SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549
                                 ---------------

                                    FORM 10-K
   (Mark One)
      |X|      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                   For the fiscal year ended December 31, 1996
                                       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 1-14108

                           360 COMMUNICATIONS COMPANY
             (Exact name of registrant as specified in its charter)


            Delaware                                           47-0649117
  (State or other jurisdiction                              (I.R.S. Employer
          of incorporation)                                  Identification No.)


                              8725 W. Higgins Road
                                Chicago, Illinois
                                   60631-2702
                                 (773) 399-2500
          (Address and telephone number of principal executive offices)

           Securities registered pursuant to Section 12(b) of the Act:

                                                    Name of each exchange on
      Title of each class                              which registered

 Common Stock, $0.01 par value                         New York Stock Exchange
 Preferred Stock Purchase Rights                       Chicago Stock Exchange
                                                       Pacific Stock Exchange

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

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

         Indicate by check mark if disclosure of delinquent  filers  pursuant to
Item 405 of Regulation S-K is not contained  herein,  and will not be contained,
to the best of  registrant's  knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K. [X]

         On March 26, 1997,  123,310,118 shares of the registrant's Common Stock
were  outstanding.  The  aggregate  market  value  on  March  26,  1997  of  the
registrant's   Common  Stock  held  by  non-affiliates  of  the  registrant  was
$2,358,306,006.

                       Documents Incorporated by Reference

         Certain portions of the registrant's definitive proxy statement for the
annual  meeting of  shareowners  to be held on May 6, 1997 are  incorporated  by
reference in Part III of this Form 10-K.





<PAGE>






                                TABLE OF CONTENTS

                                     PART I

Item 1. Business...........................................................   1
Item 2. Properties.........................................................  18
Item 3. Legal Proceedings..................................................  18
Item 4. Submission of Matters to a Vote of Security Holders................  19
Item 4a.Executive Officers of the Registrant...............................  19

                                  PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder
        Matters............................................................  21
Item 6. Selected Consolidated Financial Data...............................  23
Item 7. Management's Discussion and Analysis of Financial Condition and
        Results of Operations..............................................  24
Item 8. Financial Statements and Supplementary Data........................  34
Item 9. Changes in and Disagreements with Accountants on Accounting and
        Financial Disclosure...............................................  59

                                 PART III

Item 10.Directors and Executive Officers of the Registrant.................  60
Item 11.Executive Compensation.............................................  60
Item 12.Security Ownership of Certain Beneficial Owners and Management.....  60
Item 13.Certain Relationships and Related Transactions.....................  60

                                  PART IV

Item 14.Exhibits, Financial Statement Schedules and Reports on Form 8-K....  64



When used in this Report, the words "intends,"  "expects," "plans," "estimates,"
"anticipates,"  "projects,"  "believes," and similar expressions are intended to
identify forward-looking statements.  Specifically,  statements included in this
Report that are not historical facts,  including  statements about the Company's
beliefs and expectations about continued market and industry growth, and ability
to maintain existing churn, customer growth and increased penetration rates, are
forward-looking   statements.   Such   statements   are  subject  to  risks  and
uncertainties  that could cause actual results or outcomes to differ materially.
Such risks and  uncertainties  include,  but are not  limited  to, the degree to
which the Company is leveraged and the restrictions imposed on the Company under
its existing debt instruments that may adversely affect the Company's ability to
finance its future operations, to compete effectively against better capitalized
competitors and to withstand downturns in its business or the economy generally;
the continued downward pressure on the prices charged for cellular equipment and
services resulting from increased competition in the Company's markets; the lack
of assurance  that the  Company's  ongoing  network  improvements  and scheduled
implementation  of digital  technology in its markets will be sufficient to meet
or exceed the capabilities and quality of competing networks;  the effect on the
Company's  operations and financial  performance of changes in the regulation of
cellular activities; the degree to which the Company incurs significant costs as
a result of cellular  fraud;  the impact on the  Company's  operations  that may
arise from concerns  suggesting cellular telephones may be linked to cancer; and
the other factors  discussed in the Company's  filings with the  Securities  and
Exchange Commission,  including the factors discussed under the heading "Certain
Risk  Factors"  in the  Information  Statement  set forth as  Exhibit  99 to the
Company's Form 10 (File No.  1-14108),  which section is hereby  incorporated by
reference herein.  Forward-looking statements included in this Report speak only
as of the date  hereof and the Company  undertakes  no  obligation  to revise or
update such statements to reflect events or circumstances  after the date hereof
or to reflect the occurrence of unanticipated events.


<PAGE>



                                      TERMS

     Certain terms used herein are defined as follows.

     Airtime:  The total time that a  cellular  telephone  channel  is  occupied
including call time and tear-down time.

     Analog:  Transmission  method employing a continuous (rather than pulsed or
digital)  electrical signal that varies in amplitude or frequency in response to
changes in sound, light or position.

     Bandwidth:  Difference between the top and bottom limiting frequencies of a
continuous frequency band. Also indicates the information-carrying capacity of a
channel. FCC-licensed cellular operators have been allocated a continuous 25 MHz
bandwidth in the 850-900 MHz band.

     Broadband:  The type of FCC license  that has or will be awarded in the PCS
auctions in the 1850-1990 MHz band.

     BTA: One of the 493 Basic Trading Areas,  which are smaller than MTAs, into
which the licensing  for broadband PCS has been divided based on the  geographic
divisions in the 1992 Rand McNally Commercial Atlas & Marketing Guide.

     Caller Line ID: A call management feature that displays the phone number of
the incoming caller on the cellular telephone handset.

     CDMA:  Code Division  Multiple  Access digital  technology.  Technique that
spreads a signal over a frequency  band that is larger than the signal to enable
the use of a common band by many cellular signals and to achieve signal security
and privacy.

     Cell site: The entire  infrastructure and radio equipment associated with a
cellular  transmitting  and receiving  station,  including  the land,  building,
tower, antennas and electrical equipment.

     Cell  splitting:  Dividing  a single  cell into a number of  smaller  cells
served by lower  tower  transmitters,  thereby  increasing  the ability to reuse
frequency and the number of calls that can be handled in a given area.

     Churn: The rate of customer defection,  typically expressed as a percentage
of the total customer base.

     Cluster: A group of contiguous markets,  the provision of which facilitates
wide areas of uninterrupted  cellular service,  reduced airtime rates, automatic
delivery of inbound calls and simplified dialing patterns.

     Communications Act: The Communications Act of 1934, as amended.

     Controlled markets:  Markets in which the Company's ownership percentage is
50% or greater.

     Controlled POPs: The Net POPs in a controlled market.

     Digital:  Transmission  system in which  information  is  transmitted  in a
series of pulses.



<PAGE>



     EBITDA:  Operating  income plus  depreciation and  amortization.  EBITDA is
included herein as supplemental  disclosure  because it is generally  considered
useful  information  regarding  a  company's  ability to service  debt.  EBITDA,
however,  is not a measure  determined in  accordance  with  generally  accepted
accounting principles ("GAAP") and should not be considered in isolation or as a
substitute  for an  alternative  to net income  (loss),  cash flow  provided  by
operating  activities  or other income or cash flow data  prepared in accordance
with GAAP or as a measure of a company's operating performance or liquidity.

     ESMR: Enhanced Specialized Mobile Radio communications  services,  supplied
by  converting  analog SMR services  into an  integrated,  digital  transmission
system  providing  for call  hand-off,  frequency  reuse and wide call  delivery
networks.

     FAA: The United States Federal Aviation Administration.

     FCC: The United States Federal Communications Commission.

     FCC Rules: The rules  promulgated by the FCC governing the construction and
operation  of  cellular  communications  systems  and  licensing  and  technical
standards for the provision of cellular communications service.

     Managed market: A cellular telephone market that is managed and operated by
the Company on a day-to-day basis.

     Market: An MSA or RSA.

     Message  Retrieval  Service:  An enhanced  call  management  feature  which
notifies the cellular customer that a voicemail message is waiting.

     MSA: One of the Metropolitan  Statistical  Areas for which the FCC licensed
cellular communications systems.

     MSC: A mobile switching  center,  through which cell sites are connected to
the local landline telephone network.

     MTA:  One of the 51 Major  Trading  Areas  into  which  the  licensing  for
broadband  PCS has been divided  based on the  geographic  divisions in the 1992
Rand McNally Commercial Atlas & Marketing Guide.

     N-AMPS:  Narrowband  Advanced  Mobile  Phone  Service,  an enhanced  analog
technology  providing a three-fold  capacity increase over  conventional  analog
technology.

     Net POPs:  The  estimated  population  with respect to a given service area
multiplied  by the  percentage  interest  that the  Company  owns in the  entity
licensed  by the FCC to operate a cellular  communications  system  within  that
service area.

     Non-wireline  license:  The  license  for a market  initially  awarded to a
company or group that was not affiliated with a local landline telephone carrier
in such market.

     PCS:  Personal  Communications  Services.  PCS is the term commonly used to
describe the services  that will be offered by the  companies  that acquired PCS
licenses.

     Penetration rate: Customers divided by POPs in a given area.

     POPs: The estimate of the 1996  population of a MSA or RSA, as derived from
the 1995 population estimates prepared by Strategic Mapping, Inc.

     RBOCs: The Regional Bell Operating Companies.

     Reseller:  A company that provides  cellular  service to customers but does
not hold a FCC cellular  license or own  cellular  facilities.  A reseller  buys
blocks of cellular telephone numbers from a licensed carrier and, in turn, sells
service through its own distribution network to the public.

     RF: Radio Frequency.

     Roaming:  The ability of cellular  customers to make or receive  calls when
traveling in another cellular  company's system.  Roaming occurs when a cellular
customer leaves the cellular carrier's home area and uses his cellular phone.

     Roaming  agreements:  Agreements  entered into with other domestic cellular
companies  that allow the  Company's  customers  to make or  receive  calls when
traveling in another cellular company's system.

     RSA: One of the Rural  Service  Areas for which the FCC  licensed  cellular
communications systems.

     Service area: An MSA or RSA.

     SMR: Specialized Mobile Radio communications services.

     SuperNet: A product offered by the Company which provides seamless hand-off
from the  Company's  network to a  neighboring  cellular  network and  automatic
delivery of inbound calls to the  neighboring  market.  SuperNet is a registered
service mark.

     Voice-activated  dialing:  A feature which allows customers to place a call
by speaking aloud the telephone number they wish to dial.

     Wireline  license:  The license for a market initially awarded to a company
or group that was  affiliated  with a local landline  telephone  carrier in such
market.



<PAGE>






                                     PART I

Item 1.  Business.

General

     360  Communications  Company  is one of the  leading  and most  established
wireless communications companies in the United States. As of December 31, 1996,
the Company  served more than 2.1 million  customers in more than 140 markets in
16 states  throughout  the country.  The  Company's  interests in these  markets
represent  approximately  20.9  million  Net POPs as of  December  31,  1996 The
Company also owns, as of December 31, 1996,  minority interests in 53 additional
cellular  telephone  markets  representing  approximately  4.4 million Net POPs,
including  the New York,  New  York;  Chicago,  Illinois;  Houston,  Texas;  and
Orlando,  Florida MSAs.  The Company sells and markets  wireless  voice and data
services and related  products,  as well as residential  long distance  service,
through a  distribution  network  consisting of nationally  recognized and local
dealers,  full service  retail stores and a direct sales force.  As used herein,
the term "Company" means 360 Communications Company and its subsidiaries, unless
the context indicates otherwise.

     The Company  operates in four regions in the United  States:  Mid-Atlantic,
Midwest,  Southeast and West. The Company consolidated a fifth region, the North
Carolina  region,  with the Southeast  region in the fourth quarter of 1996. The
Company's  controlled  markets  comprising  each  region  include  a  number  of
geographic   operating   clusters  which  are  primarily  located  in  mid-sized
communities.

     For the period from January 1, 1990 to December 31, 1996,  the Company grew
its customer base by a compounded  annual growth rate of 52%. As of December 31,
1996, the Company had a cellular penetration rate of 8.9% in the markets that it
controlled.  Twenty-seven  of the  Company's  controlled  markets  had  cellular
penetration  rates in excess of 10%,  eight of which  had  penetration  rates in
excess of 15%.  For the year ended  December  31, 1996,  the  Company's  average
monthly churn rate was 1.86%.

     The Company was incorporated in October 1982 under the laws of the State of
Delaware  by Centel  Corporation.  The  Company,  then known as Centel  Cellular
Company,  received its first  operating  license from the United States  Federal
Communications  Commission  ("FCC")  in 1985.  Over the next  three  years,  the
Company received additional licenses to operate wireline systems in 19 small and
medium-sized   metropolitan  areas,   including  MSAs  in  Las  Vegas,   Nevada;
Greensboro,  North Carolina;  and Tallahassee,  Florida.  In 1988, the Company's
aggressive  expansion  effort included the  acquisition of United  TeleSpectrum,
Inc. from Sprint Corporation  ("Sprint").  Valued at more than $750 million, the
acquisition more than doubled the size of the Company,  adding approximately 7.9
million Net POPs and making it the second largest  domestic  cellular company at
that time in terms of the number of  markets  served.  On March 9, 1993,  Centel
Corporation,  then the Company's  immediate  parent,  merged with a wholly-owned
subsidiary  of  Sprint,  and the  Company  changed  its name to Sprint  Cellular
Company.  In February 1996, the Company  changed its name to 360  Communications
Company. On March 7, 1996, Sprint completed the spinoff of the Company through a
pro rata distribution to Sprint  shareholders of all of the Common Stock,  $0.01
par value (the "Common Stock"), of the Company (the "spinoff").

Growth and Operating Characteristics of the United States Cellular Industry

     The United States cellular  telephone  industry has operated as a regulated
duopoly. The industry,  however, is changing as a result of the emergence of new
wireless  competitors,   such  as  PCS  licensees.  See   "Business-Governmental
Regulation-Regulation  and  Licensing  of Cellular  Communications  Systems" and
"Business-Competition."  For the year ended  December  31,  1996,  the  cellular
industry  reported total revenues of $23.6 billion versus $19.1 billion in 1995.
The total number of cellular customers grew by 30.0% during 1996,  expanding the
customer  base from an  estimated  33.8  million to an  estimated  44.0  million
customers. The cellular industry's penetration rate as of December 31, 1996, was
16.6% for both carriers on a nationwide  basis,  or 8.3% for the average carrier
on a nationwide basis.

     The  industry's  rapid  growth has been aided by vigorous  competition  and
rapid  technological  advancement.  Industry  growth  has  also  been  aided  by
nationwide  roaming  agreements which have made it possible for customers to use
their cellular  telephones nearly everywhere in the United States. This ubiquity
of service is one of the industry's  greatest  strengths.  While industry growth
continues to be strong,  average revenue per customer has declined consistently.
This trend is indicative of the industry's  penetration  of consumer  markets as
well as competitive pressures on airtime rates.

     The  following  table  sets  forth  certain  domestic   cellular   industry
statistics published by the Cellular  Telecommunications Industry Association as
of December 31, and for each of the five years in the period ended  December 31,
1996.

                                               December 31,
                             --------------------------------------------------

Cellular Industry Statistics   1996       1995       1994      1993      1992
                             --------   --------   --------  --------   -------

----------------------------
Total Service Revenues
   (dollars in billions)      $23.6      $19.1      $14.2     $10.9      $7.8
Cellular Customers
   (millions)                  44.0       33.8       24.1      16.0      11.0
Customer Growth
   (year-over-year)            30.0%      40.0%      50.8%    45.1%      46.0%
Average Monthly Bill per
   Customer (dollars)         $47.70     $51.00     $56.21    $61.49    $68.68
Penetration-Average
   Carrier*                     8.3%       6.5%       4.7%     3.1%       2.2%

-------------------------

       * Represents the total nationwide cellular penetration, divided by two to
     reflect two cellular licensees in each market.

     In March 1995,  the FCC commenced its licensing of Personal  Communications
Services  ("PCS") by completing the auctioning of two 30 MHz licenses in each of
51 MTAs. Since that time, the FCC has auctioned an additional 60 MHz of spectrum
(three  10 MHz BTA  licenses  and one 30 MHz BTA  license)  for  such  potential
licensees.  Licenses for all three 30 MHz frequency blocks have now been issued;
applications  of the winning bidders for the three 10 MHz licenses are currently
being  processed.  PCS is the term  commonly  used to describe the services that
will be offered by the companies that acquired licenses in the FCC auctions. The
FCC has limited the amount of PCS spectrum which current cellular  carriers (and
other commercial mobile radio service licensees) can obtain within their service
areas.  As a  result,  it is  possible  that in  addition  to the  two  cellular
carriers,  an  additional  five or six wireless  providers  could compete in any
given service area.

     Despite the fact that PCS operators compete directly with the Company,  the
Company  believes that the existence of new competitors  and increased  capacity
should change the existing competitive dynamics of the industry by significantly
increasing  penetration  rates and the overall  size of the market for  wireless
communications   services.  The  Company  believes  that  the  entrance  of  new
competitors  caused  cellular  growth to accelerate in other  telecommunications
markets. The United Kingdom wireless market, for example,  experienced increased
cellular  growth  rates  following  the   introduction  of  PCS  services.   See
"Business-Competition."



<PAGE>



Markets and Clusters

     The  following  table sets forth as of December 31, 1996 (i) the markets in
which the  Company  owns an  interest  in a  cellular  system  by region  and by
cluster, (ii) the wireline or non-wireline nature of the market, (iii) the total
population of the market (as derived from 1995 population  estimates prepared by
Strategic Mapping, Inc.), (iv) the Company's ownership percentage of the system,
and (v) the Company's Net POPs based on its ownership percentage:
<TABLE>
<CAPTION>


                                                  Wireline/       Total       Ownership
                                                 Non-wireline   Population    Percentage     Net POPs
                                                 ------------   ----------    ----------     --------
CONTROLLED MARKETS
<S>                                                <C>         <C>             <C>          <C>
Mid-Atlantic Region:
  Central Virginia Cluster:
       Charlottesville, VA                          WL           142,009       100.0%         142,009
       Danville, VA                                 WL           110,396        75.0           82,797
       Lynchburg, VA                                WL           159,274       100.0          159,274
       Virginia RSA 4B2                             WL           105,326       100.0          105,326
       Virginia RSA 6B2                             WL            13,527       100.0           13,527
       Virginia RSA 7B2                             WL            50,745       100.0           50,745
       Virginia RSA 11B2                            WL            42,842       100.0           42,842
  Pennsylvania Cluster:
       Harrisburg, PA                               WL           496,511        86.8%         430,972
       York, PA                                     WL           446,753        86.8          387,782
       Lancaster, PA                                WL           447,498        86.8          388,428
       Altoona, PA                                  WL           132,385       100.0          132,385
       Johnstown, PA                                WL           239,532       100.0          239,532
       Pennsylvania RSA 3B1                         WL            37,639       100.0           37,639
       Pennsylvania RSA 4B1                         WL            29,692       100.0           29,692
       Pennsylvania RSA 8                           WL           406,665        98.7          401,378
       Pennsylvania RSA 10B1                        WL           141,778       100.0          141,778
       Pennsylvania RSA 11B1                        WL            21,687       100.0           21,687
       Pennsylvania RSA 12                          WL           117,169        66.7           78,152
       Scranton/Wilkes-Barre                        WL           660,089        78.9          520,810
       State College                                WL           129,835       100.0          129,835
       Williamsport                                 WL           121,194        98.7          119,618
  Eastern Virginia Cluster:
       Norfolk-VA Beach-Portsmouth, VA             NWL         1,046,337       100.0%       1,046,337
       Newport News-Hampton, VA                    NWL           476,334       100.0          476,334
       Petersburg-Colonial Heights-Hopewell, VA    NWL           129,405        73.6           95,242
       Virginia RSA 8                              NWL            83,224       100.0           83,224
       Virginia RSA 9                              NWL            85,224       100.0           85,224
  Tri-Cities Cluster:
       Johnson City-Kingsport-Bristol, TN           WL           454,426       100.0%         454,426
       Tennessee RSA 4B1                            WL           127,633       100.0          127,633
       Tennessee RSA 8                              WL            15,534       100.0           15,534
       Virginia RSA 1                               WL           145,584       100.0          145,584
       Virginia RSA 2                               WL           136,733        71.3           97,491
                                                               -----------                  ----------

               Total Region                                    6,752,980                    6,283,237
                                                               -----------                  ----------

Midwest Region:
  Eastern Iowa Cluster:
       Cedar Rapids, IA                             WL           178,293       100.0%         178,293
       Waterloo-Cedar Falls, IA                     WL           147,537        88.5          130,570
       Iowa City, IA                                WL           101,034       100.0          101,034
       Dubuque, IA                                  WL            88,408        85.0           75,147
  Central Illinois Cluster:
       Peoria, IL                                   WL           344,596       100.0%         344,596
       Illinois RSA 5B1                             WL            11,547       100.0           11,547

</TABLE>

<PAGE>


<TABLE>
<CAPTION>


                                                  Wireline/       Total        Ownership
                                                 Non-wireline   Population    Percentage     Net POPs
                                                 ------------   ----------    ----------     --------
<S>                                                <C>         <C>             <C>         <C>
  Northern Indiana Cluster:
       South Bend-Mishawaka, IN                     WL           302,072        83.7%        252,834
       Elkhart-Goshen, IN                           WL           165,924        83.7         138,878
       Indiana RSA 2                                WL           170,438        75.0         127,829
  Northwestern Ohio Cluster:
       Toledo, OH                                   WL           794,155        74.7%        593,234
       Lima, OH                                     WL           221,522        74.7         165,477
       Ohio 1 Williams County                       WL           127,662       100.0         127,662
       Ohio RSA 2B1                                 WL           206,759        67.5         139,562
       Ohio RSA 5                                   WL           235,310        68.3         160,717
       Mansfield, OH                                WL           127,440       100.0         127,440
       Ohio RSA 6                                   WL           447,668        82.5         369,326
  Eastern Ohio Cluster:
       Youngstown-Warren, OH                        WL           493,192        96.9%        477,903
       Sharon, PA                                   WL           122,524        96.9         118,726
       Ohio RSA 11                                  WL           112,366       100.0         112,366
       Pennsylvania RSA 1                           WL           197,792        80.0         158,234
       Pennsylvania RSA 6B1                         WL           221,393        57.1         126,415
  West Virginia Cluster
       Charleston, WV                               WL           255,548        85.0%        217,216
       Huntington-Ashland                           WL           317,193       100.0         317,193
       West Virginia 6                              WL           186,273       100.0         186,273
  Ohio Valley Cluster
       Ohio 7B2                                     WL           170,703       100.0%        170,703
       Ohio 10B2                                    WL           111,929       100.0         111,929
       Parkersburg-Marietta                         WL           157,631       100.0         157,631
       Stuebenville-Weirton                         WL           139,988       100.0         139,988
       Wheeling                                     WL           157,559       100.0         157,559
                                                               ----------                   ---------

               Total Region                                    6,314,456                   5,496,282
                                                               ----------                   ---------

Southeast Region:
   North Carolina Cluster:
        Fayetteville, NC                             WL          290,491        85.0%        246,917
        North Carolina RSA 5B2                       WL           35,298       100.0          35,298
        North Carolina RSA 6                         WL          154,967       100.0         154,967
        North Carolina RSA 11                        WL          221,315       100.0         221,315
        Greensboro-Winston Salem-High Point, NC..    WL          975,488        61.8         602,852
        Hickory, NC                                  WL          235,358       100.0         235,358
        North Carolina RSA 2B2                       WL           73,549       100.0          73,549
        North Carolina RSA 15B1                      WL          191,535        67.0         128,328
        Raleigh-Durham, NC                           WL          808,213        85.0         686,981
        Burlington, NC                               WL          114,567        85.0          97,382
        North Carolina RSA 7 (B1 and B2)             WL          281,907       100.0         281,907
        North Carolina RSA 8                         WL          286,113       100.0         286,113
        North Carolina RSA 9                         WL          118,801       100.0         118,801
        North Carolina RSA 10                        WL          277,843       100.0         277,843
        North Carolina RSA 14                        WL          238,281       100.0         238,281
        Wilmington, NC                               WL          198,532       100.0         198,532
        Jacksonville, NC                             WL          147,695       100.0         147,695
        North Carolina RSA 12                        WL          126,327       100.0         126,327
        North Carolina RSA 13                        WL          239,034       100.0         239,034

</TABLE>

<PAGE>

<TABLE>
<CAPTION>



                                                  Wireline/       Total       Ownership
                                                 Non-wireline   Population    Percentage     Net POPs
                                                 ------------   ----------    ----------     --------
<S>                                                <C>         <C>             <C>          <C>

  Charleston Cluster:
       Charleston-North Charleston, SC              WL           533,720        75.0%         400,290
       South Carolina RSA 4                         WL           211,383        50.0          105,692
       South Carolina RSA 5                         WL           241,941        50.0          120,971
       South Carolina RSA 6                         WL           194,403        50.0           97,202
       South Carolina RSA 8                         WL           171,356        50.0           85,678
  Greenville Cluster:
       Greenville-Spartanburg, SC                   WL           681,419        89.2%         607,826
       Anderson, SC                                 WL           154,386        89.2          137,712
       South Carolina RSA 1                         WL            61,407       100.0           61,407
       South Carolina RSA 2                         WL           226,371        50.0          113,186
  Florida/Alabama Cluster:
       Dothan, AL                                   WL           135,755       100.0%         135,755
       Ft. Walton Beach, FL                         WL           165,277       100.0          165,277
       Florida RSA 10                               WL           111,399       100.0          111,399
       Panama City, FL                              WL           143,194       100.0          143,194
       Tallahassee, FL                              WL           275,108        90.0          247,597
       Florida RSA 8B1                              WL            46,892        90.0           42,203
                                                               -----------                  ----------

               Total Region                                    8,369,325                    6,972,867
                                                               -----------
                                                                                            ----------

