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, 1997
                                       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 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. [ ]

         On March 27, 1998,  121,333,114 shares of the registrant's Common Stock
were  outstanding.  The  aggregate  market  value  on  March  27,  1998  of  the
registrant's   Common  Stock  held  by  non-affiliates  of  the  registrant  was
$3,685,493,337.

                       Documents Incorporated by Reference

         Certain portions of the registrant's definitive proxy statement for the
annual  meeting of shareowners  to be held on May 12, 1998 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....................................................19
Item 4.  Submission of Matters to a Vote of Security Holders..................20
Item 4a. Executive Officers of the Registrant.................................20

                                     PART II

Item 5.  Market for Registrant's Common Equity and Related Stockholder
         Matters..............................................................22
Item 6.  Selected Consolidated Financial Data.................................24
Item 7.  Management's Discussion and Analysis of Financial Condition and
         Results of Operations................................................25
Item 8.  Financial Statements and Supplementary Data..........................35
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....63



     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; a significant delay in the expected closing of the proposed
     merger  between the Company and ALLTEL  Corporation;  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.

                                       i
<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  PCS: The type of FCC license  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.

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

     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.

                                       ii
<PAGE>

     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.

     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 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 1996 population estimates prepared by Claritas 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.

     Roaming:  The ability of the  Company's  customers to make or receive calls
when  traveling in another  wireless  communications  company's  system and vice
versa.

                                      iii
<PAGE>

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

     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.

                                       iv

<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, 1997,
the Company served approximately 2.6 million customers in over 100 markets in 15
states  throughout  the  country.  The  Company's  interests  in  these  markets
represent  approximately  21.4  million Net POPs as of December  31,  1997.  The
Company also owns, as of December 31, 1997,  minority interests in 60 additional
cellular  telephone  markets  representing  approximately  4.7 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 and paging
services, 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'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, 1997,  the Company grew
its  customer  base by a compounded  annual  growth rate of 48%. At December 31,
1997, the Company had a cellular  penetration  rate of 10.7% in the markets that
it controlled.  At December 31, 1997, the Company reached 20% penetration in six
markets and 15%  penetration  in eight  additional  markets.  For the year ended
December 31, 1997, the Company's average monthly churn rate was 1.88%.

     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").

Merger Agreement with ALLTEL Corporation

     On March 16, 1998, the Company entered into an Agreement and Plan of Merger
(the  "Merger  Agreement")  with  ALLTEL  Corporation,  a  Delaware  corporation
("ALLTEL"),  and Pinnacle Merger Sub, Inc., a Delaware  corporation and a wholly
owned  subsidiary of ALLTEL  ("Merger  Sub"),  pursuant to which Merger Sub will
merge with and into the Company (the "Merger").  As a result of the Merger,  (a)
each outstanding share of the Company's Common Stock (other than shares owned by
ALLTEL or Merger Sub or held by the Company),  will be converted  into the right
to receive .74 shares of the common stock,  par value $1.00 per share, of ALLTEL
and (b) the Company will become a wholly owned subsidiary of ALLTEL.

                                       1

<PAGE>

     Consummation of the Merger is subject to certain conditions,  including the
approval of the Merger by the  respective  shareowners of the Company and ALLTEL
and the receipt of required regulatory approvals,  including the approval of the
Federal  Communications  Commission and the expiration of the applicable waiting
period  under  the  Hart-Scott-Rodino  Antitrust  Improvements  Act of 1976,  as
amended.  Pending the receipt of such approvals, the Company expects to complete
the Merger in the third quarter of 1998. The Merger  Agreement may be terminated
under  certain  circumstances  relating  to a third  party  offer to acquire the
Company,  in which  event  the  Company  will be  obligated  to pay to  ALLTEL a
termination fee of $100 million (the "Termination Fee").

     Concurrently  with the execution of the Merger  Agreement,  the Company and
ALLTEL  entered into a Stock Option  Agreement  (the "Stock  Option  Agreement")
whereby the Company granted to ALLTEL an option (the "Option") to purchase up to
19.9%  of the  number  of  shares  of the  Company's  Common  Stock  issued  and
outstanding  immediately  prior  to  the  grant  of  the  Option  (approximately
24,140,553  shares)  at an  exercise  price of  $33.90  per  share  (subject  to
adjustment in certain  circumstances).  The Option is exercisable by ALLTEL only
in the event that  ALLTEL  becomes  entitled  to receive  the  Termination  Fee.
Concurrently  with any  exercise  of the  Option,  the Company has the option to
repurchase from ALLTEL,  at a price of $35.90 per share,  any shares issued upon
the exercise of the Option.

     The  foregoing  descriptions  of the Merger  Agreement and the Stock Option
Agreement,  and the  transactions  contemplated  thereby,  do not  purport to be
complete  and are  qualified  in  their  entirety  by  reference  to the  Merger
Agreement and the Stock Option  Agreement,  copies of which are  incorporated by
reference herein as Exhibits 2.4 and 2.5, respectively, to this Report.


Growth and Operating Characteristics of the United States Cellular Industry

     The United States cellular telephone industry  historically 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, 1997, the cellular  industry reported total revenues of $27.5 billion versus
$23.6  billion in 1996.  The total  number of cellular  customers  grew by 25.7%
during 1997,  expanding the customer  base from an estimated  44.0 million to an
estimated 55.3 million customers. The cellular industry's penetration rate as of
December 31, 1997,  was 20.6% for carriers on a nationwide  basis,  or 10.3% 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.


                                       2

<PAGE>

     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,
1997.


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

Cellular Industry Statistics    1997     1996     1995     1994     1993
                              -------  -------  -------  -------  -------

Total Service Revenues
   (dollars in billions)       $27.5    $23.6    $19.1    $14.2    $10.9

Cellular Customers
   (millions)                   55.3     44.0     33.8     24.1     16.0

Customer Growth
   (year-over-year)             25.7%    30.0%    40.0%    50.8%    45.1%

Average Monthly Bill per
   Customer (dollars)          $42.78   $47.70   $51.00   $56.21   $61.49

Penetration-Average
   Carrier*                     10.3%     8.3%     6.5%     4.7%     3.1%

---------------------------
* Represents  the total  nationwide  cellular  penetration  for the average
  carrier.

     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 six spectrum blocks have now been issued. 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, in addition to the two cellular carriers, an additional three to six PCS
providers could compete in any given service area.

     Despite the fact that PCS licensees 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."


                                       3

<PAGE>

Markets and Clusters

     The  following  table sets forth as of December 31, 1997 (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 1996 population  estimates prepared by
Claritas 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
CONTROLLED MARKETS                                 Non-wireline   Population   Percentage   Net POPs
------------------                                 ------------   ----------   ----------   --------
<S>                                                <C>            <C>          <C>          <C>
Mid-Atlantic Region:
     Central Virginia Cluster:
          Charlottesville, VA                           WL          143,749      100.0%       143,749
          Danville, VA                                  WL          110,259       75.0         82,694
          Lynchburg, VA                                 WL          158,437      100.0        158,437
          Virginia RSA 4B2                              WL          105,996      100.0        105,996
          Virginia RSA 6B2                              WL           13,578      100.0         13,578
          Virginia RSA 7B2                              WL           50,873      100.0         50,873
          Virginia RSA 11B2                             WL           42,970      100.0         42,970
     Pennsylvania Cluster:
          Harrisburg, PA                                WL          499,994      100.0%       499,994
          York, PA                                      WL          450,097      100.0        450,097
          Lancaster, PA                                 WL          449,868      100.0        449,868
          Altoona, PA                                   WL          132,079      100.0        132,079
          Johnstown, PA                                 WL          238,787      100.0        238,787
          Pennsylvania RSA 3B1                          WL           37,517      100.0         37,517
          Pennsylvania RSA 4B1                          WL           29,860      100.0         29,860
          Pennsylvania RSA 8                            WL          406,342      100.0        406,342
          Pennsylvania RSA 10B1                         WL          142,030      100.0        142,030
          Pennsylvania RSA 11B1                         WL           21,776      100.0         21,776
          Pennsylvania RSA 12                           WL          117,171      100.0        117,171
          Scranton/Wilkes-Barre                         WL          659,594       78.9        520,947
          State College                                 WL          131,792      100.0        131,792
          Williamsport                                  WL          121,493      100.0        121,493
     Eastern Virginia Cluster:
          Norfolk-VA Beach-Portsmouth, VA              NWL        1,048,667      100.0%     1,048,667
          Newport News-Hampton, VA                     NWL         4 80,498      100.0        480,498
          Petersburg-Colonial Heights-Hopewell, VA     NWL          136,960       73.9        101,292
          Virginia RSA 8                               NWL           83,244      100.0         83,244
          Virginia RSA 9                               NWL           87,605      100.0         87,605
     Tri-Cities Cluster:
          Johnson City-Kingsport-Bristol, TN            WL          456,168      100.0%       456,168
          Tennessee RSA 4B1                             WL          128,224      100.0        128,224
          Tennessee RSA 8                               WL           16,452      100.0         16,452
          Virginia RSA 1                                WL          145,678      100.0        145,678
          Virginia RSA 2                                WL          136,224       71.3         97,073
                                                                  ----------                ---------
              Total Region                                        6,783,982                 6,542,951
                                                                  ----------                ---------

Midwest Region:
     Eastern Iowa Cluster:
          Cedar Rapids, IA                             WL           180,058      100.0%       180,058
          Waterloo-Cedar Falls, IA                     WL           146,645       88.5        129,842
          Iowa City, IA                                WL           101,682      100.0        101,682
          Dubuque, IA                                  WL            88,756       85.0         75,443
</TABLE>


                                       4

<PAGE>

<TABLE>
<CAPTION>




                                                     Wireline       Total      Ownership
                                                   Non-wireline   Population   Percentage    Net POPs
                                                   ------------   ----------   ----------   ---------
<S>                                                <C>            <C>          <C>          <C>
     Central Illinois Cluster:
          Peoria, IL                                    WL          344,465      100.0%       344,465
          Illinois RSA 5B1                              WL           11,562      100.0         11,562
     Northern Indiana Cluster:
          South Bend-Mishawaka, IN                      WL          303,760      100.0%       303,760
          Elkhart-Goshen, IN                            WL          167,253      100.0        167,253
          Indiana RSA 2                                 WL          171,812       75.0        128,859
     Northwestern Ohio Cluster:
          Toledo, OH                                    WL          792,921       85.1%       674,776
          Lima, OH                                      WL          221,480       85.1        188,479
          Ohio 1 Williams County                        WL          127,464      100.0        127,464
          Ohio RSA 2B1                                  WL          206,685       67.5        139,452
          Ohio RSA 5                                    WL          235,219       68.3        160,770
          Mansfield, OH                                 WL          128,300      100.0        128,300
          Ohio RSA 6                                    WL          450,273       82.5        371,359
     Eastern Ohio Cluster:
          Youngstown-Warren, OH                         WL          491,908       96.9%       476,477
          Sharon, PA                                    WL          122,370       96.9        118,531
          Ohio RSA 11                                   WL          112,518       100.0       112,518
          Pennsylvania RSA 1                            WL          197,624       80.0        158,099
          Pennsylvania RSA 6B1                          WL          227,798       57.1        130,141
     Ohio/Kentucky/WV Cluster
          Charleston, WV                                WL          256,504       85.0%       218,028
          Huntington-Ashland                            WL          317,680      100.0        317,680
          Ohio 7B2                                      WL          170,742      100.0        170,742
          Ohio 10B2                                     WL          111,865      100.0        111,865
          Parkersburg-Marietta                          WL          158,115      100.0        158,115
          Stuebenville-Weirton                          WL          139,291      100.0        139,291
          West Virginia 6                               WL          185,822      100.0        185,822
          Wheeling                                      WL          157,197      100.0        157,197
                                                                  ----------                ---------
              Total Region                                        6,327,769                 5,688,030
                                                                  ----------                ---------

Southeast Region:
     North Carolina Cluster:
          Fayetteville, NC                              WL          291,322       92.0%       268,083
          North Carolina RSA 5B2                        WL           35,403      100.0         35,403
          North Carolina RSA 6                          WL          157,106      100.0        157,106
          North Carolina RSA 11                         WL          223,100      100.0        223,100
          Greensboro-Winston Salem-High Point, NC       WL          983,707       61.8        608,249
          Hickory, NC                                   WL          237,102      100.0        237,102
          North Carolina RSA 2B2                        WL           74,023      100.0         74,023
          North Carolina RSA 15B1                       WL          193,617       67.0        129,685
          Raleigh-Durham, NC                            WL          827,723       92.0        761,694
          Burlington, NC                                WL          115,453       92.0        106,243
          North Carolina RSA 7 (B1 and B2)              WL          283,430      100.0        283,430
          North Carolina RSA 8                          WL          287,499      100.0        287,499
          North Carolina RSA 9                          WL          119,126      100.0        119,126
          North Carolina RSA 10                         WL          281,768      100.0        281,768
          North Carolina RSA 14                         WL          240,647      100.0        240,647
          Wilmington, NC                                WL          202,394      100.0        202,394
          Jacksonville, NC                              WL          145,653      100.0        145,653
          North Carolina RSA 12                         WL          128,210      100.0        128,210
          North Carolina RSA 13                         WL          239,785      100.0        239,785
</TABLE>


