SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C.
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, 2000. /  /      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 0-27416 RURAL CELLULAR
CORPORATION(Exact
name of registrant as specified in its charter) Minnesota
  41-1693295(State or other jurisdiction of
  incorporation or organization)
  (I.R.S. Employer Identification No.)
 3905 Dakota Street SW
Alexandria, Minnesota 56308(320)
762-2000(Address,
including zip code, and telephone number, including area code, of registrants
principal executive offices) Securities registered pursuant to Section 12(b) of the Act:NONE Securities registered pursuant to Section 12(g) of the Act: Class A Common Stock,
par value $.01 per share
Series A Preferred Share Purchase Rights(Title of
class) 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. /x/ YES    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.  / / Aggregate value of shares of common stock held by nonaffiliates of the
Registrant based upon the closing price on The Nasdaq National Market on March
20, 2001 (only shares held by directors, officers and their affiliates, and
holders of more than 5% of Class A or Class B stock are excluded):  $232,156,144 Number of shares of common stock outstanding as of the close of
business on March 20, 2001: Class A
  11,071,292Class B
  781,705
 Documents
incorporated by reference: Portions of the definitive Proxy Statement relating to the 2001 Annual
Meeting of Shareholders
(Proxy Statement) are incorporated by reference into Part III of this report.  TABLE OF CONTENTS

PART IITEM 1.
  BUSINESSITEM 2.
  PROPERTIESITEM
  3.
  LEGAL
  PROCEEDINGSITEM 4.
  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERSPART IIITEM 5.
  MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERSITEM
  6.
  SELECTED
  FINANCIAL DATAITEM 7.
  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
  RESULTS OF OPERATIONSITEM 7A.
  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKITEM 8.
  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAITEM 9.
  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
  FINANCIAL DISCLOSUREPART IIIITEM 10.
  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTITEM
  11.
  EXECUTIVE
  COMPENSATIONITEM 12.
  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENTITEM 13.
  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONSPART IVITEM 14.
  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-KSIGNATURES


PART I ITEM
1.                BUSINESS References in this Form 10-K to Rural
Cellular, RCC, we, our, and us refer to Rural Cellular Corporation and
its subsidiaries as a combined entity, except where it is clear that those
terms mean only the parent company. Forward-Looking
Information Forward-looking statements
herein are made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. Although
RCC believes that the expectations reflected in such forward-looking statements
are reasonable, it can give no assurance that such expectations will prove to
be correct. A number of factors could cause actual results, performance,
achievements of RCC, or industry results to be materially different from any
future results, performance or achievements expressed or implied by such
forward-looking statements. These factors include but are not limited to, the
competitive environment in the wireless and telecommunications industries,
changes in economic conditions in general, demographic changes, changes in
prevailing interest rates and the availability of and terms of financing to
fund the anticipated growth of RCCs business, the ability to attract and
retain qualified personnel, the ability to negotiate favorable roaming
agreements, the resolution of certain network technology issues, the
significant indebtedness of RCC, and changes in RCCs acquisition and capital
expenditure plans.  Investors are
cautioned that all forward-looking statements involve risks and uncertainties. In
addition, such forward-looking statements are necessarily dependent upon
assumptions, estimates and data that may be incorrect or imprecise and involve
known and unknown risks, uncertainties and other factors. Accordingly, any
forward-looking statements included herein do not purport to be predictions of
future events or circumstances and may not be realized. All subsequent written
and oral forward-looking statements attributable to RCC or persons acting on
its behalf are expressly qualified in their entirety by the foregoing
cautionary statements. RCC disclaims any obligation to update any such
statements or to announce publicly the results of any revisions to any of the
forward-looking statements contained herein to reflect future events or
developments. Factors that may affect our performance Our future operating
results could fluctuate significantly. We believe that our future
operating results and cash flows will be subject to fluctuations due to many
factors, several of which are outside our control. These factors include the
following: 
  increased costs we may incur in connection with the build-out of our
  networks and the further development, expansion and upgrade of our cellular
  systems and those we have recently acquired and/or may acquire;
  fluctuations in the demand for our services and equipment and
  wireless services generally;
  increased competition, including price competition, which has led to
  declining average monthly local service revenues per customer for us and our
  competitors;
  changes in our regulatory environment;
  the cost and availability of equipment components; and
  changes in general economic conditions.  We incurred net losses
applicable to common shares of approximately $83.3 million, $11.1 million and
$15.7 million in the years ended December 31, 2000, 1999 and 1998,
respectively. Losses are likely to be significant for the next several years as
we seek to increase our customer bases in new and existing markets. We may not
generate profits in the short term or at all. If we fail to achieve
profitability, that failure could have a negative effect on the market value of
our common stock.

Our stock price has been and may continue to
be volatile.

The trading price of our Class
A common stock has been and is likely to continue to be highly volatile and
could be subject to wide fluctuations in response to factors such as:


  actual or anticipated variations in quarterly operating results;
  changes in financial estimates by securities analysts;
  conditions or trends in the wireless communications industry;
  changes in the economic performance and/or market valuation of other
  wireless communications companies;
  our announcement of significant acquisitions, strategic partnerships,
  joint ventures or capital commitments;
  additions or departures of key personnel; and
  other events or factors, many of which are beyond our control.In addition, the stock market
in general, and The Nasdaq National Market in particular, has experienced
extreme price and volume fluctuations that have often been unrelated or
disproportionate to the operating performance of companies with securities
listed on these exchanges and quotation systems. These broad market and
industry factors may materially, adversely affect the market price of the Class
A common stock, regardless of our actual operating performance. In the past,
following periods of volatility in the market price of listed companies
securities, securities class-action litigation has often been instituted against
these companies. This kind of litigation, if instituted against us, could
result in substantial costs and a diversion of managements attention and
resources, which would materially adversely affect our business, financial
condition and operating results.

We are highly dependent on our relationships
with our roaming partners.  This
dependence could adversely affect our operating results and growth strategy if
we are unable to maintain our existing relationships or replace them with
alternative relationships on equally favorable terms.

Our results of operations are
highly dependent on our relationships with our roaming partners. The roaming
rates that we receive under our agreements with our roaming partners will
decline over the next several years. As a result, if we are unable to lower our
operating costs or if roaming call volume does not increase, our operating
income may decline.

Our roaming agreements are
short to medium term, including some which are terminable with 30 days written
notice, and may be terminated prior to expiration upon breach of any of the
material terms. When these agreements expire or are terminated, we may be
unable to renegotiate these roaming agreements or to obtain roaming agreements
with other wireless providers, the failure of which could lead to a substantial
decline in our revenues and income.

We have a significant amount of debt, which
may limit our ability to meet our debt service and dividend obligations, to
borrow additional money or to survive a downturn in our business.

We have a significant amount of
debt, which may limit our ability to meet our debt service and dividend
obligations, to borrow additional money or to survive a downturn in our
business. As of December 31, 2000, we had approximately $1.157 billion of consolidated
debt, approximately $449.1 million total liquidation preference of preferred
stock, and consolidated shareholders equity of approximately $79.9 million.
Our current levels of debt could have important consequences to you, including
the following:


  we must use a substantial portion of our cash flows from operations
  to make principal and interest payments on our debt, thereby reducing funds
  that would otherwise be available to us for working capital, capital
  expenditures, future business opportunities, the payment of cash dividends on
  our preferred or common stock and other purposes;
  we may not be able to obtain additional financing for future
  acquisitions, working capital, capital expenditures and other purposes on
  terms favorable to us or at all;
  borrowings under our bank credit facilities are at variable interest
  rates, which could cause us to be vulnerable to increases in interest rates;
  we may have more debt than many of our competitors, which may place
  us at a competitive disadvantage;
  we may have limited flexibility to react to changes in our business;
  and
  our debt service requirements and the terms of our preferred stock
  could prevent us from paying cash dividends on our common stock.We anticipate incurring
additional debt in the future to fund expansion and maintenance of our
business. If we do so, the related risks we and you now face could intensify.

The restrictive covenants in our existing
debt and preferred stock instruments and agreements may limit our ability to
operate our business.

The instruments governing our
debt, including our credit facility and the certificates of designation
governing our preferred stock, impose significant operating and financial
restrictions on us. These restrictions significantly limit, among other things,
our ability and that of our subsidiaries to:


  incur additional debt;
  pay dividends;
  repay junior debt prior to stated maturities;
  sell assets;
  make investments;
  engage in transactions with shareholders and affiliates;
  create liens; and
  engage in some types of mergers or acquisitions.In addition, our credit
facility requires us to maintain specified financial ratios. Substantially all
our assets are or will be subject to liens securing our credit facilities.
These restrictions could limit our ability to obtain future financings, make
needed capital expenditures, withstand a future downturn in our business or the
economy in general, or otherwise conduct necessary corporate activities. Our
failure to comply with these restrictions could lead to a default under the
terms of the relevant debt or a violation of the terms of the preferred stock
even though we are able to meet debt service and dividend obligations.

If there were an event of
default under our credit facility or other debt, the holders of the affected
debt could elect to declare all of that debt to be due and payable which, in
turn, could cause all of our other debt to become due and payable. We cannot
assure you that we and our subsidiaries would have sufficient funds available
to make these payments or that we would be able to obtain sufficient funds from
alternative sources to make these payments. Even if we could obtain additional
financing, we cannot assure you that the terms would be favorable to us. If the
amounts outstanding under our credit facility were accelerated, our lenders
could proceed against our assets and the stock and assets of our subsidiaries.
As a result, any event of default could have a material adverse effect on our
business and financial condition.

We expect to require substantial amounts of
capital in the future.  Our ability to
generate the capital required to meet our obligations and to maintain and
expand our systems depends on many factors beyond our control.  Any failure to raise necessary capital in
the future could materially limit our ability to compete.

We have required, and will
continue to require, substantial capital to develop, expand and upgrade our
wireless systems and those we may acquire. We had capital expenditures of $54.8
million during the year ended December 31, 2000. We have budgeted capital
expenditures for fiscal 2001 of approximately $50.0 million. We may also
require additional financing for future acquisitions, to refinance our debt at
its final maturities, and to meet mandatory redemption provisions on our
preferred stock. Our sources of additional capital may include public and
private equity and debt financings, including vendor financing. The extent of
the additional financing that we may require will depend on the success of our
operations. We may not be able to obtain additional financing on terms
acceptable to us and within the limitations contained in the instruments
governing our debt and our preferred stock, or any future financing
arrangements. Moreover, our issuance of additional equity securities may be
dilutive to our shareholders. If we cannot raise sufficient funds to meet our
planned growth or debt and preferred stock repayment obligations, including
upon a change in control, we may delay or abandon some or all of our planned
expansion or seek to sell assets to raise additional funds, which could
materially limit our ability to compete.

We rely on the use of third-party service
marks.  The loss of, or the failure to
renew, any license to use these service marks could impair our ability to
attract and/or retain customers.

We use various service marks in
our business, some of which we own and some of which we license from third
parties. If any of our licenses with third parties are not renewed upon
expiration, or if we fail to meet the applicable operating or service quality
standards or otherwise lose the rights to use any licensed service marks, our
ability both to attract new customers and to retain existing customers could be
impaired.

We operate in a very competitive business
environment, which can adversely affect our business and operations.

The wireless communications
industry is highly competitive. Many of our competitors and potential
competitors have substantially greater financial, personnel, technical,
marketing, and other resources than we do, as well as other competitive
advantages. Some competitors may market services we do not offer, such as cable
television access or landline local exchange or long distance services.
Competition for customers is based principally upon services and features
offered, technical quality of wireless systems, strength of distribution
channels, customer service, system coverage, capacity, and price.

In each of our cellular markets
we compete with one other cellular licensee and, in many of our service areas,
with providers of personal communications services. To a lesser extent, we also
compete in many of our service areas with dispatch and conventional mobile
telephone companies, resellers of wireless services, paging companies, and
landline telephone service providers. We expect this competition to increase in
the future and we may not be able to compete successfully.

Our business could be materially and
adversely affected by our failure to anticipate and react to frequent and
significant technological changes.

The telecommunications industry
is subject to rapid and significant changes in technology that are evidenced
by:


  the increasing pace of digital upgrades to existing analog wireless
  systems;
  evolving industry standards;
  the availability of new radio frequency spectrum allocations for
  wireless services;
  ongoing improvements in the capacity and quality of digital
  technology;
  shorter development cycles for new products and enhancements;
  developments in emerging wireless transmission technologies; and
  changes in end-user requirements and preferences.We may be required to select in advance one technology over another. At
the time we make our selection, it may be impossible to predict accurately
which technology may prove to be the most economic, efficient or capable of
attracting customer usage. Consequently, it is possible that we may select a
technology that does not achieve widespread commercial success and, as a
result, our business, results of operations and financial condition could be
materially and adversely affected. Moreover, one or more of the technologies
that we currently utilize may become inferior or obsolete at some time in the
future.

Our business is subject to extensive government
regulation.  The applicable legislation
and regulations, and changes to them, could adversely affect our business by
increasing our expenses.  We may also be
unable to obtain regulatory approvals necessary to operate our business.  Any failure to obtain these approvals could
negatively affect our results of operations.

The Federal Communications
Commission regulates the licensing, construction, operation, acquisition, and
sale of our wireless systems, as well as the number of cellular and other wireless
licenses permitted in each of our markets. Changes in legislation and
regulations governing wireless activities and wireless carriers or our loss of
any license or licensed area could have a material adverse effect on our
operations. In addition, some aspects of the Telecommunications Act of 1996
place additional burdens upon us or subject us to increased competition and
increase our costs of doing business.

All of our cellular licenses
are subject to renewal upon expiration of each licenses initial ten-year term.
Grants of cellular renewals are based upon Federal Communications Commission
rules establishing a presumption in favor of licensees that have complied with
their regulatory obligations during the ten-year license period. However, we
cannot assure you that the Federal Communications Commission will grant us any
future renewal applications or that our applications will be free from
challenge.

Equipment failure and natural disasters may
adversely affect our operations.

A major equipment failure or a
natural disaster affecting any of our central switching offices, microwave
links, or cell sites could have a material adverse effect on our operations.
Our inability to operate any portion of our cellular system for an extended
time period could result in a loss of customers or impair our ability to
attract new customers, which would have a material adverse effect on our
business, results of operations, and financial condition.

If wireless handsets pose health and safety
risks, we may be subject to new regulations, and demand for our services may
decrease.

Media reports have suggested
that certain radio frequency emissions from wireless handsets may be linked to
various health concerns, including cancer, and may interfere with various
electronic medical devices, including hearing aids and pacemakers. Concerns
over radio frequency emissions may have the effect of discouraging the use of
wireless handsets, which would decrease demand for our services. In recent
years, the Federal Communication Commission and foreign regulatory agencies
have updated the guidelines and methods they use for evaluating radio frequency
emissions from radio equipment, including wireless handsets. There also are
some safety risks associated with the use of wireless handsets while driving.
Concerns over these safety risks and the effect of any legislation that may be
adopted in response to these risks could limit our ability to market and sell
our wireless service.

Anti takeover provisions could adversely
affect the price of our Class A common stock.

Some of the following
provisions of our Articles of Incorporation, Amended and Restated Bylaws and
Minnesota law could delay or prevent a change of control or a change in
management that holders of Class A common stock may consider beneficial:


  provisions for a classified board of directors;
  provisions for advance notice for director nominations and
  shareholder proposals;
  provisions for supermajority votes to approve mergers or amend
  specified provisions of the Articles and Bylaws; and
  statutory limits regarding share acquisitions and business
  combinations.

We also have adopted a rights plan that could discourage, delay or
prevent an acquisition of RCC at a premium price. The rights plan provides for
preferred stock purchase rights attached to each share of our common
stock which will cause substantial dilution to a person or group acquiring 15%
or more of our stock if the acquisition is not approved by our board of
directors.

In addition, the documents
governing our indebtedness contain limitations on our ability to enter into a
change of control transaction. Under these documents, the occurrence of a
change of control transaction, in some cases after notice and grace periods,
would constitute an event of default permitting acceleration of the
indebtedness

We are subject to limitations on our ability
to pay cash dividends on and repurchase or otherwise satisfy our obligations
under our senior exchangeable preferred stock and junior exchangeable preferred
stock. As a result, if we do not satisfy these obligations, we may be in
default under our existing debt, and the holders of these series of preferred
stock may have the right to elect directors to our board of directors.

Our ability to pay cash
dividends and to redeem the senior exchangeable preferred stock and junior
exchangeable preferred stock or repurchase the exchange debentures when
required is substantially restricted under various covenants contained in
documents governing our outstanding preferred stock and our debt. In addition,
under Minnesota law, we can pay dividends on or redeem our capital stock,
including the senior exchangeable preferred stock and the junior exchangeable
preferred stock, only if our board of directors determines that we will be able
to pay our debts in the ordinary course of business after paying the dividends
or completing the redemption. We cannot predict what the value of our assets or
the amount of our liabilities will be in the future. Accordingly, we cannot
assure you that we will be able to:


  pay cash dividends on the senior exchangeable preferred stock or
  junior exchangeable preferred stock;
  redeem the senior exchangeable preferred stock or junior exchangeable
  preferred stock in the event of a change of control or otherwise; or
  exchange the senior exchangeable preferred stock or the junior
  exchangeable preferred stock for exchange debentures.If we fail to comply with the
terms of the senior exchangeable preferred stock or the junior exchangeable
preferred stock, the holders of these series of stock will each have the right
to elect directors to our board. In addition, the failure to comply could
constitute an event of default under our existing debt. As a result, the
lenders of this debt could accelerate payment of all amounts owing under the
debt.

(a)      General Development of Business

We are a cellular operator in
the United States, primarily in rural markets, covering a total cellular
population of approximately 5.0 million and serving 558,000 cellular customers
as of December 31, 2000, on a pro forma basis after giving effect to our
January 2001 acquisition of the licenses, operations, and related assets of
Saco River Telegraph and Telephone Company (Saco River). We currently provide
cellular communications services in four regional clusters operating in 12
states. We also own a 70% interest in Wireless Alliance, LLC, which provides
personal communications services covering a total population of approximately
708,000 and serving 16,000 customers.

Our markets generally are
characterized by concentrations of small businesses, vacation destinations,
and, given the distance between population centers, substantial travel time. We
operate our wireless systems using a decentralized management approach, which
allows us to achieve marketing and distribution benefits, as well as operating
efficiencies. This decentralized management approach allows us to develop a
local presence in the communities we serve, which enhances our competitive
position and allows us to tailor our products and services to meet our
customers specific needs. In addition, where appropriate, we share our service
programs and operating practices among our various markets.

In January 2001, we completed
the acquisition of the cellular licenses, operations, and related assets of
Saco River. Saco River provides wireless services under the name StarCellular
in the Portsmouth, NH cellular service area, which includes 284,000 POPs
(population served) covering approximately 1,000 square miles. Saco River is
operated under the RCC Northeast Region. This is the latest in a series of
acquisitions, which have included:


  Triton Cellular Partners, L.P., covering portions of Alabama, Kansas,
  Mississippi, Oregon, and Washington, in April 2000;
  Glacial Lakes Cellular, covering a portion of South Dakota adjacent
  to our Minnesota markets, in February 1999;
  Western Maine Cellular, covering a portion of Maine adjacent to our
  then existing Maine markets, in August 1998;
  Atlantic Cellular, covering Vermont and portions of Massachusetts,
  New Hampshire, and New York, in July 1998; and
  Unity Cellular, covering portions of Maine, in May 1997.We have invested capital and
resources to enhance the quality of our networks, expand our geographic
footprint, and broaden our service offerings. As a result of our network
investments, customers benefit from a high level of both regional and local
hand-held coverage, minimal call blocking and dropped calls, seamless call
delivery and hand-off, and the availability of expanded digital services. We offer
digital services, including caller identification, short message services, and
numeric paging, as well as other ancillary services including voicemail and
call waiting. Digital services are available in all of our markets.  As of December 31, 2000, approximately 33%
of our cellular wireless customers are using digital handsets whose digital
features can be utilized in approximately 90% of our service areas.

