<PAGE>


                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   ----------
                                    FORM 10-K
                                   ----------

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

                     For fiscal year ended December 31, 2002

                                       OR

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

                For the transition period from _______ to _______

                         Commission File Number: 0-16751

                                   NTELOS INC.
               (Exact Name of Registrant as Specified in Charter)

            VIRGINIA                                   54-1443350
   (State of Incorporation)                (IRS Employer Identification No.)

                                  P.O. Box 1990
                           Waynesboro, Virginia 22980
                    (Address of principal executive offices)

                                 (540) 946-3500
              (Registrant's telephone number, including area code)

                                   ----------

           SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

        Title of Each Class             Name of Each Exchange on Which Register
        -------------------             ---------------------------------------
               None                                     None

           SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

                           Common Stock, no par value
                           --------------------------
                                (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. YES X NO _

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

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). YES _ NO X

As of April 7, 2003, 17,780,248 shares of NTELOS Inc. common stock, no par
value, were outstanding and the aggregate market value of such common stock held
by non-affiliates* (based upon the average of the bid and asked prices of such
common stock as of June 28, 2002) was $29,959,718.

----------
*Calculated by excluding all shares held by executive officers and directors of
the registrant without conceding that all such persons are "affiliates" of the
registrant for purposes of federal securities laws.

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PART I

ITEM 1.     BUSINESS

GENERAL

            We are a regional integrated communications provider offering a
broad range of wireless and wireline products and services to business and
residential customers in Virginia, West Virginia, Kentucky, Tennessee and North
Carolina. We are a digital PCS licensee, and we own a fiber optic network,
switches and routers, which enable us to offer our customers end-to-end
connectivity in many of the regions we serve.

REORGANIZATION PROCEEDINGS

            On March 4, 2003 (the "Filing Date"), we and certain of our
subsidiaries (collectively, the "Debtors") filed separate voluntary petitions in
the United States Bankruptcy Court for the Eastern District of Virginia,
Richmond Division (the "Court") for reorganization under Chapter 11 of the
United States Bankruptcy Code (the "Bankruptcy Code"). The Chapter 11 cases (the
"Cases") are being jointly administered under case number 03-32094. The Debtors
are managing their businesses in the ordinary course as debtors-in-possession
subject to the control and supervision of the Court.

            We believe that our financial difficulties, and the events leading
up to the Chapter 11 Case, are attributable to a number of factors. The dramatic
downturn in the economy generally in the latter half of 2001 and in 2002, and
the telecommunications sector in particular, adversely impacted our ability to
build our revenue base and generate funds adequate to meet our debt servicing
requirements at the holding company level. Further we and our subsidiaries have
grown dramatically since our founding, through acquisitions and capital
expenditures, which has left us highly leveraged and thus vulnerable to general
adverse economic and industry conditions. As a debtor-in-possession, we are
authorized to continue to operate as an ongoing business, but may not engage in
transactions outside the ordinary course of business without the approval of the
Court, after notice and an opportunity to be heard.

            At first day hearings, the Court entered orders that, among other
things, granted authority to continue to pay employee salaries, wages and
benefits, and to honor warranty and service obligations to customers. On March
5, 2003, the Court also granted interim approval to access up to $10 million of
a $35 million senior secured debtor-in-possession financing facility (the "DIP
Financing Facility") to meet ongoing obligations in connection with regular
business operations, including obligations to employees and prompt payment to
vendors for goods and services. The full $35 million DIP commitment was subject
to final court approval, certain state regulatory approvals and the lenders'
receiving satisfactory assurances regarding the proposed $75 million investment
in the Company by certain holders of senior notes upon emergence from
bankruptcy. On March 24, 2003, the Court entered a final order approving the DIP
Financing Facility and authorizing the Debtors to utilize up to $35 million
under the DIP Financing Facility. Subsequent to March 24, 2003, the Company
satisfied all other conditions to full access to the DIP Financing Facility. A
description of the DIP Financing Facility appears in Item 7. Management's
Discussion and Analysis--Bankruptcy Proceeding.

            Under the Bankruptcy Code, actions to collect pre-petition
indebtedness, as well as most other pending litigation, are stayed. Absent an
order of the Court, substantially all pre-petition liabilities are subject to
settlement under a plan of reorganization to be voted upon by creditors and
equity holders, if it is determined that equity holders will receive a
distribution under the plan, and approved by the Court. Although the Debtors
expect to file a reorganization plan or plans that provide for emergence from
bankruptcy in 2003, there can be no assurance that a reorganization plan or
plans will be proposed by the Debtors or confirmed by the Court, or that any
such plan(s) will be consummated. As provided by the Bankruptcy Code, the
Debtors initially have the exclusive right to propose a plan of reorganization
for 120 days. If the Debtors fail to file a plan of reorganization during such
period or fail to obtain an extension from the Court during such period or if
such plan is not accepted by the required number of creditors and, if
applicable, equity holders, any party in interest may subsequently file its own
plan of reorganization for the Debtors. A plan of reorganization must be
confirmed by the Court, upon certain findings being made by the Court which are
required by the Bankruptcy Code. The Court may

<PAGE>

confirm a plan notwithstanding the non-acceptance of the plan by an impaired
class of creditors and, if applicable, equity holders, if certain requirements
of the Bankruptcy Code are met.

            Under the Bankruptcy Code, we may assume or reject executory
contracts, including lease obligations, subject to the approval of the Court and
certain other conditions. In this context, "assumption" means that the Debtors
agree to perform their obligations and cure certain existing defaults under an
executory contract and "rejection" means that the Debtors are relieved from
their obligations to perform further under an executory contract and are subject
only to a claim for damages for the breach thereof. Any claim for damages
resulting from the rejection of an executory contract is treated as a general
unsecured claim in the Cases. Parties affected by these rejections may file
claims with the Court in accordance with the reorganization process.

            Generally, pre-Filing Date claims against the Debtors will fall into
two categories: secured and unsecured, including certain contingent or
unliquidated claims. Under the Bankruptcy Code, a creditor's claim is treated as
secured only to the extent of the value of the collateral securing such claim,
with the balance of such claim being treated as unsecured. Unsecured and
partially secured claims do not accrue interest after the Filing Date. A fully
secured claim, however, may accrue interest after the Filing Date until the
amount due and owing to the secured creditor, including interest accrued after
the Filing Date, is equal to the value of the collateral securing such claim.
The amount and validity of pre-Filing Date contingent or unliquidated claims,
although presently unknown, ultimately may be established by the Court or by
agreement of the parties. Parties who believe they have contingent or
unliquidated claims against the Debtors will be compelled to assert such claims
in the bankruptcy proceeding or otherwise will lose the right to assert such
claims. As a result additional pre-Filing Date claims and liabilities may be
asserted, some of which may be significant. No provision has been included in
the accompanying financial statements for such potential claims and additional
liabilities that may be filed on or before June 10, 2003, the date fixed by the
Court as the last day to file proofs of claim.

            The United States Trustee ("U.S. Trustee") has appointed a
creditors' committee representing the unsecured creditors and, in accordance
with the provisions of the Bankruptcy Code, both the U.S. Trustee and the
committee have the right to be heard on all matters that come before the Court.
The Debtors expect that the appointed committee will play an important role in
the Cases and the negotiation of the terms of any plan or plans of
reorganization. There can be no assurance that this committee will support our
position in the bankruptcy proceedings or the plan of reorganization once
proposed, and disagreements between us and the committee could protract the
bankruptcy proceedings, could negatively impact our ability to operate during
bankruptcy and could delay our emergence from bankruptcy. The Debtors are
required to bear certain of the committee's costs and expenses, including those
of their counsel and other advisors.

            Our objective is to achieve the highest possible recoveries for all
creditors and shareholders, consistent with the Debtors' abilities to pay and
the continuation of their businesses. However, there can be no assurance that
the Debtors will be able to attain these objectives or achieve a successful
reorganization. Further, there can be no assurance that the liabilities of the
Debtors will not be found in the Cases to exceed the fair value of their assets.
This could result in claims being paid at less than 100% of their face value. In
addition, we anticipate that holders of equity securities would be entitled to
little or no recovery and that their claims would be cancelled for little or no
consideration. At this time, it is not possible to predict the outcome of the
Cases, in general, or the effect of the Cases on the businesses of the Debtors
or on the interests of creditors and shareholders.

BUSINESS OPERATIONS

            Our business encompasses both wireless and wireline communications
services:

        .   Wireless. Our wireless business consists primarily of digital PCS
            services, which we offer in Virginia, West Virginia, North Carolina
            and Kentucky. We began offering digital PCS services in late 1997
            and offered analog cellular until July 2000. Our PCS network
            utilizes digital CDMA technology. As of December 31, 2002, we owned
            licenses covering approximately 10.2 million pops and provided PCS
            services to approximately 266,500 subscribers.

                                        2

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        .   Wireline. We provide ILEC and CLEC services in Virginia and CLEC
            services in West Virginia. As an ILEC, we own and operate two local
            telephone companies. As of December 31, 2002, our ILECs had
            approximately 52,000 residential and business access lines
            installed. As a CLEC, we serve 16 markets in three states. Since
            commencing CLEC operations in mid-1998, we have grown our number of
            installed business access lines to approximately 44,000 as of
            December 31, 2002. In addition, we provide dial-up Internet access
            through a local presence in Virginia, West Virginia and Tennessee.
            We offer high-speed data services, such as dedicated service and DSL
            within these three states. As of December 31, 2002, our Internet
            customer base totaled approximately 61,500 dial-up subscribers and
            5,500 DSL subscribers.

            Our wireless and wireline businesses are supported by our fiber
optic network, which currently includes 1,800 route-miles. This network gives us
the ability to originate, transport and terminate much of our customers'
communications traffic in many of our service markets. We also use our network
to back-haul communications traffic for our retail services and to serve as a
carrier's carrier, providing transport services to third parties for long
distance, Internet and private network services. Our fiber optic network is
connected to and marketed with adjacent fiber optic networks in the mid-Atlantic
region.

            See Note 4 of the Notes to Consolidated Financial Statements in Item
8 of this report for financial information about industry segments.

BUSINESS STRATEGY

            Our objective is to be the leading integrated communications
provider in our region of operations. The key elements of our business strategy
are to:

            Increase Market Share by Establishing Service-Driven Customer
Relationships through a Local Presence. We intend to grow our business by
leveraging our local presence and continuing our focus on providing high levels
of customer satisfaction. We plan to accomplish this through our local retail
outlets and a business to business sales team that provides face-to-face sales
and personalized client care. We intend to enhance our local presence by
continuing our support of the communities that we serve, including corporate and
employee participation in community programs, and expanding this support to our
target markets. We will reinforce our customer relationships by continuing to
provide integrated, personalized customer care in each of our markets. We intend
to do this through our retail locations, which also serve as customer care
centers, and our 24 hours-a-day, 365 days-a-year call centers.

            Offering of Bundled Services. We offer a broad range of
communications services in a bundled package and on a single bill. We believe
that by cross-selling multiple products and services, we are building new
customer relationships, strengthening the partnership with existing customers
and increasing customer retention.

            Leverage Our Fiber Optic Network, Infrastructure and Technologies.
Our infrastructure, including our fiber optic network, switches and routers, is
a technologically-advanced communications system that connects many of our
markets. We intend to offer our broad range of communications services in many
of our markets and deliver those services over infrastructure that we control
and maintain. We also intend to continue using our network to serve as a
carrier's carrier, offering switching and transport services to other
communications carriers. As new wireless data applications become available, we
also intend to use our PCS bandwidth capacity, which ranges from 10 MHz to 40
MHz, in our markets to capitalize on opportunities in the growing market for
wireless Internet access and data transmission.

RECENT DEVELOPMENTS

            We have focused our growth efforts on our core communications
services, primarily digital PCS services, Internet access, including dedicated,
high-speed DSL and dial-up services, high-speed data transmission and local
telephone services. We have divested non-strategic assets and certain excess PCS
spectrum. Transactions that were completed in 2002 and the first quarter of 2003
include:

            .       entering into an agreement for the sale of our Portsmouth,
                    Virginia call center, subject to Court approval;

                                        3

<PAGE>

            .       entering into an agreement for the sale of our wireline
                    cable business in Alleghany County, Virginia, subject to
                    Court and franchise authority approval;

            .       sale of substantially all of the assets of our National
                    Alarm Services business;

            .       sale of PCS spectrum covering 295,000 POPS in State College
                    and Williamsport, Pennsylvania;

            .       sale of minority ownership interest in America's Fiber
                    Network, LLC;

            .       sale of excess PCS spectrum covering 373,000 POPS in
                    Winchester and Charlottesville, Virginia; and

            .       sale of excess PCS spectrum covering 672,000 POPS in Altoona
                    and Johnstown, Pennsylvania and Wheeling, West Virginia.

OUR WIRELESS MARKETS

            The following table sets forth information as of March 18, 2003
regarding estimated market POPS, market MHz held and total MHz POPS in the
digital PCS markets in which we operate and the markets in which we have
licenses but do not yet operate:

                                        4

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<TABLE>
<CAPTION>
        MARKET NAME                      POPS (000) *    MHz HELD      MHz POPS
------------------------------------     ------------   ----------   ------------
<S>                                         <C>             <C>        <C>
OPERATING MARKETS
Virginia
     Charlottesville                           224          20           4,476
     Danville                                  167          30           5,016
     Fredericksburg                            144          10           1,440
     Harrisonburg                              145          20           2,900
     Lynchburg                                 162          30           4,845
     Martinsville                               90          30           2,688
     Norfolk                                 1,751          20          35,020
     Richmond                                1,233          20          24,650
     Roanoke                                   648          30          19,428
     Staunton/Waynesboro                       109          30           3,267
     Winchester                                162          20           3,248

West Virginia
     Beckley                                   170          40           6,796
     Bluefield                                 174          30           5,217
     Charleston                                492          30          14,760
     Clarksburg-Elkins                         196          10           1,955
     Fairmont                                   56          40           2,240
     Huntington, WV-Ashland, KY                369          30          11,061
     Morgantown                                107          25           2,675
     Hagerstown, MD-Martinsburg, WV            361          20           7,226
                                         ------------                ------------
             Total Operating Markets         6,758                     158,908
                                         ------------                ------------

NON-OPERATIONAL MARKETS
West Virginia
     Logan                                      40          30           1,203
     Parkersburg, WV-Marietta, OH              181          30           5,430
     Wheeling                                  211          30           6,321
     Williamson, WV-Pikeville, KY              181          30           5,433

Ohio
     Athens                                    133          15           1,991
     Chillicothe                               107          15           1,598
     Portsmouth                                 93          30           2,796
     Zanesville-Cambridge                      188          15           2,819

Pennsylvania
     Altoona                                   225          15           3,378
     Harrisburg                                695          10           6,945
     Lancaster                                 467          10           4,672
     Reading                                   361          10           3,612
     York-Hanover                              473          10           4,725

Maryland
     Cumberland                                158          40           6,335
                                         ------------                ------------
             Total non-operational           3,513                      57,258
                                         ------------                ------------
     Total Wireless Markets                 10,271                     216,166
                                         ------------                ------------
</TABLE>

* Source: Kagan's Wireless Telecom Atlas & Databook 2001

                                        5

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PRODUCTS AND SERVICES

We segregate our services into three primary categories: wireline
communications, wireless communications and other communications services.

The percentage of total sales contributed by each class of service is as
follows:

                                      2002      2001        2000
                                      ----      ----        ----
Wireline communications               36.9%     40.2%       51.3%
Wireless communications               59.7%     55.3%       34.4%
Other communications services          3.4%      4.5%       14.3%

WIRELESS

            Digital PCS. Our digital PCS packages provide the following
affordable and reliable services:

        .   Digital Features. The features of our basic PCS service include
            voice mail with notification, caller ID, call waiting, three-way
            calling, call forwarding, voice activated dialing and 2 way mobile
            messaging. For an additional fee, we also provide wireless Internet
            access.

        .   Nationwide Service. Our nationwide roaming agreements and dual-mode
            handsets allow our customers to roam on wireless networks of other
            wireless providers. We have a nationwide roaming agreement with
            Sprint that allows our PCS customers to make and receive calls when
            roaming on the Sprint digital CDMA network.

        .   Advanced Handsets. We offer tri-mode handsets employing CDMA
            technology, which allow customers to make and receive calls on both
            CDMA PCS and analog frequency bands. These handsets allow roaming on
            digital or analog networks where our digital PCS service is not
            available. These handsets are equipped with preprogrammed features
            such as speed dial and last number redial.

        .   Extended Battery Life. The CDMA handsets that we offer provide
            extended battery life. These handsets generally offer four days of
            standby and two and one-half hours of talk time battery life.
            Handsets operating on a digital system are capable of saving battery
            life while turned on but not in use, improving efficiency and
            extending the handset's use.

        .   Enhanced Voice Quality. Our CDMA technology offers enhanced voice
            quality and clarity, powerful error correction, less susceptibility
            to call fading and enhanced interference rejection, as compared to
            analog cellular systems, all of which result in fewer dropped calls.

        .   Privacy and Security. Our PCS services provide secure voice
            transmissions encoded into a digital format, designed to prevent
            eavesdropping and unauthorized cloning of subscriber identification
            numbers.

        .   Customer Care. We offer customer care 24 hours-a-day, 365
            days-a-year. Customers can call our toll-free customer care number
            from anywhere. Our PCS handsets can be preprogrammed with a speed
            dial feature that allows customers to easily reach customer care at
            any time. Our local retail stores also serve as customer contact
            centers, where customers can receive personalized customer service.

        .   Simple Rate Plans. Customers can select from rate plans that include
            expanded local, state or regional one-rate calling areas.

        .   nAdvance Plans. Our nAdvance plan is a hybrid product designed to
            serve the growing segment of customers preferring post-pay-type rate
            plans within a pay in advance environment. After paying an
            activation fee, these accounts enjoy the same basic features as
            traditional post-pay customers, including night and weekend options,

                                        6

<PAGE>

            nationwide long distance, and the ability to add roadside assistance
            and other options. Account balances are replenished monthly by cash
            payment, automatic credit card billing or electronic bank draft. A
            one-year contract and a monthly service fee apply.

            Wholesale Wireless Services. We provide digital PCS services on a
wholesale basis to other PCS service providers. We have a ten-year agreement
commencing August 1999 with Horizon Personal Communications, Inc., a Sprint
affiliate, to provide wholesale PCS services through a contiguous 13 BTA
footprint. These BTAs include Charlottesville, Danville, Lynchburg,
Martinsville, Roanoke, and Staunton-Waynesboro, Virginia; Beckley, Bluefield,
Charleston, Clarksburg-Elkins, Fairmont, and Morgantown, West Virginia;
Huntington, West Virginia-Ashland, Kentucky. Horizon uses our network to provide
retail service to its customers in these BTAs. The agreement with Horizon was
amended in the third quarter of 2001. This amendment provides pricing changes,
includes minimum monthly revenue commitments from July 2001 through December
2003, and additional revenue for minutes of use that exceed predetermined
thresholds. As part of this amendment, our subsidiaries are complying with
certain network upgrades to 3G-1XRTT technology. This new technology is being
deployed in these wholesale BTAs in a two phase build out plan. The first phase
was completed in July 2002 and the second phase is scheduled to be completed by
August 2003. In addition to the wholesale services discussed above, the
agreement provides for roaming services for Horizon and Sprint end users.

            New Products and Services. In February 2002, NTELOS introduced
prepay roaming for prepay customers. Traditionally, prepay roaming has presented
significant risk for fraud. However, the product offered by NTELOS generates
real time billing for roaming calls, giving customers the ability to manage
their roaming expense by ending the call when the subscriber depletes their
balance, thus eliminating any fraud risk.

            In June 2002, NTELOS introduced StarVoice. This voice-activated
service provides a safe and hands free alternative while driving. Customers
simply activate the service by pressing two buttons on their phone. Once on the
StarVoice platform, customers can simply state names in their directory, or have
numbers dialed for them, to connect the calls.

            In the fourth quarter 2002, we launched Mobile Originated SMS in the
Virginia East market, branded as 2 Way Mobile Messaging. This service allows
customers to create and send text messages from their handset. This service will
be released early in the second quarter in the Virginia West and West Virginia
markets.

            In late 2001, we began offering our PCS customers mobile Internet
access, which they can utilize by connecting their wireless handsets to a laptop
or other handheld device. Our wireless Internet access enables PCS customers to
send and receive e-mail or other information any time they are on a CDMA
network. Our CDMA technology also supports direct Internet access from a
handset. Additional data products related to higher speeds and functionality are
under review.

WIRELINE

            Our wireline communications services include ILEC and CLEC services,
Internet access, including high-speed DSL and dial-up, and data transmission
services. We also own and operate a fiber optic cable network, switches and
routers through which we deliver many of our services.

            ILEC and CLEC. We currently provide ILEC and CLEC services in
Virginia, and CLEC services in West Virginia and Tennessee. As an ILEC, we own
and operate a 106-year-old telephone company in western Virginia that serves
business and residential customers. In February 2001, through our merger with
R&B Communications, we acquired the R&B ILEC, a 102-year-old telephone company
in southwestern Virginia that serves business and residential customers. As a
CLEC, we serve business customers in 16 markets.

            We offer our ILEC and CLEC customers voice services that include the
following:

        .   Custom Calling Features. We offer a broad range of custom calling
            features, including call waiting, continuous redialing, caller ID
            and voice mail.

                                        7

<PAGE>

        .   Centrex Services. We offer our business customers Centrex services,
            which replace a customer's private branch exchange, or PBX, system.
            In lieu of a PBX system, our Centrex services provide the switching
            function, along with multiple access lines.

        .   Long Distance Services. We offer domestic and international long
            distance services to our ILEC and CLEC customers using our network
            facilities or through resale arrangements with interexchange
            carriers such as MCI WorldCom.

            Internet. We provide Internet access services in Virginia, West
Virginia, Tennessee and North Carolina. We offer our Internet customers
value-added services that include the following:

        .   Local Dial-Up Internet Access. We offer dial-up Internet access
            through 59 local Internet points of presence. We offer multiple
            e-mail accounts, free software and personal disk space.

        .   Dedicated Internet Access. We provide dedicated high-speed Internet
            connectivity, including frame relay, ATM and special service
            circuits.

        .   High-Speed DSL Access. We offer DSL Internet access. DSL technology
            enables a customer to receive high-speed Internet access through a
            copper telephone line.

        .   Web Hosting. We host over 950 domains on both LINUX and Windows 2000
            servers. Domain services, collocation agreements and Internet
            marketing services are also available.

            Fiber Optic Network. We own and operate a fiber optic cable network.
Our fiber optic network provides a backbone for the delivery of our ILEC, CLEC,
Internet access and digital PCS services to business and residential customers.
Our network enables us to originate, transport and terminate communications
traffic within our service territory, facilitating our ability to control
quality and contain network operating costs.

            We also use our network to serve as a carrier's carrier, leasing
capacity on our network to other communications carriers for the provision of
long distance services, private network facilities and Internet access. A
portion of our network is a part of a fiber network managed by ValleyNet, a
partnership of us and two other nonaffiliated communications companies that have
interconnected their networks to create a 1,318 route-mile, nonswitched, fiber
optic network from Carlisle, Pennsylvania, through the Interstate 81 corridor in
Virginia, to Johnson City, Tennessee. It also includes branches from Winchester
to Herndon, Virginia and Waynesboro to Charlottesville, Virginia. ValleyNet is a
member of DDR Broadband, LLC which, in addition to the geographic area covered
by ValleyNet, provides fiber routes in North Carolina, South Carolina, Georgia,
and Florida. The ValleyNet network is also connected to and marketed with other
adjacent fiber networks, including America's Fiber Network, creating
approximately 11,000 route-miles of connected fiber optic network that serves
ten states. We are also a regional partner in the nationwide signaling network
operated by Verisign, Inc. and using the SS-7 protocol. As a regional partner,
we lease capacity to Verisign on our mated pair of signaling data switches.

OTHER

            We own and operate wireless cable systems in the Charlottesville,
Roanoke Valley, Shenandoah Valley and Richmond, Virginia markets. These systems
currently provide wireless cable service to approximately 5,800 customers. We
offer our subscribers up to 25 basic cable channels, including ESPN, CNN, TBS
and MTV, and one to three premium channels, including HBO, Cinemax, Showtime and
the Disney Channel. We also operate a 750 MHz wireline cable system with
approximately 6,600 subscribers in Alleghany County, Virginia with a similar
product offering. In February 2003, we entered into an agreement for the sale of
the assets of this wireline cable system. We also provide our customers with
paging services that cover most of Virginia. As of December 31, 2002, we had
approximately 10,900 paging customers. We offer numeric, alphanumeric, tone-only
and tone and voice paging services, as well as wide-area paging.