West Region:
  Central Texas Cluster:
       Killeen-Temple, TX                           WL           295,225        66.9%         197,506
       Waco, TX                                     WL           199,852        66.9          133,701
       Texas RSA 9B3                                WL            29,522        70.0           20,665
       Texas RSA 10 (B2 and B4)                     WL           189,845        75.0          142,384
       Texas RSA 15B1                               WL            89,017       100.0           89,017
  East Texas Cluster:
       Tyler, TX                                    WL           160,995        60.0%          96,597
       Longview-Marshall, TX                        WL           169,191        60.0          101,515
       Texas RSA 7B2                                WL            44,063        97.5           42,961
  New Mexico Cluster:
       New Mexico RSA 1                            NWL           254,550       100.0%         254,550
       New Mexico RSA 2                            NWL            23,611       100.0           23,611
       New Mexico RSA 4                            NWL           258,685       100.0          258,685
       New Mexico RSA 5                            NWL            58,288       100.0           58,288
  Las Vegas, NV                                     WL           982,985        72.2          709,715
                                                              ------------                ------------

            Total Region                                       2,755,829                    2,129,195
                                                              ------------                ------------

Total Controlled Markets                                      24,192,590                   20,881,581
                                                              ============                ============



</TABLE>



<PAGE>




<TABLE>
<CAPTION>



                                                                     Total            Ownership
                                                                   Population        Percentage     Net POPs
                                                                   ----------        ----------     --------
NON-CONTROLLED MARKETS*
  <S>                                                              <C>                   <C>        <C>

  New York, NY-Long Branch-New Brunswick, NJ                       16,327,910            10.0%      1,632,791
  Chicago-Aurora/Elgin-Joliet-Kankakee, IL-Gary, IN                 8,361,458             5.0         418,073
  Houston-Beaumont-Galveston/Texas City, TX                         4,533,619             8.8         398,958
  Orlando-Melbourne-Daytona Beach, FL                               2,077,627            15.0         311,644
  Kansas City-Lawrence, KS                                          1,609,167            19.0         305,742
  Richmond, VA                                                        800,217            27.3         218,459
  Omaha, NE                                                           627,705            27.6         173,247
  Allentown-Bethlehem-Easton, PA                                      712,049            20.8         148,106
  Cleveland-Akron-Canton-Lorain, OH-Erie, PA                        3,490,997             3.5         122,185
  Ft. Wayne, IN                                                       435,387            25.0         108,847
  Virginia RSA 10                                                     231,825            33.0          76,502
  Reading, PA                                                         349,909            15.9          55,636
  Cincinnati-Dayton-Columbus, OH                                    3,666,996             1.2          44,004
  Georgia RSA 1                                                       216,854            20.0          43,371
  Illinois RSA 3**                                                    203,705            18.1          36,871
  Pennsylvania 5**                                                     81,417            40.0          32,567
  Illinois RSA 2B2                                                     81,156            40.0          32,462
  Texas RSA 7B1                                                       126,089            25.0          31,522
  Texas RSA 11B2**                                                    107,945            28.0          30,225
  Indiana RSA 3                                                       146,034            20.0          29,207
  Pennsylvania RSA 3B2                                                 59,275            44.4          26,318
  Pennsylvania RSA 4B2                                                 68,529            33.3          22,820
  Iowa RSA 13**                                                        66,874            30.0          20,062
  St. Joseph, MO                                                       98,370            20.0          19,674
  Florida RSA 9**                                                      40,119            49.0          19,658
  Iowa RSA 11                                                         111,168            14.1          15,675
  Missouri RSA 4                                                       69,208            12.5           8,651
  Iowa RSA 16                                                         104,222             8.3           8,650
  Iowa RSA 5**                                                        108,909             7.1           7,733
  Austin, TX                                                          919,978             0.8           7,360
  Missouri RSA 9B1                                                     34,846            19.6           6,830
  Missouri RSA 1                                                       42,994            14.3           6,148
  Iowa RSA 14                                                         107,540             5.6           6,022
  Iowa RSA 15                                                          84,145             6.7           5,638
  Iowa RSA 1                                                           62,504             3.9           2,438
  Iowa RSA 8                                                           54,713             2.3           1,258
                                                                   ------------                    -----------

Total Non-Controlled Markets                                       46,221,460                       4,435,353
                                                                   ============                    ===========

Total Company Markets                                              70,414,050                      25,316,934
                                                                   ============                    ===========

--------------------
<FN>
  *  All non-controlled markets are wireline systems.

 **  Represents  non-controlled  markets  that are  managed by the  Company on a
     day-to-day basis.
</FN>
</TABLE>




<PAGE>



Business Strategy

     The  Company  will  seek to  maintain  strong  growth  and  improvement  in
operating margins by continuing to penetrate its existing  markets.  The Company
believes  that its  primary  growth  will be  internally  generated  through the
implementation  of its operating  strategies as described below. In addition,  a
key part of the Company's growth strategy is to pursue  favorable  opportunities
to expand its regional market clusters or develop new strategic  market clusters
through  acquisitions,  trades or alliances  with other cellular  carriers.  The
principal  components of the Company's  strategy to achieve these objectives are
as follows:

       --clustering of markets to provide broad areas of  uninterrupted  service
         combined  with  simplified  calling and pricing  patterns and operating
         efficiencies through economies of scale;

       --continuous  network  improvement  to  meet  customer   expectations  of
         ubiquitous coverage, clarity and reliability;

       --aggressive  distribution  management to provide effective and extensive
         marketing of products  and services  through  dealers,  Company  retail
         stores and a direct sales force targeted at high volume users;

       --exceptional  localized  customer service provided by highly  motivated,
         experienced and trained customer relations personnel who are focused on
         satisfying customer needs to build loyalty,  improve customer retention
         and increase usage;

       --targeted  pricing  strategies  and rate plans to increase  penetration,
         improve customer retention and increase usage;

       --targeted  product and service  deployment to introduce new features and
         network  solutions to stimulate  increased  usage and improve  customer
         satisfaction and retention; and

       --integration of multiple  telecommunications  services such as cellular,
         residential  long distance and paging into a single  product  offering,
         including one bill, to improve customer retention and to increase sales
         and usage of all services offered by the Company.

     The  Company  believes  that  the  strategies  employed  to  meet  existing
competition will also be effective in competing  against new service  providers.
Companies  with PCS licenses have begun to offer their  products and services in
several of the Company's  service  areas.  The Company has prepared for this new
competitive  environment  by  enhancing  its  networks,  expanding  its  service
territory,  offering new  features,  products and services to its  customers and
simplifying  its pricing of  services.  In  addition,  the Company  will seek to
further  capitalize on its incumbent  position as a leading wireless provider in
its markets by increasing  revenues  through  aggressive  customer  acquisition,
further  improving  localized  customer  service  and  enhancing  its  financial
performance by continuing to improve operating margins.

Recent Acquisitions

     The  Company's  external  growth  strategy  is designed  to  reinforce  its
incumbent  position  by  increasing  its  customer  base as  well as to  improve
operating margins by achieving significant economies of scale. In February 1997,
the  Company   signed   definitive   agreements   with   BellSouth   Corporation
("BellSouth")  to combine  ownership  interests in two cellular  partnerships in
each of which the Company currently has a noncontrolling  interest and BellSouth
has a controlling  interest and to transfer interests in two markets.  Under the
terms of the  agreements,  which are  subject to FCC  approval,  the Company and
BellSouth will combine their respective  interests in two partnerships  that own
and control  cellular  licenses  and  operations  in  Richmond,  Virginia and in
Central  Florida,  including  Orlando.  The resulting  partnership will be owned
approximately 75% by BellSouth and 25% by the

<PAGE>



Company. In addition,  the Company will contribute its 20% ownership interest in
another unconsolidated entity, Georgia RSA #1 in Dalton, Georgia, and cash. Upon
completion  of this  transaction,  the  resulting  partnership  will appoint the
Company  as  manager  of  the  Richmond,   Virginia  cellular  operation,  which
previously   was  managed  by  BellSouth.   This   transaction  is  expected  to
significantly  enhance the Company's  competitive  position in its  Mid-Atlantic
region and make the Company  the largest  cellular  operator in  Virginia.  In a
separate  transaction,  BellSouth will acquire the Dothan,  Alabama MSA from the
Company,  and the Company will acquire BellSouth's 10% ownership interest in the
Tallahassee,  Florida MSA. Upon completion of this transaction, the Company will
have a 100% ownership interest in the Tallahassee, Florida MSA.

     In November  1996,  the Company  completed its  acquisition  of Independent
Cellular Network,  Inc. and affiliated  companies the ("ICN  Acquisition") which
own and  operate  cellular  licenses  and  related  systems in  Kentucky,  Ohio,
Pennsylvania  and West  Virginia.  The ICN  Acquisition  expands  the  Company's
existing  market clusters in its Midwest and  Mid-Atlantic  regions and provides
expansion  of the  Company's  cellular  coverage  over 225  miles of  contiguous
interstate highways that lead to New York, New York;  Pittsburgh,  Pennsylvania;
and Columbus, Ohio.

     In February  1996,  the Company  purchased a 50% interest in South Carolina
RSAs 4, 5 and 6. In January  1996,  the Company  acquired a 100% interest in the
cellular license and network in North Carolina RSA 14. These  acquisitions  fill
gaps in the Company's existing North Carolina and South Carolina  clusters,  and
give the Company  continuous  coverage along the Atlantic  Ocean  coastline from
Newport  News,  Virginia  to Hilton  Head,  South  Carolina.  The  Company  also
acquired,  in February  1996,  a 100%  interest  in the Ohio RSA 1 market.  This
acquisition  fills a gap in the  Company's  Midwest  region and gave the Company
continuous  coverage from South Bend,  Indiana to Mansfield,  Ohio.  The Company
also  purchased  additional  interests  in four  Florida  markets  it  currently
controls,  increasing its ownership in the Fort Walton Beach MSA and Florida RSA
10 from 70% to 100% and  increasing  its  ownership in the  Tallahassee  MSA and
Florida RSA 8 from 60% to 90%.

     The Company  constantly  evaluates  opportunities to increase its ownership
interests  in the  markets in which it  operates.  To the extent  feasible,  the
Company  will  explore  opportunities  to exchange  some or all of its  minority
investments in cellular communications systems for increased ownership interests
in markets it currently  controls or for  ownership  interests in new markets in
which it could obtain control.

Network Improvement

     Network  quality  is a key factor in  retaining  customers  and  generating
revenue,  and is  generally  viewed  as a  critical  competitive  factor  in the
cellular  marketplace.  Customers  expect their  cellular  telephones to deliver
ubiquitous coverage,  clarity and reliability.  The Company continually improves
its systems with the goal of providing  network  service  comparable  to that of
local telephone companies. The Company believes that the quality and reliability
of its network significantly exceeds competitors' standards.

     The Company  believes  its quality  and  reliability,  as well as its broad
network  coverage,  result  from an  integrated  process  of  network  planning,
aggressive cell site construction and rigorous system  maintenance.  The Company
had over 1,400 cell sites in service as of December  31, 1996 and  approximately
400  of  the  Company's   employees  are  engaged  in   engineering  or  network
maintenance.  In addition,  the Company monitors each cellular  market's network
from its Chicago network  operations  center  twenty-four  hours a day to ensure
reliable network  performance.  The Company will continue to stress high quality
portable telephone coverage and the integrity of data transmissions.

     The Company was the first cellular  carrier to employ  Narrowband  Advanced
Mobile Phone Service ("N-AMPS"). This enhanced analog technology,  first offered
in the Company's Las Vegas market,  provides a three-fold capacity increase over
conventional analog technology. N-AMPS technology has since been deployed in ten
additional  high-traffic  markets,  serving  as  an  intermediate  step  to  the
implementation  of digital  technology.  The  Company  has sold  N-AMPS  capable
telephones in all of its markets since 1991 in anticipation of the deployment of
N-AMPS  technology,  allowing  the  migration to N-AMPS to be  indiscernible  to
customers.

     The Company  believes that its networks have sufficient  capacity to handle
the Company's  customer growth rate in the near term. In the future, the Company
intends to relieve any capacity  constraints  through  frequency  planning,  the
deployment of enhanced analog technology in additional markets and the selective
installation of additional cell sites in densely  populated  areas.  The Company
plans  to  implement  a  gradual   transition   to  digital   technology   on  a
market-by-market basis as additional calling capacity is required to accommodate
growth  in call  volume.  This  approach  should  provide  time for  anticipated
improvements in digital  technology to be realized while also avoiding premature
capital expenditures.

     In August 1996,  the Company began offering Code Division  Multiple  Access
("CDMA") digital  technology in Las Vegas,  Nevada.  The introduction of CDMA in
Las Vegas  followed a  six-month  trial that began in early  1996.  The  Company
currently  believes that CDMA technology will offer a 6 to 10 fold call carrying
capacity increase over conventional analog technology. In addition, CDMA employs
a "soft  hand-off," a technique  which makes the process of carrying a call from
cell site to cell site virtually  undetectable  to the customer.  The Company is
currently  evaluating the need for CDMA in other  markets,  and plans to install
CDMA technology in the greater Raleigh, North Carolina service area during 1997.

     The Company is also  migrating  its  networks  to an  Advanced  Intelligent
Network  architecture.  This will enable enhanced  personal mobility and service
flexibility  for customers.  The Company  supports the movement  toward industry
standards  and  interoperability  between  network  elements  based  on  Interim
Standard 41. The Company has deployed two Home Location Registers in its systems
to allow for the deployment of advanced features for customers. In addition, the
Company is upgrading the technology in many of its switches for Signaling System
7 ISDN User Part signaling. This signaling technology will allow for out-of-band
signaling and improved  trunking  efficiencies.  This signaling  technology will
also allow the Company to offer additional  features and services such as Caller
Line ID.

Distribution Management and Marketing

     The Company's  distribution  management and marketing programs have yielded
strong growth  results.  The Company's rate of penetration is above the industry
average despite its presence in mid-sized  markets.  Expansion and management of
the Company's  distribution channels is expected to result in continued customer
base growth, along with controlled churn and acquisition costs.

     The  Company  utilizes  multiple  methods  of  distribution  in each of its
markets, and regularly seeks out new distribution  channels.  The development of
multiple  distribution  channels in each of its  markets  enables the Company to
provide effective and extensive marketing of products and services and to reduce
its reliance on any single distribution source. Traditional distribution sources
like dealers and direct sales  representatives  continue to be important factors
in  achieving  the  Company's  growth  objectives.  The  table  below  shows the
Company's distribution channels as of December 31, 1996.

         Distribution Channel                    Number
         --------------------                    ------
         Dealer Locations                        1,470
         Company Retail Stores                     144
         Company Retail Kiosks                     272
         Direct Sales Representatives              306

     The Company is actively seeking to increase the proportion of new customers
acquired  through its retail stores  channel.  While the dealer and direct sales
channels  remain  important  components of the Company's  growth  strategy,  the
Company  believes that its retail stores  produce the best  combination of lower
customer acquisition costs and higher retention rates.



<PAGE>



     Retail Sales. The Company currently  conducts its retail operations through
over 140 Company retail locations.  Stand-alone stores are strategically located
in smaller local and  neighborhood  retail  centers as well as in large shopping
malls to capitalize on favorable  demographics and retail traffic patterns.  The
Company's  retail focus helps  accomplish  three key goals:  the highly  visible
retail  stores  attract new  customers  from the consumer  market  segment;  new
customers receive training from dedicated cellular sales representatives,  which
increases  customer  retention rates and average  revenue per customer;  and the
incremental  cost of obtaining a customer  through a Company retail store is the
lowest of any distribution channel.

     The Company focuses its full service,  stand-alone  retail efforts on using
sophisticated  design and  merchandising  techniques  to  simplify  the  selling
process for potential customers. Customers who enter one of the Company's retail
stores are drawn to one of several  "lifestyle  zones" which  display  carefully
selected  combinations  of  cellular  telephones,  accessories,  custom  calling
features and rate plans.  Each "lifestyle zone" is tailored to attract potential
customers from specific  market  segments.  After  selecting a phone and service
plan, new customers receive extensive  assistance on the use of a cellular phone
and on the Company's various services.

     The  Company  also  partners  with  large  national  retail  stores to sell
cellular service  directly  through Company kiosks.  The Company stations retail
sales representatives at kiosks in larger retailers like Wal-Mart and Sam's Club
to take advantage of high traffic generated by the retailers, to reduce the cost
of the sale,  and to ensure proper  training and increase the retention  rate of
new customers.  Existing customers can purchase cellular telephone  accessories,
pay bills or inquire about the Company's  services and features  while in retail
stores or at kiosks. Many retail locations provide vehicle installation services
and while-you-wait cellular telephone troubleshooting and repair.

     Dealers.  The Company has entered into dealer agreements with several large
electronics retailers and discounters in its markets,  including Sears and Radio
Shack.  The Company also  contracts  with local dealers who operate on a smaller
scale and may offer other wireless services like two-way radio or paging.

     In exchange for a commission  payment,  these dealers solicit customers for
the  Company's  cellular  service.  Such dealers are paid a commission  for each
customer  subject to  chargeback  provisions  if the customer  fails to maintain
service for a specified period of time. This arrangement increases store traffic
and  sales  volume  for the  dealers,  and  provides  a  valuable  source of new
customers for the Company.

     The  Company  actively  supports  its dealers  with  regular  training  and
promotional  support. In certain markets, the Company stations its own employees
at dealer locations to increase sales volume and improve customer retention.

     Direct Sales. The Company's direct sales force,  comprised of more than 300
employees,  focuses its efforts on business  customers with high phone usage and
multiple  lines of service.  This channel  produces the lowest churn and highest
revenue per customer compared with any other distribution channel.

     The  Company's  compensation  structure for the direct sales force has been
designed to reward long-term relationships with business accounts.  Direct sales
representatives   provide  ongoing  customer  service  to  business   customers,
including bill analysis,  equipment  upgrades,  accessory  sales and training on
features  and  functions.  This  distribution  channel is also  responsible  for
selling  advanced  services like custom  calling  features,  data  applications,
wireless office  extension  service to existing office phone systems,  voicemail
notification and message retrieval services.

   TeleCare.  TeleCare  is used to  recommend  a more  cost-effective,  and thus
usage-stimulating, rate plan. New and existing customers are contacted regularly
by regional  TeleCare teams to measure overall  customer  satisfaction  with the
Company's products and services.  During these calls, customers are also offered
revenue-enhancing   cellular  accessories  like  batteries,   battery  chargers,
enhanced antennas or hands-free  speaker adapters.  In addition,  custom calling
features and enhanced  products like data  applications  are telemarketed to the
Company's  existing  customer base.  These customer care efforts are designed to
improve customer retention levels by anticipating  questions and problems before
they arise.

<PAGE>



Customer Service

     Maintaining low churn rates is a primary goal of the Company,  particularly
as new competitors enter the marketplace.  Lower churn  contributes  directly to
acquisition  cost  savings,  since fewer new customers are needed to meet growth
targets.  The Company  experienced  an average  monthly  churn rate of 1.86% and
1.81% for the year ended December 31, 1996 and 1995,  respectively.  The Company
attributes its success in this area to its customer support proficiency.

     The  Company's  customer  service  representatives  regularly  contact  new
customers to answer  questions,  explain  features and service options and gauge
satisfaction  levels.  Annual  third-party  customer  satisfaction  surveys  and
periodic  focus  groups  measure  overall  system  quality and provide  valuable
insights into customer needs.

     Through customer research,  the Company has identified speed,  accuracy and
simplicity  as  critical   components  for  success  in  its  customer   service
operations.  Customers can  typically  expect to have fully  functional  service
within  fifteen  minutes  after  purchasing a cellular  telephone.  By employing
advanced  computer  technology,  the Company has further reduced its sales cycle
time.  Point of sale terminals  provide  prompt  on-site  activation of customer
cellular  service.  This  level of  service  gives  the  Company  a  competitive
advantage  as it seeks to partner  with  dealers  in its  various  markets.  The
Company  will  continue to deliver  more  flexible  customer  care and  billing,
shorter service activation cycles and increasingly  automated  processes.  These
improvements  are  intended  to reduce  churn and lower  per-customer  operating
costs.

         Regional call centers have been  established to handle customer service
after business hours and on weekends. The Company offers twenty-four hour, seven
day a week  customer  service to all of its  markets  using  three or four digit
speed dialing patterns on their cellular  telephones free of charge or through a
conventional   toll-free  number.   Airtime  and  toll-free  numbers  have  been
established  to  allow   customers  to  call  emergency   services  or  roadside
assistance.

     Customer  service  provided  by the  Company's  numerous  customer  service
facilities generally includes activation of new cellular access lines,  response
to billing and service  inquiries,  assistance to customers  from other cellular
markets  roaming in the area and response to network outage  reports.  Customers
can purchase new cellular  telephone  equipment and service at these facilities,
pay cellular  bills,  inquire  about  products and features and obtain  cellular
phone repair services.

Pricing

     The Company  seeks to increase  penetration,  improve  retention  rates and
stimulate  additional  usage through creative  pricing  strategies.  The Company
creates local and expanded service territories  designed to meet customer needs.
These range from low-cost,  local areas to expanded roaming regions. In February
1997,  the Company  simplified  its cellular  roaming  rates by offering  simple
per-minute  rates based on a particular  customers  home zone,  regional zone or
national zone. The Company also simplified its cellular long distance pricing by
offering a single per-minute rate for all long distance cellular calls.

     Airtime rate plans are crafted to attract users from all market segments at
profitable  margins.  The  Company  offers a variety of  cellular  rate plans to
prospective customers. These plans typically consist of a fixed monthly rate for
network access,  a package of airtime minutes included in the monthly rate and a
per minute rate for airtime used in excess of the included airtime package.  The
Company also sells airtime in bulk to resellers in certain markets.



<PAGE>



     Multiple  monthly rate plans are designed by the Company to meet  different
customer needs.  Innovative rate plan development enhances the value of cellular
service to the  customer  and helps the  Company  achieve its growth and revenue
targets.  Customers who frequently use cellular  service  generally  prefer rate
plans with a higher than average fixed monthly rate, a large package of included
minutes and a lower than average per minute  airtime  rate.  The Company  offers
several  high-end  rate plans which  include large blocks of airtime and several
usage-enhancing custom calling features. Customers who use cellular service less
frequently prefer a lower monthly fixed rate and will pay a premium for airtime.

     Custom  calling  features are also made  available to enhance the Company's
basic airtime  product.  These features are similar to custom  calling  features
available from most local  exchange  companies,  and include call waiting,  call
forwarding, three way calling, no-answer transfer and voicemail. Custom features
allow  customers to better manage calls and messages,  and the Company  benefits
from increased airtime usage.

     The  Company  has  entered  into  roaming  agreements  with other  domestic
cellular  companies  to allow  its  customers  to use  cellular  service  nearly
everywhere  in the United  States.  This  system  increases  the  utility of the
Company's product to its customers by making it ubiquitous; with few exceptions,
customers can call from anywhere in the United States, to anywhere in the United
States.  Although  roaming  rates are  declining,  roaming  usage is expected to
increase.  Consistent  with industry  trends,  the Company has begun to make its
roaming rates more affordable which is expected to increase roaming and usage.

     The Company has also  established  regional  network and roaming  alliances
with neighboring  cellular carriers which permit the expansion of the customers'
home  footprint.  Marketed  under  SuperNet  and other  brands,  these wide area
networks  offer  reduced  roaming  rates,  seamless  hand-off from the Company's
network to a  neighboring  cellular  network and  automatic  delivery of inbound
calls to the neighboring market.

     The Company offers  competitive  residential long distance and paging rates
in those markets where such services are marketed.

Product and Service Deployment

     The  Company  continues  to  introduce  new  telecommunications   products,
features and services to increase the value of the basic  cellular voice product
to the  customer  and to enhance  revenues.  Through  the  deployment  of N-AMPS
technology,  the  Company is able to offer many new  products  designed  to give
customers enhanced call management  capability and stimulate usage. For example,
VoiceMail Alert notifies customers of incoming voicemail messages while features
like  voice-activated  dialing  and  Caller  Line ID further  enhance  the basic
cellular   offering.    The   Company   also   has   arrangements   with   other
telecommunications  vendors to provide new  network  solutions  to business  and
residential  customers.  These solutions  include  DirectLink by 360 ,  a
combination  cordless phone and cellular  phone,  and  BusinessLink,  a wireless
"extension"   service  to  existing   office  phone   systems.   "DirectLink  by
360 " and "BusinessLink" are service marks.

Intergration of Multiple Telecommunications Services

     In 1996, the Company began reselling  residential long distance service and
paging  service in 13 of the 16 states in which the  Company  provides  service,
using its existing  distribution channels and brand name. The Company expects to
market  its  cellular,  residential  long  distance  and paging  services  as an
integrated  communications  solution on a single bill. In addition,  the Company
expects to conduct market trials for local exchange telephone service in 1997.



<PAGE>



Human Resource Development

     The Company  utilizes  competitive  human resource  programs,  training and
career  development  practices and financial  incentives  tied to performance to
provide  superior  customer  service as well as to  successfully  implement  its
operating strategies.

     The  Company  places a strong  emphasis  on  training  at all levels of the
organization to augment experience-based  learning and to promote performance at
a high level in each position.  Formal succession  planning and training is also
employed to provide the knowledge and skills needed to create depth of expertise
and enable career advancement within the organization.

     All  employees are rewarded for  performance  in key areas of the business.
The objectives which determine the executive  management team's compensation are
shared by the entire organization,  and every employee receives incentive pay in
some form. Those employees who do not earn sales commissions are eligible for an
annual  incentive  payment based on a combination  of personal  achievement  and
performance measured by key objectives at the appropriate operating level (e.g.,
local markets or regions). In 1996, these objectives included increasing service
revenues, net customers and cash flow, and decreasing customer churn.

Cellular Telephone Technology

     Cellular communications systems are capable of providing high quality, high
capacity voice and data communications to and from vehicle-mounted and hand-held
radio telephones.  Cellular communications systems generally offer customers the
features  offered  by  the  most  technologically  advanced  landline  telephone
services.

     The FCC has allocated two cellular communications system frequencies in the
800 MHz band of the radio  spectrum  and has  promulgated  rules  governing  the
construction and operation of cellular  communications systems and licensing for
the  provision  of  cellular  telephone  service.   See   "Business-Governmental
Regulation-Regulation and Licensing of Cellular Communications System."