The following chart summarizes
our existing wireless systems as of December 31, 2000 and the systems covered
by the Saco River acquisition:

Regions
  Percentage Ownership
  Total Population Served (POPs)(1)
  Voice Customers (2)
  Penetration % (2)
  Square Miles
  Location by StateCellular Clusters:Midwest
  100%
  705,000
  89,306
  12.7
  45,000
  MN, SDNortheastMaine
  100%
  595,000
  67,701
  11.4
  24,000
  MEAtlantic
  100%
  1,110,000
  112,027
  10.1
  21,000
  MA, NH, NY, VTSaco River (3)
  100%
  284,000
  21,704
  7.6
  1,000
  ME, NHSouth
  100%
  1,435,000
  113,994
  7.9
  71,000
  AL, KS, MSNorthwest
  100%
  890,000
  153,229
  17.2
  81,000
  OR, WACellular Total
  
  5,019,000
  557,961
  11.8
  243,000PCS Cluster:Wireless Alliance
  70%
  708,000
  15,865
  2.2
  19,000
  MN, ND, SD, WITotal
  
  5,727,000
  573,826
  10.0
  262,000(1) 1990 U.S. census figures,
updated for the July 1, 1997 estimates of the U.S. Census Bureau.
(2) Customer numbers exclude paging and long distance customers.
(3) The acquisition of Saco River was effective on January 1, 2001.



(b)      Financial Information about Segments

The companys business consists
of one segment, the operations of wireless communication systems in the United
States.

(c)      Description of Business/Service Areas

Marketing of Products and Services

We have developed our marketing
strategy on a market-by-market basis and offer service plan options to our
customers tailored to address their specific needs and to encourage cellular
usage. Most service plans have a fixed monthly access fee, which includes a
specified number of minutes, and incremental fees for enhanced services. As a
result of our focus on innovative marketing strategies as well as the upgrade
of our networks to digital capability, we are able to offer our customers a
wide array of enhanced services on an individual or bundled basis. We believe
these services stimulate demand for wireless usage and increase customer
loyalty. These services include the following:


  Caller ID Allows
  a customer to see the phone number and name of the calling party before
  answering the call or after not answering a call.
  Short Message Service
   Allows a customer to receive text messages or content messages.
  Numeric Paging
  Allows calling parties to leave a phone number rather than a voice message.
  Visual Message NotificationAllows
  a customer to know that a text or voice message has been received by
  displaying an icon on the customers phone.
  Group Ring
  Allows a customer to have multiple phones ring simultaneously when a single
  cellular phone number is called.
  Add-A-LineAllows
  an additional phone to be included on a single account for a flat fee,
  permitting a customer to share the service plan minutes.
  Voicemail Allows
  a customer to receive and retrieve voicemail.
  Regional Personal Toll-Free Number
  Provides a customer with a regional personal toll-free number, which
  encourages customers to distribute their cellular numbers and keep their
  telephones turned on to accept incoming calls.
  Nationwide Calling Option
  Allows a customer to pay a flat fee for all long distance calls made from our
  service areas.
  Phone Service
  Allows customers the option to rent handsets for a nominal monthly charge.
  This service reduces customers concerns regarding equipment obsolescence and
  enables us to better compete with our competitors free telephone offers.
  Paging Services
  Marketed both through our own system, covering northern Minnesota and eastern
  North Dakota, and as a reseller of paging services covering most of our other
  service areas.  We market our paging
  services as part of our bundled service offerings.
  Voice Activated Dialing
  Marketed to provide unique speech recognition services to wireless customers.
  These services, which include voice activated dialing, require no extra
  equipment for the customer to buy or install and overlays on their existing
  wireless service as a voice alternative to touchtone.In addition to tailoring our service plans based on features and
minutes of use, we also offer our customers regional calling plans and roaming
packages that allow our customers to pay home usage rates while traveling
within specified regional zones, both in and outside of our cellular service
areas. We have also established preferred roaming contracts and developed
system integration with adjacent cellular carriers, which permit our customers
to receive automatic call delivery, call forwarding, toll-free access to
voicemail, call hand-off, and reduced roaming rates nationwide.

Roaming is an integral
component of our service offerings to our customers and allows us to generate
incremental revenue from our cellular properties. We currently have roaming
agreements with AT&T Wireless, Verizon Communications, Voicestream Wireless
Corporation, and others. AT&T and Verizon contribute approximately 50% and 20%,
respectively, of our total outcollect roaming minutes of use (MOUs). We have
structured our roaming agreements to enable us to provide expanded network
access to our customers both regionally and nationally and provide roaming
rates based upon factors such as network coverage, feature functionality, and
number of customers. By establishing these relationships we are able to provide
expanded services to our customers that address their lifestyle patterns. For
the periods ended December 31, 2000, 1999 and 1998, roaming revenues accounted
for 27.7%, 24.5% and 17.4% of our total revenues, respectively.

We also have agreements with
the North American Cellular Network, which is the largest wireless telephone
network system in the world, linking cellular operators throughout the United
States and Canada and enabling customers to use their cellular phones to place
and receive calls in these areas as easily as they do in their home areas.
Through North American Cellular Network, customers are able to receive calls
automatically without the use of complicated roaming codes as they roam in more
than 5,000 cities and towns in the United States and Canada. In addition, North
American Cellular Network enables special services such as call forwarding and
call waiting to automatically follow customers as they travel.

Service Marks

We believe we obtain marketing
benefits from name recognition associated with our widely used service marks,
both with existing customers traveling outside of our service areas and with
potential new customers moving into our service areas. The following is a
summary of brand names used to market our services in our different regions.

Region
  Wireless Voice
  Paging
  Long DistanceNortheastMaine
  UNICEL®
  UNICEL Paging Service®
  N/AAtlantic
  CELLULARONE®
  PAGING by CELLULARONE®
  LONG DISTANCE by CELLULARONE®Saco River
  StarCellular®
  N/A
  SimplyOne®Midwest
  CELLULAR 2000®, UNICEL®
  KEYPAGE®
  N/ANorthwest
  CELLULARONE®
  N/A
  N/ASouth
  CELLULARONE®
  N/A
  N/AThe CELLULAR 2000® name and
related marks are owned by Cellular 2000, Inc., of which we currently own a 50%
interest. The only business of Cellular 2000, Inc. is the licensing of its
service mark to its shareholders. We do not pay any license fees for the use of
the CELLULAR 2000® mark.

The UNICEL®, StarCellular® and
SimplyOne® marks are owned by Rural Cellular Corporation.

The CELLULARONE® mark is owned
by the Cellular One Group, and we use the CELLULARONE® service mark pursuant to
licensing agreements with the Cellular One Group.

Distribution and Sales

We market our wireless services
through independent sales agents, direct sales personnel and Company-owned
retail locations. All sales personnel are managed by district and territory
managers. We believe that our territory manager strategy is a major contributor
to our success because the territory manager is able to tailor the distribution
strategy to meet the needs of each local market.

We have a Company-wide
distribution plan that establishes high standards and distribution guidelines
for our territory managers. The territory managers make distribution decisions
based upon specific distribution plans and analyses that are specific to their
markets. We utilize the following distribution channels:




  direct sales through:
  retail stores that we operate and staff with our employees. These
  stores are primarily located in our more densely populated markets.  As of December 31, 2000, we had 80 of
  these stores. Our retail stores provide an established Company presence and
  promote retail customer sales and service; and
  account executives who are our employees and focus on business and
  major account sales and service; and
  indirect sales through independent sales agents. Our independent
  sales agents are established businesses in their communities and may include
  retail electronics stores, farm implement dealers, automobile dealers,
  automobile parts suppliers, college and university bookstores, video and
  music stores, and local telephone companies. Most of the agents sell our
  service in conjunction with their principal business. We provide cellular,
  digital, and paging equipment to the agents for sale or rent to customers,
  and the agents market our services utilizing a cooperative advertising
  program.Each territory manager is
responsible for recruiting, training, and supporting sales personnel for each
distribution channel in a specific geographic market. The training and support
provided to sales personnel is extensive and continuous. In addition,
individuals who have customer contact are required to complete a certification
process annually in order to maintain a consistent level of customer service
and product knowledge in all regions. As a result of this certification
process, we believe that our ability to increase market penetration and
maintain high customer retention rates is significantly enhanced.

Customer Service

Our service centers are located
in Alexandria, Minnesota; Colchester, Vermont; Bangor, Maine; Enterprise,
Alabama; Bend, Oregon; and Walla Walla, Washington. Our customer service
centers can be accessed 24 hours a day, 365 days a year, and are capable of
handling both routine and complex technical questions. The customer service
centers are also responsible for processing new service orders and service changes
for existing customers and maintaining customer records.

Network Operations

CellularWe develop and build our
cellular service areas in response to customer demand by adding channels to
existing cell sites and by building new cell sites to increase coverage and
capacity. Where appropriate, we also upgrade acquired properties to enable us
to provide similar quality service over our entire network. We expect to
continue our cellular system expansion where necessary to add and retain
customers, enhance customer usage on our systems, and increase roaming traffic.
We also enhance our systems through scalable network equipment, cell site
splitting, cell site sectorization, and digital upgrades of our systems. In
addition to the customer quality aspects, these enhancements generally provide
improved network system performance and efficiency of operations.

Including Saco River, our
cellular network consisted of 592 cell sites as of December 31, 2000. We will
continue to develop our cellular service area by building new cell sites in
locations that increase capacity and improve coverage. In 2000 we added 272
sites through the acquisition of Triton Cellular while adding an additional 33
sites through lease or construction. We plan to lease and purchase additional
cell sites during 2001. The additional cell sites will further expand capacity
and will allow customers to use lower-powered or hand-held portable telephones
throughout our service areas and network.

We have chosen time division multiple access as the primary
digital standard for our cellular system enhancements. Time division multiple
access (TDMA) is the digital standard adopted and certified by the Cellular
Telecommunications Industry Association and is a digital technology deployed by
AT&T. With TDMA technology our customers phones have digital compatibility
with other cellular systems using TDMA service, like AT&T, which further
enhances our customers ability to roam. 
Further, the built-in intelligence of digital handsets allows RCC to
better control the cost we incur from our customers roaming on other carriers
networks.

Our Saco River service area
utilizes Code Divisional Multiple Access (CDMA).  Several alternatives are being explored regarding the integration
of Saco Rivers digital network with our TDMA based service areas in Maine.

At December 31, 2000 our
consolidated wireless voice network (including the Saco River regions), has
14,425 channels available for customer use, of which 6,027 are digitally
capable.

Wireless AllianceAt December 31, 2000, Wireless
Alliance had 62 cell sites. Wireless Alliance has a global system for mobile
technology-based personal communications services network (GSM). Wireless
Alliance utilizes Voicestream Wireless Corporations switch to switch personal communication
services calls and Verizon Communications networks to transport its resale of
cellular airtime within these markets.

Paging

As of December 31, 2000, our
paging network consisted of 54 paging transmitters located throughout northern
Minnesota and eastern North Dakota. The paging transmitters are connected to
and controlled by a paging terminal that is connected to the public telephone
network. The paging transmitters use a transmit-only radio frequency licensed
for a given coverage contour around the paging transmitter that allows messages
to be broadcast to the paging customer. Through our wholly owned subsidiary,
RCC Paging, Inc., we hold licenses granted by the Federal Communications
Commission for paging and radiotelephone service on the radio common carrier
frequency of 158.100 megahertz.

Licenses Not Built Out

Currently we own, but have not
yet developed operating plans for, several additional wireless licensed
properties. These wireless licenses include both local multi-point distribution
system and personal communications services spectrum.


  Our local multi-point distribution system licensed properties cover
  approximately 2.6 million POPs and either overlap or are adjacent to our
  cellular systems. We currently plan to use a portion of the local multi-point
  distribution system licenses for testing new products, services and systems.
  We will then conduct market research on these products and services to
  determine whether to introduce them in our existing markets.
  In 1999 we acquired a personal communications services basic trading
  area license for a market adjacent to our Midwest region that covers 277,000
  POPs.  As part of the acquisition of
  Triton Cellular in 2000, we acquired four additional basic trading area
  (BTA) licenses which primarily overlap in the Northwest region and cover
  482,000 POPs. We are developing a strategy that will determine how best to
  use this undeveloped  spectrum.
  As part of the January 2001 acquisition of Saco River, we acquired
  PCS licenses for two additional BTAs 
  covering 1.1 million POPs inPortland, ME and Manchester, NH.Suppliers and
Equipment PartnersWe do not manufacture any
customer or network equipment. The high degree of compatibility among different
manufacturers models of handsets and network facilities equipment allows us to
design, supply, and operate our systems without being dependent upon a single
source of equipment. We currently purchase handsets primarily from Motorola,
Inc., Ericsson, Inc. and Nokia Telecommunications, Inc. We currently purchase
network equipment from Northern Telecom, Inc., Lucent Technologies Inc.,
Harris, Inc., Nokia Telecommunications, Inc., Alcatel, Erickson, Inc. and
Motorola, Inc.

Information regarding RCCs
service areas is set forth in the following table.

Built Out Voice
License Summary

% Ownership
  POPs
  License
  Spectrum
  Date of AcquisitionCellularMidwest:Minnesota RSA 1
  100%
  50,000
  Cellular - B side
  25 MHTZ
  04/01/91Minnesota RSA 2
  100%
  64,000
  Cellular - B side
  25 MHTZ
  04/01/91Minnesota RSA 3
  100%
  59,000
  Cellular - B side
  25 MHTZ
  04/01/91Minnesota RSA 5
  100%
  206,000
  Cellular - B side
  25 MHTZ
  04/01/91Minnesota RSA 6
  100%
  257,000
  Cellular - B side
  25 MHTZ
  04/01/91South Dakota
  RSA 4
  100%
  69,000
  Cellular - B side
  25 MHTZ
  02/01/99Total
  Midwest
  
  705,000Northeast:Maine, Bangor
  MSA
  100%
  143,000
  Cellular - B side
  25 MHTZ
  05/01/97Maine, RSA 1
  100%
  83,000
  Cellular - B side
  25 MHTZ
  07/31/98Maine, RSA 2
  100%
  148,000
  Cellular - B side
  25 MHTZ
  05/01/97Maine, RSA 3
  100%
  221,000
  Cellular - B side
  25 MHTZ
  05/01/97Massachusetts
  RSA 1
  100%
  71,000
  Cellular - A side
  25 MHTZ
  07/01/98New Hampshire, Portsmouth MSA
  100%
  284,000
  Cellular - B side
  25 MHTZ
  01/01/01New Hampshire
  RSA 1
  100%
  223,000
  Cellular - A side
  25 MHTZ
  07/01/98New York RSA 2
  100%
  226,000
  Cellular - A side
  25 MHTZ
  07/01/98Vermont,
  Burlington MSA
  100%
  148,000
  Cellular - A side
  25 MHTZ
  07/01/98Vermont RSA 1
  100%
  210,000
  Cellular - A side
  25 MHTZ
  07/01/98Vermont RSA 2
  100%
  232,000
  Cellular - A side
  25 MHTZ
  07/01/98Total
  Northeast
  
  1,989,000South:Alabama RSA 3
  100%
  137,000
  Cellular - A side
  25 MHTZ
  04/01/00Alabama RSA 4
  100%
  142,000
  Cellular - A side
  25 MHTZ
  04/01/00Alabama RSA 5
  100%
  214,000
  Cellular - A side
  25 MHTZ
  04/01/00Alabama RSA 7
  100%
  169,000
  Cellular - A side
  25 MHTZ
  04/01/00Kansas RSA 1
  100%
  27,000
  Cellular - A side
  25 MHTZ
  04/01/00Kansas RSA 2
  100%
  30,000
  Cellular - A side
  25 MHTZ
  04/01/00Kansas RSA 6
  100%
  19,000
  Cellular - A side
  25 MHTZ
  04/01/00Kansas RSA 7
  100%
  79,000
  Cellular - A side
  25 MHTZ
  04/01/00Kansas RSA 11
  100%
  86,000
  Cellular - A side
  25 MHTZ
  04/01/00Kansas RSA 12
  100%
  44,000
  Cellular - A side
  25 MHTZ
  04/01/00Kansas RSA 13
  100%
  29,000
  Cellular - A side
  25 MHTZ
  04/01/00Mississippi RSA
  1
  100%
  173,000
  Cellular - A side
  25 MHTZ
  04/01/00Mississippi RSA
  3
  100%
  158,000
  Cellular - A side
  25 MHTZ
  04/01/00Mississippi RSA
  4
  100%
  128,000
  Cellular - A side
  25 MHTZ
  04/01/00Total
  South
  
  1,435,000Northwest:Oregon RSA 3
  100%
  151,000
  Cellular - A side
  25 MHTZ
  04/01/00Oregon RSA 4
  100%
  228,000
  Cellular - A side
  25 MHTZ
  04/01/00Oregon RSA 6
  100%
  200,000
  Cellular - A side
  25 MHTZ
  04/01/00Washington RSA
  2
  100%
  132,000
  Cellular - A side
  25 MHTZ
  04/01/00Washington RSA
  3
  100%
  58,000
  Cellular - A side
  25 MHTZ
  04/01/00Washington RSA
  8
  100%
  121,000
  Cellular - A side
  25 MHTZ
  04/01/00Total
  Northwest
  
  890,000Total Cellular
  
  5,019,000Wireless Alliance (PCS)Duluth, Minnesota/Superior,
  Wisconsin  BTA 119:
  70%
  270,000
  PCS  B Block
  20 MHTZ
  04/10/97Cook, Lake, St. Louis and Carlton (portion)
  Counties in Minnesota and Douglas County in WisconsinFargo, North Dakota/Moorhead,
  Minnesota BTA 166:
  70%
  175,000
  PCS  B Block
  20 MHTZ
  04/10/97Cass and Trail Counties in North Dakota and
  Clay County in MinnesotaGrand Forks, North Dakota BTA 166:
  70%
  102,000
  PCS  B Block
  20 MHTZ
  04/10/97Grand Forks County in North Dakota and Polk
  County in MinnesotaSioux Falls, South Dakota BTA 422:
  70%
  161,000
  PCS  B Block
  20 MHTZ
  11/06/97Minnehaha and Lincoln Counties in South
  DakotaTotal PCS
  
  708,000Total
  
  5,727,000Unbuilt Voice License
Summary

% Ownership
  Pops
  License
  Spectrum
  Date of AcquisitionMidwestSt. Cloud, MN
  BTA 391
  100%
  281,000
  PCS  C Block
  30 MHTZ
  07/01/99NortheastManchester & Nashua, NH  BTA 274
  100%
  583,000
  PCS  F Block
  10 MHTZ
  01/01/01Portland, Maine BTA 357
  100%
  497,000
  PCS  F Block
  10 MHTZ
  01/01/01NorthwestBend, OR BTA
  038
  100%
  144,000
  PCS  D Block
  10 MHTZ
  04/01/00Klamath Falls,
  OR BTA 231
  100%
  83,000
  PCS  D Block
  10 MHTZ
  04/01/00Roseberg, OR
  BTA 385
  100%
  103,000
  PCS  D Block
  10 MHTZ
  04/01/00Medford, OR BTA
  288
  100%
  264,000
  PCS  D Block
  10 MHTZ
  04/01/001,955,0007,682,000

Local Multipoint
Distribution Service (LMDS) License Summary

Market
  % Ownership
  Call Sign
  Spectrum
  Date of AcquisitionBrainerd, MN, BTA 054-A
  100%
  WPOK 264
  27.5 GHTZ
  08/09/99Burlington, VT BTA 063-A
  100%
  WPOK 265
  27.5 GHTZ
  08/09/99Duluth, MN BTA 119-A
  100%
  WPOK 266
  27.5 GHTZ
  08/09/99Eau Claire, WI BTA 123-A
  100%
  WPOK 267
  27.5 GHTZ
  08/09/99Fergus Falls, MN BTA 142-B
  100%
  WPOK 274
  31.3 GHTZ
  08/09/99Glens Falls, NY BTA 164-A
  100%
  WPOK 268
  27.5 GHTZ
  08/09/99Keene, NH BTA 227-A
  100%
  WPOK 269
  27.5 GHTZ
  08/09/99La Crosse,WI-Winona, MN BTA 234-A
  100%
  WPOK 270
  27.5 GHTZ
  08/09/99Lebanon-Claremont, NH BTA 249-A
  100%
  WPOK 271
  27.5 GHTZ
  08/09/99Mankato-Fairmont, MN BTA 277-B
  100%
  WPOK 275
  31.3 GHTZ
  08/09/99Plattsburgh, NY BTA 352-A
  100%
  WPOK 272
  27.5 GHTZ
  08/09/99Rochester-Austin-Albert Lea, MN BTA 378-B
  100%
  WPOK 276
  31.3 GHTZ
  08/09/99Rutland-Bennington, VT BTA 388-A
  100%
  WPOK 273
  27.5 GHTZ
  08/09/99Source:  Updated for July 1, 1997 estimates, 1990 U.
S. Census Bureau Official Statistics.