                                        8

<PAGE>

SALES AND MARKETING

            We use several sales channels to distribute our products and
services. These channels include company-owned retail stores and kiosks, a
direct and telesales sales force and third-party indirect sales agents. We seek
to have a strong retail presence in the markets that we serve, and therefore
focus our sales efforts on our retail locations. Each of our retail locations is
staffed with locally-based sales and customer service representatives. We use
our retail locations to provide face-to-face personalized product sales and
client care. We also have account representatives assigned to the small to
medium-sized business market segment and other account representatives assigned
to the large business market segment.

            Our marketing strategy focuses on our position as an integrated
communications provider. Our strategy is comprised of the following key
elements, which apply to each of our products and services across all of our
markets:

        .   provide value-added products and services through bundled packages;

        .   provide exceptional customer service; and,

        .   serve as a strong corporate citizen and integral part of the
            community.

            We seek to use these elements to position us as a customer's first
choice for complete communications solutions.

            We strengthen our local presence through corporate and employee
support of the communities in our markets. We participate in local charities,
community organizations and chambers of commerce. We use our local presence to
pursue an aggressive branding campaign, primarily by advertising through radio,
newspapers and television. Our target demographics are individuals in the 25 to
54 year-old range and small to medium-sized businesses.

NETWORK INFRASTRUCTURE AND TECHNOLOGY

            WIRELESS

            Wireless digital signal transmission is accomplished through one of
three protocols: CDMA, TDMA or GSM, none of which are compatible. We deliver our
PCS services through CDMA technology. Our CDMA network includes four wireless
switches with seven centralized base station controllers, or CBSCs, supporting
more than 752 base transceiver stations, or BTSs and 72 repeaters. We collocate
a 3Com inter-working unit with each switch to enable wireless data access. We
use various configurations of Lucent BTS equipment in our Virginia East market
and Motorola BTS equipment in Virginia West and West Virginia markets, as well
as cell site repeaters, to provide cost-efficient radio frequency coverage. We
enhance PCS backhaul facilities through the use of Tellabs digital cross-connect
systems, or DCS, equipment located at strategic BTS locations. The DCSs
consolidate the T-1 facilities from multiple BTSs for efficient backhaul to the
wireless switch.

            WIRELINE

            Our network infrastructure and supporting services form a
communications backbone through which we deliver ILEC, CLEC, Internet access and
digital PCS services. Owning and operating our own network facilities enhances
our ability to control the quality of our products and services and generate
operating efficiencies and economies of scale. One of our operating strategies
has been to deploy new technology to increase operating efficiencies and to
provide a platform for the delivery of new services to our customers. We believe
that we have been among the leaders in the communications industry in
infrastructure development. We began providing digital private line service to
our customers in 1986. We have installed fiber optic cable between our main
switches and our remote switching units. Our digital fiber network provides
faster call completion, improved transmission quality, lower costs and the
ability to offer a broader range of communications services and products.

            Our wireline network includes two Lucent 5ESS digital switches,
which provide end-office and tandem functions for both our ILEC and CLEC
businesses in Virginia. We have twelve remote switching modules deployed
throughout

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<PAGE>

our ILEC territory and three more supporting our CLEC markets. Another Lucent
5ESS digital switch, located in Charleston, supports our CLEC business in West
Virginia. We act as a regional node on Illuminet's nationwide SS7 network using
a pair of Tekelec signal transfer points.

            We use Lucent Any Media and Advanced Fiber Corporation UMC1000
digital loop carriers throughout our ILEC and CLEC access network. For DSL
service in our ILEC and CLEC areas, we use mainly Cisco and Paradyne equipment.
We provide our voicemail services on a Glenayre platform. Our network operations
center monitors our wireline, wireless and data networks on a continuous basis
using a Harris network management system. ATM and Frame Relay services are
provided using three Cisco ATM switches.

COMPETITION

            Many communications services can be provided without incurring a
short-run incremental cost for an additional unit of service. As a result, once
there are several facilities-based carriers providing a service in a given
market, price competition is likely and can be severe. We have experienced price
competition, which is expected to continue. In each of our service areas,
additional competitors could build facilities. If additional competitors build
facilities in our service areas, this price competition may increase
significantly.

            WIRELESS

            We compete in our territory with both wireless analog and wireless
digital communications service providers. Several wireless carriers compete in
portions of our market areas, including Sprint and its affiliates, including
Horizon Personal Communications, AT&T/SunCom, Verizon Wireless, Cingular, T
Mobile, ALLTEL, Nextel and Cellular One, and affiliates of some of these
companies. Many of these competitors have financial resources and customer bases
greater than ours. Some wireless providers are able to offer free services,
including, among others, free long distance, free incoming calls and free
wireless Internet access. Many of them also have more established
infrastructures, marketing programs and brand names. In addition, some of our
competitors offer coverage in areas not serviced by our PCS network, or, because
of their calling volumes or their affiliations with, or ownership of, wireless
providers, offer roaming rates lower than ours.

            We believe that a number of PCS operators will continue to compete
with us in providing some or all of the services available through our network
and may provide services that we do not. Additionally, we expect that existing
analog cellular providers, some of which have been operational for a number of
years and have significantly greater financial and technical resources and
customer bases than us, will continue to upgrade their systems to provide
digital wireless communication services competitive with ours. We also face
competition from resellers, which provide wireless service to customers but do
not hold FCC licenses or own facilities. We compete with wireless providers that
have greater resources than ours that may build their own digital PCS networks
in areas in which we operate.

            WIRELINE

            ILEC and CLEC Services. Several factors have resulted in increased
competition in the local telephone market, including:

        .   growing customer demand for alternative products and services;

            .       technological advances in the transmission of voice, data
                    and video;

        .   development of fiber optics and digital technology;

        .   a decline in the level of access charges paid by interexchange
            carriers to local telephone companies to access their local
            networks;

        .   legislation and regulations, including the Telecommunications Act of
            1996, designed to promote competition;

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<PAGE>

        .   approval of the petition by Verizon to provide intrastate, interLATA
            long distance service in both Virginia and West Virginia; and,

        .   a decline in the level of reciprocal compensation charges paid by
            incumbent local telephone companies to CLECs, most significantly for
            ISP traffic.

            As the ILEC for Waynesboro, Clifton Forge, Covington, Troutville,
Fincastle, Eagle Rock and Oriskany, Virginia, and the surrounding counties, we
are subject to competition. Although no CLECs have entered our incumbent markets
to compete with us, it is possible that one or more may enter our markets to
compete for our largest business customers. The regulatory environment governing
ILEC operations has been and will likely continue to be very liberal in its
approach to promoting competition and network access. Cable operators are also
entering local exchange markets in selected locations. Other sources of
potential competition include wireless service providers.

            Our CLEC operations compete primarily with local incumbent telephone
companies and, to a lesser extent, other CLECs. Although certain CLEC companies
have exited from our markets, we continue to face competition in our CLEC
markets from several other CLECs, including MCI, Adelphia Business Solutions,
Fibernet and KMC Telecom. We also face, and will continue to face, competition
from other current and potential future market entrants.

            Internet. We currently offer our Internet and data services in
small, underserved markets. The Internet industry is characterized by the
absence of significant barriers to entry and the rapid growth in Internet usage
among customers. As a result, we expect that our competition will increase from
market entrants offering high-speed data services, including DSL, cable and
wireless access. Our competition includes:

        .   access and content providers, such as America Online;

        .   local, regional and national Internet service providers;

        .   incumbent local telephone companies, such as Verizon and Sprint
            (particularly for DSL services); and,

        .   cable modem services offered by incumbent cable providers.

            Many of our competitors have financial resources, corporate backing,
customer bases, marketing programs and brand names that are greater than ours.
Additionally, competitors may charge less than we do for Internet services,
causing us to reduce, or preventing us from raising, our fees.

EMPLOYEES

            We employed over 1,275 regular full-time and part-time persons as of
December 31, 2002.

MISCELLANEOUS

            We sell PCS wireless service, on a wholesale basis, to other
communications providers under network service agreements. For the year ended
December 31, 2002, our sale of PCS wireless service to Horizon Personal
Communications, Inc., on a wholesale basis, accounted for approximately 12.4% of
our consolidated revenue.

            Our business generally is not seasonal, except that in the wireless
PCS business we experience higher retail sales volume, and resulting cost of
subscriber acquisition, during the fourth quarter and our roaming traffic is
typically higher in the summer months.

            No material amounts of extended payment terms are made to customers.
Orders for installation of services are being filled on a current basis. No
material part of the business is done with Government entities. Research and
development is performed by our suppliers.

                                       11

<PAGE>

            We believe we are in compliance with federal, state and local
provisions which have been enacted or adopted regulating the discharge of
materials into the environment or otherwise relating to the protection of the
environment. We do not anticipate any material effect on capital expenditures
for environmental control facilities at any time in the future in order to
remain in compliance.

AVAILABLE INFORMATION

            We maintain a website at http://www.ntelos.com. The information on
our website is not, and shall not be deemed to be a part of this report or
incorporated into any other filings we make with the SEC.

REGULATION

            Our communications services are subject to varying degrees of
federal, state and local regulation. Under the Communications Act of 1934, as
amended by the Telecommunications Act of 1996, or the "Telecommunications Act,"
the FCC has jurisdiction over the regulation of interstate and international
common carrier services, over certain aspects of interconnection between
carriers for the provision of competitive local services, and over the
allocation, licensing, and regulation of radio services. At the federal level,
the Federal Aviation Administration also regulates antenna structures used by
us. Our common carrier services are also regulated to different degrees by state
public service commissions, and local authorities have jurisdiction over public
rights-of-way and antenna structures. In recent years, the regulation of the
communications industry has been in a state of transition as the United States
Congress and various state legislatures have passed laws seeking to foster
greater competition in communications markets and various of these measures have
been challenged in court cases.

            At present, many of the services we offer are unregulated or subject
only to minimal regulation. Our Internet services are not considered to be
common carrier services, although regulatory treatment of Internet services is
evolving and the version of such services resembling traditional telephone
service may become subject, at least in part, to some form of common carrier
regulation. Our wireless digital PCS service is considered commercial mobile
radio services ("CMRS") and subject to limited FCC regulation. The states are
preempted from engaging in entry or rate regulation, although the states may
regulate the other terms and conditions of such offerings.

            Changes in rules or regulatory policy by the FCC and state
regulatory commissions can have a significant impact on the pricing and
competitive aspects of our services and we could become subject to more
pervasive regulations, or have new aspects of our operations regulated, at any
time. In addition, there are certain services that the large incumbent local
exchange carriers are required by state and federal regulators to provide to our
CLEC operation. The obligation of these ILECs to provide such services could be
altered or removed by regulators.

FEDERAL REGULATION OF THE WIRELESS COMMUNICATIONS INDUSTRY

            The FCC regulates the licensing, construction, operation,
acquisition and interconnection arrangements of wireless communications systems
in the United States. CMRS providers are considered "common carriers" and are
subject to the obligations of such carriers, except where specifically exempted
by the Congress or the FCC. For example, the FCC has concluded that CMRS
providers are entitled to enter into reciprocal compensation arrangements with
local exchange carriers. Congress has specifically exempted CMRS providers from
the definition of local exchange carriers, absent specific FCC findings related
to individual CMRS providers.

            We also hold certain digital PCS and other radio licenses under the
FCC's rules for designated entities, which enabled us to take advantage of
bidding credits and federal financing because we met certain financial limits.
The FCC's designated entities rules provide for, among other things, a number of
disclosure and trafficking restrictions to ensure that benefits received by
designated entities are not assigned to non-qualifying entities. Licenses set
aside for designated entities cannot be assigned, and control of a designated
entity holding such licenses cannot be transferred except to other designated
entities until the first build-out requirement imposed by the FCC has been
satisfied. If a designated entity

                                       12

<PAGE>

licensee seeks to transfer control or to assign its licenses, it may be required
to pay back all, or a portion, of its bidding credits and government financing
benefits and to pay off all, or a portion of, the debt owed to the federal
government.

FEDERAL REGULATION OF ILEC, CLEC AND INTEREXCHANGE SERVICES

            The Telecommunications Act requires all common carriers to
interconnect on a non-discriminatory basis with other carriers, and it imposes
additional requirements on local exchange carriers, and then even more
comprehensive requirements on the largest ILECs to provide access to their
networks to competing carriers. Among other things, the Telecommunications Act
requires these large ILECs to:

        .   provide physical collocation, which allows CLECs and other
            interconnectors to install and maintain their own network equipment
            in ILEC central offices, or virtual collocation if requested or if
            physical collocation is demonstrated to be technically infeasible;

        .   unbundle components of their local service networks and provide such
            unbundled components to other providers of local service so that
            they can compete for a wider range of local services;

        .   establish "wholesale" rates for their retail services to promote
            resale by CLECs and other competitors;

        .   allow interconnection for the provision of local services at any
            technically feasible point;

        .   disclose certain technical information; and

        .   establish reciprocal compensation rates for the exchange of local
            traffic.

            ILEC operating entities with fewer than 50,000 lines are "rural
telephone companies" and are exempt from these additional requirements. For
purposes of this definition, each of our ILEC operations are considered
separately and both are exempt from the above listed requirements.

            Interconnection Agreements. In order to obtain access to an ILEC's
network, a competitive carrier is required to negotiate an interconnection
agreement with the ILEC covering reciprocal compensation rates and the network
elements it desires to use. In the event the parties cannot agree, the matter is
submitted to the state public service commission for binding arbitration. The
Virginia State Corporation Commission has determined that it lacks the authority
under Virginia law to arbitrate these disputes pursuant to the federal law.
Therefore, the FCC has conducted several Virginia arbitrations.

            Access Charges. On October 11, 2001, the Federal Communications
Commission modified its interstate access rules for incumbent local exchange
carriers subject to rate-of-return regulation, including the NTELOS ILECs. The
rate changes ordered by the FCC in these new access rules were structured to be
"revenue neutral" to the carriers. The FCC stated that its goal in adopting the
new access rate structure was to promote competition and efficiency by better
aligning prices with costs. As part of this new federal rate structure, the
residential subscriber line charge was increased to $5.00, and the business
subscriber line charge to $9.20, on January 1, 2002. The per-minute access rates
charged by rate-of-return ILECs to long distance carriers went down by a
proportionate amount on the same date. An additional adjustment to rates was
made in July of 2002 with the final implementation steps scheduled for July of
2003. The FCC's new access plan also calls for the "implicit" high-cost support
still contained in federal access charges to be made "explicit" by shifting it
into a new universal service fund.

            State Regulation of ILEC, CLEC and Interexchange Services. Most
states have some form of certification requirement which requires
telecommunication providers to obtain authority from state regulatory
commissions prior to offering common carrier services. State regulatory
commissions generally regulate the rates ILECs charge for intrastate services,
including rates for intrastate access services paid by providers of intrastate
long distance services. ILECs must file tariffs setting forth the terms,
conditions and prices for their intrastate services. We are subject to
regulation in Virginia by the State Corporation Commission, or SCC. Our tariffs
are approved by and on file with the SCC for ILEC services in our certificated
service territory in and around Waynesboro and Clifton Forge, Virginia and in
Botetourt County, Virginia.

                                       13

<PAGE>

            The Telecommunications Act preempts state statutes and regulations
that restrict entry into the intrastate telecommunications market. As a result,
we are free to provide the full range of intrastate local and long distance
services in all states which we currently operate, and in any states into which
we may wish to expand. We are certified as a CLEC in Virginia, West Virginia and
Tennessee. We provide CLEC services to businesses in Blacksburg/Christiansburg,
Danville, Martinsville, Radford, Charlottesville, Roanoke/Salem, Harrisonburg,
Lexington, Lynchburg, Staunton and Winchester, Virginia and Barboursville,
Huntington, Beckley, Point Pleasant and Charleston, West Virginia. Although we
file tariffs covering our CLEC services, our rates for such CLEC service may
fluctuate based on market conditions.

INTERNET AND DSL

            In late 1991, the FCC ordered ILECs to share a portion of the
telephone line over which voice service is being provided so that providers of
high speed Internet access and other data services could use a portion for their
services. Line sharing permits CLECs to obtain access to the high-frequency
portion of the local loop from the ILECs over which the ILECs provide voice
services. As a result, a CLEC will be able to provide DSL-based services over
the same telephone lines simultaneously used by the ILEC for its voice services,
and will no longer need to purchase a separate local loop from the ILEC in order
to provide DSL services. This ruling greatly reduces the charges that a CLEC
must pay to the ILEC for the facilities needed to offer DSL and so makes it
easier for CLECs, including ourselves and our competitors to provide DSL
services.

            On February 20, 2003, the FCC announced as part of the biennial
review of its rules mandated by the Telecommunications Act that it had
reconsidered the status of line sharing. The FCC determined that this high
frequency portion of the loop ("HFPL") would not longer be considered an
unbundled network element which ILECs would be compelled to offer to CLECs.
Although the FCC found that CLECs would be impaired in their ability to compete
with ILECs in providing broadband services without access to local loops, the
FCC found that access to the entire stand-alone copper loop is sufficient to
overcome this impairment. During a three-year period, CLECs must transition
their existing customer base served via the HFPL to new arrangements. New
customers may be acquired only during the first year of this transition. In
addition, during each year of the transition, the price for the high-frequency
portion of the loop will increase incrementally towards the cost of a loop in
the relevant market. NTELOS is still assessing the impact that this FCC order,
if not modified on reconsideration or appeal, will have on its DSL offering.

FACTORS AFFECTING FUTURE PERFORMANCE

            VARIOUS PROVISIONS OF THIS ANNUAL REPORT ON FORM 10-K CONTAIN
FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. ACTUAL RESULTS
COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THESE FORWARD-LOOKING
STATEMENTS AS A RESULT OF CERTAIN RISK FACTORS, INCLUDING THOSE SET FORTH BELOW.
WE ARE NOT OBLIGATED TO UPDATE OR REVISE ANY FORWARD-LOOKING STATEMENTS OR TO
ADVISE OF CHANGES IN THE ASSUMPTIONS ON WHICH THEY ARE BASED, WHETHER AS A
RESULT OF NEW INFORMATION, FUTURE EVENTS OR OTHERWISE. ALL FORWARD-LOOKING
STATEMENTS SHOULD BE VIEWED WITH CAUTION. Unless the context requires otherwise,
words and phrases such as "expects," "estimates," "intends," "plans,"
"believes," "projection," "budgeted," "targets," "will continue" and "is
anticipated" are intended to identify forward-looking statements.

FORWARD LOOKING STATEMENTS

            This report and the information incorporated by reference in this
report contain various "forward-looking statements," as defined in Section 27A
of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934, as amended. These forward-looking statements are based on the beliefs of
our management, as well as assumptions made by, and information currently
available to, our management. We have based these forward-looking statements on
our current expectations and projections about future events and trends
affecting the financial condition of our business. These forward-looking
statements are subject to risks and uncertainties that may lead to results that
differ materially from those expressed in any forward-looking statement made by
us or on our behalf, including, among other things:

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<PAGE>

            .       our ability to develop, prosecute, confirm and consummate a
                    plan of reorganization;

            .       our ability to operate under debtor-in-possession financing;

            .       our ability to maintain vendor, lessor and customer
                    relationships while in bankruptcy;

            .       our substantial debt obligations and our ability to service
                    those obligations, even after the proposed reorganization;

            .       the additional expenses associated with bankruptcy as well
                    as the possibility of unanticipated expenses;

            .       restrictive covenants and consequences of default contained
                    in our financing arrangements;

            .       the cash flow and financial performance of our subsidiaries;

            .       the competitive nature of the wireless telephone and other
                    communications services industries;

            .       the achievement of build-out, operational, capital,
                    financing and marketing plans relating to deployment of PCS
                    services;

            .       the capital intensity of the wireless telephone business;

            .       retention of our existing customer base, including our
                    wholesale customers, especially Horizon, our ability to
                    attract new customers, and maintain or improve average
                    revenue per subscriber;

            .       unfavorable economic conditions on a national and local
                    level;

            .       effects of acts of terrorism or war (whether or not
                    declared);

            .       changes in industry conditions created by federal and state
                    legislation and regulations;

            .       weakening demand for wireless and wireline communications
                    services;

            .       rapid changes in technology;

            .       adverse changes in the roaming rates we charge and pay;

            .       adverse changes in rates we pay to ILECs for collocation and
                    unbundled network elements;

            .       fluctuations in the values of non-strategic assets such as
                    excess PCS and other spectrum licenses, which are currently
                    below that of recent transactions we have completed;

            .       the level of demand for competitive local exchange services
                    in smaller markets;

            .       our ability to manage and monitor billing;

            .       possible health effects of radio frequency transmission; and

            .       the impact of decline in our stock price and subsequent
                    de-listing by the NASDAQ stock market.

RISK FACTORS

The Cases and any plan of reorganization may have adverse consequences on us and
our stakeholders and/or our reorganization from the Cases may not be successful.

            Our objective is to achieve the highest possible recoveries for all
creditors and shareholders, consistent with our ability to pay and the
continuation of our businesses. However, there can be no assurance that we will
be able to attain these objectives or achieve a successful reorganization and
remain a going concern. The consolidated financial statements included elsewhere
in this Report do not include any adjustments relating to the recoverability and
classification of recorded asset amounts or the amount and classification of
liabilities or the effect on existing shareholders' equity that may result from
any plans, arrangements or other actions arising from the Cases, or the possible
inability of the Company to continue in existence. Adjustments necessitated by
such plans, arrangements or other actions could materially impact

                                       15

<PAGE>

the Company's financial position and/or our future results of operations.
Further, there can be no assurance that the rights of, and the ultimate payments
to, pre-Filing Date creditors will not be substantially altered.

            Additionally, while the Debtors operate their businesses as
debtors-in-possession pursuant to the Bankruptcy Code during the pendency of the
Cases, the Debtors will be required to obtain the approval of the Court prior to
engaging in any transaction outside the ordinary course of business. In
connection with any such approval, creditors and other parties in interest may
raise objections to such approval and may appear and be heard at any hearing
with respect to any such approval. Accordingly, the Debtors may be prevented
from engaging in transactions that might otherwise be considered beneficial to
us. The Court also has the authority to oversee and exert control over the
Debtors' ordinary course operations.

Holders of the Company's equity securities are likely to receive little or no
value for their interests in the plan of reorganization.

            Generally, under the provisions of the Bankruptcy Code, holders of
equity interests may not participate under a plan of reorganization unless the
claims of creditors are satisfied in full under the plan or unless creditors
accept a reorganization plan that permits holders of equity interest to
participate. The formulation and implementation of a plan of reorganization
could take a significant period of time, or may be unsuccessful. The ultimate
recovery to preferred securities holders and/or common shareholders, if any,
will not be determined until confirmation of a plan or plans of reorganization.
No assurance can be given as to what values, if any, will be ascribed in the
bankruptcy proceedings to each of these constituencies. A plan of reorganization
could also result in holders of our preferred and common stock receiving no
value for their interests. Because of such possibilities, the value of the
preferred and common stock is highly speculative. Accordingly, we urge that
appropriate caution be exercised with respect to existing and future investments
in any of these securities.

Shareholders may not be able to resell their stock or may have to sell at prices
substantially lower than the price they paid for it.

            The trading price for our common stock has been volatile and could
continue to be subject to fluctuations in response to our filing for
reorganization, variations in our operating results, general conditions in the
telecommunications industry or the general economy, and other factors. In
addition, the stock market is subject to price and volume fluctuations affecting
the market price for public companies generally, or within broad industry
groups, which fluctuations may be unrelated to the operating results or other
circumstances of a particular company. Such fluctuations may adversely affect
the liquidity of our common stock, as well as the price that holders may achieve
for their shares upon any future sale. Furthermore, as a result of the delisting
of the Company from Nasdaq National Market, the trading market for our stock has
been materially adversely affected.

            Our common stock is currently trading on the Over the Counter
Bulletin Board ("OTCBB"). Continued listing on the OTCBB requires market-maker
sponsorship and there can be no assurance that our common stock will continue to
be traded or that liquidity for our common stock will not be adversely affected.

We have substantial debt that we may not be able to service.

            As of December 31, 2002, we had approximately $260.5 million of
outstanding secured indebtedness under our senior credit facility, $25.0 million
of other secured debt, $280.0 million of outstanding senior notes, and $95.0
million of outstanding subordinated notes. Our substantial indebtedness was a
principal factor in our decision to commence the Cases.

            Although the terms of a plan of reorganization have not been
determined, we currently anticipate that the plan will result in a substantial
reduction in our indebtedness, with conversion of existing debt securities into
substantially all of the common ownership of the reorganized Company.

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<PAGE>

            In order to fund operations during the reorganization process, on
March 6, 2003 we entered into the DIP Financing Facility, which currently
provides us with borrowing capacity of up to $35 million and matures in 180
days. If we are unable to make all of the representations and warranties under
our DIP Financing Facility, we may not be able to draw down funds and we may not
be able to fund ongoing operations. If the reorganization process takes longer
than we currently anticipate, we may require additional financing.