     Cellular  communications  technology  is based upon the division of a given
market area into a number of smaller  geographic  areas or "cells." Each cell is
equipped with  transmitter-receivers  and other  equipment  that  communicate by
radio signal with cellular  telephones  located within range of the cell.  Cells
generally  have an operating  range of up to 25 miles.  The cells are  typically
designed  on  a  grid.   Terrain   factors,   including   natural  and  man-made
obstructions,  signal coverage  patterns and capacity  constraints may result in
irregularly shaped cells and overlaps or gaps in coverage.

     Each cell site is connected to a mobile switching center ("MSC"), which, in
turn, is connected to the local landline  telephone  network.  Because  cellular
communications  systems are fully  interconnected  with the  landline  telephone
network and long distance  networks,  customers  can receive and originate  both
local and long distance calls from their cellular telephones. When a customer in
a particular cell dials a number, the cellular telephone sends the call by radio
signal to the cell's  transmitter-receiver,  which in turn  transmits  it to the
MSC.  The MSC  then  completes  the  call by  connecting  it with  the  landline
telephone  network  or  another  cellular  telephone  unit.  Incoming  calls are
received by the MSC,  which  instructs  the  appropriate  cell to  complete  the
communications link by radio signal between the cell's  transmitter-receiver and
the  cellular   telephone.   Cellular   communications   systems  operate  under
interconnection   agreements   with   various   local   exchange   carriers  and
interexchange carriers. Interconnection agreements establish the manner in which
the cellular telephone system integrates with other telecommunications  systems.
The cellular operator and the local landline telephone company must cooperate in
the  interconnection  between the  cellular and  landline  telephone  systems to
permit  cellular  customers  to call  landline  customers  and vice  versa.  The
technical and financial details of such interconnection arrangements are subject
to negotiation and vary from system to system.



<PAGE>



     FCC Rules require that all cellular  telephones be functionally  compatible
with  cellular  systems in all  markets  within  the United  States and with all
frequencies allocated for cellular use, allowing a cellular telephone to be used
wherever a customer is located,  subject to appropriate arrangements for service
charges. Changes to cellular telephone numbers or other technical adjustments to
cellular  telephones by the  manufacturer  or local cellular  telephone  service
businesses may be required,  however,  to enable the customer to change from one
cellular service provider to another within a service area.

     The rapid  growth of the  cellular  customer  base has begun to strain  the
call-processing  capacity  of many  existing  analog  networks.  Present  analog
technology  and  assigned  spectrum  limit  the  number of  signals  that can be
transmitted  simultaneously in a given area. In highly populated MSAs, the level
of demand  for mobile  and  portable  service  is often  greater  than  existing
capacity.  Because the primary objective of the cellular licensing process is to
address  mobile and portable uses,  operators in highly  populated MSAs may have
capacity  constraints  which limit their ability to provide  alternate  cellular
service.

     Each  cellular  network is  designed  to meet a certain  level of  customer
density and traffic demand. Once these traffic levels are exceeded, the operator
must take steps to improve the network capacity.  This improvement can initially
be  accomplished  by adding  voice  channels to cell  sites,  and later by using
techniques  such as  sectorization  and cell  splitting.  Network  operators and
infrastructure  manufacturers  are  developing a number of additional  solutions
which are expected to increase network capacity and coverage.

     Within certain  limitations,  increasing demand may be met by simply adding
available  frequency  capacity  through  voice  channel  additions  to  cells as
required,  or by using  directional  antennae  to  divide a cell  into  discrete
multiple  sectors or  coverage  areas  (also  known as  sectorization),  thereby
reducing the required distance between cells using the same frequency.  When all
possible  channels  are in use,  further  growth can be  accomplished  through a
process called "cell  splitting." Cell splitting  entails dividing a single cell
into a number of  smaller  cells  served by  lower-tower  transmitters,  thereby
increasing  the reuse  factor  and the  number of calls that can be handled in a
given area.

     Network  capacity  can also be enhanced  through the  development  of newer
network  technologies like N-AMPS analog technology (which triples call carrying
capacity over conventional analog technology) and CDMA digital technology (which
increases  call carrying  capacity  over  conventional  analog  technology by an
estimated factor of 6 to 10), which in each case allow cellular  carriers to add
customers  without  degrading   service  quality.   Digital   technology  offers
advantages,  including larger system capacity,  and lower  incremental costs for
additional customers.  The conversion from analog to digital radio technology is
expected to be an industry-wide process that will take a number of years.

     The Company  believes that its networks have sufficient  capacity to handle
the Company's  customer growth rate in the near term. In the future, the Company
intends  to  relieve  any  capacity   constraints  through  frequency  planning,
additional  deployment  of  N-AMPS  or CDMA  and  the  prudent  installation  of
additional cell sites in densely populated areas. As additional calling capacity
is required to accommodate growth in call volume, the Company plans to implement
the  transition  to  digital  technology  on  a  market  by  market  basis.  See
"Business-Governmental  Regulation-State,  Local  and  Other  Regulation"  for a
discussion on those  governmental  regulations  which may restrict the Company's
ability to install additional cell sites.

Competition

     Cellular  carriers  compete  primarily  against the other  facilities-based
cellular carrier in each MSA and RSA market.  The Company also faces competition
from services such as conventional mobile telephone service,  ESMR systems,  PCS
and resellers.  ESMR is a wireless communications service supplied by converting
analog SMR services into an integrated, digital transmission system.



<PAGE>



     The Company  believes  that  competition  for  customers  between  cellular
licensees is based principally upon the services and enhancements  offered,  the
quality of the cellular system,  customer service,  system coverage and capacity
and price.  Such  competition  may  increase  to the extent  that  licenses  are
transferred from smaller,  stand-alone  operators to larger,  better capitalized
and more  experienced  cellular  operators  who may be able to  offer  consumers
certain network advantages similar to those offered by the Company.

     Existing   and  new  users  of   cellular   systems  may  also  find  their
communications  needs  satisfied by other current and  developing  technologies,
such as PCS.  Licensing  areas for  broadband PCS have been divided into 51 MTAs
and 493 smaller Basic Trading Areas ("BTAs")  based on the geographic  divisions
in the 1992 Rand McNally  Commercial Atlas & Marketing  Guide.  There could be a
minimum of three and a maximum of six broadband PCS providers in any given area.
Of the six licensees,  three will hold 30 MHz of PCS spectrum, one of which will
be licensed for a BTA, and the remaining  three licensees of 10 MHz will offer a
broad range of voice, data and related communications services in a BTA.

     The FCC has  allocated  a total of 2,071  broadband  licenses  by  auction,
according to rules that, among other things,  prohibit a commercial mobile radio
services ("CMRS") licensee from having an attributable  interest in more than 45
MHz of licensed  broadband PCS,  cellular and SMR spectrum  (regulated as CMR's)
with significant overlap in any geographic area.  Significant overlap is defined
as covering at least 10 percent of the  population  of the PCS licensed  service
area. Thus, given the 25 MHz of spectrum  afforded  cellular  carriers under the
cellular  rules,  cellular  carriers  could acquire up to 20 MHz of PCS spectrum
within their cellular markets (assuming that they had no other CMRS interests in
that geographic area).

     PCS  services  generally  consist of  wireless  two-way  telecommunications
services   for   voice,   data  and  other   transmissions   employing   digital
micro-cellular  technology. PCS will operate in the 1850 to 1990 MHz band. It is
expected  that PCS will  involve a network  of small,  low-powered  transceivers
placed throughout a neighborhood,  business  complex,  community or metropolitan
area  to  provide   customers   with   mobile  and   portable   voice  and  data
communications.  PCS customers could have dedicated  personal  telephone numbers
and would  communicate  using small digital radio handsets that could be carried
in a pocket or purse.  Although the Company currently has the technology and the
engineering ability to offer similar services, there can be no assurance that it
will be able to do so on a timely and profitable basis.

     Many new PCS  licensees  who will  compete  with the Company have access to
more substantial capital resources than the Company. In addition,  many of these
companies, or their predecessors and affiliates,  already operate large cellular
telephone  networks and thus bring significant  wireless  experience to this new
marketplace.

     The Company has prepared for this new competitive  environment by enhancing
its  networks,  expanding  its service  territory  and  offering  new  features,
products and  services to its  customers.  The Company  believes it will benefit
from its  position as an  incumbent  in the  cellular  field with a high quality
network  and  extensive  footprint  that  is not  capacity  constrained,  strong
distribution channels, superior customer service capabilities and an experienced
management team. Since the Company operates in medium to small markets,  the new
PCS licensees are unlikely to offer  comparable  wireless service in many of the
Company's   territories   in  the  near  term  because  the  extensive   capital
expenditures  required  to deploy the  infrastructure  for PCS are more  readily
justifiable from an economic  standpoint in larger, more densely populated urban
areas.  This may position the Company to offer roaming services to PCS customers
as well as to provide bulk lines of service for resale to certain PCS companies.



<PAGE>



     The FCC  requires  all  cellular  system  operators  to provide  service to
"resellers." A reseller provides cellular service to customers but does not hold
an FCC cellular license or own cellular  facilities.  Instead, the reseller buys
blocks of cellular  telephone  numbers from one or both of the licensed carriers
in a particular market and resells service through its own distribution channels
to the  public.  Thus,  a reseller  may be a customer  of a cellular  licensee's
services,  a  competitor  of that  licensee,  or both.  The Company will explore
additional  relationships  with  resellers to supplement  existing  distribution
channels and to reach specific  market  segments.  The Company  expects to offer
competitive  bulk airtime  pricing,  as well as enhanced  billing and  marketing
services in order to attract  resellers in its markets  without  eroding airtime
profit  margins or  inflating  acquisition  costs.  The number of  resellers  is
currently  small,  but it is  expected to  increase  in the  Company's  markets.
Recently, several well-known  telecommunications  companies have begun reselling
cellular  service as a  complement  to their  long  distance,  local  telephone,
paging,  cable television or Internet offerings.  The Company believes that this
development will stimulate  overall market interest in cellular service and thus
is not expected to have a material adverse effect on the Company's  business for
the foreseeable future.

Governmental Regulation

Regulation and Licensing of Cellular Communications Systems

     The Company is subject to extensive regulation by the Federal government as
a provider of cellular communications  services.  Pursuant to the Communications
Act of 1934, as amended  ("Communications  Act"),  the licensing,  construction,
operation,  acquisition and transfer of cellular  communications  systems in the
United States are regulated by the FCC. The FCC has promulgated  rules governing
the construction and operation of cellular  communications systems and licensing
and technical  standards for the provision of cellular  telephone  service ("FCC
Rules"). For licensing purposes,  the United States is divided into 734 discrete
geographically defined market areas comprised of 306 MSAs and 428 RSAs.

     In each market,  the frequencies  allocated for cellular  telephone use are
divided  into two equal 25 MHz  blocks  and  designated  as Block A and Block B.
Block B licenses were initially reserved for entities affiliated with a wireline
telephone company,  such as the Company was at that time, while Block A licenses
were initially  reserved for non-wireline  entities.  Under current FCC Rules, a
Block A or Block B license  may be  transferred  or assigned  with FCC  approval
without restriction as to wireline affiliation, but generally, no entity may own
a  substantial  interest  in both  systems  in any  one MSA or RSA.  The FCC may
prohibit or impose conditions on sales or transfers of licenses.

     Initial  operating  licenses  are  generally  granted for terms of up to 10
years,  beginning on the dates of the grant of the Initial  Operating  Authority
and are  renewable  upon  application  to the FCC.  Licenses  may be revoked and
license  renewal  applications  denied for cause  after  appropriate  notice and
hearing.  The FCC generally  grants current  licensees a license renewal if they
have substantially  complied with their obligations under the Communications Act
during their license terms. A potential  challenger would bear a heavy burden to
demonstrate  that a license should not be renewed if the licensee's  performance
merits a renewal expectancy.

     Cellular  service  providers  must  satisfy a variety  of FCC  requirements
relating  to  technical  and  reporting  matters.  One such  requirement  is the
coordination  of  proposed   frequency  usage  with  adjacent   cellular  users,
permittees  and  licensees  in  order  to avoid  interference  between  adjacent
systems.  In  addition,  the  height  and  power  of base  station  transmitting
facilities  and the  type of  signals  they  emit  must  fall  within  specified
parameters.  The FCC also regulates  cellular  service resale  practices and the
terms under which certain  ancillary  services may be provided  through cellular
facilities.

     The Company also  regularly  applies for FCC  authority  to use  additional
frequencies,  to modify the technical parameters of existing licenses, to expand
its  service  territory  and to provide new  services.  The  Communications  Act
requires  prior  FCC  approval  for  transfers  to  or  from  the  Company  of a
controlling  interest  in any  license  or  construction  permit,  or any rights
thereunder.  Although  there can be no  assurance  that any future  requests for
approval of applications filed will be approved or acted upon in a timely manner
by the FCC, the Company has no reason to believe such  requests or  applications
would not be approved or granted in due course.

     Near the conclusion of the license term,  licensees must file  applications
for renewal of licenses to obtain  authority to operate for up to an  additional
10-year  term.  Applications  for  license  renewal  may be  denied  if the  FCC
determines that the grant of an application would not serve the public interest.
In  addition,  at  license  renewal  time,  other  parties  may  file  competing
applications for  authorization.  In the event that qualified  competitors file,
the FCC may be required to hold a hearing to determine  whether the incumbent or
the  competitor  will receive the  license.  In 1993,  the FCC adopted  specific
standards to apply to cellular renewals, concluding that it will award a renewal
expectancy  to  a  cellular  licensee  that  meets  certain  standards  of  past
performance.  If the existing licensee receives a renewal expectancy, it is very
likely that the existing  licensee's  cellular license will be renewed without a
full comparative hearing. To receive a renewal expectancy,  a licensee must show
that it (i) has provided "substantial" service during its past license term, and
(ii) has  substantially  complied with applicable FCC rules and policies and the
Communications Act.  "Substantial" service is defined as service which is sound,
favorable and  substantially  above a level of mediocre  service that might only
minimally warrant renewal.

     In 1994, the Company filed for renewal of five expiring licenses which were
originally  granted by the FCC during 1985. All five licenses  (Harrisburg,  PA;
Charleston,  SC; Youngstown,  OH; Greensboro,  NC; and Toledo, OH) were approved
without  challenge.  In  September  1995,  the Company  filed for renewal of six
expiring FCC licenses  (Raleigh,  NC; Las Vegas, NV; Norfolk,  VA; Newport News,
VA;  Johnson  City,  TN; and  Greenville,  SC). All six licenses  were  approved
without challenge.  In September 1996, the Company filed for renewal of thirteen
expiring FCC licenses (York, PA; Peoria, IL; Lancaster, PA; Southbend-Mishawaka,
IN;  Fayetteville,   NC;  Lima,  OH;   Killeen-Temple,   TX;  Tallahassee,   FL;
Elkhart-Goshen,  IN; Anderson, SC; Sharon, PA; Dothan, AL; and Burlington,  NC).
All thirteen licenses were approved without  challenge.  In its applications for
renewal,  the Company demonstrated not only its compliance with FCC regulations,
but also its service in the public  interest.  The Company is confident  that it
will  continue  to meet all  requirements  necessary  to secure  renewal  of its
cellular licenses as they expire.

Character and Citizenship Requirements

     Applications for FCC authority may be denied, and in extreme cases licenses
may be revoked, if the FCC finds that an entity lacks the requisite  "character"
qualifications to be a licensee. In making that determination, the FCC considers
whether an applicant  or licensee has been the subject of adverse  findings in a
judicial or administrative proceeding involving felonies, the possession or sale
of unlawful drugs, fraud, antitrust violations or unfair competition, employment
discrimination,  misrepresentations  to the FCC or other government agencies, or
serious violations of the  Communications  Act or FCC regulations.  The FCC also
requires  licensees  to comply  with  statutory  restrictions  on the  direct or
indirect ownership or control of radio licenses by non-U.S. persons or entities.
The FCC has found the  Company  to be  qualified  to hold FCC  licenses  and the
Company has  included  provisions  in its Amended and  Restated  Certificate  of
Incorporation,  as  amended,  which  authorize  it to redeem  its stock from any
person whose  ownership  would  jeopardize the grant,  holding or renewal of any
material license held by the Company.

Federal Legislation

     Recent  legislative  changes to the  Communications  Act and the  antitrust
consent  decree  applicable to the Regional Bell Operating  Companies  ("RBOCs")
affect the cellular industry.  This legislation (known as the Telecommunications
Act  of   1996),   among   other   things,   affects   competition   for   local
telecommunications   services,   interconnection   arrangements   for  carriers,
universal  service  funding and the provision of  interexchange  services by the
RBOCs wireless systems.



<PAGE>



State, Local and Other Regulation

     Congress amended the Communications Act to preempt,  as of August 10, 1994,
state or local  regulation  of the  entry  of,  or the  rates  charged  by,  any
commercial mobile service or any private mobile service, which includes cellular
telephone service. As a practical matter, the Company is free to establish rates
and  offer  new  products  and  service  with  a  minimum  of  state  regulatory
requirements.  A few of the  Company's  16 states of  operation  still  maintain
nominal oversight  jurisdiction,  primarily focusing upon resolution of customer
complaints.  In such states  (primarily  Nevada and Ohio),  the Company  devotes
resources as necessary to maintaining positive  relationships with state utility
commissions.

     The location and construction of cellular  transmitter  towers and antennas
are subject to United States Federal Aviation Administration ("FAA") regulations
and may be  subject  to United  States  Federal,  state and local  environmental
regulation  as well as state or local  zoning,  land use and  other  regulation.
Before  a  system  can  be put  into  commercial  operation,  the  grantee  of a
construction  permit  must  obtain  all  necessary  zoning and  building  permit
approvals   for  the  cell  sites  and  MSC  locations  and  must  secure  state
certification  and tariff  approvals,  if  required.  The time  needed to obtain
zoning  approvals and requisite  state permits  varies from market to market and
state to state. Likewise,  variations exist in local zoning processes. There can
be no  assurance  that  any  state or local  regulatory  requirements  currently
applicable  to the systems in which the  Company's  affiliates  have an interest
will not be changed in the future or that  regulatory  requirements  will not be
adopted in those states and localities which currently have none.

     Zoning and planning  regulation  may become more  restrictive in the future
with the  addition of PCS carriers  seeking  sites for network  construction  as
well.  The   Telecommunications  Act  of  1996,  however,  has  imposed  certain
limitations on the arbitrary  restriction of the expansion of cellular  networks
by state or local government agencies.

Employees

     At  December  31,  1996 the  Company  had  approximately  4,000  employees,
including  non-controlled  Company markets that are managed by the Company, none
of whom  is  represented  by a labor  organization.  Management  of the  Company
considers its relations with employees to be excellent.

Item 2.  Properties.

     The Company maintains its corporate headquarters in Chicago,  Illinois. The
Company currently leases approximately 468,000 square feet in this facility. For
each  cluster  of  markets  served  by the  Company's  operations,  the  Company
maintains  at least  one  sales or  administrative  office  and a number of cell
transmitter and antenna sites. Most facilities are leased and some are owned. As
of December 31, 1996, the Company had approximately 140 leases for retail stores
used  as one  of its  distribution  channels.  The  Company  believes  that  its
facilities are in good working condition,  suitable for its current business and
that additional facilities will be available for its foreseeable needs.

Item 3.  Legal Proceedings.

     On or about March 29, 1996, a lawsuit was brought in the Chancery  Court of
Washington County,  Jonesborough,  Tennessee (the "Tennessee Action"), on behalf
of  all  customers  in  the  Company's   Tennessee  markets  regarding  customer
notification  of the Company's  practice with respect to billing for  fractional
minutes of service. In April 1996, the original complaint was amended to enlarge
the class of plaintiffs to include all customers in all of the Company's service
areas. In late April 1996, the Tennessee Action was removed to the United States
District Court for the Eastern  District of Tennessee,  Northern  Division.  The
Company moved to dismiss the action and the plaintiff  filed a motion to remand.
On July 16, 1996, the Tennessee District Court granted the plaintiff's motion to
remand and returned the case to the Chancery  Court of  Washington  County.  The
Company's Motion to Dismiss is currently pending before the Chancery Court.

     On or about May 28,  1996,  a lawsuit was brought in the Common Pleas Court
of Erie County,  Ohio (the "Ohio Action"),  on behalf of all customers in all of
the Company's  service areas regarding  notification  of the Company's  practice
with respect to billing for fractional minutes of service. On June 25, 1996, the
Ohio Action was removed to the United  States  District  Court for the  Northern
District of Ohio,  Western Division.  Thereafter,  the Company filed a Motion to
Dismiss Or In The Alternative,  Stay pending  resolution of the Tennessee Action
and the plaintiff  filed a Motion to Remand.  By Order dated  December 17, 1996,
the Ohio District Court granted plaintiff's motion to remand and the Ohio Action
was  returned  to the Common  Pleas  Court.  Plaintiff  has  recently  commenced
discovery  by serving a document  request  and  interrogatories.  On January 17,
1997, the Company filed a Motion to Stay This Action And For A Protective  Order
seeking to stay the Ohio Action, including all discovery,  pending resolution of
the  Tennessee  Action.  The basis for the  Motion to Stay,  which is  currently
pending  before the Common Pleas Court,  is the duplicity of the Ohio Action and
the Tennessee Action.

     The Company is party to various  other legal  proceedings  in the  ordinary
course of its business.  Although the ultimate resolution of these various other
proceedings  cannot be  ascertained,  management of the Company does not believe
that such  proceedings,  individually or in the aggregate,  will have a material
adverse  effect on the  results  of  operations  or  financial  position  of the
Company.

Item 4.  Submission of Matters to a Vote of Security Holders.

      No matters  were  submitted  to a vote of security  holders of the Company
during the quarter ended December 31, 1996.

Item 4a. Executive Officers of the Registrant.

     Set forth below is certain information concerning the executive officers of
the Company.  The executive  officers' continued service is determined solely by
the Company's Board of Directors.


       Name         Age              Position and Offices Held
------------------  --- --------------------------------------------------------
Dennis E. Foster    56  President and Chief Executive Officer and Director
Kevin L. Beebe      38  Executive Vice President-Operations
Michael J. Small    39  Executive Vice President and Chief Financial Officer
Susan L. Amato      38  Senior Vice President-Engineering and Network Operations
Gary L. Burge       43  Senior Vice President-Finance
Kevin C. Gallagher  49  Senior Vice President, General Counsel and Secretary
Debra L. Ferrari    39  Vice President-Human Resources

     Mr. Foster was elected President of the Company in March 1993 and President
and Chief  Executive  Officer of the  Company in February  1996.  He was elected
director  of the Company on March 7, 1996.  Mr.  Foster had been  President  and
Chief  Operating  Officer of the Cellular and Wireless  Division of Sprint since
March 1993, a position he resigned from effective with the spinoff, and prior to
that he was Senior Vice  President of the Local  Telecommunications  Division of
Sprint  beginning in May 1992.  Prior to joining  Sprint,  he was  President and
Chief Operating Officer of GTE Mobilnet, a position he had held since June 1991.
Mr. Foster had been Area Vice  President and General  Manager of GTE North since
September 1989.



<PAGE>



     Mr. Beebe was elected Executive Vice President-Operations of the Company on
February 6, 1996. Prior to the spinoff, Mr. Beebe had been employed by Sprint or
its subsidiaries for over 11 years, joining the Company in February 1994 as Vice
President-Marketing and Administration.  In April 1995, he became Vice President
Operations.  Prior to joining the Company and  beginning in June 1991, he served
with Sprint's  United North Central as Director of Marketing.  In November 1990,
Mr. Beebe became  Director of the  Engineering  and  Operations  Staff at United
Telephone  Systems-Southeast  Group and became  Director  of Product  Management
Business Development in June 1988.

     Mr. Small was elected  Executive Vice President and Chief Financial Officer
of the Company  effective  December  1, 1995.  Prior to that time he served as a
member of the Office of the President of Lynch  Corporation as well as President
and Chief Executive Officer of Lynch Multimedia since January 1994. Prior to his
positions with Lynch Corporation,  he was employed by Sprint or its subsidiaries
and Centel Corporation, a predecessor corporation,  or its subsidiaries for over
12 years.  He joined the cellular  organization  in March 1991 as Executive Vice
President-Administration  and  Engineering  and  prior  to that  served  as Vice
President of Investor Relations at Centel Corporation since September 1989.

     Ms.  Amato  was  elected  Senior  Vice  President-Engineering  and  Network
Operations of the Company on February 6, 1996.  Prior to the spinoff,  Ms. Amato
had been  employed  by Sprint or its  subsidiaries  and  Centel  Corporation,  a
predecessor  corporation,  or its subsidiaries for over 14 years. She joined the
cellular  organization  in  September  1990 as Regional  Vice  President  of the
Mid-Atlantic region and became Vice  President-Wireless  Business Development in
February 1994 and Vice  President-Engineering and Network Operations in February
1995.

     Mr.  Burge was  elected  Senior  Vice  President-Finance  of the Company on
February 6, 1996. Prior to the spinoff, Mr. Burge had been employed by Sprint or
its  subsidiaries  and Centel  Corporation,  a predecessor  corporation,  or its
subsidiaries for over 14 years. He joined the cellular  organization in November
1989 as Controller  and became Vice  President and  Controller in April 1991 and
Vice President - Finance and Administration in March 1995.

     Mr.  Gallagher  was elected  Senior  Vice  President,  General  Counsel and
Secretary  of the  Company  on  February  6,  1996.  Prior to the  spinoff,  Mr.
Gallagher  had  been  employed  by  Sprint  or  its   subsidiaries   and  Centel
Corporation,  a predecessor corporation,  or its subsidiaries for over 14 years.
He joined the cellular  organization in January 1990 as Vice President of Legal,
became  Vice  President  of  Legal  and  External  Affairs  in May 1991 and Vice
President and General Counsel in September 1992.

     Ms. Ferrari was elected Vice President - Human  Resources of the Company on
February 6, 1996. Prior to the spinoff,  Ms. Ferrari had been employed by Sprint
or its subsidiaries and Centel Corporation,  a predecessor  corporation,  or its
subsidiaries  for over 12 years.  She joined the  Company in  September  1993 as
Director of Human  Resources.  Prior to joining the  Company  and  beginning  in
January  1987,  she was with  Centel  Corporation  as General  Staff  Manager of
Compensation Planning.



