**Exhibit99.1**

 

**ORANGE COUNTY**-POUGHKEEPSIE LIMITEDPARTNERSHIP

**TABLEOF CONTENTS**

 
|                                                          | ** ** | ** ** | **Page** | ** ** |
|----------------------------------------------------------|------------|------------|----------|------------|
| REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING  FIRM |       | 1          |     |
|                                                     |       |       |     |
| Balance Sheets                                           |       | 2          |     |
| *December  31, 2006 and 2005*                            | * *   |       |     |
| * *                                                 | * *   |       |     |
| Statements of  Operations                                |       | 3          |     |
| *For the  years ended December 31, 2006, 2005 and 2004*  | * *   |       |     |
| * *                                                 | * *   |       |     |
| Statements of  Changes in Partners’ Capital         |       | 4          |     |
| *For the  years ended December 31, 2006, 2005 and 2004*  | * *   |       |     |
| * *                                                 | * *   |       |     |
| Statements of  Cash Flows                                |       | 5          |     |
| *For the  years ended December 31, 2006, 2005 and 2004*  | * *   |       |     |
| * *                                                 | * *   |       |     |
| Notes to  Financial Statements                           |       | 6-12       |     |

 

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|        |   | Deloitte & Touche LLP   |
|--------|--------|-----------------------------|
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|   |   | Atlanta, GA 30303-1924      |
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|   |   | www.deloitte.com            |

 

**REPORT OF INDEPENDENT REGISTEREDPUBLIC ACCOUNTING FIRM**

To the Partners of OrangeCounty **-** Poughkeepsie LimitedPartnership:

We have auditedthe accompanying balance sheets of Orange County - Poughkeepsie LimitedPartnership (the “Partnership”) as of December 31, 2006 and 2005, and therelated statements of operations, changes in partners’ capital, and cash flowsfor each of the three years in the period ended December 31, 2006.  These financial statements are theresponsibility of the Partnership’s management. Our responsibility is to express an opinion on these financialstatements based on our audits.

We conducted ouraudits in accordance with the standards of the Public Company AccountingOversight Board (United States).** **Thosestandards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of materialmisstatement.  The Partnership is not required to have, nor were weengaged to perform, an audit of its internal control over financialreporting.  Our audit included considerationof internal control over financial reporting as a basis for designing auditprocedures that are appropriate in the circumstances, but not for the purposeof expressing an opinion on the effectiveness of the Partnership’s internalcontrol over financial reporting.  Accordingly, we express no suchopinion.  An audit also includes examining, on a test basis, evidencesupporting the amounts and disclosures in the financial statements, assessingthe accounting principles used and significant estimates made by management, aswell as evaluating the overall financial statement presentation.  Webelieve that our audits provide a reasonable basis for our opinion.

In our opinion,such financial statements present fairly, in all material respects, thefinancial position of the Partnership as of December 31, 2006 and 2005, and theresults of its operations and its cash flows for each of the three years in theperiod ended December 31, 2006, in conformity with accounting principlesgenerally accepted in the United States of America.

As discussed inNotes 2 and 4 to the financial statements, approximately 98% of the Partnership’srevenue in each of the three years in the period ended December 31, 2006 isaffiliate revenue.

****
| Atlanta,  Georgia  |
|--------------------|
| February  28, 2007 |

 

 

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**ORANGE COUNTY - POUGHKEEPSIE LIMITED PARTNERSHIP**

 