            We have entered into a plan support agreement with a majority of the
lenders under our senior credit facility. The plan support agreement provides,
among other things, the terms of a post-emergence credit facility ("Exit
Financing Facility") which permits us to continue to have access to our current
$225 million of outstanding term loans with a $36 million revolver commitment.
See Note 1 of the Notes to Consolidated Financial Statements in Item 8 of this
report for a description of the plan support agreement. There can be no
assurance that we will enter into the Exit Financing Facility with such lenders.

            While we anticipate that much of our unsecured indebtedness will be
converted into equity or otherwise cancelled in the reorganization process, we
will continue to have substantial debt following our emergence from bankruptcy,
including borrowings under our senior credit facility, and other secured debt
and obligations under our new convertible notes.

The subscription agreement for a $75 million investment in new notes by certain
of our senior noteholders may not be completed if certain conditions are not
satisfied.

            The subscription agreement executed by certain of our senior
noteholders for an aggregate of $75 million of our new 9.0% senior convertible
notes, is subject to, among other things, such senior noteholders' reasonable
satisfaction with the final terms of the plan of reorganization. Satisfaction of
certain conditions are out of our control. Accordingly, even though we have
entered into a plan support agreement with a majority of the lenders under our
senior credit facility, there can be no assurance that the new investment will
be completed.

We face substantial competition in the telecommunications industry generally
from competitors with substantially greater resources than us and from competing
technologies.

            We operate in an increasingly competitive environment. As a wireless
communications provider, we face intense competition from other wireless
providers, including Sprint and its affiliates, AT&T/SunCom, Verizon Wireless,
Cingular, ALLTEL, Nextel, T Mobile and Cellular One.

            Many of our competitors are, or are affiliated with, major
communications companies that have substantially greater financial, technical
and marketing resources than we have and may have greater name recognition and
more established relationships with a larger base of current and potential
customers, and accordingly, we may not be able to compete successfully. We
expect that increased competition will result in more competitive pricing.
Companies that have the resources to sustain losses for some time have an
advantage over those companies without access to these resources. We cannot
assure you that we will be able to achieve or maintain adequate market share or
revenue or compete effectively in any of our markets.

            Competition may cause the prices for wireless products and services
to continue to decline in the future. Our ability to compete will depend, in
part, on our ability to anticipate and respond to various competitive factors
affecting the telecommunications industry.

            Additionally, many of our competitors have national networks, which
enable them to offer long-distance telephone services to their subscribers at a
lower cost. Therefore, some of our competitors are able to offer pricing plans
that include "free" long-distance. We do not have a national network, and we
must pay other carriers a per-minute charge for carrying long-distance calls
made by subscribers. To remain competitive, we absorb the long-distance charges
without increasing the prices we charge to our subscribers.

                                       17

<PAGE>

            We expect competition to intensify as a result of the rapid
development of new technologies, including improvements in the capacity and
quality of digital technology, such as the move to third generation, or 3G,
wireless technologies. Technological advances and industry changes could cause
the technology used on our network to become obsolete. We may not be able to
respond to such changes and implement new technology on a timely basis or at an
acceptable cost. To the extent that we do not keep pace with technological
advances or fail to timely respond to changes in competitive factors in our
industry, we could experience a decline in revenue and net income. Each of the
factors and sources of competition discussed above could have a material adverse
effect on our business.

            As a wireline telephone business, we face competition from CLEC and
wireless service providers. Many communications services can be provided without
incurring a short-run incremental cost for an additional unit of service. For
example, there is little marginal cost for a carrier to transmit a call over its
own telephone network. As a result, once there are several facilities-based
carriers providing a service in a given market, price competition is likely and
can be severe. As a result, we have experienced price competition, which is
expected to continue. In each of our service areas, additional competitors could
build facilities. If additional competitors build facilities in our service
areas, this price competition may increase significantly.

            As an integrated communications provider, we also face competition
in our business from:

            .       national and regional Internet service providers;

            .       cable television companies; and,

            .       resellers of communications services and enhanced services
                    providers.

If we fail to raise the capital or fail to have continued access to the capital
required to build-out and operate our planned networks, we may experience a
material adverse effect on our business.

            We require additional capital to build-out and operate planned
networks and for general working capital needs. We expect our capital
expenditures for 2003 to be approximately $58 million to $66 million in the
aggregate, including approximately $8 million to $10 million relating to a
planned wireless network upgrade to 3G-1XRTT technology. We may require
additional and unanticipated funds if there are significant industry, market or
other economic developments not contemplated by our current business plan, if we
have unforeseen delays, cost overruns, unanticipated expenses due to regulatory
changes, if we incur engineering design changes or other technological risks.
Our network build-out may not occur as scheduled or at the cost we have
anticipated. We believe that proceeds from the issuance of $75 million of new
convertible notes and the availability of the $36.0 million revolver under the
senior credit facility will provide such additional funds; however, there can be
no assurance that the new convertible notes will be issued or that the senior
credit facility will be in place.

We need to add a sufficient number of new PCS customers to support our PCS
business plans and to generate sufficient cash flow to service our debt.

            The wireless industry generally has experienced a decline in
customer growth rates and we experienced such a decline in 2002 as well. Our
future success will depend on our ability to continue expanding our current
customer base, penetrate our target markets and otherwise capitalize on wireless
opportunities. We must increase our subscriber base without excessively reducing
the prices we charge to realize the anticipated cash flow, operating
efficiencies and cost benefits of our network.

If we experience a high rate of PCS customer turnover, our costs could increase
and our revenues could decline.

            Many PCS providers in the U.S. have experienced a high rate of
customer turnover. The rate of customer turnover may be the result of several
factors, including limited network coverage, reliability issues such as blocked
or dropped calls, handset problems, inability to roam onto third-party networks
at competitive rates, or at all, price competition and affordability, customer
care concerns and other competitive factors. We cannot assure you that our
strategies to address customer turnover will be successful. A high rate of
customer turnover could reduce revenues and

                                       18

<PAGE>

increase marketing and customer acquisition costs to attract the minimum number
of replacement customers required to sustain our business plan, which, in turn,
could have a material adverse effect on our business, prospects, operating
results and ability to service our debt.

The loss of significant customers or a decrease in their usage could cause our
revenues to decline.

            For the year ended December 31, 2002, Horizon Personal
Communications, Inc. accounted for approximately 12.4% of our revenue. In late
2002, Horizon notified us that it disputed certain categories of charges
invoiced to Horizon. In connection with this dispute, on March 24, 2003, we
filed a Stipulation with the Court pursuant to which we agreed with Horizon to
negotiate in good faith toward resolution of the dispute. If we are unable to
resolve this dispute through negotiations, either party may submit the dispute
to arbitration in accordance with the agreement. A description of the
Stipulation appears in Item 4. Legal Proceedings. Our ability to maintain strong
relationships with Horizon and our other principal customers is essential to our
future performance. If we lose Horizon or any other key customers or if Horizon
or any of our other key customers reduce their usage, require us to reduce our
prices or are financially unable to pay our charges, our revenue could decline,
which could cause our business, financial condition and operating results to
suffer.

Our larger competitors and/or wholesale customers may build networks in our
markets, which may result in decreased revenues and severe price-based
competition.

            Our current roaming partners, larger wireless providers and/or
wholesale customers might build their own digital PCS networks in our service
areas. Should this occur, use of our networks would decrease and our roaming
and/or wholesale revenues would be adversely affected. Once a digital PCS system
is built out, there are only marginal costs to carrying an additional call, so a
larger number of competitors in our service areas could introduce significantly
higher levels of price competition and reduce our revenues, as has occurred in
many areas in the United States. Over the last three years, the per-minute rate
for wireless services has declined. We expect this trend to continue into the
foreseeable future. As per-minute rates continue to decline, our revenues and
cash flows may be adversely impacted.

Our largest customer may face severe financial problems.

            On March 28, 2003, Horizon filed its Form 10-K for the year ending
December 31, 2002. In this report, Horizon disclosed that there was substantial
doubt about its ability to continue as a going concern because of the
probability that Horizon will violate one or more of its debt covenants in 2003.
Our future wholesale revenues under the wholesale network services agreement
with Horizon could be materially impacted if Horizon was to be unable to
continue as a going concern.

Our results of operations may decline if the roaming rates we charge for the use
of our network by outside customers decrease or the roaming rates we pay for our
customers' usage of third party networks increase.

            We earn revenues from customers of other wireless communications
providers who enter our service areas and use our network, commonly referred to
as roaming. Roaming rates per minute have declined over the last several years
and we expect that these declines will continue for the foreseeable future.
Similarly, because we do not have a national network, we must pay roaming
charges to other communications providers when our wireless customers use their
networks. We have entered into roaming agreements with other communications
providers that govern the roaming rates that we are permitted to charge and that
we are required to pay. If these roaming agreements are terminated, the roaming
rates we currently charge may further decrease and the roaming rates that we are
charged may increase and, accordingly, our revenues and cash flow may decline.

The proposed recapitalization will reduce favorable tax attributes.

            Although we do not believe that implementation of our proposed
recapitalization will itself result in significant tax liability, it likely will
reduce substantially the amount of our existing net operating loss carryovers
and could result in limitations on our ability to use remaining loss carryovers
and built-in losses. The reduction of, and

                                       19

<PAGE>

potential limitations on our ability to use, such favorable tax attributes could
adversely affect our financial position in future years.

ITEM 2.     PROPERTIES

            We are headquartered in Waynesboro, VA and own offices and
facilities in a number of locations within our operating markets. We believe
that our current facilities are adequate to meet our needs in our existing
markets for the foreseeable future. The table below provides the location,
description and approximate square footage of our material properties.

            OWNED FACILITIES

<TABLE>
<CAPTION>
                                                                                              Approximate
            Location                     Property Description                               Square Footage
            -----------------            ---------------------------------------            --------------
            <S>                          <C>                                                    <C>
            Clifton Forge, VA            Wireline Switch Facility                                 4,100
                                         Directory Service Center (1)                            15,700

            Cloverdale, VA               Wireline Switch Facility                                   772

            Covington, VA                Wireline Switch Facility                                18,000
                                         Plant Service Center                                    11,900

            Daleville, VA                Executive Offices                                       15,000
                                         Warehouse                                                7,500

            Fincastle, VA                Wireline Switch Facility                                   900

            Eagle Rock, VA               Wireline Switch Facility                                 1,000

            Harrisonburg, VA             Wireline Switch Facility (4)                             3,000

            Norfolk, VA                  Wireless Switch Facility                                 5,000

            Oriskany, VA                 Wireline Switch Facility                                   100

            Portsmouth, VA               Customer Care Center (3)                               100,000

            Potts Creek, VA              Wireline Switch Facility                                   500

            Richmond, VA                 Wireless Switch Facility                                 5,000

            Troutville, VA               Wireline Switch Facility                                 8,240

            Waynesboro, VA               Corporate Headquarters                                  26,000
                                         Wireless Switch and Operations Building                 16,750
                                         Customer Care Center                                    31,000
                                         Corporate Support Services Building                     50,000
                                         Retail Store                                             6,400
                                         Directory Service Center (1)                            15,700
                                         Wireline Switch Facility                                36,200
                                         Plant Service Center                                     8,750

            Winchester, VA               Directory Service Center (1)(2)                         17,500
</TABLE>

----------

                                       20

<PAGE>

              (1)   These facilities were leased to telegate AG, the buyer of
                    our directory service operations, until July 2002, at which
                    time we released telegate AG from its lease obligations.
                    Following the release, these facilities have not been
                    occupied. See Note 7 of the Notes to Consolidated Financial
                    Statements in Item 8 of this report for information about
                    the release.

              (2)   This directory assistance call center is housed in an
                    approximately 33,000 square foot building. Of that 33,000
                    square feet, approximately 15,500 square feet is not
                    renovated. A wireline switch is located in this building
                    serving the Winchester CLEC Market.

              (3)   The customer care operations is housed in approximately a
                    30,000 square foot portion of the building. The remaining
                    70,000 square feet is leased to outside third parties with
                    varying expiration dates. In March 2003, we entered into an
                    agreement for the sale of this property and building,
                    subject to Court approval.

              (4)   Approximately 2,600 square feet is leased to Security
                    Concepts Inc. The remaining space houses a wireline switch
                    serving the Harrisonburg CLEC Market and one office for a
                    salesperson.

LEASED FACILITIES

            ADMINISTRATIVE

<TABLE>
<CAPTION>
                                                                                            Approximate
              Location                Property Description                                 Square Footage
              ---------------         ----------------------------------------------       --------------
              <S>                     <C>                                                      <C>
              Richmond, VA            Wireless Corporate Support                               10,976
              Charleston, WV          Wireless/Wireline Corporate Support and Switch           24,000
                                      Facility
              Waynesboro, VA          Warehouse                                                19,500
</TABLE>

We also lease several other local business office facilities throughout our
operating region with the largest facility consisting of about 8,000 square
feet.

            RETAIL

We lease retail space throughout our operating region consisting of a mix of
retail store fronts and smaller kiosks units. We have approximately 19 retail
stores and 20 kiosks in the Virginia East Market, 17 retail stores and 12 kiosks
in the Virginia West Market, and 13 retail stores and 16 kiosk in the West
Virginia Market.

            CELL SITES

Substantially all of our operational cell sites are leased.

ITEM 3.     LEGAL PROCEEDINGS

            During the pendency of the Cases, all pending litigation against the
Debtors is stayed. See Item 1. "Business - Reorganization Proceedings" for a
discussion of the reorganization proceedings. Such discussion is incorporated
herein by reference.

            In late 2002, Horizon Personal Communications, Inc. disputed certain
categories of charges under the Network Services Agreement with West Virginia
PCS Alliance, L.C. and Virginia PCS Alliance, L.C. (collectively, the
"Alliances"), alleging that the Alliances overcharged Horizon $4.8 million
during the period commencing October 1999 and ending September 2002 and $1.2
million for the period commencing October 2002 and ending December 2002. Horizon
withheld these categories of charges from payments made from and after December
2002 and failed to timely pay their January 2003 invoice due following the
Filing Date. On March 11, 2003, Horizon filed a motion with the Court which
effected an administrative freeze as to the amounts payable on the January
invoice. On March 12, 2003, the Alliances notified Horizon of the failure to
make payment on the January invoice, reserving the right to terminate the
agreement in accordance with the terms thereof. On March 24, 2003, the parties
entered a Stipulation with the Court pursuant to which Horizon paid the January
invoice and agreed to pay all future invoices and the Alliances agreed not to
exercise their termination right, assuming all future payments are made in
accordance with the agreement. The Stipulation further provides that Horizon is
permitted to withhold amounts under monthly invoices in

                                       21

<PAGE>

excess of $3 million if it determines in good faith that such amounts in excess
of $3 million represent an overcharge by the Alliances, pending resolution of
the dispute. In addition, the parties agreed to continue to discuss and
negotiate, in good faith, their dispute regarding Horizon's claim. To the extent
the dispute remains unresolved after 30 days, either party may submit the
dispute to arbitration in accordance with the agreement.

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

            There were no matters submitted to a vote of security holders during
the quarter ending December 31, 2002.

                                     PART II

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

            On March 13, 2003, our common stock was delisted from the Nasdaq
National Market following announcement of our filing of a voluntary petition
under Chapter 11 of the Bankruptcy Code. Our common stock is currently trading
on the Over-the-Counter Bulletin Board under the symbol "NTLOQ.OB." The number
of registered shareholders totaled 3,658 as of December 31, 2002.

            We have not paid any dividends on our common stock during the two
most recent fiscal years. In accordance with the Bankruptcy Code, the DIP
Financing Facility and our senior credit facility, we are not permitted to pay
any dividends or purchase any of our stock.

            The following table shows, for the periods indicated, the high and
low closing bid prices for our common stock as reported by the Nasdaq National
Market.

                                      2002                        2001
                           -------------------------   -------------------------
                               HIGH          LOW           HIGH          LOW
                           -----------   -----------   -----------   -----------
        First Quarter      $     15.61   $      3.55   $     24.88   $     15.44
        Second Quarter            4.42          1.11         30.06         17.02
        Third Quarter             1.66          0.14         26.75          6.85
        Fourth Quarter            0.73          0.21         15.49          7.66

As a result of the bankruptcy filing and the subsequent delisting by NASDAQ, our
common stock closed on the OTCBB on April 7, 2003 at $.06.

ITEM 6.     SELECTED FINANCIAL DATA

The table below summarizes our recent financial information and supplementary
data. For further information, refer to our Consolidated Financial Statements
and Notes to Consolidated Financial Statements in Item 8. Financial Statements
and Supplemental Data, of this Report.

NTELOS INC. AND SUBSIDIARIES

<TABLE>
<CAPTION>
(In thousands, except per share amounts)         2002               2001              2000                1999              1998
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                           <C>             <C>                <C>                 <C>               <C>
Operating revenues                            $  262,727      $     215,063      $     113,519       $     69,830      $     58,163
Depreciation and amortization                     82,924             82,281             37,678             11,323             9,472
Asset impairment charges                         402,880                 --                 --              3,951                --
Operating (loss) income                         (424,559)           (61,777)           (17,426)            12,671            19,975
Income taxes (benefit)                            (6,464)           (34,532)             1,326              2,622             4,587
Equity loss from PCS investees                        --             (1,286)           (12,259)           (11,366)           (6,466)
Gain on sale of assets                             8,472             31,845             62,616              8,318                --
</TABLE>

                                       22

<PAGE>

<TABLE>
<S>                                           <C>             <C>                <C>                 <C>               <C>
Income (loss) from continuing operations        (488,947)           (63,713)             2,270              5,891             6,856
Income (loss) applicable to common shares       (509,364)           (82,556)            10,471              6,493             8,508
Income (loss) from continuing operations
 per share-diluted                                (29.34)             (5.02)             (0.45)              0.45              0.52
Net income (loss) per common share -
 diluted                                          (29.34)             (5.02)              0.80               0.50              0.65
Cash dividends per common share                       --                 --              0.115              0.459             0.435
EBITDA/1/                                         61,245             20,504             20,252             27,945            29,447
Investment in property, plant and equipment      570,052            599,457            406,623            159,748           138,955
Total assets                                     729,521          1,196,886          1,079,017            218,002           154,334
Debt - Current and long-term/2/                  642,722            612,416            556,287             37,685            19,774
Redeemable, convertible preferred stock       $  286,164      $     265,747      $     246,906       $         --      $         --
Average number of common shares
 outstanding - diluted                            17,358             16,442             13,106             13,113            13,094
Number of employees                                1,278              1,395              1,218                981               743
Number of common shareholders of record            3,658              3,613              3,092              2,977             2,998
</TABLE>

----------
/1/  Operating (loss) income before depreciation and amortization and asset
     impairment charges. See Management's Discussion and Analysis for additional
     factors to consider in using this measure. A reconciliation of operating
     (loss) income to EBITDA (a non-GAAP measure) follows:

<TABLE>
<S>                                   <C>                <C>              <C>              <C>             <C>
Operating (loss) income               $      (424,559)   $     (61,777)   $     (17,426)   $     12,671    $      19,975
Depreciation and amortization                  82,924           82,281           37,678          11,323            9,472
Asset impairment charges                      402,880               --               --           3,951               --
                                      ---------------    -------------    -------------    ------------    -------------
EBITDA                                $        61,245    $      20,504    $      20,252    $     27,945    $      29,447
                                      ---------------    -------------    -------------    ------------    -------------
</TABLE>

/2/  At December 31, 2002, approximately $623.8 million of the Company's
     long-term debt was classified as current due to the bankruptcy filing and
     other scheduled maturities. See Management's Discussion and Analysis for
     additional information.

                                       23

<PAGE>

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

OVERVIEW

We are a leading regional integrated communications provider offering a broad
range of wireless and wireline products and services to business and residential
customers primarily in Virginia and West Virginia and in portions of certain
other adjoining states. We own our own digital PCS licenses, fiber optic
network, switches and routers, which enables us to offer our customers
end-to-end connectivity in the regions that we serve. This facilities-based
approach allows us to control product quality and generate operating
efficiencies. Our sales strategy is focused largely on a direct relationship
with our customers through our 97 retail stores and kiosks located across the
regions we serve as a direct business sales approach. As of December 31, 2002,
we had approximately 266,500 digital PCS subscribers (up from 223,800 at
December 31, 2001) and approximately 95,800 combined incumbent local exchange
carrier ("ILEC") and competitive local exchange carrier ("CLEC") access lines
installed (up from 85,600 installed lines at December 31, 2001).

We have been focusing our growth efforts on our core communications services,
primarily digital PCS services, Internet access, including dedicated, high-speed
DSL and dial-up services, high-speed data transmission and local telephone
services. We have also divested non-strategic assets and certain excess PCS
spectrum. Transactions that were completed in 2002 include:

            .       sale of substantially all of the assets of our National
                    Alarm Services business;

            .       sale of PCS spectrum covering 295,000 million POPS in State
                    College and Williamsport, Pennsylvania;

            .       sale of minority ownership interest in America's Fiber
                    Network, LLC;

            .       sale of excess PCS spectrum covering 373,000 million POPS in
                    Winchester and Charlottesville, Virginia; and

            .       sale of excess PCS spectrum covering 436,000 million POPS in
                    Altoona and Johnstown, Pennsylvania and Wheeling, West
                    Virginia.

CHAPTER 11 BANKRUPTCY FILING

On March 4, 2003 (the "Petition Date"), the Company and certain of its
subsidiaries (collectively, the "Debtors"), filed voluntary petitions for
reorganization under Chapter 11 of the United States Bankruptcy Code (the
"Bankruptcy Code") in the United States Bankruptcy Court for the Eastern
District of Virginia (the "Bankruptcy Court"). By order of the Bankruptcy Court,
the Debtors' respective cases are being jointly administered under the case
number 03-32094 (the "Bankruptcy Case") for procedural purposes only. The
Bankruptcy Case was commenced in order to implement a comprehensive financial
restructuring of the Company.

In the first half of 2002, the Company took a number of restructuring steps to
improve operating results, financial condition and conserve cash on hand by
reducing its operating expenses, including a reduction in workforce, an early
retirement program, termination of certain services in selected unprofitable
locations, and curtailing or deferring certain capital expenditures. Despite the
improved operating performance resulting from these measures and continued
execution of the Company's business plan, the Company continues to require
additional cash to fund its operating expenses, debt service and capital
expenditures.

In September 2002, the Company retained UBS Warburg as its financial advisor to
assist the Company in exploring a variety of restructuring alternatives.
Thereafter, continued competition in the wireless telecommunications sector
resulted

                                       24

<PAGE>

in a modification to the Company's long-term business plan, including a
reduction in wireless subscriber growth, a decrease in average revenue per
wireless subscriber, a slower improvement in subscriber churn and slower growth
in wholesale revenues. In addition, capital and lending prospects for
telecommunication companies continued to deteriorate. On November 29, 2002, the
Company entered into an amendment and waiver with the lenders under the Senior
Credit Facility which restricted the amounts that the Company could borrow and
waived the Company's obligation to make certain representations in order to
submit a borrowing request. Without an extension of the waiver, the Company did
not have access to the Senior Credit Facility following January 31, 2003. During
this period, the Company was actively negotiating with its debtholders to
develop a comprehensive financial restructuring plan. The Company was unable to
reach an agreement with its debtholders on an out-of-court restructuring plan
and, accordingly, on March 4, 2003, the Company filed a petition for relief
under Chapter 11 of the Bankruptcy Code.

The Company conducts its operations through a number of wholly-owned or
majority-owned subsidiaries. While it implements the proposed recapitalization,
the Company expects its subsidiaries to continue to operate in the ordinary
course of business.

            Proposed Restructuring

The Bankruptcy Case was commenced in order to implement a comprehensive
financial restructuring of the Company, including the senior notes due 2010 (the
"Senior Notes"), subordinated notes due 2011 and preferred and common equity
securities. As of the date of this report, a plan of reorganization (the "Plan")
has not been submitted to the Bankruptcy Court.

In order to meet ongoing obligations during the reorganization process, the
Company entered into a $35 million debtor-in-possession financing facility (the
"DIP Financing Facility"), subject to Bankruptcy Court approval. On March 5,
2003, the Bankruptcy Court granted access to up to $10 million of the DIP
Financing Facility, with access to the full $35 million subject to final
Bankruptcy Court approval, certain state regulatory approvals and the banks'
receiving satisfactory assurances regarding the senior noteholders' proposed $75
million investment in the Company upon emergence from bankruptcy. On March 24,
2003, the Bankruptcy Court entered a final order authorizing the Company to
access up to $35 million under the DIP Financing Facility and, as of April 11,
2003, the Company satisfied all other conditions to full access to the DIP
Financing Facility.

The Company anticipates that the Plan will be funded by two sources of capital:
(i) an equity investment made by certain holders of Senior Notes of an aggregate
of $75 million in exchange for new 9% convertible notes ("New Notes") of the
reorganized company and (ii) a credit facility which permits the Company to
continue to have access to its current $225 million of outstanding term loans
with a $36 million revolver commitment ("Exit Financing Facility"). This Exit
Financing Facility also provides that the term loans and any new borrowings
under the revolver will be at current rates and existing maturities.

