of
claim. As part of its objection, Picus asserted a counterclaim against the
Company, raising similar claims to those originally brought in the district
court. Picus' counterclaim alleges damages of approximately $717,000. Management
has indicated its intention to vigorously defend against Picus' claims, if
necessary, and to vigorously prosecute its claims for damages against Picus.
Based on the preliminary stage of this case, we are not yet able to provide an
evaluation of the likelihood of a favorable or unfavorable result, or the amount
or range of potential recovery or loss, if any.

         On or about January 27, 2002, Davel was served with a complaint, in an
action captioned Sanchez et al. v. DavelTel, Inc. d/b/a Davel Communications,
Inc. et. al., brought in the district court for Cameron County, Texas.
Plaintiffs accuse the defendants of negligence in the death of the father of
Thomas Sanchez, a former Davel employee. The matter has been forwarded to
Davel's insurance carrier for action. While Davel believes it possesses adequate
insurance coverage for the case and has meritorious defenses, the matter is in
its initial stages. Accordingly, Davel cannot at this time predict its
likelihood of success on the merits.


                                       10
<PAGE>
                   DAVEL COMMUNICATIONS, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                    (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
                                   (CONTINUED)

         The Company is involved in other litigation arising in the normal
course of its business which it believes will not materially affect its
financial condition or results of operations.



                                       11
<PAGE>
ITEM 2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
            CONDITION AND RESULTS OF OPERATIONS

         The following discussion and analysis should be read in conjunction
with the Company's consolidated financial statements and notes thereto appearing
elsewhere herein.

         With the exception of historical information (information relating to
the Company's financial condition and results of operations at historical dates
or for historical periods), the matters discussed in this Management's
Discussion and Analysis of Financial Condition and Result of Operations ("MD&A")
are forward-looking statements that necessarily are based on certain assumptions
and are subject to certain risks and uncertainties. The forward-looking
statements are based on management's expectations as of the date hereof. Actual
future performance and results could differ materially from that contained in or
suggested by these forward-looking statements as a result of the factors set
forth in this MD&A and related filings with the SEC. The Company assumes no
obligation to update any such forward-looking statements.


GENERAL

     During the first quarter of 2002, the Company derived its revenues from two
principal sources: coin calls and non-coin calls. Coin calls represent calls
paid for by callers with coins deposited in the payphone. Coin call revenues are
recorded in the amount of coins deposited in the payphones.

     Non-coin calls include credit card, calling card, collect, and third-party
billed calls, handled by operator service providers selected by the Company.
Non-coin call revenues are recognized based upon the commission received by the
Company from the carriers of these calls.

     The Company also recognizes non-coin revenues from calls that are dialed
from its payphones to gain access to a long distance company other than the one
pre-programmed into the telephone or to make a traditional "toll free" call
(dial-around calls). Revenues from dial-around calls are recognized based on
estimates of calls made using most recent actual historical data and the FCC
mandated dial-around compensation rate in effect.

     The principal costs related to the ongoing operation of the Company's
payphones include telephone charges, commissions, and service, maintenance and
network costs. Telephone charges consist of payments made by the Company to LECs
and long distance carriers for line charges and use of their networks.
Commission expense represents payments to owners of locations at which the
Company's payphones are installed ("Location Owners"). Service, maintenance and
network costs represent the cost of servicing and maintaining the payphones on
an ongoing basis.


REGULATORY IMPACT ON REVENUE

Local Coin Rates

     In ensuring "fair compensation" for all calls, the FCC previously
determined that local coin rates from payphones should be generally deregulated
by October 7, 1997, but provided for possible modifications or exemptions from
deregulation upon a detailed showing by an individual state that there are
market failures within the state that would not allow market-based rates to
develop. On July 1, 1997, a federal court issued an order which upheld the FCC's
authority to deregulate local coin call rates. In accordance with the FCC's
ruling and the court order, certain LECs and IPPs, including the Company,
increased rates for local coin calls from $0.25 to $0.35 after October 7, 1997
and, beginning in November 2001, to $0.50. In 2002, the Company


                                       12
<PAGE>

experienced lower coin call volumes on its payphones resulting from the
increased rates, as well as from continued growth in wireless communication
services, changes in call traffic and the geographic mix of the Company's
payphones.

Dial-around Compensation

         On September 20, 1996, the FCC adopted rules in a docket entitled IN
THE MATTER OF IMPLEMENTATION OF THE PAYPHONE RECLASSIFICATION AND COMPENSATION
PROVISIONS OF THE TELECOMMUNICATIONS ACT OF 1996, FCC 96-388 (the "1996 Payphone
Order"), implementing the payphone provisions of Section 276 of the Telecom Act.
The 1996 Payphone Order, which became effective November 7, 1996, initially
mandated dial-around compensation for both access code calls and 800 subscriber
calls at a flat rate of $45.85 per payphone per month (131 calls multiplied by
$0.35 per call). Commencing October 7, 1997, and ending October 6, 1998, the
$45.85 per payphone per month rate was to transition to a per-call system at the
rate of $0.35 per call. Several parties filed petitions for judicial review of
certain of the FCC regulations including the dial-around compensation rate. On
July 1, 1997, the U.S. Court of Appeals for the District of Columbia Circuit
(the "Court") responded to appeals related to the 1996 Payphone Order by
remanding certain issues to the FCC for reconsideration. These issues included,
among other things, the manner in which the FCC established the dial-around
compensation for 800 subscriber and access code calls, the manner in which the
FCC established the interim dial-around compensation plan and the basis upon
which IXCs would be required to compensate PSPs. The Court remanded the issue to
the FCC for further consideration, and clarified on September 16, 1997, that it
had vacated certain portions of the FCC's 1996 Payphone Order, including the
dial-around compensation rate. Specifically, the Court determined that the FCC
did not adequately justify (i) the per-call compensation rate for 800 subscriber
and access code calls at the deregulated local coin rate of $0.35 because it did
not sufficiently explain its conclusion that the costs to provide local coin
calls are similar to those of 800 subscriber and access code calls and (ii) the
allocation of the dial-around payment obligations among the IXCs for the period
November 7, 1996 to October 6, 1997.