                                       5

<PAGE>

<TABLE>




                                                      Wireline      Total      Ownership
                                                   Non-wireline  Population    Percentage    Net POPs
                                                   ------------  ----------    ----------   ----------
<S>                                                <C>           <C>           <C>          <C>
     Charleston Cluster:
          Charleston-North Charleston, SC               WL         526,281        75.0%        394,763
          South Carolina RSA 4                          WL         212,463        50.0         106,232
          South Carolina RSA 5                          WL         243,529        50.0         121,765
          South Carolina RSA 6                          WL         195,183        50.0          97,592
          South Carolina RSA 8                          WL         173,664        50.0          86,832
     Greenville Cluster:
          Greenville-Spartanburg, SC                    WL         686,113        89.2%        611,807
          Anderson, SC                                  WL         155,628        89.2         138,773
          South Carolina RSA 1                          WL          61,928       100.0          61,928
          South Carolina RSA 2                          WL         227,027        50.0         113,514
     Florida Cluster:
          Ft. Walton Beach, FL                          WL         167,808       100.0%        167,808
          Florida RSA 10                                WL         112,525       100.0         112,525
          Panama City, FL                               WL         145,363       100.0         145,363
          Tallahassee, FL                               WL         278,223       100.0         278,223
          Florida RSA 8B1                               WL          46,924       100.0          46,924
                                                                -----------                 ----------
              Total Region                                       8,299,727                   7,013,249
                                                                -----------                 ----------

West Region:
     Central Texas Cluster:
          Killeen-Temple, TX                            WL         300,940        66.9%        201,389
          Waco, TX                                      WL         200,740        66.9         134,335
          Texas RSA 9B3                                 WL          29,663        70.0          20,762
          Texas RSA 10 (B2 and B4)                      WL         190,679        75.0         143,009
          Texas RSA 15B1                                WL          90,377       100.0          90,377
     East Texas Cluster:
          Tyler, TX                                     WL         162,194        60.0%         97,316
          Longview-Marshall, TX                         WL         169,960        60.0         101,976
          Texas RSA 7B2                                 WL          44,358        97.5          43,249
     New Mexico Cluster:
          New Mexico RSA 1                             NWL         257,276       100.0%        257,276
          New Mexico RSA 2                             NWL          23,796       100.0          23,796
          New Mexico RSA 4                             NWL         263,381       100.0         263,381
          New Mexico RSA 5                             NWL          59,226       100.0          59,226
     Las Vegas, NV                                      WL       1,018,224        72.2         735,220
                                                                -----------                 ----------
              Total Region                                       2,810,814                   2,171,312
                                                                -----------                 ----------
Total Controlled Markets                                        24,222,292                  21,415,540
                                                                ===========                 ==========
</TABLE>


                                       6

<PAGE>
<TABLE>
<CAPTION>


                                                             Total    Ownership
NON-CONTROLLED MARKETS*                                  Population  Percentage   Net POPs
-----------------------                                  ----------  ----------  ----------
<S>                                                      <C>         <C>         <C>
     New York, NY-Long Branch-New Brunswick, NJ          16,394,955     10.0%     1,639,496
     Chicago-Aurora/Elgin-Joliet-Kankakee, IL-Gary, IN    8,413,093      5.0        420,655
     Houston-Beaumont-Galveston/Texas City, TX            4,595,807      8.8        403,052
     Kansas City-Lawrence, KS                             1,617,578     19.0        307,340
     Orlando-Melbourne-Daytona Beach, FL                  2,405,918     24.6        591,615
     Richmond, VA**                                         802,859     24.6        197,423
     Omaha, NE                                              630,141     27.9        175,809
     Cleveland-Akron-Canton-Lorain, OH-Erie, PA           3,495,249      3.5        122,334
     Allentown-Bethlehem-Easton, PA                         714,126     20.8        148,324
     Ft. Wayne, IN                                          437,208     25.0        109,302
     Virginia RSA 10                                        233,327     33.0         76,998
     Cincinnati-Dayton-Columbus, OH                       3,680,472      1.2         44,166
     Illinois RSA 3**                                       203,087     18.1         36,835
     Illinois RSA 2B2                                        81,146     40.0         32,458
     Texas RSA 7B1                                          126,305     25.0         31,576
     Texas RSA 11B2**                                       107,932     28.0         30,221
     Indiana RSA 3                                          146,081     20.0         29,216
     Pennsylvania RSA 4B2                                    68,489     50.0         34,245
     Reading, PA                                            351,468     15.9         55,708
     St. Joseph, MO                                          98,084     20.0         19,617
     Florida RSA 9**                                         40,388     49.0         19,790
     Pennsylvania RSA 3B2                                    59,328     61.5         36,505
     Missouri RSA 4                                          69,073     12.5          8,634
     Iowa RSA 16                                            104,124      8.3          8,674
     Iowa RSA 5***                                          108,984      7.1          7,781
     Austin, TX                                             940,500      0.8          7,712
     Missouri RSA 9B1                                        34,669     19.6          6,795
     Missouri RSA 1                                          42,617     14.3          6,086
     Iowa RSA 14                                            107,028      5.6          5,951
     Iowa RSA 15                                             83,766      6.7          5,587
     Iowa RSA 1                                              62,300      3.9          2,430
     Iowa RSA 8                                              54,521      2.3          1,253
     Pennsylvania 5**                                        82,527     40.0         33,011
     Hartford/New Britain/Bristol, CT.                    1,112,760      0.1          1,652
     Bridgeport/Stamford/Norwalk, CT                        830,330      0.1          1,233
     New Haven/West Haven, CT                               791,830      0.1          1,176
     Springfield/Chicopee/Holyoke, MA                       591,653      0.1            879
     New London/Norwich, CT                                 248,221      0.1            369
     Connecticut #1                                         180,107      0.1            267
     Connecticut #2                                         104,079      0.1            155
     Massachusetts #1                                        70,685      0.1            105
                                                         ----------              ----------
     Total Non-Controlled Markets                        50,322,815               4,662,435
                                                         ----------              ----------
     Total Company Markets                               74,545,107              26,077,975
                                                         ==========              ==========
--------------------
<FN>
  *  All non-controlled markets are wireline systems.

 **  Represents non-controlled markets that are managed by the Company on a
     day-to-day basis.

***  The Company manages the Jones County, IA portion of the market only.
</FN>
</TABLE>

                                       7

<PAGE>

Business Strategy

     The Company  intends to maintain its strong revenue growth and  improvement
in operating  margins by continuing to add customers and increase minutes of use
per customer.  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:

         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;

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

         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;

         continuous  network  improvement to meet customer  expectations  and to
         provide  minutes  of use at  lower  costs  through  deployment  of CDMA
         digital service;

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

         targeted  product and service  deployment  and  pricing  strategies  to
         introduce  new  features and network  solutions to stimulate  increased
         usage, augment revenue per customer,  and improve customer satisfaction
         and retention.

     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  currently  offer their  products  and services in
markets that  represent  about 50% of the Company's  total POPs. The Company has
prepared for this 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
intends to further  capitalize on its incumbent  position as a leading  wireless
provider in its markets by increasing  revenues  through  customer  acquisition,
selling into its existing  customer  base based on  segmentation  data,  further
improving localized customer service and enhancing its financial  performance by
continuing to improve operating margins.

Recent Acquisitions

     During the second  quarter of 1997,  the Company and BellSouth  Corporation
("BellSouth")  combined their interests in two partnerships that own and control
cellular licenses and operations in Richmond,  Virginia,  and Orlando,  Florida.
The resulting partnership is owned approximately 75% by BellSouth and 25% by the
Company,  with the Company assuming management  responsibilities of the cellular
operations  in  Richmond.  In  connection  with this  transaction,  the  Company
contributed $80 million to the resulting partnership.  Also in 1997, the Company
acquired minority interests in 15 of its controlled markets, which increased its
ownership interest to 100% in 10 of those markets.

                                       8

<PAGE>

     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 1,600 cell sites in service as of December  31, 1997 and  approximately
400  of  the  Company's   employees  are  engaged  in   engineering  or  network
maintenance.  In addition,  to ensure reliable network performance,  the Company
monitors each cellular market's network twenty-four hours a day from its Chicago
network  operations  center.  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 meet any capacity  requirements  through frequency planning,  network
optimization  and the  deployment  of  additional  network  infrastructure.  The
Company  plans  to  accelerate  its  transition  to  digital   technology  on  a
market-by-market  basis to provide  more  minutes of use to customers at a lower
cost per minute.

     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.  CDMA provides minutes of
use at a lower cost than  analog  technology,  improves  call  quality,  permits
longer  battery life and improves  customer call privacy.  In 1997,  the Company
initiated  installation  of digital  technology  in its greater  Raleigh,  North
Carolina,  service  area.  The Company  expects to begin  commercially  offering
digital  service to its customers in Raleigh in the second  quarter of 1998. The
Company  also  plans to  initiate  installation  of digital  technology  in five
additional  markets in 1998.  By the year  2000,  the  Company  expects to offer
digital service in markets that represent more than 80% of its total POPs.

     The Company is also  migrating  its  networks  to an  Advanced  Intelligent
Network architecture. This technology 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 ANSI
41, the standard for inter-system operations.  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.

                                       9
<PAGE>

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, 1997.

                      Distribution Channel                              Number
                      --------------------                              ------
                      Dealer Locations                                  1,562
                      Company Retail Stores                               147
                      Company Retail Kiosks                               306
                      Direct Sales Representatives                        280

     The Company  continues  to expand and develop  its retail  stores  channel.
Dealer and direct sales channels  remain  important  components of the Company's
growth  strategy,  with the primary  objective for all channels being to produce
the best  combination of lower customer  acquisition  costs and higher retention
rates.

     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
reinforces  customer  retention and provides  opportunities  to improve  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
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.  Many retail locations  provide vehicle
installation services and while-you-wait cellular telephone  troubleshooting and
repair.

     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  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.

     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.

                                       10
<PAGE>

     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 nearly 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 make targeted contact with customers that are
designed to improve  customer  retention  levels by  anticipating  questions and
problems  before they arise.  An example of a typical  TeleCare call would be to
recommend a more cost-effective,  and potentially 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.
In the past the Company has used these calls to offer  additional  products  and
services to the customer. This marketing opportunity may, in some circumstances,
be  restricted  by  the  FCC's  recently  released  order  concerning   Customer
Proprietary Network Information.

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 1.88% and
1.86% for the year ended December 31, 1997 and 1996,  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.

     Five twenty-four hour 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 customers via abbreviated
dialing  from  customers  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

                                       11
<PAGE>

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 stimulate  additional usage,  increase penetration and
improve retention rates 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  customer's  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.

     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 so that, 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  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 has also established  roaming  agreements with
certain PCS carriers to allow their customers to roam on the Company's network.

     The Company offers  competitive  residential long distance and paging rates
in all of its markets.

                                       12
<PAGE>

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.  During the third quarter of 1997, the Company  introduced a
new service offering called the Bundled Value Pack whereby  customers may choose
a combination  of cellular and long  distance,  cellular and paging or all three
services and receive the selected services all on one bill.

Integration of Multiple Telecommunications Services

     In 1996, the Company began reselling  residential  long distance and paging
services in the states in which the Company provides wireless service, using its
existing distribution channels and brand name. The Company markets its cellular,
residential  long distance and paging  services as an integrated  communications
solution on a single bill.

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,  regions or total company).  In 1997, 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.

                                       13

<PAGE>

     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.

     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 Company  anticipates that markets  representing more
than 80% of its total POPs will be covered by digital service by the year 2000.

                                       14

<PAGE>

     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 meet any capacity  requirements  through frequency planning,  network
optimization and the deployment of network infrastructure.  The Company plans to
accelerate its 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   currently   compete   primarily   against  the  other
facilities-based cellular carrier in each MSA and RSA market, and PCS in certain
markets.  Companies  with PCS  licenses  offer their  products  and  services in
markets  that  represent  about 50% of the  Company's  total POPs.  PCS services
generally  consist of wireless  two-way  telecommunications  services for voice,
data and other transmissions  employing digital technology.  PCS operates in the
1850 to 1900 MHz band. The Company also faces  competition from ESMR systems and
resellers.  ESMR is a wireless  communications  service  supplied by  converting
analog SMR services into an integrated, digital transmission system.

     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 available PCS licenses,  three provide authority to utilize 30 MHz of
PCS spectrum,  one on a BTA basis,  and the remaining three 10 MHz, all on a BTA
basis.

     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 CMRS)
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).

     The Company has prepared for this competitive  environment by enhancing its
networks,  expanding its service  territory and offering new features,  products
and  services to its  customers.  In  addition,  the Company  intends to further
capitalize on its position as an incumbent provider 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.  Because the Company  operates in medium to small
markets, 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. The Company has established  roaming agreements with certain PCS carriers
to allow  their  customers  to roam on the  Company's  network and is capable of
providing bulk lines of service for resale to PCS licensees.

     Nationally,  25 PCS licensees have launched  commercial  service in markets
representing  185  million  total  POPs,  or  approximately   73%  of  the  U.S.
population,  according to industry statistics.  PCS licensees competing with the
Company, however, have launched commercial service in markets representing about
50% of the  Company's  total POPs.  Although  the rate of new PCS  launches  has

                                       15
<PAGE>

slowed  nationally  and in the Company's  markets since early 1997,  the Company
expects PCS licensees in its markets to improve their competitiveness over time.
Many PCS licensees  competing  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 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 currently is taking steps to ensure full compliance with
the FCC's recently  announced but as yet unpublished  rules  regarding  Customer
Proprietary Network Information.