**BALANCE SHEETSDECEMBER 31, 2006 AND 2005(Dollars in Thousands)**

** **
| ** **                                          | ** ** | **2006** | ** ** | **2005**   | ** ** |
|-----------------------------------------------------|------------|----------|------------|------------|------------|
| **ASSETS**                                          |       |     | ** ** | ** ** | ** ** |
|                                                |       |     | ** ** | ** ** | ** ** |
| CURRENT ASSETS:                                     |       |     | ** ** | ** ** | ** ** |
|                                                |       |     |       |       |       |
| Accounts  receivable, net of allowance of $0 and $0 |       | $        | 98         |       | $          | 254 |   |
| Unbilled revenue                                    |       | 1,586    |       | 1,599      |       |
| Due from general  partner                           |       | 9,509    |       | 7,802      |       |
| Prepaid expenses  and other current assets          |       | 111      |       | 157        |       |
|                                                |       |     |       |       |       |
| Total current  assets                               |       | 11,304   |       | 9,812      |       |
|                                                |       |     |       |       |       |
| PROPERTY, PLANT AND  EQUIPMENT - Net                |       | 38,917   |       | 37,516     |       |
|                                                |       |     |       |       |       |
| TOTAL ASSETS                                        |       | $        | 50,221     |       | $          | 47,328 |   |
|                                                |       |     |       |       |       |
| **LIABILITIES AND PARTNERS’  CAPITAL**         |       |     |       |       |       |
|                                                |       |     |       |       |       |
| CURRENT LIABILITIES:                                |       |     |       |       |       |
| Accounts payable  and accrued liabilities           |       | $        | 103        |       | $          | 171 |   |
| Advance billings                                    |       | —   |       | 72         |       |
| Total current  liabilities                          |       | 103      |       | 243        |       |
|                                                |       |     |       |       |       |
| LONG TERM LIABILITIES                               |       | 328      |       | 189        |       |
|                                                |       |     |       |       |       |
| Total liabilities                                   |       | 431      |       | 432        |       |
|                                                |       |     |       |       |       |
| COMMITMENTS AND  CONTINGENCIES (NOTES 5 and 6)      |       |     |       |       |       |
|                                                |       |     |       |       |       |
| PARTNERS’ CAPITAL                              |       | 49,790   |       | 46,896     |       |
|                                                |       |     |       |       |       |
| TOTAL LIABILITIES AND PARTNERS’ CAPITAL        |       | $        | 50,221     |       | $          | 47,328 |   |

 

 

See notes tofinancial statements.

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**ORANGECOUNTY - POUGHKEEPSIE LIMITED PARTNERSHIP**

** **

**STATEMENTSOF OPERATIONSYEARS ENDED DECEMBER 31, 2006, 2005 AND 2004(Dollars in Thousands)**

 
| ** **                                                                                          | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** |
|-----------------------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| ** **                                                                                          |       |     |       |     |       |     |       |
| OPERATING  REVENUE (see Note 4 for Transactions with Affiliates):                                   |       |     |       |     |       |     |       |
| Service revenues                                                                                    |       | $        | 157,993    |     | $          | 180,508  |       | $ | 163,367 |   |
|                                                                                                |       |     |       |     |       |     |       |
| OPERATING COSTS  AND EXPENSES (see Note 4 for Transactions with Affiliates):                        |       |     |       |     |       |     |       |
| Cost of service (excluding depreciation and  amortization related to network assets included below) |       | 24,449   |       | 25,292   |       | 16,854   |       |
| General and administrative                                                                          |       | 2,623    |       | 2,142    |       | 2,242    |       |
| Depreciation and amortization                                                                       |       | 6,720    |       | 6,347    |       | 5,521    |       |
| Net loss on sale of property, plant and equipment                                                   |       | —   |       | 1        |       | 60       |       |
|                                                                                                |       |     |       |     |       |     |       |
| Total operating costs and expenses                                                                  |       | 33,792   |       | 33,782   |       | 24,677   |       |
|                                                                                                |       |     |       |     |       |     |       |
| OPERATING INCOME                                                                                    |       | 124,201  |       | 146,726  |       | 138,690  |       |
|                                                                                                |       |     |       |     |       |     |       |
| INTEREST AND  OTHER INCOME - Net                                                                    |       | 693      |       | 782      |       | 980      |       |
|                                                                                                |       |     |       |     |       |     |       |
| NET INCOME                                                                                          |       | $        | 124,894    |     | $          | 147,508  |       | $ | 139,670 |   |
|                                                                                                |       |     |       |     |       |     |       |
| Allocation of  Net Income:                                                                          |       |     |       |     |       |     |       |
| Limited partners                                                                                    |       | $        | 18,734     |     | $          | 22,126   |       | $ | 20,950 |   |
| General partner                                                                                     |       | 106,160  |       | 125,382  |       | 118,720  |       |

 

 

See notes tofinancial statements.