Competition

We compete primarily against
one other cellular carrier in each of our markets and also compete with a
number of personal communications services providers and enhanced specialized
mobile radio service providers. We compete for customers based on wireless
system coverage and quality, service value equation (minutes and features over
price), local market presence, digital voice and features, customer service,
distribution strength, and name brand recognition. Some competitors also market
other services, such as long distance, landline local exchange, and Internet
access service, with their wireless telecommunication service offerings. Many
of our competitors have been operating for a number of years, currently serve a
substantial customer base, and have significantly greater financial, personnel,
technical, marketing, sales, and distribution resources than we do.

The following table highlights
our competitors on a market-by-market basis:

Region
  Cellular Competition
  PCS / ESMR CompetitionCellularMidwest:Minnesota RSA 1 and 2
  Western
  Wireless Corporation
  Cellular
  Mobile Systems of St. Cloud ("CMS")Minnesota RSA 3, 5 and 6
  American
  Cellular Corporation
  WirelessNorth,
  L.L.C., CMSSouth Dakota RSA 4
  Western
  Wireless Corporation
  Sprint PCSNortheast:Maine, Bangor MSA, RSA 1, 2 3
  United
  States Cellular Corporation
  N/APortsmith, NH MSA
  Verizon
  Communications, AT&T Wireless
  Sprint PCS,
  Nextel Communications, Inc.Massachusetts RSA 1
  Cingular
  Wireless
  N/ANew Hampshire RSA 1
  United
  States Cellular Corporation
  N/ANew York RSA 2
  Verizon
  Communications
  N/AVermont, Burlington MSA, RSA 1
  Verizon
  Communications
  N/AVermont, RSA 2
  Verizon
  Communications, United States Cellular Corporation
  N/ASouth:Alabama RSA 3
  Cingular
  Wireless
  VoiceStream
  Wireless CorporationAlabama RSA 4
  ALLTEL
  Corporation
  VoiceStream
  Wireless Corporation, Pine Belt WirelessAlabama RSA 5
  ALLTEL
  Corporation, Cingular Wireless, Public Service Telephone
  VoiceStream
  Wireless Corporation, Nextel Communications, Inc.Alabama RSA 7
  ALLTEL
  Corporation
  VoiceStream
  Wireless Corporation, Sprint PCS GroupKansas RSA 1, 2, 6, 7, 12 and 13
  ALLTEL
  Corporation
  Westlink
  Communications (1,2,6,7,12)Kansas RSA 11
  ALLTEL
  Corporation
  PanHandle
  Telecommunications Systems, Inc.Mississippi RSA 1 and 4
  Cingular
  Wireless, Cellular Telepak, Inc.
  VoiceStream
  Wireless Corporation, Telecorp PCS, Inc.Mississippi RSA 3
  Cellular
  Telepak, Inc
  VoiceStream
  Wireless Corporation, Telecorp PCS, Inc.Northwest:Oregon RSA 3
  United
  States Cellular Corporation
  N/AOregon RSA 4
  Verizon
  Communications
  VoiceStream
  Wireless Corporation, Sprint PCS, Qwest, Nextel Communications, Inc.Oregon RSA 6
  United
  States Cellular Corporation
  Sprint PCS,
  Nextel Communications, Inc.Washington RSA 2 and 3
  Verizon
  Communications
  N/AWashington RSA 8
  Inland
  Cellular
  N/APCSWireless Alliance:Duluth, Minnesota / Superior,
  Wisconsin
  Verizon
  Communications
  WirelessNorth,
  L.L.C., Sprint PCS, Nextel Communications, Inc.Fargo, North Dakota / Moorhead,
  Minnesota; Grand Forks, North Dakota
  Western
  Wireless Corporation
  WirelessNorth,
  L.L.C., Sprint PCSSioux Falls, South Dakota
  Western
  Wireless Corporation, Verizon Communications.
  Sprint PCS,
  Nextel Communications, Inc

The telecommunications industry is experiencing significant
technological changes, as evidenced by the increasing pace of improvements in
the capacity and quality of digital technology, shorter cycles for new
products and enhancements, and changes in consumer preferences and
expectations. Accordingly, with the entrance of new competitors and the
development of new technologies, products, and services, competition in the
wireless telecommunications industry has been dynamic and intense.

In the future, we expect to
face increased competition from entities holding licenses for personal
communications services spectrum not yet operating in our markets. We believe
that personal communications services networks will continue to be focused
primarily in urban areas due to capital and population coverage requirements.
The Federal Communications Commission has issued licenses for both narrowband
and broadband personal communications services, and six broadband licenses were
issued in each of our cellular service areas. Narrowband personal
communications services typically are advanced paging and messaging services.
Broadband personal communications services consist of wireless two-way
telecommunications services for voice, data, and other transmissions employing
digital micro-cellular technology. Many broadband personal communications
services compete with existing cellular systems. Under recent Federal
Communications Commission rulings, license holders are allowed to disaggregate
the spectrum covered by their license. Accordingly, we may face competition
from additional providers of personal communications services if the Federal
Communications Commission approves a disaggregation of spectrum for any license
for personal communications services in one of our service areas, or if any C
Block licensee elects to surrender, pursuant to a special Federal
Communications Commission program, 15 megahertz of its 30 megahertz license. In
addition, the Omnibus Budget Reconciliation Act of 1993 requires, among other
things, the allocation to commercial use of a portion of 200 megahertz of the
spectrum currently reserved for government use. It is possible that some
portion of the spectrum that is reallocated will be used to create new
land-mobile services or to expand existing land-mobile services. Further, the
Federal Communications Commission has announced plans to auction licenses in
the 39 gigahertz spectrum and 700 megahertz spectrum that may be used for
wireless communications.

Specialized mobile radio and
other private radio systems, such as those generally used by local dispatch,
fleet services, and other communications services that have the technical
capability to handle mobile telephone calls, including interconnection to the
landline telephone network, may provide competition in some markets. In
addition, enhanced specialized mobile radio systems may compete with cellular
service by providing high quality digital communication technology, lower
rates, enhanced privacy, and additional features such as paging, particularly
in metropolitan areas.

We also compete to a lesser
extent with resellers, landline telephone service providers, fixed wireless
services, and satellite-based telecommunications systems. The Federal
Communications Commission requires all cellular and personal communications
services licensees to provide service to "resellers." A reseller
provides wireless services to customers but does not hold a Federal Communications
Commission license and might not own facilities. Instead, the reseller buys
blocks of wireless telephone numbers and capacity from a licensed carrier and
resells service through its own distribution network to the public. Thus, a
reseller is both a customer of a wireless licensees service and also a
competitor of that licensee. Several small resellers currently operate in
competition with our systems.

We anticipate that market
prices for wireless communications service and equipment will continue to decline
in the future based upon increased competition and cost reductions. Our ability
to compete successfully is dependent, in part, on our ability to anticipate and
respond to various competitive factors affecting the industry. Our marketing
and sales organization includes a group that carefully monitors and analyzes
competitive product and service offerings, changes in consumer preferences,
changes in demographic trends and economic conditions, and pricing strategies
by competitors that could adversely affect our operations or present strategic
opportunities.

We believe that we are strategically positioned to compete with other
communications technologies that now exist and with cellular and paging
resellers. Continuing technological advances in telecommunications and
Federal Communications Commission policies that encourage the development of
new spectrum-based technologies make it difficult, however, to predict the
extent of future competition.

Legislation and Regulation

The following summary of regulatory
developments and legislation does not purport to describe all present and
proposed federal, state, and local legislation and regulation affecting the
telecommunications industry. Other existing federal and state legislation and
regulations are currently the subject of judicial proceedings, legislative
hearings, and administrative proposals which could change, in varying degrees,
the manner in which this industry operates. Neither the outcome of these
proceedings nor their impact upon us or the telecommunications industry in
general can be predicted at this time.

Overview

Our services are subject to
varying degrees of federal, state, and local regulation. The Federal
Communications Commission exercises jurisdiction over all facilities of, and
services offered by, telecommunications common carriers, to the extent those
facilities are used to provide, originate or terminate interstate or
international communications. State regulatory commissions retain jurisdiction
over most of the same facilities and services to the extent they are used to
originate or terminate intrastate communications. In addition, many of the
regulations issued by these regulatory bodies may be subject to judicial
review, the result of which review we are unable to predict.

Federal
Regulation

We must comply with the
applicable requirements of the Communications Act of 1934, which was amended by
the Telecommunications Act of 1996. The 1996 Act effected plenary changes in
regulation at both the federal and state levels that affect virtually every
segment of the telecommunications industry. The stated purpose of the 1996 Act
is to promote competition in all areas of telecommunications and to reduce
unnecessary regulation to the greatest extent possible.

The 1996 Act greatly expands
the Federal Communications Commissions interconnection requirements for
incumbent local exchange carriers by requiring them to:

         provide physical co-location;

         unbundle and provide access to components of their local
service networks to other providers of local service; and

         establish wholesale rates for the services they offer at
retail.

The 1996 Act also requires all
local exchange carriers to:

         establish number portability;

         establish dialing parity; and

         provide nondiscriminatory access to telephone poles, ducts,
conduits, and rights-of-way.

In addition, the 1996 Act
requires local exchange carriers to compensate telecommunications carriers for
traffic originated by the local exchange carriers and terminated on the other
carriers networks. The 1996 Act requires all telecommunications carriers,
including RCC, to provide interconnection upon reasonable request.

Local exchange carriers are
required to negotiate in good faith with carriers requesting any of the above
arrangements. If a requesting carrier and the local exchange carrier cannot
reach an agreement within the prescribed time, either carrier may request
binding arbitration by the appropriate state commission. Where an agreement
cannot be reached, carriers remain subject to the interconnection obligations
established by the Federal Communications Commission and state
telecommunications regulatory commissions.

The Federal Communications Commission is charged with establishing
national guidelines to implement the 1996 Act. The Federal Communications Commission
issued its interconnection orders on August 8, 1996, which established detailed
rules regarding rates, terms, and conditions for interconnection between
telecommunications carriers and local exchange carriers and regarding the
implementation of dialing parity. The interconnection orders were appealed to
the U.S. Court of Appeals for the Eighth Circuit. On July 18, 1997, the Eighth
Circuit issued a decision vacating many of the interconnection pricing rules
and the "most favored nation" rule as well as other interconnection
rules on jurisdictional grounds. The Eighth Circuit affirmed some rules as they
pertain to commercial mobile radio service providers. Several parties appealed
the Eighth Circuit decision to the United States Supreme Court. In January 1999
the Supreme Court reversed the Eighth Circuits decision and reinstated the
Commissions pricing rules. The Supreme Court is currently considering
challenges to the Eighth Circuits most recent decision regarding the Federal
Communications Commissions pricing rules. 
In addition, in July 2000, the Federal Communications Commission
adopted an order denying requests for mandatory interconnection between
resellers switches and commercial mobile radio providers networks and
declining to impose general interconnection obligations between such
networks.  Negotiated interconnection
agreements are subject to state approval and various rules of the Federal
Communications Commission, some of which are subject to pending regulatory
proceedings or court review.  The
states regulatory commissions must consider applications for approval in a
manner consistent with the terms of the Communications Act of 1934, as
amended.  The Federal Communications
Commissions rules as well as the state arbitration proceedings will directly
impact the nature and cost of the facilities necessary for interconnection of
our wireless systems with local, national and international telecommunications
networks.  The agreements will determine
the nature and amount of revenues we can receive for terminating calls
originating on the networks of local exchange and other telecommunications
carriers.

Since some of the 1996 Acts
interconnection requirements apply to all providers of telecommunications
services, including us, it may provide us with the ability to reduce our own
access costs by interconnecting directly with non-incumbent local exchange
carriers, but may also cause us to incur additional administrative and
regulatory expenses in replying to interconnection requests.

The Federal Communications
Commission also regulates the construction, operation, and acquisition of
commercial mobile radio service systems in the United States. Cellular and
personal communications services operate under licenses granted by the Federal
Communications Commission within a specified market area. Paging licenses
historically were granted for generally smaller areas, based upon the area
served by a particular facility. The Federal Communications Commission has
adopted rules pursuant to which paging systems will be licensed on a
market-wide basis in the future. An auction of certain paging spectrum has been
scheduled to commence on June 26, 2001. 
There is an application freeze in place with respect to paging services
pending the implementation of the market area licensing scheme.  The current application freeze and proposed
transition to a market area based licensing scheme for paging services may
hinder our ability to modify existing facilities and secure authorization for
additional facilities. The licenses are generally transferable, subject to
specified limitations prescribed by the Federal Communications Commission.

Near the conclusion of the initial term of a cellular, personal
communications services, or paging license, licensees must file applications
for renewal of licenses to obtain authority to operate for up to an additional
ten-year term. Applications for license renewal may be denied if the Federal
Communications Commission determines that the renewal would not serve the
public interest, convenience, or necessity. The Federal Communications
Commission also may revoke a license prior to the end of its term in
extraordinary circumstances. In addition, at license renewal time, other
parties may file competing applications for the authorization. The Federal
Communications Commission has adopted specific standards stating renewal
expectancy will be awarded to a commercial mobile radio service licensee that
has provided substantial service during its license term and has substantially
complied with applicable Federal Communications Commission rules and policies
and the Communications Act. If the Federal Communications Commission awards the
commercial mobile radio service licensee a renewal expectancy, its license
renewal application generally is granted and the competing applications are
dismissed.

Although we are unaware of any
circumstances that would prevent the approval of any future renewal
application, no assurance can be given that the Federal Communications
Commission will renew any of our licenses. Moreover, although revocation and
involuntary modification of licenses are extraordinary measures, the Federal
Communications Commission has the authority to restrict the operation of a
licensed facility or revoke or modify licenses. None of our licenses has ever
been revoked or involuntarily modified.

Our licenses for personal
communications services are subject to forfeiture to the Federal Communications
Commission, as are all similar licenses held by other companies, if the
construction requirements stated in the Federal Communications Commissions
rules are not satisfied in a timely manner. 
We do not anticipate any circumstances that would jeopardize our ability
to meet the Federal Communications Commissions construction requirements and,
in so doing, avoid a forfeiture of the licenses to which those requirements
apply.

The Communications Act and
Federal Communications Commission rules require the Federal Communications
Commissions prior approval of the assignment or transfer of control of
commercial mobile radio service licenses where there would be a substantial
change in the ownership or control of the licenses. Any acquisition by us of an
interest in any commercial mobile radio service license may also require the
prior approval of state or local regulatory authorities having jurisdiction
over the commercial mobile radio service industry.

Commercial mobile radio service
providers also must satisfy a variety of Federal Communications Commission
requirements relating to technical and reporting matters, including
coordination of proposed frequency usage with adjacent systems in order to
avoid electrical interference between adjacent systems. The Federal
Communications Commission also requires licensees to secure Federal
Communications Commission consent to system modifications in specified
instances.

Commercial mobile radio service
systems are subject to Federal Aviation Administration regulations respecting
the location, marking, lighting, and construction of transmitter towers and
antennas and may be subject to regulation under the National Environmental
Policy Act and the environmental regulations of the Federal Communications
Commission. The Federal Communications Commission has also adopted guidelines
and methods for evaluating radio frequency emissions from radio equipment.  We believe that all wireless devices we
currently provide to our customers comply with these standards.

The 1996 Act mandates that telecommunications carriers contribute to
the federal Universal Service Fund, the purpose of which is to ensure
that basic telephone services are available and affordable for all citizens.
The Universal Service Fund is intended to promote access to communications
services in high cost areas and for low income persons, schools, libraries, and
rural health care providers. We also are required to contribute to state
universal service funds. The federal Universal Service Fund is administered
jointly by the Federal Communications Commission, the fund administrator, and
state regulatory authorities, many of which are still in the process of
establishing their administrative rules. 
Because we are permitted to collect the required contribution amounts
from our customers, we expect that our obligation to contribute to the
Universal Service Fund will have a minimal financial impact on us.

We also are required to
contribute annually to the Telecommunications Relay Service Fund and the North
American Numbering Plan Administration Fund, Local Number Portability and to
remit regulatory fees to the Federal Communications Commission with respect to
our operations. We do not expect that these contribution obligations will have
a material financial impact on us.

Cellular and broadband
commercial mobile radio service providers also must comply with the Federal
Communications Commissions rules regarding emergency 911 service. In 1997, the
Federal Communications Commission released revised timetables and provisions
for emergency 911 service availability provided by cellular, personal
communications services, and other mobile service providers, including enhanced
911 services that provide the callers telephone number, location, and other
useful information. Phase I of implementation required that by April 1998, the
metropolitan markets must be able to provide automatic number identification
and cell site information for 911 calls to the 911 dispatch points, called
Public Safety Answering Points. This mandate was effective June 1, 1998 for
carriers in rural markets that have received a request for Phase I service from
a Public Safety Answering Point. Phase II enhanced 911 service requirements
require broadband personal communications services providers and other
commercial mobile radio service providers to provide to designated Public
Safety Answering Points the location of all 911 calls by longitude and latitude
in conformance with accuracy standards set out in the Federal Communications
Commissions rules.  To comply, licensees
may elect either network-based location technologies or mobile radio
handset-based location technologies and thereafter meet, according to a
phased-in schedule, the Phase II enhanced 911 service standards stated in the
Federal Communications Commissions rules. 
On October 26, 1999, the Wireless Communications and Public Safety Act
was signed into law by former President Clinton. This new law enhances public
safety by making 911 the universal emergency assistance number, promoting
wireless communications, clarifying and enhancing the liability protections
offered to wireless carriers for both emergency and non-emergency service, and
supporting the location of wireless consumers in distress. In November 1999 the
Federal Communications Commission determined that a cost recovery mechanism no
longer has to be in place before a carrier is obligated to provide enhanced 911
service. The implementation of enhanced 911 obligations may have a financial
impact on us. We are not yet able to predict the extent of that impact.

Cellular and broadband personal
communications services providers are now required to provide number
portability, which enables customers to change providers and services without
changing their telephone number. Based upon financial and technological
considerations and the current level of competition in the marketplace, several
parties have requested that the Federal Communications Commission forbear from
requiring broadband commercial mobile radio service carriers to implement
service provider number portability until personal communications services
carriers have completed their five-year buildout requirements. By November 24,
2002, commercial mobile radio service providers must be able to offer number
portability without impairment of quality, reliability, or convenience when
switching service providers, including the ability to support roaming throughout
their networks. The Federal Communications Commission has solicited further
comment on the appropriate cost recovery methods regarding long-term number
portability. To date, the Federal Communications Commission has not generally
extended this deadline. Although the failure to comply with this obligation
could result in a fine or revocation of our licenses, we are not yet able to
predict whether we will be able to comply with the number portability
requirements prior to the existing deadline.