                                       16
<PAGE>

     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 1997,  the Company
filed for renewal of twenty expiring licenses  (Altoona,  PA; Cedar Rapids,  IA;
Charlottesville,   VA;  Danville,  VA;  Fort  Walton  Beach,  FL;  Hickory,  NC;
Huntington-Ashland,     WV/KY/OH;     Jacksonville,     NC;    Johnstown,    PA;
Longview-Marshall,  TX;  Lynchburg,  VA;  Mansfield,  OH; Panama City, FL; State
College, PA;  Steubenville-Weirton,  OH/WV; Waco, TX;  Waterloo-Cedar Falls, IA;
Wheeling,  WV/OH; Wilmington,  NC; Tyler, TX.) All twenty 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.


                                       17

<PAGE>

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.

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. Notwithstanding such preemption, a state had until August 10,
1994 to petition the FCC for authority to continue  regulating the rates for any
commercial  mobile service.  Eight states filed petitions to continue their rate
regulation authority: Arizona, California,  Connecticut,  Hawaii, Louisiana, New
York,  Ohio and Wyoming.  In May 1995,  the FCC denied all eight  petitions  and
precluded those states from  regulating the rates for commercial  mobile service
providers,  including cellular operators.  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 15 states of operation
still  maintain  nominal  oversight   jurisdiction,   primarily   focusing  upon
resolution of customer complaints.  In such states (primarily  Kentucky,  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,  1997 the  Company  had  approximately  4,400  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 208,000 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, 1997, 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.

                                       18

<PAGE>

Item 3.  Legal Proceedings.

     In August 1995,  four  independent  dealers filed a lawsuit in the Court of
Common Pleas of Greenville  County,  South  Carolina,  alleging that the Company
breached its dealer  agreements  with the plaintiffs and engaged in unfair trade
practices.  In particular,  the plaintiffs alleged that the Company discontinued
the practice of allowing the  plaintiffs to sell cellular  telephones out of the
Company's  inventory,  and instead required the plaintiffs to maintain their own
inventories and sold cellular  telephones to the public at prices lower than the
prices that the Company charged to the plaintiffs.  On November 21, 1997, a jury
awarded the plaintiffs $1.9 million in  compensatory  damages and $10 million in
punitive  damages.  The  Company  has  filed an appeal  with the South  Carolina
Supreme  Court  seeking to reverse the  decision.  The Company  believes that it
acted in accordance  with the dealer  agreements and that the decision is wholly
unwarranted by the facts. The Company does not believe that this proceeding will
have a  material  adverse  effect on the  results  of  operations  or  financial
position of the Company.

     In March 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.  The Company
believes the lawsuit to be without merit.

     In May 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 the lawsuit to be without merit.

     In March 1998, a separate lawsuit similar to the August 1995 dealer lawsuit
was brought in the Court of Common Pleas of Greenville  County,  South Carolina,
by an independent dealer alleging that the Company breached its dealer agreement
with the plaintiff and engaged in unfair trade  practices by  discontinuing  the
practice  of allowing  the  plaintiff  to sell  cellular  telephones  out of the
Company's  inventory and by selling cellular  telephones to the public at prices
lower than the prices that the  Company  charged to the  plaintiff.  The Company
believes  the  lawsuit  to  be  without  merit  and  intends  to  defend  itself
vigorously.  The  Company  does not  believe  that this  proceeding  will have a
material  adverse  effect on the results of operations or financial  position of
the Company.

     In March 1998,  the Company and all of its current  directors were named as
defendants  in a  complaint  filed in the  Court  of  Chancery  in the  State of
Delaware.  The complaint  was brought by a purported  shareowner of the Company,
individually  and  purportedly  as  a  class  action  on  behalf  of  all  other
shareowners of the Company.  The complaint alleges breaches of fiduciary duty by
the Company's  directors in  connection  with the Merger and seeks to enjoin the
consummation of the Merger and other unspecified damages. The defendants believe
the  complaint  to be without  merit and the Company  does not believe that this
proceeding  will have a material  adverse effect on the results of operations or
financial position of the Company.

                                       19

<PAGE>

     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, 1997.

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    57  President and Chief Executive Officer and Director
Kevin L. Beebe      39  Executive Vice President-Operations
Michael J. Small    40  Executive Vice President and Chief Financial Officer
Susan L. Amato      39  Senior Vice President-Marketing
Gary L. Burge       44  Senior Vice President-Engineering and Network Operations
Debra L. Ferrari    40  Senior Vice President-Human Resources
Kevin C. Gallagher  50  Senior Vice President, General Counsel and Secretary
Jeffery R. Gardner  38  Senior Vice President-Finance

     Mr. Foster was elected President of the Company in March 1993 and President
and Chief Executive  Officer of the Company in February 1996. He has served as a
director of the Company since 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.

     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.


                                       20

<PAGE>

     Ms.  Amato was elected  Senior Vice  President-Marketing  of the Company on
July 14, 1997. She had served as Senior Vice  President-Engineering  and Network
Operations  of the Company  since  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-Engineering  and  Network
Operations  of the  Company  on July 14,  1997.  He had  served as  Senior  Vice
President-Finance  of the Company since 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.

     Ms.  Ferrari  was  elected  Senior Vice  President-Human  Resources  of the
Company on November 1, 1997. She had served as Vice President - Human  Resources
of the Company since  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.

     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.

     Mr.  Gardner was elected  Senior Vice  President-Finance  of the Company on
July 14,  1997.  He had served as President  of the  Mid-Atlantic  region of the
Company since February 1994. Prior to the spinoff, Mr. Gardner had been employed
by Sprint or its subsidiaries and Centel Corporation, a predecessor corporation,
or its subsidiaries for nearly 11 years. He joined the cellular  organization in
March 1988 as an Operations Accounting Manager, became Director of Accounting in
November 1990, and General Manager of the Las Vegas market in November 1992.


                                       21

<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  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 1997
and 1996.


           1996       High     Low          1997          High      Low
    --------------  -------  -------    --------------  --------  --------
    First Quarter    27       21 1/2    First Quarter    24 3/8    16 7/8
    Second Quarter   25 1/8   22 1/8    Second Quarter   19 5/8    13 7/8
    Third Quarter    24 3/4   22        Third Quarter    22        16 5/8
    Fourth Quarter   25 7/8   22 1/4    Fourth Quarter   22 3/8    18 5/8

     On March 25, 1998, there were  approximately  61,523 registered  holders 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-hundredth 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");  provided,  however,  that a person  who  acquires
beneficial  ownership  of 15% or more of the  outstanding  shares of the  Common
Stock  solely as a result of  repurchases  by the Company of the Common Stock is
not  considered  an  Acquiring  Person  under the Rights Plan unless such person
purchases or otherwise becomes the beneficial owner of an additional 1% of the

                                       22

<PAGE>

then outstanding shares of the Common Stock. Following such an announcement, or,
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.

     Effective  March 16, 1998,  the  Company's  Board of Directors  amended the
Rights Plan to (i) exclude from the definition of Acquiring  Person,  ALLTEL and
its  affiliates;  provided that ALLTEL or any of its affiliates does not acquire
beneficial  ownership  of 15% or more of the  outstanding  shares of the  Common
Stock other than pursuant to the Merger  Agreement or the Stock Option Agreement
and (ii) amend the expiration date of the Rights to the earlier of March 5, 2006
and the time immediately prior to the effective time of the Merger.

     The Rights Plan is not intended to deter all takeover bids for the Company.
To the extent an acquirer is  discouraged  by the Rights Plan from  acquiring an
equity  position in the Company,  shareowners  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 descriptions of the Rights and the Rights Plan do not
purport to be complete and are  qualified in their  entirety by reference to the
Rights  Agreement  dated as of March 5, 1996  between the  Company and  Chemical
Bank, as Rights Agent,  and the First Amendment to Rights  Agreement dated as of
March 16, 1998 to Rights Agreement dated as of March 5, 1996 between the Company
and The Chase  Manhattan  Bank,  as successor in interest to Chemical  Bank,  as
Rights Agent,  copies of which are  incorporated by reference herein as Exhibits
4.4 and 4.9, respectively, to this Report.

Recent Sales of Unregistered Securities

     On March 16, 1998, the Company  granted to ALLTEL the Option to purchase up
to 19.9% of the  number of shares  of the  Company's  Common  Stock  issued  and
outstanding  immediately  prior  to  the  grant  of  the  Option  (approximately
24,140,553  shares)  at an  exercise  price of  $33.90  per  share  (subject  to
adjustment in certain  circumstances).  The Option is exercisable by ALLTEL only
in the event that ALLTEL becomes  entitled to receive the  Termination Fee under

                                       23

<PAGE>

the Merger Agreement.  Concurrently with any exercise of the Option, the Company
has the option to repurchase  from ALLTEL,  at a price of $35.90 per share,  any
shares  issued upon the  exercise of the  Option.  See  "Business-General-Merger
Agreement with ALLTEL Corporation."

     In  granting  the  Option,   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
ALLTEL contained in the Stock Option Agreement,  a copy of which is incorporated
by reference herein as Exhibit 2.5 to this Report.

     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  face  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 herein as Exhibit 2.2 to this Report.

Item 6.  Selected Consolidated Financial Data

<TABLE>
<CAPTION>

                                                        For The Year Ended and as of December 31,
                            ---------------------------------------------------------------------------------------------------
                               1997        1996 (1)        1995        1994        1993         1992        1991        1990
                            -----------   ----------   ----------- ----------- -----------  ----------- ----------- -----------
(in thousands,                                                                                          (Unaudited) (Unaudited)
<S>                         <C>           <C>          <C>         <C>         <C>          <C>         <C>         <C>
Total operating revenues     $1,347,172   $1,095,872   $  834,415  $  626,475   $  410,480  $  280,119   $  213,515  $  161,915

Net income (loss)            $   81,495   $   59,519   $   (1,695) $  (19,757)  $  (51,484) $  (65,522)  $  (64,277) $  (74,961)

Earnings (loss) per share(2) $     0.67   $     0.50   $    (0.01) $    (0.17)  $    (0.45) $    (0.58)  $    (0.58) $    (0.68)

Total assets                 $2,941,924   $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)           $1,825,347   $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, earnings (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
360 common stock to three shares of Sprint common stock.

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

                                       24
<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  forth  herein  under
"Forward-Looking Statements."

Results of Operations

Customer Growth Rate

     The Company's number of cellular  customers  increased to 2,583,000 in 1997
from  2,156,000 in 1996 and 1,502,000 in 1995, an increase of 19.8% and 43.6% in
1997 and 1996,  respectively.  In 1997 and 1996,  the Company  added 443,000 and
470,000 customers,  respectively,  through internal growth. In 1997, the Company
divested 16,000 customers through the sale of one of its consolidated  entities.
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 10.7% at December 31, 1997,
compared with 8.9% at December 31, 1996.  Annual  penetration  improvement  from
internal growth was 1.8% in 1997 and 2.1% in 1996.  Customer churn,  the average
monthly rate of customers who discontinue  service,  was 1.88%,  1.86% and 1.81%
for the years ended December 31, 1997, 1996 and 1995, respectively.

     Historically,  the Company and the  industry  in general  have  experienced
significant  customer  growth during the fourth  quarter.  The Company  attained
30.0%  and 35.7% of its  annual  internal  customer  growth in the 1997 and 1996
fourth  quarters,  respectively.  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  expenses  associated  with the cost to  acquire  new
cellular customers.  This is a result of the significant  customer growth, which
causes a deterioration in fourth quarter operating margins. The Company believes
that more typical operating margins are experienced in subsequent  periods which
reflect the revenue benefits of its significantly increased customer base.

Service Revenues

     Service  revenues  primarily  consist of charges for airtime,  access fees,
roaming fees and other services.  Service  revenues  increased in 1997 and 1996,
principally  from  growth  in  the  number  of  cellular   customers.   Expanded
distribution, increased promotional activity, and improved consumer awareness of
wireless  communications are key factors  contributing to the Company's customer
growth.  The  industrywide  trend toward lower  negotiated  roaming  rates among
carriers and  generally  lower revenue per customer  have  partially  offset the
revenue  growth  resulting  from  the  Company's  increased  customer  base.  In
addition,  acquisitions  completed  in the first  and  fourth  quarters  of 1996
contributed to increases in service revenues of  approximately  $83.3 million in
1997 and $46.8 million in 1996.

     Consistent   with  the  industry,   the  Company  has  achieved   increased
penetration  in the  consumer  market  fueled by  declining  cellular  telephone
equipment prices and increased promotional activities, an increased awareness of
wireless  communications,  widespread distribution channels in consumer-oriented
retail locations and expanded network coverage and capacity. The Company expects
this trend to  continue.  Service  revenue  per average  customer  per month was
$45.44 in 1997,  $49.39 in 1996 and $53.01 in 1995. New customers  generally use
less airtime than existing

                                       25

<PAGE>

customers,  causing  the  average  service  revenue  per  customer  per month to
decline.  Also impacting the decline in average service revenue per customer per
month was an increase in promotional activities in 1997. Promotional activities,
which  include  free  minutes  and free  access,  increased  to 4.0% of  service
revenues for the year ended December 31, 1997, from 2.2% of service revenues for
the year ended  December  31,  1996.  The Company  expects  service  revenue per
average  customer  per  month to  continue  to  decline,  at a slower  rate,  as
penetration rates continue to increase.