 

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**ORANGE COUNTY - POUGHKEEPSIE LIMITED PARTNERSHIP**

**STATEMENTSOF CHANGES IN PARTNERS’ CAPITALYEARS ENDED DECEMBER 31, 2006, 2005 AND 2004(Dollars in Thousands)**

 
| ** **                      | ** ** | **General Partner**          | ** ** | **Limited Partners** | ** ** | ** **    | ** ** |
|---------------------------------|------------|-----------------------------------|------------|---------------------------|------------|---------------|------------|
| ** **                      | ** ** | ** **                        | ** ** | ** **                | ** ** | **Warwick**   | ** ** | ** ** | ** ** |
| ** **                      | ** ** | **Verizon**                       | ** ** | **Taconic**               | ** ** | **Valley**    | ** ** | **Total** | ** ** |
| ** **                      | ** ** | **Wireless**                      | ** ** | **Telephone**             | ** ** | **Telephone** | ** ** | **Partners’** | ** ** |
| ** **                      | ** ** | **of the East LP** | ** ** | **Corporation**           | ** ** | **Company**   | ** ** | **Capital** | ** ** |
| BALANCE—January 1, 2004    |       | $                                 | 42,260     |                      | $          | 3,729         |       | $ | 3,729 |   | $ | 49,718 |   |
|                            |       |                              |       |                      |       |          |       |   |   |
| Net income                      |       | 118,720                           |       | 10,475                    |       | 10,475        |       | 139,670 |   |
|                            |       |                              |       |                      |       |          |       |   |   |
| Distribution to  partners       |       | (133,450                          | )          | (11,775                   | )          | (11,775       | )          | (157,000 | ) |
|                            |       |                              |       |                      |       |          |       |   |   |
| BALANCE—December 31,  2004 |       | 27,530                            |       | 2,429                     |       | 2,429         |       | 32,388 |   |
|                            |       |                              |       |                      |       |          |       |   |   |
| Net income                      |       | 125,382                           |       | 11,063                    |       | 11,063        |       | 147,508 |   |
|                            |       |                              |       |                      |       |          |       |   |   |
| Distribution to  partners       |       | (113,050                          | )          | (9,975                    | )          | (9,975        | )          | (133,000 | ) |
|                            |       |                              |       |                      |       |          |       |   |   |
| BALANCE—December 31,  2005 |       | 39,862                            |       | 3,517                     |       | 3,517         |       | 46,896 |   |
|                            |       |                              |       |                      |       |          |       |   |   |
| Net income                      |       | 106,160                           |       | 9,367                     |       | 9,367         |       | 124,894 |   |
|                            |       |                              |       |                      |       |          |       |   |   |
| Distribution to  partners       |       | (103,700                          | )          | (9,150                    | )          | (9,150        | )          | (122,000 | ) |
|                            |       |                              |       |                      |       |          |       |   |   |
| BALANCE—December 31, 2006  |       | $                                 | 42,322     |                      | $          | 3,734         |       | $ | 3,734 |   | $ | 49,790 |   |

 

See notes to financialstatements.

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**ORANGECOUNTY - POUGHKEEPSIE LIMITED PARTNERSHIP**

**STATEMENTSOF CASH FLOWSYEARS ENDED DECEMBER 31, 2006, 2005 AND 2004(Dollars in Thousands)**
| ** **                                                                         | ** ** | **2006** | ** ** | **2005** | ** ** | **2004** | ** ** |
|------------------------------------------------------------------------------------|------------|----------|------------|----------|------------|----------|------------|
| CASH FLOWS FROM  OPERATING ACTIVITIES:                                             |       |     |       |     |       |     |       |
| Net income                                                                         |       | $        | 124,894    |     | $          | 147,508  |       | $ | 139,670 |   |
| Adjustments to reconcile net income to net cash  provided by operating activities: |       |     |       |     |       |     |       |
| Depreciation and amortization                                                      |       | 6,720    |       | 6,347    |       | 5,521    |       |
| Net loss on sale of property, plant and equipment                                  |       | —   |       | 1        |       | 60       |       |
| Changes in certain assets and liabilities:                                         |       |     |       |     |       |     |       |
| Accounts receivable                                                                |       | 156      |       | (10      | )          | (171     | )          |
| Unbilled revenue                                                                   |       | 13       |       | (350     | )          | (383     | )          |
| Prepaid expenses and other current assets                                          |       | 46       |       | (105     | )          | (3       | )          |
| Accounts payable and accrued liabilities                                           |       | 68       |       | (5       | )          | 88       |       |
| Advance billings                                                                   |       | (72      | )          | (72      | )          | (166     | )          |
| Long term liabilities                                                              |       | 139      |       | 189      |       | —   |       |
|                                                                               |       |     |       |     |       |     |       |
| Net cash provided by operating activities                                          |       | 131,964  |       | 153,503  |       | 144,616  |       |
|                                                                               |       |     |       |     |       |     |       |
| CASH FLOWS FROM  INVESTING ACTIVITIES:                                             |       |     |       |     |       |     |       |
| Capital expenditures, including purchases from  affiliates, net                    |       | (8,257   | )          | (9,599   | )          | (10,484  | )          |
| Change in due from General Partner, net                                            |       | (1,707   | )          | (7,802   | )          | 19,766   |       |
|                                                                               |       |     |       |     |       |     |       |
| Net cash used in / (provided by) investing  activities                             |       | (9,964   | )          | (17,401  | )          | 9,282    |       |
|                                                                               |       |     |       |     |       |     |       |
| CASH FLOWS FROM  FINANCING ACTIVITIES:                                             |       |     |       |     |       |     |       |
| Change in due to General Partner                                                   |       | —   |       | (3,102   | )          | 3,102    |       |
| Distribution to partners                                                           |       | (122,000 | )          | (133,000 | )          | (157,000 | )          |
|                                                                               |       |     |       |     |       |     |       |
| Net cash used in financing activities                                              |       | (122,000 | )          | (136,102 | )          | (153,898 | )          |
|                                                                               |       |     |       |     |       |     |       |
| CHANGE IN CASH                                                                     |       | —   |       | —   |       | —   |       |
|                                                                               |       |     |       |     |       |     |       |
| CASH—BEGINNING  OF YEAR                                                       |       | —   |       | —   |       | —   |       |
|                                                                               |       |     |       |     |       |     |       |
| CASH—END OF YEAR                                                              |       | $        | —     |     | $          | —   |       | $ | — |   |
|                                                                               |       |     |       |     |       |     |       |
| NONCASH  TRANSACTIONS FROM INVESTING AND FINANCING ACTIVITIES:                     |       |     |       |     |       |     |       |
| Accruals for  capital expenditures                                                 |       | $        | 36         |     | $          | 174      |       | $ | 434 |   |