         In accordance with the Court's mandate, on October 9, 1997 the FCC
adopted and released its SECOND REPORT AND ORDER in the same docket, FCC 97-371
(the "1997 Payphone Order"). This order addressed the per-call compensation rate
for 800 subscriber and access code calls that originate from payphones in light
of the decision of the Court which vacated and remanded certain portions of the
FCC's 1996 Payphone Order. The FCC concluded that the rate for per-call
compensation for 800 subscriber and access code calls from payphones is the
deregulated local coin rate adjusted for certain cost differences. Accordingly,
the FCC established a rate of $0.284 ($0.35 - $0.066) per call for the first two
years of per-call compensation (October 7, 1997, through October 6, 1999). The
IXCs were required to pay this per-call amount to PSPs, including the Company,
beginning October 7, 1997. Based on the FCC's tentative conclusion in the 1997
Payphone Order, the Company during 1997 adjusted the amounts of dial-around
compensation previously recorded for the period November 7, 1996 to June 30,
1997 from the initial $45.85 rate to $37.20 ($0.284 per call multiplied by 131
calls). As a result of this adjustment, the provision recorded for the year
ended December 31, 1997 for reduced dial-around compensation was approximately
$3.3 million.

         On March 9, 1998, the FCC issued a Memorandum Opinion and Order, FCC
98-481, which extended and waived certain requirements concerning the provision
by the LECs of payphone-specific coding digits which identify a call as
originating from a payphone. Without the transmission of payphone-specific
coding digits, some of the IXCs have claimed they are unable to identify a call
as a payphone call eligible for dial-around compensation. With the stated
purpose of ensuring the continued payment of dial-around compensation, the FCC,
by Memorandum and Order issued on April 3, 1998, left in place the requirement
for payment of per-call compensation for payphones on lines that do not transmit
the requisite payphone-specific coding digits, but gave the IXCs a choice for
computing the amount of compensation for payphones on LEC lines not transmitting
the payphone-specific coding digits of either accurately computing per-call
compensation from their databases or paying per-phone, flat-rate compensation
computed by multiplying the $0.284 per call rate by the nationwide average
number of 800 subscriber and access code calls placed from RBOC payphones


                                       13
<PAGE>

for corresponding payment periods. Accurate payments made at the flat rate are
not subject to subsequent adjustment for actual call counts from the applicable
payphone.

         On May 15, 1998, the Court again remanded the per-call compensation
rate to the FCC for further explanation without vacating the $0.284 per call
rate. The Court determined that the FCC had failed to explain adequately its
derivation of the $0.284 default rate. The Court stated that any resulting
overpayment may be subject to refund and directed the FCC to conclude its
proceedings within a six-month period from the effective date of the Court's
decision.

         In response to the Court's second remand, the FCC conducted further
proceedings and sought additional comment from interested parties to address the
relevant issues posed by the Court. On February 4, 1999, the FCC released the
Third Report and Order and Order on Reconsideration of the Second Report and
Order (the "1999 Payphone Order"), in which the FCC abandoned its efforts to
derive a "market-based" default dial-around compensation rate and instead
adopted a "cost-based" rate of $0.24 per dial-around call, which was adjusted to
$.238 effective April 21, 2002. Both PSPs and IXCs petitioned the Court for
review of the 1999 Payphone Order's determination of the dial-around
compensation rate. On June 16, 2000, the Court affirmed the 1999 Payphone Order
setting a 24-cent dial-around compensation rate. On all the issues, including
those raised by the IXCs and the payphone providers, the Court applied the
"arbitrary and capricious" standard of review, and found that the FCC's rulings
were lawful and sustainable under that standard. The FCC has stated its
intention to conduct a third-year review of the rate, but no review has yet been
commenced. There is pending a Petition for Reconsideration of the 1999 Payphone
Order filed with the FCC by the IPPs, which has yet to be ruled on by the FCC.
In view of the Court's affirmation of the 1999 Payphone Order, it is unlikely
that the FCC will adopt material changes to the key components of the Order
(other than the pending retroactive application issue, discussed below) pursuant
to the pending Reconsideration Petition, although no assurances can be given.

         On April 5, 2001, the FCC released an order that is expected to have a
significant impact on the obligations of telecommunications carriers to pay
dial-around compensation to PSPs. The effect of the decision is to require that
the first long distance carrier to handle a dial-around call originating from a
payphone has the obligation to track and pay compensation on the call,
regardless of whether other carriers may subsequently transport or complete the
call. This modified rule became effective on November 23, 2001. The Company
believes that this modification to the dial-around compensation system will
result in a significant increase to the number of calls for which the Company is
able to collect such compensation. Because, however, the FCC ruling is subject
to a pending petition for court review and the system modification is as yet
untested, no assurances can be given as to the precise timing or magnitude of
revenue impact that may flow from the decision.