<PAGE>



                                     PART II

Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters.

      The outstanding shares of the Company's Common Stock are listed on the New
York Stock  Exchange,  the Chicago Stock Exchange and the Pacific Stock Exchange
and trade under the symbol XO.

      Trading of the Common Stock  commenced on the New York Stock Exchange on a
when-issued  basis on February 23, 1996, and commenced on a regular-way basis on
March 7, 1996. Prior to the spinoff,  the Company was an indirect,  wholly-owned
subsidiary of Sprint and there was no trading  market for the Common Stock.  The
following  table sets forth the high and low sale prices of the Common  Stock as
reported on the New York Stock Exchange Composite Tape for each quarter in 1996.

                 1996                   High                  Low
            ---------------            -------               -------

            First Quarter              27                    21 1/2
            Second Quarter             25 1/8                22 1/8
            Third Quarter              24 3/4                22
            Fourth Quarter             25 7/8                22 1/4


      On March 26, 1997,  there were  approximately  67,766 holders of record of
the Common Stock.

      The Company  currently  does not  anticipate  paying cash dividends on the
Common  Stock in the  foreseeable  future.  The future  dividend  policy will be
determined on the basis of various factors,  including the Company's  results of
operations,   financial   condition,   capital   requirements,   and  investment
opportunities.  In addition,  the Company's  existing debt instruments limit the
Company's ability to pay dividends. See "Management's Discussion and Analysis of
Financial Condition and Results of Operation-Liquidity and Capital Resources."

Rights Plan

      Prior to the spinoff,  the Company's  Board of Directors  adopted a rights
plan  pursuant  to which the  Company  distributed  a  dividend  of one right (a
"Right")  to  purchase  certain  shares of capital  stock of the  Company  under
certain  circumstances,  for each  outstanding  share of the  Common  Stock (the
"Rights Plan"). The Rights are currently traded with the Common Stock and detach
and become  exercisable  only if, in a transaction not approved by the Company's
Board of Directors,  a person or entity  acquires 15% or more of the outstanding
shares of the Common Stock or announces a tender offer the consummation of which
would result in ownership by a person or group of 15% or more of such shares.

     Once  the  Rights  detach  and  become  exercisable,   unless  subsequently
redeemed,  each Right then entitles its holder to purchase one one-hundredths of
a share of the Company's  Preferred  Stock,  First Series  Junior  Participating
Preferred Stock (the "First Series Preferred  Stock"),  for an exercise price of
$100.00, subject to certain adjustments.  If the Company is involved in a merger
or other business  combination  transaction after the Rights become exercisable,
each Right will entitle its holder to purchase,  for the Right's exercise price,
a number of the acquiring or surviving company's shares of common stock having a
market value equal to twice the exercise price.  The Company will be entitled to
redeem  the  Rights  at $.01 per  Right  at any time  until  ten  business  days
following a public  announcement  that a person or group of persons has acquired
beneficial  ownership  of 15% or more of the  outstanding  shares of the  Common
Stock ("Acquiring Person"). Following such an announcement, or,

<PAGE>



subject to certain exceptions, the acquisition of beneficial ownership of 15% or
more of the  outstanding  shares of the Common Stock by the Acquiring  Person or
certain related persons,  the Rights acquired by such person or persons shall be
null and void. Prior to the date upon which the Rights detach,  the terms of the
Rights  Plan may be amended by the  Company's  Board of  Directors  without  the
consent of the  holders of the Rights.  The Rights  will expire in 2006,  unless
earlier  redeemed by the Company.  The Rights Plan was not intended to deter all
takeover bids for the Company.  To the extent an acquirer is  discouraged by the
Rights Agreement from acquiring an equity position in the Company,  stockholders
may be  deprived  from  receiving a premium for their  shares.  The  issuance of
additional  shares  of the  Common  Stock  prior to the time the  Rights  become
exercisable will result in an increase in the number of Rights outstanding.

     The First Series Preferred Stock, if issued,  will rank junior to all other
series of the  Company's  Preferred  Stock,  $0.01 par  value,  (the  "Preferred
Stock"),  as to the  payment  of  dividends  and the  distribution  of assets in
liquidation,  unless the terms of any such other series shall provide otherwise.
Each share of the First Series  Preferred  Stock will have a quarterly  dividend
rate per share equal to the  greater of $1.00 or 100 times the per share  amount
of any dividend (other than a dividend  payable in shares of the Common Stock or
a  subdivision  of the Common  Stock)  declared  from time to time on the Common
Stock, subject to certain adjustments. The holders of the First Series Preferred
Stock will be entitled to receive a preferred  liquidation  payment per share of
$10.00 (plus accrued and unpaid  dividends)  or, if greater,  an amount equal to
100 times the payment to be made per share of the Common Stock.  Generally,  the
holder of each share of the First Series Preferred Stock will vote together with
the Common Stock (and any other series of the Preferred  Stock  entitled to vote
on such  matter) on any matter as to which the Common Stock is entitled to vote,
including  the  election  of  directors.  The  holder of each share of the First
Series  Preferred  Stock  will be  entitled  to 100  votes.  In the event of any
merger,  consolidation,  combination or other transaction in which shares of the
Common Stock are exchanged for or changed into other stock or  securities,  cash
and/or  property,  the holder of each share of the First Series  Preferred Stock
will be entitled to receive 100 times the aggregate amount of stock, securities,
cash and/or  property  into which or for which each share of the Common Stock is
changed or exchanged.

      The foregoing dividend,  voting and liquidation rights of the First Series
Preferred  Stock are  protected  against  dilution in the event that  additional
shares  of the  Common  Stock  are  issued  pursuant  to a stock  split or stock
dividend.  Because of the nature of the First Series Preferred Stock's dividend,
voting,  liquidation and other rights,  the value of the one one-hundredths of a
share of the  First  Series  Preferred  Stock  purchasable  with  each  Right is
intended to approximate the value of two shares of the Common Stock.

      The  foregoing  summary  description  of the Rights does not purport to be
complete and is  qualified in its entirety by reference to the Rights  Agreement
dated as of March 5, 1996  between  the  Company and  Chemical  Bank,  as Rights
Agent,  a copy of which is  incorporated  by  reference  as Exhibit  4.4 to this
Report.

Recent Sales of Unregistered Securities

     On November 1, 1996,  the Company issued to  Independent  Cellular  Network
Partners and certain of its affiliates (collectively,  "ICNP"), 6,500,000 shares
of the Company's Common Stock and $122 million in aggregate  principal amount of
the Company's subordinated  non-negotiable  promissory notes as a portion of the
purchase price paid in connection with the ICN  Acquisition.  See  "Management's
Discussion  and Analysis of Financial  Condition  and Results of  Operation-Cash
Flows-Investing Activities."

      In issuing  such  securities,  the Company  relied on the  exemption  from
registration provided by Section 4(2) of the Securities Act of 1933, as amended.
The Company's reliance was based on, among other things, representations made by
ICNP contained in the Exchange and Merger Agreement, dated as of May 31, 1996, a
copy of which is incorporated by reference as Exhibit 2.2 to this Report.



<PAGE>

<TABLE>


Item 6.  Selected Consolidated Financial Data.
<CAPTION>

                                                        For the Year Ended December 31,
                            ------------------------------------------------------------------------------------------
                             1996 (1)       1995          1994        1993         1992          1991          1990
                            -----------  -----------  -----------  -----------  -----------  -----------  ------------
(in thousands)                                                                               (unaudited)  (unaudited)
<S>                         <C>          <C>          <C>          <C>          <C>          <C>          <C>

Total Operating Revenues    $ 1,095,872  $  834,415   $  626,475   $  410,480   $  280,119   $  213,515   $  161,915

Net Income (Loss)           $    59,519  $   (1,695)  $  (19,757)  $  (51,484)  $  (65,522)  $  (64,277)  $  (74,961)

Net Income (Loss)
 Per Share (in Dollars) (2) $      0.50  $    (0.01)  $    (0.17)  $    (0.45)  $    (0.58)  $    (0.58)  $    (0.68)

Total Assets                $ 2,812,069  $1,973,246   $1,728,344   $1,505,221   $1,494,648   $1,390,245   $1,270,563

Long-Term Debt (3)          $ 1,699,778  $1,517,729   $1,354,116   $1,246,822   $1,249,168   $1,109,796   $  969,544

----------
<FN>

(1) On March 7, 1996,  the spinoff  from  Sprint  Corporation  was  consummated.
Additionally,  on November 1, 1996,  the Company  completed its  acquisition  of
Independent  Cellular  Network,  Inc.  and  affiliated  companies.  See Notes to
Consolidated Financial Statements for more information regarding these events.

(2) In 1995 and prior  years,  Net Income  (Loss) per Share has been  calculated
based upon the number of Sprint Corporation  weighted average shares outstanding
for each respective period,  adjusted for a conversion ratio of one share of the
Company's Common Stock to three shares of Sprint common stock.

(3)   Represents advances from and notes to affiliates for 1995 and prior years.
</FN>
</TABLE>



<PAGE>



Item 7. Management's Discussion and Analysis of Financial Conditions and Results
        of Operations.

General

     The  following is a discussion  and analysis of the  historical  results of
operations   and  financial   condition  of  360   Communications   Company  and
Subsidiaries  (the  "Company")  and factors  affecting the  Company's  financial
resources.  This discussion  should be read in conjunction with the consolidated
financial  statements,  including the notes thereto,  included elsewhere in this
Report. This discussion contains forward-looking  statements which are qualified
by  reference  to,  and  should  be  read in  conjunction  with,  the  Company's
discussion regarding  forward-looking  statements as set under  "Forward-Looking
Statements."

Spinoff

     On July 26, 1995, Sprint Corporation ("Sprint") announced that its Board of
Directors  decided  to  pursue a  tax-free  spinoff  of the  Company  to  Sprint
shareholders  ("spinoff").  In the  Federal  Communications  Commission  ("FCC")
auction of wireless Personal  Communications  Services ("PCS") licenses,  Sprint
Spectrum LP won the rights to several markets that overlap  service  territories
operated  by the  Company.  Under FCC rules,  Sprint was  required  to divest or
reduce its cellular  holdings in certain markets to clear conflicts with the PCS
licenses awarded to Sprint Spectrum LP. For these reasons,  Sprint and its Board
of Directors  decided to pursue a spinoff of the cellular  operations of Sprint.
On March 7, 1996, the spinoff was consummated.

Results of Operations

     The following table sets forth the Company's cellular service revenues, the
components of certain operating  expenses and the related percentage of cellular
service  revenues  represented  by each  component  for the years  indicated (in
thousands).

                                  Results of Cellular Service Operations
                                         Year Ended December 31,
                        --------------------------------------------------------
                              1996                1995                1994
                        ------------------  -----------------   ----------------
Cellular Service
   Revenues             $1,052,726  100.0%  $789,459   100.0%   $569,793  100.0%

Cost of Service             99,745    9.5     68,223     8.6      51,071    9.0
Other Operations Expense    55,776    5.3     40,591     5.1      30,905    5.4
Sales, Marketing and
   Advertising Expenses    206,147   19.6    141,505    17.9     136,501   24.0
General, Administrative
   and Other Expenses      263,191   25.0    214,536    27.2     150,985   26.5
Depreciation               124,024   11.8     95,540    12.1      73,054   12.8


Customer Growth Rate

     The  number of  cellular  customers  increased  to  2,156,000  in 1996 from
1,502,000 in 1995 and  1,040,000 in 1994, an increase of 43.6% and 44.4% in 1996
and 1995, respectively.  In 1996 and 1995, the Company added 470,000 and 462,000
customers,  respectively,  through internal  growth.  In 1996, the Company added
185,000 customers through acquisitions. The Company's penetration rate, which is
the number of customers  divided by the total population in its licensed service
areas,  reached 8.9% at December 31,  1996,  compared  with 7.6% at December 31,
1995. Annual  penetration  improvement from internal growth was 2.1% in 1996 and
2.3% in 1995. Customer churn, the average monthly rate of customer  disconnects,
was 1.86%, 1.81% and 1.80% for the years ended December 31, 1996, 1995 and 1994,
respectively.

     Historically,  the Company and the  industry  in general  have  experienced
significant  customer  growth during the fourth  quarter.  The Company  attained
35.7% and 33.2% of its annual internal growth customer gain in the 1996 and 1995
fourth quarter,  respectively, and expects this trend to continue. This trend is
attributable to increases in cellular  communications service activations during
the holiday season.  Revenue benefits associated with significant fourth quarter
customer growth, however, are not experienced until subsequent quarters.  During
the fourth quarter of each year, the Company experiences  significant  increases
in sales  commission  expenses as a result of the significant  customer  growth,
which causes a deterioration in fourth quarter  operating  margins.  The Company
believes  that more  meaningful  operating  margins are  reflected in subsequent
periods after it experiences the revenue benefits of its significantly increased
customer base.

Cellular Service Revenues

     Cellular  service  revenues  increased in 1996 and 1995,  principally  from
growth in the number of cellular  customers.  Increased  distribution  channels,
expanded network capacity, declining prices for cellular telephone equipment and
service, increased consumer awareness and acceptance of wireless communications,
and  pricing  plans  targeted  at  particular  market  segments  are key factors
contributing to the Company's customer growth. The industry-wide trend for lower
negotiated roaming rates among carriers and generally lower revenue per customer
has partially  offset the revenue growth  resulting from the increased  customer
base. In addition,  acquisitions  completed in the first and fourth  quarters of
1996 contributed $53.1 million of service revenues.

     Consistent  with the rest of the  industry,  the  Company  has  experienced
increased penetration in the consumer market - a trend attributable to declining
cellular  telephone  equipment  and  service  prices and  increased  promotional
activities  (i.e.,  packaging,  special rate plans),  an increased  awareness of
cellular  communications,  widespread distribution channels in consumer-oriented
retail locations and expanded network coverage and capacity. The Company expects
this trend to continue.  New customers  generally use less airtime than existing
customers,  causing  the  average  service  revenue  per  customer  per month to
decline.  As a result,  cellular revenue growth has not kept pace with the level
of growth in the number of customers.  Service revenue per average  customer per
month  was  $49.39  in 1996,  $53.01 in 1995 and  $58.57  in 1994.  The  Company
anticipates that service revenue per average customer per month will continue to
decline as penetration rates continue to increase.

     The Company expects that roaming rates between carriers will continue to be
reduced as part of the industry-wide effort to increase cellular telephone usage
through  increased  roaming  airtime,  which may reduce  revenues  derived  from
cellular service users who roam into the Company's systems. The Company projects
roaming  airtime will increase as reduced  roaming  rates  between  carriers are
ultimately  passed on to customers,  thus stimulating  increased usage.  Roaming
airtime  minutes  increased  during 1996 and 1995 when  compared  with the prior
years,  resulting  in increases  of $51.8  million and $30.1  million in roaming
revenue in those years.

     Future  revenue  growth  will  be  impacted  by the  Company's  success  in
maintaining customer growth in existing markets,  generating  additional revenue
from the increasing  availability of a variety of enhanced and related  services
and  products,  and  acquiring  additional  cellular  communications  systems to
further  strengthen  its  existing  regional  clusters.  The growth  rate of new
customers is expected to decline as the Company's  customer  base grows.  Future
revenue  growth  also  will be  impacted  by the  Company's  entrance  into  the
residential  long  distance and paging  businesses.  In 1996,  the Company began
marketing  residential  long distance service and reselling paging service in 13
of the 16 states in which the Company  provides  wireless  service.  An improved
competitive  position,  reduced cellular churn and increased brand awareness are
expected as the Company's long distance and paging services businesses mature.

Equipment Sales

     Equipment  sales decreased 4.0% in 1996 and 20.7% in 1995 compared with the
prior  years,  despite an increase in the number of  telephone  units sold.  The
price of cellular  telephones is a key factor  influencing  the rate of customer
growth.  Although declining  cellular telephone prices have generated  increased
activations  of cellular  service,  negative  gross  margins on equipment  sales
continue to impact operating results as the Company sells cellular telephones at
or below  cost.  Competitive  market  pressures  are  expected  to  result  in a
continued trend of negative gross margins on equipment sales.

Cost of Service

     Excluding the impact of roaming activities, cost of service as a percentage
of cellular  service  revenues was 8.1% in 1996,  8.6% in 1995 and 9.0% in 1994.
Economies  of  scale  and  the  favorable  effects  of  renegotiated  terms  and
conditions of a new long distance contract with Sprint are key factors favorably
impacting  the trend in cost of  service as a  percentage  of  cellular  service
revenues. Long distance telecommunications and operator services are provided to
the Company by Sprint based on terms and conditions of a contract governing such
charges.  In March 1996, a  renegotiated  agreement  with a three-year  term was
entered into between the Company and Sprint on an exclusive basis (provided that
Sprint is able to provide such services at competitive  terms and conditions) on
terms that are believed to be  comparable  to those which could be obtained from
unaffiliated third parties.

     In August 1996,  in an effort to level the  competitive  telecommunications
field,  the FCC issued an order  that will  result in a  reduction  in costs for
wireless companies to interconnect with local telephone companies.  In addition,
wireless   companies  will  be  compensated  by  landline   carriers  for  calls
terminating  on  wireless  networks.  The new  structure  is intended to achieve
reciprocal,   cost-based   interconnection   rates.  The  Company  currently  is
renegotiating its interconnection  arrangements with major telephone  companies.
The Company believes it will benefit from reduced interconnection rates.

     Roaming margins associated with the Company's  customers roaming into other
carriers' markets declined in 1996,  resulting in an increase in cost of service
as  a  percent  of  cellular  service  revenues.   The  decline  in  margins  is
attributable to increased competitive pressures to reduce rates for such roaming
traffic and an increase in unbillable fraudulent roaming activities. The Company
expects  that the  industry-wide  trend to  reduce  rates  will  continue,  thus
stimulating an increase in cellular telephone usage, resulting in an increase in
roaming  airtime.  To the extent reduced retail rates stimulate  increased usage
and the Company is able to negotiate  reduced wholesale roaming rates with other
carriers, the effects of discounted rates will be somewhat mitigated.

     Unauthorized usage of customers' telephone numbers, commonly referred to in
the  industry  as cloning  fraud,  resulted  in  unbillable  fraudulent  roaming
activities that approximated 1.5%, 1.0% and 0.5% of cellular service revenues in
1996, 1995 and 1994, respectively. Significant fraud activity in several markets
caused the increase in unbillable  fraudulent roaming activity in 1995. In 1996,
the  increase in  unbillable  fraudulent  roaming  activity  was the result of a
significant  increase in the level of fraud  activity in several  markets during
the fourth quarter of 1996.  Unbillable  fraudulent  roaming  activities reached
approximately 3% of cellular service revenues in the three months ended December
31, 1996.  The Company  believes it will  continue to be impacted by  fraudulent
roaming activities on a going-forward basis and continues to productively invest
in new systems and technologies to reduce the incidence of fraud.

Other Operations Expense

     Other operations expense as a percent of cellular service revenues was 5.3%
in 1996,  5.1% in 1995 and 5.4% in 1994. In 1996,  nonrecurring  charges and the
effects of an  overall  increase  in the level of  customer  debt  delinquencies
nationwide more than offset realized economies of scale,  causing an increase in
other operations expense as a percent of cellular service revenues. In 1996, the
Company incurred approximately $700,000 of additional maintenance expense caused
by two major  hurricanes  and $900,000 of  increased  expense for the testing of
cell sites to ensure compliance with new environmental protection laws. Bad debt
expense as a percentage of cellular service  revenues  increased to 2.3% in 1996
from 2.1% in 1995 and 2.2% in 1994.  The  decrease in costs as a  percentage  of
cellular  service  revenues in 1995  compared with 1994 was due primarily to the
growth in the  number  of  cellular  customers  and an  improvement  in bad debt
levels.  The Company  expects that other  operations  expense as a percentage of
cellular  service  revenues  will  decrease  as  future  economies  of scale are
realized.


<PAGE>



Sales, Marketing and Advertising Expenses

     Sales,  marketing  and  advertising  expenses as a  percentage  of cellular
service  revenues were 19.6% in 1996,  17.9% in 1995 and 24.0% in 1994. In 1996,
additional advertising, promotional and other marketing expenses associated with
the  introduction  and promotion of the  Company's new brand name,  and with the
initiation of residential  long distance  service,  increased  expenses by $26.2
million and $3.3 million,  respectively.  These factors caused sales,  marketing
and advertising  expenses as a percent of cellular  service revenues to increase
in 1996.  During 1995, sales  distribution  channel  efficiencies  were realized
causing a  decrease  in costs as a percent of  cellular  service  revenues  when
compared with 1994.

     To improve sales and reduce costs  associated with acquiring new customers,
the Company  has begun to depend  more upon its own sales  force  working out of
Company   retail  outlets  and  kiosks  located  in  shopping  malls  and  other
non-company owned retail locations.  Incremental sales costs at a Company retail
store or  kiosk  are  significantly  lower  than  commissions  paid to  national
dealers.  Although  the Company  intends to continue to support its large dealer
network,  continued  increases  in its  own  retail  distribution  channels  are
planned.  The Company has  experienced  little change in churn levels,  a factor
further contributing to the Company's ability to manage the costs of maintaining
and growing its customer base.

General, Administrative and Other Expenses

     General,  administrative  and other  expenses as a  percentage  of cellular
service  revenues  were  25.0% in 1996,  27.2%  in 1995 and  26.5% in 1994.  The
decrease in 1996 was due to economies of scale  realized as a result of customer
growth.  In connection  with the spinoff,  the Company began to perform  certain
functions  previously  provided by Sprint. The undertaking of such functions did
not have a significant  impact on the Company's  1996  operating  expenses.  The
increase in  expenses  as a  percentage  of  cellular  service  revenues in 1995
compared  with 1994 was due  primarily to  increases  in costs  allocated to the
Company by Sprint for administrative  support functions and an increase in phone
upgrade  expenses,  a cost required to retain  customers and effectively  manage
customer churn. The Company  anticipates an ongoing trend of decreased  general,
administrative and other expenses as a percentage of cellular service revenues.

Depreciation and Amortization

     Acquisitions  of  existing   cellular   communications   systems  generated
intangible  assets such as FCC license  costs and goodwill  which are  amortized
over 40 years.  Amortization  expense  totaled $22.8 million,  $19.2 million and
$19.4 million in 1996,  1995 and 1994,  respectively.  The Company  periodically
assesses the ongoing value of these  intangible  assets and expects the carrying
amounts to be fully recoverable.

     Depreciation expense totaled $124 million,  $95.5 million and $73.1 million
in 1996, 1995 and 1994,  respectively.  Depreciation as a percentage of cellular
service   revenues  was  11.8%,   12.1%  and  12.8%  in  1996,  1995  and  1994,
respectively.  The increases in depreciation expense primarily are the result of
increased capital investment in the Company's cellular network.  As a percent of
cellular service  revenues,  depreciation  continues to decline,  primarily as a
result  of  economies  of  scale as more  customers  are  added to the  existing
network.

     The  Company  continues  to invest in analog and  enhanced  analog  network
infrastructure  to support  customer  growth  and  maintain  the  quality of its
service.  The Company  believes  that its networks have  sufficient  capacity to
handle the  Company's  expected  customer  growth rate in the near term.  In the
future,  the  Company  intends  to  relieve  any  capacity  constraints  through
frequency  planning,  the deployment of enhanced analog technology in additional
markets,  and the selective  installation  of  additional  cell sites in densely
populated areas. The Company plans to implement a gradual  transition to digital
technology  on a  market-by-market  basis  as  additional  calling  capacity  is
required to accommodate growth in call volume. This approach should provide time
for anticipated  improvements in digital  technology to be realized,  while also
avoiding  premature  capital  expenditures.  In August 1996,  the Company  began
offering Code Division Multiple Access ("CDMA") digital technology in Las Vegas,
Nevada.  The  introduction  of CDMA in Las Vegas followed a six-month trial that
began in early  1996.  The  Company's  investment  in  digital  technology  will
increase in 1997. The Company  believes the service lives on its existing analog
technology are appropriate.

Interest Expense

     Interest expense  decreased in 1996 compared with 1995 because of decreases
in   interest   rates  and  reduced   borrowing   levels  as  a  result  of  the
recapitalization  at the  time  of  the  spinoff.  See  "Liquidity  and  Capital
Resources" for additional information regarding the Company's  recapitalization.
Interest expense increased in 1995 when compared with 1994 primarily as a result
of interest rate increases and increased  borrowings  from Sprint.  Prior to the
spinoff, the Company borrowed from Sprint,  primarily to fund construction costs
and  start-up  losses,  at  interest  rates  based on prime plus 2% and a 30-day
commercial  paper rate. The average interest rate was 7.1% in 1996, 8.9% in 1995
and 7.6% in 1994.  Current  borrowings  consist of $450 million of 7 1/8% Senior
Notes due 2003,  $450 million of 7 1/2% Senior  Notes due 2006,  $122 million of
subordinated  promissory  notes,  borrowings  under a revolving  credit facility
("Credit  Facility")  with a  number  of banks  and  institutional  lenders  and
market-based short-term borrowings.

Minority Interests in Net Income of Consolidated Entities

     Minority Interests in Net Income of Consolidated  Entities represents other
investors'  interests in the operating  results of cellular systems in which the
Company has a controlling interest. The increases in 1996, 1995 and 1994 are due
to improved operating results.

Equity in Net Income of Unconsolidated Entities

     Equity in Net Income of  Unconsolidated  Entities  represents the Company's
share of  operating  results of cellular  systems in which the Company  does not
have a controlling  interest.  Equity earnings  increased in 1996, 1995 and 1994
primarily  as a result  of  increased  income  generated  by  minority  cellular
investments in markets that continue to mature.

     As  described  in Note 10 of Notes to  Consolidated  Financial  Statements,
various suits  arising in the normal course of business are pending  against the
cellular  system  entities  in which  the  Company  does not have a  controlling
interest. Because the outcome of such legal proceedings has not been determined,
no  provision  for any  liability  that may  result  upon  adjudication  of such
litigation  has  been  made  in the  consolidated  financial  statements  of the
cellular system entity or the Company. In view of the uncertainty regarding each
litigation,  there can be no assurance that the outcome of such  litigation will
not have a material adverse effect on the Company's investment in these entities
or in its equity in the net income of each entity.