     Roaming  airtime minutes  increased  during 1997 and 1996 compared with the
corresponding  prior  year,  while  roaming  revenues  as a percent  of  service
revenues have declined.  The Company expects  roaming rates between  carriers to
continue to decline,  which may reduce  revenues  derived from cellular  service
users who roam into the Company's  systems.  The Company expects roaming airtime
minutes to increase as reduced  roaming rates between  carriers  ultimately  are
passed on to customers.

     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 services and products;
and acquiring additional cellular  communications  systems to further strengthen
the  Company's  existing  regional  market  clusters.  The  growth  rate  of new
customers will decline as the Company's customer base grows. Revenue growth also
will be impacted by the  Company's  long  distance  and paging  businesses.  The
Company currently  markets  residential long distance and paging services in the
states in which the Company provides wireless service.

Cost of Service

     Excluding the impact of roaming activities and expenses associated with the
long  distance  business,  cost of service as a percent of service  revenues was
7.4% in 1997, 8.1% in 1996 and 8.6% in 1995.  Economies of scale, the effects of
renegotiated  long distance  contracts in 1996 and 1997 with Sprint  Corporation
("Sprint"),  and reduced interconnection rates paid to local telephone companies
were key factors favorably impacting the declining trend in cost of service as a
percent of service  revenues.  Long  distance  telecommunications  and  operator
services are provided to the Company by Sprint based on terms and  conditions of
contracts governing such charges.

     Roaming margins associated with the Company's  customers roaming into other
carriers' markets declined in 1997 and 1996, resulting in an increase in cost of
service as a percent of 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 during the first quarter
of 1997. As part of a pricing simplification effort, the Company implemented new
roaming rate plans in early 1997 that  contributed  to the  reduction in roaming
margins.  The Company believes that the industrywide  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 customer  telephone numbers,  commonly referred to in
the  industry  as cloning  fraud,  resulted  in  unbillable  fraudulent  roaming
activities that  approximated  1.3%, 1.5% and 1.0% of service  revenues in 1997,
1996 and 1995,  respectively.  In 1996,  the increase in  unbillable  fraudulent
roaming  activities  was the result of a  significant  increase  in the level of
fraud activity in several markets during the fourth quarter of 1996. The Company
responded  quickly by  implementing  a combination  of systems and technology to
prevent and manage the problem. Unbillable fraudulent roaming activities for the
three months ended December 31, 1997, were down to .25% of service revenues. The
Company  believes  it  will  continue  to  be  impacted  by  fraudulent  roaming
activities in the future and continues to proactively  invest in new systems and
technologies to mitigate the occurrence of cellular fraud.

Cost to Acquire New Customers

    Cost to acquire new customers  represents sales,  marketing and advertising
costs and losses on equipment sales for each new cellular  customer  added.  The
cost to acquire a new cellular  customer  was $293,  $302 and $280 for the years
ended December 31, 1997, 1996 and 1995, respectively.

                                       26
<PAGE>

     In 1997,  advertising,  promotional and other marketing expenses associated
with the promotion of the Company's  brand name  decreased by $11.5 million from
1996. This decrease was a result of additional costs in 1996 associated with the
introduction of the Company's new brand name.  Also  contributing to the decline
in cost to  acquire  was a  continued  reduction  in the  wholesale  prices  for
cellular  phones and the transition of new customer sales from national  dealers
to Company-owned retail outlets.

     The cost to acquire a new cellular customer increased in 1996 compared with
1995 as a result of expenses associated with the new brand name.

     Advertising,  promotional and other marketing expenses  associated with the
introduction and promotion of the Company's  residential long distance  business
increased by $5.2 million in 1997 compared with 1996.

     To improve sales and reduce costs  associated with acquiring new customers,
the  Company  continues  to  focus  on  expanding  its  lower-cost  distribution
channels, including Company retail outlets and kiosks located in shopping malls.
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,  the Company has plans to increase
its own retail distribution  channels. The Company has experienced little change
in churn  levels,  reflecting  the  Company's  ability  to  manage  the costs of
maintaining  and growing its customer  base. The Company is unable to anticipate
the  impact of the cost to add new  customers  as  savings  associated  with the
transition to the use of internal  sales  channels level off, the growth rate of
new  customers   declines  and  competition  for  local  and  national   dealers
intensifies.

Other Operations Expense

     Other operations expense as a percent of service revenues was 5.4% in 1997,
5.3% in 1996 and 5.1% in 1995. In 1997, maintenance salaries and wages increased
over 1996 as a result of an  increase  in the number of  associates.  Switch and
cell site maintenance  expense increased in 1997 compared with the prior year as
a result of an increase in the number of cell sites. These increases, along with
the effects of an overall  increase in the level of customer debt  delinquencies
nationwide,  more than offset  realized  economies of scale in 1997,  causing an
increase in other operations expense as a percent of service revenues.  Bad debt
expense as a percent of service revenues  increased to 2.5% in 1997 from 2.3% in
1996 and 2.1% in 1995.  This trend is  attributable  to the Company's  continued
penetration into the consumer market, which is becoming a greater percent of the
Company's customer base. In 1996,  nonrecurring  charges and an overall increase
in the level of customer debt delinquencies  offset realized economies of scale,
accounting for the increase in other operations  expense as a percent of service
revenues.  In 1996, the Company incurred  approximately  $700,000 for 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.

General, Administrative and Other Expenses

     General, administrative and other expenses as a percent of service revenues
were 23.9% in 1997,  25.0% in 1996 and 27.2% in 1995.  The decreases in 1997 and
1996 were due to economies of scale realized as a result of customer growth.  In
connection with the Company's spinoff from Sprint,  the Company began to perform
certain  functions  previously  provided by Sprint.  See  "Spinoff"  for further
discussion.  The undertaking of such functions did not have a significant impact
on the Company's operating expenses. The Company anticipates an ongoing trend of
decreased  general,  administrative  and other  expenses as a percent of service
revenues.

Depreciation and Amortization

     Acquisitions of cellular communications systems generate intangible assets,
such as Federal  Communications  Commission  ("FCC") license costs and goodwill,
which are amortized over 40 years.  Amortization  expense totaled $29.6 million,
$22.8  million  and $19.2  million  in 1997,  1996 and 1995,  respectively.  The
increase in  amortization  expense in 1997  compared with 1996 was the result of
additional  amortization  expense incurred by the Company in connection with the

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<PAGE>

acquisition  of  cellular  properties  during  the fourth  quarter of 1996.  The
Company  periodically  assesses the ongoing value of these intangible assets and
expects the carrying amounts to be fully recoverable.

     Depreciation expense totaled $155.1 million, $124 million and $95.5 million
in 1997,  1996 and 1995,  respectively.  Depreciation  as a percent  of  service
revenues was 12.0%,  11.8% and 12.1% in 1997, 1996 and 1995,  respectively.  The
increases in depreciation expense primarily were the result of increased capital
investment in the Company's cellular network.  In 1997,  economies of scale were
mitigated  as a result of updating the network of cellular  properties  acquired
during the fourth quarter of 1996, causing  depreciation expense as a percent of
service  revenues to increase.  The Company  expects  depreciation  expense as a
percent of service  revenues to decline as  economies  of scale are  realized as
more  customers  are added to the  existing  network.  The Company  believes the
service lives on its existing analog technology are appropriate.

     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 its networks have sufficient  capacity to handle
its expected  customer growth rate in the near term. In the future,  the Company
intends to meet any capacity  requirements  through frequency planning,  network
optimization  and the  deployment  of  additional  network  infrastructure.  The
Company  plans  to  accelerate  its  transition  to  digital   technology  on  a
market-by-market  basis to provide  more  minutes of use to customers at a lower
cost per minute.  The Company believes this approach will stimulate usage,  help
mitigate  declining service revenue per average customer per month, and increase
service revenue growth going forward. In August 1996, the Company began offering
Code Division Multiple Access ("CDMA") digital technology in Las Vegas,  Nevada.
In 1997, the Company initiated installation of digital technology in its greater
Raleigh, North Carolina, service area. The Company expects to begin commercially
offering  digital  service to its customers in Raleigh in the second  quarter of
1998. The Company also plans to initiate  installation of digital  technology in
five additional markets in 1998.

Interest Expense

     Interest  expense  increased  in 1997  compared  with  1996  because  of an
increase in borrowing  levels.  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 Company's spinoff from Sprint.
See "Liquidity and Capital Resources" for additional  information  regarding the
Company's  recapitalization.  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 2.0% and a 30-day  commercial  paper rate. The average
interest  rate was 7.2% in  1997,  7.1% in 1996 and 8.9% in 1995.  See Note 6 of
Notes to  Consolidated  Financial  Statements  for a discussion of the Company's
current 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 1997,  1996 and 1995 were
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 1997, 1996 and 1995
primarily  as a result  of  increased  income  generated  by  minority  cellular
investments  in markets that  continue to mature.  Income  generated by minority
cellular  investments may not continue to grow at the pace  experienced in prior
years  because of  increased  competition  in the more  highly  populated  urban
markets  and  the  Company's   strategy  of  exchanging  its  minority  cellular
investments for increased ownership interests in its controlled markets or other
markets in which it could obtain control.

     In addition,  various lawsuits 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 outcomes of such legal proceedings have not

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<PAGE>

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  such  litigation,  there  can be no  assurance  that the
outcome  of these  lawsuits  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 1997, 1996 and 1995 was $73.8 million,
$57.8  million  and  $25.4  million,  respectively.  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,  1997,  the Company had  recorded  deferred  income tax
assets of $87.5 million, net of a $19.6 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 of these deferred
income tax assets.

Competition

     Cellular  carriers  compete  primarily  against the other  facilities-based
cellular carrier in each market. However, companies with Personal Communications
Services  ("PCS")  licenses have begun to offer products and services in several
of the Company's  service areas.  The Company has prepared for this  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.  During the third  quarter of 1997,  the Company  introduced a new
service offering called the Bundled Value Pack,  whereby  customers may choose a
combination  of cellular and long  distance,  cellular and paging,  or all three
services and receive the selected services all on one bill. The Company believes
it will  benefit  from its  position as an  incumbent  provider in the  cellular
industry with a high quality network, extensive geographic footprint that is not
capacity constrained,  strong distribution  channels,  superior customer service
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 competition.

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 ("spinoff").  In
the FCC auction of wireless 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.

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  ("1996
Indenture")  and  approximately  $500  million of initial  borrowings  under the
Credit Facility ("Credit  Facility").  In addition,  a  recapitalization  of the
Company's  common stock was effected  pursuant to which the Company split the 10

                                       29
<PAGE>

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.

     In 1997,  the Company filed a shelf  registration  with the  Securities and
Exchange  Commission,  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.

     In the first quarter of 1997,  the Company issued $200 million in aggregate
principal  amount  of  its  7.6%  Senior  Notes  due  2009  under  an  indenture
("Indenture").  The net proceeds  received by the Company from the sale of these
Debt  Securities  were  used  to  repay a  portion  of the  Company's  long-term
indebtedness outstanding under the Credit Facility.

     The Credit Facility has general and financial  covenants that place certain
restrictions on the Company.  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. See "Cash Flows - Investing  Activities" for information  regarding the
ICN Acquisition.  On December 5, 1997, the Company entered into a second amended
and  restated  Credit  Facility  which  relaxed  the   restrictions  on  certain
covenants,  while extending the term of the Credit Facility to December 5, 2002.
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  may limit the  aggregate  amount of  additional
borrowings  that can be  incurred by the  Company.  At December  31,  1997,  the
Company had $600 million of borrowings outstanding under the Credit Facility and
additional  borrowing  capacity  of $308  million  under the terms of the Credit
Facility.

     The 1996  Indenture  has general  and  financial  covenants  similar to the
Credit Facility.  However, these covenants,  except for the limitation on liens,
have been suspended while the Company's  public debt is rated  investment  grade
(BBB-) by Standard & Poor's and Duff & Phelps.

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 in 1997 and 1996 reflect  improved  operating
results.   During  1996,  operating  cash  flows  were  impacted  by  additional
advertising and 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.

                                       30


<PAGE>

Cash Flows - Investing Activities

     Capital expenditures were $281.3 million, $300.1 million and $323.7 million
in 1997, 1996 and 1995,  respectively.  The decrease in capital  expenditures in
1997 and 1996,  compared with the corresponding  prior year, was a result of the
Company's maturing cellular network.  Other factors contributing to the decrease
in capital  expenditures in 1997 were the  efficiencies  created through network
design and implementation, improved pricing and concessions from vendors and the
postponement  of the  construction  of certain  cell sites until 1998 because of
local community zoning issues.  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. In 1997, the Company initiated  installation of
CDMA digital  technology in the greater Raleigh,  North Carolina,  service area.
The  Company  expects  to begin  commercially  offering  digital  service to its
customers  in Raleigh in the second  quarter of 1998.  The Company also plans to
initiate installation of digital technology in five additional markets in 1998.

     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. To achieve  cellular  system  compatibility
and standard customer functionality, it was necessary for the Company to replace
the acquired  cell site  equipment and  switches.  The Company  began  replacing
equipment in 1996 and completed the switch-out in 1997.