         The 24-cent rate that became effective April 21, 1999 will be applied
retroactively to the period beginning on October 7, 1997 and ending on April 20,
1999 (the "intermediate period"), less a $0.002 amount to account for FLEX ANI
payphone tracking costs, for a net compensation of $0.238. There is, however, a
pending petition for reconsideration of this retroactive application of the
rate. The 1999 Payphone Order deferred a final ruling on the treatment of the
period beginning on November 7, 1996 and ending on October 6, 1997 (the "interim
period") to a later order. The FCC further ruled that, after the establishment
of an interim period compensation rate and an allocation of the rate among
carriers, a true-up may be made for all payments or credits (with applicable
interest) due and owing between the IXCs and the PSPs, including Davel, for both
the interim and intermediate periods. Based on the reduction in the per-call
compensation rate in the 1999 Payphone Order, the Company further reduced
non-coin revenues by $9.0 million during 1998. The adjustment included
approximately $6.0 million to adjust revenue recorded during the period November
7, 1996 to October 6, 1997 from $37.20 per phone per month to $31.18 per phone
per month ($0.238 per call multiplied by 131 calls). The Company recorded
dial-around compensation revenue, net of adjustments from the 1997 Payphone
Order and the 1999 Payphone Order, of approximately $22.9 million and $35.9
million for 2000 and 1999, respectively.


                                       14
<PAGE>

         In a decision released January 31, 2002, which remains subject to
reconsideration, the FCC partially addressed the remaining issues concerning
interim and intermediate period compensation. The FCC adjusted the per-call rate
to $.229, for the interim period only, to reflect a different method of
calculating the delay in IXC payments to PSPs for the interim period, and
determined that the total interim period compensation rate should be $33.89 per
payphone per month ($.229 times an average of 148 calls per payphone per month).
The FCC deferred to a later, as yet unreleased, order its determination of the
allocation of this total compensation rate among the various carriers required
to pay compensation for the interim period. It is possible that the final
resolution of the timing and other issues relating to these retroactive
adjustments and the outcome of any related administrative or judicial review of
such adjustments could have a material adverse effect on the Company.

         Market forces and factors outside the Company's control could
significantly affect the Company's dial-around compensation revenues. These
factors include the following: (i) the final resolution by the FCC of the "true
up" of the initial interim period flat-rate and "per call" assessment periods,
(ii) the possibility of administrative proceedings or litigation seeking to
modify the dial-around compensation rate, and (iii) ongoing technical or other
difficulties in the responsible carriers' ability and willingness to properly
track or pay for dial-around calls actually delivered to them.


THREE MONTHS ENDED MARCH 31, 2002 COMPARED TO THREE MONTHS ENDED MARCH 31, 2001

         For the three months ended March 31, 2002, total revenues decreased
approximately $5.9 million, or 25.7%, to approximately $17.3 million from
approximately $23.2 million in the same period of 2001. This decrease was
primarily attributable to the removal of unprofitable phones, and lower call
volumes, due to increased competition from the wireless communications industry,
resulting in lower average revenue per phone.

         Coin call revenues decreased approximately $3.3 million, or 21.5%, to
approximately $12.2 million in the three months ended March 31, 2002 from
approximately $15.5 million in the first quarter of 2001. The decrease in coin
call revenues was primarily attributable to a reduction in the number of average
payphones per month from approximately 66,000 phones during the period ended
March 31, 2001 to approximately 54,000 during the period ended March 31, 2002,
as a result of the Company's ongoing strategy to remove unprofitable phones, and
from lower call volumes on the Company's payphones resulting from increased
competition from wireless communication services and changes in call traffic.

         Non-coin call revenues, which is comprised primarily of dial-around
revenue and operator service revenue, decreased approximately $2.6 million, or
34.2%, to approximately $5.1 million in the three months ended March 31, 2002
from approximately $7.7 million in the three months ended March 31, 2001. The
decrease was primarily attributable to the removal of unprofitable phone
locations, and lower call volumes on the Company's payphones resulting from the
growth in wireless communication services and changes in call traffic.
Dial-around revenue decreased approximately $1.1 million, to approximately $3.5
million in the three months ended March 31, 2002 from approximately $4.6 million
in the first quarter of 2001. The dial-around decrease is primarily attributable
to the net removal of approximately 12,000 unprofitable phones, or 19.1% of the
total payphone base over the 12-month period, and lower calls per phone due to
increased competition from wireless services. Long-distance revenues decreased
approximately $1.7 million, to approximately $1.4 million in the first quarter
of 2002 from approximately $3.1 million in the three months ended March 31,
2001. The decrease is attributable to fewer payphones in service, fewer long
distance calls made per phone, and reduced call time per call. Non-carrier
revenues increased $0.2 million during the period.

         Telephone charges decreased approximately $4.9 million, or 54.5%, to
approximately $4.1 million for the quarter ended March 31, 2002 from
approximately $9.0 million in the three months ended March 31, 2001.



                                       15
<PAGE>

This reduction was primarily due to the net removal of 12,000 unprofitable
phones and to the ongoing impact on monthly bills of recent regulatory changes.
In addition, telephone charges for the quarter were reduced due to net credits
totaling $1.9 million related to the resolution of disputes over line charges
which have been substantially settled. The Company is currently negotiating
contracts and pursuing additional regulatory relief that it believes will
further reduce local access charges on a per-phone basis, but is unable to
estimate the impact of further telephone charge reductions at this time.

         Commissions decreased approximately $1.4 million, or 26.2%, to
approximately $3.9 million in the three months ended March 31, 2002 from
approximately $5.3 million in the three months ended March 31, 2001. Commissions
for the quarter ended March 31, 2001 included the reversal of a prior year
commission expense accrual of approximately $0.6 million reflecting an
adjustment to the expense in accordance with changes made to a contract. The
decrease was primarily attributable to lower commissionable revenues from the
reduced number of Company payphones and management actions to re-negotiate
contracts with lower rates upon renewal. The Company continues to actively
review its strategies related to contract renewals in order to maintain its
competitive position while retaining its customer base.