Personal communications services licensees must comply with
microwave relocation rules. For a period of up to ten years after the grant of
a personal communications services license (subject to extension), a personal
communications services licensee will be required to share spectrum with
existing licensees that operate specified fixed microwave systems which exist
within the personal communications services licensees markets. To secure a
sufficient amount of unencumbered spectrum to offer our personal communications
services efficiently, we may need to negotiate agreements to relocate many of
these existing licensees. In places where relocation is necessary to permit
offering of our personal communications services, any delay in the relocation
of these licensees may adversely affect our ability to commence timely
commercial operation of our personal communications services. In an effort to
balance the competing interests of existing microwave users and newly
authorized personal communications services licensees, the Federal
Communications Commission has adopted a transition plan to relocate these
microwave operators to other spectrum blocks and a cost sharing plan so that if
the relocation of an incumbent benefits more than one personal communications
services licensee, the benefiting personal communications services licensees
will share the costs of the relocation. In the case of A and B Block personal
communications services license holders, this transition plan allows most
microwave users to operate in the personal communications services spectrum for
a two-year voluntary negotiation period and an additional one-year mandatory
negotiation period. For public safety entities dedicating a majority of their
system communications for police, fire or emergency medical services
operations, the voluntary negotiation period is three years, with a two-year
mandatory negotiation period. Parties unable to reach agreement within these
time periods may refer the matter to the Federal Communications Commission for
resolution, but the existing microwave user is permitted to continue its
operations until final Federal Communications Commission resolution of the
matter. The transition and cost sharing plans expire on April 4, 2005 for A and
B Block licenses, at which time remaining incumbents in the personal
communications services spectrum will be responsible for their costs to
relocate to alternate spectrum locations. The Federal Communications Commission
has shortened the voluntary negotiation period to one year (for non-public safety
entities) for all Blocks other than A and B. We believe that we are in
compliance with applicable spectrum relocation requirements enacted by the
Federal Communications Commission.

Telecommunications carriers
also are subject to the Communications Assistance for Law Enforcement Act, also
known as the Wiretap Act, which is under the purview of the Department of
Justice. The Wiretap Act requires carriers to have a specific number of open
ports available for law enforcement personnel with the appropriate legal
authority to perform wiretaps on each carriers network. Full implementation of
the Wiretap Acts assistance capability requirements was required by June 30,
2000.  However, because it found that
there is a lack of equipment available to meet these requirements, the Federal
Communications Commission accepted petitions for a two-year extension of this
deadline on a carrier-by-carrier basis. 
RCC has submitted such a petition. Additional, more recently adopted requirements
must be met by September 30, 2001. If we are not able to comply with the
Wiretap Act prior to the deadline, we could be fined up to $10,000 per day. We
are not yet able to predict whether we will be able to comply with the Wiretap
Act requirements prior to the existing deadline.

For most of our facilities, we
use lead-acid batteries as back-up power sources. As a result, we are subject
to annual reporting requirements under the Community Right-To-Know Act. In
addition, we may be subject to other environmental controls or liabilities due to
failure to comply with reporting requirements or emissions or contamination
regulations in connection with facilities we own or operate or have previously
owned or operated. Although we are not aware of any material liabilities of
this type, we cannot assure you that none will arise in the future.

The Federal Communications Commission adopted on January 19, 2001 a
Notice of Proposed Rule Making that initiates a review of its spectrum
aggregation limits and its cellular cross-interest rule.  The cellular cross-interest rule
limits the ability of an entity to have ownership interests in both cellular
carriers in overlapping cellular geographic service areas.  In the proceeding, the Federal
Communications Commission will consider whether such rules should be
eliminated, modified or retained, based upon the public interest standard set
forth under the Communications Act.

The Federal Communications
Commissions rules currently require licensees in broadband personal
communications services, cellular and most specialized mobile radio services to
provide a manual roaming service upon reasonable request by any customer to any
of these services whose handset is capable of accessing their systems.  A proceeding has been initiated by the
Federal Communications Commission to consider whether the manual roaming
service obligation should cease as of some date and be replaced with a
requirement that subject carriers provide an automatic roaming on a non–discriminatory
basis.  With automatic roaming, a
customers call can be processed and completed without interruption, whereas
with manual roaming the serving carrier will not complete a call unless the
customer provides call billing information. 
Automatic roaming currently is available only where the serving carrier
has a roaming agreement with the customers home carrier.

The Federal Communications
Commission has opened a proceeding to consider actions it could take to remove
unnecessary regulatory barriers to the development of more robust secondary
markets in radio spectrum usage rights. 
The proceeding includes an examination of how leasing of spectrum usage
rights by wireless licensees could be accomplished in a manner which promotes
the efficient utilization of spectrum. 
The Federal Communications Commission indicated that it will review
impediments to leasing of spectrum which are related to current policies based
upon its past interpretation of transfer of control issues.

The Federal Communications
Commission adopted on December 29, 2000 a Notice of Proposed Rule Making to
explore the possible use of frequency bands below 3 gigahertz to support the
introduction of new advanced wireless services, including third generation as
well as future generations of wireless systems.  In the proceeding the Federal Communications Commission
identified spectrum in five frequency bands below 3 gigahertz that are not
currently used for cellular, broadband personal communications services or
specialized mobile radio services but which could be made available for
advanced wireless services.

Limitation on Foreign Ownership

Ownership of our capital stock
by non-U.S. citizens is subject to limitations under the Communications Act and
Federal Communications Commission regulations.

State
and Local Regulation

We are also subject to
regulation by state and local governments. The extent of this regulation varies
from state to state. The Communications Act preempts state and local regulation
of the entry of or the rates charged by any commercial mobile radio service
provider, subject to the ability of a state to petition the Federal
Communications Commission for authority to regulate rates due to local market
conditions. The states in which we operate our systems do not currently
regulate the rates for any commercial mobile radio service, but could petition
the Federal Communications Commission for authority in the future. The siting
and construction of commercial mobile radio service transmitter towers,
antennas and equipment shelters are often subject to state or local zoning,
land use, and other regulation.

We are subject to state and
local environmental legislation and regulations, including land use and related
permitting legislation and regulation. We believe that we are currently
complying with these laws and regulations, but we cannot assure you that we may
not violate them in the future.

Employees and Sales Agents

As of March 1, 2001, we had
1,162 employees, including 495 in sales and marketing, 308 in customer service,
195 in network and systems operations, 101 in administration and 63 in finance
and accounting. Thirty of our employees were part-time. None of our employees
is represented by a labor organization, and we believe we have excellent
relations with our employees. In addition, we utilize approximately 650
independent sales agents. Wireless Alliance has no full-time or part-time
employees but operates utilizing our employees.

ITEM
2.      PROPERTIES

Our corporate facilities
include the following:

Address
  Lease/ Owned
  Square FeetMidwest:Principal Corporate HQ
  3905 Dakota Street SW Alexandria, Minnesota
  Owned
  50,000Northeast:Atlantic Regional HQ
  1100 Mountain View Drive, Colchester, Vermont
  Leased
  23,579MRCC Regional HQ
  6 Telcom Drive, Bangor, Maine
  Owned
  36,250*Saco Regional HQ/ILEC
  Route 4A Bar Mills, Maine
  Owned
  4,500*Saco Regional
  HQ/Wireless
  323 North Street, Saco, Maine
  Owned
  4,000Northwest:Regional HQ
  600 SW Columbia, Suite 1100 Bend, Oregon
  Leased
  10,932South:Regional HQ
  621 Boll Weevil Circle, Suite 2 Enterprise,
  Alabama
  Leased
  18,000* (Acquired January 1, 2001)As of December 31, 2000, our
network consisted of the following cell sites:



Owned
  Leased
  TotalMidwest
  82
  36
  118Wireless Alliance
  16
  46
  62NortheastMaine
  15
  53
  68Atlantic
  2
  96
  98Saco (Acquired January 1, 2001)
  6
  13
  19Northwest
  77
  74
  151South
  47
  91
  138Total
  245
  409
  654Our leased sites consist of
either land leases, tower leases, or both. We own all the equipment within the
leased sites. The leases covering leased sites have various expiration dates
and are with numerous lessors. These leases generally have renewal terms that
we would anticipate exercising. Due to our network design, loss of a leased
location would not have a material impact on the operations of a regions
business.

As of December 31, 2000, we
owned 54 paging transmitters used in our Midwest paging business.



Our distribution system is
comprised of 80 retail locations, of which approximately 70 are leased. The
leases covering these locations have various expiration dates.  We believe that the loss of any one of these
retail sites would not have a material impact on our business as we would
likely be able to obtain substantially equivalent alternative space.

ITEM 3.                LEGAL
PROCEEDINGS

We are a party to routine
filings and customary regulatory proceedings with the Federal Communications
Commission and state regulatory agencies from time to time. Also, we are
involved in legal proceedings from time to time relating to claims arising out
of our operations in the normal course of business. There are no pending legal
proceedings to which we are a party or of which any of our property is subject
which, if adversely decided, would have a material effect on our business or
financial condition.

ITEM 4.                SUBMISSION OF MATTERS TO A VOTE
OF SECURITY HOLDERS

No matters were submitted to a
vote of security holders during the fourth quarter of the fiscal year covered
by this report.

EXECUTIVE OFFICERS OF
THE REGISTRANT

The following table sets forth
certain information with regard to each of our executive officers:

Name
  Age
  PositionRichard P. Ekstrand
  51
  President, Chief Executive Officer and
  DirectorWesley E. Schultz
  44
  Executive Vice President, Chief Financial
  Officer and DirectorAnn K. Newhall
  50
  Executive Vice President, Chief Operating
  Officer and DirectorDavid J. Del Zoppo
  45
  Vice President, Finance and AccountingScott G. Donlea
  41
  Vice President of Market DevelopmentRichard P. Ekstrand has served as our President, Chief Executive
Officer and a director since 1990. Mr. Ekstrand is the past president of the
Minnesota Telephone Association and the Association of Minnesota Telephone
Utilities. He currently is active in the Cellular Telecommunications and
Internet Association, serving as Vice Chairman of the Board of Directors and on
the Executive Committee. Mr. Ekstrand also serves as Chairman and a member of
the board of directors of The Wireless Foundation. Mr. Ekstrand is the sole
shareholder, Chief Executive Officer and a director of North Holdings,
Inc.(formerly Lowry Telephone Co., Inc.), which is a shareholder of Rural
Cellular.  From 1994 through 2000, Mr.
Ekstrand had served as vice president and a director of Lowry Telephone Co.,
Inc.  North Holdings, Inc. is a member
of Lowry Telephone Company, LLC, of which Mr. Ekstrand is the treasurer and a
member of the board of governors.

Wesley E. Schultz  joined us in May 1996 as Vice President of
Finance and Chief Financial Officer.  In
August 1999, he was appointed to our board of directors, in October 1999, he
was appointed Senior Vice President and Chief Financial Officer and Assistant
Secretary, and in August 2000, he was appointed Executive Vice President and
Chief Financial Officer. Prior to joining us Mr. Schultz had served as acting Chief Financial Officer of
Spanlink Communications, Inc. since February 1996 and as Chief
Financial Officer of Nicollet Process Engineering, Inc. from
March 1995 through October 1995. Mr. Schultz is a certified
public accountant and served for three years as an auditor with Deloitte and
Touche, LLP.



Ann K. Newhall joined
us joined us as Senior Vice President and
General Counsel in February 1999.  In
August 1999, she was appointed to our board of directors, in February 2000, she
was appointed Secretary, and in August 2000, she was appointed Executive Vice
President and Chief Operating Officer. Prior to joining Rural Cellular,
Ms. Newhall was a shareholder attorney with Moss & Barnett, A Professional
Association, most recently serving as President and a director of the firm. Ms.
Newhall received her J.D. from the University of Minnesota Law School, cum laude,
in 1977.

David
J. Del Zoppo joined us in May 1997 as Controller.
In July 1998, Mr. Del Zoppo was promoted to Vice President, and in October 1999
he was named Vice President, Finance and Accounting. Prior to joining Rural
Cellular, Mr. Del Zoppo served as a Vice President of Operations with Business
Records Corporation from January 1988 to May 1997 and as Divisional Controller
from 1986 to 1988. Mr. Del Zoppo is a certified public accountant and served
for four years as an auditor with KPMG Peat Marwick.

Scott
G. Donlea served as our Vice President of Sales
and Marketing beginning in August 1995 and on June 17, 1999, was appointed Vice
President, Market Development. Mr. Donlea joined us in 1992 as Manager of
Market Operations. Mr. Donlea currently serves as Chairperson of the Rural
Cellular Associations business and marketing committee.

PART II

ITEM 5.      
          MARKET
FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Our Class A Common Stock trades
on The Nasdaq National Market under the symbol RCCC.  The following table indicates the high and low price for each
quarter of the 2000 and 1999 fiscal years.

High
  Low1999First Quarter
  $17.000
  $10.500Second Quarter
  $21.000
  $14.000Third Quarter
  $48.250
  $19.750Fourth Quarter
  $100.000
  $42.3752000First Quarter
  $94.000
  $42.750Second Quarter
  $82.250
  $56.000Third Quarter
  $80.688
  $46.500Fourth Quarter
  $66.875
  $25.063Our Class B Common Stock is not
publicly traded.

As of March 20, 2001, there
were approximately 111 holders of record of our Class A Common Stock and
approximately 23 holders of record of our Class B Common Stock.

Dividend
Policy

RCC has never paid dividends on
the Common Stock.  We currently intend
to retain all future earnings, if any, for the operation and expansion of our
business and do not expect to pay any cash dividends on our Common Stock in the
foreseeable future. Further, the terms of our credit facilities, 9 5/8% Senior
Subordinated Notes, and Exchangable Preferred Stock limit our ability to pay
dividends on our Common Stock.

ITEM
6.                SELECTED FINANCIAL DATA

The following tables set forth
certain of our historical consolidated financial and operating data as of and for
each of the five years in the period ended December 31, 2000. We derived the
selected financial data for each of the five years ended December 31 from our
consolidated financial statements, which have been audited by Arthur Andersen
LLP.

The data set forth below should
be read in conjunction with "Managements Discussion and Analysis of
Financial Condition and Results of Operations" and the consolidated
financial statements and accompanying notes included elsewhere in this Form
10-K.



(In thousands, except per share and other
  operating data)
  Years ended
  December 31,2000
  1999
  1998
  1997
  1996Statement of Operations Data:Revenues:Service
  $238,556
  $125,361
  $90,997
  $52,456
  $28,792Roaming
  98,693
  43,081
  19,821
  9,622
  6,517Equipment
  18,848
  7,299
  2,700
  1,020
  927Total
  revenues
  356,097
  175,741
  113,518
  63,098
  36,236Operating expenses:Network costs
  85,988
  38,549
  33,863
  20,773
  12,506Costs of equipment sales
  34,711
  10,951
  5,968
  2,807
  1,375Selling, general and
  administrative
  95,034
  54,753
  39,156
  25,225
  13,576Depreciation and
  amortization
  91,078
  41,277
  26,532
  12,458
  5,539Total
  operating expenses
  306,811
  145,530
  105,519
  61,263
  32,996Operating income
  49,286
  30,211
  7,999
  1,835
  3,240Other income (expense):Interest expense
  (89,839)
  (27,116)
  (19,060)
  (6,065)
  (281)Interest and dividend
  income
  2,249
  467
  1,461
  232
  335Minority interest
  -
  1,663
  4,553
  3,082
  331Other
  (24)
  (338)
  (535)
  (350)
  52Other income
  (expense), net
  (87,614)
  (25,324)
  (13,581)
  (3,101)
  437Income (loss) before income taxes and
  extraordinary item
  (38,328)
  4,887
  (5,582)
  (1,266)
  3,677Income tax provision
  -
  37
  -
  -
  200Net income (loss) before extraordinary item
  (38,328)
  4,850
  (5,582)
  (1,266)
  3,477Extraordinary item  early extinguishment
  of debt
  (925)
  -
  (1,042)
  -
  -Net income (loss)
  (39,253)
  4,850
  (6,624)
  (1,266)
  3,477Preferred stock dividend
  (44,081)
  (15,912)
  (9,090)
  -
  -Net income (loss) applicable to common
  shares
  $(83,334)
  $(11,062)
  $(15,714)
  $(1,266)
  $3,477Basic and diluted net income (loss) per
  common share
  $(7.24)
  $(1.22)
  $(1.76)
  $(0.14)
  $0.41Basic and diluted weighted average common
  shares outstanding
  11,510
  9,047
  8,916
  8,853
  8,509*EBITDA
  $140,364
  $71,488
  $34,531
  $14,293
  $8,779(*) See footnote (1) on page 27
under Item 7. Managements Discussion and Analysis of Financial Condition and
Results of Operations for a definition and discussion of EBITDA.

December 31,2000
  1999
  1998
  1997
  1996Balance Sheet Data:Working capital (deficit)
  $(30,902)
  $(5,887)
  $(9,538)
  $514
  $(11,215)Net property and
  equipment
  234,490
  130,651
  131,714
  77,920
  41,935Total assets
  1,771,796
  526,278
  480,524
  181,588
  60,507Total long term debt
  1,157,472
  339,742
  298,851
  128,000
  8,492Total shareholders
  equity
  79,955
  9,427
  19,279
  33,731
  34,996

Other Operating Data:
  Years ended
  December 31,2000
  1999
  1998
  1997
  1996Customers at period end:Wireless Voice
  552,122
  245,771
  203,100
  101,767
  45,094Wholesale
  12,727
  -
  -
  -
  -Other
  12,214
  12,476
  11,550
  9,312
  6,890Total customers
  577,063
  258,247
  214,650
  111,079
  51,984POPs
  5,443,000
  3,118,000
  3,049,000
  1,939,000
  636,000Penetration: (1)
  10.1%
  7.9%
  6.7%
  5.2%
  7.1%Retention: (2)
  98.2%
  98.3%
  98.3%
  98.4%
  98.7%Average monthly revenue per customer: (3)
  $61
  $54
  $55
  $56
  $66Acquisition cost per customer: (4)
  $358
  $365
  $395
  $358
  $307Cell sites / Base stations:
  654
  328
  286
  121
  72


1.       Represents the ratio of
wireless voice customers at the end of the period to POPs.

2.       Determined for each
period by dividing total postpaid wireless voice customers discontinuing
service during such period by the average postpaid wireless voice customers for
such period (customers at the beginning of the period plus customers at the end
of the period, divided by two), dividing that result by the number of months in
the period, and subtracting such result from one.

3.       Determined for each period by dividing the sum of access,
airtime, roaming, long distance, features, connection, disconnection, and other
revenues for such period by the monthly average postpaid wireless voice
customers for such period (customers at the beginning of the period plus
customers at the end of the period, divided by two), and dividing that result
by the number of months in such period.

4.       Determined for each period by dividing selling and marketing
expenses, net costs of equipment sales, and depreciation of rental telephone
equipment by the gross postpaid wireless voice customers added during such
period.

ITEM 7.        MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

INTRODUCTION

We have materially expanded our business
through acquisitions. The acquisitions of the licenses, operations, and related
assets of Triton Cellular Partners, L.P. (Triton Cellular) and Atlantic
Cellular Company L.P. (Atlantic Cellular), in fiscal 2000 and 1998, respectively,
approximately doubled our number of customers at the time of each transaction,
on a pro forma basis. All acquisitions have been accounted for under the
purchase method of accounting and, therefore, our historical results of
operations include the results of operations for each acquired system
subsequent to its respective acquisition date. Over the past three years, our
financial performance, and the year-to-year comparability of such performance,
has been affected by:

         The
acquisitions described below;

         The
development of Wireless Alliance;

         The
issuance of our senior subordinated notes and junior and senior exchangeable
preferred stock;

         The
issuance of common stock in February 2000; and

         The
$1.2 billion credit facility.