     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  continue  pursuing  opportunities  to exchange  some or all of its  minority
investments in cellular communications systems for increased ownership interests
in its controlled markets or for ownership  interests in new markets in which it
could obtain control.  See Note 3 of Notes to Consolidated  Financial Statements
for a discussion of acquisitions and divestitures.

Cash Flows - Financing Activities

     In 1995,  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 1996  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 that have been  suspended  while the
Company's  public debt is rated investment grade (BBB-) by Standard & Poor's and
Duff & Phelps.

     In 1996,  the Company  repurchased  shares of its common  stock on the open
market for  purposes of  distributing  shares under the Sprint  Employees  Stock
Purchase  Plan,  which  terminated on June 30, 1996, and issuing common stock in
conjunction  with stock option  exercises.  See Note 8 of Notes to  Consolidated
Financial  Statements  for  information  regarding  the Sprint  Employees  Stock
Purchase Plan.

     In 1997, the Company's  Board of Directors  authorized the repurchase of up
to 3 million  shares of the  Company's  common  stock  through May 1, 1998.  The
shares  may be  purchased  from time to time on the open  market  at  prevailing
prices,  subject to market conditions.  As of December 31, 1997, the Company had
purchased  approximately  2.1 million shares of the Company's common stock at an
average price of $17 per share. The

                                       31
<PAGE>

purchase of treasury  shares did not have a significant  effect on the Company's
earnings per share calculation.

     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 $100
million under certain debt covenants.

Liquidity

     In August 1995,  four  independent  dealers filed a lawsuit in the Court of
Common Pleas of Greenville  County,  South  Carolina,  alleging that the Company
breached its dealer  agreements  with the plaintiffs and engaged in unfair trade
practices.  In particular,  the plaintiffs alleged that the Company discontinued
the practice of allowing the  plaintiffs to sell cellular  telephones out of the
Company's  inventory,  and instead required the plaintiffs to maintain their own
inventories and sold cellular  telephones to the public at prices lower than the
prices that the Company charged to the plaintiffs.  On November 21, 1997, a jury
awarded the plaintiffs $1.9 million in  compensatory  damages and $10 million in
punitive  damages.  The  Company  has  filed an appeal  with the South  Carolina
Supreme  Court  seeking to reverse the  decision.  The Company  believes that it
acted in accordance  with the dealer  agreements and that the decision is wholly
unwarranted by the facts.

     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.

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 have been used to meet the
Company's capital requirements.

     The Company expects to make capital expenditures,  excluding  acquisitions,
of  approximately  $270  million in 1998.  The Company  expects  cash flows from
operations to substantially fund its capital  expenditure  program. In addition,
the Company can utilize  existing cash  resources,  borrowings  under the Credit
Facility and the issuance of Debt Securities to meet these funding requirements.
These  expenditures will be made to expand and enhance existing cellular systems
and to deploy digital technology.

     The Company expects that it may need to raise  additional  funds to finance
acquisition activities.  Such acquisition activities may include acquisitions of
new  cellular  communications  systems or  additional  investments  in  cellular
communications  systems  in which the  Company  already  holds an  interest.  An
agreement  that was designed to preserve the  tax-free  status of the  Company's
spinoff from Sprint,  and which  imposed  certain  limitations  associated  with
equity transactions,  expired on March 7, 1998.  Accordingly,  the Company is no
longer  restricted as to the aggregate amount of additional common stock that it
can issue.

     The Company  believes 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  sufficient  capital  to  meet  its  projected  funding   requirements  for
operations in 1998 and thereafter. The Company currently does not intend to seek
funding from other sources during 1998. 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 from  operations  will be adequate
to meet the Company's projected funding requirements.

                                       32

<PAGE>

General Hedging Policies

     The Company utilizes  certain  derivative  financial  instruments to manage
exposure to interest rate risk,  but not for trading  purposes.  During 1997 and
1996, the use 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, 1997 and 1996,
any potential loss or exposure  related to interest rate swap agreements was not
material to overall operations, financial condition and liquidity.

     The  Company's  earnings  are  affected by changes in  interest  rates as a
result of its variable rate Credit Facility borrowings.  However, as a result of
the  purchase of interest  rate swap  agreements,  the effects of interest  rate
changes are limited.  If market interest rates for those borrowings average 2.0%
more in 1998 than in 1997, the Company's interest expense, after considering the
effects of its interest rate swap agreements,  would increase, and income before
taxes would decrease by $8 million.  Comparatively, if market interest rates for
its Credit  Facility  borrowings  averaged  2.0% more in 1997 than in 1996,  the
Company's  interest expense,  after considering the effects of its interest rate
swap agreements, would increase, and income before taxes would decrease by $11.6
million.  These  amounts  are  determined  by  considering  the  impact  of  the
hypothetical  interest  rates on the Company's  borrowing cost and interest rate
swap agreements. These analyses do not consider the effects of the reduced level
of overall economic  activity that could exist in such an environment.  However,
because of the uncertainty of the specific actions that would be taken and their
possible effects,  the sensitivity  analysis assumes no changes in the Company's
financial  structure.  See Note 6 of Notes to Consolidated  Financial Statements
for more information related to borrowings and interest rate swap agreements.

Dividend Policy

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

Impact of Year 2000

     The "Year  2000  Issue" is the  result of  computer  programs  having  been
written  using  two  digits  rather  than four to define  the  applicable  year.
Computer programs that have  time-sensitive  software may recognize a date using
"00" as the year 1900 rather than the year 2000.  This could  result in a system
failure or cause  disruptions of operations,  including,  among other things,  a
temporary inability to process transactions,  send invoices or engage in similar
business activities.

     Based on a recent assessment,  the Company believes that with modifications
to existing  software and conversions to new software,  the Year 2000 Issue will
not pose significant operational problems for its computer systems.  However, if
such modifications and conversions are not made, or not made in a timely manner,
the Year 2000  Issue  could  have a  material  impact on the  operations  of the
Company. The Company has determined it has no exposure to contingencies  related
to the Year 2000 Issue for the products and services it provides.

     The  Company  anticipates  completing  the Year 2000  project no later than
December 31, 1998,  which is prior to any  anticipated  impact on its  operating
systems. The Company has not incurred incremental costs to date and believes the
total  cost of the year  2000  project  will not have a  material  effect on its
results of operations.

Impact of Recently Issued Accounting Standards

     In June 1997, Statement of Financial Accounting Standards ("SFAS") No. 130,
"Reporting  Comprehensive  Income", was issued. This statement requires that all
items  recognized  under  accounting  standards as components  of  comprehensive
income be reported in a full set of general purpose  financial  statements.  The
Company  will  adopt  SFAS No.  130 in the  first  quarter  of 1998 and does not
believe the effect of adoption will be material.

                                       33
<PAGE>

     In June 1997,  SFAS No. 131,  "Disclosures  about Segments of an Enterprise
and Related  Information,"  was issued.  This  statement  requires  companies to
report financial and descriptive  information  about their reportable  operating
segments.  Generally,  companies are required to report financial information on
the basis that it is used  internally for  evaluating  segment  performance  and
deciding how to allocate resources to segments.  The Company will adopt SFAS No.
131 for financial statements as of and for the year ended December 31, 1998, and
does not believe the effect of adoption will be material.

Recent Developments

     On January 13, 1998, the Company issued $100 million in aggregate principal
amount of its 6.65%  Senior  Notes due 2008.  The net  proceeds  received by the
Company from the sale of these Debt  Securities  were used to repay a portion of
the Company's long-term indebtedness outstanding under the Credit Facility.

     On February 27, 1998, the  divestiture  of the Company's  27.9% interest in
the Omaha,  Nebraska,  cellular  market was  completed  through  the sale of its
interest  in the  Omaha  Cellular  General  Partnership.  This  divestiture  was
initiated  by the  managing  partner's  exercise  of an  option to  acquire  the
Company's  interest  pursuant to a preexisting  agreement.  Also on February 27,
1998, the Company acquired a minority interest in one of its controlled markets.

     On March 16, 1998, the Company entered into an Agreement and Plan of Merger
with ALLTEL Corporation ("ALLTEL") and Pinnacle Merger Sub, Inc., a wholly owned
subsidiary of ALLTEL,  pursuant to which each outstanding share of the Company's
common stock will be converted into .74 shares of ALLTEL common stock, par value
$1.00  per  share.  The  transaction  will  be  accounted  for as a  pooling  of
interests.  Upon  consummation  of the merger,  the Company will become a wholly
owned  subsidiary  of ALLTEL.  Consummation  of the merger is subject to certain
conditions,  including the approval by the respective shareowners of the Company
and ALLTEL and the receipt of required regulatory approvals. Pending the receipt
of such  approvals,  the  Company  expects to  complete  the merger in the third
quarter of 1998.

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;  a
significant  delay in the expected  closing of the proposed  merger  between the
Company and ALLTEL Corporation; 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.

                                       34
<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, 1997 and 1996, and
the related consolidated statements of operations, shareowners' equity, and cash
flows for each of the three years in the period ended  December  31,  1997.  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 $191,275,000  and  $121,654,000 at December
31, 1997 and 1996,  respectively,  and the Company's equity in the net income of
these  partnerships  is  $48,344,000,  $39,644,000 and $32,753,000 for the years
ended December 31, 1997, 1996 and 1995, respectively. Those financial statements
were audited by other  auditors  whose  reports  have been  furnished to us. 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, 1997 and 1996,  and the  consolidated
results  of its  operations  and cash  flows for each of the three  years in the
period ended December 31, 1997, 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 therein.

                                                               Ernst & Young LLP

Chicago, Illinois
March 6, 1998


                                       35
<PAGE>





                REPORT OF OTHER INDEPENDENT PUBLIC ACCOUNTANTS





To GTE Mobilnet of South Texas Limited Partnership:

We have  audited the  accompanying  balance  sheets of the GTE Mobilnet of South
Texas Limited  Partnership (a Delaware  limited  partnership) as of December 31,
1997 and 1996, 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 GTE Mobilnet of South Texas
Limited  Partnership  as of December  31, 1997 and 1996,  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
February 13, 1998


                                       36
<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,  1997  and  1996,  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, 1997 and 1996, 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 16, 1998


                                       37
<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, 1997 and 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 New York SMSA  Limited
Partnership  as of December 31, 1997 and 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.


New York, New York
February 13, 1998

                                       38
<PAGE>





                        REPORT OF INDEPENDENT ACCOUNTANTS


To the Partners of the Orlando SMSA Limited Partnership


We have audited the accompanying  consolidated balance sheet of the Orlando SMSA
Limited  Partnership  as of December  31,  1997,  and the  related  consolidated
statements of income,  changes in partners'  capital and cash flows for the year
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 audit.

We conducted our audit 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 audit provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the consolidated  financial position of the Orlando SMSA
Limited  Partnership  as of December 31, 1997, and the results of its operations
and its cash  flows  for the year  then  ended,  in  conformity  with  generally
accepted accounting principles.


                                                        Coopers & Lybrand L.L.P.

Atlanta, Georgia
March 6, 1998


                                       39
<PAGE>

                   360 COMMUNICATIONS COMPANY AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                 (In thousands)

                                                               December 31,
                                                     ---------------------------
                     ASSETS                              1997           1996
                     ------                          ------------   ------------

Current Assets
Cash and cash equivalents                            $     3,471    $     2,554
Accounts receivable, less allowances
  of  $6,602 and $5,730,  respectively                   100,472        102,483
Other receivables                                         26,981         27,090
Unbilled revenue                                          35,618         35,712
Inventory                                                 34,354         35,908
Deferred income taxes                                     15,220          8,462
Prepaid expenses and other                                14,051         16,634
                                                     ------------   ------------
    Total current assets                                 230,167        228,843
                                                     ------------   ------------

Property, plant and equipment                          1,750,097      1,499,407
Less: accumulated depreciation                           561,140        415,981
                                                     ------------   ------------
Property, plant and equipment, net                     1,188,957      1,083,426
                                                     ------------   ------------

Investments in unconsolidated entities                   459,669        349,231
Intangibles, net                                       1,045,007      1,136,587
Other assets                                              18,124         13,982
                                                     ------------   ------------
    Total assets                                     $ 2,941,924    $ 2,812,069
                                                     ============   ============

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

Current Liabilities
Trade accounts and other payables                    $   241,127    $   227,654
Short-term borrowings                                     18,150         43,750
Advance billings                                          31,779         28,314
Accrued taxes                                             17,846         17,951
Accrued agent commissions                                 11,923         12,089
Other                                                     46,386         21,090
                                                     ------------   ------------
    Total current liabilities                            367,211        350,848
                                                     ------------   ------------

Long-term debt                                         1,825,347      1,699,778
                                                     ------------   ------------

Deferred Credits and Other Liabilities
Deferred income taxes                                     60,470        113,005
Postretirement and other benefit obligations               6,347          5,855
                                                    -------------   ------------
    Total deferred credits and other liabilities          66,817        118,860
                                                    -------------   ------------

Minority interests in consolidated entities              173,248        180,083
                                                    -------------   ------------

Shareowners' Equity
Common stock ($.01 par value; 1 billion shares
  authorized; issued and outstanding shares
  121,267,127 in 1997 and 123,308,921 in 1996)             1,233          1,233
Additional paid-in capital                               774,938        773,472
Accumulated deficit                                     (229,437)      (310,932)
Treasury stock, at cost (2,097,021 shares in
  1997 and 55,227 shares in 1996)                        (37,433)        (1,273)
                                                    -------------   ------------
    Total shareowners' equity                            509,301        462,500
                                                    -------------   ------------
    Total liabilities and shareowners' equity         $2,941,924    $ 2,812,069
                                                    =============   ============