         Service, maintenance and network costs decreased approximately $1.4
million, or 22.1%, to approximately $4.8 million in the three months ended March
31, 2002 from approximately $6.2 million in the three months ended March 31,
2001. The decrease was primarily attributable to the lower phone count and
savings associated with the PhoneTel servicing agreement. Wage-related cost
reductions of approximately $0.4 million were generated from reduced headcount
resulting from better route densities. Service and collection and vehicle
expenses were approximately $0.1 million lower and field office expenses were
$0.3 million lower as a result of the lower phone count and field
reorganizations. In addition, network billing charges were $0.3 million lower
and property and franchise taxes were also $0.3 million lower.

         Depreciation expense in the three months ended March 31, 2002 increased
to approximately $4.4 million from approximately $4.3 million recorded in the
three months ended March 31, 2001. Amortization expense in the three months
ended March 31, 2002 increased to approximately $0.5 million from approximately
$0.3 million recorded in the three months ended March 31, 2001.

         Selling, general and administrative expenses decreased approximately
$0.3 million, or 9.8%, to approximately $2.7 million in the three months ended
March 31, 2002 from approximately $3.1 million in the three months ended March
31, 2001. The decrease in expense was attributable to a reduction in salaries
and salary-related expenses of approximately $0.1 million and a reduction in
professional fees of approximately $0.2 million.

         Interest expense in the three months ended March 31, 2002 declined
approximately $3.2 million, or 41.7%, compared to the prior-year period, to
approximately $4.6 million in the first quarter of 2002 from approximately $7.8
million in the first quarter of 2001. The decrease in recorded interest is due
to lower interest rates and a reduction of $0.9 million for the amortization of
loan origination fees charged to interest expense.

         Net loss decreased approximately $4.8 million, or 37.9%, to
approximately $7.8 million in the three months ended March 31, 2002 from
approximately $12.6 million in the first quarter of 2001.


LIQUIDITY AND CAPITAL RESOURCES

Cash Flows

     Historically, the Company's primary sources of liquidity have been cash
from operations, borrowings under various credit facilities and, periodically,
proceeds
from the issuance of common stock and proceeds


                                       16
<PAGE>

from the issuance of preferred stock. There was no stock issued in the most
recent two years, and borrowings under the Company's Old Credit Facility ceased
after the third quarter of 2000.

     The Company's payphone revenues by operating region are affected by
seasonal variations, geographic distribution of payphones, removal of
unprofitable phones and type of location. Because many of the payphones are
located outdoors, weather patterns have differing effects on the Company's
results depending on the region of the country where the payphones are located.
Payphones located in the southern United States produce substantially higher
call volume in the first and second quarters than at other times during the
years, while the Company's payphones throughout the midwestern and eastern
United States produce their highest call volumes during the second and third
quarters.

     In the three months ended March 31, 2002, operating activities used
approximately $4.6 million of net cash which was funded from the $5.0 million
received from the New Senior Credit Facility. Operating activities provided
approximately $0.5 million of net cash in the three months ended March 31, 2001.
The operating cash use resulted from the fact that total uses, which included
the operating loss of $7.8 million, increases in other assets of $2.2 million
for prepaid insurance and expenses associated with the merger, payments for
contracts totaling $0.1 million, and reductions in accounts payable and accrued
liabilities of $6.2 (which included the $3.2 million BellSouth New Service Test
adjustment noted above), exceeded total sources, which included depreciation and
amortization of $5.0 million, a reduction in accounts receivable of $2.4 million
and an increase in accrued interest of $4.3 million.

     Capital expenditures for the three months ended March 31, 2002 were $0.1
million, equal to the $0.1 million in the three months ended March 31, 2001. The
on-going strategy of removing under-performing phones, combined with the
existence of an extensive inventory of phone components, allows for minimal
capital equipment expenditures.

     The Company's principal source of liquidity in the three months ended March
31, 2002 came from cash received pursuant to the New Senior Credit Facility. See
"New Senior Credit Facility" below for a description of this indebtedness. The
Company's primary uses of liquidity are to provide working capital and to meet
debt service requirements. At March 31, 2002, the Company no longer had
borrowing availability through a revolving line of credit under the Old Credit
Facility. See "Old Credit Facility" below for a discussion of the amendments
that have restructured the Old Credit Facility and a description of current
indebtedness. All outstanding debt in connection with the Old Credit Facility
has been reclassified as current liabilities.

Old Credit Facility

     In connection with the merger with Peoples Telephone Company in 1998, the
Company entered into a secured credit facility ("Old Credit Facility") with Bank
of America, formerly known as NationsBank, N.A. (the "Administrative Agent"),
and the other lenders named therein ("Junior Lenders"). The Old Credit Facility
provides for borrowings by the Company's wholly owned subsidiary, Davel
Financing Company, L.L.C., from time to time of up to $245.0 million, including
a $45 million revolving facility, for working capital and other corporate
purposes.

     Indebtedness of the Company under the Old Credit Facility is secured by
substantially all of its and its subsidiaries' assets, including but not limited
to their equipment, inventory, receivables and related contracts, investment
property, computer hardware and software, bank accounts, and all other goods and
rights of every kind and description and is guaranteed by the Company and all of
its subsidiaries.

     The Company's borrowings under the original Old Credit Facility bore
interest at a floating rate and may be maintained as Base Rate Loans (as defined
in the Old Credit Facility) or, at the Company's option, as Eurodollar Loans (as
defined in the Old Credit Facility). Base Rate Loans bear interest at the Base
Rate (defined as the higher of (i) the applicable prime lending rate of Bank of
America or (ii) the Federal Reserve


                                       17
<PAGE>

reported certificate of deposit rate plus 1%). Eurodollar Loans bear interest at
the Eurodollar Rate (as defined in the Old Credit Facility).