On April 10, 2003, the Company entered into a Plan Support Agreement (the "Plan
Support Agreement") with a majority of the lenders under its Senior Credit
Facility. The Plan Support Agreement provides that the lenders will agree to
support a "Conforming Plan," which must include the following: (i) financing
upon emergence from bankruptcy on agreed terms, (ii) cancellation of, or
conversion into equity of the reorganized company upon emergence from bankruptcy
of, substantially all of the Company's outstanding debt and equity securities,
(iii) outstanding indebtedness on the effective date of the Plan consisting of
only certain hedge agreements, Exit Financing Facility, New Notes, existing
government loans and certain capital leases, (iv) consummation of the sale of
New Notes on the effective date of the Plan and (v) repayment of the DIP
Financing Facility and the $36 million outstanding under the revolver.

On April 10, 2003, the Company also entered into a Subscription Agreement with
certain holders of Senior Notes for the sale of $75 million aggregate principal
amount of New Notes. The Plan Support Agreement and Subscription Agreement are
subject to, among other things, confirmation of a Conforming Plan.

The Plan Support Agreement provides that a Conforming Plan and accompanying
disclosure statement must be filed with the Bankruptcy Court prior to May 31,
2003 and that a disclosure statement, reasonably acceptable to the lenders, must
be

                                       25

<PAGE>

approved by the Bankruptcy Court no later than August 15, 2003. In addition, the
Plan Support Agreement obligates the Company to have filed a Conforming Plan,
solicited votes and conducted a confirmation hearing prior to September 30,
2003.

While a Plan has not been submitted, the Company anticipates that the Plan will
constitute a Conforming Plan, with the conversion of existing debt securities
into common ownership of the reorganized Company. The Company also anticipates
that the holders of common stock of the Company will be entitled to little or no
recovery. Accordingly, the Company anticipates that all, or substantially all,
of the value of all investments in the Company's common stock will be lost.

            Bankruptcy Proceeding

In conjunction with the commencement of the Bankruptcy Case, the Debtors sought
and obtained several first day orders from the Bankruptcy Court which were
intended to enable the Debtors to operate in the normal course of business
during the Bankruptcy Case. The most significant of these orders (i) authorize
access to up to $10 million of its $35 million debtor-in-possession financing
facility (the "DIP Financing Facility") with Wachovia Bank, (ii) permit the
Debtors to operate their consolidated cash management system during the
Bankruptcy Case in substantially the same manner as it was operated prior to the
commencement of the Bankruptcy Case, (iii) authorize payment of pre-petition
employee salaries, wages, and benefits and reimbursement of pre-petition
employee business expenses, (iv) authorize payment of pre-petition sales,
payroll, and use taxes owed by the Debtors, and (iv) authorize payment of
certain pre-petition obligations to customers.

On March 5, 2003, the Bankruptcy Court entered an interim order authorizing the
Debtors to enter into the DIP Financing Facility, and to grant first priority
mortgages, security interests, liens (including priming liens), and super
priority claims on substantially all of the assets of the Debtors to secure the
DIP Financing Facility. At first day hearings, the Court entered orders that,
among other things, granted authority to continue to pay employee salaries,
wages and benefits, and to honor warranty and service obligations to customers.
On March 24, 2003, the Bankruptcy Court entered a final order approving the DIP
Financing Facility and authorizing the Debtors to utilize up to $35 million
under the DIP Financing Facility. The full $35 million DIP commitment was
subject to final Court approval, certain state regulatory approvals and the
lenders' receiving satisfactory assurances regarding the proposed $75 million
investment in the Company by certain holders of Senior Notes upon emergence from
bankruptcy. Subsequent to March 24, 2003, the Company satisfied all other
conditions to obtain full access to the DIP Financing Facility. The DIP
Financing Facility is available to meet ongoing financial obligations in
connection with the Company's regular business operations, including obligations
to vendors, customers and employees during the Bankruptcy Case.

The Debtors are currently operating their businesses as debtors-in-possession
under the Bankruptcy Code. Pursuant to the Bankruptcy Code, pre-petition
obligations of the Debtors, including obligations under debt instruments,
generally may not be enforced against the Debtors, and any actions to collect
pre-petition indebtedness are automatically stayed, unless the stay is lifted by
the Bankruptcy Court. The pre-petition obligations of the Debtors are subject to
settlement under a plan of reorganization. In addition, as
debtors-in-possession, the Debtors have the right, subject to the Bankruptcy
Court approval and certain other limitations, to assume or reject executory
contracts and unexpired leases. In this context, "assumption" means that the
Debtors agree to perform their obligations and cure all existing defaults under
the contract or lease, and "rejection" means that the Debtors are relieved from
their obligations to perform further under the contract or lease, but are
subject to a claim for damages for the breach thereof. Any damages resulting
from rejection of executory contracts and unexpired leases will be treated as
general unsecured claims in the Bankruptcy Case unless such claims were secured
prior to the Petition Date. The Debtors are in the process of reviewing their
executory contracts and unexpired leases to determine which, if any, they will
reject. The Debtors cannot presently determine or reasonably estimate the
ultimate liability that may result from rejecting contracts or leases or from
the filing of claims for any rejected contracts or leases, and no provisions
have yet been made for these items. The amount of the claims to be filed by the
creditors could be significantly different than the amount of the liabilities
recorded by the Debtors.

Since the Petition Date, the Debtors have conducted business in the ordinary
course. As noted above, early in 2002 the Company completed an operational
restructuring (see Note 19) and, accordingly, does not contemplate further

                                       26

<PAGE>

operational restructuring at this time. After developing the Plan, the Debtors
will seek the requisite acceptance of the Plan by impaired creditors and equity
holders, if it is determined that equity holders will receive a distribution
under the Plan, and confirmation of the Plan by the Bankruptcy Court, all in
accordance with the applicable provisions of the Bankruptcy Code. During the
pendency of the Bankruptcy Case, the Debtors may, with the Bankruptcy Court
approval, sell assets and settle liabilities, including for amounts other than
those reflected in the financial statements. The administrative and
reorganization expenses resulting from the Bankruptcy Case will unfavorably
affect the Debtor's results of operations. Future results of operations may also
be adversely affected by other factors related to the Bankruptcy Case. No
assurance can be given that the Debtor's creditors will support the proposed
Plan, or that the Plan will be approved by the Bankruptcy Court. Additionally,
there can be no assurance of the level of recovery to which the Debtors' secured
and unsecured creditors will receive.

BASIS OF PRESENTATION

Our consolidated financial statements have been prepared on a going concern
basis of accounting in accordance with accounting principles generally accepted
in the United States. The going concern basis of presentation assumes that the
Company will continue in operation for the foreseeable future and will be able
to realize its assets and discharge its liabilities in the normal course of
business. Because of the Bankruptcy Case and the circumstances leading to the
filing thereof, there is substantial doubt about the Company's ability to
continue as a going concern. The Company's ability to realize the carrying value
of its assets and discharge its liabilities is subject to substantial
uncertainty. The Company's ability to continue as a going concern depends upon,
among other things, the Company's ability to comply with the terms of the DIP
Financing Facility, confirmation of a plan of reorganization, availability of
exit financing from existing lenders under the Senior Credit Facility, receipt
of additional funding through the issuance of an aggregate of $75 million of New
Notes, and the Company's ability to generate sufficient cash flows from
operations. Our financial statements do not reflect adjustments for possible
future effects on the recoverability of assets or the amounts and
classifications of liabilities that may result from the outcome of the
Bankruptcy.

Our consolidated financial statements do not reflect adjustments that may occur
in accordance with the AICPA Statement of Position 90-07 ("Financial Reporting
by Entities in Reorganization Under the Bankruptcy Code") ("SOP 90-07"), which
the Company will adopt for its financial reporting in periods ending after
emergence from bankruptcy, assuming the Company will continue as a going
concern. In the Bankruptcy Case, substantially all unsecured liabilities as of
the Petition Date are subject to settlement under a plan of reorganization to be
voted on by creditors and equity holders, if it is determined that equity
holders will receive a distribution under the Plan, and approved by the
Bankruptcy Court. It is expected that the proposed Plan will result in "Fresh
Start" reporting pursuant to SOP 90-7. Under Fresh Start reporting, the value of
the reorganized Company would be determined based on the amount a willing buyer
would pay for the Company's assets upon confirmation of the Plan by the
Bankruptcy Court. This value would be allocated to specific tangible and
identifiable intangible assets. Liabilities existing as of the effective date of
the plan of reorganization would be stated at the present value of amounts to be
paid based on current interest rates. For financial reporting purposes for
periods ending after the Bankruptcy filing, those liabilities and obligations
whose treatment and satisfaction is dependent on the outcome of the Bankruptcy
Case will be segregated and classified as Liabilities Subject to Compromise in
the consolidated balance sheet under SOP 90-07.

Generally, all actions to enforce or otherwise effect repayment of pre-petition
liabilities as well as all pending litigation against the Debtors are stayed
while the Debtors continue their business operations as debtors-in-possession.
The ultimate amount of and settlement terms for such liabilities are subject to
an approved plan of reorganization and, accordingly, are not presently
determinable. Pursuant to SOP 90-07, professional fees associated with the
Bankruptcy Case will be expensed as incurred and reported as reorganization
costs. Also, interest expense and preferred dividends will be reported only to
the extent that they will be paid during the Bankruptcy Case or that it is
probable that they will be an allowed claim.

BACKGROUND INFORMATION

We closed on numerous significant transactions during 2000 and 2001, which
significantly impact the comparability of the annual results of operations for
the three years ended December 31, 2002. A summary of these transactions
follows.

                                       27

<PAGE>

During 2000, we completed the following:

            .       acquisition of the wireless PCS licenses, assets and
                    operations of PrimeCo Personal Communications, L.P.
                    ("PrimeCo") in the Richmond and Hampton Roads, Virginia
                    markets ("PrimeCo VA" and also referred to within our
                    operations as "VA East");

            .       issuance and sale of an aggregate of $375 million of
                    Unsecured Senior Notes and Unsecured Subordinated Notes
                    ("Senior Notes" and "Subordinated Notes", respectively);

            .       closing of $325 million Senior Secured Term Loans (also
                    referred to as the "Senior Credit Facility"), with $150
                    million borrowed on the date of the PrimeCo VA closing, $175
                    million outstanding at year-end 2000 and $225 million
                    outstanding at year-end 2001;

            .       payment of existing senior indebtedness and refinancing of
                    the Virginia PCS Alliance, L.C. ("VA Alliance") and the West
                    Virginia PCS Alliance, L.C. (the "WV Alliance, and
                    collectively, the "Alliances") debt obligations;

            .       issuance and sale of $250 million of redeemable, convertible
                    preferred stock;

            .       redemption of the Series A preferred membership interest in
                    the VA Alliance and conversion of the Series B preferred
                    membership interest into common interest;

            .       dispositions of Virginia RSA5 Limited Partnership interest
                    and the analog assets and operations of Virginia RSA6
                    Cellular Limited Partnership in connection with the PrimeCo
                    VA acquisition; and,

            .       disposition of our directory assistance operation.

We completed a majority of our geographic expansion in 2001. In February 2001,
the Company completed closing of the merger agreement with R&B Communications,
Inc. (R&B"), an integrated communications provider in a geographic market
contiguous to ours, and commensurate therewith, began consolidating the results
of the WV Alliance (Note 6).

We accounted for the directory assistance operation disposed of in July 2000 as
a discontinued operation. Therefore, the directory assistance operating results
are separated in the financial statements from the results of continuing
operations and are separately discussed after the income taxes in the results of
operations section below.

Collectively, these 2000 and 2001 events are referred to as the "Transactions"
elsewhere in this document. All references to "Notes" relates to the disclosures
contained in the footnotes to the Company's audited financial statements.

As a result of the Transactions and the various effective dates of each (Notes
5, 6, 7, 8 and 9), 2002 annual and quarterly results differ significantly from
2001 and 2001 results differ significantly from 2000 results. The first quarter
of 2001 differed significantly from the last three quarters of 2001 as the R&B
merger and the WV Alliance consolidation occurred February 13, 2001. Similarly,
the fourth quarter of 2000 differed significantly from the first three quarters
of 2000 as the VA East acquisition and the VA Alliance consolidation were
consummated on July 26, 2000. We reported significant losses from operations
after the second quarter of 2000 due to the following:

            .       addition of the VA East operations and the consolidation of
                    the VA Alliance in July 2000 and the consolidation of the WV
                    Alliance in February 2001, both of which generated
                    significant losses during 2000 and 2001.

            .       increased amortization of goodwill, acquired licenses and
                    other intangibles from the PCS acquisitions and the merger
                    with R & B; and,

            .       interest expense increased significantly due to the
                    additional debt and preferred equity financing noted.

            .       asset impairment charges of $403 million reported in the
                    fourth quarter of 2002 on the wireless licenses, goodwill
                    and other intangible assets and the network goodwill.

                                       28

<PAGE>

OTHER OVERVIEW DISCUSSION

To supplement its financial statements presented on a GAAP basis, throughout
this document the Company references non-GAAP measures, such as EBITDA, to
measure operating performance. Management believes EBITDA to be a meaningful
indicator of the Company's performance that provides useful information to
investors regarding the Company's financial condition and results of its
operations. Presentation of EBITDA is consistent with the Company's past
practice and EBITDA is a non-GAAP measure commonly used in the communications
industry and by financial analysts and others who follow the industry to measure
operating performance. EBITDA should not be construed as an alternative to
operating income or cash flows from operating activities (both of which are
determined in accordance with generally accepted accounting principles) or as a
measure of liquidity. A reconciliation of operating loss to EBITDA is provided
in Note 4 of the Company's financial statements.

         As a result of our increasing focus on and growth in digital PCS,
Internet access and CLEC services, a significant portion of our operating
revenues and EBITDA are generated by these businesses. Unlike our ILEC business,
these newer businesses have significant start-up costs associated with expansion
into new markets, introduction of new service offerings throughout the regions
we serve and significant competitive pricing pressures, which results in lower
operating margins. As we continue to grow these businesses, we expect these
operating margins to improve but to continue to be lower than those realized
before these other businesses were significant to the Company's consolidated
operations.

The discussion and analysis herein should be read in conjunction with the
financial statements and the notes thereto included herein. Much of the
discussion in this section involves forward-looking statements that involve
risks and uncertainties. Our actual results could differ materially from those
results anticipated in these forward-looking statements as a result of certain
risk factors, including those set forth in the Form 10-K for the year ended
December 31, 2002, under "Factors Affecting Future Performance". We wish to
caution readers that these forward-looking statements and any other
forward-looking statements made by us are based on a number of assumptions,
estimates and projections including but not limited to: our ability to develop,
prosecute, confirm and consummate a plan of reorganization; our ability to
operate under debtor-in-possession financing; our ability to maintain vendor,
lessor and customer relationships while in bankruptcy; our substantial debt
obligations and our ability to service those obligations, even after the
proposed reorganization; the additional expenses associated with bankruptcy as
well as the possibility of unanticipated expenses; restrictive covenants and
consequences of default contained in our financing arrangements; the cash flow
and financial performance of our subsidiaries; the competitive nature of the
wireless telephone and other communications services industries; the achievement
of build-out, operational, capital, financing and marketing plans relating to
deployment of PCS services; the capital intensity of the wireless telephone
business; retention of our existing customer base, including our wholesale
customers, especially Horizon; the ability of Horizon and other customers to pay
for our services; our ability to attract new customers, and maintain or improve
average revenue per subscriber; unfavorable economic conditions on a national
and local level; effects of acts of terrorism or war (whether or not declared);
changes in industry conditions created by federal and state legislation and
regulations; weakening demand for wireless and wireline communications services;
rapid changes in technology; adverse changes in the roaming rates we charge and
pay; adverse changes in rates we pay to ILECs for collocation and unbundled
network elements; fluctuations in the values of non-strategic assets such as
excess PCS and other spectrum licenses, which are currently below that of recent
transactions we have completed; the level of demand for competitive local
exchange services in smaller markets; our ability to manage and monitor billing;
possible health effects of radio frequency transmission; and the impact of
decline in our stock price and subsequent de-listing by the NASDAQ stock market.
Investors are cautioned that any such forward-looking statements are not
guarantees of future performance and involve risks and uncertainties, and that
any significant deviations from these assumptions could cause actual results to
differ materially from those expressed or implied by such forward-looking
statements. Forward-looking statements included herein are as of the date
hereof. We are not obligated to update or revise any forward-looking statements
or to advise of any changes in the assumptions on which they are based, whether
as a result of new information, future events or otherwise.

CRITICAL ACCOUNTING POLICIES

The fundamental objective of financial reporting is to provide useful
information that allows a reader to comprehend our business activities. To aid
in that understanding, management has identified our critical accounting
policies for discussion herein. These policies have the potential to have a more
significant impact on our financial statements, either because of the
significance of the financial statement item to which they relate, or because
they require judgment and estimation due to the uncertainty involved in
measuring, at a specific point in time, events which are continuous in nature.

Revenue Recognition Policies - As discussed in Note 3, we recognize operating
revenues as services are provided or when products are delivered. In connection
with recording revenue, estimates and assumptions are required in determining
the expected conversion of the revenue streams to cash collected. The reserve
estimation process requires

                                       29

<PAGE>

that management make assumptions based on historical results, future
expectations related to collections and dispute resolution, the economical and
competitive environment, changes in the credit worthiness of our customers, and
other relevant factors.

Long-lived Asset Recovery - Long-lived assets, consisting primarily of property,
plant and equipment and intangibles, comprise a significant portion of our total
assets. Costs associated directly with the uncompleted assets where we engage in
the related construction include employee related costs and interest expense
incurred during the construction period and are capitalized. Changes in
technology or changes in our intended use of these assets may cause the
estimated period of use or the value of these assets to change. We perform
reviews once a year or more frequently, as management deems necessary, to
confirm the appropriateness of estimated economic useful lives for each category
of property, plant and equipment. Estimates and assumptions used in both setting
depreciable lives and testing for recoverability require both judgment and
estimation. When assets are sold, impaired, retired or otherwise disposed of,
the cost and related accumulated depreciation are eliminated from the accounts
and a gain or loss is recognized.

            On January 1, 2002, the Company adopted SFAS No. 144, Accounting for
the Impairment or Disposal of Long-Lived Assets ("SFAS No. 144"). This
pronouncement establishes a single accounting model, based on the framework
established in SFAS No. 121, for the recognition and measurement of the
impairment of long-lived assets to be held and used or to be disposed of by
sale. The Company adopted SFAS No. 144 at the beginning of fiscal 2002. The
Company has completed its fixed asset testing under this standard as of December
31, 2002. From this testing, the Company determined that impairment existed with
certain of the wireless PCS segment assets. Accordingly, an asset impairment
charge was recorded which totaled $28.5 million, $16.7 million of which
pertained to property, plant and equipment and $11.8 million of which related to
intangible assets with finite lives. In addition to this, the Company reported a
SFAS No. 144 $1.1 million and $10.3 million asset impairment charge related to
property, plant and equipment and finite lived radio spectrum licenses,
respectively, in the wireless cable business (see Note 2).

            Radio spectrum licenses for areas where the licenses are being used
in operations had historically been classified in the property, plant and
equipment section of the balance sheet. In order to better conform with industry
practice, these assets, along with their related accumulated amortization, have
been reclassified to the other assets section of the balance sheet for all
periods presented.

Further discussions on these accounting policies are found in Note 3.

Goodwill and Indefinite Lived Intangibles - We have had significant merger and
acquisition activity in 2000 and 2001 (see Note 6 and the discussion on the
"Transactions" above). In all cases, we have recorded the transactions under the
purchase accounting method. Purchase accounting requires extensive use of
accounting estimates and judgments to allocate the purchase price to the fair
value of the assets and liabilities purchased. In our recording of the
transactions, a significant portion of our cost in excess of the book value of
net assets acquired has been allocated to indefinite lived licenses and
goodwill. Also, amounts have been allocated to other identifiable intangible
assets such as non-compete agreements, customer lists, assembled workforce,
tower franchise rights and employment agreements. Finite useful lives were
assigned to these intangibles and they will be amortized over their remaining
lives. As with any intangible asset, future write downs may be required if the
value of these assets becomes impaired.

            The Company adopted Statement of Financial Accounting Standard No.
142 ("SFAS 142"), Goodwill and Other Intangible Assets, on January 1, 2002.
Under these new rules, goodwill, assembled workforce intangible asset and other
intangible assets deemed to have indefinite lives will no longer be amortized
but will be subject to annual impairment tests in accordance with this
Statement. Other intangible assets will continue to be amortized over their
useful lives. Accordingly, the Company ceased amortization of goodwill,
assembled workforce and PCS radio spectrum licenses on January 1, 2002. The
Company performed transitional testing as of January 1, 2002 and performed
additional testing at June 30, 2002. Based on the results of this testing, no
impairment was recorded. During the first quarter of 2003, the Company completed
its annual SFAS No. 142 impairment tests as of October 1, 2002. Based on this
testing, the Company reported asset impairment charges totaling $362.1 million
(see Note 2). The Company reviewed the results performed as of October 1, 2002
to determine whether they would have been materially different if they had been

                                       30

<PAGE>

performed as of December 31, 2002. The Company concluded that no changes would
have been made to the underlying assumptions that would have resulted in
materially different test results.

Employee Benefit Plan Assumptions - Retirement benefits are a significant cost
of doing business and yet represent obligations that will be settled far in the
future. Retirement benefit accounting is intended to reflect service periods
based on the terms of the plans and the investment and funding decisions made by
the Company. The accounting requires that management make assumptions regarding
such variables as the return on assets, the discount rate, and future health
care costs. Changes in these key assumptions can have a significant impact on
the projected benefit obligation, funding requirements and periodic benefit cost
incurred by the Company. Our policies and key assumptions are discussed in Note
15.

Income Taxes - Our estimates of income taxes and the significant items giving
rise to the deferred assets and liabilities are shown in Note 13. These reflect
our assessment of actual future taxes to be paid on items reflected in the
financial statements, giving consideration to both timing and probability of
these estimates. Actual income taxes could vary from these estimates due to
future changes in income tax law or on results from final Internal Revenue
Service review of our tax returns. We have generated significant NOL's in recent
years. We have evaluated the realizability of the related deferred tax asset
base in light of anticipated future results. In 2002, we recorded a valuation
allowance against deferred tax assets based on management's determination that
the realization of the tax asset was uncertain given losses in recent years and
uncertainty over utilization within the statutory life. Depending on the outcome
of the restructuring of our debt and equity securities under the bankruptcy
filing (see Note 1), the restructuring could result in a substantial reduction
in the amount of existing NOL carry-overs and could result in limitations on our
ability to use remaining carryovers and built-in losses in future years. The
reduction of or potential limitation on our ability to use such favorable tax
attributes could adversely affect our financial position in future years.

Other New Accounting Pronouncements - In June 2001, the FASB also approved SFAS
No. 143, Accounting for Asset Retirement Obligations ("SFAS No. 143"). SFAS No.
143 establishes accounting standards for recognition and measurement of a
liability for an asset retirement obligation and the associated asset retirement
cost. The fair value of a liability for an asset retirement obligation is to be
recognized in the period in which it is incurred if a reasonable estimate of
fair value can be made. The associated retirement costs are capitalized and
included as part of the carrying value of the long-lived asset and amortized
over the useful life of the asset. SFAS No. 143 will be effective for the
Company beginning on January 1, 2003. The Company has performed a preliminary
assessment of the applicability and materiality of the adoption of this
standard. The Company has determined that this is primarily applicable to tower
sites within the wireless segment and has determined that the adoption of the
standard could be material and may result in an asset retirement obligation
estimated of up to $12 million.

            In June 2002, the FASB issued SFAS No. 146, Accounting for Costs
Associated with Exit or Disposal Activities. SFAS No. 146 requires that a
liability associated with an exit or disposal activity be recognized at its fair
value when the liability has been incurred, and supercedes EITF Issue No. 94-3,
"Liability Recognition for Certain Employee Termination Benefits and Other Costs
to Exit an Activity." Under EITF Issue No. 94-3, certain exit costs were accrued
upon management's commitment to an exit plan, which was generally before an
actual liability had been incurred. The Company will adopt SFAS No. 146 on
January 1, 2003. A restructuring charge was reported during the first, second
and fourth quarters of 2002 for $4.3 million relating to severance costs and
pension curtailment costs for employees affected by the reduction in force
activity, lease termination obligations associated with the exit of certain
facilities and financial restructuring legal and advisor costs. At December 31,
2002, approximately $1.1 million of the remaining $1.5 million obligations
relating to the operational restructuring related to pension curtailment costs.
Had the Company reported the restructuring charges recorded in 2002 under SFAS
No. 146, the timing of recognition would have been impacted.