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

                                       40


<PAGE>

                   360 COMMUNICATIONS COMPANY AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                    (In thousands, except per share amounts)




                                               For the Year Ended December 31,
                                            ------------------------------------
                                               1997         1996         1995
                                            -----------  -----------  ----------
OPERATING REVENUES
Service revenues                            $1,296,669   $1,052,726   $ 789,459
Equipment sales                                 50,503       43,146      44,956
                                            -----------  -----------  ----------
     Total operating revenues                1,347,172    1,095,872     834,415
                                            -----------  -----------  ----------

OPERATING EXPENSES
Cost of service                                158,309       99,745      68,223
Cost of equipment sales                        116,456      104,327     109,441
Other operations expense                        70,561       55,776      40,591
Sales, marketing and advertising expenses      232,962      206,147     141,505
General, administrative and other expenses     310,340      263,191     214,536
Depreciation and amortization                  184,702      146,841     114,731
                                            -----------  -----------  ----------
     Total operating expenses                1,073,330      876,027     689,027
                                            -----------  -----------  ----------

OPERATING INCOME                               273,842      219,845     145,388
Interest expense                              (131,589)    (106,364)   (127,240)
Minority interests in net income
   of consolidated entities                    (50,880)     (46,622)    (34,269)
Equity in net income of
   unconsolidated entities                      60,681       50,234      40,016
Other income (expense), net                      3,270          255        (185)
                                            -----------  -----------  ----------
Income before income taxes                     155,324      117,348      23,710
Income tax expense                              73,829       57,829      25,405
                                            -----------  -----------  ----------
     Net income (loss)                      $   81,495   $   59,519   $  (1,695)
                                            ===========  ===========  ==========

Basic and diluted earnings (loss)
   per share                                $     0.67   $     0.50   $   (0.01)
                                            ===========  ===========  ==========

Weighted average shares
   outstanding                                 122,339      117,917     116,706
                                            ===========  ===========  ==========


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

                                       41

<PAGE>

<TABLE>
                   360 COMMUNICATIONS COMPANY AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (In thousands)
<CAPTION>


                                                     For the Year Ended December 31,
                                                  ------------------------------------
                                                     1997         1996         1995
                                                  ----------  ------------  ----------
<S>                                               <C>         <C>           <C>
Operating Activities
Net income (loss)                                 $  81,495   $    59,519   $  (1,695)
Adjustments to reconcile net income (loss) to net
  cash provided by operating activities:
     Depreciation and amortization                  184,702       146,841     114,731
     Deferred income taxes                           40,910        36,230      36,267
     Gain on the sale of cellular investments        (3,029)           --          --
     Equity in net income of unconsolidated
       entities, net of distributions               (22,903)      (27,838)     (7,206)
     Minority interests in net income of
       consolidated entities                         50,880        46,622      34,269
     Changes in operating assets and liabilities
        Receivables, net                             (2,161)      (28,748)    (20,610)
        Other current assets                          5,058       (23,222)      7,592
        Trade accounts and other payables            21,301       110,146       3,420
        Accrued expenses and other
            current liabilities                      33,379        (3,984)      6,365
        Noncurrent assets and liabilities, net       (5,007)         (685)     12,007
     Other, net                                       3,080         4,392      (1,847)
                                                  ----------  ------------  ----------
Net Cash Provided by Operating Activities           387,705       319,273     183,293
                                                  ----------  ------------  ----------

Investing Activities
Capital expenditures                               (281,313)     (300,123)   (323,651)
Acquisitions and divestitures                       (56,629)     (352,533)     (1,142)
Investments in unconsolidated entities and other    (80,928)      (14,890)     (3,743)
                                                  ----------  ------------  ----------
Net Cash Used for Investing Activities             (418,870)     (667,546)   (328,536)
                                                  ----------  ------------  ----------

Financing Activities
Net borrowings (payments) under bank revolving
   credit facility                                  (80,000)      680,000          --
Proceeds from long-term debt                        200,000       900,000          --
Debt issuance costs                                  (1,609)      (15,229)         --
Net short-term borrowings (payments)                (25,600)       43,750          --
Purchases of common stock for treasury              (36,401)       (3,427)         --
Increase in advances from affiliates                     --       135,892     158,482
Contributions from minority investors                   100         5,636       7,228
Distributions to minority investors                 (25,358)      (14,849)     (6,971)
Repayment of advances from affiliates                    --    (1,400,000)         --
Other, net                                              950            31          --
                                                  ----------  ------------  ----------
Net Cash Provided by Financing Activities            32,082       331,804     158,739
                                                  ----------  ------------  ----------

Increase (Decrease) in Cash and Cash Equivalents        917       (16,469)     13,496
Cash and Cash Equivalents at Beginning of Year        2,554        19,023       5,527
                                                  ----------  ------------  ----------
Cash and Cash Equivalents at End of Year          $   3,471   $     2,554   $  19,023
                                                  ==========  ============  ==========

</TABLE>


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

                                       42
<PAGE>

<TABLE>
                   360 COMMUNICATIONS COMPANY AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF SHAREOWNERS' EQUITY
                      (In thousands, except share amounts)


<CAPTION>


                                      Common Stock         Treasury Stock     Additional                  Total
                                ----------------------- ---------------------   Paid-In  Accumulated   Shareowners'
                                   Shares      Amount     Shares     Amount     Capital    Deficit        Equity
                                ------------- --------- ----------- --------- ---------- ------------  ------------
<S>                             <C>           <C>       <C>         <C>       <C>        <C>           <C>

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            -             -
Shares issued for acquisition      6,500,000        65           -         -    150,248            -       150,313
Treasury stock, net                  (55,227)        -      55,227    (1,273)         -            -        (1,273)
Other, net                           130,165         1           -         -     (1,288)           -        (1,287)
                                ------------- --------- ----------- --------- ---------- ------------  ------------

Balance at December 31, 1996     123,308,921     1,233      55,227    (1,273)   773,472     (310,932)      462,500

Net income                                -          -           -         -          -       81,495        81,495
Treasury stock, net               (2,041,794)        -   2,041,794   (36,160)       (69)           -       (36,229)
Other, net                                -          -           -          -     1,535            -         1,535
                                ------------- --------- ----------- --------- ---------- ------------  ------------
Balance at December 31, 1997     121,267,127  $  1,233   2,097,021  $(37,433) $ 774,938  $  (229,437)  $   509,301
                                ============= ========= =========== ========= ========== ============  ============
</TABLE>

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

                                       43
<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.  The Company also
markets residential long distance and paging services in the 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.   The  Company   operates  in  four  regions  in  the  United   States:
Mid-Atlantic, Midwest, Southeast 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

     The  Company  has  adopted  Statement  of  Financial  Accounting  Standards
("SFAS")  No. 128  "Earnings  per Share."  SFAS No. 128  requires  companies  to
disclose basic and diluted earnings per share.  Basic earnings per share amounts
were  calculated   based  on  the  weighted  average  number  of  common  shares
outstanding and excludes common stock equivalents from the calculation.  Because
of the  relative  insignificance  of the  Company's  common  stock  equivalents,
diluted earnings per share amounts were not affected.

     Basic earnings per share amounts were computed  using the weighted  average
number of shares  outstanding,  excluding  common  stock  equivalents,  totaling
122,338,741  and  117,917,484  for the years ended  December  31, 1997 and 1996,
respectively.  Diluted  earnings  per  share  amounts  were  computed  using the
weighted   average  number  of  shares   outstanding,   including  common  stock
equivalents,  totaling  122,398,834 and 118,135,881 for the years ended December
31, 1997 and 1996, respectively. Options to purchase approximately 1,991,000 and
1,363,000  shares of common stock at December  31, 1997 and 1996,  respectively,
were excluded  from the  computation  of diluted  earnings per share because the
effect  was  antidilutive.  In 1995,  loss per share  amounts  were based on the
weighted average number of Sprint shares outstanding,  adjusted for a conversion
ratio of one  share of the  Company's  common  stock to three  shares  of Sprint
common stock.


                                       44

<PAGE>

1. Summary of Significant Accounting Policies (continued)

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.

   Advertising Costs

     The Company  expenses the costs of  advertising  as  incurred.  Advertising
expense for the years ended  December 31, 1997,  1996 and 1995 was  $53,726,000,
$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 $41,384,000 and $34,924,000 at December 31, 1997 and 1996, 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 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, 1997, 1996 and 1995 was $2,425,000, $2,234,000 and $1,553,000, 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 $284,553,000 and
$232,014,000 as of December 31, 1997 and 1996, 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 $48,089,000 and $46,295,000 as of December 31, 1997 and
1996, respectively.

     Amortization  expense for the years ended December 31, 1997,  1996 and 1995
was  $6,480,000,  $5,798,000 and  $5,770,000,  respectively,  and is included in
equity in net income of unconsolidated entities in the accompanying Consolidated
Statements of Operations.

                                       45

<PAGE>

1. Summary of Significant Accounting Policies (continued)

   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 that it would 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  $183,375,000  and  $153,908,000 as of December 31, 1997 and
1996, respectively.  Amortization expense for the years ended December 31, 1997,
1996 and 1995 was $29,576,000, $22,817,000 and $19,191,000, 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 $124,798,000, $78,124,000 and $127,240,000 for
the years ended December 31, 1997, 1996 and 1995, respectively.  Income taxes of
$27,392,000, $25,707,000 and $(5,500,000) were paid (received) by the Company in
1997, 1996 and 1995, 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.  Under a tax sharing
arrangement  in effect  prior to the  spinoff,  Sprint  paid the Company 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  SFAS  No.  123,   "Accounting  for  Stock-Based
Compensation."  However,  in accordance with the provisions of SFAS No. 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 the date of grant,  as  prescribed  by SFAS No.
123.

                                       46

<PAGE>

1. Summary of Significant Accounting Policies (continued)

   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.

   Impact of Recently Issued Accounting Standards

     In June 1997, SFAS No. 130, "Reporting  Comprehensive  Income," was issued.
This statement requires that all items recognized under accounting  standards as
components of comprehensive  income be reported in a full set of general purpose
financial  statements.  The Company will adopt SFAS No. 130 in the first quarter
of 1998 and does not believe the effect of adoption will be material.

     In June 1997,  SFAS No. 131,  "Disclosures  about Segments of an Enterprise
and Related  Information,"  was issued.  This  statement  requires  companies to
report financial and descriptive  information  about their reportable  operating
segments.  Generally,  companies are required to report financial information on
the basis that it is used  internally for  evaluating  segment  performance  and
deciding how to allocate resources to segments.  The Company will adopt SFAS No.
131 for financial statements as of and for the year ended December 31, 1998, and
does not believe the effect of adoption will be material.

2. Spinoff

     On July 26, 1995,  Sprint announced that its Board of Directors had 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.

     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

     During  the  first  and  second  quarters  of 1997,  the  Company  divested
ownership interests in certain unconsolidated  entities as well as in one of its
controlled markets. During the second quarter of 1997, the Company and BellSouth
Corporation  ("BellSouth") combined their interests in two partnerships that own
and control cellular licenses and operations in Richmond, Virginia, and Orlando,
Florida.  The resulting  partnership is owned approximately 75% by BellSouth and
25% by the Company, with the Company assuming management responsibilities of the
cellular  operations  in Richmond.  In  connection  with this  transaction,  the
Company  contributed  $80 million to the  resulting  partnership.  In 1997,  the
Company  acquired  minority  interests in 15 of its  controlled  markets,  which
increased its ownership interest to 100% in 10 of those markets.

                                       47

<PAGE>

3. Acquisitions and Divestitures (continued)

     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  million.  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,   providing   cellular   service  to
approximately  140,000  customers in 20 markets,  representing  an estimated 3.3
million potential customers.  The Company acquired the licenses from Independent
Cellular Network Partners and certain of its affiliates 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 an allocation of the purchase price.

     On December 17, 1997, the Company  signed a definitive  agreement to divest
its 27.9% interest in the Omaha,  Nebraska,  cellular market through the sale of
its interest in the Omaha Cellular General Partnership. The proposed transaction
is subject to the receipt of all necessary  consents and  government  approvals.
The Company expects to complete this transaction in the first quarter of 1998.

4. Property, Plant and Equipment

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


                                       Depreciable
                                          lives             December 31,
                                      -------------  --------------------------
                                                        1997           1996
                                                     ------------  ------------
Switching, base site controller and
    radio frequency equipment          8-10 years     $  964,389    $  847,214
Cell site towers and shelters          5-20 years        456,464       404,094
Office furniture and other equipment    2-5 years        189,872       162,255
                                                     ------------  ------------
    Plant in service                                   1,610,725     1,413,563
Construction work in progress                            139,372        85,844
                                                     ------------  ------------
                                                       1,750,097     1,499,407
Less: accumulated depreciation                           561,140       415,981
                                                      $1,188,957    $1,083,426
                                                     ============  ============

     Depreciation expense charged to operations for the years ended December 31,
1997,   1996  and  1995  was   $155,126,000,   $124,024,000   and   $95,540,000,
respectively.