     The Company is required to pay the lenders under the Old Credit Facility a
commitment fee, payable in arrears on a quarterly basis, on the average unused
portion of the Old Credit Facility during the term of the facility. The Company
is also required to pay an annual agency fee to the Agent. In addition, the
Company was also required to pay an arrangement fee for the account of each bank
in accordance with the banks' respective pro rata share of the Old Credit
Facility. The Administrative Agent and the other lenders will receive such other
fees as have been separately agreed upon with the Administrative Agent.

     The Old Credit Facility requires the Company to meet certain financial
tests and contains certain covenants that, among other things, limit the
incurrence of additional indebtedness, prepayments of other indebtedness, liens
and encumbrances and other matters customarily restricted in such agreements.

First Amendment

     In the first quarter of 1999, the Company gave notice to the Administrative
Agent that lower than expected performance in the first quarter of 1999 would
result in the Company's inability to meet certain financial covenants contained
in the Old Credit Facility. On April 8, 1999, the Company and the Lenders agreed
to the First Amendment to Credit Agreement and Consent and Waiver (the "First
Amendment") which waived compliance, for the fiscal quarter ended March 31,
1999, with the financial covenants set forth in the Old Credit Facility. In
addition, the First Amendment waived any event of default related to two
acquisitions made by the Company in the first quarter of 1999, and waived the
requirement that the Company deliver annual financial statements to the Lenders
within 90 days of December 31, 1998, provided that such financial statements be
delivered no later than April 15, 1999. The First Amendment contained amendments
that provided for the following:

     -  Amendment of the applicable percentages for Eurodollar Loans for the
        period between April 1, 1999 and June 30, 2000 at each pricing level to
        0.25% higher than those in the previous pricing grid

     -  Payment of debt from receipt of dial-around compensation accounts
        receivable related to the period November 1996 through October 1997

     -  Further limitations on permitted acquisitions as defined in the Credit
        Agreement through June 30, 2000

     -  During the period April 1, 1999 to June 30, 2000, required lenders'
        consent for the making of loans or the issuance of letters of credit if
        the sum of revolving loans outstanding plus letter of credit obligations
        outstanding exceeds $50.0 million

     -  The introduction of a new covenant to provide certain operating data to
        the Lenders on a monthly basis

     -  Increases in the maximum allowable ratio of funded debt to EBITDA
        through the quarter ended June 30, 2000

     -  Decreases in the minimum allowable interest coverage ratio through the
        quarter ended June 30, 2000

     -  Decreases in the minimum allowable fixed charge coverage ratio through
        the quarter ended June 30, 2000.


                                       18
<PAGE>

     The First Amendment also places limits on capital expenditures and required
the payment of an amendment fee equal to the product of the Lender's commitment
multiplied by 0.35%.

Second Amendment

     In the first quarter of 2000, the Company gave notice to the Administrative
Agent that lower than expected performance in the first quarter of 2000 would
result in the Company's inability to meet certain financial covenants contained
in the Old Credit Facility. Effective March 9, 2000, the Company and the Lenders
agreed to the Second Amendment to Credit Agreement and Consent and Waiver (the
"Second Amendment"), which waived certain covenants through January 15, 2001. In
exchange for the covenant relief, the Company agreed to a lowering of the
available credit facility to $245 million (through a permanent reduction of the
revolving line of credit to $45 million), placement of a block on the final $10
million of borrowing under the revolving credit facility (which requires that
all of the Lenders be notified in order to access the final $10.0 million of
availability on that facility), a fee of 35 basis points of the Lenders
commitment and a moratorium on acquisitions. The Second Amendment contained
amendments that provided for the following:

     -  Amendment of the applicable percentages for Eurodollar Loans to:


          (a)      3.50% for all Revolving Loans which are Eurodollar Loans, all
                   Tranche A Term Loans which are Eurodollar Loans, and all
                   Letter of Credit Fees;
          (b)      4.25% for all Tranche B Term Loans which are Eurodollar
                   Loans;
          (c)      2.00% for all Revolving Loans which are Base Rate Loans and
                   all Tranche A Term Loans which are Base Rate Loans;
          (d)      2.75% for all Tranche B Term Loans which are Base Rate Loans;
                   and
          (e)      0.75% for all Commitment Fees;

     -  After March 9, 2000, introduction of a new covenant requiring lenders'
        consent for the making of loans or the issuance of letters of credit if
        the sum of revolving loans outstanding plus letter of credit obligations
        outstanding exceeds $35.0 million;

     -  The addition of a new covenant to provide financial statements to the
        Lenders on a monthly basis;

     -  Increases in the maximum allowable ratio of funded debt to EBITDA
        through the maturity date of the loan;

     -  Decreases in the minimum allowable interest coverage ratio through the
        maturity date of the loan;

     -  Decreases in the minimum allowable fixed charge coverage ratio through
        the maturity date of the loan;

     -  Decreases in permitted capital expenditures to $10 million annually; and

     -  Reduction of the maximum interest period for Eurodollar loans to 30
        days.


Third Amendment

     In the second quarter of 2000, the Company gave notice to the
Administrative Agent that lower than expected performance during the first six
months of 2000 would result in the Company's inability to meet certain financial
covenants contained in the Old Credit Facility as well as the June 30, 2000 debt
amortization and interest payments. On June 22, 2000, the Company and the
Lenders who are party to the agreement


                                       19
<PAGE>

agreed to the Third Amendment to Credit Agreement (the "Third Amendment"), which
eliminated the financial covenant compliance test for the fiscal quarter ended
June 30, 2000, as was set forth in the Old Credit Facility. The Third Amendment
also provided for the following:

     -  Term Loan A amortization payments totaling $5.0 million scheduled for
        June 30, 2000 would be due on September 30, 2000 together with the $5.0
        million amortization payment scheduled for that date. The total Term A
        amortization payments due on September 30, 2000 are $10.0 million;

     -  Term Loan B amortization payments totaling approximately $0.2 million
        scheduled for June 30, 2000 would be due on September 30, 2000 together
        with the approximately $0.2 million amortization payment scheduled for
        that date. The total Term B amortization payments due on September 30,
        2000 are approximately $0.5 million;

     -  Interest payments due on June 30, 2000 became due and were paid on July
        10, 2000; and

     -  All interest otherwise due and payable on each interest payment date
        occurring after June 30, 2000 and before September 30, 2000 continued to
        accrue on the applicable loans from and after such interest payment date
        and were to have been due and payable in arrears on September 30, 2000.