Acquisition and
Joint Venture HistoryWe follow a strategy of acquiring and
developing wireless systems, primarily in rural markets. Through December 31,
2000, we have entered into a joint venture to develop and offer personal
communications services and have completed the acquisitions of cellular systems
as described below:



  In November
  1996, we formed a joint venture named Wireless Alliance with an affiliate of
  Voicestream Communications. We originally owned 51% of Wireless Alliance; as
  of June 1999, we increased our ownership to 70%, with an affiliate of
  Voicestream Communications owning the remaining 30%.

  Effective
  May 1997, we acquired the Maine wireless operations and assets of Unity
  Cellular Systems, Inc. and related cellular and microwave licenses from
  InterCel, Inc. for approximately $85.7 million.

  Effective
  July 1998, we acquired the Massachusetts, New Hampshire, New York, Vermont
  and cellular  licenses, operations,
  and related assets of Atlantic Cellular L.P. and one of its subsidiaries for
  approximately $262.5 million.

  Effective
  August 1998, we acquired the outstanding stock of Western Maine Cellular,
  Inc., a wholly-owned subsidiary of Utilities, Inc., for approximately $7.5
  million.

  Effective
  February 1999, we acquired the outstanding stock of RGI Group, Inc., d/b/a
  Glacial Lakes Cellular 2000, for approximately $11.9 million.

  Effective
  April 2000, we acquired the licenses, operations and related assets of Triton
  Cellular, covering portions of Alabama, Kansas, Mississippi, Oregon, and
  Washington for approximately $1.265 billion.On January 1, 2001, we completed the $194
million acquisition of the cellular licenses, operations, and related assets of
Saco River Telegraph and Telephone Company (Saco River). Saco River provides
wireless services under the name StarCellular in the Portsmouth, New Hampshire
cellular service area, which includes 284,000 POPs (population served)
covering approximately 1,000 square miles. Saco Rivers Independent Local
Exchange Carrier (ILEC) operations cover a 120 square mile area in the
northern portion of York County, Maine, providing approximately 10,000
customers local and long distance phone service in addition to internet service
for 2,000 customers.



GENERAL

Rural Cellulars principal operating
objective is to increase revenues and profitability through the acquisition and
development of new markets and increased penetration in existing markets. We
believe that owning and operating wireless systems in rural markets provides
growth opportunities because these systems have lower penetration rates, a
higher proportion of roaming revenues, and less competition for customers than
wireless systems located in larger metropolitan areas.

We have a strategy of acquiring wireless
systems primarily in rural markets and focus on acquiring underdeveloped
wireless systems that include a high concentration of highway corridors and, as
a result, tend to have a significant amount of roaming activity.

We have continued to penetrate our existing
regions through our sales initiatives, resulting in increased revenues in the
year ended December 31, 2000 as compared to the prior year. Our revenues
primarily consist of service, roaming and equipment revenues, each of which is
described below:



  Service revenues
  include monthly access charges, charges for airtime used in excess of the
  time included in the service package purchased, long distance charges derived
  from calls placed by our customers as well as cellular and paging equipment
  lease revenues. Total service revenues are affected by the number of
  customers, pricing, and number of minutes used. Additional charges include
  activation fees and charges for such features as voicemail, call waiting, and
  call forwarding. RCC also includes the charges to our customers when they use
  their cellular phone in other wireless providers markets (Incollect
  Revenue) as service revenue.

  Roaming revenues
  include only the revenue from other wireless providers customers who use
  RCCs network (Outcollect Revenue)

  Equipment revenues
  include sales of cellular and paging equipment, accessory sales to customers,
  and network equipment reselling.

Our operating
expenses include network costs, cost of equipment sales, selling, general and
administrative expenses and depreciation and amortization, each of which is
described below:



  Network costs
  include switching and transport expenses and the expenses associated with the
  maintenance and operation of our wireless network facilities, as well as
  charges from other service providers for resold minutes and the expense
  associated with incollect revenue.

  Cost of equipment sales
  includes the costs associated with telephone equipment and accessories sold
  to customers. In recent years, RCC and other cellular providers have
  increased the use of discounts on phone equipment as competition between
  service providers has intensified. As a result, RCC has incurred, and expects
  to continue to incur, losses on equipment sales and increased marketing and
  selling costs per gross additional customer. RCC expects to continue these
  discounts and promotions because it believes they will result in increases in
  the number of cellular customers and, consequently, increased revenues.

  Selling, general and administrative
  includes salaries, benefits, and operating expenses such as marketing,
  commissions, customer support, accounting, administration, and billing.

  Depreciation and amortizationrepresents
  the costs associated with the depreciation of RCCs fixed assets and the
  amortization of its intangible assets, primarily cellular license acquisition
  costs, goodwill and customer lists. 
  The high level of depreciation and amortization is associated with
  RCCs acquisition activities and the build-out and upgrade of its network.

In addition to the operating expenses
discussed above, RCC also incurs other income (expense), primarily interest
expense related to financing and acquisition activities.



  Interest expense
  primarily results from borrowings under the credit facility and senior
  subordinated notes, the proceeds of which were used to finance acquisitions
  and further develop RCCs cellular network.

  Other income (expense)
  includes RCCs minority partners absorption of Wireless Alliance losses as
  accounted for under generally accepted accounting principles. RCC realized the
  maximum benefit from the allocation of losses to the minority partner as of
  December 31, 1999 and will receive no further benefit until Wireless Alliance
  generates income.

RESULTS OF OPERATIONS
The following table presents certain consolidated statement of operations data
as a percentage of total revenues as well as other operating data for the
periods indicated.



Years ended December 31,2000
  1999
  1998REVENUES:Service
  67.0%
  71.3%
  80.2%Roaming
  27.7
  24.5
  17.4Equipment
  5.3
  4.2
  2.4Total revenues
  100.0
  100.0
  100.0OPERATING EXPENSES:Network costs
  24.1
  21.9
  29.8Cost of equipment sales
  9.7
  6.2
  5.3Selling, general and administrative
  26.7
  31.2
  34.4Depreciation and amortization
  25.6
  23.5
  23.4Total operating expenses
  86.1
  82.8
  92.9OPERATING  INCOME
  13.9
  17.2
  7.1OTHER INCOME (EXPENSE):Interest expense
  (25.2)
  (15.4)
  (16.8)Interest and dividend income
  0.6
  0.3
  1.3Minority interest
  -
  0.9
  4.0Other
  -
  (0.2)
  (0.5)Other expense, net
  (24.6)
  (14.4)
  (12.0)INCOME (LOSS)  BEFORE INCOME TAX AND EXTRAORDINARY ITEM
  (10.7)
  2.8
  (4.9)INCOME TAX PROVISION
  -
  -
  -NET INCOME (LOSS) BEFORE
  EXTRAORDINARY ITEM
  (10.7)
  2.8
  (4.9)EXTRAORDINARY ITEM-EARLY
  EXTINGUISHMENT OF DEBT
  (0.3)
  -
  (0.9)NET  INCOME (LOSS)
  (11.0)
  2.8
  (5.8)PREFERRED STOCK DIVIDEND
  (12.4)
  (9.1)
  (8.0)NET  LOSS APPLICABLE TO COMMON SHARES
  (23.4)%
  (6.3)%
  (13.8)%EBITDA (1)
  39.4%
  40.7%
  30.4%(1)      EBITDA is the sum
of earnings before interest, taxes, depreciation and amortization and is
utilized as a performance measure within the cellular industry.  EBITDA is not intended to be a performance
measure that should be regarded as an alternative for other performance
measures and should not be considered in isolation.  EBITDA is not a measurement of financial performance under
accounting principles generally accepted in the United States and does not
reflect all expenses of doing business (e.g., interest expense,
depreciation).  Accordingly, EBITDA
should not be considered as having greater significance than or as an
alternative to net income or operating income as an indicator of operating
performance or to cash flows as a measure of liquidity.

Years Ended December 31, 2000 and 1999

Revenues

Service
Revenues. Service revenues for the year ended
December 31, 2000 increased 90.3% to $238.6 million from $125.4 million in
1999. The revenue growth reflects the additional revenue resulting from Triton
Cellular  combined with additional net
prepaid and postpaid customers added through increased penetration in existing
markets. We expect service revenues to increase in the future primarily as a
result of anticipated growth in customers and expansion of coverage.

Roaming
Revenues. Reflecting the acquisition of Triton
Cellular in April 2000 combined with increases in outcollect roaming minutes,
consolidated roaming revenues for 2000 increased 129.1% to $98.7 million from
$43.1 million in 1999. Roaming minutes in existing markets have increased in
part due to the activation of additional cell sites and increased industry-wide
wireless usage resulting from the now popular single rate calling plans.
Partially offsetting the increase in roaming minutes of use during 2000 was the
decrease in roaming yield per minute, including toll, to $0.48 as compared to
$0.68 in 1999. We expect roaming revenues to increase in 2001 primarily
reflecting roaming revenue from the newly acquired Saco River service areas.

Equipment
Revenues. Equipment revenues for the year ended
December 31, 2000 increased 158.2% to $18.8 million from $7.3 million in the
prior year. This growth reflects RCC ownership in Triton Cellular for nine
months as well as increases in direct phone sales programs.

Key
Revenue Indicators. Our penetration increased to
10.1% at December 31, 2000 as compared to 7.9% at December 31, 1999. Average
monthly revenue per customer for the year ended December 31, 2000 increased to
$61, as compared to $54 in the prior year.

Operating Expenses

Network
Costs. Primarily reflecting the additional network
costs resulting from the acquisition of Triton Cellular, our consolidated
network costs for 2000 increased 123.1% to $86.0 million from $38.5 million in
1999.  As a percentage of total
revenues, consolidated network costs for 2000 increased to 24.1% from 21.9%  in 1999. 
Certain service plans in the newly acquired Triton regions, which have
extended footprints for  its customers,
have incurred higher than expected increases in incollect minutes thereby
contributing to the increase in network costs as a percentage of total
revenues.  In future periods, we
anticipate reducing network costs, as a percentage of revenues.

Cost
of Equipment Sales.  Reflecting additional equipment costs resulting from the
acquisition of Triton Cellular, cost of equipment sales for 2000 increased
217.0% over 1999 to $34.7 million.  As a
percentage of revenue, cost of equipment sales increased to 9.7% as compared to
6.2% in 1999.  Contributing to the
increase in cost of equipment sales, as a percentage of revenue, were handset
costs resulting from the migration of existing customers from analog service to
digital service and greater emphasis on the purchase of digital phones rather
than renting them.

Selling,
General and Administrative. Selling, general and
administrative expenses for 2000 increased 73.6% over 1999 to $95.0
million.  The increase in selling,
general and administrative expenses primarily reflects RCCs ownership of
Triton Cellular operations for the second, third and fourth quarters of
2000.  The increase also reflects higher
costs related to more aggressive promotional activity during 2000 as compared
to 1999.  Reflecting efficiencies
resulting from the acquisition of Triton Cellular, selling, general and
administrative expenses, as a percentage of sales for 2000, decreased to 26.7%
as compared to 31.2% in 1999.

Depreciation
and Amortization. Depreciation and amortization
expense for the year ended December 31, 2000 increased 120.7% over the prior
year to $91.1 million from $41.3 million. 
The increase reflects added amortization relating to the intangible
assets acquired from Triton Cellular, additional depreciation attributable to
Tritons property, plant and equipment in addition to the depreciation related
to $54.8 million of capital expenditures during 2000.



Other Income (Expense)

Interest
Expense. Interest expense for 2000 increased
231.3% to $89.8 million as compared to $27.1 million in 1999.  The increase primarily reflects increased
borrowing under the credit facility to complete the acquisition of Triton
Cellular.

Interest
and Dividend Income. Interest and dividend income
for 2000 increased to $2.2 million, as compared to $467,000 during 1999.  This increase primarily reflects interest
earned by our interest bearing restricted escrow accounts and other cash
balances funded through increased borrowings and proceeds from the sale of
common and preferred stock.

Preferred
Stock Dividends

Preferred stock dividends in
2000 increased 177.0% to $44.1 million as compared to $15.9 million in
1999.  The increase primarily resulted
from the issuances of junior and senior exchangeable preferred stock in
February 2000, Class T preferred stock issued in March 2000 and Class M
preferred stock issued in April 2000. 
Dividends on the senior and junior preferred stock were and will be paid
through the issuance of additional shares of exchangeable preferred stock.  Throughout 2000, RCC issued 19,707 and
13,283 shares of senior and junior preferred stock dividends respectively.  On February 15, 2001, RCC distributed 5,467
and 4,686 shares of senior and junior preferred stock dividends, respectively.

Years Ended December 31, 1999 and 1998

Revenues

Service
Revenues. Service revenues for the year ended
December 31, 1999 increased 37.8% to $125.4 million from $91.0 million in 1998.
The revenue growth reflects the effect of 37,000 additional net customers added
through increased penetration in existing markets and 7,000 additional
customers added through the acquisition of Glacial Lakes Cellular.

Roaming
Revenues. Roaming revenues for the year ended
December 31, 1999 increased 117.4% to $43.1 million from $19.8 million in 1998.
Roaming revenues have increased due to the activation of additional cell sites,
acquisitions of new service areas, and increased industry-wide wireless usage
resulting from the now popular single rate calling plans. Partially offsetting the
effect of increases in roaming minutes of use during the year ended December
31, 1999 was the impact of lower roaming rates with two major roaming partners.

Equipment
Revenues. Equipment revenues for the year ended
December 31, 1999 increased 170.3% to $7.3 million from $2.7 million in the
prior year. This growth reflects network equipment reselling and increases in
direct phone sales programs.

Key
Revenue Indicators. Our penetration increased to
7.9% at December 31, 1999 as compared to 6.7% at December 31, 1998. Average
monthly revenue per customer for the year ended December 31, 1999 decreased to
$54, as compared to $55 in the prior year.

Operating Expenses

Network
Costs. Network costs for the year ended December
31, 1999, increased 13.8% over the prior year to $38.5 million from $33.9
million. Reflecting the discontinuance of cellular reselling, Wireless Alliance
network costs for the year ended December 31, 1999 decreased to $4.6 million
from $9.3 million in the prior year. As a percentage of total revenues, network
costs for the year ended December 31, 1999 decreased to 21.9% from 29.8% in the
prior year. The increase in network costs resulted primarily from expenses
incurred in Atlantic Cellular region.

Cost
of Equipment Sales. Cost of equipment sales for
the year ended December 31, 1999 increased 83.5% over the prior year to $11.0
million from $6.0 million. As a percentage of revenue, cost of equipment sales
for the year ended December 31, 1999 increased to 6.2% as compared to 5.3% in
the prior year. This growth was primarily due to the cost of resold network
equipment combined with an increase in the number of phones sold to customers.

Selling,
General and Administrative. Selling, general and
administrative expenses for the year ended December 31, 1999 increased 39.8%
over the prior year to $54.8 million from $39.2 million. The increase in
selling, general and administrative expenses reflects RCCs ownership of the
Atlantic Cellular for a full year during 1999 as compared to six months in
1998. Reflecting certain economies achieved through the acquisition of Atlantic
Cellular and the relatively fixed nature of selling, general and administrative
expenses, selling, general and administrative expenses decreased as a
percentage of total revenues for the year ended December 31, 1999 to 31.2% as
compared to 34.4% in the prior year.

Depreciation
and Amortization. Depreciation and amortization
expense for the year ended December 31, 1999 increased 55.6% over the prior
year to $41.3 million from $26.5 million. The increase reflects the depreciable
assets acquired as part of the Atlantic Cellular acquisition and our continued
construction of network facilities, including our launch of PCS services
through Wireless Alliance, and rental equipment.

Other
Income (Expense)

Interest
Expense. Interest expense for the year ended
December 31, 1999 increased 42.3% to $27.1 million as compared to $19.0 million
in the prior year. The increase resulted from higher average borrowings under
the credit facility and interest related to the senior subordinated notes.
Borrowings under the $300 million credit facility and the $125 million 9 5/8%
senior subordinated notes were used to finance the acquisitions of Atlantic
Cellular and Western Maine Cellular in 1998, the continued build-out of
additional cell sites, and other growth initiatives.

Other
Income. Other income for the year ended December
31, 1999 includes a decrease of 63.5% in the minority partners absorption of
Wireless Alliance losses, to $1.7 million from $4.6 million in the prior year.

Preferred
Stock Dividends

Preferred stock dividends
increased 75.0% to $15.9 million in the year ended December 31, 1999 as
compared to $9.1 million in 1998. The increase primarily resulted from the
senior exchangeable preferred stock having been outstanding for a full year in
1999, versus less than eight months in 1998. The preferred stock dividends were
paid by issuing additional shares of senior exchangeable preferred stock.

Liquidity
and Capital Resources

RCCs primary liquidity requirements
are for working capital, capital expenditures, debt service, and acquisitions.
In the past RCC has met these requirements through cash flow from operations,
sales of common stock and preferred securities, borrowings under its credit
facility, and issuance of its senior subordinated notes. On April 3, 2000, RCC
amended and restated its credit facility increasing it from $300 million to
$1.2 billion in addition to creating a $175 million incremental facility. The credit facility was amended and restated
again on June 29, 2000 to increase the incremental facility from $175 million
to $275 million.  Reflecting the
acquisition of Triton Cellular and other operating cash requirements, RCC had
$1.018 billion outstanding under its credit facility as of December 31, 2000. The credit facility was also amended and restated
in December 2000 in connection with the acquisition of Saco River and to amend
certain covenants. After completing the acquisition of Saco River, as of
January 1, 2001, we had drawn approximately $1.2 billion with additional
availability under our credit facility of approximately $70 million. Under
the credit facility, amounts may be borrowed, subject to mandatory repayments,
or repaid at any time through maturity, provided that the outstanding borrowings
do not exceed the total amount available.

Net cash provided by operating
activities was $82.2 million for the year ended December 31, 2000. Adjustments
to the $39.3 million net loss to reconcile to net cash provided by operating
activities included $91.1 million in depreciation and amortization, a $14.1
million increase in accounts receivable, $25.3 million increase in accounts
payable and $14.7 million increase in other accrued expenses.

Net cash used in investing
activities for the year ended December 31, 2000 was $1.299 billion. The
principal uses of cash included $1.233 billion for the acquisition of Triton
Cellular, $10.0 million in pending acquisition deposits for Saco River and
$54.8 million in purchases of property and equipment. Capital expenditures for
2001 are expected to be approximately $50.0 million. These purchases reflect
the continued expansion of our existing cellular coverage and upgrading of
existing cell sites and switching equipment.

Net cash provided by financing
activities was $1.218 billion for the year ended December 31, 2000, consisting
primarily of $1.105 billion from the issuance of long-term debt, $160.4 million
in net proceeds from a common stock offering, $263.4 million in net proceeds
from the issuance of preferred securities offset by $299.4 million in
repayments of long-term debt.

In February 2000, RCC sold
2,748,000 shares of Class A Common Stock at $61 7/8 per share and 140,000
shares of 12 1⁄4% Junior Exchangeable Preferred Stock and 25,000 shares of 11
3/8% Senior Exchangeable Preferred Stock at prices of $1,000.00 and $988.88 per
share, respectively. The shares of preferred stock have a liquidation
preference of $1,000.00 per share and are not convertible into common stock.

On April 1, 2000, RCC issued
110,000 shares of redeemable voting convertible preferred stock for
consideration of $110.0 million. The redeemable voting convertible preferred
stock may be converted into common stock at $53 per share.

Other Matters

Inflation

The impact of inflation on our
operations has not been significant.