Income Taxes

     The Company's income tax expense for 1996, 1995 and 1994 was $57.8 million,
$25.4  million and $5.7  million,  respectively.  The reduction in the Company's
effective  tax rate in 1996 compared with 1995,  primarily was  attributable  to
increased  levels of  pre-tax  income  which  lessened  the  impact of items not
deductible  for income tax  purposes.  In the 1996 fourth  quarter,  the Company
recorded a $2.2 million nonrecurring adjustment to its income tax provision. See
Note 9 of Notes to Consolidated  Financial Statements for additional information
regarding  differences  that caused the effective  income tax rates to vary from
the statutory federal income tax rates.

     As of December  31,  1996,  the Company had  recorded  deferred  income tax
assets of $54.9 million, net of a $10.1 million valuation allowance.  See Note 9
of Notes to  Consolidated  Financial  Statements for  information  regarding the
sources that gave rise to these assets.  The Company has  determined  that it is
more  likely  than not that these  deferred  tax  assets,  net of the  valuation
allowance, will be realized based on current income tax laws and expectations of
future taxable income  stemming from the reversal of deferred tax liabilities or
ordinary operations. Uncertainties surrounding income tax law changes, shifts in
operations between state taxing jurisdictions and future operating income levels
may,  however,  affect the ultimate  realization of all or some portion of these
deferred income tax assets.

Net Losses

     The Company  sustained net losses in each fiscal year from its formation in
1982 through 1995. These losses primarily  related to the start-up nature of the
Company's business which required significant  expenditures  associated with the
acquisition of new customers and  substantial  investment in  infrastructure  to
support  growth.  Total operating  expenses as a percentage of cellular  service
revenues  have declined and it is  anticipated  that this trend will continue as
the Company  realizes  economies of scale associated with growth in its customer
base.  Accordingly,  the  Company  produced  net income in 1996.  Moreover,  the
Company's   business   strategy  is  intended  to  produce   ongoing   long-term
profitability.

Competition

     Cellular  carriers  compete  primarily  against the other  facilities-based
cellular carrier in each market. However, companies with PCS licenses have begun
to offer their products and services in several of the Company's  service areas.
The Company has prepared for this new  competitive  environment by enhancing its
networks,  expanding its service territory,  offering new features, products and
services to its customers and simplifying  its pricing of services.  The Company
believes it will benefit from its position as an incumbent in the cellular field
with a high quality network, extensive geographic footprint that is not capacity
constrained,   strong   distribution   channels,   superior   customer   service
capabilities  and an  experienced  management  team.  However,  there  can be no
assurance that these measures will completely mitigate the pressures  associated
with the expected increase in the level of PCS competition.

Liquidity and Capital Resources

     In  conjunction  with the spinoff  from  Sprint,  the  Company  repaid $1.4
billion of intercompany debt to Sprint. The remaining  intercompany debt, net of
receivables  from  affiliates,  was  contributed  to the  Company  by  Sprint as
Additional  Paid-In  Capital.  Funding for the  repayment  was derived  from the
proceeds of $900 million of Senior Notes issued under an indenture ("Indenture")
and approximately  $500 million of initial borrowings under the Credit Facility.
In  addition,  a  recapitalization  of the  Company's  common stock was effected
pursuant  to which the  Company  split the 10 shares of issued  and  outstanding
common  stock into  116,733,983  new shares of common stock to allow for the pro
rata  distribution  of such stock to the  common  shareholders  of Sprint.  This
distribution was effected as a tax-free dividend.

     The Credit Facility has general and financial  covenants that place certain
restrictions on the Company.  The Company is limited with respect to: the making
of payments (dividends and distributions);  the incurrence of certain liens; the
sale  of  assets  under  certain  circumstances;   entering  into  or  otherwise
permitting any subsidiary distribution  restrictions;  certain transactions with
affiliates;  certain consolidations,  mergers and transfers; and the use of loan
proceeds.  In  addition,  the Credit  Facility  limits the  aggregate  amount of
additional borrowings that can be incurred by the Company.

     The  Indenture has general and  financial  covenants  similar to the Credit
Facility.  However,  these  covenants,  except for the limitation on liens,  are
suspended while the Company's  public debt is rated  investment  grade by two or
more credit  rating  agencies.  The Company  attained  the second such rating on
February 10, 1997.

Holding Company Structure

     The  Company's   operations  are  conducted   largely  through   subsidiary
corporations and  partnerships.  In the case of subsidiary  corporations,  those
entities are wholly owned,  directly or  indirectly,  by the Company and are not
restricted in any way from paying dividends or other payments to the Company. In
addition,  the  Company's  subsidiaries  are  not  permitted  under  the  Credit
Facility,  subject to  certain  exceptions,  to  restrict  distributions  to the
Company.  In the case of  partnerships,  to the extent funds are  available  for
distribution,   distributions  are  generally  required  under  the  partnership
agreements,  except to the extent such funds are required for additional capital
investments in the  partnership.  However,  because the Company does not control
the  capital  structure  of  certain  partnerships  in which  it holds  minority
interests,  it is possible  that such  partnerships  may have  entered into loan
agreements   or  other   contractual   arrangements   that   restrict  or  limit
distributions to the partners of such partnerships.

Cash Flows - Operating Activities

     Operating cash flow increases reflect improved  operating  results.  During
1996, operating cash flows were impacted by additional advertising,  promotional
and other marketing  expenses  associated with the introduction and promotion of
the  Company's  new brand name.  Although  future cash flows will continue to be
impacted by costs associated with the promotion of the Company's new brand name,
the Company expects cash flows generated by operating  activities to continue to
increase.

Cash Flows - Investing Activities

     Capital expenditures were $300.1 million, $323.7 million and $264.3 million
in 1996, 1995 and 1994,  respectively.  The decrease in capital  expenditures in
1996,  compared  with 1995,  was the  result of the  maturing  of the  Company's
cellular network. In previous years, the Company  concentrated on satisfying the
FCC's  requirements  for the  build  out of  cellular  systems  relating  to the
expansion of the geographic footprint or coverage area of Company-held licenses,
in  addition  to  capital  investment  to  support  customer  growth.  With  the
geographic  areas of its  licensed  markets  essentially  covered,  the  Company
currently  focuses  on capital  investment  to  support  customer  growth and on
improving customer call quality. The Company plans to install CDMA technology in
the greater Raleigh, North Carolina, service area during 1997.

     On November 1, 1996, the Company  completed its  acquisition of Independent
Cellular Network,  Inc. and affiliated  companies (the "ICN Acquisition")  which
own and  operate  cellular  licenses  and  related  systems in  Kentucky,  Ohio,
Pennsylvania  and West Virginia,  providing  cellular  service to  approximately
140,000 customers in 20 markets, representing an estimated 3.3 million potential
customers.  The  purchase  price  was  approximately  $519  million,  comprising
6,500,000  shares of the  Company's  Common  Stock,  $122  million in  aggregate
principal  amount  of  the  Company's  subordinated  promissory  notes  and  the
Company's  assumption  of $240  million in senior  debt,  which was  immediately
refinanced with borrowings under the Credit Facility.  The remaining  portion of
the purchase price was paid in cash. The ICN  Acquisition was accounted for as a
purchase  and  its  results  of  operations  are  included  in the  consolidated
financial  statements from the date of acquisition.  Assets and liabilities have
been recorded at estimated  fair value based on a preliminary  allocation of the
purchase  price.  Additional  adjustments to these  estimates are expected to be
made.  To  achieve   cellular  system   compatibility   and  standard   customer
functionality, it will be necessary for the Company to replace the acquired cell
site equipment and switches.
Such replacements commenced in 1996 and will be completed in 1997.

     In the first quarter of 1996, the Company acquired  cellular  properties in
South Carolina,  North Carolina and Ohio and additional partnership interests in
Florida. The aggregate purchase price of these acquisitions was $110 million.

     On a limited  basis,  the Company has increased its ownership  interests in
certain of its controlled markets.  To the extent feasible,  the Company intends
to reduce its  minority  investments  in  cellular  communications  systems  and
increase its ownership interests in controlled markets. The Company also intends
to pursue the  acquisition  of additional  markets with similar  characteristics
that provide  opportunities  to enhance the  clustering  of  contiguous  service
areas. See Note 3 of Notes to Consolidated Financial Statements for a discussion
of completed and proposed acquisitions and divestitures.




<PAGE>



Cash Flows - Financing Activities

     In 1995  and  1994,  cash  provided  by  financing  activities  principally
reflected borrowings from Sprint. Following the spinoff, capital to meet funding
requirements  was no longer  available  from  Sprint.  In  conjunction  with the
spinoff,  the Company repaid $1.4 billion of  intercompany  debt to Sprint.  The
remaining  intercompany  debt  was  contributed  to the  Company  by  Sprint  as
Additional Paid-In Capital.  Funding for the repayment was derived from proceeds
of the Company's Senior Notes issued under the Indenture and initial  borrowings
under the Credit Facility. In conjunction with the ICN Acquisition,  the Company
issued $122 million in aggregate principal amount of the Company's  subordinated
promissory  notes and assumed $240 million of senior debt which was  immediately
refinanced  under the Credit Facility.  The  subordinated  promissory notes have
general  and  financial  covenants  which  are  currently  suspended  while  the
Company's  public debt is rated  investment  grade by two or more credit  rating
agencies. The Company attained the second such rating on February 10, 1997.

     As part of its cash management program,  the Company also incurs short-term
borrowings   based  on  market   interest   rates  to  support  its  daily  cash
requirements. The aggregate amount of these borrowings is limited to $50 million
under certain debt covenants.

     In 1996, the Company  repurchased shares of Common Stock on the open market
for purposes of distributing shares under the Employee Stock Purchase Plan which
terminated on June 30, 1996 and issuing Common Stock in  conjunction  with stock
option exercises. These purchases reduced shareowners' equity by $3.4 million.

Liquidity

     Prior to the ICN Acquisition,  the Credit Facility was amended and restated
to permit,  among other  things,  the ICN  Acquisition  and the  increase in the
Company's  borrowing  capacity  from $800 million to $1 billion.  The  aggregate
amount of additional  borrowings which can be incurred under the Credit Facility
is ultimately  limited by certain covenants  included  therein.  At December 31,
1996,  the Company had $680 million of borrowings  outstanding  under the Credit
Facility  and was  not  limited  in its  borrowing  capacity  under  the  Credit
Facility.

     On February 13, 1997, a shelf  registration  filed with the  Securities and
Exchange Commission became effective,  providing for the issuance,  from time to
time, of up to $500 million in aggregate initial offering price of the Company's
unsecured debt securities  and/or  warrants to purchase debt  securities  ("Debt
Securities").  The net  proceeds to be received by the Company from the sales of
Debt Securities will be available for general corporate purposes and may be used
for the repayment of short-term  debt and borrowings  under the Credit  Facility
and for the funding of future  acquisitions,  capital  expenditures  and working
capital requirements.

Capital Requirements

     Substantial  capital  is  required  to expand  and  operate  the  Company's
existing  cellular  systems  and to acquire  interests  in  additional  cellular
systems.  The Company has  increased  borrowings to the extent its existing cash
needs have not been met  through  existing  cash  resources  and cash flows from
operations.  Prior to the  spinoff,  the Company  met its  funding  requirements
through  borrowings  from  Sprint.  Subsequent  to the  spinoff,  existing  cash
resources,  internally  generated funds and borrowings under the Credit Facility
have been used to meet the Company's capital requirements.

     The Company expects to make capital expenditures,  excluding  acquisitions,
of  approximately  $315  million  in 1997.  Funding  for these  expenditures  is
expected to be derived from existing cash resources, cash flows from operations,
borrowings under the Credit Facility and the issuance of Debt Securities.  These
expenditures  will be made to expand  and  enhance  existing  cellular  systems,
install digital  technology in the Company's  greater  Raleigh,  North Carolina,
service area and replace equipment in markets acquired in the ICN Acquisition.



<PAGE>



     For the next several  years,  the Company does not expect its operations to
generate sufficient cash flow to meet both future capital requirements needed to
fund operating  activities and cash  requirements  for acquisitions of ownership
interests in cellular communications systems. Acquisition activities may include
acquisitions of new cellular communications systems or additional investments in
cellular  communications systems in which the Company already holds an ownership
interest.  The Company  expects that it will need to raise  additional  funds to
make such investments. An agreement, which was designed to preserve the tax-free
status  of the  Company's  spinoff  from  Sprint,  imposes  certain  limitations
associated with equity transactions. Accordingly, the Company is prohibited from
issuing  preferred stock and is limited as to the aggregate amount of additional
common  stock that it can  issue,  unless an  unqualified  opinion of counsel or
ruling from the Internal Revenue Service states that such action would not cause
the spinoff to be  taxable.  At December  31,  1996,  the Company was limited to
issuing up to an additional 19 million common shares. This limitation expires on
March 7, 1998.

     The  Company  believes  that it will have the needed  access to the capital
markets on suitable terms and that,  together with  borrowings  under the Credit
Facility,  the issuance of Debt  Securities and net cash provided by operations,
it will have adequate capital to satisfy its projected funding  requirements for
operations in 1997 and thereafter. The Company currently does not intend to seek
funding  from other  sources  during 1997.  See Note 3 of Notes to  Consolidated
Financial Statements for a discussion of completed and proposed acquisitions and
divestitures.  There can be no assurance that access to the capital  markets can
be obtained in amounts and on terms  adequate to meet its objectives or that the
borrowings  or net cash  provided  by  operations  will be  adequate to meet the
Company's projected funding requirements.

General Hedging Policies

     The Company utilizes certain derivative financial  instruments in an effort
to manage exposure to interest rate risk, but not for trading  purposes.  During
1996,  the  utilization  of such  instruments  was limited to interest rate swap
agreements.  The  Company  does not take  speculative  positions  or  create  an
exposure in an effort to benefit  from market  fluctuations.  As of December 31,
1996,  any potential loss or exposure  related to interest rate swap  agreements
was immaterial to overall  operations,  financial  condition and liquidity.  See
Note 6 of Notes  to  Consolidated  Financial  Statements  for  more  information
related to interest rate swap agreements.

Dividend Policy

     The Company  currently  does not  anticipate  paying cash  dividends on its
Common Stock in the foreseeable future.

Recent Developments

     On March 17, 1997, the Company issued  $200,000,000 in aggregate  principal
amount of its 7.60%  Senior  Notes Due 2009.  The net  proceeds  received by the
Company  from the sale of these Debt  Securities  was used to repay a portion of
the Company's long-term indebtedness outstanding under the Credit Facility.

     On March 11, 1997, the Company  announced  that its customer  growth in the
first quarter of 1997 is expected to  substantially  exceed its customer gain of
94,605 during the first  quarter of 1996.  The Company  expects  results for the
first quarter of 1997 to be adversely  affected by higher  customer  acquisition
costs resulting from such customer growth.  The first quarter customer growth is
attributed to the Company's  new brand  positioning  which was launched in March
1996; continued promotional activity; and the introduction of simplified pricing
plans. The Company's new roaming rate plans, which were implemented earlier this
year as part of the  pricing  simplification  effort,  are  expected  to  reduce
operating  revenues  by  approximately  $4  million  to $5  million in the first
quarter of 1997.

     In January  1997,  the Company  reported  that it incurred  cellular  fraud
losses,  primarily  in  December  1996,  that were $6  million  higher  than its
historical  cellular fraud level of 1% of service revenues.  Although the losses
attributable  to cellular fraud have declined in 1997,  such losses are expected
to average  approximately $3 million per month,  above historical  rates, in the
first quarter of 1997.

Forward-Looking Statements

     When  used  in  this  Report,  the  words  "intends,"  "expects,"  "plans,"
"estimates," "projects," "believes,"  "anticipates," and similar expressions are
intended  to  identify  forward-looking  statements.  Specifically,   statements
included in this  Report that are not  historical  facts,  including  statements
about the Company's beliefs and expectations about continued market and industry
growth,  and ability to maintain  existing churn,  customer growth and increased
penetration rates, are forward-looking  statements.  Such statements are subject
to risks and uncertainties that could cause actual results or outcomes to differ
materially.  Such risks and uncertainties  include,  but are not limited to, the
degree to which the Company is  leveraged  and the  restrictions  imposed on the
Company  under its  existing  debt  instruments  that may  adversely  affect the
Company's  ability to  finance  its future  operations,  to compete  effectively
against  better  capitalized  competitors  and  to  withstand  downturns  in its
business or the economy generally; the continued downward pressure on the prices
charged for cellular equipment and services resulting from increased competition
in the  Company's  markets;  the lack of assurance  that the  Company's  ongoing
network  improvements and scheduled  implementation of digital technology in its
markets will be  sufficient  to meet or exceed the  capabilities  and quality of
competing  networks;  the  effect  on the  Company's  operations  and  financial
performance of changes in the regulation of cellular  activities;  the degree to
which the Company incurs  significant  costs as a result of cellular fraud;  the
impact on the  Company's  operations  that may arise  from  concerns  suggesting
cellular  telephones may be linked to cancer; and the other factors discussed in
the Company's filings with the Securities and Exchange Commission, including the
factors  discussed  under the heading  "Certain Risk Factors" in the Information
Statement  set forth as Exhibit 99 to the Company's  Form 10 (File  No.1-14108),
which  section  is hereby  incorporated  by  reference  herein.  Forward-looking
statements  included  in this  Report  speak only as of the date  hereof and the
Company  undertakes no obligation to revise or update such statements to reflect
events or  circumstances  after the date hereof or to reflect the  occurrence of
unanticipated events.


<PAGE>



Item 8.  Financial Statements and Supplementary Data.

                         REPORT OF INDEPENDENT AUDITORS


Board of Directors and Shareowners
360 Communications Company


We  have  audited  the   accompanying   consolidated   balance   sheets  of  360
Communications  Company and  Subsidiaries  as of December 31, 1996 and 1995, and
the related consolidated statements of operations, shareowners' equity, and cash
flows for each of the three years in the period ended  December  31,  1996.  Our
audits also included the  financial  statement  schedule  listed in the index at
Item 14 (a). These financial  statements and schedule are the  responsibility of
the Company's  management.  Our responsibility is to express an opinion on these
financial  statements  and  schedule  based on our audits.  We did not audit the
financial  statements  of GTE Mobilnet of South Texas Limited  Partnership,  New
York SMSA Limited Partnership,  Orlando SMSA Limited Partnership and Chicago MSA
Limited  Partnership,  equity investees of the Company,  for which the Company's
investment in these partnerships is $121,654,000 and $93,210,000 at December 31,
1996 and 1995, respectively, and the Company's equity in the net income of these
partnerships  is  $39,644,000,  $32,753,000  and $24,289,000 for the years ended
December 31, 1996, 1995 and 1994, respectively.  Those financial statements were
audited  by other  auditors  whose  reports  have been  furnished  to us and our
opinion, insofar as it relates to data included for such partnerships,  is based
solely on the reports of the other auditors.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe our audits and the  reports of other  auditors  provide a  reasonable
basis for our opinion.

In our  opinion,  based on our audits and the  reports  of other  auditors,  the
consolidated  financial  statements  referred to above  present  fairly,  in all
material   respects,   the  consolidated   financial   position  of  360
Communications  Company and  Subsidiaries at December 31, 1996 and 1995, and the
consolidated  results of their  operations  and their cash flows for each of the
three years in the period ended December 31, 1996, in conformity  with generally
accepted  accounting  principles.  Also, in our opinion,  the related  financial
statement  schedule,   when  considered  in  relation  to  the  basic  financial
statements  taken as a whole,  presents  fairly  in all  material  respects  the
information set forth herein.

                                                        Ernst & Young LLP

Chicago, Illinois
February 26, 1997


<PAGE>






                         REPORT OF INDEPENDENT AUDITORS

The Partners
Kansas City SMSA Limited Partnership


We have  audited the  accompanying  balance  sheets of Kansas City SMSA  Limited
Partnership  as of December  31, 1996 and 1995,  and the related  statements  of
income,  changes in partners' capital,  and cash flows for the years then ended.
These  financial   statements  are  the   responsibility  of  the  Partnership's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosure in the financial  statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all  material  respects,  the  financial  position of Kansas  City SMSA  Limited
Partnership at December 31, 1996 and 1995, and the results of its operations and
its cash flows for the years then ended in conformity  with  generally  accepted
accounting principles.



                                                        Ernst & Young LLP

San Antonio, Texas
February 14, 1997



<PAGE>







                 REPORT OF OTHER INDEPENDENT PUBLIC ACCOUNTANTS




To the Partners of the
GTE Mobilnet of South Texas Limited Partnership:

We have audited the balance  sheets of the GTE  Mobilnet of South Texas  Limited
Partnership (a Delaware  limited  partnership) as of December 31, 1996 and 1995,
and the related statements of operations,  changes in partners' capital and cash
flows  for  the  years  then  ended.   These   financial   statements   are  the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects, the financial position of the GTE Mobilnet of South Texas
Limited  Partnership  as of December  31, 1996 and 1995,  and the results of its
operations  and its cash  flows  for the years  then  ended in  conformity  with
generally accepted accounting principles.


                                                        ARTHUR ANDERSEN LLP

Atlanta, Georgia
January 24, 1997


<PAGE>







                 REPORT OF OTHER INDEPENDENT PUBLIC ACCOUNTANTS




To the Partners of the
Chicago SMSA Limited Partnership:

We have audited the balance sheets of the Chicago SMSA Limited  Partnership  (an
Illinois  partnership)  as of  December  31,  1996  and  1995,  and the  related
statements of income, partners' capital and cash flows for the years then ended;
such financial  statements are not included  separately herein.  These financial
statements  are  the  responsibility  of  the  Partnership's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all  material  respects,  the  financial  position of the Chicago  SMSA  Limited
Partnership  as of December 31, 1996 and 1995, and the results of its operations
and its cash  flows for the years  then  ended,  in  conformity  with  generally
accepted accounting principles.


                                                        ARTHUR ANDERSEN LLP

Chicago, Illinois
January 17, 1997


<PAGE>






                        REPORT OF INDEPENDENT ACCOUNTANTS


To the Partners of the New York SMSA Limited Partnership


We have  audited the  accompanying  balance  sheets of the New York SMSA Limited
Partnership (the  Partnership) as of December 31, 1996 and 1995, and the related
statements of income,  changes in partners' capital and cash flows for the years
then  ended.   These  financial   statements  are  the   responsibility  of  the
Partnership's  management.  Our responsibility is to express an opinion on these
financial statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all  material  respects,  the  financial  position of the New York SMSA  Limited
Partnership  as of December 31, 1996 and 1995, and the results of its operations
and its cash  flows for the years  then  ended,  in  conformity  with  generally
accepted accounting principles.


                                                        Coopers & Lybrand L.L.P.


New York, New York
February 13, 1997



<PAGE>






                        REPORT OF INDEPENDENT ACCOUNTANTS


To the Partners of the Orlando SMSA Limited Partnership


We have  audited the  accompanying  balance  sheets of the Orlando  SMSA Limited
Partnership  as of December  31,  1996,  and the related  statements  of income,
changes in  partners'  capital  and cash flows for the years then  ended.  These
financial statements are the responsibility of the Partnership's management. Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all  material  respects,  the  financial  position of the Orlando  SMSA  Limited
Partnership  as of December 31, 1996,  and the results of its operations and its
cash flows for the years then  ended,  in  conformity  with  generally  accepted
accounting principles.


                                                        Coopers & Lybrand L.L.P.

Atlanta, Georgia
February 7, 1997





<PAGE>
                   360 COMMUNICATIONS COMPANY AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

                             (Thousands of Dollars)

                                                            December 31,
                                                     --------------------------
                 ASSETS                                  1996          1995
                 ------                              -----------    -----------
Current Assets
Cash and Cash Equivalents                            $     2,554    $    19,023
Accounts Receivable, less allowances
  of  $5,730 and $2,370,  respectively                   102,483         68,087
Other Receivables                                         27,090         29,799
Unbilled Revenue                                          35,712         23,481
Inventory                                                 35,908         19,576
Deferred Income Taxes                                      8,462
Prepaid Expenses and Other                                16,634          6,604
                                                     -----------    -----------
    Total Current Assets                                 228,843        166,570
                                                     -----------    -----------

Property, Plant and Equipment                          1,499,407      1,151,157
Less: Accumulated Depreciation                           415,981        300,703
                                                     -----------    -----------
Property, Plant and Equipment, net                     1,083,426        850,454
                                                     -----------    -----------

Investments in Unconsolidated Entities                   349,231        318,287
Intangibles, net                                       1,136,587        632,756
Other Assets                                              13,982          5,179
                                                     -----------    -----------
    Total Assets                                     $ 2,812,069    $ 1,973,246
                                                     ===========    ===========

                 LIABILITIES AND SHAREOWNERS' EQUITY
                 -----------------------------------

Current Liabilities
Trade Accounts and Other Payables                    $   227,654    $   111,770
Short-Term Borrowings                                     43,750
Advance Billings                                          28,314         20,559
Accrued Taxes                                             17,951         19,690
Accrued Agent Commissions                                 12,089         15,417
Other                                                     21,090         27,092
                                                     -----------    -----------
    Total Current Liabilities                            350,848        194,528
                                                     -----------    -----------

Long-Term Debt                                         1,699,778             --
Advances From and Notes to Affiliates                         --      1,517,729
                                                     -----------    -----------

Deferred Credits and Other Liabilities
Deferred Income Taxes                                    113,005         99,168
Postretirement and Other Benefit Obligations               5,855         12,859
                                                     -----------    -----------
    Total Deferred Credits and Other Liabilities         118,860        112,027
                                                     -----------    -----------

Minority Interests in Consolidated Entities              180,083        146,894
                                                     -----------    -----------

Shareowners' Equity
Common  Stock  ($.01 par value;  1,000,000,000
  shares  authorized;  123,308,921 shares issued
  and outstanding in 1996 and no par value;
  10 shares authorized; 10 shares issued;
  10 shares outstanding in 1995)                           1,233         11,541
Additional Paid-In Capital                               772,199        360,978
Accumulated Deficit                                     (310,932)      (370,451)
                                                     -----------    -----------
    Total Shareowners' Equity                            462,500          2,068
                                                     -----------    -----------
    Total Liabilities and Shareowners' Equity        $ 2,812,069    $ 1,973,246
                                                     ===========    ===========

The  accompanying  Notes  are an  integral  part of the  Consolidated  Financial
Statements.