Fourth Amendment

         In the third quarter of 2000, the Company gave notice to the
Administrative Agent that lower than expected performance during the first nine
months of 2000 would result in the Company's inability to meet certain financial
covenants contained in the Old Credit Facility as well as the September 30, 2000
debt amortization and interest payments. On September 28, 2000, the Company and
the Lenders who are party to the agreement agreed to the Fourth Amendment to
Credit Agreement, which eliminated the financial covenants in their entirety
with respect to all periods ending on and after September 30, 2000 and also
provided for the following:

     -  Term Loan A, Term Loan B and Revolving Loan amortization payments
        totaling $15.7 million were to have been due on January 12, 2001. In
        addition, amortization payments of approximately $7.7 million are due on
        each of March 31, June 30, September 30 and December 31, 2001, and the
        balance of the then outstanding principal amount of all loan obligations
        is due on January 11, 2002;

     -  Interest payments otherwise due and payable on any interest payment date
        prior to January 12, 2001 will continue to accrue were to have been
        payable in arrears on January 12, 2001;

     -  Applicable percentages for adjusted LIBOR interest rates after September
        29, 2000 were generally lowered from those set forth in the Third
        Amendment to 2.75% for all Loans, except that rates will continue to
        equal 3.50% for all Letter of Credit Fees and 0.75% for all Commitment
        Fees;

     -  Positive net cash on hand in excess of $2.0 million at the end of each
        month will be paid to the Lenders as a prepayment of the Loans;

     -  The Revolving Loan commitment was terminated;

     -  Capital expenditures for the period October 1, 2000 to January 12, 2001
        were limited to $400,000; and

     -  The provision regarding the application of prepayments was modified, and
        a new provision was added requiring the Company to submit to the Lenders
        bi-weekly cash flow forecasts and a revised business plan for the 2001
        fiscal year.


                                       20
<PAGE>

Fifth Amendment

     On November 29, 2000, the Borrower requested that the Lenders waive its
noncompliance with the requirements of the Credit Agreement resulting from the
Borrower's non-delivery of a revised business plan to the Lenders on or before
November 15, 2000. In exchange, the Borrower agreed to amend certain provisions
of the Credit Agreement that had permitted the Borrower to dispose of certain
property outside the ordinary course of business and to make certain investments
outside the ordinary course of business so as to require, in each case, the
Lenders' prior written approval for any such disposition or investment.

Sixth Amendment

     In the fourth quarter of 2000, the Company gave notice to the new
Administrative Agent that the Company would not be able to make the January 12,
2001 debt amortization and interest payments. On March 23, 2001, the Company and
the Lenders entered into the Sixth Amendment to Credit Agreement and Waiver,
effective as of January 12, 2001 (the "Sixth Amendment"), which provided for the
following:

     -  Principal amortization payments would be made in the amounts of $1.1
        million on April 15, 2001, $2.2 million on July 15, 2001 and $3.3
        million on October 15, 2001;

     -  The remaining outstanding principal amount of all loans, together with
        all accrued and unpaid interest, will be due on January 11, 2002;

     -  The Company will provide monthly budget reconciliation reports to the
        Lenders;

     -  The Company will comply with an agreed-upon budget for expenses in 2001;

     -  The Company will be subject to a limit on capital expenditures and
        certain location signing bonuses in 2001 and a minimum EBITDA covenant
        for 2001; and

     -  The Company agreed to the substitution of a new administrative agent for
        the Lenders, to pay such new agent a monthly fee of $30,000 and to pay
        certain earned fees of the professional advisors to the Lenders.

Seventh Amendment

     Effective as of February 19, 2002, the Company and the Junior Lenders
        entered into the Seventh Amendment to Credit Agreement and Consent and
        Waiver (the "Seventh Amendment"), which provided for the following:

     -  The payment defaults arising out of the Company's failure to make
        scheduled principal payments on July 15, 2001, October 15, 2001 and
        January 11, 2002 were waived effective as of the dates such payments
        were due;

     -  The covenant violations arising out of the Company's failure to comply
        with its minimum cumulative EBITDA covenant from May to December 2001
        were waived effective as of the dates of such violations; and

     -  The Junior Lenders provided their consent to the New Senior Credit
        Facility and the transactions contemplated by the merger agreement with
        PhoneTel, including the debt-for-equity exchange described above.


                                       21
<PAGE>

     The Old Credit Facility contains customary events of default, including
without limitation, payment defaults, defaults for breaches of representations
and warranties, covenant defaults, cross-defaults to certain other indebtedness,
defaults for certain events of bankruptcy and insolvency, judgment defaults,
failure of any guaranty or security document supporting the Old Credit Facility
to be in full force and effect, and defaults for a change of control of the
Company.

New Senior Credit Facility

         Effective as of February 19, 2002, Madeleine L.L.C. and ARK CLO 2000-1,
Limited (the "New Senior Lenders") entered into the New Senior Credit Facility
with Davel Financing Company, L.L.C., PhoneTel and Cherokee Communications,
Inc., a wholly owned subsidiary of PhoneTel. The New Senior Credit Facility is
guaranteed by the Company and all of its domestic subsidiaries. Pursuant to the
New Senior Credit Facility, the New Senior Lenders loaned $10.0 million in the
aggregate on February 20, 2002, $5.0 million to each of Davel and PhoneTel.
Davel and PhoneTel agreed to remain jointly and severally liable for all amounts
owing under the New Senior Credit Facility.