                                       48

<PAGE>

5. Investments in Unconsolidated Entities

   Interests Owned

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


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

                                                              1997        1996
                                                             -------     -------

   Florida 9 RSA Limited Partnership                          49.00%      49.00%
   Illinois Valley Cellular RSA 2-II Partnership              40.00%      40.00%
   Pennsylvania RSA No. 5 General Partnership                 40.00%      40.00%
   Virginia 10 RSA Limited Partnership                        33.00%      33.00%
   Texas RSA No. 11B Limited Partnership                      28.00%      28.00%
   Omaha MSA Limited Partnership                              27.90%      27.59%
   GTE Mobilnet of Fort Wayne Limited Partnership             25.00%      25.00%
   Texas RSA 7B1 Limited Partnership                          25.00%      25.00%
   Orlando SMSA Limited Partnership                           24.59%      15.00%
   RCTC Wholesale Company (Richmond)                          24.59%      27.27%
   Allentown SMSA Limited Partnership                         20.77%      20.77%
   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%      15.85%
   Missouri 1--Atchison RSA Limited Partnership               14.28%      14.28%
   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%
   Georgia RSA No. 1 Limited Partnership                          --      20.00%
   Iowa RSA No. 13 Limited Partnership                            --      30.00%
   Pennsylvania 3 Wireline Settlement Limited Partnership         --      44.44%
   Pennsylvania 4 Wireline Settlement Limited Partnership         --      33.33%
   RSA 11 Limited Partnership (IA)                                --      14.14%

                                       49

<PAGE>

5. Investments in Unconsolidated Entities (continued)

   Financial Information

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


                                           For the Year Ended December 31,
                                         -----------------------------------
                                            1997        1996        1995
                                         ----------- ----------- -----------
    Results of Operations
 Cellular service revenues               $2,207,922  $2,187,202  $1,796,895
 Equipment sales                            111,358     109,314      97,727
    Total operating revenues              2,319,280   2,296,516   1,894,622

 Cost of equipment sales                    185,239     209,895     151,334

 Operating, selling, general,
       administrative and other expenses  1,304,689   1,266,353   1,049,117
 Depreciation and amortization              230,224     227,480     201,459
      Total operating expenses            1,720,152   1,703,728   1,401,910
 Operating income                           599,128     592,788     492,712
 Non-operating income (expenses)              8,230        (642)    (12,903)
 Minority interests in net income
       of consolidated entities                  --          --      (1,513)
 Income before cumulative effects of
  changes in accounting principles          607,358     592,146     478,296
 Cumulative effects of changes in
  accounting principles, net                 (6,523)         --          --
                                         ----------  ----------  ----------
 Net income                              $  600,835  $  592,146  $  478,296
                                         ==========  ==========  ==========



                                                      December 31,
                                             ------------------------------
                                                  1997            1996
                                             --------------  --------------
     Assets
              Current assets                 $     473,253   $     514,788
              Noncurrent assets                  1,786,617       1,702,668
                                             -------------   -------------
                                             $   2,259,870   $   2,217,456
                                             =============   =============

     Liabilities and equity
              Current liabilities            $     188,656   $     337,465
              Long-term liabilities                 12,634           8,911
              Minority interests                        --           3,384
              Equity                             2,058,580       1,867,696
                                             -------------   -------------
                                             $   2,259,870   $   2,217,456
                                             =============   =============

Additional Disclosures

     Accumulated deficit at December 31, 1997, included  $178,765,000 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 $47,728,000  and  $42,502,000 at
December 31, 1997 and 1996, respectively.

                                       50
<PAGE>

6. Borrowings

   Long-Term Debt

     Long-term debt consisted of the following (in thousands):

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

                                                        1997          1996
                                                     ----------    ----------

Credit facility borrowings, due 2002                 $  600,000    $  680,000
Senior notes
   due 2003, 7.125%, net of unamortized discount of
      $1,077 in 1997 and $1,242 in 1996 (7.2%)(1)       448,923       448,758
   due 2006, 7.5%, net of unamortized discount of
      $903 in 1997 and $980 in 1996 (7.5%)(1)           449,097       449,020
   due 2009, 7.6%, net of unamortized discount
      of $311 in 1997 (7.4%)(2)                         199,689            --
Subordinated promissory notes, due 2006, 9%             127,638       122,000
                                                     ----------    ----------
   Total long-term debt(3)                           $1,825,347    $1,699,778
                                                     ==========    ==========
--------------------

(1)  Weighted average annual effective interest rate at December 31, 1997 and
     1996.
(2)  Weighted average annual effective interest rate at December 31, 1997.
(3)  Estimated fair value of $1,873,075 and $1,690,677 at December 31, 1997 and
     1996, respectively, based on  public quotations and
     discounted cash flow analyses.

     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  $562,000 and
$390,000  in 1997 and 1996,  respectively.  Such fees may range from .15% to .5%
depending on the Company's public debt rating. At December 31, 1997, the Company
had additional borrowing capacity under the Credit Facility of $308 million.

     As part of its interest rate risk management program,  the Company utilizes
interest  rate swap  agreements to hedge  variable  interest rate risk under the
Credit  Facility to a fixed rate.  Interest rate swap  agreements are designated
with all or a portion  of the  principal  balances  and terms of  specific  debt
obligations.  The related amount payable to or receivable from counterparties is
included in other current  liabilities or assets.  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, 1997 and 1996, the Company had
interest rate swap agreements with an aggregate  notional amount of $200 million
and $100  million  outstanding,  respectively.  The Company has not incurred any
gains or losses on terminations of interest rate swap agreements.

     The Credit Facility has general and financial  covenants that place certain
restrictions  on the Company.  On December 5, 1997,  the Company  entered into a
second amended and restated  Credit  Facility which relaxed the  restrictions on
certain  covenants,  while extending the term of the Credit Facility to December
5, 2002.  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.

                                       51

<PAGE>

6. Borrowings (continued)

     The senior notes have general and financial covenants similar to the Credit
Facility.  However,  these covenants,  except for the limitation on liens,  have
been suspended while the Company's  public debt is rated investment grade (BBB-)
by Standard & Poor's and Duff & Phelps.

     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 is paid on
each interest payment date and the remaining 50% is capitalized and becomes 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 (BBB-) by Standard & Poor's and Duff & Phelps.

     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 ("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.

     On March 17, 1997, the Company  issued $200 million in aggregate  principal
amount of its 7.6%  senior  notes due 2009.  The net  proceeds  from the sale of
these Debt  Securities  were used to repay a portion of the Company's  long-term
indebtedness outstanding under the Credit Facility.

   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,  1997 and  1996,  the  Company  had  short-term
borrowings of $18,150,000 and  $43,750,000,  respectively.  The weighted average
interest  rates on these  borrowings  was 5.77%  and  5.62% for the years  ended
December 31, 1997 and 1996, respectively.

7. Employee Benefit Plans

   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 $5,287,000,
$5,283,000 and $2,030,000 in 1997, 1996 and 1995, 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 have 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.

                                       52

<PAGE>

7. Employee Benefit Plans (continued)

     The Company  sponsors  postretirement  benefits  arrangements  (principally
providing health care benefits) covering substantially all employees.  Employees
who retired before  specified  dates are eligible for these benefits at no cost.
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  1997,  1996 and 1995  were  $495,000,
$474,000 and $176,000, respectively.

     The Company's  accrued  postretirement  benefits costs were  $4,544,000 and
$4,049,000 as of December 31, 1997 and 1996, 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 the date of grant.  Options
under these  plans vest over one,  three or four  years.  All options  expire 10
years from the date of grant.  Approximately  1.0% 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 4,801,000 at December 31, 1997. Under the Company's various stock option
plans,  2,665,000  shares were available for the granting of options at December
31,  1997.  In  addition,  non-vested  stock is issued to certain  officers  and
outside  directors and vests from one to five years after the date of grant. The
cost of shares of non-vested stock are amortized over their vesting period.

     Stock option activity for the years 1997, 1996 and 1995 was as follows:


                                             1997             1996      1995
                                     --------------------- ---------  ---------
                                                 Weighted
                                                 average
                                                 exercise
                                       Shares     price      Shares    Shares
                                     ---------  ---------- ---------  ---------
Options outstanding,
   beginning of year                 1,365,397    $20.16     611,680    454,976
Options granted                        709,050    $19.88     816,505    162,659
Options exercised                        4,948    $15.44      22,783      5,955
Options canceled                        78,267    $22.03      40,005         --
                                     ---------             ---------  ---------

Options outstanding,
   end of year                       1,991,232    $20.01   1,365,397    611,680
                                     =========             =========  =========

Exercisable, end of year               733,592    $18.15

Weighted average fair value
   of options granted during 1997        $7.55



                                       53

<PAGE>

8. Stock-Based Compensation (continued)


     The following table summarizes  information about stock options outstanding
at December 31, 1997:

<TABLE>
<CAPTION>


                            Options Outstanding                 Options Exercisable
                    -------------------------------------  --------------------------

                                                Weighted                   Weighted
                       Number      remaining    average      Number         average
    Range of        outstanding   contractual   exercise    exercisable    exercise
 exercise prices    at 12/31/97       life       price      at 12/31/97      price
 ----------------   ------------  -----------  ----------   ------------  -----------
<S>                 <C>           <C>          <C>          <C>           <C>

 $  7.56 - $12.57      167,859        2.9        $10.00       167,859       $10.00
 $ 14.91 - $19.94    1,083,164        8.1        $18.86       246,935       $16.83
 $ 22.63 - $26.00      692,209        8.2        $23.39       318,798       $23.46
 $ 29.00 - $32.00       32,000        8.3        $30.50             -            -
 $ 35.00 - $35.00       16,000        8.3        $35.00             -            -
                    ------------                            ------------
 $  7.56 - $35.00    1,991,232        7.7        $20.01       733,592       $18.15
                    ============                            ============

</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 1997,  1996 and 1995,
consistent with the provisions of SFAS No. 123, the Company's net income and per
share amount would have been decreased by  approximately  $3,027,000 or $.03 per
share in 1997 and by  $3,546,000  or $.03 per share in 1996.  The  Company's net
loss would have been  increased by $576,000 or $.01 per share in 1995.  The fair
value  of  options  at date of  grant  was  estimated  using  the  Black-Scholes
valuation model with the following weighted average assumptions:


                             1997                1996                 1995
                        --------------      --------------       ---------------
Expected life (years)         4.8                6.0                   5.9
Expected volatility          31.6%              29.8%                 29.8%
Dividend yield                 --                  --                    --
Interest rate                6.19%              7.15%                 7.08%

     The  pro  forma  effect  on net  income  for  1997,  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.

     In March 1997,  the Company began  offering a new Employee  Stock  Purchase
Plan ("ESPP"). The Company reserved 500,000 common shares for issuance under the
ESPP. The ESPP permits  eligible  employees to purchase  shares of common stock,
not to exceed 1,000 shares in a 12-month period, through payroll deductions. The
purchase  price of the  offering is the lower of 85% of the fair market value of
the Company's common stock on the first or last day of the defined period. As of
December 31, 1997,  the Company had issued  approximately  69,000  common shares
under the ESPP.


                                       54
<PAGE>

8. Stock-Based Compensation (continued)

     Had  compensation  cost for the Company's ESPP been determined based on the
fair value of the employees'  rights to purchase  common stock,  consistent with
the provisions of SFAS No. 123, the Company's net income would have decreased by
approximately  $326,000 and would have no effect on the  Company's  earnings per
share in 1997. The fair value of the employees'  rights to purchase common stock
was  estimated  using the  Black-Scholes  valuation  model  assuming  a weighted
average  expected life of .496 years and an interest rate of 5.47%. The weighted
average fair value of the Company's ESPP was $4.12 for the 1997 plan year.

9. Income Taxes

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


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

                                           1997          1996           1995
                                       ------------   -----------  -------------
Current income tax expense (benefit)
     Federal                           $  28,606      $  17,054    $   (14,485)
     State                                 4,313          4,545          3,623
Deferred income tax expense
     Federal                              38,684         22,872         27,158
     State                                 2,226         13,358          9,109
                                       ------------   -----------  -------------
             Total income tax expense  $  73,829      $  57,829    $    25,405
                                       ============   ===========  =============

     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,
                                               ---------------------------------

                                                 1997        1996        1995
                                               ----------- ----------- ---------

Income tax expense at the statutory rate       $ 54,363    $ 41,072    $  8,299
Effect of
     State income tax expense, net of federal
       income tax effect                          4,250      11,637       8,276
     Amortization of intangibles                 10,344       7,556       8,736
     Amounts relating to prior year's taxes       5,028      (2,753)         --
     Other, net                                    (156)        317          94
                                               ----------- ----------- ---------
Income tax expense                             $ 73,829    $ 57,829    $ 25,405
                                               =========== =========== =========
Effective income tax rate                          47.5%       49.3%      107.1%
                                               =========== =========== =========


                                       55
<PAGE>

9. Income Taxes (continued)

     The sources of the  differences  that gave rise to the deferred  income tax
assets and  liabilities as of December 31, 1997 and 1996,  along with the income
tax effect of each, were as follows (in thousands):
<TABLE>
<CAPTION>


                                              1997 Deferred                    1996 Deferred
                                               Income Taxes                     Income Taxes
                                      -------------------------------   -----------------------------
                                       Current       Noncurrent        Current        Noncurrent
                                       assets   assets (liabilities)    assets   assets (liabilities)
                                      -------   --------------------    ------   --------------------
<S>                                   <C>      <C>                     <C>      <C>
Property, plant and equipment         $    --     $    (113,152)        $   --     $    (108,832)
Postretirement and other benefits          --             1,396             --             1,341
Accrued liabilities                     9,570                --          9,384                --
Intangibles                                --            27,155             --           (40,467)
Alternative minimum tax credit
   carry forwards                          --             9,716             --                --

Operating loss carryforwards            8,634            30,566          2,951            40,758
Other, net                                 --               427            --                471
Less: valuation allowance              (2,984)          (16,578)        (3,873)           (6,276)
                                       ------     -------------         ------     -------------
     Total                            $15,220     $     (60,470)        $8,462     $    (113,005)
                                      =======     =============         ======     =============
</TABLE>

     During 1997, the valuation  allowance related to deferred income tax assets
increased by $9,413,000.  The increase was  attributable to purchase  accounting
for the ICN Acquisition. Federal operating loss carryforwards remaining from the
ICN Acquisition  totaled  $24,705,000  with  expiration  dates from 2004 through
2011.