                                        1


<PAGE>
                   360 COMMUNICATIONS COMPANY AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                             (Thousands of Dollars)




                                              For the Year Ended December 31,
                                           ------------------------------------
                                              1996          1995        1994
                                           -----------   ----------  ----------
OPERATING REVENUES
Cellular Service Revenues                  $1,052,726    $ 789,459   $ 569,793
Equipment Sales                                43,146       44,956      56,682
                                           -----------   ----------  ----------
     Total Operating Revenues               1,095,872      834,415     626,475
                                           -----------   ----------  ----------

OPERATING EXPENSES
Cost of Service                                99,745       68,223      51,071
Cost of Equipment Sales                       104,327      109,441      79,000
Other Operations Expense                       55,776       40,591      30,905
Sales, Marketing and Advertising Expenses     206,147      141,505     136,501
General, Administrative and Other Expenses    263,191      214,536     150,985
Depreciation and Amortization                 146,841      114,731      92,435
                                           -----------   ----------  ----------
     Total Operating Expenses                 876,027      689,027     540,897
                                           -----------   ----------  ----------

OPERATING INCOME                              219,845      145,388      85,578
Interest Expense                             (106,364)    (127,240)    (98,437)
Minority Interests in Net Income
   of Consolidated Entities                   (46,622)     (34,269)    (22,110)
Equity in Net Income of
   Unconsolidated Entities                     50,234       40,016      26,390
Other Income (Expense), net                       255         (185)     (5,481)
                                           -----------   ----------  ----------
Income (Loss) Before Income Taxes             117,348       23,710     (14,060)
Income Tax Expense                             57,829       25,405       5,697
                                           -----------   ----------  ----------
     Net Income (Loss)                     $   59,519    $  (1,695)  $ (19,757)
                                           ===========   ==========  ==========

Net Income (Loss) per Share (in Dollars)   $     0.50    $   (0.01)  $   (0.17)
                                           ===========   ==========  ==========

Weighted Average Shares
   Outstanding, in thousands                  118,136      116,706     116,247
                                           ===========   ==========  ==========









The  accompanying  Notes  are an  integral  part of the  Consolidated  Financial
Statements.

                                        2



<PAGE>
<TABLE>

                   360 COMMUNICATIONS COMPANY AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                             (Thousands of Dollars)

<CAPTION>


                                                     For the Year Ended December 31,
                                                    ---------------------------------
                                                       1996       1995       1994
                                                    ---------- ---------- ----------
<S>                                                 <C>        <C>        <C>
Operating Activities
Net Income (Loss)                                   $  59,519  $  (1,695) $ (19,757)
Adjustments to Reconcile Net Income (Loss) to Net
 Cash Provided by Operating Activities:
    Depreciation and Amortization                     146,841    114,731     92,435
    Deferred Income Taxes                              36,197     36,267     20,646
    Loss on the Sale of Cellular Property                                     4,352
    Equity in Net Income of Unconsolidated
      Entities, net of distributions                  (27,838)    (7,206)   (10,899)
    Minority Interests in Net Income of
      Consolidated Entities                            46,622     34,269     22,110
    Changes in Operating Assets and Liabilities,
           excluding acquisitions
       Receivables, net                               (28,748)   (20,610)   (23,111)
       Other Current Assets                           (23,222)     7,592    (18,225)
       Trade Accounts and Other Payables              110,146      3,420     38,293
       Accrued Expenses and Other
           Current Liabilities                         (3,984)     6,365     36,590
       Noncurrent Assets and Liabilities, net            (685)    12,007     (1,455)
    Other, net                                          4,425     (1,847)       834
                                                    ---------  ---------- ---------
Net Cash Provided by Operating Activities             319,273    183,293    141,813
                                                    ---------  ---------- ---------

Investing Activities
Capital Expenditures                                 (300,123)  (323,651)  (264,333)
Acquisitions                                         (352,533)    (1,142)        --
Investments in Unconsolidated Entities and Other      (14,890)    (3,743)    (8,009)
Proceeds from Sale of Cellular Property                    --         --      9,920
                                                    ---------  ---------- ---------
Net Cash Used by Investing Activities                (667,546)  (328,536)  (262,422)
                                                    ---------  ---------- ---------

Financing Activities
Net Borrowings under Bank Revolving Credit Facility   680,000         --         --
Proceeds from Long-Term Debt                          900,000         --         --
Debt Issuance Costs                                   (15,229)        --         --
Net Short-Term Borrowings                              43,750
Increase in Advances from Affiliates                  135,892    158,482    107,294
Contributions from Minority Investors                   5,636      7,228     17,742
Distributions to Minority Investors                   (14,849)    (6,971)    (4,405)
Repayment of Advances from Affiliates              (1,400,000)        --         --
Other                                                  (3,396)        --         --
                                                    ---------  ---------- ---------
Net Cash Provided by Financing Activities             331,804    158,739    120,631
                                                    ---------  ---------- ---------

Decrease in Cash and Cash Equivalents                 (16,469)    13,496         22
Cash and Cash Equivalents at Beginning of Year         19,023      5,527      5,505
                                                    ---------  ---------- ---------
Cash and Cash Equivalents at End of Year            $   2,554  $  19,023  $   5,527
                                                    =========  ========== =========


The  accompanying  Notes  are an  integral  part of the  Consolidated  Financial
Statements.

                                        3
</TABLE>


<PAGE>

<TABLE>

                   360 COMMUNICATIONS COMPANY AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF SHAREOWNERS' EQUITY

                  (Thousands of Dollars, except share amounts)

<CAPTION>

                                    Common Stock     Additional                Total
                               ---------------------  Paid-In   Accumulated Shareowners'
                                  Shares     Amount   Capital     Deficit     Equity
                               ------------ -------- ---------- ----------- ------------
<S>                            <C>          <C>      <C>        <C>         <C>
Balance at December 31, 1993            10 $ 11,541 $ 360,978  $ (348,999) $    23,520
Net Loss                                 -        -         -     (19,757)     (19,757)
                               ----------- -------- ---------  ----------  -----------
Balance at December 31, 1994            10   11,541   360,978    (368,756)       3,763
Net Loss                                 -        -         -      (1,695)      (1,695)
                               ----------- -------- ---------  ----------  -----------
Balance at December 31, 1995            10   11,541   360,978    (370,451)       2,068

Net Income                               -        -         -      59,519       59,519
Capital Contributions by Sprint
  Corporation in Conjunction
  with Spinoff                           -        -   253,160           -      253,160
Recapitalization of Stock
  Pursuant to Spinoff from
  Sprint Corporation           116,733,973  (10,374)   10,374           -            0
Shares Issued for Acquisition    6,500,000       65   150,248           -      150,313
Other, net                          74,938        1    (2,561)          -       (2,560)
                               ----------- -------- ---------  ----------  -----------
Balance at December 31, 1996   123,308,921 $  1,233 $ 772,199  $ (310,932) $   462,500
                               =========== ======== =========  ==========  ===========

The  accompanying  Notes  are an  integral  part of the  Consolidated  Financial
Statements.

                                        4
</TABLE>


<PAGE>



                   360 COMMUNICATIONS COMPANY AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.  Summary of Significant Accounting Policies

Basis of Consolidation and Presentation

     360  Communications  Company and its subsidiaries  (the "Company")  provide
wireless voice and data telecommunications  services. In 1996, the Company began
marketing  residential  long distance service and reselling paging service in 13
of the 16 states in which the Company  provides  wireless  service.  The Company
operates as a general and limited partner and majority owner of cellular systems
in  various  metropolitan  and rural  service  areas  and as a limited  minority
partner or manager in other cellular systems. In the fourth quarter of 1996, the
Company  consolidated its North Carolina region with its Southeast  region.  The
Company operates in three additional regions in the United States: Mid-Atlantic,
Midwest and West.

     The Company was a wholly owned subsidiary of Centel  Corporation,  a wholly
owned  subsidiary of Sprint  Corporation  ("Sprint").  On March 7, 1996,  Sprint
completed the spinoff of the Company to Sprint  shareholders  through a pro rata
distribution of all of the Common Stock of the Company ("spinoff").  For further
discussion of the spinoff, see Note 2.

     The accompanying  consolidated financial statements include the accounts of
the Company and its wholly-owned and  majority-owned  subsidiaries.  The assets,
liabilities  and  results of  operations  of  entities  (both  corporations  and
partnerships)  in  which  the  Company  has a  controlling  interest  have  been
consolidated.  The ownership interests of noncontrolling owners in such entities
are  reflected  as  minority  interests.  The  Company  accounts  for all  other
investees using the equity method of accounting.  All  significant  intercompany
accounts and transactions have been eliminated.

     The  preparation  of financial  statements  in  conformity  with  generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that  affect the  reported  amounts of assets and  liabilities  and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period. Actual results could differ from those estimates.

Earnings Per Share

     In 1996,  earnings per share  amounts  were based on the  weighted  average
number of shares  outstanding,  including common stock equivalents.  In 1995 and
1994, loss per share amounts were based on the weighted average number of Sprint
shares  outstanding,  including  common stock  equivalents,  for each respective
period,  adjusted for a conversion  ratio of one share of the  Company's  Common
Stock to three shares of Sprint common stock.

Revenue Recognition

     The Company  earns  revenues by  providing  access to its  cellular  system
("access revenue"),  for usage of its cellular system ("airtime  revenue"),  for
long  distance  calls  placed  by the  Company's  customers  and  those of other
carriers within the Company's service area ("long distance"),  and for providing
service to customers from other cellular  systems who are traveling  through the
service area ("roaming revenue").  Access revenue is billed one month in advance
and is  recognized  when  earned.  Airtime  revenue,  roaming  revenue  and long
distance  revenue are  recognized  when the service is rendered.  Other  service
revenues are recognized after services are performed and include  connection and
installation  revenues.  Equipment  sales  are  recognized  on  delivery  of the
equipment to the customer.


<PAGE>



Advertising Costs

     The Company  expenses the costs of  advertising  as  incurred.  Advertising
expense  for the years ended  December  31,  1996 and 1995 was  $55,491,000  and
$27,337,000, respectively.

Cash

     As part of its cash management  program,  the Company  utilizes  controlled
disbursement banking arrangements. Outstanding checks in excess of cash balances
totaled $34,924,000 and $34,013,000 at December 31, 1996 and 1995, respectively,
and are  classified  as Trade  Accounts and Other  Payables in the  accompanying
Consolidated  Balance  Sheets.  Sufficient  funds were  available  to fund these
outstanding checks when they were presented for payment.

Inventory

     Inventory  consists of cellular  telephone and certain accessory  equipment
held for resale and is stated at the lower of cost (principally  first in, first
out method) or market.

Property, Plant and Equipment

     Property,  plant and  equipment  are  stated at cost,  including  labor and
overhead  expenses  associated  with  construction.  Cost  includes  capitalized
interest on funds  borrowed to finance  construction  and is amortized  over the
lives of the related assets.  Capitalized  interest for the years ended December
31, 1996, 1995 and 1994 was $2,234,000, $1,553,000 and $1,097,000, respectively.
Depreciation is computed by applying the straight-line method over the estimated
service lives for depreciable plant and equipment.

Investments in Unconsolidated Entities

     Minority  partnership  investments include the excess of the purchase price
over the underlying net book value of cellular  partnerships of $232,014,000 and
$229,812,000 as of December 31, 1996 and 1995, respectively.  Such excess, which
relates to Federal  Communications  Commission ("FCC") licenses or goodwill,  is
generally being amortized on a  straight-line  basis over 40 years.  Accumulated
amortization  aggregated $46,295,000 and $40,498,000 as of December 31, 1996 and
1995, respectively.

     Amortization  expense for the years ended December 31, 1996,  1995 and 1994
was  $5,798,000,  $5,770,000 and  $5,769,000,  respectively,  and is included in
Equity in Net Income of Unconsolidated Entities in the accompanying Consolidated
Statements of Operations.

Intangibles

     The  Company  has  acquired  identifiable  intangible  assets,  as  well as
goodwill, through its acquisitions of interests in various cellular systems. The
cost of acquired entities is allocated to identifiable assets at the date of the
acquisition and the excess of the total purchase price over the amounts assigned
to identifiable assets is recorded as goodwill. Intangible assets related to the
acquisition  of  entities  in which  the  Company  does  not have a  controlling
interest are included in Investments in Unconsolidated Entities.

     The FCC issues licenses that enable cellular carriers to provide service in
specific cellular geographic service areas. The FCC grants licenses for terms of
up to 10 years and generally  grants  renewals if the licensee has complied with
its obligations under the  Communications  Act of 1934. In 1993, the FCC adopted
specific  standards to apply to cellular  renewals,  concluding  it will award a
renewal  expectancy to a cellular  licensee that meets certain standards of past
performance.  Historically,  the FCC has granted license renewals routinely. The
Company  believes  that it has met and will  continue  to meet all  requirements
necessary to secure renewal of its cellular licenses.

     Intangible   assets  are  being   amortized  over  40  years.   Accumulated
amortization  related to  acquisitions  of  controlling  interests  in  cellular
systems  aggregated  $153,908,000  and  $131,091,000 as of December 31, 1996 and
1995, respectively.  Amortization expense for the years ended December 31, 1996,
1995 and 1994 was $22,817,000, $19,191,000 and $19,381,000, respectively.

     The  ongoing  value and  remaining  useful  life of  intangible  assets are
subject to periodic  evaluation and the Company  currently  expects the carrying
amounts to be fully recoverable.  Should events and circumstances  indicate that
intangible assets might be impaired, an undiscounted cash flow methodology would
be used to determine whether an impairment loss would be recognized.

Supplemental Cash Flow Information

     The Company paid interest of $78,124,000,  $127,240,000 and $98,437,000 for
the years ended December 31, 1996, 1995 and 1994, respectively.  Income taxes of
$25,707,000,  $(5,500,000) and $(13,915,000) were paid (received) by the Company
in 1996, 1995 and 1994, respectively.

Income Taxes and Tax Sharing Arrangement

     Deferred  income taxes are provided for temporary  differences  between the
carrying amounts of assets and liabilities for financial  reporting purposes and
the amounts used for tax purposes.  The Company was included in the consolidated
federal income tax return of Sprint through March 7, 1996 (see Note 11). Under a
tax sharing arrangement in effect prior to the spinoff, the Company was paid for
the utilization of net operating losses included in the consolidated tax return,
even if such  losses and  credits  could not have been used if the  Company  had
filed on a separate return basis.

Stock Option Plans

     The Company has adopted Statement of Financial Accounting Standards No. 123
("SFAS 123") "Accounting for Stock-Based  Compensation."  However, in accordance
with the  provisions  of SFAS 123,  the Company  continues  to apply  Accounting
Principles  Board Opinion No. 25,  "Accounting for Stock Issued to Employees" in
accounting  for its stock  option  plans  and  accordingly,  does not  recognize
compensation cost. See Note 8 for a summary of the pro forma effects to reported
net  income and  earnings  per share if the  Company  had  elected to  recognize
compensation  cost based on the fair value of the options granted at grant date,
as prescribed by SFAS 123.

Concentrations of Credit Risk

     To the extent that the Company's  customers become  delinquent,  collection
activities  commence.  No single  customer is large enough to pose a significant
financial  risk to the Company.  The Company  maintains an allowance  for losses
based on the expected collectibility of accounts receivable.  Credit losses have
been within management's expectations.

Reclassifications

     Certain  1995 and 1994  amounts  have been  reclassified  to conform to the
presentation used in 1996.



<PAGE>



2.  Spinoff

     On July 26, 1995,  Sprint announced that its Board of Directors  decided to
pursue a tax-free  spinoff of the  Company  to Sprint  shareholders.  In the FCC
auction of wireless Personal  Communications  Services ("PCS") licenses,  Sprint
Spectrum LP won the rights to several markets that overlap  service  territories
operated  by the  Company.  Under FCC rules,  Sprint was  required  to divest or
reduce its cellular  holdings in certain markets to clear conflicts with the PCS
licenses awarded to Sprint Spectrum LP. For these reasons,  Sprint and its Board
of Directors decided to pursue a spinoff of the cellular operations of Sprint.

     On March 7, 1996,  the spinoff was  consummated.  In  conjunction  with the
spinoff,  the Company repaid $1.4 billion of  intercompany  debt to Sprint.  The
remaining intercompany debt, net of receivables from affiliates, was contributed
to the  Company  by  Sprint  as  Additional  Paid-In  Capital.  Funding  for the
repayment  was derived  from the proceeds of $900 million of Senior Notes issued
under an indenture and approximately  $500 million of initial borrowings under a
revolving  credit  facility  ("Credit  Facility")  with a number  of  banks  and
institutional  lenders. In addition,  a recapitalization of the Company's common
stock was effected  pursuant to which the Company  split the 10 shares of issued
and  outstanding  common  stock into  116,733,983  new shares of common stock to
allow for the pro rata distribution of such stock to the common  shareholders of
Sprint. This distribution was effected as a tax-free dividend.

3.  Acquisitions and Divestitures

     On January 31, 1996, the Company purchased additional partnership interests
in 360  Communications  Company of Ft. Walton Beach Limited  Partnership and 360
Communications  Company of Tallahassee Limited Partnership.  Also on January 31,
1996, the Company  purchased an operating license and related cellular assets in
the North Carolina RSA No. 14 market. On February 23, 1996, the Company acquired
an  operating  license  and  related  assets  in the Ohio RSA No. 1  market.  In
addition,  on February 29, 1996,  the Company  purchased a 50% interest in South
Carolina  RSA No.  4  Cellular  General  Partnership,  a 50%  interest  in South
Carolina  RSA No. 5 Cellular  General  Partnership  and a 50%  interest in South
Carolina  RSA No.  6  Cellular  General  Partnership.  These  acquisitions  were
accounted for as purchases and the aggregate  purchase  price was  approximately
$110,000,000.  The effects of these acquisitions on the operating results of the
Company were not significant.

     On November 1, 1996, the Company  completed its  acquisition of Independent
Cellular Network,  Inc. and affiliated  companies (the "ICN Acquisition")  which
own and operate  cellular  licenses and related  systems and assets in Kentucky,
Ohio,  Pennsylvania  and West Virginia.  The Company  acquired the licenses from
Independent   Cellular   Network   Partners   and  certain  of  its   affiliates
(collectively,  "ICNP") for  approximately  $519 million,  comprising  6,500,000
shares of the Company's common stock, $122 million in aggregate principal amount
of the Company's  subordinated  promissory notes and the Company's assumption of
$240 million of Independent  Cellular  Network  Partners' senior debt, which was
immediately  refinanced with borrowings under the Credit Facility. The remaining
portion  of the  purchase  price  was  paid in  cash.  The ICN  Acquisition  was
accounted  for as a purchase and its results of  operations  are included in the
consolidated  financial  statements  from the date of  acquisition.  Assets  and
liabilities  have been  recorded at estimated  fair value based on a preliminary
allocation of the purchase price.  Additional adjustments to these estimates are
expected to be made.



<PAGE>



     The following  unaudited  consolidated pro forma information shows the 1996
and 1995 results of the Company's  operations as though the ICN  Acquisition had
occurred  at  January  1,  1995.  The pro  forma  results  are  not  necessarily
indicative of the future  results or actual results that would have occurred had
the purchase been made at the beginning of the period presented (in thousands).

                                                  For the Year Ended
                                                     December 31,
                                            ------------------------------
                                               1996               1995
                                            ------------      ------------

  Operating Revenues                        $   1,153,441     $    895,262
  Net Income (Loss)                         $       48,813    $    (25,323)
  Earnings (Loss) Per Share (in dollars)    $         .40     $       (.21)

     In August  1994,  the Company  sold all of the assets  associated  with the
cellular communications system in Sioux City, Iowa, to a wholly owned subsidiary
of  McCaw  Cellular  Communications,   Inc.  The  purchase  price  received  was
approximately  $9,920,000,  and a  loss  of  $4,352,000  was  realized  on  this
divestiture.  The effect of this  divestiture  on the  operating  results of the
Company was not significant.

     In January 1997, the Company  acquired  additional  ownership  interests in
certain majority-owned  partnerships and divested ownership interests in certain
unconsolidated  entities.  In  February  1997,  the  Company  signed  definitive
agreements  with  BellSouth  Corporation   ("BellSouth")  to  combine  ownership
interests  in two cellular  partnerships  in which the Company  currently  has a
noncontrolling  interest and BellSouth has a controlling interest. The resulting
partnership will be owned approximately 75% by BellSouth and 25% by the Company.
In  addition,  the Company will  contribute  its  ownership  interest in another
unconsolidated entity and cash. In a separate transaction, the Company agreed to
sell to BellSouth its interest in a 100% owned entity and acquire from BellSouth
an additional interest in a majority-owned  partnership.  The combined effect of
these transactions is expected to result in a net cash payment by the Company of
approximately $100 million.

4.  Property, Plant and Equipment

     Property, plant and equipment consisted of the following (in thousands):

                                               Depreciable
                                                  Lives         December 31,
                                               ---------------------------------
                                                            1996         1995
                                                         -----------  ----------
       Switching, Base Site Controller and
          Radio Frequency Equipment          9-10 years  $   847,214  $  639,170
       Cell Site Towers and Shelters         5-20 years      404,094     319,673
       Office Furniture and Other Equipment   2-5 years      162,255     121,577
                                                         -----------  ----------
          Plant in Service                                 1,413,563   1,080,420
       Construction Work in Progress                          85,844      70,737
                                                         -----------  ----------
                                                           1,499,407   1,151,157
       Less: Accumulated Depreciation                        415,981     300,703
                                                         -----------  ----------
                                                         $ 1,083,426  $  850,454
                                                         ===========  ==========

     Depreciation expense charged to operations for the years ended December 31,
1996, 1995 and 1994 was $124,024,000, $95,540,000 and $73,054,000, respectively.



<PAGE>



5.  Investments in Unconsolidated Entities

Interests Owned

     Interests  owned in cellular  systems of  unconsolidated  entities  were as
follows:

                                                                  December 31,
                                                              ------------------
                                                               1996      1995
                                                              -------   -------

     Florida 9 RSA Limited Partnership                         49.00%    49.00%
     Pennsylvania 3 Wireline Settlement Limited Partnership    44.44%    27.78%
     Illinois Valley Cellular RSA 2-II Partnership             40.00%    40.00%
     Pennsylvania RSA No. 5 General Partnership                40.00%      -
     Pennsylvania 4 Wireline Settlement Partnership            33.33%    33.33%
     Virginia 10 RSA Limited Partnership                       33.00%    33.00%
     Iowa RSA No. 13 Limited Partnership                       30.00%    30.00%
     Texas RSA No. 11B Limited Partnership                     28.00%    28.00%
     Omaha MSA Limited Partnership                             27.59%    27.59%
     RCTC Wholesale Company (Richmond)                         27.27%    27.27%
     GTE Mobilnet of Fort Wayne Limited Partnership            25.00%    25.00%
     Texas RSA 7B1 Limited Partnership                         25.00%    25.00%
     Allentown SMSA Limited Partnership                        20.77%    16.77%
     Georgia RSA No. 1 Limited Partnership                     20.00%    20.00%
     GTE Mobilnet of Indiana RSA #3 Limited Partnership        20.00%    20.00%
     St. Joseph SMSA Limited Partnership                       20.00%    20.00%
     Missouri RSA 9B1 Limited Partnership                      19.60%    19.60%
     Kansas City SMSA Limited Partnership                      19.00%    19.00%
     Illinois Independent RSA No. 3 General Partnership        18.13%    18.13%
     Reading SMSA Limited Partnership                          15.85%     5.85%
     Orlando SMSA Limited Partnership                          15.00%    15.00%
     Missouri 1--Atchison RSA Limited Partnership              14.28%    14.28%
     RSA 11 Limited Partnership (IA)                           14.14%    14.14%
     Missouri RSA 4 Partnership                                12.50%    12.50%
     New York SMSA Limited Partnership                         10.00%    10.00%
     GTE Mobilnet of South Texas Limited Partnership            8.77%     8.77%
     Iowa 16--Lyon Limited Partnership                          8.33%     8.33%
     Iowa RSA 5 Limited Partnership                             7.14%     7.14%
     Iowa 15--Dickinson Limited Partnership                     6.67%     6.67%
     Iowa RSA No. 14 Limited Partnership                        5.56%     5.56%
     Chicago SMSA Limited Partnership                           5.00%     5.00%
     RSA 1 Limited Partnership (IA)                             3.90%     3.90%
     GTE Mobilnet of Ohio Limited Partnership                   3.50%     3.50%
     Iowa 8--Monona Limited Partnership                         2.30%     2.30%
     Cincinnati SMSA Limited Partnership                        1.20%     1.20%
     GTE Mobilnet of Austin Limited Partnership                  .82%      .82%


<PAGE>



Financial Information

     Condensed combined financial information,  a portion of which is unaudited,
for  investments  in entities  accounted for under the equity method follows (in
thousands):

                                              For the Year Ended December 31,
                                         --------------------------------------
                                             1996          1995         1994
                                         --------------------------------------
  Results of Operations
   Cellular Service Revenues             $ 2,187,202   $ 1,796,895   $1,357,945
   Equipment Sales                           109,314        97,727       67,945
                                         -----------   -----------   ----------
        Total Operating Revenues           2,296,516     1,894,622    1,425,890
                                         -----------   -----------    ---------

   Cost of Equipment Sales                   209,895       151,334      101,691
   Operating, Selling, General,
      Administrative and Other Expenses    1,266,353     1,049,117      824,049
   Depreciation and Amortization             227,480       201,459      165,010
                                         -----------   -----------   ----------
          Total Operating Expenses         1,703,728     1,401,910    1,090,750
                                         -----------   -----------   ----------
   Operating Income                          592,788       492,712      335,140
   Non-operating Expenses                       (642)      (12,903)        (725)
   Minority Interests in Net (Income)
      Loss of Consolidated Entities               --        (1,513)       1,958
                                         -----------   -----------   ----------

   Net Income                            $   592,146   $   478,296   $  336,373
                                         ===========   ===========   ==========


                                                 December 31,
                                        ------------------------------
                                             1996             1995
                                        ---------------- -------------
  Assets
       Current Assets                   $     514,788    $     371,827
       Noncurrent Assets                    1,702,668        1,487,159
                                        -------------    -------------
                                        $   2,217,456    $   1,858,986
                                        =============    =============

  Liabilities and Equity
       Current Liabilities              $     337,465    $     309,873
       Long-term Liabilities                    8,911           71,818
       Minority Interests                       3,384            6,086
       Equity                               1,867,696        1,471,209
                                        -------------    -------------
                                        $   2,217,456    $   1,858,986
                                        =============    =============

Additional Disclosures

     Accumulated deficit at December 31, 1996, included  $118,236,000 related to
undistributed earnings of unconsolidated entities.