 

See notes to financial statements.

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**ORANGE COUNTY - POUGHKEEPSIELIMITED PARTNERSHIP**

**NOTES TOFINANCIAL STATEMENTSYEARS ENDED DECEMBER 31, 2006, 2005, AND 2004(Dollars in Thousands)**

**1.**              ORGANIZATION AND MANAGEMENT

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

The partners and their respective ownershippercentages as of December 31, 2006, 2005 and 2004 are as follows:
| Managing and general  partner:                         |   |   |   |
|--------------------------------------------------------|--------|--------|--------|
|                                                   |   |   |   |
| Verizon Wireless of the East LP*                       |   | 85.0   | %      |
|                                                   |   |   |   |
| Limited  partners:                                     |   |   |   |
|                                                   |   |   |   |
| Taconic Telephone Corporation (“Taconic”)    |   | 7.5    | %      |
| Warwick Valley Telephone Company (“Warwick”) |   | 7.5    | %      |

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*                    VerizonWireless of the East LP is a partnership which is consolidated by CellcoPartnership (d/b/a Verizon Wireless) (“Cellco”).  Prior to August 15, 2006, Verizon Wireless ofthe East LP (the “General Partner”) was a partnership between Verizon Wirelessof Georgia LLC and Verizon Wireless Acquisition South LLC, which hold acontrolling interest, and Price Communications which had a preferredinterest.  On August 15, 2006 VerizonELPI Holding Corp. (a subsidiary of Verizon Communications Inc.) became theowner of the preferred interest previously held by Price Communications.

**2.**              SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

***Use of Estimates***—The preparation of financial statements inconformity with accounting principles generally accepted in the United Statesof America requires management to make estimates and assumptions that affectthe reported amounts of assets and liabilities and the disclosure of contingentassets and liabilities at the date of the financial statements and the reportedamounts of revenues and expenses during the reporting period.  Actual results could differ from thoseestimates.  Estimates are used for, butnot limited to, the accounting for: allocations, allowance for uncollectibleaccounts receivable, unbilled revenue, fair value of financial instruments,depreciation and amortization, useful lives and impairment of assets, accruedexpenses, taxes, and contingencies. Estimates and assumptions are periodically reviewed and the effects ofany material revisions are reflected in the financial statements in the periodthat they are determined to be necessary.