            In December 2002, the FASB issued SFAS No. 148, Accounting for
Stock-Based Compensation -Transition and Disclosure, an Amendment of FASB
Statement No. 123. SFAS No. 148 provides alternative methods of transition for a
voluntary change to the fair value based method of accounting for stock-based
employee compensation prescribed by SFAS No. 123. SFAS No. 148 also amends the
disclosure requirements of SFAS No. 123 to require disclosure in both annual and
interim financial statements about the method of accounting for stock-based
employee compensation and the effect of the method used on reported results. As
the Company has elected to continue accounting for stock-based

                                       31

<PAGE>

employee compensation using the intrinsic value method under APB Opinion No. 25,
the Company has only adopted the revised disclosure requirements of SFAS No. 148
as of December 31, 2002 (Note 17).

            In November 2002, the FASB issued FASB Interpretation No. 45 ("FIN
45"), Guarantor's Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others. FIN 45 requires that
upon issuance of a guarantee, a guarantor must recognize a liability for the
fair value of an obligation assumed under a guarantee. FIN 45 also requires
additional disclosures by a guarantor in its interim and annual financial
statements about the obligations associated with guarantees issued. The
recognition provisions of FIN 45 are effective for guarantees issued after
December 31, 2002, while the disclosure requirements were effective for
financial statements for periods ending after December 15, 2002. At December 31,
2002, the Company had not entered into any material arrangement that would be
subject to the disclosure requirements of FIN 45. The Company does not believe
that the adoption of FIN 45 will have a material impact on its consolidated
financial statements.

            In January 2003, the FASB issued Interpretation No. 46 ("FIN 46"),
"Consolidation of Variable Interest Entities", which clarifies the application
of Accounting Research Bulletin No. 51, Consolidated Financial Statements, to
certain entities in which equity investors do not have the characteristics of a
controlling financial interest or do not have sufficient equity at risk for the
entity to finance its activities without additional subordinated financial
support from other parties. Certain disclosure requirements of FIN 46 are
effective for financial statements of interim or annual periods issued after
January 31, 2003. FIN 46 applies immediately to variable interest entities
created, or in which an enterprise obtains an interest, after January 31, 2003.
For variable interest entities in which an enterprise holds a variable interest
that it acquired before February 1, 2003, FIN 46 applies to interim or annual
periods beginning after June 15, 2003. The Company is in the process of
evaluating the impact of FIN 46 on its consolidated financial statements.

OPERATING REVENUES

            Our revenues, net of bad debt expense, are generated from the
following categories:

            .       wireless PCS, consisting of retail, service and wholesale
                    digital PCS revenues;

            .       wireline communications, including ILEC service revenues,
                    CLEC service revenues, Internet, fiber optic network usage
                    (or carrier's carrier services), and long distance revenues;
                    and,

            .       other communications services revenues, including revenues
                    from paging, wireless and wireline cable television, our
                    sale and lease of communications equipment and revenue from
                    leasing excess building space.

OPERATING EXPENSES

            Our operating expenses are generally incurred from the following
categories:

            .       cost of sales, exclusive of other operating expenses shown
                    separately, including digital PCS handset equipment costs
                    which we sell to our customers at a price below our cost,
                    and usage-based access charges, including long distance,
                    roaming charges, and other direct costs;

            .       maintenance and support expenses, including costs related to
                    specific property, plant and equipment, as well as indirect
                    costs such as engineering and general administration of
                    property, plant and equipment;

            .       depreciation and amortization, including amortization of
                    intangible assets where applicable (Note 2) and depreciable
                    long lived property, plant and equipment;

            .       asset impairment charge, including impairments recognized
                    against property, plant and equipment and both finite and
                    infinite lived intangible assets and goodwill;

            .       customer operations expenses, including marketing, product
                    management, product advertising, sales, billing, publication
                    of a regional telephone directory, customer care and
                    directory services;

            .       corporate operations expenses, including taxes other than
                    income, executive, accounting, legal, purchasing,
                    information technology, human resources and other general
                    and administrative expenses; and,

                                       32

<PAGE>

            .       operational and capital restructuring charges associated
                    with organizational initiatives, workforce reductions and
                    exiting certain facilities and capital restructuring.

OTHER INCOME (EXPENSES)

            Our other income (expenses) are generated (incurred) from interest
income and expense, equity loss from the VA Alliance (through July 25, 2000) and
WV Alliance (through February 13, 2001) (collectivity, the "Alliances" or "PCS
investees"), and gains or losses on the sale of investments and other assets.

INCOME TAXES

        Our income tax liability or benefit and effective tax rate increases or
        decreases based upon changes in a number of factors, including our
        pre-tax income or loss, net operating losses and related carryforwards,
        valuation allowances, alternative minimum tax credit carryforwards,
        state minimum tax assessments, gain or loss on the sale of assets and
        investments, write-down of assets and investments, non-deductible
        amortization, and other tax deductible amounts.

RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 2002 COMPARED TO YEAR ENDED DECEMBER 31, 2001

OVERVIEW

Operating revenues, which are reported net of bad debt expense, increased $47.6
million, or 22%, from $215.1 million in 2001 to $262.7 million in 2002.
Operating loss increased $362.8 million, from $61.8 million in 2001 to $424.6
million in 2002. Net income excluding depreciation and amortization and asset
impairment charges or as commonly referred to and referred to herein as "EBITDA"
("earnings before interest, taxes, depreciation and amortization"), increased
$40.7 million, or 199%, from $20.5 million in 2001 to $61.2 million in 2002.

            The combination of digital PCS customers from acquisitions and
significant customer additions over the two year period, wireline growth from
the R&B merger, internal growth and growth in CLEC and Internet customers
contributed to the year over year 22% increase in revenue. PCS revenues
increased $38.0 million (32%), ILEC revenues increased $4.3 million (10%), CLEC
revenues increased $5.5 million (32%), network revenues decreased $.2 million
(3%) and Internet revenues increased $.8 million (5%), from 2001 to 2002. Bad
debt expense on a consolidated basis increased $6.0 million (60%), from $10.1
million in 2001 to $16.1 million in 2002. Primarily all of this increase is from
the wireless PCS segment, driven by the significant increase in customer and
revenue growth and customer churn, primarily occurring in the VA East PCS market
(see Wireless PCS operating revenue section below for further discussion).

            The significant increase in operating losses is due to the $402.9
million asset impairment charge recorded in 2002 (discussed in detail in the
overview section) and a $4.3 million restructuring charge in 2002, offset by an
improvement in EBITDA before the restructuring charges of $45.0 million.
Depreciation and amortization remained flat despite $73.3 million in capital
expenditures and an $11.2 million increase in accelerated depreciation from
early retirements of network equipment replaced in the 3G-1XRTT during 2002 as
compared to 2001. This was offset by the $20.4 million decrease in amortization
of intangibles associated with the adoption of Statement of Financial Accounting
Standard No. 142 ("SFAS 142") on January 1, 2002 and depreciation reductions
from $44.4 million of property, plant and equipment retirements, primarily
related to the 3G-1XRTT upgrade project.

            Net loss applicable to common shares for 2002 was $509.4 million,
which included $402.9 million in asset impairment charges, $4.3 million in
restructuring charges, $8.5 million gains on sale of assets and $78.4 million
interest expense.

            Net loss applicable to common shares for 2001 was $82.6 million,
which included equity losses from the Alliances of $1.3 million, $23.0 million
gain on sale of securities available for sale, $8.6 million gain on sale of a
PCS spectrum license and $2.2 million of merger termination fees, net of fees
and expenses.

                                       33

<PAGE>

OPERATING REVENUES

<TABLE>
<CAPTION>
              OPERATING REVENUES                    TWELVE MONTHS ENDED DECEMBER 31,
              ----------------------------------------------------------------------------
                                                                        $            %
              ($'s in 000's)               2002          2001        Variance     Variance
              ----------------------------------------------------------------------------
              <S>                     <C>            <C>            <C>                 <C>
              Wireless PCS            $   156,860    $  118,832     $   38,028          32%

              Wireline
                  ILEC                     47,128        42,786          4,342          10%
                  Network                   8,449         8,694           (245)         (3%)
                  CLEC                     22,858        17,346          5,512          32%
                  Internet                 18,481        17,659            822           5%
              ----------------------------------------------------------------------------
                    Total Wireline         96,916        86,485         10,431          12%

              Other                         8,951         9,746           (795)         (8%)
              ----------------------------------------------------------------------------
              Total                   $   262,727    $  215,063     $   47,664          22%
</TABLE>

WIRELESS COMMUNICATIONS REVENUES-Wireless communications revenues increased
$38.0 million, or 32%, due primarily to an increase in PCS subscribers of
42,700, from 223,800 at the end of 2001 to 266,500 at the end of 2002, and a
$14.0 million increase in the wholesale and roaming revenues. Average monthly
revenue per subscriber ("ARPU", without roaming) remained steady during 2002
with overall ARPU at $44 at year-end 2001 and 2002, due primarily to pricing
pressures on post-pay type plans and a shrinking of the pre-paid customer base
in total and as a percent of the total customer base. As of December 31, 2002,
post-pay type products accounted for 94% of the subscriber base compared to 82%
as of year end 2001.

            In addition to subscriber growth and growth in these related
revenues, wholesale revenues generated through an agreement with Sprint/Horizon
increased $13.4 million, from $19.1 million in 2001 to $32.5 million in 2002
(see Liquidity and Capital Resources section for discussion on the amendment to
this agreement). In March 2003, Horizon filed a dispute with the Bankruptcy
court claiming we over billed them for a total of $6 million (see Note 18). We
are contesting allegations and will be seeking to resolve this dispute during
April 2003 or will seek resolution through an arbitration process.

            On March 28, 2003, Horizon filed its Form 10-K for the year ending
December 31, 2002. This document disclosed that there was substantial doubt
about Horizon's ability to continue as a going concern because of the
probability that Horizon will violate one or more of its debt covenants in 2003.
The Company's future wholesale revenues under the wholesale network services
agreement with Horizon could be materially impacted if Horizon was to be unable
to continue as a going concern. No other single customer accounted for more than
10% of the Company's consolidated revenues in any of the three years during the
period ended December 31, 2002.

WIRELINE COMMUNICATIONS REVENUES-Wireline communications revenues increased
$10.4 million, or 12%, from $86.5 million in 2001 to $96.9 million in 2002.

..       Telephone Revenues. Telephone revenues, which include local service,
        access and toll service, directory advertising and calling feature
        revenues from our ILEC business increased $4.3 million, or 10%, from
        $42.8 million in 2001 to $47.1 million in 2002. Access lines remained
        essentially flat throughout 2002 as lines totaled 52,014 at year end
        2002, just 22 lines behind the prior year end; however, carrier access
        minutes increased 6.9% from 2001 to 2002 and composition of the access
        minutes shifted favorably towards higher priced rate types.

                                       34

<PAGE>

..       Network Revenues. Revenues from fiber optic and other long haul
        transport related network usage decreased $.2 million, or 3%, from $8.6
        million in 2001 to $8.4 million in 2002. This was primarily due to
        reductions in network rates and the loss of certain traffic in the
        second half of 2001.

..       CLEC Revenues. Revenues from CLEC operations increased $5.5 million, or
        32%, from $17.3 million in 2001 to $22.9 million in 2002. During 2002,
        we added 10,200 access lines, a 30% increase, finishing the year with
        43,800 access lines. In addition to revenue growth generated from
        traditional CLEC services, revenues from private line or dedicated
        circuits for business accounts increased $.9 million, or 30%, from $3.3
        million in 2001 to $4.2 million in 2002. This growth was offset by a
        decline in reciprocal compensation revenues (revenues earned for
        terminating calls from other ILEC's or CLEC's) of $1.3 million, or 35%,
        from $3.7 million in 2001 to $2.4 million in 2002 due to a significant
        reduction in rates in mid-2001 and mid-2002.

..       Internet Revenues. Revenues from Internet services increased $.8
        million, or 5%, from $17.7 million in 2001 to $18.5 million in 2002. As
        part of the Company's previously announced expense reduction
        initiatives, operations were ceased in certain dial-up Internet markets
        and rates were increased in others, both of which have resulted in some
        loss of dial-up customers. Additionally, in the process of consolidating
        multiple billing systems, we recorded dial-up customer adjustments of
        approximately 3,100 in third quarter 2002 and a final additional
        adjustment of 5,000 in fourth quarter 2002; however, these adjustments
        had no financial impact. Despite the overall decline in subscribers from
        the factors noted above, we grew the number of digital subscriber line
        ("DSL") customers by 1,530, or 38%, resulting in $1.2 million of DSL
        revenue growth. In 2001 we added residential DSL through line sharing
        (discussed in the Overview section above), which greatly increased the
        size of the market population within the existing geographic markets
        that we serve and improved the attractiveness of the DSL product. Prior
        to this, DSL was only sold to businesses.

OTHER COMMUNICATIONS SERVICES REVENUES-Other communications services revenues
decreased $.8 million, or 8%, from $9.7 million in 2001 to $8.9 million in 2002.
This was primarily due to a decline in Voicemail and Paging revenues of $1.4
million (58%) due to the movement of voicemail assets and operations out of
other communications services to the wireless PCS segment (which is the primary
user of this service) in 2002 and a decline in rental revenues from the loss of
the rentals of our directory assistance calling centers offset by the $1.1
million related lease buyout (see Note 7).

OPERATING EXPENSES

<TABLE>
<CAPTION>
              OPERATING EXPENSES                                  TWELVE MONTHS ENDED DECEMBER 31,
              -----------------------------------------------------------------------------------------
                                                                                                  %
              ($'s in 000's)                                2002          2001    Variance     Variance
              -----------------------------------------------------------------------------------------
              <S>                                        <C>         <C>         <C>                <C>
              Operating Expenses, excluding Depreciation
                and Amortization and Asset Impairment
                Charges
              Wireless PCS                               $ 142,022   $ 139,531   $   2,491            2%

              Wireline
                  ILEC                                      14,520      15,330        (810)          (5%)
                  Network                                    1,597       1,429         168           12%
                  CLEC                                      16,927      15,442       1,485           10%
                  Internet                                  13,561      16,313      (2,752)         (17%)
              -----------------------------------------------------------------------------------------
                    Total Wireline                          46,605      48,514      (1,909)          (4%)

              Other                                         12,855       6,514       6,341           97%
              -----------------------------------------------------------------------------------------
              Sub-Total                                    201,482     194,559       6,923            4%
              Depreciation & Amortization                   82,924      82,281         643            1%
              Asset Impairment Charges                     402,880           -     402,880          N/M
              -----------------------------------------------------------------------------------------
              Total                                      $ 687,286   $ 276,840   $ 410,446          148%
</TABLE>

TOTAL OPERATING EXPENSES-As noted above, total operating expenses increased
$410.4 million in 2002 compared to 2001. Of this increase, $402.9 million is due
to the asset impairment charges recorded in the fourth quarter in the wireless
PCS and Network segments and in the wireless cable business of $367.0 million,
$20.9 million and $15.0

                                       35

<PAGE>

million, respectively. Additionally, depreciation and amortization were
increased by $3.9 million and $15.0 million for 2001 and 2002, respectively, for
the accelerated depreciation related to the early retirement of network
equipment in connection with the 3G-1XRTT upgrade. Another factor resulting in a
comparative difference between depreciation and amortization was the ceasing of
amortization on goodwill and other indefinite lived assets in 2002. Amortization
of these assets was $20.4 million in 2001. These factors were offset by $59
million of net growth in depreciable assets (assets placed in service during
2002 less 2002 retirements) excluding the fourth quarter 2002 impact from asset
impairment charges. Finally, $6.1 million of the year over year fluctuation in
operating expenses is due to the exclusion of R&B and the WV Alliance from
operating expenses for the first 43 days of 2001. Operating expenses, excluding
depreciation and amortization and asset impairment charges, increased $6.9
million, or 4%, from $194.6 million for 2001 to $201.5 million for 2002.

            Wireline operating expenses, excluding depreciation and
amortization, decreased $1.9 million, or 4%, from $48.5 million in 2001 to $46.6
million in 2002. Wireless operating expenses, excluding depreciation and
amortization, increased $2.5 million, or 2%, from $139.5 million in 2001 to
$142.0 million in 2002. Within the individual segments that comprise total
wireline, ILEC decreased $.8 million, or 5%, CLEC increased $1.5 million, or
10%, Internet decreased $2.7 million, or 17%, and Network increased $.2 million,
or 12%. Within the wireless business, WV Alliance, consolidated in February
2001, increased $4.3 million, or 17%. VA East, which was consolidated in July
2000, increased $1.3 million, or 2%, and the VA West market, consisting
primarily of VA Alliance, which was also consolidated in July 2000, decreased
$2.9 million, or 6%. Operating expenses, excluding depreciation and
amortization, from the other communication service businesses increased $6.3
million due primarily to restructuring charges of $4.3 million recognized in
2002, as well as increases in corporate related professional fees and insurance
costs. Across all businesses, operation expense reductions driven by the
operational restructuring in early 2002 and continued improvements in network
efficiency and other cost containment measures held operating expenses down
despite continued customer growth noted in the preceding revenue discussions.

COST OF WIRELESS SALES-Cost of wireless sales increased $1.1 million, or 2%,
from $47.8 million in 2001 to $48.9 million in 2002. The exclusion of the WV
Alliance for the first 43 days of 2001 accounted for $1.4 million of this
increase; therefore, cost of sales decreased $.3 million, or 1%, after
accounting for this exclusion. This decrease was due to improved network
efficiency, lower handset costs and improved inventory control, offset by a 19%
increase in customers over 2001. The Company's average selling price for
handsets with service contracts was approximately $31 in 2001 and $47 in 2002
and the average handset cost was $161 in 2001 and $152 in 2002, for a subsidy of
$130 per unit in 2001 and $105 per unit in 2002. Additionally, a decrease in
annual customer churn, from 4.31% in 2001 to 4.16% in 2002 also contributed to
holding cost of wireless sales significantly below the related revenue increase.

MAINTENANCE AND SUPPORT EXPENSES-Maintenance and support expenses increased $1.9
million, or 3%, from $62.5 million in 2001 to $64.4 million in 2002. Of this
increase, $1.7 million relates to the exclusion of R&B and the WV Alliance for
the first 43 days of 2001 prior to consolidation. Also contributing to the
increase were increased unbundled network elements ("UNE's") and transport costs
due to CLEC customer growth, offset by staff reductions, cost containment
measures across all segments and improved efficiency in network and transport
costs (i.e. network grooming).

DEPRECIATION AND AMORTIZATION EXPENSES-Depreciation and amortization expenses
increased $.6 million, or 1%, from $82.3 million in 2001 to $82.9 million in
2002. We reported accelerated depreciation of $15.0 million for the twelve
months ended December 31, 2002 on wireless digital PCS equipment replaced during
2002 or which are scheduled to be replaced into the first half of 2003, and on
certain CLEC equipment whose lives were shortened due to capacity limitations.
Accelerated depreciation for 2001 was $3.9 million. The 2002 replacement
schedule was accelerated within the year resulting in this significant increase
in depreciation during the twelve-month period. Accelerated depreciation will
continue on the assets scheduled to be retired in 2003. The effect of this is
expected to be approximately $1.5 million in 2003.

            On January 1, 2002, the Company adopted SFAS No. 142, Goodwill and
Other Intangible Assets. In accordance with the provisions of SFAS 142, we
discontinued amortization of goodwill, wireless PCS spectrum licenses and the
assembled workforce intangible asset as of that date, as these assets are
considered indefinite lived intangible assets and

                                       36

<PAGE>

are subject to periodic impairment testing rather than amortization (Notes 2 and
3). Amortization of indefinite lived intangible assets was $20.4 million in
2001.

ASSET IMPAIRMENT CHARGES-During the first quarter of 2003, the Company completed
the 2002 annual SFAS No. 142 impairment testing of all goodwill and indefinite
lived intangible assets as of October 1, 2002. Additionally, the Company
performed impairment testing on other long term assets in accordance with SFAS
No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, during
the fourth quarter based on the presence of impairment indicators. In September
2002, the Company retained UBS Warburg as its financial advisor to assist the
Company in exploring a variety of restructuring alternatives. Thereafter,
continued competition in the wireless telecommunications sector resulted in a
modification to the Company's long-term business plan, including a reduction in
wireless subscriber growth, a decrease in average revenue per wireless
subscriber, a slower improvement in subscriber churn and slower growth in
wholesale revenues. In addition, capital and lending prospects for
telecommunication companies continued to deteriorate. These factors negatively
impacted the Company and the industry sector's financial projections and market
valuations. Accordingly, the Company recognized impairment on its wireless PCS
licenses, goodwill and other intangible assets totaling $350.3 million.
Additionally, certain wireless PCS property, plant and equipment was required to
be restated to fair value which resulted in a $16.7 million impairment charge.
In addition to the impairment recognized in the wireless PCS segment, the
network segment goodwill was determined to be impaired resulting in a $20.9
million impairment charge. Finally, licenses, goodwill and property, plant and
equipment associated with the wireless cable business were also determined to be
impaired resulting in a $15.0 million impairment charge.

CUSTOMER OPERATIONS EXPENSES-Customer operations expenses remained relatively
flat from year to year, increasing $.3 million, or 1%, from $65.7 million in
2001 to $66.0 million in 2002. This was due in part to the fact that we
converted our VA East PCS customers onto our billing system in July 2001 and
in-sourced the billing functions, causing billing-related costs to decrease
significantly from year to year. Additionally, cost of acquisition ("COA"),
which is the cost of the handset subsidy (included in the Cost of Wireless Sales
line) and marketing costs, advertising costs, sales commissions and sales
management costs (included in the Customer Operations line), decreased from $344
in 2001 to $302 in 2002, primarily from handset subsidy reductions (discussed in
the Wireless Cost of Sales section), cost containment efforts related to
advertising and marketing expenses and a shift in the sales channel mix from the
more expensive indirect channel to the direct channel. These savings were offset
by the 19% increase in customers from the end of 2001 to December 31, 2002.

CORPORATE OPERATIONS EXPENSES-Corporate operations expenses decreased $.7
million, or 4%, from $18.6 million in 2001 to $17.9 million in 2002. This
decrease is primarily due to personnel reductions in corporate related back
office functions, offset by increases in legal costs and fees for other
professional services.

RESTRUCTURING CHARGES- Restructuring charges were recorded in the first, second
and fourth quarters of 2002 based on an approved plan to reduce our workforce by
approximately 15% through the offering of early retirement incentives, the
elimination of certain vacant and budgeted positions and the elimination of some
jobs. The plan also involved exiting certain facilities in connection with the
workforce reduction and centralizing certain functions. A total of 96 current
employees left the Company as a result of these actions. The employees impacted
were primarily in management, operations, engineering and a number of other
support functions. Total costs related to these activities were $2.7 million and
were reported during the first and second quarters of 2002. An additional $1.6
million was reported during the fourth quarter of 2002 which was primarily
related to capital restructuring. We incurred significant legal and advisory
fees in the third and fourth quarter of 2002 in an effort to restructure our
debt terms and capital structure. These efforts were unsuccessful and the
related costs were expensed accordingly (see Notes 1 and 19).

OTHER INCOME (EXPENSES)

Gains on the sale of assets decreased $23.3 million, or 73%, from $31.8 million
in 2001 to $8.5 million in 2002. The $31.8 million gain in the previous year
related primarily to the sale of our holdings of Illuminet, Inc. ($23.0 million)
and to the sale of PCS licenses in Kingsport, Tennessee ($8.6 million). The
current year gain related to sales of excess PCS licenses (Note 7).

                                       37

<PAGE>

            Interest expense increased $2.1 million, or 3%, from $76.3 million
in 2001 to $78.4 million in 2002. This increase is due to an increase in the
average debt over the respective periods primarily from capital expenditures
needed to support future growth in excess of cash flow generated from current
operations. During 2002, we increased our borrowings under the Senior Credit
Facility by $36 million. This was partially offset by a decrease in our average
annual borrowing rate of .7%, from 11.7% to 11.0%.

            Other income (expense) decreased $7.2 million, from $5.7 million
income in 2001 to $1.5 million expense in 2002. The prior year income was
comprised primarily of interest income earned on an average restricted cash
balance of approximately $51 million, interest from advances to the WV Alliance,
which averaged approximately $68 million during the first 43 days of 2001, and
other miscellaneous asset retirement gains. During the twelve months ended
December 31, 2002, interest income on restricted cash was down significantly due
to the reduced average restricted cash balance of approximately $15 million. The
remaining restricted cash balance was consumed by the August 15, 2002 interest
payment on the Senior Notes. This income was offset by a $1.1 million permanent
impairment recorded for our investment in WorldCom, Inc., other corporate
financing costs and miscellaneous non-operating expenses.

            Our share of losses from the WV Alliance decreased $1.3 million, or
100%, from $1.3 million in 2001 to zero in 2002. This is due to the fact that,
upon completion of the R&B merger in February 2001, the Company began
consolidating the results of operations for the WV Alliance (Note 6). Our
ownership interests in the VA Alliance and the WV Alliance increased to 91% and
79%, respectively, upon completion of the R&B merger (Note 6). Subsequent to our
purchases of additional minority interest during 2001, our ownership interests
increased to 97% for the VA Alliance and 98% for the WV Alliance.