Seasonality

We experience seasonal
fluctuations in revenues and operating income. Our average monthly roaming
revenue per cellular customer increases during the second and third calendar
quarters. This increase reflects greater usage by our roaming customers who
travel in our cellular service area for weekend and vacation recreation or work
in seasonal industries. Because our cellular service area includes many
seasonal recreational areas, we expect that roaming revenues will continue to
fluctuate seasonally more than service revenues.

Certain unaudited quarterly
results for 2000 and 1999 are set forth below (In thousands, except average
monthly revenue per cellular customer):

2000 Quarter EndedMar 31
  Jun 30
  Sep 30
  Dec 31Revenues:Service
  $33,594
  $66,608
  $69,936
  $68,418Roaming
  10,310
  27,138
  35,409
  25,836Equipment
  2,725
  6,011
  4,800
  5,312Total Revenues
  46,629
  99,757
  110,145
  99,566Operating income
  4,321
  14,390
  22,238
  8,337Net loss applicable to common shares
  $(6,020)
  $(26,418)
  $(19,243)
  $(31,653)Basic and diluted loss per share
  $(0.57)
  $(2.24)
  $(1.63)
  $(2.68)EBITDA (*)
  15,521
  40,185
  48,925
  35,733Average monthly revenue per customer
  $57
  $62
  $66
  $591999 Quarter EndedMar 31
  Jun 30
  Sep 30
  Dec 31Revenues:Service
  $27,716
  $31,587
  $33,554
  $32,504Roaming
  7,625
  9,952
  15,845
  9,659Equipment
  1,272
  1,623
  2,809
  1,595Total Revenues
  36,613
  43,162
  52,208
  43,758Operating income
  3,720
  8,098
  14,095
  4,298Net earnings (loss) applicable to common shares
  $(5,368)
  $(2,630)
  $3,522
  $(6,586)Basic net earnings (loss) per share
  $(0.60)
  $(0.29)
  $0.39
  $(0.72)Diluted net earnings (loss) per share
  $(0.60)
  $(0.29)
  $0.36
  $(0.72)EBITDA (*)
  13,446
  18,025
  23,991
  16,026Average monthly revenue per customer
  $55
  $62
  $70
  $58(*) See footnote (1) under
Item 7. Managements Discussion and Analysis of Financial Condition and
Results of Operations for a definition and discussion of EBITDA.



ITEM 7A.  
        QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK

Rural Cellular Corporation has used senior
subordinated notes and bank credit facilities as part of its financing of
acquisition activities, capital requirements and operations.  These on-balance sheet financial instruments,
to the extent they provide for variable rates of interest, expose RCC to
interest rate risk, with the primary interest rate risk exposure resulting from
changes in LIBOR or the prime rate, which are used to determine the interest
rates that are applicable to borrowings under our bank credit facilities.  RCC uses off-balance sheet derivative
financial instruments, including interest rate swap and interest rate
protection agreements, to manage interest rate risk.

At December 31, 2000, RCC had debt totaling $1.018
billion under our credit facility.  RCC
has interest rate swap, collar and flooridor arrangements covering debt with a
notional amount of $786 million to effectively change the interest on the
underlying debt from a variable rate to a fixed rate for the term of the
agreements.  After giving effect to
these instruments RCC had fixed rate debt of $535 million and variable rate
debt of $483 million at December 31, 2000. 
For fixed rate debt, interest rate changes affect the fair market value
but do not impact our earnings or cash flows. 
Conversely, for variable rate debt, interest rate changes generally do
not affect the fair market value but do impact our future earnings and cash
flows, assuming other factors are held constant. Had RCC not entered into the
interest rate swaps, collars and flooridor, and holding other variables
constant, such as debt levels, a one percentage point increase in interest
rates, net of the effect of derivatives, would have impacted pretax earnings
and cash flows for the year ended December 31, 2000 by approximately $8.4
million.

ITEM 8.                FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA

See Consolidated Financial
Statements and Notes thereto commencing on Page F-1.

ITEM 9.                CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

PART
III

ITEM 10.    
          DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT

Information regarding directors
of Rural Cellular is set forth in the Proxy Statement under the heading
Election of Directors and is incorporated herein by reference.  The information regarding our executive
officers is contained in Part I of this Form 10-K.

ITEM 11.      
        EXECUTIVE COMPENSATION

Information required by this
item is set forth in the Proxy Statement under the headings Election of
Directors and Executive Compensation and is incorporated herein by
reference.

ITEM 12.    
          SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT

Information required by this
item is set forth in the Proxy Statement under the heading Common Stock
Ownership and is incorporated herein by reference.

ITEM 13.    
          CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS

Information required by this
item is set forth in the Proxy Statement under the heading Certain
Transactions and is incorporated herein by reference.

PART IV

ITEM 14.    
          EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K

(a)
  (1)
  Consolidated Financial StatementsReport of Independent Public AccountantsConsolidated Balance Sheets as of December
  31, 2000 and 1999Consolidated Statements of Operations for
  the Years Ended December 31, 2000, 1999 and 1998Consolidated Statements of Shareholders
  Equity for the Years Ended December 31, 2000, 1999 and 1998Consolidated Statements of Cash Flows for
  the Years Ended December 31, 2000, 1999 and 1998Notes to Consolidated Financial Statements(2)
  Consolidated Financial Statement ScheduleThe following financial statement schedule
  is filed as part of this Form 10-K:Report of Independent Public AccountantsSchedule II - Valuation and Qualifying
  AccountsAll schedules not included are omitted
  either because they are not applicable or because the information required
  therein is included in Notes to Consolidated Financial Statements.(3)
  ExhibitsSee Exhibit Index(b)
  Reports on Form 8-KNo reports on Form 8-K were filed during
  the quarter ended December 31, 2000.(c)
  ExhibitsSee Exhibit Index(d)
  Other Financial StatementsNot applicable.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.

Rural Cellular Corporation/s/ Richard P. EkstrandRichard P. EkstrandPresident and Chief Executive OfficerDate: March 26, 2001

Pursuant to the requirements of
the Securities Exchange Act of 1934, this Report has been signed by the
following persons in the capacities and on the date indicated.



Signature
  Title
  Date/s/ Richard P. Ekstrand
  President and Chief Executive Officer (Principal Executive Officer)
  and Director
  March 26, 2001Richard P. Ekstrand/s/ Wesley E. Schultz
  Executive Vice President, Chief Financial Officer and Director
  (Principal Financial Officer)
  March 26, 2001Wesley E. Schultz/s/ Ann K. Newhall
  Director
  March 26, 2001Ann K. Newhall/s/ David J. Del Zoppo
  Vice President, Finance and Accounting (Principal Accounting Officer)
  March 26, 2001David J. Del Zoppo/s/ George W. Wikstrom
  Director
  March 26, 2001George W. Wikstrom/s/ Don C. Swenson
  Director
  March 26, 2001Don C. Swenson/s/ Jeffrey S. Gilbert
  Director
  March 26, 2001Jeffrey S. Gilbert/s/ Marvin C. Nicolai
  Director
  March 26, 2001Marvin C. Nicolai/s/ George M. Revering
  Director
  March 26, 2001George M. Revering/s/ John Hunt
  Director
  March 26, 2001John Hunt/s/ Paul J.  Finnegan
  Director
  March 26, 2001Paul J. Finnegan

Report of independent public accountants

To Rural Cellular Corporation:

We have audited the
accompanying consolidated balance sheets of Rural Cellular Corporation (a
Minnesota corporation) (the Company or RCC) and subsidiaries as of December
31, 2000 and 1999, and the related consolidated statements of operations,
shareholders equity and cash flows for each of the three years in the period
ended December 31, 2000.  These
financial statements are the responsibility of the Companys management.  Our responsibility is to express an opinion
on these financial statements based on our audits.

We conducted our audits in
accordance with auditing standards generally accepted in the United
States.  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 Rural Cellular Corporation and subsidiaries as of December 31, 2000
and 1999, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 2000 in conformity with
accounting principles generally accepted in the United States.

Arthur Andersen LLP

Minneapolis, Minnesota,
February 2, 2001

RURAL
CELLULAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
As of December 31,
(In thousands)

ASSETS

2000
  1999CURRENT
  ASSETS:Cash
  $2,205
  $1,285Accounts
  receivable, less allowance of $2,385 and $894
  43,324
  17,036Inventories
  6,753
  4,419Other
  current assets
  2,618
  633Total
  current assets
  54,900
  23,373PROPERTY AND
  EQUIPMENT, less accumulated depreciation of $93,446 and $68,604
  234,490
  130,651LICENSES AND
  OTHER ASSETS:Licenses
  and other intangible assets, less accumulated amortization of  $66,574 and $19,728
  1,442,806
  318,632Deferred
  debt issuance costs, less accumulated amortization of $5,163 and $1,385
  22,331
  7,284Restricted
  funds in escrow
  10,000
  35,000Other
  assets
  7,269
  7,523Total
  licenses and other assets
  1,482,406
  368,439$1,771,796
  $522,463The accompanying notes are an integral part of these consolidated
balance sheets.

RURAL CELLULAR
CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE
SHEETS
As of December 31,
(In thousands)
LIABILITIES AND SHAREHOLDERS EQUITY



2000
  1999CURRENT
  LIABILITIES:Accounts
  payable
  $41,545
  $16,220Advance
  billings and customer deposits
  7,563
  3,271Accrued
  interest
  15,724
  3,683Dividends
  payable
  11,911
  2,102Other
  accrued expenses
  8,561
  3,984Total
  current liabilities
  85,304
  29,260LONG TERM
  DEBT
  1,157,472
  339,742Total
  liabilities
  1,242,776
  369,002COMMITMENTS
  AND CONTINGENCIES (Note 9)PREFERRED
  SECURITIES
  449,065
  144,034SHAREHOLDERS
  EQUITY:Class
  A common stock; $.01 par value; 200,000 and 15,000 shares authorized, 11,034
  and 8,090 issued
  110
  81Class
  B common stock; $.01 par value; 10,000 and 5,000 shares authorized, 782 and
  1,032 issued
  8
  10Additional
  paid-in capital
  190,751
  36,916Accumulated
  deficit
  (110,914)
  (27,580)Total
  shareholders equity
  79,955
  9,427$1,771,796
  $522,463The accompanying notes are an integral part of these consolidated
balance sheets.

RURAL CELLULAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONSFOR THE
YEARS ENDED DECEMBER 31,
(In thousands, except per share data)



2000
  1999
  1998REVENUES:Service
  $238,556
  $125,361
  $90,997Roaming
  98,693
  43,081
  19,821Equipment
  18,848
  7,299
  2,700Total
  revenues
  356,097
  175,741
  113,518OPERATING
  EXPENSES:Network
  costs
  85,988
  38,549
  33,863Cost
  of equipment sales
  34,711
  10,951
  5,968Selling,
  general and administrative
  95,034
  54,753
  39,156Depreciation
  and amortization
  91,078
  41,277
  26,532Total
  operating expenses
  306,811
  145,530
  105,519OPERATING
  INCOME
  49,286
  30,211
  7,999OTHER INCOME
  (EXPENSE):Interest
  expense
  (89,839)
  (27,116)
  (19,060)Interest
  and dividend income
  2,249
  467
  1,461Minority
  interest
  -
  1,663
  4,553Other
  (24)
  (338)
  (535)Other
  expense, net
  (87,614)
  (25,324)
  (13,581)INCOME
  (LOSS) BEFORE INCOME TAX AND EXTRAORDINARY ITEM
  (38,328)
  4,887
  (5,582)INCOME TAX
  PROVISION
  -
  37
  -INCOME
  (LOSS) BEFORE EXTRAORDINARY ITEM
  (38,328)
  4,850
  (5,582)EXTRAORDINARY
  ITEM  EARLY EXTINGUISHMENT OF DEBT
  (925)
  -
  (1,042)NET INCOME
  (LOSS)
  (39,253)
  4,850
  (6,624)PREFERRED
  STOCK DIVIDEND
  (44,081)
  (15,912)
  (9,090)NET LOSS
  APPLICABLE TO COMMON SHARES
  $(83,334)
  $(11,062)
  $(15,714)NET LOSS PER
  BASIC AND DILUTED  COMMON SHARE
  $(7.24)
  $(1.22)
  $(1.76)WEIGHTED
  AVERAGE COMMON SHARES OUTSTANDING,
       BASIC AND DILUTED
  11,510
  9,047
  8,916The accompanying notes are an integral part of these consolidated
financial statements.

RURAL CELLULAR
CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF SHAREHOLDERS
EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998(In thousands)

Class A
  Common Stock
  Class B
  Common Stock
  Additional
  Paid -In
  Accumulated
  Total
  ShareholdersShares
  Amount
  Shares
  Amount
  Capital
  Deficit
  EquityBALANCE, December 31, 1997
  7,593
  $76
  1,260
  $13
  $34,446
  $(804)
  $33,731Conversion of Class B
  common stock to Class A common stock
  57
  1
  (57)
  (1)
  -
  -
  -Stock
  issued through employee stock
       purchase plan
  6
  -
  -
  -
  57
  -
  57Stock options exercised
  124
  1
  -
  -
  1,204
  -
  1,205Net
  loss applicable to common shares
  -
  -
  -
  -
  -
  (15,714)
  (15,714)BALANCE, December 31, 1998
  7,780
  78
  1,203
  12
  35,707
  (16,518)
  19,279Conversion of Class B
  common stock to
       Class A common stock
  171
  2
  (171)
  (2)
  -
  -
  -Stock
  issued through employee stock
       purchase plan
  17
  -
  -
  -
  151
  -
  151Stock options exercised
  122
  1
  -
  -
  1,058
  -
  1,059Net
  loss applicable to common shares
  -
  -
  -
  -
  -
  (11,062)
  (11,062)BALANCE, December 31, 1999
  8,090
  81
  1,032
  10
  36,916
  (27,580)
  9,427Conversion of common
  stock to Class T preferred stock
  (43)
  -
  (105)
  (1)
  (7,539)
  -
  (7,540)Issuance of common stock,
  net
  2,749
  27
  -
  -
  160,409
  -
  160,436Conversion of Class B
  common stock
       to Class A common stock
  145
  1
  (145)
  (1)
  -
  -
  -Stock
  issued through employee stock
       purchase plan
  38
  -
  -
  -
  375
  -
  375Stock options exercised
  55
  1
  -
  -
  590
  -
  591Net
  loss applicable to common shares
  -
  -
  -
  -
  -
  (83,334)
  (83,334)BALANCE, December 31, 2000
  11,034
  $110
  782
  $8
  $190,751
  $(110,914)
  $79,955The accompanying notes are an integral part of these consolidated
financial statements.

RURAL CELLULAR
CORPORATION AND SUBSIDIARIESCONSOLIDATED
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
(In thousands)

2000
  1999
  1998OPERATING
  ACTIVITIES:Net
  income (loss)
  $(39,253)
  $4,850
  $(6,624)Adjustments to reconcile to net cash provided by
  operating activities:Depreciation
  and amortization
  91,078
  41,277
  26,532Extraordinary
  item  early extinguishment of debt
  925
  -
  1,042Equity
  in losses of unconsolidated affiliates
  2
  3
  655Change
  in minority interest
  -
  (1,663)
  (4,553)Other
  1,419
  1,045
  8Change
  in other operating elements:Accounts
  receivable
  (14,071)
  (3,365)
  (1,058)Inventories
  145
  (2,098)
  (230)Other
  current assets
  192
  187
  365Accounts
  payable
  25,297
  (181)
  9,097Advance
  billings and customer deposits
  14,717
  34
  (16)Other
  accrued expenses
  1,721
  323
  3,346Net
  cash provided by operating activities
  82,172
  40,412
  28,564INVESTING
  ACTIVITIES:Purchases
  of property and equipment, net
  (54,832)
  (26,287)
  (41,491)Purchases
  of wireless properties
  (1,232,692)
  (11,465)
  (269,984)Pending
  acquisition costs
  (10,000)
  (36,360)
  -Purchases
  of FCC Licenses
  -
  (8,656)
  -Purchase
  of investment
  (750)
  -
  -Other
  (1,013)
  19
  (1,734)Net
  cash used in investing activities
  (1,299,287)
  (82,749)
  (313,209)FINANCING
  ACTIVITIES:Proceeds
  from issuance of common stock related to ESOP and stock options
  966
  1,210
  1,262Proceeds
  from offering of common stock, net
  160,436
  -
  -Proceeds
  from issuance of preferred securities, net
  263,394
  -
  125,000Proceeds
  from issuance of long-term debt
  1,104,948
  67,000
  193,625Repayments
  of long-term debt
  (299,350)
  (27,000)
  (148,625)Proceeds
  from issuance of senior subordinated notes
  -
  -
  125,000Proceeds
  from interest rate swap transactions
  6,550
  982
  1,003Payments
  of debt issuance costs
  (18,909)
  (632)
  (12,553)Net
  cash provided by financing activities
  1,218,035
  41,560
  284,712NET INCREASE
  (DECREASE)  IN CASH
  920
  (777)
  67CASH, at
  beginning of year
  1,285
  2,062
  1,995CASH, at end
  of year
  $2,205
  $1,285
  $2,062The accompanying notes are an integral part of these consolidated
financial statements.

RURAL CELLULAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2000 and 1999
(Continued)

1. 
Organization and Nature of Business:

Rural Cellular Corporation and
its subsidiaries (the Company or RCC) provide wireless communication
services in portions of the Midwest, South, Northeast and Northwest areas of
the United States. The Company operates its cellular and paging systems under
licenses granted by the Federal Communications Commission (FCC). The
Companys operations are subject to the applicable rules and regulations of the
FCC.

2. 
Acquisitions:

Atlantic
Cellular Company, L.P.

Effective July 1, 1998, the
Company completed the acquisition of the Massachusetts, New Hampshire, New York
and Vermont cellular telephone licenses, operations and related assets of
Atlantic Cellular Company L.P. and one of its subsidiaries (Atlantic), for
approximately $262.5 million. Under the terms of the agreement, the Company
acquired a contiguous, multi-state service area of 21,000 square miles,
encompassing approximately 1.1 million population served (POPs).

Western
Maine Cellular, Inc.

Effective July 31, 1998, the
Company completed the acquisition of the outstanding stock of Western Maine
Cellular, Inc. (WMC), a wholly-owned subsidiary of Utilities, Inc. for
approximately $7.5 million.  WMC provides
cellular service to a 3,700 square-mile service area of western Maine,
encompassing 83,000 POPs.

Glacial
Lakes Cellular 2000

Effective February 1, 1999, the
Company acquired RGI, Inc. d/b/a Glacial Lakes Cellular 2000 (Glacial) for
approximately $11.9 million.  Operating
under the name Cellular 2000®, Glacial provides cellular service to
northeastern South Dakota, which includes eight counties and is adjacent to
RCCs existing cellular operation in northern and central Minnesota.  Glacials service area encompasses 69,000
POPs.

Triton
Cellular Partners, L.P.

Effective April 1, 2000, the
Company acquired the licenses, operations, and related assets of Triton
Cellular Partners, L.P. (Triton Cellular) for approximately $1.256 billion.
Triton Cellulars multi-state service area covers approximately 152,000 square
miles with approximately 2.3 million POPs. In addition, the acquisition
included unbuilt PCS licenses in four basic trading areas in Oregon.

Accounting
Treatment

The purchase prices were
allocated to tangible assets, customer lists and FCC licenses at their
estimated fair values and the excess was recorded as goodwill and is being
amortized over 20 to 40 years.  The
purchase price allocation for Triton Cellular has been completed on a preliminary
basis, subject to adjustment should new or additional facts about the business
become known.  All of the above
acquisitions have been accounted for under the purchase method of accounting;
accordingly operating results have been included from the date of acquisition.