***Revenue Recognition***—The Partnership earns revenue by providing accessto the network (access revenue) and for usage of the network (airtime/usagerevenue), which includes roaming and long distance revenue.  In general, access revenue is billed onemonth in advance and is recognized when earned; the unearned portion isclassified in advance billings. Airtime/usage revenue, roaming revenue and long

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distancerevenue are recognized when service is rendered and included in unbilledrevenue until billed.  The roamingrates charged by the Partnership to Cellco do not necessarily reflect current marketrates.  The Partnership will continue to re-evaluate the rates on aperiodic basis (see Note 4).  The Partnership’s revenue recognitionpolicies are in accordance with the Securities and Exchange Commission’s (“SEC”)Staff Accounting Bulletin (“SAB”) No. 101, *RevenueRecognition in Financial Statements* and SAB No. 104, *Revenue Recognition.*

Approximately98% of the Partnership’s 2006, 2005 and 2004 revenue is affiliate revenue dueto the fact that Cellco is the Partnership’s primary reseller.  The wholesale rates charged to Cellco do notnecessarily reflect current market rates. The Partnership continues to re-evaluate the rates and expects theserates to be reduced in the future consistent with market trends and the termsof the limited partnership agreement (See Note 4).

Cellularservice revenues resulting from a cellsite agreement with Cellco are recognizedbased upon an allocation of airtime minutes (See Note 4).

***Operating Costs and Expenses***—Operatingcosts and expenses include costs and expenses incurred directly by thePartnership, as well as an allocation of certain administrative and operatingcosts incurred by the General Partner or its affiliates on behalf of thePartnership.  Services performed on behalfof the Partnership are provided by employees of Cellco.  These employees are not employees of thePartnership and therefore, operating expenses include direct and allocatedcharges of salary and employee benefit costs for the services provided to thePartnership.  The Partnership believessuch allocations, principally based on the Partnership’s percentage of totalcustomers, customer gross additions, or minutes-of-use, are reasonable.

***Property, Plant and Equipment***—Property,plant and equipment primarily represents costs incurred to construct and expandcapacity and network coverage on Mobile Telephone Switching Offices (“MTSOs”)and cell sites.  The cost of property,plant and equipment is depreciated over its estimated useful life using thestraight-line method of accounting. Leasehold improvements are amortized over the shorter of their estimateduseful lives or the term of the related lease. Major improvements to existing plant and equipment are capitalized.Routine maintenance and repairs that do not extend the life of the plant andequipment are charged to expense as incurred.

Uponthe sale or retirement of property, plant and equipment, the cost and relatedaccumulated depreciation or amortization is eliminated from the accounts andany related gain or loss is reflected in the Statements of Operations.

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

***FCC Licenses***—The FederalCommunications Commission (“FCC”) issues licenses that authorize cellularcarriers to provide service in specific cellular geographic service areas.  The FCC grants licenses for terms of up toten years.  In 1993 the FCC adoptedspecific standards to apply to cellular renewals, concluding it will reward alicense renewal to a cellular licensee that meets certain standards of pastperformance.  Historically, the FCC hasgranted license renewals routinely.  Allwireless licenses issued by the FCC that authorize the Partnership to providecellular services are recorded on the books of Cellco.  The current term of the Partnership’s FCClicenses expire in June 2007 and January 2008. Cellco believes it will be able to meet all requirements necessary tosecure renewal of the Partnership’s wireless licenses.

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***Valuation of Assets***—Long-lived assets,including property, plant and equipment, are reviewed for impairment wheneverevents or changes in circumstances indicate that the carrying amount of theasset may not be recoverable.  Thecarrying amount of a long-lived asset is not recoverable if it exceeds the sumof the undiscounted cash flows expected to result from the use and eventualdisposition of the asset.  The impairmentloss, if determined to be necessary, would be measured as the amount by whichthe carrying amount of the asset exceeds the fair value of the asset.

As discussed above, theFCC licenses under which the Partnership operates are recorded on the books ofCellco.  Cellco does not charge thePartnership for the use of any FCC license recorded on its books.  However, Cellco believes that under the Partnershipagreement it has the right to allocate, based on a reasonable methodology, anyimpairment loss recognized by Cellco for all licenses included in Cellco’snational footprint.  Accordingly, the FCClicenses, including the licenses under which the Partnership operates, recordedon the books of Cellco are evaluated for impairment by Cellco, under theguidance set forth in Statement of Financial Accounting Standards (“SFAS”) No.142, *Goodwill and Other Intangible Assets*.