INCOME TAXES

            Income tax benefit decreased $28.0 million, or 81%, from $34.5
million in 2001 to $6.5 million in 2002. The 2002 benefit is net of a valuation
allowance of $155.5 million. Further, with the adoption of SFAS No. 142 on
January 1, 2002, we no longer have the permanent differences associated with
non-deductible goodwill. Offsetting these factors in the current year are the
non-deductible basis differences in licenses sold and asset impairment charges
taken in accordance with SFAS No. 142 and 144, which reduced the rate from the
statutory rate; as a result, the effective tax rate was 32.7% in 2002, excluding
the impact of the $155.5 million valuation reserve, compared to 36.9% in 2001.

MINORITY INTERESTS IN LOSSES (EARNINGS) OF SUBSIDIARIES

            Minority interests in losses decreased $3.0 million, from $3.5
million in 2001 to $.5 million in 2002. Due to the fact that the Alliances have
accumulated deficits in equity, we record 100% of the results of operations from
the Alliances in our consolidated results until such time as the collectibility
of the minority interest assets generated (but not booked) becomes certain. This
occurs upon collection of minority capital contributions from capital calls.
Capital calls to minority partners totaled $3.5 million in 2001 and $.6 million
in 2002. One of the reasons that this amount declined is due to the substantial
decrease in percentage of minority interest in the Alliances. Minority interest
in the VA Alliance and WV Alliance after January 2002 was 3% and 2%,
respectively.

DIVIDEND REQUIREMENTS ON PREFERRED STOCK

Dividend requirements on preferred stock increased $1.6 million, from $18.8
million in 2001 to $20.4 million in 2002. The Company issued $250 million of
redeemable, convertible preferred stock ($112.5 million of Series B preferred,
$137.5 million of Series C preferred in July 2000 pursuant to the 2000
Transactions discussed in the Overview section above). The preferred stock
accrues dividends at a rate of 8.5% and 5.5% per annum for the Series B
preferred and Series C preferred, respectively, which is payable semi-annually
on June 30 and December 31. If dividends are not paid in cash, the unpaid amount
is added to the accreted value of the preferred stock. As of December 31, 2002,
all dividends have been paid in kind. In addition to the dividend accruals,
accretion of the issuance costs is recorded in dividend requirements on
preferred stock. This amounted to $1.1 million in both 2001 and 2002.

                                       38

<PAGE>

RESULTS OF OPERATIONS

Year Ended December 31, 2001 Compared to Year Ended December 31, 2000

OVERVIEW

Operating revenues, which are reported net of bad debt expense, increased $101.6
million, or 89%, from $113.5 million in 2000 to $215.1 million in 2001. EBITDA
increased $.2 million, or 1%, from $20.3 million in 2000 to $20.5 million in
2001. Operating loss increased $44.4 million, from $17.4 million in 2000 to
$61.8 million in 2001.

            The combination of digital PCS customers from acquisitions and
significant customer additions over the two year period, wireline growth from
the R&B merger, internal growth and growth in CLEC and Internet customers
contributed to the year over year 89% increase in revenue. PCS revenues
increased $79.7 million (204%), ILEC revenues increased $10.6 million (33%),
CLEC revenues increased $8.4 million (93%) and network and Internet revenues
increased $5.0 million (135%) and $4.2 million (31%), respectively, from 2000 to
2001. Bad debt expense increased $6.9 million (212%), from $3.2 million in 2000
to $10.1 million in 2001. Of this increase, $6.1 million is from the wireless
PCS segment, driven by the significant increase in customer and revenue growth
and customer churn, primarily occurring in the VA East PCS market (see Wireless
PCS operating revenue section below for further discussion).

            EBITDA remained relatively flat from 2000 to 2001 due to the
inclusion of the VA East and VA Alliance operations for the full year 2001 as
compared to the partial year 2000 and the consolidation of the WV Alliance in
early 2001. These businesses generated EBITDA losses of $6.8 million and $17.5
million for 2000 and 2001, respectively. In addition to these comparative
differences, digital PCS customer additions exceeded prior year customer
additions on a pro forma basis by 9,100, or 20% and with this, additional
related costs of acquiring new PCS subscribers were incurred (discussed above)
of approximately $3 million. These factors were offset by the inclusion of the
R&B operation, which generated positive EBITDA of $9.1 million in 2001.
Adjusting EBITDA to include VA East, VA Alliance and WV Alliance for both 2000
and 2001, pro forma EBITDA improved $15.1 million, from $5.3 million in 2000 to
$20.4 million in 2001, $7.1 million of which is from the PCS operations and $8.9
million are from the wireline operations, relatively evenly distributed between
ILEC, CLEC, Internet and Network.

            The significant increase in operating loss is primarily attributable
to increased amortization of intangibles associated from acquisition activity of
$6.7 million, depreciation increases from inclusion of the acquired entities and
the post-acquisition growth in property, plant and equipment within these
operations of $32.0 million, and $.4 million increased depreciation from
property and equipment growth in the other operations, net of decreases in the
other wireless operations from the disposition of the analog cellular operation
in July 2000.

            Net loss applicable to common shares for 2001 was $82.6 million,
which included equity losses from the Alliances of $1.3 million, $23.0 million
gain on sale of securities available for sale, $8.6 million gain on sale of a
PCS spectrum license and $2.2 million of merger termination fees, net of fees
and expenses.

            Net income applicable to common shares for 2000 was $10.5 million,
which included $62.6 million of gains from the sale of our RSA6 analog assets
and operations and our limited partnership interest in RSA5, $16.4 million of
income and gain on sale of discontinued operation, as well as equity losses from
the Alliances of $12.3 million.

                                       39

<PAGE>

OPERATING REVENUES

<TABLE>
<CAPTION>
              OPERATING REVENUES                      TWELVE MONTHS ENDED DECEMBER 31,
              -------------------------------------------------------------------------------
                                                                            $            %
              ($'s in 000's)                      2001          2000    Variance     Variance
              -------------------------------------------------------------------------------
              <S>                              <C>         <C>         <C>                <C>
              Wireless                         $ 118,832   $  39,096   $  79,736          204%

              Wireline
                  ILEC                            42,786      32,169      10,617           33%
                  Network                          8,694       3,693       5,001          135%
                  CLEC                            17,346       8,975       8,371           93%
                  Internet                        17,659      13,443       4,216           31%
              -------------------------------------------------------------------------------
                   Total Wireline                 86,485      58,280      28,205           48%

              Other                                9,746      16,143      (6,397)         (40%)
              -------------------------------------------------------------------------------
              Total                            $ 215,063   $ 113,519   $ 101,544           89%
</TABLE>

WIRELESS COMMUNICATIONS REVENUES-Wireless communications revenues increased
$79.7 million, from $39.1 million in 2000 to $118.8 million in 2001. This
increase is primarily due to the acquisition of PrimeCo VA and the consolidation
of the VA Alliance (Note 6), which occurred on July 26, 2000. The acquisition of
PrimeCo VA (now referred to as the VA East market) and the consolidation of the
VA Alliance accounted for $54.9 million, or 69%, of the total increase. The
consolidation of the WV Alliance in February 2001 accounted for $21.5 million,
or 27%, of the total increase. We increased PCS subscribers by 180,500, from
43,300 at the beginning of 1999 to 223,800 by the end of 2001. This increase is
comprised of growth from acquisitions (approximately 145,600) and comparative
period to period growth (34,900) over this two year period. Average monthly
revenue per subscriber ("ARPU", without roaming) trended upward during 2001,
with ARPU at $52 for the fourth quarter of 2001 as compared to $46 for fourth
quarter of 2000, reflecting the development of higher-end rate plans. Partially
offsetting these growth factors was a pre-pay ARPU decrease during 2001 with the
planned shift in customer mix from pre-pay to post-pay. As of December 31, 2001,
post-pay type products accounted for 82% of the subscriber base compared to 64%
as of the year end 2000.

            In addition to subscriber growth and growth in these related
revenues, wholesale revenues generated through an agreement with Sprint/Horizon
increased $12.1 million, from $7.0 million in 2000 to $19.1 million in 2001 (see
Liquidity and Capital Resources section for discussion on the amendment to this
agreement).

            Pro forma year over year total increase for VA East, VA Alliance and
WV Alliance was $26.2 million, or 31%, reflecting the aforementioned subscriber
growth, ARPU improvements and growth in wholesale revenues.

WIRELINE COMMUNICATIONS REVENUES-Wireline communications revenues increased
$28.2 million, or 48%, from $58.3 million in 2000 to $86.5 million in 2001.

..       Telephone Revenues. Telephone revenues, which include local service,
        access and toll service, directory advertising and calling feature
        revenues from our ILEC business increased $10.6 million, or 33%, from
        $32.2 million in 2000 to $42.8 million in 2001. This increase was
        primarily due to the consolidation of R&B in February 2001, which
        contributed $9.1 million of the total ILEC revenue in 2001, and growth
        in carrier access minutes. Access lines remained essentially flat
        throughout 2001 as lines totaled 52,036 at year end 2001, just 77 lines
        ahead of the prior year end. On a pro forma basis, ILEC operating
        revenues increased $2.9 million, or 7%, from $41.2 million in 2000 to
        $44.1 million in 2001, driven by growth in carrier access minutes.

..       Network Revenues. Revenues from fiber optic and other long haul
        transport related network usage increased $5.0 million, or 135%, from
        $3.7 million in 2000 to $8.7 million in 2001. The primary cause for the
        increase was the consolidation of R&B in February 2001, which
        contributed fiber optic network revenue of $4.6 million in 2001. On a
        pro forma basis, network revenue grew $1.1 million, or 14%, from $8.2
        million in 2000 to $9.3 million in 2001 due to increased network usage.

                                       40

<PAGE>

..       CLEC Revenues. Revenues from CLEC operations increased $8.3 million, or
        93%, from $9.0 million in 2000 to $17.3 million in 2001. The addition of
        R&B in February 2001 accounted for $3.1 million, or 37%, of the total
        increase. During 2001, we added 19,000 access lines, finishing the year
        with 33,600 access lines. Of these additions, 6,400, or 32%, were added
        as a result of the R&B merger. On a pro forma basis, CLEC revenues grew
        $6.1 million, or 52%, from $11.8 million in 2000 to $17.9 million in
        2001 reflecting access line growth. In addition to revenue growth
        generated from traditional CLEC services, revenues from private line or
        dedicated circuits for business accounts increased $2.7 million.
        Additionally, reciprocal compensation revenues (revenues earned for
        terminating calls from other ILECs or CLECs) were $3.7 million for both
        2000 and 2001. However, a significant reduction in rates in mid-2001
        caused a significant decline in reciprocal compensation revenues in the
        second half of 2001.

..       Internet Revenues. Revenues from Internet services increased $4.2
        million, or 31%, from $13.4 million in 2000 to $17.7 million in 2001. We
        added a total of 13,400 subscribers during 2001, with 74,200 dial-up and
        DSL subscribers at year-end. The customer growth achieved was from
        additions within our existing markets (11,200 subscribers, or 84% of the
        total growth) and growth through the merger with R&B (2,100 subscribers,
        or 16% of the total growth). We grew the number of digital subscriber
        lines ("DSL") customers by 2,349, or 142%, which accounted for $2.5
        million, or 60% of the revenue growth. We added residential DSL through
        line sharing noted in the preceding 2002 to 2001 results of operation
        section.

OTHER COMMUNICATIONS SERVICES REVENUES-Other communications services revenues
decreased $6.4 million, or 40%, from $16.1 million in 2000 to $9.7 million in
2001. This was primarily due to the disposition of the analog cellular portion
of our business in July 2000, which accounted for $5.6 million, or 87%, of the
total decrease. Additionally, cable revenues decreased $.4 million (7% of the
total decrease) due to a declining subscriber base.

OPERATING EXPENSES

<TABLE>
<CAPTION>
              OPERATING EXPENSES                                  TWELVE MONTHS ENDED DECEMBER 31,
              -----------------------------------------------------------------------------------------
                                                                                                  %
              ($'s in 000's)                                2001       2000      Variance      Variance
              -----------------------------------------------------------------------------------------
              <S>                                        <C>         <C>         <C>                <C>
              Operating Expenses, excluding
               Depreciation & Amortization
              Wireless                                   $ 139,531   $  48,926   $  90,605          185%

              Wireline
                  ILEC                                      15,330       9,713       5,617           58%
                  Network                                    1,429       1,312         117            9%
                  CLEC                                      15,442       9,355       6,087           65%
                  Internet                                  16,313      14,380       1,933           13%
              -----------------------------------------------------------------------------------------
                    Total Wireline                          48,514      34,760      13,754           40%

              Other                                          6,514       9,581      (3,067)         (32%)
              -----------------------------------------------------------------------------------------
              Sub-Total                                    194,559      93,267     101,292          109%
              Depreciation & Amortization                   82,281      37,678      44,603          118%
              -----------------------------------------------------------------------------------------
              Total                                      $ 276,840   $ 130,945   $ 145,895          111%
</TABLE>

TOTAL OPERATING EXPENSES-Total operating expenses increased $145.9 million, or
111%, from $130.9 million in 2000 to $276.8 million in 2001. The consolidation
of the VA Alliance and the acquisition of VA East accounted for $93.3 million,
or 64%, of the total increase, and the consolidation of the WV Alliance
accounted for an additional $32.4 million of the total change. Finally, R&B
accounted for $18.7 million of the total change. Thus, the remaining net change
in operating expenses from all other areas was $1.5 million. Operating expenses,
excluding depreciation and amortization, increased $101.3 million, or 109%, from
$93.3 million for 2000 to $194.6 million for 2001. The combined effect of the
consolidation of the VA Alliance and the acquisition of VA East accounted for
$63.9 million, or 63%, of this total year over year increase. The consolidation
of R&B in February 2001 accounted for $10.7 million, or 11%, of the total
increase, and the consolidation of the WV Alliance in February 2001 accounted
for $25.7 million, or 25%, of the total increase. Therefore, the total impact
from the businesses consolidated during the comparative periods was $100.3
million of the $101.3 million total change. The remaining businesses increased
in total by $3.9 million, offset by a $2.9 million decrease from analog
cellular, which was sold in July 2000.

                                       41

<PAGE>

            Wireline operating expenses, excluding depreciation and
amortization, increased $13.8 million, or 40%, from $34.7 million in 2000 to
$48.5 million in 2001. R&B operations accounted for $10.3 million, or 75%, of
the total increase. Within the individual segments that comprise total wireline,
ILEC accounted for $5.6 million, or 41%, CLEC accounted for $6.1 million, or
44%, Internet accounted for $1.9 million, or 14%, and the remaining $.1 million
was attributable to the Network segment. Wireless operating expenses, excluding
depreciation and amortization, increased $90.6 million, or 185%, from $48.9
million in 2000 to $139.5 million in 2001. Within the wireless business, the
consolidation of the WV Alliance in February 2001 accounted for $25.8 million,
or 28%, of the total increase. The VA Alliance consolidation and the acquisition
of VA East in July 2000 accounted for $61.3 million, or 68%, of the total
increase. Other changes within the wireless businesses netted to a $3.5 million
increase. Operating expenses, excluding depreciation and amortization, from the
other communication service businesses decreased $3.1 million due primarily to
the sale of the analog cellular business in July 2000.

COST OF WIRELESS SALES-Cost of wireless sales increased $29.1 million, or 156%,
from $18.7 million in 2000 to $47.8 million in 2001. Of this increase, $23.0
million, or 79%, is from the addition of VA Alliance and VA East, and $9.0
million, or 31%, is due to the consolidation of the WV Alliance in February
2001. These increases are offset by a decrease in parts of our western Virginia
market due to the sale of the analog cellular operation in July 2000. In
addition to the 33% increase in customers as of the end of 2001 compared to the
end of 2000 and the differences created from the consolidations noted above, the
Company decreased annual customer churn from 4.52% in 2000 to 4.31% in 2001.

MAINTENANCE AND SUPPORT EXPENSES-Maintenance and support expenses increased
$31.3 million, or 100%, from $31.2 million in 2000 to $62.5 million in 2001.
This increase was primarily attributable to the consolidation of the WV Alliance
in February 2001 ($7.3 million), the consolidation of R&B in February 2001 ($7.2
million), the addition of the VA Alliance and VA East in July 2000 ($11.8
million), growth in CLEC ($3.3 million) and growth in corporate support ($2.8
million), primarily from the centralization of certain engineering related
functions. These increases were offset by decreases totaling $1.1 million in
ILEC, network, ISP, and other communications services reflecting certain cost
containment measures, the most significant of which was conversion of network
facilities from third party to intercompany and other efficiencies achieved from
network grooming. Network grooming is the process used to redesign network
requirements to achieve a high level of cost efficiency. Despite these measures,
the largest driver of expense increase was network access and other plant
related expenses due to geographic expansions and new costs from acquisitions.
These types of expenses represent the largest start-up expense from geographic
expansion.

DEPRECIATION AND AMORTIZATION EXPENSES-Estimates and assumptions are used both
in setting depreciable lives and testing for recoverability. Assumptions are
based on internal reviews, industry data on lives, recognition of technological
advancements and understanding of business strategy. Depreciation and
amortization expenses increased $44.6 million, or 118%, from $37.7 million in
2000 to $82.3 million in 2001. Of this increase, $8.0 million, or 18%, relates
to the consolidation of R&B in February 2001, $6.8 million, or 15%, relates to
the consolidation of the WV Alliance in February 2001, and $29.4 million, or
66%, relates to the addition of the VA Alliance and VA East in July 2000.
Network and CLEC depreciation and amortization grew $1.0 million, offset by
declines in the other communications services.

            Relative to the composition of depreciation and amortization by type
of asset, network equipment, license amortization and amortization of
intangibles increased the most. Cell site additions and other network equipment
related capital investments, excluding additions from acquisitions, increased
$106.4 million during 2001 and totaled $447.6 million at year-end 2001.
Depreciation on these assets increased $28.1 million, from $17.8 million in 2000
to $45.9 million in 2001. PCS license amortization increased $5.0 million, from
$6.1 million in 2000 to $11.1 million in 2001 and amortization of cost in excess
of assets acquired (i.e. goodwill) and other intangibles increased $6.7 million,
from $5.5 million in 2000 to $12.2 million in 2001. The shift in the composition
of the asset base to network plant and equipment and goodwill from acquisitions
(both of which have shorter asset lives) is partially offset by the increased
lives associated with PCS licenses.

CUSTOMER OPERATIONS EXPENSES-Customer operations expenses increased $33.7
million, or 105%, from $32.0 million in 2000 to $65.7 million in 2001. The
consolidation of the WV Alliance and R&B in February 2001 accounted

                                       42

<PAGE>

for $6.9 million, or 20%, and $3.0 million, or 9%, of the total increase,
respectively. In addition to the $23.1 million increase for the inclusion of the
VA Alliance and VA East for a full year in 2001, increases occurred in the CLEC
business ($1.5 million), which were offset by declines in the ILEC and network
businesses. The increases relate primarily to marketing and sales activities and
customer care costs primarily associated with adding new customers. Also
contributing to the increases was our addition of 12 new retail locations during
2001 in order to strengthen the direct retail sales channel. The decline in ILEC
and network is due to the fact that these businesses absorb a smaller percentage
of the related fixed infrastructure costs with the rapid growth in PCS and CLEC.

CORPORATE OPERATIONS EXPENSES-Corporate operations expenses increased $7.2
million, or 62%, from $11.4 million in 2000 to $18.6 million in 2001. This was
due to the growth in the infrastructure needed to support the acquired VA
Alliance and VA East businesses ($5.9 million), acquired WV Alliance business
($2.4 million), acquired R&B businesses ($.5 million), and other geographic
expansion in the markets which the CLEC business served by the end of 2001. The
total of these factors is $8.8 million and is offset by $1.7 million in reduced
costs relating to other businesses from cost containment measures and a
redeployment of resources to better support the growth businesses.

OTHER INCOME (EXPENSES)

            Gains on sales of assets decreased $30.8 million, or 49%, from $62.6
million in 2000 to $31.8 million in 2001. The $62.6 million gain in the previous
year related to the sale of the 22% limited partnership interest in RSA5 and the
disposition of the RSA6 analog assets and operations (Note 6). The $31.8 million
gain in 2001 related primarily to the sale of our holdings of Illuminet, Inc.
($23.0 million) and to the sale of PCS licenses in Kingsport, Tennessee ($8.6
million)(Note 7).

            We incurred bridge commitment financing fees and related expenses of
$6.5 million in 2000 (Note 8) related to the VA East acquisition.

            Interest expense increased $44.9 million, or 143%, from $31.4
million in 2000 to $76.3 million in 2001. This increase is due to the annual as
compared to partial year 2000 interest costs associated with additional
financing to fund 2000 acquisitions and other third quarter 2000 transactions,
and borrowings to fund capital outlays supporting customer growth and network
expansion (Notes 6, 7, 8 and 9), coupled with an increase in our average annual
borrowing rate of 1.3%, from 10.4% to 11.7% (due to full versus partial year of
2000 new debt which carries higher interest rates than the debt retired in July
2000).

            Other income, principally interest, decreased $1.3 million, or 19%,
from $7.0 million in 2000 to $5.7 million in 2001. Interest income decreased
$1.5 million due to the decrease in restricted cash investments from 2000 to
2001 due to use of funds to pay 2001 senior notes interest payments and due to
the elimination of the advances to the Alliances prior to the consolidation of
the operating results of these partnerships. At December 31, 2000, the Company
held a $57 million advance to the WV Alliance and $71 million in restricted cash
investments as compared to no external party advances and $36.2 million in
restricted cash at December 31, 2001. The interest income earned on restricted
cash, along with the principal, is restricted to fund the first four payments
against the Senior Notes due in 2001 and 2002. In addition to the interest
income change, we recognized a $2.2 million net gain in 2001 related to the
termination of the merger agreement with CEI (Note 10). These increases were
partially offset by a $1.2 million reduction in capitalized interest due
primarily to fewer large long-term capital construction projects and
miscellaneous other credits totaling $1.2 million.

            Our share of losses from the VA Alliance decreased $3.7 million, or
100%, from $3.7 million in 2000 to zero in 2001. This is due to the fact that
equity accounting was used through July 25, 2000, after which we began
consolidating the VA Alliance results of operations (Note 6). Our share of
losses from the WV Alliance decreased $7.3 million, or 85%, from $8.6 million in
2000 to $1.3 million in 2001. This is due to the fact that upon completion of
the R&B merger in February 2001, the Company began consolidating the results of
operations for the WV Alliance (Note 6). Our ownership interests in the VA
Alliance and the WV Alliance increased to 91% and 79%, respectively, upon
completion of the R&B merger (Note 6), which was completed in February 2001. At
year-end 2001, the Company's ownership interests are 97% for the VA Alliance and
98% for the WV Alliance due to the Company's purchase of additional minority
interest during 2001.

                                       43

<PAGE>

INCOME TAXES

Income taxes decreased $35.8 million, from a $1.3 million expense in 2000 to a
tax benefit of $34.5 million in 2001. This decrease was due to the change in the
pre-tax income for the comparable periods. With near break even taxable income
($3.6 million income before taxes) in 2000, the effective tax rate was
significantly impacted by favorable tax treatment of certain items which
resulted in an effective tax rate of 36.9%. The Company had a significant loss
in 2001 (loss before tax of $98.2 million). Thus, permanent book-tax differences
and other tax events had a smaller impact on the effective tax rate. However,
the effective tax rate was greatly impacted by non-deductible goodwill
amortization associated with the R&B acquisition. In addition, we realized a one
time gain on sale of investments that were acquired as part of the R&B merger.
We are also subject to minimum taxes in certain states that also impact our
effective rate.

MINORITY INTERESTS IN LOSSES (EARNINGS) OF SUBSIDIARIES

Minority interests in losses increased $1.9 million, from $1.6 million in 2000
to $3.5 million in 2001. Due to the fact that the Alliances have accumulated
deficits in equity, we record 100% of the results of operations from the
Alliances in our consolidated results until such time as the collectibility of
the minority interest assets generated (but not booked) becomes certain. This
occurs upon collection of minority capital contributions from capital calls.
Capital calls to minority partners totaled $3.5 million in 2001 and $1.6 million
in 2000.

DISCONTINUED OPERATION

In May 2000, we announced that we had entered into a definitive agreement to
sell our directory assistance operation. We sold our directory assistance
operation in July 2000. The Company had no discontinued operations in 2001.

DIVIDEND REQUIREMENTS ON PREFERRED STOCK
Dividend requirements on preferred stock increased $10.6 million, from $8.2
million in 2000 to $18.8 million in 2001. As of December 31, 2001, all dividends
have been paid in-kind. In addition to the dividend accruals, accretion of the
issuance costs is recorded in dividend requirements on preferred stock. This
amounted to $.5 million and $1.1 million in 2000 and 2001, respectively. See
further discussion related to preferred stock dividends in the 2001 to 2002
results of operations section earlier in this document.