The following unaudited pro
forma information presents the consolidated results of operations as if the
acquisitions of Triton Cellular and Glacial had occurred as of January 1, 1999.
This summary is not necessarily indicative of what the results of operations of
the Company and the acquired entities would have been if they had been a single
entity during such period, nor does it purport to represent results of
operations for any future periods.


Year Ended
  December 31,(Unaudited)2000
  1999REVENUES:Service
  $264,951
  $226,928Roaming
  112,278
  103,609Equipment
  21,116
  14,637Total revenues
  398,345
  345,174OPERATING EXPENSES:Network costs
  96,354
  78,473Cost of equipment sales
  37,664
  22,505Selling, general and administrative
  106,553
  99,758Depreciation and amortization
  108,267
  101,072Total operating expenses
  348,838
  301,808OPERATING INCOME
  49,507
  43,366NET LOSS BEFORE EXTRAORDINARY ITEM
  (57,273)
  (64,207)NET LOSS APPLICABLE TO COMMON SHARES
  $(103,964)
  $(112,385)Basic and diluted net loss per share
  $(9.03)
  $(9.65)3. 
Summary of Significant Accounting Policies:

Roaming
Revenue Reclassification

Rural Cellular Corporation
generates revenue from charges to its customers when they use their cellular
phone in other wireless providers markets (Incollect Revenue). Until April
2000, RCC included Incollect Revenue in the roaming revenue line item in its
statement of operations. Expense associated with Incollect Revenue, charged by
third-party wireless providers, was also included in roaming revenue on a net
basis. RCC used this method because, historically, it has passed through to its
customers most of the costs related to Incollect Revenue. However, the wireless
industry, including RCC, has increasingly been using pricing plans that include
flat rate pricing and larger home service areas. Under these types of plans,
amounts charged to RCC by other wireless providers may not necessarily be
passed through to its customers.

In April 2000, RCC adopted a policy
to include the associated expense from its incollect activity into network cost
rather than reducing roaming revenue and is including Incollect Revenue as
service revenue rather than increasing roaming revenue.  Roaming revenue will include only the revenue
from other wireless providers customers who use RCCs network (Outcollect
Revenue). Prior periods have been restated to conform to this new
presentation.  This change in
presentation has no impact on operating income.

Recently Issued Accounting Pronouncements

In June 1998, Statement of
Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities," was issued. SFAS No. 133 establishes
accounting and reporting standards for derivative instruments, hedging
activities, and exposure definition. SFAS No. 133 requires an entity to
recognize all derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value. Derivatives
that are not hedges must be adjusted to fair value through income. If the
derivative is a hedge, depending on the nature of the hedge, changes in fair
value will either be offset against the change in fair value of the hedged
assets, liabilities, or firm commitments through earnings, or recognized in
other comprehensive income until the hedged item is recognized in earnings. The
Company adopted SFAS No. 133 as of January 1, 2001. If SFAS No. 133 were
required to be applied to interest rate swaps and collars in place at December
31, 2000, changes in the fair value would increase liabilities by approximately
$14.9 million with an offsetting amount included in accumulated other
comprehensive income. Additionally, the flooridor in place at December 31, 2000
would result in a cumulative-effect-type adjustment favorable to net income of
approximately $1.6 million. Management does not believe that adoption of SFAS
No. 133 will significantly alter the Companys hedging strategies. However, its
application may increase the volatility of other income and expense and other
comprehensive income.

In
December 1999, the SEC staff released Staff Accounting Bulletin No. 101,
Revenue Recognition in Financial Statements (SAB 101). SAB 101 provides
interpretive guidance on the recognition presentation and disclosures of
revenue in the financial statements effective for all transactions beginning
January 1, 2000.  Adoption of SAB 101
did not materially impact the Companys revenue recognition policies.

Principles
of Consolidation

The consolidated financial
statements include the accounts of RCC and its wholly-owned subsidiaries, RCC
Atlantic, Inc., RCC Minnesota, Inc., MRCC, Inc., RCC Paging, Inc., RCC Atlantic
Long Distance, Inc., RCC Network, Inc., RCC Transport, Inc., RCC Holdings, Inc.
and TLA Spectrum, LLC, and its majority owned joint venture, Wireless Alliance,
LLC (Wireless Alliance). All significant intercompany balances
and transactions have been eliminated.

Revenue
Recognition

The Company earns revenue by
providing cellular and paging services to customers of the Company and of other
cellular carriers traveling (roaming) in the Companys service area and from
sales and rentals of cellular and paging equipment and accessories.  Service revenue consists of the base monthly
service fee and airtime revenue.  Base
monthly service fees are billed one month in advance and are recognized in the
month earned.  Airtime revenue is
recognized when service is provided. 
Roaming revenue consists of the fee charged to other cellular carriers
customers for roaming in the Companys service area as well as related airtime
revenue for use of RCCs cellular network. 
Roaming revenue is recognized when the service is rendered. The Company
recognizes other service revenues from equipment installations, equipment leases
and connection fees when earned.

Income
Taxes

The Company follows the
liability method of accounting for income taxes, and deferred income taxes are
based on the estimated future tax effects of differences between the financial
statement and tax bases of assets and liabilities based on enacted tax laws.

Net
Income (Loss) Per Common Share

The Company follows the
provisions of SFAS Statement No. 128, Earnings per Share.  Basic EPS is computed by dividing net income
(loss) by the weighted average number of shares outstanding during the year.
Diluted EPS is computed by including dilutive common stock equivalents with the
basic weighted average shares outstanding.

Inventories

Inventories consist of cellular
telephone equipment, pagers and accessories and are stated at the lower of
cost, determined using the average cost method, or market.

Property
and Equipment

Property and equipment are recorded at cost.  Additions, improvements or major renewals are capitalized, while
expenditures that do not enhance or extend the assets useful life are charged
to operating expenses as incurred. 
Depreciation is computed using the straight-line method based on the
estimated useful life of the asset.

The components of property and equipment and the useful lives of the Companys
assets are as follows as of December 31:



(In thousands)
  2000
  1999
  Useful LivesLand
  $    6,145
  $   
  5,010
  N/ABuilding and tower
  81,424
  49,028
  15-39 YearsEquipment
  210,341
  131,356
  2-10 YearsFurniture and fixtures
  18,431
  12,573
  3-10 YearsAssets under construction
  11,595
  1,288
  N/A327,936
  199,255Lessaccumulated depreciation
  (93,446)
  (68,604)Property and equipment 
  net
  $234,490
  $130,651The Companys network
construction expenditures are recorded as assets under construction until the
system or assets are placed in service, at which time the assets are
transferred to the appropriate property and equipment category.  Throughout the year ended December 31, 2000,
as a component of assets under construction, the Company capitalized $2.4
million in both interest and salaries of the Companys engineering employees
during the construction period for projects that extended beyond one year.

Licenses
and Other Intangible Assets

Licenses consist of the cost of
acquiring paging licenses, the value assigned to the Wireless Alliance personal
communications services (PCS) licenses, other PCS licenses, local multipoint
distribution service (LMDS) licenses, and the value assigned to cellular licenses
acquired through acquisitions. Other intangibles, resulting primarily from
acquisitions, include the value assigned to customer lists and goodwill.
Amortization is computed using the straight-line method based on the estimated
useful life of the asset.

The components of licenses and
other intangible assets are as follows as of December 31:

(In
  thousands)
  2000
  1999
  Amortizable
   LivesLicenses:Cellular
  $967,958
  $138,858
  33 - 40 YearsPCS
  11,792
  11,115
  40 YearsPaging
  275
  275
  30 YearsLocal Multi-Point
  Distribution
  7,045
  7,045
  40 YearsOther
  intangible assets:Goodwill
  370,980
  128,237
  20 - 40 YearsCustomer lists
  151,330
  52,830
  7-10 Years1,509,380
  338,360Less-accumulated
  amortization
  (66,574)
  (19,728)Licenses and other intangible assets, net
  $1,442,806
  $318,632



Deferred
Debt Issuance Costs

Deferred debt issuance costs
relate to the credit facility and the senior subordinated notes (see Note 4).
These costs are being amortized over the respective instruments terms.

Other
Assets

Other assets primarily consist
of costs related to restricted investments and investments in unconsolidated
affiliates. Restricted investments represent the Companys investments in stock
of the CoBank, ACB and are stated at cost, which approximates fair value.  The restricted investments were purchased
pursuant to the terms of a loan agreement and are restricted as to withdrawal.
Investments in unconsolidated affiliates are accounted for using the equity
method and represent the Companys ownership interests in Cellular 2000,
Inc.  Cellular 2000, Inc. is an entity
organized to own the trade name and related trademark for Cellular 2000®.

Business
and Credit Concentrations

The Company provides wireless
communication services in portions of the Midwest, South, Northeast and
Northwest areas of the United States. No single customer accounted for a
significant amount of revenues or accounts receivable.

Long-Lived
Assets

The Company periodically
evaluates the value of all long-lived assets to determine if events have
occurred that indicate the remaining estimated useful lives of these assets may
warrant revision, or whether the remaining balance may not be recoverable.  If asset recovery is in question, the
Company uses an estimate of future net undiscounted cash flows over the
remaining useful lives of the long-lived assets to measure recoverability.



Fair Value of Financial Instruments

FASB
Statement No. 107, Disclosures about Fair Value of Financial Instruments,
requires disclosure of fair value information about financial instruments for
which it is practicable to estimate that value, whether or not recognized in
the balance sheet. In cases where quoted market prices are not available, fair
values are based on estimates using present value or other valuation
techniques. Statement No. 107 excludes certain financial instruments and all
non-financial instruments from its disclosure requirements. Accordingly, the
aggregate fair value amounts do not represent the underlying value of the
Company.

The
carrying amounts and fair values of the Companys financial instruments are as
follows as of December 31:

Carrying Amount
  Estimated Fair Value(In thousands)
  Notional Amount
  2000
  1999
  2000
  1999Financial
  assetCash
  $-
  $2,205
  $1,285
  $2,205
  $1,285Restricted funds
  in escrow
  -
  10,000
  35,000
  10,000
  35,000Accounts
  receivable, net
  -
  43,324
  17,036
  43,324
  17,036Financial
  liabilitiesCredit facility
  -
  1,018,850
  213,000
  1,018,000
  213,0009 5/8 % Senior
  Subordinated Notes
  -
  125,000
  125,000
  125,000
  125,000Other long term
  debt
  -
  14,122
  892
  14,122
  892Other
  financial instrumentsInterest rate swap
  agreements:TD
  Securities (terminated April 1, 2000)
  65,000
  -
  -
  -
  645Bank
  Boston (terminated April 1, 2000)
  65,000
  -
  -
  -
  646PNC
  Bank (terminated April 1, 2000)
  35,000
  -
  -
  -
  (628)TD
  Securities (terminated July 17, 2000)
  125,000
  -
  -
  -
  3,763TD
  Securities (terminates May 16, 2003)
  84,000
  -
  -
  (3,500)
  -PNC
  Bank (terminates May 16, 2003)
  42,000
  -
  -
  (1,756)
  -Union
  Bank (terminates May 16, 2003)
  84,000
  -
  -
  (3,577)
  -Fleet
  Bank (terminates May 16, 2003)
  42,000
  -
  -
  (1,767)
  -Interest rate
  collar agreements:PNC
  Bank (terminates May 25, 2003)
  47,000
  -
  -
  (916)
  -Fleet
  Bank (terminates May 25, 2003)
  47,000
  -
  -
  (916)
  -Union
  Bank (terminates June 5, 2003)
  94,000
  -
  -
  (1,341)
  -PNC
  Bank (terminates June 5, 2003)
  94,000
  -
  -
  (1,093)
  -Interest
  rate Flooridor:Fleet
  Bank (terminates May 12, 2003)
  252,000
  1,018
  -
  2,640
  -

Use of Estimates

The preparation of financial
statements in conformity with accounting principles generally accepted in the
United States 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 reported periods.  Ultimate results could differ from those
estimates.

4. 
Long-term debt:

The Company had the following
long-term debt outstanding as of December 31 (In thousands):

2000
  1999Credit facility:Revolver
  $     
  93,350
  $113,000Term Loan A (terminates 04/03/2008)
  450,000
  100,000Term Loan B (terminates, 04/03/2008)
  237,500
  -Term Loan C (terminates, 04/03/2009)
  237,500
  -1,018,350
  213,000Deferred gain on hedge and swap agreements
  7,374
  1,7429 5/8% Senior Subordinated Notes
  125,000
  125,000Other
  6,748
  -Long-term liabilities
  $1,157,472
  $339,742Credit facility  On April 3, 2000, the Company amended and restated
its credit facility, increasing it from $300 million to $1.2 billion in addition
to creating a new $175 million incremental facility. The credit facility was amended and restated again on June 29, 2000 to
increase the incremental facility from $175 million to $275 million. Advances
under the credit facility bear interest at the London Interbank Offering Rate
(LIBOR) plus an applicable margin (2.85% as of December 31, 2000) based on
the Companys ratio of indebtedness to annualized operating cash flow as of the
end of the most recently completed fiscal quarter.  As of December 31, 2000, the effective rate of interest on the
credit facility, excluding the impact of hedge agreements, was 9.48%.  A commitment fee of 0.50% on the unused
portion of the credit facility is payable quarterly. Borrowings under the
credit facility are secured by a pledge of all the assets of the Company,
excluding its ownership in the stock of Cellular 2000, Inc. and its 70%
ownership in Wireless Alliance, LLC. Mandatory commitment reductions are
required upon any material sale of assets. The credit facility is subject to
various covenants, including the ratio of indebtedness to annualized operating
cash flow and the ratio of annualized operating cash flow to interest expense.
As of December 31, 2000, the Company was in compliance with all covenants under
the credit facility.In conjunction with the April 3, 2000
amendment to the credit facility, the Company wrote off deferred costs of $1.3
million during the second quarter of 2000, of which approximately $925,000 was
treated as an extraordinary item while $358,000 was treated as interest expense
in the accompanying income statements.The credit facility was also amended and
restated in December 2000 in connection with the acquisition of Saco River and
to amend certain covenants. After completing the acquisition of Saco River, as
of January 1, 2001, the Company had drawn approximately $1.2 billion with
additional availability under our credit facility of approximately $70 million.

9 5/8 % Senior Subordinated Notes - On
May 14, 1998, the Company issued $125 million principal amount of 9 5/8 %
Senior Subordinated Notes due 2008. Interest
on the Senior Subordinated Notes is payable semi-annually on May 15 and
November 15 of each year. The Senior Subordinated Notes will mature on May 15,
2008, and are redeemable, in whole or in part, at the option of the Company, at
any time on or after May 15, 2003.  In
addition, at any time prior to May 15, 2001, the Company may redeem up to 25%
of the aggregate principal amount of Senior Subordinated Notes with the net
cash proceeds of a qualifying event at a price equal to 109.625% of the
aggregate principal amount thereof, plus accrued and unpaid interest, if any,
to the date of redemption; provided that at least $90 million in aggregate
principal amount of Senior Subordinated Notes remains outstanding immediately
after such redemption. A qualified event is a public equity offering or one or
more strategic equity investments which in either case results in aggregate net
proceeds to the Company of not less than $50 million. Within 30 days after the
occurrence of a change of control, the Company will be required to make an
offer to purchase all outstanding Senior Subordinated Notes at a price equal to
101% of the aggregate principal amount thereof, plus accrued and unpaid
interest, if any, to the date of purchase. The Senior Subordinated Notes are
unsecured senior subordinated obligations of the Company and will be
subordinated in right of payment to future senior indebtedness (as defined in
the Indenture related to the Senior Subordinated Notes) of the Company and
effectively subordinated to all obligations of the Companys subsidiaries
(including the guarantees by such subsidiaries of the credit facility described
above).Maturities of the credit facility and Senior Subordinated Notes as of
December 31, 2000, are as follows (In thousands):

Year
  Amount2001
  $              -2002
  -2003
  53,2522004
  89,3772005
  105,439Thereafter
  895,282Total
  $1,143,350Deferred gain on
hedge and swap agreements In May 2000, the
Company settled swaps it had entered into in August 1998 with a total notional
amount of $165 million, resulting in a gain of approximately $3.1 million.  In July 2000, the Company settled swaps it
had entered into in February 1999 with a total notional amount of $250 million,
resulting in a gain of approximately $2.8 million.  Gains from these transactions are being accreted as a reduction
of interest expense over the lives of the underlying debt instruments.Other In conjunction
with the acquisition of Triton Cellular, the Company became part of a purchase
option agreement whereby it may acquire certain cell sites in the future for
$6.5 million.  The option expires
February 28, 2003.  Since the Company
expects to exercise the option, the unpaid portion of the total cost has been
included as long-term debt.  The Company
assumed an agreement to utilize the assets covered by the option for the period
prior to exercising the option.  The
ongoing payments pursuant to this agreement have been reflected as interest
expense in the accompanying consolidated statements of operations.5.
Financial Instruments:

As required by the credit
facility, the Company maintains interest rate swaps on at least 50% of the
principal amount of the loans outstanding for an average period of three years
from the date of the hedge agreements.

The Company has entered into
several financial instruments with a total outstanding notional amount of $786
million. Income and expense associated with these instruments are accrued over
the periods prescribed by the contracts.

Notional amounts outstanding at
December 31, 2000, for interest rate swaps total $252.0 million with expected
maturity on May 16, 2003.  The interest
rate swaps effectively lock the interest rate on $252.0 million of the Companys
credit facility borrowings between 7.592% and 7.632%.

Notional amounts outstanding at
December 31, 2000, for interest rate collars with expected maturity on May 25,
2003, effectively guarantee the Companys interest on $47.0 million of the
Companys credit facility not to exceed 9.0% and not to be less than 5.86% and
also guarantee interest on an additional $47.0 million of the Companys credit
facility not to exceed 9.0% and not to be less than 6.1%.

Notional amounts outstanding at December 31, 2000, for interest
rate collars with expected maturity on June 5, 2003, effectively guarantee the
Companys interest on $188.0 million of the Companys credit facility not to
exceed 9.0% and not to be less than 6.5%.

During 2000, the Company
entered into an interest rate instrument (Flooridor) that is carried at the
lower of cost or market in the accompanying balance sheet.  The Flooridor does not qualify for hedge
accounting treatment under SFAS No. 133 and will be required to be recorded in
the balance sheet at fair value.  The
related changes in fair value will be included in our statement of operations.

6. Preferred Securities:

The Company has also issued the
following preferred securities with liquidation preferences of $1,000 per
share:

Dividend
  rate per
  annum
  Number of
  shares
  originally
  issued
  Shares distributed
  as dividends
  through
  December 31, 2000
  Accrued
  dividends at
  December 31, 2000
  (In thousands)Senior Exchangeable
  Preferred Stock
  11.375%
  150,000
  42,556
  $ 2,738Junior Exchangeable
  Preferred Stock
  12.250%
  140,000
  13,283
  2,347Redeemable Voting
  Convertible Preferred Stock (Class M)
  8.000%
  110,000
  -
  6,600Class T Convertible
  Preferred Stock
  4.000%
  7,541
  -
  226Total
  
  407,541
  55,839
  $11,911Dividends on the Senior
Exchangeable Preferred Stock are cumulative, payable quarterly, and may be
paid, at the Companys option, on any dividend payment date occurring on or
before May 15, 2003 either in cash or by the issuance of additional shares of
Senior Exchangeable Preferred Stock having an aggregate liquidation preference
equal to the amount of such dividends. 
Thereafter, all dividends will be payable in cash only.

Dividends on the Junior
Exchangeable Preferred Stock are cumulative, are payable quarterly, and may be
paid, at the Companys option, on any dividend payment date occurring on or
before February 15, 2005 either in cash or by the issuance of additional shares
of Junior Exchangeable Preferred Stock having an aggregate liquidation
preference equal to the amount of such dividends.  Thereafter, all dividends will be payable in cash only.