         Interest on the funds loaned pursuant to the New Senior Credit Facility
accrues at the rate of fifteen percent (15%) per annum and is payable monthly in
arrears. A principal amortization payment in the amount of $833,333, to be
shared equally by the Company and PhoneTel, is owing on the last day of each
month, beginning July 31, 2002 and ending on the maturity date of June 30, 2003.
All amounts owing under the New Senior Credit Facility will be due and owing on
August 31, 2002 if the PhoneTel Merger shall not have been consummated by such
date (unless the New Senior Lenders shall have consented to an extension of such
date).

         Pursuant to an Intercreditor and Subordination Agreement, dated as of
February 19, 2002, the Junior Lenders agreed to subordinate their security
interest in Company collateral to the security interest of the New Senior
Lenders in such collateral. Upon the repayment in full of the amounts owing
under the New Senior Credit Facility, the senior security interests of the New
Senior Lenders will terminate and the Junior Lenders will, once again, hold
first priority security interests in the Company collateral. Pursuant to the
Seventh Amendment, the Junior Lenders consented to the Company's entering into
the New Senior Credit Facility.

First Amendment

         On May 10, 2002, the Company notified the New Senior Lenders that
Davel had determined, in consultation with its independent auditors based on the
best available information regarding certain anticipated dial-around
receivables, that the Company would be unable to meet the Minimum Adjusted
EBITDA and Minimum EBITDA covenants set forth in the New Senior Credit Facility
for at least the first six months of 2002. On May 14, 2002, the Company entered
into the First Amendment to the New Senior Credit Facility ("First Amendment").
Pursuant to the First Amendment, which is effective February 19, 2002, the
Minimum Adjusted EBITDA and Minimum EBITDA covenants were loosened through June
30, 2002.

         The Company incurred losses of approximately $43.4 million and $7.8
million for the year ended December 31, 2001 and the quarter ended March 31,
2002, respectively. These losses were primarily attributable to increased
competition from providers of wireless communication services and the impact on
the Company's revenue of certain regulatory changes. As of March 31, 2002, the
Company had a working capital deficit of $282.4 million and its liabilities
exceed its assets by $237.6 million. In addition, the Company was unable to make
debt payments of approximately $237.7 million and interest payments of
approximately $36.3 million, which became due and payable on January 11, 2002 to
the lenders of the Old Credit Facility. However, the Seventh Amendment extended
the due date of all payment obligations thereunder to August 31, 2002.

         Notwithstanding the New Senior Credit Facility and the debt-for-equity
exchange described above, the Company may face liquidity shortfalls and, as a
result, might be required to dispose of assets or operations to fund its
operations, to make capital expenditures and to meet its debt service and other
obligations. There can be no assurances as to the ability to execute such
dispositions, or the timing thereof, or the amount of proceeds that the Company
could realize from such sales. As a result of these matters, substantial doubt
exists about the Company's ability to continue as a going concern.



                                       22
<PAGE>
IMPACT OF INFLATION

         Inflation is not considered a material factor affecting the Company's
business. General operating expenses such as salaries, employee benefits and
occupancy costs are, however, subject to normal inflationary pressures.


SEASONALITY

         The Company's revenues from its payphone operation regions are affected
by seasonal variations, geographic distribution of payphones and type of
location. Because many of the Company's payphones are located outdoors, weather
patterns have differing effects on the Company's results depending on the region
of the country where they are located. Most of the Company's payphones in the
southeastern United States produce substantially higher call volume in the first
and second quarters than at other times during the year, while the Company's
payphones throughout the midwestern and eastern United States produce their
highest call volumes during the second and third quarters. While the aggregate
effect of the variations in different geographical regions tend to counteract
the effect of one another, the Company has historically experienced higher
revenue and income in the second and third quarters than in the first and fourth
quarters. Changes in the geographical distribution of its payphones may in the
future result in different seasonal variations in the Company's results.


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The Company is exposed to certain market risks inherent in the Company's
financial instruments that arise from transactions entered into in the normal
course of business. The Company is subject to variable interest rate risk on its
existing Old Credit Facility and any future financing requirements. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."





                                       23
<PAGE>


PART II - OTHER INFORMATION
---------------------------


ITEM 1. LEGAL PROCEEDINGS

         On September 29, 1998, the Company announced that it was exercising its
contractual rights to terminate a merger agreement (the "Davel/PhoneTel Merger
Agreement") with PhoneTel, based on breaches of representations, warranties and
covenants by PhoneTel. On October 1, 1998, the Company filed a lawsuit in
Delaware Chancery Court seeking damages, rescission of the Davel/PhoneTel Merger
Agreement and a declaratory judgment that such breaches occurred. On October 27,
1998, PhoneTel answered the complaint and filed a counterclaim against the
Company alleging that the Davel/PhoneTel Merger Agreement had been wrongfully
terminated. At the same time, PhoneTel also filed a third party claim against
Peoples Telephone Company (acquired by the Company on December 23, 1998)
alleging that Peoples Telephone wrongfully caused the termination of the
Davel/PhoneTel Merger Agreement. The counterclaim and third party claim seek
specific performance by the Company of the transactions contemplated by the
Davel/PhoneTel Merger Agreement and damages and other equitable relief from the
Company and Peoples Telephone. Effective February 19, 2002, the parties to the
lawsuit signed a Settlement Agreement and Mutual Release ("Settlement
Agreement"). The Settlement Agreement provides that, upon the closing of the
PhoneTel Merger, all parties to the lawsuit will release and discharge all
claims and liability against all other parties, without an admission of
liability by any party. The Settlement Agreement further provides that as
promptly as possible after the closing of the PhoneTel Merger, the parties will
execute a Joint Stipulation and Order for Dismissal with Prejudice requesting
that the Delaware Chancery Court dismiss the lawsuit in its entirety, with
prejudice.