     The  Company  has  guaranteed   50%  of  a  discounted   note  held  by  an
unconsolidated  entity with a carrying value of $42,502,000  and  $37,848,000 at
December 31, 1996 and 1995, respectively.



<PAGE>



6.  Borrowings

Long-Term Debt and Advances From and Notes to Affiliates

     Long-Term   Debt  and  Advances  From  and  Notes  to   Affiliates,   which
approximates  fair value based on market prices,  consisted of the following (in
thousands):
                                                             December 31,
                                                     ---------------------------
                                                         1996          1995
                                                     ---------------------------

  Credit Facility Borrowings, due 2001               $   680,000   $          --
  Senior Notes
      due 2003, 7.125%, net of unamortized
       discount of $1,242 (7.18%)1                       448,758              --
      due 2006, 7.5%, net of unamortized
       discount of $980 (7.53%)1                         449,020              --
  Subordinated Promissory Notes, due 2006, 9.5%          122,000              --
                                                     -----------   -------------
      Total Long-Term Debt                           $ 1,699,778   $          --
                                                     ===========   =============

  Advances from Affiliates                           $        --   $     413,529
  Subordinated Note to Centel Capital Corporation,
       due 1996                                               --         950,000
  Subordinated Note to Centel Corporation,
       due 1998                                               --         154,200
                                                     -----------   -------------
      Total Advances From and Notes to Affiliates    $        --   $   1,517,729
                                                     ===========   =============
----------
1.  Weighted average annual effective interest rate at December 31, 1996.

     The  Company  has a revolving  credit  facility  with a number of banks and
institutional  lenders,  with  interest  rates  currently  based  on the  London
Interbank  Offered Rate plus 50 basis  points.  On October 31, 1996,  the Credit
Facility  was  amended  and  restated to permit,  among  other  things,  the ICN
Acquisition  and to increase the Company's  borrowing  capacity  thereunder from
$800 million to $1 billion. A commitment fee of .15% per annum is charged on the
unused portion of the Credit Facility. Commitment fees totaled $390,000 in 1996.
Such fees may range from .15% to .5%  depending  on the  Company's  public  debt
rating.  At December 31, 1996,  the Company was not restricted or limited in its
borrowing capacity under the Credit Facility.

     As part of its interest rate risk management  program,  in August 1996, the
Company entered into two interest rate swap agreements maturing in 1999 to hedge
variable  interest  rate risk under the Credit  Facility  to a fixed  rate.  Net
interest  paid or received  related to such  agreements  is  recorded  using the
accrual method and as an adjustment to interest  expense.  At December 31, 1996,
the Company had interest rate swap agreements with an aggregate  notional amount
of $100 million outstanding.

     The Credit Facility has general and financial  covenants that place certain
restrictions on the Company.  The Company is limited with respect to: the making
of payments (dividends and distributions);  the incurrence of certain liens; the
sale  of  assets  under  certain  circumstances;   entering  into  or  otherwise
permitting any subsidiary distribution  restrictions;  certain transactions with
affiliates;  certain consolidations,  mergers and transfers; and the use of loan
proceeds.  In addition,  the aggregate amount of additional borrowings which can
be incurred by the Company may be limited.

     The Senior Notes have general and financial covenants similar to the Credit
Facility.  However,  these  covenants,  except  for  limitation  on  liens,  are
suspended while the Company's  public debt is rated  investment  grade by two or
more credit  rating  agencies.  The Company  attained  the second such rating on
February 10, 1997.

     In conjunction  with the ICN Acquisition,  the Company issued  subordinated
promissory notes with an annual interest rate of 9.5%, which was reduced to 9.0%
on February 10, 1997.  Fifty  percent of the interest due and owing will be paid
on each  interest  payment date and the remaining  50% will be  capitalized  and
become part of the principal amount owed thereunder. The subordinated promissory
notes  have  general  and  financial  covenants  that are  suspended  while  the
Company's  public debt is rated  investment  grade by two or more credit  rating
agencies.
The Company attained the second such rating on February 10, 1997.
     Interest rates on Advances From Affiliates and the  Subordinated  Note, due
1998,  were based on a 30-day  commercial  paper rate.  The interest rate on the
Subordinated Note, due 1996, was based on the prime rate plus 2 basis points. As
discussed in Note 2, in  conjunction  with the spinoff,  the Company repaid $1.4
billion of Advances From and Notes to Affiliates with proceeds from the issuance
of the Senior Notes and borrowings under the Credit Facility, with the remaining
intercompany  debt  contributed  to the Company by Sprint as Additional  Paid-In
Capital.

     On February 13, 1997, a shelf  registration  filed with the  Securities and
Exchange Commission became effective,  providing for the issuance,  from time to
time,  of up to $500 million in aggregate  initial  offering  price of unsecured
debt securities and/or warrants to purchase debt securities. The net proceeds to
be received by the Company will be available for general corporate  purposes and
may be used for the repayment of short-term debt and borrowings under the Credit
Facility and for the funding of future  acquisitions,  capital  expenditures and
working capital requirements.

Short-Term Debt

     As part of its cash  management  program,  the  Company  incurs  short-term
borrowings   based  on  market   interest   rates  to  support  its  daily  cash
requirements.  At December 31, 1996,  the Company had  short-term  borrowings of
$43,750,000 with an interest rate of 7.4%. The weighted average interest rate on
these borrowings was 5.6% for the year ended December 31, 1996.

7.  Employee Benefit Plans

Defined Benefit Pension Plan

     Prior to the spinoff,  substantially  all of the Company's  employees  were
covered by a  noncontributory  defined  benefit pension plan sponsored by Sprint
which  provided   benefits  based  upon  years  of  service  and   participants'
compensation.  The cost to the Company of its employees'  participation  in this
plan was actuarially determined by Sprint, and totaled $1,917,000 and $1,656,000
in  1995  and  1994,  respectively.  The  Company's  accrued  pension  cost  was
$7,361,000 as of December 31, 1995.

     Effective with the spinoff,  the Company's  employees no longer participate
in Sprint's  defined  benefit  pension plan and Sprint assumed the liability for
benefits of the Company's  employees  under  Sprint's  plan. The Company did not
recognize any  curtailment  gain or loss upon  discontinuance  of its employees'
participation  in Sprint's plan and has not  established its own defined benefit
pension plan.

Defined Contribution Plans

     Substantially   all  employees  of  the  Company  are  covered  by  defined
contribution  employee savings plans.  Participants  may contribute  portions of
their compensation to the plans and the Company makes matching  contributions up
to specified levels. The Company's matching contributions aggregated $5,283,000,
$2,030,000 and $1,736,000 in 1996, 1995 and 1994, respectively.

     Effective with the spinoff,  the Company  discontinued its participation in
Sprint's defined  contribution  employee savings plans. The Company  established
its own defined  contribution  plan, the terms and conditions of which have been
revised to reflect  increased  matching  contribution  levels.  Balances held by
Sprint's  defined  contribution  401(k)  plan  on the  behalf  of the  Company's
employees has been transferred to the Company's new defined  contribution 401(k)
plan.

Postretirement Benefits

     Effective with the spinoff,  the Company  discontinued its participation in
Sprint's   postretirement   benefits  arrangements,   and  established  its  own
arrangements.  Terms and  conditions of the Company's  arrangements  and related
cost levels do not differ significantly from those under Sprint's arrangements.
     The  Company  sponsors  postretirement  benefits  (principally  health care
benefits)  arrangements  covering  substantially  all  employees of the Company.
Employees who retired before  specified dates are eligible for these benefits at
no cost to the retirees.  Employees  retiring after specified dates are eligible
for these  benefits on a shared cost basis.  The Company funds the accrued costs
as benefits are paid. The net  postretirement  benefits costs for 1996, 1995 and
1994 were $474,000, $176,000 and $512,000, respectively.

     The Company's  accrued  postretirement  benefits costs were  $4,049,000 and
$3,575,000 as of December 31, 1996 and 1995, respectively.

Postemployment Benefits

     Postemployment   benefits   offered  by  the  Company  include   severance,
disability  and  workers  compensation,  including  the  continuation  of  other
benefits such as health care and life  insurance  coverage.  Effective  with the
spinoff, the Company  discontinued its participation in Sprint's  postemployment
benefits  arrangements.  Terms and conditions of the Company's  arrangements and
related  cost  levels do not  differ  significantly  from those  under  Sprint's
arrangements.

8.  Stock-Based Compensation

     Under various  stock option plans,  shares of Common Stock are reserved for
issuance  to  officers,  outside  directors  and certain  employees.  Generally,
options are granted at 100% of the market price at date of grant.  Options under
these plans vest over one, three or four years. All options expire 10 years from
date of grant.  Approximately 1.4% of these options  outstanding provide for the
granting of stock  appreciation  rights as an  alternative  method of settlement
upon exercise.  Shares authorized for grants of stock options totaled 3,567,000.
Under the Company's various stock option plans,  2,068,000 shares were available
for the granting of options at December 31, 1996. In addition,  non-vested stock
is issued to certain  officers and outside  directors and vests from one to five
years after grant.  Such shares of  non-vested  stock are  amortized  over their
vesting period.

     Stock option activity for the years 1996, 1995 and 1994 follows:

                                      1996                1995        1994
                              -----------------------   ---------  ----------
                                            Weighted
                                             Average
                                            Exercise
                                Shares       Price       Shares     Shares
                              ----------   ----------   ---------  ----------
Options outstanding,
   beginning of year            611,680     $  15.07     454,976     343,810
Options granted                 816,505     $  23.89     162,659     192,353
Options exercised                22,783     $  15.00       5,955      70,437
Options canceled                 40,005     $  21.46          --      10,750
                              ----------                --------- ----------

Options outstanding,
   end of year                1,365,397     $  20.16     611,680     454,976
                              ==========                ========= ==========

Exercisable, end of year        329,142     $  13.18

Weighted Average Fair Value
   of options, granted
   during 1996                  $  9.74



<PAGE>




     The following table summarizes  information about stock options outstanding
at December 31, 1996:
<TABLE>

<CAPTION>
                                      Options Outstanding                          Options Exercisable
                    -----------------------------------------------------    -------------------------------

                                     Weighted Average      Weighted                          Weighted
  Range of          Number           Remaining             Average            Number         Average
  Exercise Prices   Outstanding      Contractual Life      Exercise Price     Exercisable    Exercise Price
 -----------------  ------------    -------------------    --------------    -------------   ---------------
   <S>              <C>                <C>                   <C>              <C>              <C>
   $  7 - $14         167,859          4.26                  10.00            167,859          10.00
   $14.5 - $20        409,620          7.13                  17.10            160,901          16.46
   $ 21 - $35         787,918          9.00                  23.90                382          25.63
                    ---------                                                 -------
   $  7 - $35       1,365,397          7.86                  20.16            329,142          13.18
                    =========                                                 =======
</TABLE>





     Had compensation  cost for the Company's stock option plans been determined
based on the  fair  value  at the  grant  date  for  awards  in 1995  and  1996,
consistent with the provisions of SFAS 123, the Company's net loss and per share
amount would have been increased by approximately $576,000, or $.01 per share in
1995 and net income would have been reduced by  $3,546,000  or $.03 per share in
1996.  The fair  value of  options  at date of grant  was  estimated  using  the
Black-Scholes valuation model with the following weighted average assumptions:

                                               1996              1995
                                            -----------       ------------
                Expected life (years)           6.0               5.9
                Expected volatility             29.8%             29.8%
                Dividend yield                   --                --
                Interest rate                   7.15%             7.08%

     The pro forma effect on net income for 1996 and 1995 is not  representative
of the pro forma effect on net income for future years  because it does not take
into account pro forma compensation expense related to grants made prior to 1995
or the potential for issuance of additional stock options in future years.

Employees Stock Purchase Plan

     Under the 1994  offering  of the  Sprint  Employees  Stock  Purchase  Plan,
Company  employees held elections to purchase shares of Sprint's common stock as
of  December  31,  1995.  In  connection  with the  spinoff,  elections  made by
employees of the Company to purchase shares of Sprint common stock were replaced
by  elections to purchase  99,000  shares of the  Company's  Common  Stock.  The
purchase  price  under the  offering  could not exceed  $16.90 per share or fall
below $6.27 per share.  Aggregate  fair  market  value of stock  underlying  the
elections was  maintained by adjusting the per share purchase price of elections
as well as the number of shares under election.
The 1994 offering terminated on June 30, 1996.



<PAGE>



9.  Income Taxes

     The components of the income tax expense were as follows (in thousands):

                                         For the Year Ended December 31,
                                       ----------------------------------
                                           1996        1995       1994
                                       ----------  ----------  ----------
Current income tax expense (benefit)
     Federal                           $  17,054   $ (14,485)   $ (17,755)
     State                                 4,545       3,623        2,806
Deferred income tax expense
     Federal                              22,872      27,158       20,331
     State                                13,358       9,109          315
                                       ---------   ----------  ----------

             Total income tax expense  $  57,829   $  25,405    $   5,697
                                       ==========  ==========  ==========

     A reconciliation  from the statutory income tax rate (35%) to the effective
income tax rate  (income  tax expense  divided by income  (loss)  before  income
taxes) follows (in thousands):

                                           For The Year Ended December 31,
                                        ------------------------------------
                                          1996        1995          1994
                                        ---------   ---------    -----------

Income tax expense (benefit)
     at the statutory rate              $ 41,072     $  8,299      $  (4,921)
Effect of
     State income tax expense,
     net of federal income tax effect     11,637        8,276          2,029
     Amortization of intangibles           7,556        8,736          8,796
     Other, net                           (2,436)          94           (207)
                                        ---------   ---------    -----------
Income tax expense                      $ 57,829     $ 25,405     $    5,697
                                        =========   =========    ===========
Effective income tax rate                   49.3%       107.1%        (40.5)%
                                        =========   =========    ===========

     The sources of the  differences  that gave rise to the deferred  income tax
assets and  liabilities as of December 31, 1996 and 1995,  along with the income
tax effect of each, were as follows (in thousands):

                                          1996 Deferred        1995 Deferred
                                          Income Taxes          Income Taxes
                                   --------------------------  --------------

                                                 Noncurrent      Noncurrent
                                     Current      Assets          Assets
                                     Assets    (Liabilities)    (Liabilities)
                                    --------  ---------------  --------------

Property, plant and equipment      $     --   $   (108,832)    $ (60,061)
Postretirement and other benefits        --          1,341         2,986
Accrued liabilities                   9,384             --         7,972
Intangibles                              --        (40,467)      (43,625)
Operating loss carryforwards          2,951         40,758         9,405
Other, net                               --            471       (10,540)
Less: Valuation allowance                                         (5,305)
                                     (3,873)        (6,276)
                                   =========  =============    ==========
       Total                       $  8,462   $   (113,005)    $ (99,168)
                                   =========  =============    ==========


<PAGE>



     During 1996, the valuation  allowance related to deferred income tax assets
increased  $4,844,000.  The  increase  was  primarily  attributable  to the  ICN
Acquisition.  Federal  operating  loss  carryforwards  generated  prior  to  the
acquisition date by markets acquired in the ICN Acquisition  totaled $31,754,000
with expiration dates from 2004 through 2011.

     As of December 31, 1996, the Company had available tax benefits  associated
with  federal  and  state  operating  loss   carryforwards  of  $31,261,000  and
$12,448,000  respectively,  which expire in varying  amounts  annually from 1997
through 2011.

10.  Commitments and Contingencies

Litigation, Claims and Assessments

     On or about March 29, 1996, a lawsuit was brought in the Chancery  Court of
Washington County,  Jonesborough,  Tennessee (the "Tennessee Action"), on behalf
of  all  customers  in  the  Company's   Tennessee  markets  regarding  customer
notification  of the Company's  practice with respect to billing for  fractional
minutes of service. In April 1996, the original complaint was amended to enlarge
the class of plaintiffs to include all customers in all of the Company's service
areas. In late April 1996, the Tennessee Action was removed to the United States
District Court for the Eastern  District of Tennessee,  Northern  Division.  The
Company moved to dismiss the action and the plaintiff  filed a motion to remand.
On July 16, 1996, the Tennessee District Court granted the plaintiff's motion to
remand and returned the case to the Chancery  Court of  Washington  County.  The
Company's Motion to Dismiss is currently pending before the Chancery Court.

     On or about May 28,  1996,  a lawsuit was brought in the Common Pleas Court
of Erie County,  Ohio (the "Ohio Action"),  on behalf of all customers in all of
the Company's  service areas regarding  notification  of the Company's  practice
with respect to billing for fractional minutes of service. On June 25, 1996, the
Ohio Action was removed to the United  States  District  Court for the  Northern
District of Ohio,  Western Division.  Thereafter,  the Company filed a Motion to
Dismiss Or In The Alternative,  Stay pending  resolution of the Tennessee Action
and the plaintiff  filed a Motion to Remand.  By Order dated  December 17, 1996,
the Ohio District Court granted plaintiff's motion to remand and the Ohio Action
was  returned  to the Common  Pleas  Court.  Plaintiff  has  recently  commenced
discovery  by serving a document  request  and  interrogatories.  On January 17,
1997, the Company filed a Motion to Stay This Action And For A Protective  Order
seeking to stay the Ohio Action, including all discovery,  pending resolution of
the  Tennessee  Action.  The basis for the  Motion to Stay,  which is  currently
pending  before the Common Pleas Court,  is the duplicity of the Ohio Action and
the Tennessee Action.

     The Company  believes that both lawsuits are without  merit;  however,  the
ultimate  outcome of these  matters and the  potential  effect on the  financial
condition and results of operations of the Company  cannot be determined at this
time.

     The Company is party to various  other legal  proceedings  in the  ordinary
course  of  business.   Although  the  ultimate   resolution  of  these  various
proceedings  cannot be  ascertained,  management of the Company does not believe
that such  proceedings,  individually or in the aggregate,  will have a material
adverse  effect on the  results  of  operations  or  financial  position  of the
Company.

     In addition,  various  suits  arising in the normal  course of business are
pending  against the cellular system entities in which the Company does not have
a controlling  interest.  Because the outcome of such legal  proceedings has not
been   determined,   no  provision  for  any  liability  that  may  result  upon
adjudication  of such  litigation  has been made in the  consolidated  financial
statements  of the  cellular  system  entity  or the  Company.  In  view  of the
uncertainty  regarding  each  litigation,  there  can be no  assurance  that the
outcome  of such  litigation  will not have a  material  adverse  effect  on the
Company's  investment  in these  entities  or in its equity in the net income of
each entity.



<PAGE>



Operating Leases

     Minimum rental  commitments as of December 31, 1996, for all non-cancelable
operating leases, consisting principally of leases for office space, real estate
and tower space, were as follows (in thousands):


            1997                              $   18,275
            1998                                  17,291
            1999                                  15,885
            2000                                  14,912
            2001                                  13,755
            Thereafter                            79,201
                                              ----------
                      Total                   $  159,319
                                              ==========

     Rental expense aggregated $20,259,000, $17,605,000 and $12,344,000 in 1996,
1995 and 1994,  respectively.  The amount of rental  commitments  applicable  to
subleases, contingent rentals and executory costs is not significant.

11.  Related Party Transactions

     Management believes that the pre-spinoff  consolidated financial statements
of  the  Company,   presented   herein,   reasonably   reflect  the   historical
relationships  with Sprint and its  affiliates  and reflect all of the Company's
costs of doing business.  Management believes that there would not have been any
material  difference  from the amounts  presented  in the  historical  financial
statements had the Company operated on a stand-alone basis.

     Prior to the  spinoff,  the  Company  reimbursed  Sprint for  certain  data
processing  services,  other  data-related  costs  and  certain  management  and
administrative  support  services that were incurred for the Company's  benefit.
Total charges for such services  aggregated  $22,754,000 and $16,287,000 in 1995
and 1994,  respectively.  The terms of the arrangements determining such charges
by Sprint were reasonable, although there was no assurance that these terms were
comparable  to those that  would  have been  obtained  from  unaffiliated  third
parties or on a stand-alone basis.  Subsequent to the spinoff,  Sprint continued
to  provide  certain  administrative  support  services  to  assure  an  orderly
transition. Total charges reimbursed to Sprint aggregated $15,820,000 in 1996.

     Charges for long distance telecommunications and operator services provided
by  interexchange  carriers  to  cellular  customers  are  based  on  terms  and
conditions  negotiated  with  Sprint.  In early  1996,  a new  agreement  with a
three-year  term was  entered  into  between  the  Company  and  Sprint for long
distance  service on an exclusive basis (provided that Sprint is able to provide
such services at competitive  terms and conditions)  which replaced the existing
long distance  service  agreement on terms that are believed to be comparable to
those that could be obtained from unaffiliated third parties.

     The Company  received local  telephone,  interconnection  and toll services
from subsidiaries of Sprint pursuant to agreements  between the subsidiaries and
the Company. Prior to the spinoff,  related payments amounted to $43,601,000 and
$27,766,000  in 1995 and 1994,  respectively.  Payables  to  affiliates  totaled
$2,705,000 at December 31, 1995.

     Prior to the spinoff,  the Company  borrowed from Sprint to the extent cash
requirements  were not met  through  cash  flows  from  operations  and  capital
contributions from minority partners.  The Company entered into cash advance and
borrowing  transactions with Sprint and certain  affiliates as described in Note
6. Interest  expense on advances from and notes to affiliates  was  $23,463,000,
$127,240,000 and $98,437,000 in 1996, 1995 and 1994, respectively.



<PAGE>



Tax Sharing Agreement

     In connection  with the spinoff,  Sprint and the Company entered into a Tax
Sharing  and  Indemnification  Agreement  (the  "Tax  Sharing  Agreement")  that
allocated the responsibility  for taxes between Sprint and the Company.  The Tax
Sharing  Agreement  provides that the Company will indemnify  Sprint for any tax
liability  relating to the Company for all periods.  The Company was included in
the  consolidated  federal  income  tax  returns of Sprint up to the time of the
spinoff.  The Tax Sharing Agreement  generally provides that the Company's share
of the tax liability reflected on such consolidated  federal income tax returns,
as originally filed and amended, is equal to the amount of tax which the Company
would have  incurred on its separate  taxable  income  computed as if it filed a
separate  tax  return.  It also  provides  that if the  Company  incurred  a net
operating  loss  in any  year in  which  it  joined  with  Sprint  in  filing  a
consolidated federal income tax return, as originally filed and amended,  Sprint
would pay an amount equal to the reduction in its tax liability  attributable to
such loss.  Similar provisions apply in the case of state tax returns filed on a
consolidated basis.

     In  addition,  the Tax Sharing  Agreement  generally  provides  that Sprint
agrees to indemnify  the Company  against  liability  for any taxes  relating to
Sprint  or its  affiliates,  other  than  the  Company,  for  periods  up to and
including  the  spinoff  date or for  periods  after that date if imposed on the
Company by any taxing authority.

Tax Assurance Agreement

     In  connection  with the  spinoff,  Sprint and the Company  entered into an
agreement (the "Tax Assurance  Agreement") pursuant to which certain limitations
designed  to  preserve  the  tax-free  status of the  spinoff are imposed on the
Company  for a period of two years after the  completion  of the  spinoff.  Such
limitations may prohibit the Company from exchanging,  contributing or otherwise
transferring or disposing of cellular properties.  In addition, such limitations
may limit the aggregate  amount of equity  securities the Company could issue or
buy back  following  the spinoff,  including  the issuance of common  stock,  in
certain  circumstances,  by the  Company.  If the  Company  were to  breach  its
obligations  under  the Tax  Assurance  Agreement,  and as a direct  result  the
spinoff is not  treated  as a tax-free  distribution  under  Section  355 of the
Internal Revenue Code of 1986, the Company would be required to indemnify Sprint
pursuant to the Tax Sharing Agreement for any taxes assessed with respect to the
spinoff.



<PAGE>
<TABLE>

                          QUARTERLY FINANCIAL DATA (1)
<CAPTION>


                          First Quarter     Second Quarter     Third Quarter     Fourth Quarter
                          1996     1995     1996     1995     1996       1995    1996     1995
                        ----------------- ----------------- ------------------ -----------------
<S>                     <C>      <C>      <C>      <C>      <C>       <C>      <C>      <C>
Operating Revenues
Cellular Service
  Revenues              $230,754 $168,078 $263,560 $196,478 $271,819  $207,472 $286,593 $217,431
Equipment Sales            8,941   11,397   10,613   12,417    9,857    10,311   13,735   10,831
                        -------- -------- -------- -------- --------- -------- -------- --------
     Total Operating
     Revenues           $239,695 $179,475 $274,173 $208,895 $281,676  $217,783 $300,328 $228,262
                        ======== ======== ======== ======== ========= ======== ======== ========

Operating Expenses
Cost of Service         $ 22,139 $ 14,820 $ 22,205 $ 18,181 $ 24,148  $ 17,488 $ 31,253 $ 17,734
Cost of Equipment Sales   20,609   22,311   25,355   28,298   25,046    27,324   33,317   31,508
Selling, General,
  Administrative and
  Other Expenses         117,527   85,274  123,675   94,707  132,055   100,165  151,857  116,486
Depreciation and
  Amortization            32,997   26,784   35,157   27,502   36,833    29,380   41,854   31,065
                        -------- -------- -------- -------- --------- -------- -------- --------
     Total Operating
     Expenses           $193,272 $149,189 $206,392 $168,688 $218,082  $174,357 $258,281 $196,793
                        ======== ======== ======== ======== ========= ======== ======== ========

Net Income (Loss)       $  6,980 $ (5,919)$ 24,284 $   (758)$ 22,887  $  4,547 $  5,369 $    435
                        ======== ======== ======== ======== ========= ======== ======== ========

Net Income (Loss)
  Per Share
  (in Dollars) (2)      $   0.06 $  (0.05)$   0.21 $  (0.01)$   0.20  $   0.04 $   0.04 $   0.00
                        ======== ======== ======== ======== ========= ======== ======== ========

----------
<FN>
(1) Certain amounts have been  reclassified to conform to the presentation  used
in 1996.