     As of December 31, 1997, the Company had available tax benefits  associated
with  federal  and  state  operating  loss   carryforwards  of  $24,705,000  and
$14,495,000,  respectively,  which expire in varying amounts  annually from 1998
through 2012.

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.

                                       56
<PAGE>

10. Commitments and Contingencies (continued)

     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.

     In August 1995,  four  independent  dealers filed a lawsuit in the Court of
Common Pleas of Greenville  County,  South  Carolina,  alleging that the Company
breached its dealer  agreements  with the plaintiffs and engaged in unfair trade
practices.  In particular,  the plaintiffs alleged that the Company discontinued
the practice of allowing the  plaintiffs to sell cellular  telephones out of the
Company's  inventory,  and instead required the plaintiffs to maintain their own
inventories and sold cellular  telephones to the public at prices lower than the
prices that the Company charged to the plaintiffs.  On November 21, 1997, a jury
awarded the plaintiffs $1.9 million in  compensatory  damages and $10 million in
punitive  damages.  The  Company  has  filed an appeal  with the South  Carolina
Supreme  Court  seeking to reverse the  decision.  The Company  believes that it
acted in accordance  with the dealer  agreements and that the decision is wholly
unwarranted by the facts.

     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 lawsuits 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 outcomes of such legal proceedings have 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  such  litigation,  there  can be no  assurance  that the
outcome  of these  lawsuits  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.

   Operating Leases

     Minimum rental  commitments as of December 31, 1997, for all non-cancelable
operating leases, consisting principally of leases for office space, real estate
and tower space, were as follows (in thousands):


     1998                     $ 27,693
     1999                       23,626
     2000                       21,222
     2001                       19,467
     2002                       17,529
     Thereafter                 94,771
                              --------
                      Total   $204,308
                              ========

     Rental expense aggregated $28,356,000, $20,259,000 and $17,605,000 in 1997,
1996 and 1995,  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.

                                       57

<PAGE>

11. Related Party Transactions (continued)

     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 in 1995. 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 of contracts  governing such charges. In March 1996 and May 1997, the
Company renegotiated  agreements 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 in
1995.

     As discussed in Note 2, in conjunction with the spinoff, the Company repaid
$1.4 billion of intercompany  debt 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.  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.   Interest   expense  on
intercompany   debt  was  $23,463,000   and   $127,240,000  in  1996  and  1995,
respectively.

     The Company advances funds to unconsolidated  entities to which it provides
management   services  for  use  in  these  entities'  current   operations  and
construction  activity.  In turn,  these  entities  advance  excess  cash to the
Company for cash  management and  investment.  Minority  investments  receivable
totaled  $82,000 and $733,000 at December 31, 1997 and 1996,  respectively,  and
are included in prepaid expenses and other on the  Consolidated  Balance Sheets.
Minority  investments payable totaled $20,267,000 and $1,068,000 at December 31,
1997 and 1996,  respectively,  and are included in other current  liabilities on
the Consolidated Balance Sheets.

   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 is only applicable to taxes for 1996 and earlier years.

   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  were  imposed on the
Company for a period of two years after the  completion of the spinoff.  The Tax
Assurance Agreement expires on March 7, 1998.

    12. Subsequent Event

     On January 13, 1998, the Company issued $100 million in aggregate principal
amount of its 6.65%  senior notes due 2008.  The net  proceeds  from the sale of
these Debt  Securities  were used to repay a portion of the Company's  long-term
indebtedness outstanding under the Credit Facility.

                                       58
<PAGE>

<TABLE>



                            Quarterly Financial Data
                    (In thousands, except per share amounts)

                                   (Unaudited)


<CAPTION>

                                   First Quarter        Second Quarter        Third Quarter          Fourth Quarter
                                  1997       1996       1997      1996       1997       1996       1997       1996
                              ----------  ---------  --------- ---------- ---------  ---------  ---------  ----------
<S>                           <C>         <C>        <C>       <C>        <C>        <C>        <C>        <C>
 Operating Revenues
   Service revenues            $293,970    $230,754   $328,834   $263,560  $335,245   $271,819   $338,620    $286,593
   Equipment sales               12,876       8,941     11,428     10,613    12,264      9,857     13,935      13,735
                              ----------  ---------  --------- ---------- ---------  ---------  ---------  ----------
    Total operating revenues   $306,846    $239,695   $340,262   $274,173  $347,509   $281,676   $352,555    $300,328
                              ==========  =========  ========= ========== =========  =========  =========  ==========

 Operating Expenses

   Cost of service             $  41,489   $ 22,139    $ 40,283  $ 22,205  $ 37,127   $ 24,148   $ 39,410    $ 31,253
   Cost of equipment sales        28,449     20,609      24,394    25,355    28,486     25,046     35,127      33,317
   Selling, general,
     administrative
     and other expenses          148,666    117,527    152,892    123,675   151,014    132,055    161,291     151,857
   Depreciation and
     amortization                 45,529     32,997     46,833     35,157    45,376     36,833     46,964      41,854
                              ----------  ---------  --------- ---------- ---------  ---------  ---------  ----------
       Total operating
           expenses            $ 264,133  $ 193,272  $ 264,402  $ 206,392 $ 262,003   $218,082   $282,792    $258,281
                              ==========  =========  ========= ========== =========  =========  =========  ==========
 Net Income                    $   9,445  $   6,980  $  21,807  $ 24,284  $  28,879  $ 22,887    $ 21,364    $  5,369
                              ==========  =========  ========= ========== =========  =========  =========  ==========

     Earnings Per Share        $    0.08  $    0.06  $    0.18  $   0.21  $    0.24  $   0.20   $    0.18    $   0.04
                             ===========  =========  ========= ========== ========== =========  ========== ==========

</TABLE>

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

      None.



                                       59
<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 12,  1998  (the  "Proxy
Statement"),  which was filed with the  Securities  and Exchange  Commission  on
March 31, 1998, 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-Spinoff."  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, in fact,
the Company and Sprint are currently  competitors in wireless  communications in
several markets.

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.

                                       60

<PAGE>

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
provided that with respect to Sprint's  retirement  pension plan,  all employees
who remained employed by the Company after the spinoff continued to earn service
credit under such plan, but only for purposes of vesting.

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.


                                       61
<PAGE>

Transitional Administrative Services

     The  Distribution  Agreement  provided  for Sprint to  continue  to provide
certain  administrative  services to the Company for a period of up to two years
after the spinoff date. The Company agreed to the manner of compensating  Sprint
for these  services on a  service-by-service  basis,  but in general the parties
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 is only applicable to taxes for 1996 and earlier years.

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  were  imposed on the
Company for a period of two years after the  completion of the spinoff.  The Tax
Assurance Agreement expired on March 7, 1998.

Operational Relationship

     In March 1996 and May 1997,  the Company  renegotiated  agreements  entered
into between the Company and Sprint for long  distance  services 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.  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 wide area  frame  relay  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 "Certain Transactions" in
the Proxy Statement and is incorporated by reference herein.


                                       62

<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, 1997 and
                      1996

                  -   Consolidated  Statements of Operations for the years ended
                      December 31, 1997, 1996 and 1995

                  -   Consolidated  Statements of Cash Flows for the years ended
                      December 31, 1997, 1996 and 1995

                  -   Consolidated  Statements  of  Shareowners'  Equity for the
                      years ended December 31, 1997, 1996 and 1995

                  -   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, 1997, 1996 and 1995

                  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, 1997,  under "Item 5.
Other  Events," the Company filed a press release  announcing  its  consolidated
operating results for the third quarter and first nine months of 1997.


                                       63

<PAGE>
<TABLE>


                   360 COMMUNICATIONS COMPANY AND SUBSIDIARIES



           SCHEDULE II-CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS



                  Years Ended December 31, 1997, 1996 and 1995
                                 (In thousands)

<CAPTION>

                                                             Additions
                                                  -------------------------------
                                     Balance                        Charged to                         Balance
                                  Beginning of      Charged to         Other           Other            End of
                                      Year            Income         Accounts       Deductions           Year
                                 ---------------  --------------- --------------- ---------------   --------------
<S>                              <C>              <C>             <C>             <C>               <C>
Allowance for uncollectibles      $       5,730    $     32,020     $     (227)   $   (30,921) (1)   $     6,602
Valuation allowance-
     deferred income tax assets   $      10,149    $     (1,478)    $   10,891    $         -        $    19,562
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
------------
<FN>

(1)  Accounts written off, net of recoveries.

</FN>
</TABLE>


                                       64

<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, 1998

        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, 1998
------------------------------ Officer and Director
      Dennis E. Foster         (Principal Executive Officer)

   /s/ Michael J. Small        Executive Vice President and      March 31, 1998
------------------------------ Chief Financial Officer
      Michael J. Small         (Principal Financial Officer)

   /s/ Jeffery R. Gardner      Senior Vice President - Finance   March 31, 1998
------------------------------ (Principal Accounting Officer)
      Jeffery R. Gardner

   /s/ Frank E. Reed           Chairman of the Board             March 31, 1998
------------------------------  of Directors
      Frank E. Reed

   /s/ Lester Crown            Director                          March 31, 1998
------------------------------
      Lester Crown

   /s/ Michael Hooker          Director                          March 31, 1998
------------------------------
      Michael Hooker

   /s/ Robert E. R. Huntley    Director                          March 31, 1998
------------------------------
      Robert E. R. Huntley

   /s/ Valerie B. Jarrett      Director                          March 31, 1998
------------------------------
      Valerie B. Jarrett

   /s/ Alice M. Peterson       Director                          March 31, 1998
------------------------------
      Alice M. Peterson

   /s/ Charles H. Price, II    Director                          March 31, 1998
------------------------------
      Charles H. Price, II



                                       65

<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.)

2.4               Agreement  and Plan of Merger dated as of March 16, 1998 among
                  ALLTEL   Corporation,   Pinnacle  Merger  Sub,  Inc.  and  360
                  Communications  Company (Filed as Exhibit 2.1 to the Company's
                  Current  Report on Form 8-K/A dated March 16,  1998,  File No.
                  1-14108, and incorporated herein by reference.)

2.5               Stock  Option  Agreement  dated as of March 16,  1998  between
                  ALLTEL  Corporation and 360  Communications  Company (Filed as
                  Exhibit  2.2 to the  Company's  Current  Report on Form  8-K/A
                  dated  March 16,  1998,  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.)


                                       66

<PAGE>





4.2               Indenture dated as of March 7, 1996 between 360 Communications
                  Company and Citibank,  N.A., as 4.2 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.)

4.8               360  Communications  Company's  6.65%  Senior  Note Due  2008.
                  (Filed as Exhibit 4.8 to the Company's  Current Report on Form
                  8-K dated January 13, 1998, File No. 1-14108, and incorporated
                  herein by reference.)

4.9               First Amendment to Rights Agreement dated as of March 16, 1998
                  to  Rights  Agreement  dated as of March 5, 1996  between  360
                  Communications  Company  and  The  Chase  Manhattan  Bank,  as
                  successor  in  interest  to Chemical  Bank,  as Rights  Agent.
                  (Filed as Exhibit 4.9 to the Company's  Current Report on Form
                  8-K/A dated March 16, 1998, 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.  (Filed as  Exhibit  10.3 to the  Company's
                  Annual Report on Form 10-K for the fiscal year ended  December
                  31,  1996,  File  No.  1-14108,  and  incorporated  herein  by
                  reference.)*

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.)*


                                       67

<PAGE>




10.6              360  Communications  Company  Amended  and  Restated  Director
                  Equity and Deferred Compensation Plan.*

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              First   Amendment   to   Employment   Agreement   between  360
                  Communications Company and Dennis E. Foster.*

10.10             Form  of  Amended  and  Restated  Change-In-Control  Agreement
                  between 360 Communications  Company and each executive officer
                  other  than  Dennis  E.  Foster.*

10.11             Second  Amended  and  Restated  Credit  Agreement  dated as of
                  December 5, 1997 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 N.T & S.A., as  Syndication  Agent.  (Filed as Exhibit
                  10.11  to the  Company's  Current  Report  on Form  8-K  dated
                  January 13, 1998, File No. 1-14108, and incorporated herein by
                  reference.)

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

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

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

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

27                Financial Data Schedule.

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

* Indicates management contract or compensatory plan or arrangement.


                                       68