MARKET-SENSITIVE INSTRUMENTS AND RISK MANAGEMENT

            The Company is exposed to market risks with respect to certain of
the financial instruments that it holds. These financial instruments and the
Company's exposure to market risk and interest rate changes will likely be
significantly altered based on the aforementioned Chapter 11 bankruptcy filing.
The Company has limited investments which are subject to significant long-term
market risk, and cash and restricted cash investments are generally high grade,
fixed rate instruments. With respect to long-term debt instruments, at December
31, 2002 the Company has $387.4 million (or 63% of total long-term debt), which
are fixed rate instruments. While changes in interest rates impact the fair
value of these instruments, there is no impact to earnings and cash flows. The
remaining $225 million of long-term debt represents borrowings against the $325
million variable-rate, Senior Credit Facility. Of the $225 million, the interest
rate risk of $162.5 million is managed by two interest rate swap agreements
(Note 11). The remaining $62.5 million of outstanding credit facility debt is
subject to interest rate risks. Currently, the variable interest is
significantly below those covered by the interest rate swap agreements. As the
variable interest rate is based on the one month LIBOR rate, we are most
vulnerable to changes in these short term rates.

                                       44

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

In September 2002, we retained UBS Warburg as our financial advisor to assist us
in exploring a variety of restructuring alternatives. Thereafter, continued
competition in the wireless telecommunications sector resulted in a modification
to our long-term business plan, including a reduction in wireless subscriber
growth, a decrease in average revenue per wireless subscriber, a slower
improvement in subscriber churn and slower growth in wholesale revenues. In
addition, capital and lending prospects for telecommunication companies
continued to deteriorate. On November 29, 2002, we entered into an amendment and
waiver with the lenders under the Senior Credit Facility which restricted the
amounts that we could borrow and waived our obligation to make certain
representations in order to submit a borrowing request. Without an extension of
the waiver, we did not have access to the Senior Credit Facility following
January 31, 2003. During this period, we were actively negotiating with our
debtholders to develop a comprehensive financial restructuring plan. As a result
of the above factors and current market conditions, we were unable to reach an
agreement with our debtholders on an out-of-court restructuring plan and,
accordingly, on March 4, 2003, we filed a petition for relief under Chapter 11
of the Bankruptcy Code.

            As a result of the bankruptcy filing, we no longer have the ability
during the pendency of the bankruptcy filing to make additional borrowings under
the Senior Credit Facility. However, the Company has access to the $35 million
DIP Financing Facility described above. The DIP Financing Facility is available
to meet ongoing financial obligations in connection with our regular business
operations, including obligations to vendors, customers and employees during the
Bankruptcy Case.

            During the three year period ended December 31, 2002, we funded our
working capital requirements and capital expenditures from net cash provided
from operating activities and borrowings under our Senior Credit Facility. After
closing on the acquisition of PrimeCo VA (Note 6) and the related financing, we
had $175 million in unused borrowings available under our Senior Credit
Facility. We borrowed an additional $50 million in 2001 and an additional $36
million in 2002.

            Although we had a significant net operating loss in 2002 for tax
purposes, state minimum tax and franchise tax requirements totaled a $1.1
million tax liability.

            During the year ended December 31, 2002, net cash provided by
operating activities was $22.0 million, with $14.1 million provided by
operations plus net positive changes in operating assets and liabilities
totaling $7.9 million. Within the $14.1 million provided by operations, one of
the reconciling items adjusting net loss to net cash is an adjustment for $25.8
million, which represents interest expense paid from restricted cash, net of
interest income earned from this restricted cash. This is reflected as an
adjustment to reconcile net loss to net cash since the payment of interest on
the Senior Notes is paid out of restricted cash through August 15, 2002.
Depreciation, amortization and asset impairment charges totaled $485.8 million.
The principal changes in operating assets and liabilities were as follows:
accounts receivable increased by $3.5 million, or 11.5%, due primarily to a 22%
increase in revenues in 2002 over 2001 offset by improved receivable turnover;
inventories and supplies decreased $6.9 million due to efforts to reduce handset
inventory levels in recognition of improvement in handset availability and
improved inventory flow; other assets and income taxes decreased by $3.9 million
primarily from a decrease in non-trade and tax receivables; and, accounts
payable and other current liabilities increased a total of $.5 million due to
the timing of payments.

            During 2001, net cash used in operating activities was $11.5
million. Principal changes in operating assets and liabilities were as follows:
other current assets increased $1.8 million primarily from an increase in other
receivables based on new arrangements with third party processors; and, income
taxes receivable decreased $1.8 million at December 31, 2001 as compared to
2000.

                                       45

<PAGE>

Our cash flows used in investing activities for 2002 aggregated $42.4 million
and include the following:

     .    $73.2 million for the purchase of property and equipment, $26.1
          million of which related to purchases of 3G-1XRTT equipment in order
          to replace the network plant and equipment in significant portions of
          the VA Alliance and the WV Alliance market areas pursuant to a
          wholesale service agreement (see "Other Commitments" above); and,

     .    $31.1 million proceeds from the sale of towers, licenses and
          investments (Note 7).

Our cash flows used in investing activities for 2001 aggregated $29.8 million
and include the following:

     .    $102.9 million for the purchase of property and equipment, $5.3
          million of which related to purchases of 3G-1XRTT equipment;

     .    $60.8 million proceeds from the sale of towers and investments;

     .    $3.5 million deferred proceeds from the sale of discontinued operation
          in 2000;

     .    $8.0 million refund of deposits outstanding at December 31, 2000 for
          an FCC license auction;

     .    $3.0 million of net advances to the WV Alliance prior to
          consolidation;

     .    $2.2 million cash on hand from R&B at the time of the merger, net of
          merger closing costs paid; and,

     .    $2.9 million net proceeds from the CEI merger termination fee (Note
          10).

            Net cash provided by financing activities for 2002 aggregated $25.3
million, which primarily represents the following:

     .    $36.0 million proceeds from our Senior Credit Facility; and,

     .    $11.0 million in scheduled and required payments against several long
          term debt instruments.

            Net cash provided by financing activities for 2001 aggregated $47.0
million, which represents the following:

     .    $50.0 million proceeds from our Senior Credit Facility;

     .    $3.4 million cash outlay for capital lease obligations and scheduled
          FCC and other debt principle payments;

     .    $.3 million cash outlay to pay off debt financing closing costs; and,

     .    $.7 million of net proceeds from the exercise of stock options.

Under restrictions related to our financing (Note 8), we have discontinued
payment of dividends to common shareholders effective for the quarter ended June
30, 2000.

            In 2003, we anticipate capital restructuring upon the emergence from
bankruptcy which, if consummated as described in "Chapter 11 Bankruptcy Filing"
above, will significantly improve the level of leverage and reduce cash outflows
for interest payments from the planned conversion or extinguishment of the
Senior Notes and Subordinated Notes, the securing of $75 million of new 9.0%
convertible notes of the reorganized Company ("New Notes"), and a lowering of
average interest rates on the remaining debt. From an operational standpoint, we
anticipate a continued increase in PCS subscribers, continued improvement in
cash flows in most of the operating segments, particularly in the wireless
segment, and continued revenue growth from our wireline segments. Consummation
of a plan of reorganization and achievement of these results is important to
ensure long-term liquidity and continued access to borrowings under our Senior
Credit Facility.

In addition, our liquidity needs will be impacted by:

                                       46

<PAGE>

     .    capital expenditures required to complete the deployment of 3G-1XRTT
          technology in certain of the VA Alliance and WV Alliance markets
          (approximately $8 million);

     .    capital expenditures required to support customer growth and wholesale
          usage to provide sufficient PCS capacity;

     .    capital expenditures required to support access line growth in
          existing markets; and,

     .    significant interest expense associated with current and increasing
          debt levels.

Our liquidity sources assume:

     .    cash flow from operations;

     .    $35 million available under our DIP financing facility, subject to
          compliance with financial, business and reporting covenant
          requirements during the pendency of the bankruptcy filing;

     .    $75 million of proceeds from the planned issuance of $75 million of
          New Notes; and,

     .    disposition of additional non-strategic businesses and assets,
          including $6.9 million from the planned sale of the Company's
          Portsmouth call center building and $8.7 million from the planned sale
          of the wireline cable operation. In addition, the Company holds PCS
          licenses in 17 markets where service is currently being provided and
          20 markets where service is not currently being provided. In many
          cases we own licenses covering spectrum in excess of what will be
          needed to execute our business plan for the foreseeable future.

We expect capital expenditures for the year 2003 to be between $58 million and
$66 million. We expect these capital expenditures to be used to:

     .    complete deployment of 3G-1XRTT technology in certain of the VA
          Alliance and WV Alliance markets;

     .    support network capacity and coverage demands of VA East, VA Alliance
          and WV Alliance operations;

     .    support customer and usage growth in ILEC, CLEC and Internet access
          services; and,

     .    support back office tools in order to improve customer satisfaction
          and improve our internal controls and efficiencies.

Approximately $8 to $10 million of these anticipated 2003 capital expenditures
are based on an obligation within our wholesale agreement with Sprint/Horizon to
complete the build out of a 3G-1XRTT network in certain markets. VA East and the
Alliances have substantially satisfied their FCC build-out requirements.
Accordingly, aside from the 3G-1XRTT network upgrade commitment, the
expenditures forecast noted above is primarily driven by the expected need to
support customer growth and wholesale usage. To the extent that this customer
growth and wholesale usage is less than expected, our capital expenditures will
be reduced. Since these are generally capacity related expenditures to support
customer growth, it is uncertain when these proposed uses will be initiated or
completed.

Subject to consummation of a restructuring plan, as described above and based on
our assumptions about the future of our operating results and our capital
expenditure needs, we believe that we will have sufficient financial resources
to fund our existing and currently anticipated operational plans. However, if
any of our assumptions prove incorrect, or we are unable to consummate the
aforementioned plan of reorganization, we would not have sufficient financial
resources to continue as a going concern.

ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company's $325 senior credit facility, $260.5 million of which was
outstanding at January 31, 2003, bears interest at rates 3% to 4% above the
Eurodollar rate or 2.5% to 3% above the federal funds rates. The Company's
unsecured senior notes and unsecured subordinated notes are at fixed interest
rates of 13% and 13.5%, respectively. The Company has other fixed rate,
long-term debt totaling $25.0 million at December 31, 2002.

                                       47

<PAGE>

The Company is exposed to market risks primarily related to interest rates. To
manage its exposure to interest rate risks and in accordance with conditions of
the senior note indenture, the Company entered into two, five year interest rate
swap agreements with notional amounts of $162.5 million in September 2000. These
swap agreements manage the Company's exposure to interest rate movements by
effectively converting a portion of the long-term debt from variable to fixed
rates. The net fact amount of interest rate swaps subject to variable rates as
of December 31, 2001 and 2002 was $162.5 million. These agreements involve the
exchange of fixed rate payments for variable rate payments without the effect of
leverage and without the exchange of the underlying face amount. Fixed interest
rate payments are at a per annum rate of 6.76%. Variable rate payments are based
on one month US dollar LIBOR. The weighted average LIBOR rate applicable to
these agreements was 1.382% as of December 31, 2002. The notional amounts do not
represent amounts exchanged by the parties, and thus are not a measure of
exposure of the Company. The amounts exchanged are normally based on the
notional amounts and other terms of the swaps. Interest rate differentials paid
or received under these agreements are recognized over the one-month maturity
periods as adjustments to interest expense. The fair values of our interest rate
swap agreements are based on dealer quotes. Neither the Company nor the
counterparties, which are prominent bank institutions, are required to
collateralize their respective obligations under these swaps. The Company is
exposed to loss if one or more of the counterparties default. At December 31,
2002, the Company had minor exposure to credit loss on interest rate swaps. At
December 31, 2001 and 2002, the swap agreements had a fair value $13.1 and $20.0
million, respectively, below their face value. The Company has interest rate
risk on the borrowings in excess of the $162.5 million of senior bank debt
covered by the swap noted above. At December 31, 2002, the Company senior bank
debt totaled $260.5 million, or $98.0 million over the swap agreements. The
effects of a one percentage point change in LIBOR rates would change the fair
value of the swap agreements by $4.5 million for a one percentage point increase
in the rate (to $15.5 million below face value) and $4.6 million for a one
percentage point decrease in the rate (to $24.6 million below face value). The
interest rate swap liability at December 31, 2002 has been classified as a
current liability as a result of the bankruptcy filing and a cross-default as a
result of non-compliance with the debt to capitalization rates under the Senior
Credit Facility.

The Company's senior notes are trading at rates well below their book values.
The Company's management believes that the risk of the fair value exceeding the
carrying value of this debt in the foreseeable future is remote due to filing of
the Cases.

At December 31, 2002, the Company's financial assets included cash and cash
equivalents of $12.2 million and securities and investments of $8.7 million.
With respect to the cash and cash equivalents, as well as $8.3 million of the
investments, there is no material market risks as these are fixed maturity, high
quality instruments. Also, we believe there is minimal credit risks as the
counterparties are prominent financial institutions.

The following sensitivity analysis indicates the effect of the fair value of
financial instruments, which is potentially subject to material market risks
assuming a ten percent change in market rates or, in the case of the interest
rate swap, a one percent change in the interest rates:

<TABLE>
<CAPTION>

                                                                Fair Value assuming    Fair Value assuming
                                      Book                       noted decrease in      noted increase in
At December 31, 2002                  Value        Fair Value      market pricing         market pricing
----------------------------------------------------------------------------------------------------------
<S>                              <C>              <C>                <C>                    <C>
Marketable long-term debt        $    271,400     $    84,000        $    75,600            $    92,400
Non-marketable long-term debt         371,300         311,200            282,600                345,400
Interest rate swaps                         -         (20,000)           (24,600)               (15,500)
</TABLE>

                                       48

<PAGE>

ITEM 8.     FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         NTELOS INC. AND SUBSIDIARIES
         (DEBTOR-IN-POSSESSION)

         CONSOLIDATED FINANCIAL REPORT

         DECEMBER 31, 2002

         CONSOLIDATED FINANCIAL STATEMENTS

            Consolidated Balance Sheets                                   50-51

            Consolidated Statements of Operations                            52

            Consolidated Statements of Cash Flows                            53

            Consolidated Statements of Shareholders' Equity (Deficit)        54

            Notes to Consolidated Financial Statements                    55-86
         INDEPENDENT AUDITORS' REPORT                                     87-88

                                       49

<PAGE>

CONSOLIDATED BALANCE SHEETS
NTELOS INC. AND SUBSIDIARIES
(DEBTOR-IN-POSSESSION)

<TABLE>
<CAPTION>
(In thousands)
  December 31,                                                                      2002         2001
--------------------------------------------------------------------------------------------------------
<S>                                                                              <C>         <C>
ASSETS

CURRENT ASSETS
   Cash and cash equivalents                                                     $   12,216  $     7,293
   Restricted cash                                                                        -       18,069
   Accounts receivable, net of allowance of $23,170 ($13,971 in 2001)                33,748       30,328
   Inventories and supplies                                                           2,588        9,619
   Other receivables and deposits                                                     3,058        4,669
   Prepaid expenses and other                                                         3,557        3,929
   Income taxes receivable                                                                -        1,945
--------------------------------------------------------------------------------------------------------
                                                                                     55,167       75,852
--------------------------------------------------------------------------------------------------------

INVESTMENTS AND ADVANCES
   Securities and investments                                                           867        6,134
   Restricted investments                                                             7,829        7,829
   Restricted cash                                                                        -       18,094
--------------------------------------------------------------------------------------------------------
                                                                                      8,696       32,057
--------------------------------------------------------------------------------------------------------

PROPERTY, PLANT AND EQUIPMENT
   Land and building                                                                 51,026       50,836
   Network plant and equipment                                                      437,938      447,585
   Furniture, fixtures and other equipment                                           65,366       65,283
--------------------------------------------------------------------------------------------------------
     Total in service                                                               554,330      563,704
   Under construction                                                                15,722       35,753
--------------------------------------------------------------------------------------------------------
                                                                                    570,052      599,457
Less accumulated depreciation                                                       135,597      133,513
--------------------------------------------------------------------------------------------------------
                                                                                    434,455      465,944
--------------------------------------------------------------------------------------------------------

Other Assets

   Goodwill, less accumulated amortization of $7,524 ($10,264 in 2001)               86,016      135,635
   Other intangibles, less accumulated amortization of $1,379 ($8,261 in 2001)        1,879       23,677
   Radio spectrum licenses in service                                               107,234      423,181
   Other radio spectrum licenses                                                      2,572       11,930
   Radio spectrum licenses not in service                                             7,155        9,935
   Deferred charges                                                                  18,563       18,675
   Deferred income taxes                                                              7,784            -
--------------------------------------------------------------------------------------------------------
                                                                                    231,203      623,033
--------------------------------------------------------------------------------------------------------
                                                                                 $  729,521  $ 1,196,886
========================================================================================================
</TABLE>

See Notes to Consolidated Financial Statements.

                                       50

<PAGE>

CONSOLIDATED BALANCE SHEETS
NTELOS INC. AND SUBSIDIARIES
(DEBTOR-IN-POSSESSION)

<TABLE>
<CAPTION>
(In thousands)
  December 31,                                                                          2002           2001
----------------------------------------------------------------------------------------------------------------
<S>                                                                                   <C>          <C>
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES
   Long-term debt in default and scheduled maturities                                 $   623,762  $           -
   Deferred liabilities - interest rate swap agreements relating to debt in default        20,012              -
   Accounts payable                                                                        22,350         39,917
   Advance billings and customer deposits                                                  13,013          8,889
   Accrued payroll                                                                          6,160          5,540
   Accrued interest                                                                        19,131         18,332
   Deferred revenue                                                                         4,455          5,092
   Other accrued liabilities                                                                5,227          4,927
----------------------------------------------------------------------------------------------------------------
                                                                                          714,110         82,697
----------------------------------------------------------------------------------------------------------------
Long-term Debt                                                                             18,960        612,416
----------------------------------------------------------------------------------------------------------------
LONG-TERM LIABILITIES
   Deferred income taxes                                                                        -          2,200
   Retirement benefits                                                                     25,542         18,101
   Long-term deferred liabilities                                                          26,899         41,312
----------------------------------------------------------------------------------------------------------------
                                                                                           52,441         61,613
----------------------------------------------------------------------------------------------------------------
Minority Interests                                                                            523            847
----------------------------------------------------------------------------------------------------------------
Redeemable Convertible Preferred Stock                                                    286,164        265,747
----------------------------------------------------------------------------------------------------------------

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY (DEFICIT)
   Preferred stock, no par value per share, authorized 1,000 shares; none issued                -              -
   Common stock, no par value per share, authorized 75,000 shares; issued 17,780
     shares (17,209 in 2001)                                                              182,380        182,093
   Stock warrants                                                                          22,874         22,874
   Accumulated deficit                                                                   (532,565)       (23,201)
   Accumulated other comprehensive loss                                                   (15,366)        (8,200)
----------------------------------------------------------------------------------------------------------------
                                                                                         (342,677)       173,566
----------------------------------------------------------------------------------------------------------------
                                                                                      $   729,521  $   1,196,886
================================================================================================================
</TABLE>

See Notes to Consolidated Financial Statements.

                                       51

<PAGE>

CONSOLIDATED STATEMENTS OF OPERATIONS
NTELOS INC. AND SUBSIDIARIES
(DEBTOR-IN-POSSESSION)

<TABLE>
<CAPTION>
(In thousands, except per share amounts)

Years Ended December 31,                                                2002          2001       2000
--------------------------------------------------------------------------------------------------------
<S>                                                                  <C>          <C>          <C>
OPERATING REVENUES
   Wireless PCS                                                      $ 156,860    $ 118,832    $  39,096
   Wireline communications                                              96,916       86,485       58,280
   Other communications services                                         8,951        9,746       16,143
--------------------------------------------------------------------------------------------------------
                                                                       262,727      215,063      113,519
--------------------------------------------------------------------------------------------------------

OPERATING EXPENSES
   Cost of wireless sales (exclusive of the items shown separately
   below)                                                               48,868       47,808       18,657
   Maintenance and support                                              64,408       62,508       31,177
   Depreciation and amortization                                        82,924       82,281       37,678
   Asset impairment charges                                            402,880            -            -
   Customer operations                                                  66,007       65,657       31,992
   Corporate operations                                                 17,914       18,586       11,441
   Operational and capital restructuring charges                         4,285            -            -
--------------------------------------------------------------------------------------------------------
                                                                       687,286      276,840      130,945
--------------------------------------------------------------------------------------------------------
OPERATING LOSS                                                        (424,559)     (61,777)     (17,426)

OTHER INCOME (EXPENSES)
   Equity loss from PCS investees
     VA PCS Alliance                                                         -            -       (3,679)
     WV PCS Alliance                                                         -       (1,286)      (8,580)
   Gain on sale of assets                                                8,472       31,845       62,616
   Other financing costs                                                     -            -       (6,536)
   Interest expense                                                    (78,351)     (76,251)     (31,407)
   Other (expense) income                                               (1,454)       5,679        6,970
--------------------------------------------------------------------------------------------------------
                                                                      (495,892)    (101,790)       1,958

Income Taxes (Benefit)                                                  (6,464)     (34,532)       1,326
--------------------------------------------------------------------------------------------------------
                                                                      (489,428)     (67,258)         632

Minority Interests in Losses of Subsidiaries                               481        3,545        1,638
--------------------------------------------------------------------------------------------------------
(Loss) Income from Continuing Operations                              (488,947)     (63,713)       2,270

DISCONTINUED OPERATION
   Income from discontinued operation, net of tax                            -            -          396
   Gain on sale of discontinued operation, net of tax                        -            -       15,973
--------------------------------------------------------------------------------------------------------
Net (Loss) Income                                                     (488,947)     (63,713)      18,639

Dividend requirements on preferred stock                                20,417       18,843        8,168
--------------------------------------------------------------------------------------------------------
(Loss) Income Applicable to Common Shares                            $(509,364)   $ (82,556)   $  10,471
========================================================================================================

BASIC AND DILUTED EARNINGS PER COMMON SHARE:
   (Loss) Income  from continuing operations                         $  (29.34)   $   (5.02)   $   (0.45)
   Income from discontinued operation                                        -            -         1.25
--------------------------------------------------------------------------------------------------------
     Basic and diluted (loss) earnings per common share              $  (29.34)   $   (5.02)   $    0.80

Average shares outstanding - basic and diluted                          17,358       16,442       13,106
--------------------------------------------------------------------------------------------------------
Cash dividends per share                                             $       -    $       -    $   0.115
</TABLE>

See Notes to Consolidated Financial Statements.

                                       52

<PAGE>

CONSOLIDATED STATEMENTS OF CASH FLOWS
NTELOS INC. AND SUBSIDIARIES
(DEBTOR-IN-POSSESSION)

<TABLE>
<CAPTION>
(In thousands)
Years Ended December 31,                                                     2002           2001           2000
--------------------------------------------------------------------------------------------------------------------
<S>                                                                     <C>             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income                                                       $   (488,947)   $    (63,713)   $     18,639
Deduct income from discontinued operation                                          -               -            (396)
Deduct gain on sale of discontinued operation                                      -               -         (15,973)
--------------------------------------------------------------------------------------------------------------------
(Loss) income from continuing operations                                    (488,947)        (63,713)          2,270

Adjustments to reconcile net income to net cash provided by operating
 activities:
     Gain on sale of assets                                                   (8,472)        (31,845)        (62,616)
     Gain from merger termination fee                                              -          (2,204)              -
     Asset impairment charges                                                402,880               -               -
     Depreciation                                                             79,528          70,679          32,666
     Amortization                                                              3,396          11,602           5,012
     Non-cash restructuring charge                                             1,101               -               -
     Deferred taxes                                                           (7,421)        (35,313)            915
     Retirement benefits and other                                             1,902           1,803           1,556
     Interest paid from restricted cash                                       25,781          35,711          20,121
     Accrued interest income on restricted cash                                 (238)         (3,460)         (1,862)
     Equity loss from PCS Alliances                                                -           1,286          12,259
     Accretion of loan discount and origination fees                           4,601           4,265           1,772
Changes in assets and liabilities from operations, net of effects of
 acquisitions and dispositions:
     Increase in accounts receivable                                          (3,497)           (388)         (5,746)
     Decrease (increase) in inventories and supplies                           6,941              (8)         (2,164)
     Decrease (increase) in other current assets                               1,942          (1,820)           (792)
     Changes in income taxes                                                   1,983           1,790           2,400
     Decrease in accounts payable                                            (17,922)           (497)         (1,313)
     Increase in other current liabilities                                    18,457             611           5,451
--------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) continuing operations                          22,015         (11,501)          9,929
Net cash used in discontinued operation                                            -               -             (51)
--------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities                           22,015         (11,501)          9,878

CASH FLOWS FROM INVESTING ACTIVITIES
  Purchases of property and equipment                                        (73,164)       (102,872)        (65,590)
  Proceeds from sale of assets                                                31,116          60,818           3,200
  Cash payment on purchase of PrimeCo VA                                           -               -        (408,644)
  Investments in restricted cash, net                                              -               -         (69,162)
  Proceeds from sale of discontinued operation                                     -           3,500          30,343
  Investments in PCS Alliances                                                     -            (687)        (15,292)
  Cash from merged entity, net of closing costs                                    -           2,192               -
  Advances to PCS Alliances                                                        -          (2,960)        (62,385)
  Deposit refunds (deposit) on assets                                              -           8,000         (14,852)
  Proceeds from merger termination fee, net                                        -           2,918               -
  Purchase of minority interest                                                    -             (93)        (10,745)
  Purchase of investments and other                                             (355)           (612)         (8,375)
--------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities                                        (42,403)        (29,796)       (621,502)
--------------------------------------------------------------------------------------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES
  Proceeds from issuance of long-term debt                                    36,000          50,000         544,357
  Proceeds from issuance of preferred stock and warrants                           -               -         242,523
  Payoff of VA PCS Alliance long-term debt                                         -               -        (118,570)
  Cash dividends                                                                   -               -          (1,501)
  Payments on senior notes                                                         -               -         (12,727)
  Additional payments under lines of credit (net) and other
   debt instruments                                                          (10,976)         (3,422)        (23,530)
  Net proceeds from exercise of stock options and stock
   issuance through Employee Stock Purchase Plan                                 287             670           1,133
  Payment of debt financing closing costs                                          -            (295)        (18,622)
--------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities                                     25,311          46,953         613,063
--------------------------------------------------------------------------------------------------------------------
  Increase in cash and cash equivalents                                        4,923           5,656           1,439
  Cash and cash equivalents:
  Beginning                                                                    7,293           1,637             198
--------------------------------------------------------------------------------------------------------------------
  Ending                                                                $     12,216    $      7,293    $      1,637
====================================================================================================================
</TABLE>

See Notes to Consolidated Financial Statements.