The FCC licenses aretreated as an indefinite life intangible asset on the books of Cellco under theprovisions of SFAS No. 142 and are not amortized, but rather are tested forimpairment annually or between annual dates, if events or circumstanceswarrant.  All of the licenses in Cellco’snationwide footprint are tested in the aggregate for impairment under SFAS No.142.  When testing the carrying value ofthe wireless licenses in 2004 for impairment, Cellco determined the fair valueof the aggregated wireless licenses by subtracting from enterprise discountedcash flows (net of debt) the fair value of all of the other net tangible andintangible assets of Cellco, including previously unrecognized intangibleassets. This approach is generally referred to as the residual method.  In addition, the fair value of the aggregatedwireless licenses was then subjected to a reasonableness analysis using publicinformation of comparable wireless carriers. If the fair value of theaggregated wireless licenses as determined above was less than the aggregatedcarrying amount of the licenses, an impairment would have been recognized byCellco and then may have been allocated to the Partnership. During 2004, thetest for impairment was performed with no impairment recognized.

On September 29, 2004,the SEC issued a Staff Announcement No. D-108, *Use of theResidual Method to Value Acquired Assets other than Goodwill*.  This Staff Announcement requires SECregistrants to adopt a direct value method of assigning value to intangibleassets, including wireless licenses, acquired in a business combination underSFAS No. 141, *Business Combinations*, effectivefor all business combinations completed after September 29, 2004.  Further, all intangible assets, includingwireless licenses, valued under the residual method prior to this adoption arerequired to be tested for impairment using a direct value method no later thanthe beginning of 2005. Any impairment of intangible assets recognized uponapplication of a direct value method by entities previously applying theresidual method should be reported as a cumulative effect of a change in accountingprinciple.  Under this StaffAnnouncement, the reclassification of recorded balances from wireless licensesto goodwill prior to the adoption of this Staff Announcement is prohibited.

Cellco evaluated itswireless licenses for potential impairment using a direct value methodology asof December 15, 2006 and 2005 in accordance with SEC Staff Announcement No.D-108.  The valuation and analysesprepared in connection with the adoption of a direct value method and subsequentrevaluation resulted in no adjustment to the carrying value of Cellco’swireless licenses and, accordingly, had no effect on its financialstatements.  Future tests for impairmentwill be performed at least annually and more often if events or circumstanceswarrant.

***Concentrations***—To the extent thePartnership’s customer receivables become delinquent, collection activitiescommence.  The General Partner accountsfor 93.6% and 83.8% of the accounts receivable

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balance at December 31,2006, and 2005 respectively.  ThePartnership maintains an allowance for losses, as necessary, based on theexpected collectibility of accounts receivable.

Approximately  98% of the Partnership’s 2006, 2005 and 2004revenue is affiliate revenue.

Cellcoand the Partnership rely on local and long-distance telephone companies, someof whom are related parties, and other companies to provide certaincommunication services.  Althoughmanagement believes alternative telecommunications facilities could be found ina timely manner, any disruption of these services could potentially have anadverse impact on the Partnership’s operating results.

AlthoughCellco and the General Partner attempt to maintain multiple vendors forequipment, which are important components of its operations, they are currentlyacquired from only a few sources. Certain of these products are in turn utilized by the Partnership andare important components of the Partnership’s operations.  If the suppliers are unable to meet theGeneral Partner’s needs as it builds out its network infrastructure and sellsservice, delays and increased costs in the expansion of the Partnership’snetwork infrastructure or losses of potential customers could result, whichwould adversely affect operating results.

***Financial Instruments***—The Partnership’strade receivables and payables are short-term in nature, and accordingly, theircarrying value approximates fair value.

***Income Taxes***—The Partnership is not a taxable entity for Federal and state income taxpurposes.  Any taxable income or loss isapportioned to the partners based on their respective partnership interests andis reported by them individually.

***Due to/from GeneralPartner***—Due to/fromGeneral Partner principally represents the Partnership’s cash position.  The General Partner manages all cash,investing and financing activities of the Partnership.  As such, the change in Due from General Partners is reflectedas an investing activity in the Statements of Cash Flows while the change inDue to General Partner is reflected as a financing activity.  Additionally,administrative and operating costs incurred by the General Partner on behalf ofthe Partnership are charged to the Partnership through this account.  Interest expense/income is based on theaverage monthly outstanding balance in this account and is calculated byapplying Cellco’s average cost of borrowing from Verizon Global Funding, awholly owned subsidiary of Verizon Communications. The cost of borrowing wasapproximately 5.4%, 4.8%, and 5.9% for the years ended December 31, 2006, 2005and 2004, respectively.  Included inInterest and Other Income, Net is net interest income related to the Due fromGeneral Partner balance of $693, $782 and $980 for the years ended December 31,2006, 2005 and 2004, respectively.