Dividends on the Class M
Preferred Stock are cumulative and accrue at 8% per annum. The Class M
Preferred Stock may be converted into common stock at $53 per share. The shares
of Class M Preferred Stock may vote on all matters submitted for a vote of the
holders of the common stock on an as converted basis.

In order to comply with the FCC
rules regarding cross-ownership of cellular licensees within a given market,
the Company issued 7,541 shares of Class T Convertible Preferred Stock to
Telephone & Data Systems, Inc. (TDS) with a par value of $1,000 on March
31, 2000 in exchange for 43,000 shares of Class A Common Stock and 105,940
shares of Class B Common Stock owned by TDS. TDS or the Company can convert the
Class T preferred stock into the original number of shares of Class A or Class
B Common Stock in the future if ownership by TDS of the Common Stock would then
be permissible under FCC rules. Dividends on the Class T preferred stock are
cumulative and have a fixed coupon rate of 4% per annum.

The Senior Exchangeable
Preferred Stock is senior to all classes of junior preferred stock and common
stock of the Company with respect to dividend rights and rights on liquidation,
winding-up and dissolution of the Company. 
The Junior Exchangeable Preferred Stock is junior to the Senior
Exchangeable Preferred Stock and Class T Convertible Preferred Stock and senior
to the Class M Convertible Preferred Stock and common stock with respect to
dividend rights and rights on liquidation, winding-up and dissolution of the
Company. Shares of the senior and junior exchangeable preferred stock are
non-voting, except as otherwise required by law and as provided in their
respective Certificates of Designation.

7.  Shareholders Equity:

Authorized
Shares

On March 22, 2000, the
Companys shareholders voted to approve a proposal to adopt an amendment to the
Articles of Incorporation of the Company that increased the number of
authorized shares of capital stock to 300,000,000 shares, consisting of
200,000,000 shares of Class A common stock, 10,000,000 shares of Class B common
stock and 90,000,000 undesignated shares.

Common
Stock Rights

Class A common shareholders are
entitled to one vote for each share owned while Class B common shareholders are
entitled to ten votes for each share owned. 
Each share of Class B common stock may at any time be converted into one
share of Class A common stock at the option of the holder.  Additionally, all issued Class B common
shares will be converted into an equivalent number of Class A common shares
upon the affirmative vote of not less than 66 2/3% of the then issued Class B
common shares.  Further, Class B common
shares are automatically converted to an equal number of Class A common shares
if they are transferred to anyone who is not an affiliate of the transferring
shareholder of the Company.

On April 30, 2000 RCC adopted a
shareholder rights plan for its Class A Common Stock and Class B Common Stock.
The rights plan gives each holder of Class A Common Stock the right to purchase
1/100th of a newly authorized preferred share that is essentially
equivalent to one share of Class A Common Stock and each holder of Class B
Common Stock the right to purchase 1/100th of a newly authorized
preferred share, essentially equivalent to one share of Class B Common
Stock.  The exercise price for both the
Class A rights and the Class B rights is $120 per right.

The rights become exercisable
by existing shareholders only following the acquisition by a buyer, without
prior approval of the Companys board of directors, of 15% or more of the
outstanding Common Stock, Class A and Class B, or following the announcement of
a tender offer for 15% of the outstanding Common Stock.  If a person acquires 15% or more of the
Companys Common Stock, each right (except those held by the acquiring person)
will entitle the holder to purchase shares of the companys Class A or Class B
Common Stock, as appropriate, having a market value of twice the rights
exercise price, or, in effect, at a 50% discount from its then current market
value.  If the Company were acquired in
a merger or similar transaction after a person acquires 15% of the Companys
outstanding Common Stock, without prior approval of the board of directors,
each right would entitle the holder (other than the acquirer) to purchase
shares of the acquiring company having a market value of twice the exercise
price of the right, or, in effect, at a discount of 50%. Until the acquisition
by any person of 15% or more of the Companys Common Stock, the rights can be
redeemed by the board of directors for $.001 per right.

Stock
Compensation Plans

The stock compensation plan
(the Plan) for employees authorizes the issuance of up to 2,400,000 shares of
Class A common stock in the form of stock options, stock appreciation rights or
other stock-based awards.  The Plan
provides that the exercise price of any option shall not be less than 85% of
the fair market value of the Class A common stock as of the date of the grant
(100% in the case of incentive stock options). 
Options and other awards granted under the Plan shall vest and become
exercisable as determined by the Board of Directors or a stock option
committee.

The stock option plan for
nonemployee directors authorizes the issuance of up to 210,000 shares of Class
A common stock.  The plan provides that
the option price shall not be less than the fair market value of the Class A
common stock outstanding on the date of grant. 
The options vest and become exercisable one year following the date of
grant and expire five years thereafter.

The employee stock purchase plan authorizes the issuance of 250,000
shares of Class A common stock. Employees who satisfy certain length of service
and other criteria are permitted to purchase shares at 85% of the fair
market value of the Class A common stock on January 1 or December 31 of each
year, whichever is lower.

Options outstanding as of
December 31, 2000 have exercise prices ranging between $8.75 and $79.25. Information related to stock
options is as follows:

2000
  1999
  1998Shares
  Weighted
  Average
  Exercise Price
  Shares
  Weighted
  Average


Exercise Price
  Shares
  Weighted
  Average
  Exercise PriceOptionsOutstanding,
  beginning of period
  1,046,547
  $12.36
  872,700
  $11.17
  735,200
  $  
  9.47Granted
  299,950
  70.86
  323,250
  14.53
  291,250
  14.66Exercised
  (55,375)
  10.92
  (129,903)
  9.95
  (123,750)
  9.78Canceled
  (24,700)
  40.66
  (19,500)
  10.99
  (30,000)
  9.13Outstanding, end of
  period
  1,266,422
  17.18
  1,046,547
  12.36
  872,700
  11.17Exercisable, end of
  period
  488,052
  12.28
  317,557
  11.15
  264,590
  10.06Weighted average
  fair value of options granted
  
  $55.94
  
  $10.94
  
  $ 10.04The Company accounts for stock
options under Accounting Principles Board Opinion No. 25, under which no
compensation cost has been recognized. 
Had compensation cost for the Companys plans been determined consistent
with SFAS No. 123, Accounting for Stock-Based Compensation, the Companys
results of operations and net loss per share would have been adjusted to the
following pro forma amounts:



Years ended December 31,(In
  thousands except for per share data)
  2000
  1999
  1998Net loss:As reported
  $(83,334)
  $(11,062)
  $(15,714)Pro forma
  (84,782)
  (12,510)
  (16,790)Basic and diluted net
  loss per share:As reported
  $(7.24)
  $(1.22)
  $(1.76)Pro forma
  $(7.37)
  $(1.38)
  $(1.88)The fair value of each option
grant is estimated on the date of the grant using the Black-Scholes
option-pricing model with the following weighted average assumptions used for
grants in 2000, 1999 and 1998: expected volatility of 63.47%, 54.78% and
50.50%, respectively; risk-free interest rates of 8.5%; expected life of 10
years and no expected dividend yield. 
The per share weighted average fair value of options granted in 2000,
1999 and 1998 was $55.94, $10.94 and $10.04 per share, respectively.

8.  Income Taxes:The components of the Companys income tax provision
are as follows (In thousands):

Years ended
December 31,

2000
  1999
  1998Current:Federal
  $    -
  $    -
  $    -State
  -
  37
  --
  37
  -Deferred
  -
  -
  -$    -
  $  37
  $    -The Companys income tax
provision for the year ended December 31,1999 relates to franchise fees for
states in which the Company has operations.

The income tax effect of the
items that create deferred income tax assets and liabilities are as follows (In
thousands):

December 31,

2000
  1999Deferred
  income tax assets:Operating
  loss carryforwards
  $52,116
  $19,280Tax
  credit carryforwards
  85
  85Temporary
  differences:Allowance
  for doubtful accounts
  769
  1,202Other
  2,407
  326Valuation
  allowance
  (19,242)
  (2,596)Total
  deferred income tax assets
  36,135
  18,297Deferred
  income tax liabilities:Depreciation
  (12,721)
  (8,471)Intangible
  assets
  (21,714)
  (8,751)Other
  (1,700)
  (1,075)Net
  deferred income tax asset
  $-
  $-In assessing the realizability
of deferred tax assets, management considers whether it is more likely than not
that some portion or all of the deferred tax assets will not be realized.  The ultimate realization of deferred tax
assets is dependent upon the generation of future taxable income during the periods
in which those temporary differences become deductible.  Management has considered the scheduled
reversal of deferred tax liabilities and tax planning strategies in making this
assessment.  Based upon the assessment,
management has established a valuation allowance for net deferred income tax
assets not expected to be offset by deferred income tax liabilities due to the
uncertainty of the realization of future tax benefits.

As of December 31, 2000, the
Company had tax operating loss carryforwards of approximately $137.0 million
available to offset future income tax liabilities.  These carryforwards expire in the years 2006 through 2020.  The Tax Reform Act of 1986 contains
provisions that may limit the availability and timing of usage of net operating
loss carryforwards in the event of certain changes in the ownership of the
Companys common stock.

9.  Commitments and Contingencies:

Employment
Agreements

The Company has employment
agreements with certain executive officers with terms of three years.  These agreements provide for payment of amounts
up to three times their annual compensation if there is a termination of their
employment as a result of change in control of the Company, as defined in the
agreements.  The maximum contingent
liability under these agreements was $3.0 million at December 31, 2000.

Legal
and Regulatory Matters

The Company is subject to
various legal and regulatory matters arising in the normal course of
business.  Management does not believe
any of these matters will have a significant effect on the Company and its financial
position or results of operations.

Leases
(In thousands)

The Company leases office space
and real estate under noncancelable operating leases.  Future minimum payments under these leases as of December 31,
2000 are as follows:

Year
  Amount2001
  $5,3962002
  4,2212003
  3,5902004
  2,4302005
  1,247Thereafter
  1,396Total
  $18,280Under the terms of the lease
agreements, the Company also is responsible for certain operating expenses and
taxes.  Total rent expense of $5.8
million, $3.3 million and $2.3 million was charged to operations for the years
ended December 31, 2000, 1999 and 1998, respectively.

10. 
Defined Contribution Plan:

The Company has a defined
contribution savings and profit-sharing plan for employees who meet certain age
and service requirements.  Under the
savings portion of the plan, employees may elect to contribute a percentage of
their salaries to the plan, with the Company contributing a matching percentage
of the employees contributions.  Under
the profit-sharing portion of the plan, the Company contributes a percentage of
employees salaries.  Contributions
charged to operations for the years ended December 31, 2000, 1999 and 1998 were
$662,000, $435,000 and $297,000 respectively. 
The percentages the Company matches under the savings portion of the
plan and contributes under the profit-sharing portion of the plan are
determined annually by the Companys Board of Directors.

11.  Supplemental Cash Flow Information:



Years ended December 31,
  (In thousands)2000
  
  1999
  
  1998Cash paid for:Interest
  $76,640
  
  $25,488
  
  $16,273Income taxes
  -
  
  46
  
  -12. Events Subsequent to December 31, 2000:

Rural Cellular Corporation
completed the $194 million acquisition of the outstanding shares of the Saco
River Telegraph and Telephone Company (Saco River) on January 1, 2001. Saco
River provides wireless and ILEC telecommunication services to southern Maine
and eastern New Hampshire. Saco Rivers wireless services in the Portsmouth, NH
MSA are provided under the name StarCellular and include 284,000  POPs covering 1,000 square miles. The
acquisition of Saco River was financed through RCCs existing credit facility.
The PCS licenses are currently not built out and cover approximately 1,080,000
POPs. These license areas are contiguous to RCCs existing Northeast
properties.

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Rural Cellular Corporation:

We have audited, in accordance with auditing standards generally
accepted in the United States, the consolidated financial statements included
in Rural Cellular Corporations Form 10-K and have issued our report thereon
dated February 2, 2001.  Our audit was
made for the purpose of forming an opinion on those statements taken as a whole.  The schedule listed in the index of
consolidated financial statements is the responsibility of the Companys
management and is presented for purposes of complying with the Securities and
Exchange Commissions rules and is not part of the basic consolidated financial
statements.  This schedule has been
subjected to the auditing procedures applied in the audits of the basic
consolidated financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic consolidated financial statements taken as a whole.

Arthur Andersen LLP

Minneapolis, Minnesota,
February 2, 2001

RURAL CELLULAR
CORPORATION AND SUBSIDIARIES
Schedule II - Valuation and Qualifying Accounts

Allowance
for Uncollectible Accounts:



Years Ended December 31,(In thousands)
  2000
  
  1999
  
  1998Balance, at beginning of year
  $    894
  
  $1,555
  
  $1,146Additions charged to income
  9,440
  
  3,029
  
  2,843Write-offs, net of recoveries
  (7,949)
  
  (3,690)
  
  (2,434)Balance, at end of year
  $ 2,385
  
  $   894
  
  $1,555

EXHIBIT INDEX

Number
  Description2.1
  Asset Purchase Agreement among Triton
  Cellular Partners, L.P. and Rural Cellular Corporation as of November 8, 1999
  [1]3.1(a)
  Articles of Incorporation
  [2]3.1(b)
  Amendment to Articles of Incorporation,
  effective March 24, 2000
  [2]3.2(a)
  Amended and Restated Bylaws
  [2]3.2(b)
  Amendment to Amended and Restated Bylaws,
  effective March 22, 2000
  [2]4.1
  Indenture dated May 14, 1998 between the
  Registrant, as Issuer, and Norwest Bank Minnesota, N.A., as Trustee, with
  respect to the 9 5/8% Senior Subordinated Notes Due 2008
  [3]4.2
  Form of the 9 5/8% Senior Subordinated
  Notes Due 2008 (included as an exhibit to the Indenture, filed herewith as
  Exhibit 4.1)
  [3]4.3
  Certificate of Designation of 11 3/8%
  Senior Exchangeable Preferred Stock
  [3]4.4
  Certificate of Designation of 12 1/4%
  Junior Exchangeable Preferred Stock
  [2]4.5(a)
  Class A Share Rights Agreement dated April
  30, 1999
  [4]4.5(b)
  Amendment 
  to the Class A Rights Agreement dated March 31, 2000
  [5]4.6(a)
  Recapitalization Agreement dated
  October 31, 1999 by and between Rural Cellular Corporation and Telephone
  and Data Systems, Inc.
  [6]4.6(b)
  First Amendment to Recapitalization
  Agreement dated December 6, 1999 by and between Rural Cellular
  Corporation and Telephone and Data Systems, Inc.
  [6]4.6(c)
  Second Amendment to Recapitalization
  Agreement dated March 31, 2000 by and between Rural Cellular Corporation
  and Telephone and Data Systems, Inc.
  [6]4.6(d)
  Registration Rights Agreement dated
  March 31, 2000 by and between Rural Cellular Corporation and Telephone
  and Data Systems, Inc.
  [6]4.6(e)
  Certificate of Designation of Voting Power,
  Preferences and Relative Participating, Optional and Other Special Rights,
  Qualifications, and Restrictions of Class T Convertible Preferred Stock
  of Rural Cellular Corporation
  [6]4.7(a)
  Preferred Stock Purchase Agreement dated
  April 3, 2000 among Rural Cellular Corporation, Madison Dearborn Capital
  Partners III, L.P., Madison Dearborn Special Equity III, L.P.,
  Special Advisors Fund I, LLC, Boston Ventures Limited Partnership V
  and Toronto Dominion Investments, Inc. (collectively "Class M
  Investors")
  [6]4.7(b)
  Certificate of Designation of Voting Power,
  Preferences and Relative Participating, Optional and Other Special Rights,
  Qualifications and Restrictions of Class M Redeemable Voting Convertible
  Preferred Stock of Rural Cellular Corporation
  [6]4.7(c)
  Registration Rights Agreement dated
  April 3, 2000 among Rural Cellular Corporation and Class M Investors
  [6]10.1(a)
  Second Amended and Restated Loan Agreement
  dated April 3, 2000 among Rural Cellular Corporation and certain financial
  institutions and Toronto Dominion (Texas), Inc. as administrative agent
  [7]10.1(b)
  Third Amended and Restated Loan Agreement
  dated June 29, 2000 among Rural Cellular Corporation and certain financial
  institutions and Toronto Dominion (Texas), Inc. as administrative agent
  [8]10.1(c)
  First Amendment to the Third Amended and
  Restated Loan Agreement dated December 14, 2000 among Rural Cellular
  Corporation and certain financial institutions and Toronto Dominion (Texas),
  Inc. as administrative agent
  [14]10.2(a)
  Trademark and Trade Name License Agreements
  between Cellular 2000, Inc. and North Woods Cellular Partnership, Northern
  Lights Cellular Partnership, Great River Cellular Partnership, Cellular Five
  Partnership and Heartland Cellular Partnership
  [9]10.2(b)
  Assignment and Assumption Agreements by and
  between the Registrant and each partnership
  [9]*10.3
  1995 Stock Compensation Plan, as amended to
  date
  [10]*10.4
  Stock Option Plan for Non-employee
  Directors, as amended to date
  [11]*10.5(a)
  Employment Agreement with Richard P.
  Ekstrand effective January 22, 1999
  [12]*10.5(b)
  Amendment to Employment Agreement with
  Richard P. Ekstrand effective January 1, 2001
  [14]*10.6(a)
  Employment Agreement with Wesley E. Schultz
  effective January 22, 1999
  [12]*10.6(b)
  Amendment to Employment Agreement with
  Wesley E. Schultz effective January 1, 2001
  [14]*10.7(a)
  Employment Agreement with Ann K. Newhall
  effective February 6, 1999
  [13]*10.7(b)
  Amendment to Employment Agreement with Ann
  K. Newhall effective January 1, 2001
  [14]*10.8
  Change of Control Agreement with Scott
  Donlea effective January 1, 2001
  [14]*10.9
  Change of Control Agreement with David Del
  Zoppo effective January 1, 2001
  [14]21
  Subsidiaries of Registrant
  [14]23
  Consent of Arthur Andersen LLP
  [14]*Indicates
  management contract or compensatory plan or agreement required to be filed as
  an exhibit to this Form.[1]
  Filed as an
  exhibit to Report on Form 10-Q for the quarter ended September 30, 1999 and
  incorporated herein by reference.[2]
  Filed as an
  exhibit to Report on Form 10-K for the year ended December 31, 1999 and
  incorporated herein by reference.[3]
  Filed as an
  exhibit to Registration Statement on Form S-4 (SEC No. 333-57677), filed June
  25, 1998, and incorporated herein by reference.[4]
  Filed as an
  exhibit to Registration Statement on Form 8-A filed May 19, 1999 and
  incorporated herein by reference.[5]
  Filed as an
  exhibit to Registration Statement on Form 8-A/A-1 filed April 18, 2000 and
  incorporated herein by reference.[6]
  Filed as an
  exhibit to Report on Form 8-K dated April 1, 2000 and incorporated herein by
  reference.[7]
  Filed as an
  exhibit to Report on Form 8-K/A dated April 1, 2000 and incorporated herein
  by reference.[8]
  Filed as an
  exhibit to Report on Form 10-Q for the quarter ended June 30, 2000 and
  incorporated herein by reference.[9]
  Filed as an
  exhibit to Registration Statement on Form S-1 (Sec. No. 33-80189) filed
  December 8, 1995 and incorporated herein by reference.[10]
  Filed with
  definitive proxy statement for 2000 Annual Meeting on April 7, 2000 and
  incorporated herein by reference.[11]
  Filed as an
  exhibit to Report on Form 10-K for the year ended December 31, 1996 and
  incorporated herein by reference.[12]
  Filed as an
  exhibit to Report on Form 10-K for the year ended December 31, 1998 and
  incorporated herein by reference.[13]
  Filed as an
  exhibit to Report on Form 10-Q for the quarter ended March 31, 1999 and
  incorporated herein by reference.[14]
  Filed
  herewith.