(2) In 1995 and prior  years,  Net Income  (Loss) per Share has been  calculated
based upon the number of Sprint Corporation  weighted average shares outstanding
for each respective period,  adjusted for a conversion ratio of one share of the
Company's Common Stock to three shares of Sprint common stock.
</FN>
</TABLE>


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

      None.



<PAGE>



                                    PART III

Item 10.  Directors and Executive Officers of the Registrant.

     Information  regarding  directors  of the  Company  is set forth  under the
heading "Election of Directors" in the Company's  definitive proxy statement for
the  annual  meeting  of  shareowners  to be held  on May 6,  1997  (the  "Proxy
Statement"),  which was filed with the  Securities  and Exchange  Commission  on
March 28, 1997, and is incorporated herein by reference.  Information  regarding
executive officers of the Company is included under Item 4a. of Part I hereof.

Item 11.  Executive Compensation.

     Information required by this Item is set forth under the heading "Executive
Compensation"  in the Proxy  Statement  and,  except for  information  under the
headings  "Executive  Compensation-Organization,   Compensation  and  Nominating
Committee     Report    on    Executive     Compensation"     and     "Executive
Compensation-Performance  Graph" contained therein, is incorporated by reference
herein.

Item 12.  Security Ownership of Certain Beneficial Owners and Management.

     Information  required by this Item is set forth under the heading "Security
Ownership of Certain  Beneficial  Owners and  Management" in the Proxy Statement
and is incorporated by reference herein.

Item 13.  Certain Relationships and Related Transactions.

Background of Spinoff and Relationship With Sprint

    On June 23, 1995,  Sprint  Spectrum LP was awarded PCS licenses in 29 out of
51 MTAs  auctioned  by the  FCC.  Four  additional  MTAs  are  held by  entities
affiliated with Sprint Spectrum LP or owned by affiliates of Sprint Spectrum LP.
FCC regulations  prohibit a PCS licensee from also owning  cellular  licenses in
overlapping  markets,  effectively  requiring  Sprint  to  divest  itself of the
cellular  licenses in an MTA covering 10% or more of the population of such MTA.
As a result,  the Sprint Board of Directors  reviewed  several  alternatives  to
eliminate  conflicted  cellular  markets,  including  the  sale  of  conflicting
holdings or the sale of more  extensive  holdings and a tax-free  spinoff of the
Company to the holders of Sprint common stock. Because of concerns regarding tax
consequences  of a sale of interests in  individual  markets and the effect that
such sales might have on the ability of the Company to market its  services  and
products, the Sprint Board of Directors approved the spinoff of the Company.

     On March 7, 1996, the date of the spinoff, the Company paid $1.4 billion of
intercompany  debt owed by the Company to Sprint and its subsidiaries and Sprint
and its  subsidiaries  contributed to the equity capital of the Company any debt
then owed to them by the Company in excess of the $1.4  billion of  intercompany
debt that was repaid.  See  "Management's  Discussion  and Analysis of Financial
Condition and Results of Operations-Liquidity  and Capital Resources." After the
spinoff,  the Company began  operating as an  independent  company.  There is no
agreement  restricting  competition  between  the  Company and Sprint and Sprint
Spectrum  LP  and it is  expected  that  the  Company  and  Sprint  will  become
competitors in wireless  communications  in several markets,  including those in
which Sprint's PCS licenses overlap with the cellular licenses of the Company.



<PAGE>



Distribution Agreement

     In  connection  with the  spinoff,  Sprint and the Company  entered into an
agreement (the "Distribution  Agreement")  governing the terms and conditions of
the spinoff  and  certain  aspects of the  relationship  between  Sprint and the
Company  after  the  spinoff.   The  following  paragraphs  describe  the  major
provisions  of the  Distribution  Agreement  and related  agreements  as well as
relationships between the two companies after the spinoff.

Allocation of Pre-Spinoff Contingent Liabilities

     The Company and Sprint agreed to mutual indemnification against liabilities
arising out of business  activities of the other party prior to the spinoff.  In
general,  the Company will indemnify  Sprint for any liabilities  arising out of
cellular operations prior to the spinoff,  and Sprint will indemnify the Company
for any liabilities  arising from non-cellular  operations prior to the spinoff.
Sprint  and the  Company  agreed  in the  Distribution  Agreement  to  equitably
allocate  liabilities either jointly  attributable to the business activities of
Sprint and the Company or not clearly  attributable to either.  The Distribution
Agreement  provides  more  specific  rules for  allocating  certain  classes  of
liabilities  between  Sprint and the Company.  For  instance,  the  Distribution
Agreement allocates employment-related claims to the Company or Sprint, based on
which party employed the claimant on the date the occurrence  giving rise to the
claim arose. Also, the Distribution Agreement provides that (i) any claims based
on  health  effects  of  electro-magnetic  radiation  from  the use of  cellular
telephone service will be allocated entirely to the Company, and (ii) any claims
based on alleged misstatements or omissions in the disclosure documents relating
to the spinoff  related  public  offering of the Company's  senior notes will be
allocated  to  the  Company,  except  with  respect  to  those  portions  of the
disclosure documents for which Sprint provided information.

Release of Spinoff Related Liabilities

     Both the  Distribution  Agreement  and the  Company's  Amended and Restated
Certificate of Incorporation, as amended, provide that the Company may not bring
any claim against Sprint,  its affiliates,  or any officer,  director,  or other
affiliate  of Sprint  (including  those who are  officers  or  directors  of the
Company),  for breach of any duty that occurred  prior to or in connection  with
the spinoff,  including but not limited to, the duty of loyalty or fair dealing,
on account of a diversion of a corporate  business  opportunity to Sprint or its
affiliates, including Sprint Spectrum LP.

Employee Benefits

     The  Distribution  Agreement  provided for the treatment of Sprint employee
benefits  subsequent  to the spinoff,  as they related to employees who remained
employed  by Sprint or its  subsidiaries  after the spinoff  and  employees  who
remained employed by the Company after the spinoff.  The Distribution  Agreement
also provided for the  adjustment of outstanding  stock options.  In the case of
grants made under  Sprint's stock option plans and employee stock purchase plans
held by  individuals  who  remained  employed  by  Sprint,  the number of shares
covered by a grant under such plans was increased,  and the exercise or purchase
price per share  was  decreased,  pursuant  to a formula  designed  to cause the
economic value of the grants to remain the same after the spinoff, giving effect
to the  diminution  in value of Sprint  common  stock.  Employees  who  remained
employed  by the Company  after the  spinoff  and who had grants  under a Sprint
stock option plan or who elected to do so under Sprint's employee stock purchase
plan  received  replacement  grants to purchase the  Company's  Common Stock and
their Sprint  grants were  canceled.  In addition,  the  Distribution  Agreement
provides that with respect to Sprint's  retirement  pension plan,  all employees
who remained  employed by the Company  after the spinoff  will  continue to earn
service credit under such plan, but only for purposes of vesting.



<PAGE>



Intellectual Property

     The  Distribution   Agreement   provided  for  Sprint  to  license  certain
intellectual  property  rights to the  Company  prior to the  spinoff  including
proprietary  information  and trademarks and trade names,  as well as the use of
proprietary  information  by employees  transferred to the Company in connection
with the spinoff. Under the Distribution Agreement, the Company was permitted to
use the Sprint  brand name for a limited  period,  after  which the  Company was
prohibited  from  using the  Sprint  brand,  including  logos,  marks,  or other
insignia or words suggestive of affiliation with Sprint.

Transitional Administrative Services

     The  Distribution  Agreement  provides  that  Sprint will  provide  certain
administrative services to the Company for a period of up to two years after the
spinoff date.  The Company has agreed to the manner of  compensating  Sprint for
these services on a  service-by-service  basis,  but in general the parties have
attempted to make the amount of compensation approximate Sprint's variable cost.

Tax Sharing Agreement

     In connection  with the spinoff,  Sprint and the Company entered into a Tax
Sharing   Agreement   (the  "Tax  Sharing   Agreement")   that   allocated   the
responsibility  for  taxes  between  Sprint  and the  Company.  The Tax  Sharing
Agreement  provides that the Company will indemnify Sprint for any tax liability
relating  to the  Company  for all  periods.  The  Company  was  included in the
consolidated federal income tax returns of Sprint up to the time of the spinoff.
The Tax Sharing Agreement generally provides that the Company's share of the tax
liability  reflected  on  such  consolidated  federal  income  tax  returns,  as
originally  filed and  amended,  is equal to the amount of tax which the Company
would have  incurred on its separate  taxable  income  computed as if it filed a
separate  tax  return.  It also  provides  that if the  Company  incurred  a net
operating  loss  in any  year in  which  it  joined  with  Sprint  in  filing  a
consolidated federal income tax return, as originally filed and amended,  Sprint
would pay an amount equal to the reduction in its tax liability  attributable to
such loss.  Similar provisions apply in the case of state tax returns filed on a
consolidated basis.

     In  addition,  the Tax Sharing  Agreement  generally  provides  that Sprint
agrees to indemnify  the Company  against  liability  for any taxes  relating to
Sprint  or its  affiliates,  other  than  the  Company,  for  periods  up to and
including  the  spinoff  date or for  periods  after that date if imposed on the
Company by any taxing authority.

Tax Assurance Agreement

     In  connection  with the  spinoff,  Sprint and the Company  entered into an
agreement (the "Tax Assurance  Agreement") pursuant to which certain limitations
designed  to  preserve  the  tax-free  status of the  spinoff are imposed on the
Company  for a period of two years after the  completion  of the  spinoff.  Such
limitations may prohibit the Company from exchanging,  contributing or otherwise
transferring or disposing of cellular properties.  In addition, such limitations
may limit the aggregate  amount of equity  securities the Company could issue or
buy back  following  the spinoff,  including  the issuance of Common  Stock,  in
certain  circumstances,  by the  Company.  If the  Company  were to  breach  its
obligations  under  the Tax  Assurance  Agreement,  and as a direct  result  the
spinoff is not  treated  as a tax-free  distribution  under  Section  355 of the
Internal Revenue Code of 1986, the Company would be required to indemnify Sprint
pursuant to the Tax Sharing Agreement for any taxes assessed with respect to the
spinoff.



<PAGE>



Operational Relationship

     Immediately prior to the spinoff, the Company and Sprint entered into a new
agreement  with a  three-year  term for long  distance  services on an exclusive
basis (except where Sprint is unable to provide such services)  which contains a
provision  that terms and  conditions  of the  agreement  will be  reviewed  and
changed as necessary every six months to ensure that they are  competitive  with
those generally available from third parties.  Sprint's Local Telecommunications
Division  provides  certain  regulated  long distance  service to the Company in
areas  served by Sprint's  local  telephone  companies  pursuant to an agreement
which was negotiated at arms-length  prior to the  acquisition of the Company by
Sprint.  Sprint's Local  Telecommunications  Division provides these services at
rates tariffed for such services by state regulatory authorities.

     Sprint also provides the Company with network  monitoring and bill printing
and mailing services under existing agreements.  These  administrative  services
are  in  addition  to  the   administrative   services   described   above  (see
"Transitional  Administrative Services"), and the Company expects to continue to
obtain these services from Sprint for the indefinite  future.  In addition,  the
Company  leases from Sprint  various  equipment  location sites that the Company
expects to keep in place.

     The amounts paid  pursuant to these and other  operational  agreements  and
funding arrangements during each of the last three fiscal years are set forth in
Note 11 of Notes to Consolidated Financial Statements.

Certain Other Related Transactions

     Information  required by this Item  relating  to  directors  and  executive
officers of the Company is set forth under the heading "Related Transactions" in
the Proxy Statement and is incorporated by reference herein.


<PAGE>



                                     PART IV

Item 14.  Exhibits, Financial Statement Schedule and Reports on Form 8-K.

(a)    Financial Exhibits, Financial Statement Schedule and Exhibits:

           1.     Financial Statements:

                  360 Communications Company and Subsidiaries

                  -   Report of Independent Auditors

                  -   Reports of Other Independent Accountants

                  -   Consolidated  Balance  Sheets as of December  31, 1996 and
                      1995

                  -   Consolidated  Statements of Operations for the years ended
                      December 31, 1996, 1995 and 1994

                  -   Consolidated  Statements of Cash Flows for the years ended
                      December 31, 1996, 1995 and 1994

                  -   Consolidated  Statements  of  Shareowners'  Equity for the
                      years ended December 31, 1996, 1995 and 1994

                  -   Notes to Consolidated Financial Statements

             2.   Financial Statement Schedule:

                  The  following  schedule,  for which  provision is made in the
applicable accounting  regulations of the Securities and Exchange Commission and
is thereby required, is filed herewith:

                  Schedule II  360  Communications Company and Subsidiaries

                  -   Consolidated  Valuation  and  Qualifying  Accounts for the
                      years ended December 31, 1996, 1995 and 1994

                  All  other   schedules  are  omitted   because  they  are  not
applicable,   immaterial  or  the  required   information  is  included  in  the
consolidated financial statements or notes thereto.

(b)    Reports on Form 8-K:

       On Current  Report on Form 8-K,  dated  October 15, 1996,  under "Item 5.
Other  Events," the Company filed a press release  announcing  its  consolidated
operating results for the third quarter of 1996.

       On Current  Report on Form 8-K,  dated  November 1, 1996,  under "Item 2.
Acquisition or Disposition  of Assets" and "Item 7.  Financial  Statements,  Pro
Forma  Financial   Information  and  Exhibits,"  the  Company  reported  on  the
completion of the ICN  Acquisition  and filed  financial  statements,  pro forma
information and exhibits relating thereto.


<PAGE>
<TABLE>

                   360 COMMUNICATIONS COMPANY AND SUBSIDIARIES

           SCHEDULE II-CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS

                  Years Ended December 31, 1996, 1995 and 1994
                             (Thousands of Dollars)

<CAPTION>
                                             Additions
                                       -----------------------
                              Balance              Charged to               Balance
                             Beginning  Charged to   Other       Other      End of
                              of Year     Income    Accounts   Deductions    Year
                             --------- ----------- ---------- -----------  --------

<S>                          <C>       <C>          <C>         <C>          <C>
1996
Allowance for uncollectibles $  2,370  $  23,952   $    845   $(21,437)(1) $  5,730
Valuation allowance-
 deferred income tax assets  $  5,305  $    (276)  $  5,120   $      -     $ 10,149

1995
Allowance for uncollectibles $  2,043  $  16,475   $     10   $(16,158)(1) $  2,370
Valuation allowance-
 deferred income tax assets  $  2,850  $   2,455   $      -   $      -     $  5,305

1994
Allowance for uncollectibles $  1,637  $  12,460   $    323   $(12,377)(1) $  2,043
Valuation allowance-
 deferred income tax assets  $  1,853  $     997   $      -   $      -     $  2,850

----------
<FN>
(1)  Accounts written off, net of recoveries.
</FN>
</TABLE>



<PAGE>



                                   SIGNATURES

         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                           360  COMMUNICATIONS COMPANY


                                           By: /s/ Dennis E. Foster
                                           Dennis E. Foster
                                           President and Chief Executive Officer

  Date:  March 31, 1997

        Pursuant to the  requirements  of the  Securities  Exchange Act of 1934,
this  report has been  signed  below by the  following  persons on behalf of the
registrant and in the capacities and on the dates indicated:

        Signature                      Title                         Date
        ---------                      -----                         ----

   /s/ Dennis E. Foster        President and Chief Executive     March 31, 1997
------------------------------ Officer and Director
      Dennis E. Foster         (Principal Executive Officer)

   /s/ Michael J. Small        Executive Vice President and      March 31, 1997
------------------------------ Chief Financial Officer
      Michael J. Small         (Principal Financial Officer)

   /s/ Gary L. Burge           Senior Vice President - Finance   March 31, 1997
------------------------------ (Principal Accounting Officer)
      Gary L. Burge

   /s/ Frank E. Reed           Chairman of the Board of          March 31, 1997
------------------------------ Directors
      Frank E. Reed

   /s/ Lester Crown            Director                          March 31, 1997
------------------------------
      Lester Crown

   /s/ Michael Hooker          Director                          March 31, 1997
------------------------------
      Michael Hooker

   /s/ Robert E. R. Huntley    Director                          March 31, 1997
------------------------------
      Robert E. R. Huntley

   /s/ Valerie B. Jarrett      Director                          March 31, 1997
------------------------------
      Valerie B. Jarrett

   /s/ Alice M. Peterson       Director                          March 31, 1997
------------------------------
      Alice M. Peterson

   /s/ Charles H. Price, II    Director                          March 31, 1997
------------------------------
      Charles H. Price, II


<PAGE>



                                  EXHIBIT INDEX



Exhibit
Number                        Description of Exhibits
------                        -----------------------

 2.1       Distribution Agreement dated as of March 7, 1996, by and among Sprint
           Corporation,  360  Communications  Company  (formerly Sprint Cellular
           Company) and Centel Corporation. (Filed as Exhibit 2 to the Company's
           Annual  Report on Form 10-K for the fiscal  year ended  December  31,
           1995; File No. 1-14108, and incorporated herein by reference.)

 2.2       Exchange and Merger Agreement, dated as of May 31, 1996, by and among
           Independent  Cellular Network  Partners,  James A. Dwyer,  Jr., David
           Winstel,  CC  Industries,  Inc.,  Ohio Cellular RSA,  L.P.,  Ohio RSA
           Corporation,  Quality Cellular Communications of Ohio, Inc., Cellular
           Plus, L.P., C-Plus, Inc., Quality Cellular Plus Communications, Inc.,
           Henry Crown and Company  (Not  Incorporated)  and 360  Communications
           Company.  (Filed as Exhibit 2.2 to the Company's  Quarterly Report on
           Form 10-Q for the  quarterly  period  ended June 30,  1996,  File No.
           1-14108, and incorporated herein by reference.)

 2.3       First  Amendment  to  Exchange  and  Merger  Agreement,  dated  as of
           November 1, 1996, by and among Independent Cellular Network Partners,
           James A.  Dwyer,  Jr.,  David  Winstel,  CC  Industries,  Inc.,  Ohio
           Cellular  RSA,  L.P.,   Ohio  RSA   Corporation,   Quality   Cellular
           Communications  of Ohio,  Inc.,  Cellular Plus, L.P.,  C-Plus,  Inc.,
           Quality Cellular Plus  Communications,  Inc., Henry Crown and Company
           (Not Incorporated) and 360 Communications  Company. (Filed as Exhibit
           2.3 to the  Company's  Current  Report on Form 8-K dated  November 1,
           1996, File No. 1-14108, and incorporated herein by reference.)

 3.1       Amended   and   Restated   Certificate   of   Incorporation   of  360
           Communications  Company,  as amended  as of March 4, 1996.  (Filed as
           Exhibit  3.1 to the  Company's  Annual  Report  on Form  10-K for the
           fiscal  year  ended  December  31,  1995;  File  No.   1-14108,   and
           incorporated herein by reference.)

 3.2       Amended and Restated Bylaws of 360 Communications  Company. (Filed as
           Exhibit  3.2 to the  Company's  Annual  Report  on Form  10-K for the
           fiscal  year  ended  December  31,  1995,  File  No.   1-14108,   and
           incorporated herein by reference.)

 3.3       Certificate  of  Designation  of First  Series  Junior  Participating
           Preferred Stock of 360 Communications  Company. (Filed as Exhibit 3.3
           to  Amendment  No.  4 to  Registration  Statement  on Form  S-1  (No.
           33-99756), and incorporated herein by reference.)

 4.1       360  Communications  Company's 7 1/8% Senior Note Due 2003 and 7 1/2%
           Senior Note Due 2006.  (Filed as Exhibit 4.1 to the Company's  Annual
           Report on Form 10-K for the fiscal year ended December 31, 1995, File
           No. 1-14108, and incorporated herein by reference.)

 4.2       Indenture  dated as of  March  7,  1996  between  360  Communications
           Company and Citibank,  N.A., as Trustee. (Filed as Exhibit 4.2 to the
           Company's  Annual  Report  on Form  10-K for the  fiscal  year  ended
           December 31,  1995,  File No.  1-14108,  and  incorporated  herein by
           reference.)

 4.3       Form of 360  Communications  Company  Common Stock,  $0.01 par value,
           certificate.  (Filed as Exhibit 4.3 to the Company's Annual Report on
           Form 10-K for the  fiscal  year ended  December  31,  1995,  File No.
           1-14108, and incorporated herein by reference.)

 4.4       Rights Agreement dated as of March 5, 1996 between 360 Communications
           Company and Chemical  Bank.  (Filed as Exhibit 10.3 to the  Company's
           Annual  Report on Form 10-K for the fiscal  year ended  December  31,
           1995, File No. 1-14108, and incorporated herein by reference.)

 4.5       Form  of 360  Communications  Company's  Subordinated  Non-Negotiable
           Promissory  Note (included in Exhibit 2.2 to the Company's  Quarterly
           Report on Form 10-Q for the  quarterly  period  ended June 30,  1996,
           File No. 1-14108, and incorporated herein by reference).

 4.6       Indenture dated as of March 1, 1997 from 360  Communications  Company
           to Citibank, N.A., as Trustee. (Filed as Exhibit 4.6 to the Company's
           Current  Report on Form 8-K dated March 17, 1997,  File No.  1-14108,
           and incorporated herein by reference.)

 4.7       360  Communications  Company's 7.60% Senior Note Due 2009.  (Filed as
           Exhibit 4.7 to the Company's  Current  Report on Form 8-K dated March
           17, 1997, File No. 1-14108, and incorporated herein by reference.)

 10.1      Tax  Sharing  Agreement  dated  as of  March  7,  1996  among  Sprint
           Corporation and 360 Communications Company. (Filed as Exhibit 10.1 to
           the  Company's  Annual  Report on Form 10-K for the fiscal year ended
           December 31,  1995,  File No.  1-14108,  and  incorporated  herein by
           reference.)

 10.2      Tax  Assurance  Agreement  dated as of March 7, 1996,  by and between
           Sprint Corporation and 360 Communications  Company. (Filed as Exhibit
           10.2 to the Company's  Annual Report on Form 10-K for the fiscal year
           ended December 31, 1995, File No. 1-14108, and incorporated herein by
           reference.)

 10.3      Employment Agreement between 360 Communications Company and Dennis E.
           Foster.*

 10.4      360 Communications  Company  Replacement Stock Option Plan. (Filed as
           Exhibit  10.4 to the  Company's  Annual  Report  on Form 10-K for the
           fiscal  year  ended  December  31,  1995,  File  No.   1-14108,   and
           incorporated herein by reference.)*

 10.5      360  Communications  Company 1996 Equity  Incentive  Plan.  (Filed as
           Exhibit  10.5 to the  Company's  Annual  Report  on Form 10-K for the
           fiscal  year  ended  December  31,  1995,  File  No.   1-14108,   and
           incorporated herein by reference.)*

 10.6      360 Communications  Company Director Equity and Deferred Compensation
           Plan.  (Filed as Exhibit 10.6 to the Company's  Annual Report on Form
           10-K for the fiscal year ended December 31, 1995,  File No.  1-14108,
           and incorporated herein by reference.)*

 10.7      Form of Indemnification  Agreement between 360 Communications Company
           and  its  directors  and  officers.  (Filed  as  Exhibit  10.7 to the
           Company's  Annual  Report  on Form  10-K for the  fiscal  year  ended
           December 31,  1995,  File No.  1-14108,  and  incorporated  herein by
           reference.)*

 10.9      Credit  Agreement dated as of March 6, 1996 among 360  Communications
           Company,  the initial  lenders  named  therein,  Citibank,  N.A.,  as
           Administrative  Agent,  Chemical Bank, as Syndication Agent,  Toronto
           Dominion (Texas),  Inc., as Documentation  Agent, and Bank of America
           Illinois,  as  Co-Syndication  Agent.  (Filed as Exhibit  10.9 to the
           Company's  Annual  Report  on Form  10-K for the  fiscal  year  ended
           December 31,  1995,  File No.  1-14108,  and  incorporated  herein by
           reference.)

 10.10     Amended and Restated  Credit  Agreement  dated as of October 31, 1996
           among 360 Communications  Company, the initial lenders named therein,
           Citibank, N.A., as Administrative Agent, The Chase Manhattan Bank, as
           Syndication Agent,  Toronto Dominion (Texas),  Inc., as Documentation
           Agent, and Bank of America Illinois, as Syndication Agent.

 12        Statement  regarding  computation  of  Ratio  of  Earnings  to  Fixed
           Charges.

 21        Subsidiaries of 360 Communications Company.

 23.1      Consent of Ernst & Young LLP.

 23.2      Consent of Ernst & Young LLP,  regarding the Kansas City SMSA Limited
           Partnership.

 23.3      Consent of Arthur Andersen LLP, regarding GTE Mobilnet of South Texas
           Limited Partnership.

 23.4      Consent  of Arthur  Andersen  LLP,  regarding  Chicago  SMSA  Limited
           Partnership.

 23.5      Consent of Coopers & Lybrand L.L.P.,  regarding New York SMSA Limited
           Partnership.

 23.6      Consent of Coopers & Lybrand L.L.P.,  regarding  Orlando SMSA Limited
           Partnership.

 27        Financial Data Schedule.

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* Indicates management contract or compensatory plan or arrangement.