***Distributions****—*The Partnership isrequired to make distributions to its partners on a quarterly basis based uponthe Partnership’s operating results, cash availability and financing needs asdetermined by the General Partner at the date of distribution.

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

Property, plant and equipment, net, consists of thefollowing as of December 31, 2006 and 2005:
|                                    | ** ** | **Useful Lives** | ** ** | **2006** | ** ** | **2005** | ** ** |
|------------------------------------|------------|-----------------------|------------|----------|------------|----------|------------|
| Buildings                          |       | 10-40 years           |       | $        | 14,367     |     | $          | 13,408 |   |
| Wireless plant  equipment          |       | 3-15 years            |       | 61,795   |       | 58,087   |       |
| Furniture, fixtures and  equipment |       | 2-5 years             |       | 18       |       | 303      |       |
| Leasehold Improvements             |       | 5 years               |       | 2,460    |       | 2,149    |       |
|                               |       |                  |       |     |       |     |       |
|                               |       |                  |       | 78,640   |       | 73,947   |       |
|                               |       |                  |       |     |       |     |       |
| Less accumulated  depreciation     |       |                  |       | (39,723  | )          | (36,431  | )          |
|                               |       |                  |       |     |       |     |       |
| Property, plant and equipment, net |       |                  |       | $        | 38,917     |     | $          | 37,516 |   |

 

Capitalizednetwork engineering costs of $545 and $406 were recorded during the years endedDecember 31, 2006 and 2005, respectively. Construction-in-progress included in certain of the classificationsshown above, principally wireless plant equipment, amounted to $641 and $2,368at December 31, 2006 and 2005, respectively. Depreciation and amortization expense for the years ended December 31,2006, 2005 and 2004 was $6,720, $6,347 and $5,521, respectively.

**4.**              TRANSACTIONS WITH AFFILIATES

Significanttransactions with affiliates (Cellco and its related entities), includingallocations and direct charges, are summarized as follows for the years endedDecember 31, 2006, 2005 and 2004:
|                                                                | ** ** | **2006**   | ** ** | **2005**   | ** ** | **2004**   | ** ** |
|----------------------------------------------------------------|------------|------------|------------|------------|------------|------------|------------|
| **Revenue:**                                                   | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Operating revenues  (b)                                        |       | $          | 153,176    |       | $          | 176,310    |       | $ | 158,571 |   |
| Cellsite  allocated revenues (c)                               |       | 1,336      |       | 1,377      |       | 1,506      |       |
| **Cost of Service:**                                           |       |       |       |       |       |       |       |
| Direct  telecommunication charges (a)                          |       | 7,194      |       | 6,355      |       | 1,697      |       |
| Long distance  charges                                         |       | 7,082      |       | 8,208      |       | 5,580      |       |
| Allocation of  cost of service (a)                             |       | 3,812      |       | 3,364      |       | 3,360      |       |
| Allocation of  switch usage cost (a)                           |       | 4,360      |       | 5,519      |       | 4,705      |       |
| **Selling, General and  Administrative:**                      |       |       |       |       |       |       |       |
| Allocation of certain  general and administrative expenses (a) |       | 1,911      |       | 1,672      |       | 2,198      |       |
|                                                                |            |            |            |            |            |            |            |  |  |  |

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(a)             Expenses wereallocated based on the Partnership’s percentage of total customers, customergross additions or minutes-of-use where applicable.  The Partnership believes the allocations arereasonable.

(b)            Affiliate operatingrevenues primarily represent revenues generated from transactions with Cellco,the Partnership’s primary reseller.  Thewholesale rates charged to Cellco do not necessarily reflect current marketrates.  The Partnership continues tore-evaluate the rates and expects these rates to be reduced in the futureconsistent with market trends and the terms of the limited partnershipagreement.

(c)             Cellsite allocatedrevenues, based on the Partnership’s percentage of minutes of use, result fromthe Partnership sharing a cell site with the Catskills RSA Limited Partnership,an affiliate entity.

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All affiliatetransactions captured above are based on actual amounts directly incurred byCellco on behalf of the Partnership and/or allocations from Cellco.  Revenues and expenses were allocated based onthe Partnership’s percentage of total customers, gross customer additions orminutes of use where applicable. The General Partner believes the allocationsare reasonable.  The affiliatetransactions are not necessarily conducted at arm’s length.