         In December 1999, the Company and its wholly owned subsidiary
Telaleasing Enterprises, Inc. were sued in the United States District Court,
Central District of California, by Telecommunications Consultant Group, Inc.
("TCG") and U.S. Telebrokers, Inc. ("UST"), two payphone consulting companies
which allege to have assisted the Company in obtaining a telephone placement
agreement with CSK Auto, Inc. ("CSK"). The suit alleged that the Company
breached its commission agreement with the plaintiffs based on the Company's
alleged wrongful rescission of its agreement with CSK. Plaintiffs' amended
complaint alleged damages in excess of $700,000. The Company moved to dismiss
the complaint, and, on August 24, 2000, the Court denied the Company's motion.
The Company subsequently answered the complaint and asserted a counterclaim,
seeking declaratory relief. On October 13, 2000, plaintiffs answered the
counterclaim, denying its material allegations. The Company, during a mediation
conference held on October 29, 2001, agreed to a confidential settlement of this
case, pursuant to which the case was dismissed with prejudice in exchange for
payments to the plaintiffs, the sum of which was not material to the Company and
was recorded in the third quarter of 2001.

         In March 2000, the Company and its wholly owned subsidiary Telaleasing
Enterprises, Inc. were sued in a related action in Maricopa County, Arizona
Superior Court by CSK. The suit alleges that the Company breached a location
agreement between the parties. CSK's complaint alleges damages in excess of $5
million. The Company removed the case to the U.S. District Court for Arizona and
moved to have the matter transferred to facilitate consolidation with the
related case in California brought by TCG and UST. On October 16, 2000, the U.S.
District Court for Arizona denied the Company's transfer motion and ordered the
case remanded back to Arizona state court. On November 13, 2000, the Company
filed its Notice of Appeal of the remand order with the United States Court of
Appeals for the Ninth Circuit. The appeal and underlying suit are in their
initial stages, and discovery is underway. The Company intends to vigorously
defend itself in the case.

         In February 2001, Picus Communications, LLC ("Picus"), a debtor in
Chapter 11 bankruptcy, filed suit against the Company and its wholly owned
subsidiary Telaleasing Enterprises, Inc. claiming unpaid invoices of over
$600,000 for local telephone services in Virginia, Maryland and the District of
Columbia. The Company denied the material allegations of Picus' complaint. On or
about April 2, 2001, Picus


                                       24
<PAGE>

voluntarily dismissed its case, indicating that it may refile its claim against
the Company in the bankruptcy court. On May 10, 2001, the district court entered
an order dismissing Picus' complaint without prejudice. On March 13, 2001, the
Company filed a proof of claim in the bankruptcy court to recover damages based
on Picus' breach of contract and failure to secure and pay the Company federally
mandated dial-around compensation. On September 21, 2001, the Company filed an
application for administrative payment with the bankruptcy court seeking
approximately $1.5 million in post-petition damages sustained by the Company as
a result of Picus's actions. On or about May 9, 2002, Picus filed a response to
the Company's claim for administrative payment as well as an objection to the
Company's proof of claim. As part of its objection, Picus asserted a
counterclaim against the Company, raising similar claims to those originally
brought in the district court. Picus' counterclaim alleges damages of
approximately $717,000. Management has indicated its intention to vigorously
defend against Picus' claims, if necessary, and to vigorously prosecute its
claims for damages against Picus. Based on the preliminary stage of this case,
we are not yet able to provide an evaluation of the likelihood of a favorable or
unfavorable result, or the amount or range of potential recovery or loss, if
any.

         On or about January 27, 2002, Davel was served with a complaint, in an
action captioned Sanchez et al. v. DavelTel, Inc. d/b/a Davel Communications,
Inc. et. al., brought in the district court for Cameron County, Texas.
Plaintiffs accuse the defendants of negligence in the death of the father of
Thomas Sanchez, a former Davel employee. The matter has been forwarded to
Davel's insurance carrier for action. While Davel believes it possesses adequate
insurance coverage for the case and has meritorious defenses, the matter is in
its initial stages. Accordingly, Davel cannot at this time predict its
likelihood of success on the merits.

         The Company is involved in other litigation arising in the normal
course of its business which it believes will not materially affect its
financial condition or results of operations.


ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

         (a)      See Exhibit Index.

         (b)      On February 27, 2002, the Company filed a Current Report on
                  Form 8-K announcing the execution of an agreement and plan of
                  reorganization and merger with PhoneTel Technologies, Inc. and
                  of an exchange agreement with its Junior Lenders, each
                  effective as of February 19, 2002, and certain other related
                  matters. No other current reports on Form 8-K were filed
                  during the quarter ended March 31, 2002.






                                       25
<PAGE>




SIGNATURE
---------

        Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Form 10-Q to be signed on its behalf by the
undersigned thereunto duly authorized.

                                                     DAVEL COMMUNICATIONS, INC.

Date: May 15, 2002                                    /s/ MARC S.  BENDESKY
                                                       --------------------

                                                          Marc S. Bendesky
                                                      Chief Financial Officer























                                       26
<PAGE>

                                 EXHIBIT INDEX


Exhibit No.    Description
-----------    -----------

10.1           First Amendment, dated as of May 14, 2002, to the Credit
               Agreement, dated as of February 19, 2002, among Davel
               Communications, Inc., Davel Financing Company, L.L.C., the
               Domestic Subsidiaries thereof as Guarantors, PhoneTel
               Technologies, Inc., Cherokee Communications, Inc., and the
               lenders named therein.