The Partnership had net purchases of plant, property,and equipment with affiliates of $4,691, $4,738 and $7,245 in 2006, 2005 and2004, respectively.

**5.**              COMMITMENTS

The General Partner, onbehalf of the Partnership, and the Partnership itself have entered into operating leases for facilitiesand equipment used in its operations. Lease contracts include renewal options that include rent expenseadjustments based on the Consumer Price Index as well as annual andend-of-lease term adjustments.  Rentexpense is recorded on a straight-line basis. The noncancellable lease term used to calculate the amount of thestraight-line rent expense is generally determined to be the initial leaseterm, including any optional renewal terms that are reasonably assured.  Leasehold improvements related to these operatingleases are amortized over the shorter of their estimated useful lives or thenoncancellable lease term.  Forthe years ended December 31, 2006, 2005 and 2004, the Partnershiprecognized a total of $2,001, $1,845 and $1,446, respectively, as rent expenserelated to payments under these operating leases, which was included in cost ofservice in the accompanying Statements of Operations.

Aggregatefuture minimum rental commitmentsunder noncancelable operating leases, excluding renewal options that are notreasonably assured, for the years shown are as follows:
| Years                  | ** ** | ** ** | ** ** | **Amount** | ** ** |
|------------------------|------------|------------|------------|------------|------------|
| 2007                   |       | $          | 1,758      |       |
| 2008                   |       | 1,661      |       |
| 2009                   |       | 1,159      |       |
| 2010                   |       | 515        |       |
| 2011                   |       | 198        |       |
| 2012 and thereafter    |       | 255        |       |
|                   |       |       |       |
| Total minimum payments |       | $          | 5,546      |       |

 

From time to time theGeneral Partner enters into purchase commitments, primarily for networkequipment, on behalf of the Partnership.

**6.**              CONTINGENCIES

Cellco is subject to variouslawsuits and other claims including class actions, product liability, patentinfringement, antitrust, partnership disputes, and claims involving  relations with resellers and agents. Cellco is also defending lawsuits filed againstitself and other participants in the wireless industry alleging various adverseeffects as a result of wireless phone usage. Various consumer classaction lawsuits allege that Cellco breached contracts with consumers, violatedcertain state consumer protection laws and other statutes and defraudedcustomers through concealed or misleading billing practices. Certain of these lawsuitsand other claims may impact the Partnership. These litigation matters mayinvolve indemnification obligations by third parties and/or affiliated partiescovering all or part of any potential damage awards against Cellco and thePartnership and/or insurance coverage. Attorney

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Generals in a number of statesalso are investigating certain sales, marketing and advertising practices.All of the above matters are subject to many uncertainties, and outcomes arenot predictable with assurance.

The Partnership may be allocated a portion of thedamages that may result upon adjudication of these matters if the claimantsprevail in their actions. Consequently, the ultimate liability with respect tothese matters at December 31, 2006 cannot be ascertained. The potential effect,if any, on the financial condition and results of operations of thePartnership, in the period in which these matters are resolved, may bematerial.

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

**7.**              RECONCILIATION OF ALLOWANCE FOR DOUBTFUL ACCOUNTS
|                                  | ** ** | **Balance at**       | ** ** | **Additions**       | ** ** | **Write-offs**  | ** ** | **Balance at**       | ** ** |
|----------------------------------|------------|---------------------------|------------|---------------------|------------|-----------------|------------|---------------------------|------------|
| ** **                       | ** ** | **Beginning**             | ** ** | **Charged to** | ** ** | **Net of** | ** ** | **End**                   | ** ** |
| ** **                       | ** ** | **of the Year** | ** ** | **Operations**      | ** ** | **Recoveries**  | ** ** | **of the Year** | ** ** |
| Accounts Receivable  Allowances: |       |                      |       |                |       |            |       |                      |       |
| 2006                             |       | $                         | —     |                | $          | —          |       | $                         | —     |   | $ | — |   |
| 2005                             |       | $                         | —     |                | $          | —          |       | $                         | —     |   | $ | — |   |
| 2004                             |       | $                         | 20         |                | $          | —          |       | $                         | (20        | ) | $ | — |   |

 

**8.**              SUBSEQUENT EVENTS

Effective January 15, 2007, the General Partner,Cellco and Taconic entered into a Partnership interest Purchase Agreement whereTaconic agreed to sell its 7.5% limited partnership interest to Cellco.  On February 20, 2007, Warwick notified Cellcoit exercised its right to purchase a proportionate share of Taconic’s interestat the offer price.

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