                                       53

<PAGE>

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
NTELOS INC. AND SUBSIDIARIES
(DEBTOR-IN-POSSESSION)

<TABLE>
<CAPTION>
                                                                                            RETAINED    ACCUMULATED        TOTAL
                                                           COMMON STOCK                     EARNINGS       OTHER       SHAREHOLDERS'
                                                      ------------------------    STOCK   (ACCUMULATED COMPREHENSIVE      EQUITY
(IN THOUSANDS)                                          SHARES         AMOUNT    WARRANTS    DEFICIT)   INCOME (LOSS)    (DEFICIT)
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                        <C>       <C>         <C>      <C>           <C>               <C>
Balance, January 1, 2000                                   13,060    $  43,943   $      -   $  50,385     $   21,856    $  116,184
Comprehensive income:
   Net income                                                                                  18,639
   Unrealized loss on securities available for sale,
    net of $8,529 of deferred tax benefit                                                                    (13,398)
   Comprehensive income                                                                                                      5,241
Tax benefit related to stock options                                       196                                                 196
Dividends on common shares                                                                     (1,501)                      (1,501)
Dividends on preferred shares                                                                  (8,168)                      (8,168)
Issuance of warrants                                                               22,874                                   22,874
Stock options exercised, net                                   70        1,095                                               1,095
Shares issued through Employee Stock Purchase Plan              2           38                                                  38
------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2000                                 13,132       45,272     22,874      59,355          8,458       135,959
Comprehensive loss:
   Net loss                                                                                   (63,713)
   Cash flow hedge:
     Cumulative effect on the adoption of SFAS No.
      133, net of $2,489 of deferred tax benefit                                                              (3,900)
     Derivative losses, net of $2,608 of deferred
      tax benefit                                                                                             (4,105)
     Unrealized loss on securities available for
      sale, net of $124 of deferred tax benefit                                                                 (195)
     Realization of gain due to sale of equity
      interest in Illuminet Holdings, Inc., net of
      $5,484 deferred tax obligation                                                                          (8,458)
   Comprehensive loss                                                                                                      (80,371)
Dividends on preferred shares                                                                 (18,843)                     (18,843)
Common stock issuance pursuant to R&B Merger                3,704      131,376                                             131,376
Common stock issuance for purchase of additional
 interest in Alliances                                        320        4,775                                               4,775
Stock options exercised, net                                   16          106                                                 106
Shares issued through Employee Stock Purchase Plan             37          564                                                 564
------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2001                                 17,209      182,093     22,874     (23,201)        (8,200)      173,566
Comprehensive loss:
  Net loss                                                                                   (488,947)
  Cash flow hedge:
     Derivative losses, net of $2,687 of deferred
      tax benefit                                                                                             (4,221)
     Unrealized loss on securities available for sale                                                           (321)
     Reclassification of unrealized loss to realized
      loss, included in net income                                                                               509
     Minimum pension liability charge                                                                         (3,133)
  Comprehensive loss                                                                                                      (496,113)
Dividends on preferred shares                                                                 (20,417)                     (20,417)
Common stock issuance (cancellation), net                      (2)        (155)                                               (155)
Shares issued through Employee Stock Purchase Plan            573          442                                                 442
------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 2002                                 17,780    $ 182,380   $ 22,874   $(532,565)    $  (15,366)   $ (342,677)
====================================================================================================================================
</TABLE>

See Notes to Consolidated Financial Statements.

                                       54

<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NTELOS INC. AND SUBSIDIARIES
(DEBTOR-IN-POSSESSION)

NOTE 1. ORGANIZATION

Overview

NTELOS Inc. (debtor-in-possession, hereafter referred to as "NTELOS" or the
"Company") is an integrated communications provider that provides a broad range
of products and services to businesses, telecommunication carriers and
residential customers in Virginia and surrounding states. The Company's services
include wireless digital personal communications services ("PCS"), local and
long distance telephone services, dial-up Internet access, high-speed DSL
(high-speed Internet access), paging, and wireline and wireless cable
television.

            On March 4, 2003 (the "Petition Date"), the Company and certain of
its subsidiaries (collectively, the "Debtors"), filed voluntary petitions for
reorganization under Chapter 11 of the United States Bankruptcy Code (the
"Bankruptcy Code") in the United States Bankruptcy Court for the Eastern
District of Virginia (the "Bankruptcy Court"). By order of the Bankruptcy Court,
the Debtors' respective cases are being jointly administered under the case
number 03-32094 (the "Bankruptcy Case") for procedural purposes only. The
Bankruptcy Case was commenced in order to implement a comprehensive financial
restructuring of the Company.

            In the first half of 2002, the Company took a number of
restructuring steps to improve operating results, financial condition and
conserve cash on hand by reducing its operating expenses, including a reduction
in workforce, an early retirement program, termination of certain services in
selected unprofitable locations, and curtailing or deferring certain capital
expenditures. Despite the improved operating performance resulting from these
measures and continued execution of the Company's business plan, the Company
continues to require additional cash to fund its operating expenses, debt
service and capital expenditures.

            In September 2002, the Company retained UBS Warburg as its financial
advisor to assist the Company in exploring a variety of restructuring
alternatives. Thereafter, continued competition in the wireless
telecommunications sector resulted in a modification to the Company's long-term
business plan, including a reduction in wireless subscriber growth, a decrease
in average revenue per wireless subscriber, a slower improvement in subscriber
churn and slower growth in wholesale revenues. In addition, capital and lending
prospects for telecommunication companies continued to deteriorate. On November
29, 2002, the Company entered into an amendment and waiver with the lenders
under the Senior Credit Facility which restricted the amounts that the Company
could borrow and waived the Company's obligation to make certain representations
in order to submit a borrowing request. Without an extension of the waiver, the
Company did not have access to the Senior Credit Facility following January 31,
2003. During this period, the Company was actively negotiating with its
debtholders to develop a comprehensive financial restructuring plan. The Company
was unable to reach an agreement with its debtholders on an out-of-court
restructuring plan and, accordingly, on March 4, 2003, the Company filed a
petition for relief under Chapter 11 of the Bankruptcy Code.

            The Company conducts its operations through a number of wholly-owned
or majority-owned subsidiaries. While it implements the proposed
recapitalization, the Company expects its subsidiaries to continue to operate in
the ordinary course of business.

                                       55

<PAGE>

Proposed Restructuring

The Bankruptcy Case was commenced in order to implement a comprehensive
financial restructuring of the Company, including the senior notes due 2010 (the
"Senior Notes"), subordinated notes due 2011 and preferred and common equity
securities. As of the date of this report, a plan of reorganization (the "Plan")
has not been submitted to the Bankruptcy Court.

In order to meet ongoing obligations during the reorganization process, the
Company entered into a $35 million debtor-in-possession financing facility (the
"DIP Financing Facility"), subject to Bankruptcy Court approval. On March 5,
2003, the Bankruptcy Court granted access to up to $10 million of the DIP
Financing Facility, with access to the full $35 million subject to final
Bankruptcy Court approval, certain state regulatory approvals and the banks'
receiving satisfactory assurances regarding the senior noteholders' proposed $75
million investment in the Company upon emergence from bankruptcy. On March 24,
2003, the Bankruptcy Court entered a final order authorizing the Company to
access up to $35 million under the DIP Financing Facility and, as of April 11,
2003, the Company satisfied all other conditions to full access to the DIP
Financing Facility.

The Company anticipates that the Plan will be funded by two sources of capital:
(i) an equity investment made by certain holders of Senior Notes of an aggregate
of $75 million in exchange for new 9% convertible notes ("New Notes") of the
reorganized company and (ii) a credit facility which permits the Company to
continue to have access to its current $225 million of outstanding term loans
with a $36 million revolver commitment ("Exit Financing Facility"). This Exit
Financing Facility also provides that the term loans and any new borrowings
under the revolver will be at current rates and existing maturities.

On April 10, 2003, the Company entered into a Plan Support Agreement (the "Plan
Support Agreement") with a majority of the lenders under its Senior Credit
Facility. The Plan Support Agreement provides that the lenders will agree to
support a "Conforming Plan," which must include the following: (i) financing
upon emergence from bankruptcy on agreed terms, (ii) cancellation of, or
conversion into equity of the reorganized company upon emergence from bankruptcy
of, substantially all of the Company's outstanding debt and equity securities,
(iii) outstanding indebtedness on the effective date of the Plan consisting of
only certain hedge agreements, Exit Financing Facility, New Notes, existing
government loans and certain capital leases, (iv) consummation of the sale of
New Notes on the effective date of the Plan and (v) repayment of the DIP
Financing Facility and the $36 million outstanding under the revolver.

On April 10, 2003, the Company also entered into a Subscription Agreement with
certain holders of Senior Notes for the sale of $75 million aggregate principal
amount of New Notes. The Plan Support Agreement and Subscription Agreement are
subject to, among other things, confirmation of a Conforming Plan.

The Plan Support Agreement provides that a Conforming Plan and accompanying
disclosure statement must be filed with the Bankruptcy Court prior to May 31,
2003 and that a disclosure statement, reasonably acceptable to the lenders, must
be approved by the Bankruptcy Court no later than August 15, 2003. In addition,
the Plan Support Agreement obligates the Company to have filed a Conforming
Plan, solicited votes and conducted a confirmation hearing prior to September
30, 2003.

While a Plan has not been submitted, the Company anticipates that the Plan will
constitute a Conforming Plan, with the conversion of existing debt securities
into substantially all of the common ownership of the reorganized Company. The
Company also anticipates that the holders of common and preferred stock of the
Company will be entitled to little or no recovery. Accordingly, the Company
anticipates that all, or substantially all, of the value of all investments in
the Company's common and preferred stock will be lost.

Bankruptcy Proceeding

In conjunction with the commencement of the Bankruptcy Case, the Debtors sought
and obtained several first day orders from the Bankruptcy Court which were
intended to enable the Debtors to operate in the normal course of business
during the Bankruptcy Case. The most significant of these orders (i) authorize
access to up to $10 million of its $35 million debtor-in-possession financing
facility (the "DIP Financing Facility") with Wachovia Bank, (ii)

                                       56

<PAGE>

permit the Debtors to operate their consolidated cash management system during
the Bankruptcy Case in substantially the same manner as it was operated prior to
the commencement of the Bankruptcy Case, (iii) authorize payment of pre-petition
employee salaries, wages, and benefits and reimbursement of pre-petition
employee business expenses, (iv) authorize payment of pre-petition sales,
payroll, and use taxes owed by the Debtors, and (iv) authorize payment of
certain pre-petition obligations to customers.

            On March 5, 2003, the Bankruptcy Court entered an interim order
authorizing the Debtors to enter into the DIP Financing Facility, and to grant
first priority mortgages, security interests, liens (including priming liens),
and super priority claims on substantially all of the assets of the Debtors to
secure the DIP Financing Facility. At first day hearings, the Court entered
orders that, among other things, granted authority to continue to pay employee
salaries, wages and benefits, and to honor warranty and service obligations to
customers. On March 24, 2003, the Bankruptcy Court entered a final order
approving the DIP Financing Facility and authorizing the Debtors to utilize up
to $35 million under the DIP Financing Facility. The full $35 million DIP
commitment was subject to final Court approval, certain state regulatory
approvals and the lenders' receiving satisfactory assurances regarding the
proposed $75 million investment in the Company by certain holders of Senior
Notes upon emergence from bankruptcy. Subsequent to March 24, 2003, the Company
satisfied all other conditions to obtain full access to the DIP Financing
Facility. The DIP Financing Facility is available to meet ongoing financial
obligations in connection with the Company's regular business operations,
including obligations to vendors, customers and employees during the Bankruptcy
Case.

            The Debtors are currently operating their businesses as
debtors-in-possession under the Bankruptcy Code. Pursuant to the Bankruptcy
Code, pre-petition obligations of the Debtors, including obligations under debt
instruments, generally may not be enforced against the Debtors, and any actions
to collect pre-petition indebtedness are automatically stayed, unless the stay
is lifted by the Bankruptcy Court. The pre-petition obligations of the Debtors
are subject to settlement under a plan of reorganization. In addition, as
debtors-in-possession, the Debtors have the right, subject to the Bankruptcy
Court approval and certain other limitations, to assume or reject executory
contracts and unexpired leases. In this context, "assumption" means that the
Debtors agree to perform their obligations and cure all existing defaults under
the contract or lease, and "rejection" means that the Debtors are relieved from
their obligations to perform further under the contract or lease, but are
subject to a claim for damages for the breach thereof. Any damages resulting
from rejection of executory contracts and unexpired leases will be treated as
general unsecured claims in the Bankruptcy Case unless such claims were secured
prior to the Petition Date. The Debtors are in the process of reviewing their
executory contracts and unexpired leases to determine which, if any, they will
reject. The Debtors cannot presently determine or reasonably estimate the
ultimate liability that may result from rejecting contracts or leases or from
the filing of claims for any rejected contracts or leases, and no provisions
have yet been made for these items. The amount of the claims to be filed by the
creditors could be significantly different than the amount of the liabilities
recorded by the Debtors.

            Since the Petition Date, the Debtors have conducted business in the
ordinary course. As noted above, early in 2002 the Company completed an
operational restructuring (see Note 19) and, accordingly, does not contemplate
further operational restructuring at this time. After developing the Plan, the
Debtors will seek the requisite acceptance of the Plan by impaired creditors and
equity holders, if it is determined that equity holders will receive a
distribution under the Plan, and confirmation of the Plan by the Bankruptcy
Court, all in accordance with the applicable provisions of the Bankruptcy Code.
During the pendency of the Bankruptcy Case, the Debtors may, with the Bankruptcy
Court approval, sell assets and settle liabilities, including for amounts other
than those reflected in the financial statements. The administrative and
reorganization expenses resulting from the Bankruptcy Case will unfavorably
affect the Debtor's results of operations. Future results of operations may also
be adversely affected by other factors related to the Bankruptcy Case. No
assurance can be given that the Debtor's creditors will support the proposed
Plan, or that the Plan will be approved by the Bankruptcy Court. Additionally,
there can be no assurance of the level of recovery to which the Debtors' secured
and unsecured creditors will receive.

                                       57

<PAGE>

BASIS OF PRESENTATION

Our consolidated financial statements have been prepared on a going concern
basis of accounting in accordance with accounting principles generally accepted
in the United States. The going concern basis of presentation assumes that the
Company will continue in operation for the foreseeable future and will be able
to realize its assets and discharge its liabilities in the normal course of
business. Because of the Bankruptcy Case and the circumstances leading to the
filing thereof, there is substantial doubt about the Company's ability to
continue as a going concern. The Company's ability to realize the carrying value
of its assets and discharge its liabilities is subject to substantial
uncertainty. The Company's ability to continue as a going concern depends upon,
among other things, the Company's ability to comply with the terms of the DIP
Financing Facility, confirmation of a plan of reorganization, availability of
exit financing from existing lenders under the Senior Credit Facility, receipt
of additional funding through the issuance of an aggregate of $75 million of New
Notes, and the Company's ability to generate sufficient cash flows from
operations. Our financial statements do not reflect adjustments for possible
future effects on the recoverability of assets or the amounts and
classifications of liabilities that may result from the outcome of the
Bankruptcy Case.

            Our consolidated financial statements do not reflect adjustments
that may occur in accordance with the AICPA Statement of Position 90-07
("Financial Reporting by Entities in Reorganization Under the Bankruptcy Code")
("SOP 90-07"), which the Company will adopt for its financial reporting in
periods ending after emergence from bankruptcy, assuming the Company will
continue as a going concern. In the Bankruptcy Case, substantially all unsecured
liabilities as of the Petition Date are subject to settlement under a plan of
reorganization to be voted on by creditors and equity holders, if it is
determined that equity holders will receive a distribution under the Plan, and
approved by the Bankruptcy Court. It is expected that the proposed Plan will
result in "Fresh Start" reporting pursuant to SOP 90-7. Under Fresh Start
reporting, the value of the reorganized Company would be determined based on the
amount a willing buyer would pay for the Company's assets upon confirmation of
the Plan by the Bankruptcy Court. This value would be allocated to specific
tangible and identifiable intangible assets. Liabilities existing as of the
effective date of the plan of reorganization would be stated at the present
value of amounts to be paid based on current interest rates. For financial
reporting purposes for periods ending after the Bankruptcy filing, those
liabilities and obligations whose treatment and satisfaction is dependent on the
outcome of the Bankruptcy Case will be segregated and classified as Liabilities
Subject to Compromise in the consolidated balance sheet under SOP 90-07.

            Generally, all actions to enforce or otherwise effect repayment of
pre-petition liabilities as well as all pending litigation against the Debtors
are stayed while the Debtors continue their business operations as
debtors-in-possession. The ultimate amount of and settlement terms for such
liabilities are subject to an approved plan of reorganization and, accordingly,
are not presently determinable. Pursuant to SOP 90-07, professional fees
associated with the Bankruptcy Case will be expensed as incurred and reported as
reorganization costs. Also, interest expense and preferred dividends will be
reported only to the extent that they will be paid during the Bankruptcy Case or
that it is probable that they will be an allowed claim.

NOTE 2. ASSET IMPAIRMENT CHARGES

            The Company adopted Statement of Financial Accounting Standard No.
142, Goodwill and Other Intangible Assets ("SFAS No. 142"), on January 1, 2002
(see Note 3, "Significant Accounting Policies" for additional discussions of
this standard). The Company completed the transitional impairment testing as of
January 1, 2002 for goodwill and the assembled workforce and determined that no
impairment existed as of that date.

            During the first quarter of 2003, the Company completed the 2002
annual SFAS No. 142 impairment testing of all goodwill and indefinite lived
intangible assets as of October 1, 2002. The Company engaged an independent
appraisal firm to perform valuation work related to the PCS radio spectrum
licenses, goodwill and the assembled workforce intangible asset within the
wireless segment. The Company performed testing of wireless goodwill and the
wireless assembled workforce intangible asset utilizing a combination of a
discounted cash flow method and other market valuation methods. The Company's
testing of PCS radio spectrum licenses and goodwill in the other

                                       58

<PAGE>

reporting units utilized a discounted cash flow method. The discounted cash flow
method involved long-term cash flow projections using numerous assumptions and
estimates related to these projections. In performing this testing, the Company
revised its business and financial forecasts to reflect the current and
projected results (see Note 1). During this exercise, revisions to certain of
the Company's short-term and long-term assumptions had a significant impact on
the Company's long-term cash flows. The level of competition in pricing and plan
offerings, customer churn rate and other market condition variables have
negatively affected the Company and the industry sector's financial projections.
Additionally, market valuations have continued to decline. Based on this
testing, the Company has concluded that the wireless radio spectrum licenses
required an impairment adjustment of $313.7 million. Additionally, in connection
with requirements under SFAS No. 142, the Company determined that there was no
intrinsic value of the goodwill and assembled workforce asset and recorded a
$24.8 million impairment charge accordingly.

            In addition to the impairment determined in the wireless PCS
segment, the Company's network segment, which contained $27.6 million of
goodwill, was found to be impaired as measured under the provisions of SFAS No.
142. The network segment experienced unfavorable pricing adjustments throughout
2002 that resulted in the lowering of cash flow projections. As noted above, the
Company utilized a discounted cash flow model in determining the existence of
impairment in this segment. From these updated calculations, the segment fair
value was determined to be below the carrying value. Upon completing the "memo
based" purchase price allocation as required under step 2 of SFAS No. 142, the
Company determined the goodwill impairment valuation adjustment to be $20.9
million.

            The Company's telephone segment, which has $65.5 million of goodwill
from the R&B Communications merger (Note 6), contains two incumbent local
exchange carrier ("ILEC") businesses which are managed as one operating segment
as they are operationally integrated and management reviews results and
allocates resources from a consolidated perspective. Therefore, the SFAS No. 142
testing is required to be performed on the total segment (similar to the
Company's network and ISP businesses). Based on this testing, the Company
determined that there was no impairment of this goodwill. Had the SFAS No. 142
testing been performed on the R&B ILEC as a stand alone entity, this goodwill
would have been impaired and an impairment charge would have been required.

            In addition to the testing under SFAS No. 142, the Company
determined that impairment indicators were present in all of its operating
segments under the provisions of SFAS No. 144 (see Note 3, "Significant
Accounting Policies" for additional discussions of this standard). Based on the
results of the Company's SFAS No. 144 testing, certain of the wireless PCS
segment assets were found to be impaired. Accordingly, the Company determined
the fair market value of these assets utilizing the services of the third party
appraisal firm. Based on this determination, the Company found the property,
plant and equipment to be impaired by $16.7 million, primarily related to cell
site and other network plant and equipment. Other finite lived intangible assets
consist of the customer list and tower franchise rights originating from the
2000 acquisition of PrimeCo VA (Note 6). These assets had carrying values of
$9.7 million and $2.1 million, respectively, and were being amortized over
useful lives of 5 years and 10 years, respectively. In light of current market
conditions, the Company determined that the market for these intangible assets
had significantly deteriorated and thus, these assets had only marginal or no
marketable value. Accordingly, the Company recorded an additional $11.8 million
impairment.

            The Company's wireless cable business contains goodwill and licenses
of $3.7 million and $12.8 million, respectively, and property, plant and
equipment totaling $1.4 million. The current use of the licenses and long lived
assets is primarily for one-way video transmission. This application does not
produce sufficient cash flow to recover the carrying value of these assets under
SFAS No. 142 and SFAS No. 144. Management has been testing a two-way high speed
Internet application which, if deployed, is expected to produce cash flows which
recover the carrying value of the goodwill, licenses and property, plant and
equipment. Based on the progress of this new application over the last year,
certain required FCC approvals over the use of the licensed spectrum which are
expected but remain pending at this time, and other factors relating to capital
funding and forecasting uncertainties, the Company has not considered this
application in performing the impairment testing. Accordingly, the Company has
recorded a write-down of the goodwill, licenses and property, plant and
equipment of $3.7 million, $10.3 million and $1.1 million, respectively.

                                       59

<PAGE>

            The Company reviewed the results of the October 1, 2002 testing as
of December 31, 2002 and concluded that no material changes would have been made
to the underlying assumptions that would have resulted in materially different
test results from those performed as of October 1, 2002.

            A summary of the asset impairment charges recorded in the fourth
quarter of 2002 and discussed above follows:

<TABLE>
<CAPTION>
                                                      Historical                     Asset
                                                       Carrying                    Impairment
(In thousands)                                          Value      Fair value       Charges
----------------------------------------------------------------------------------------------
 <S>                                                <C>            <C>            <C>
 Wireless PCS
    Property, Plant and Equipment -VA East Market   $    104,808   $     88,140   $     16,668
    Goodwill and Assembled Workforce                      24,836              -         24,836
    Licenses                                             428,066        114,389        313,677
    Other Intangibles                                     11,769              -         11,769
                                                    ------------------------------------------
       Sub-total                                         569,479        202,529        366,950

 Network Segment Goodwill                                 25,582          4,682         20,900

 Wireless Cable
    Property, Plant and Equipment                          1,383            294          1,089
    Goodwill                                               3,654              -          3,654
    MMDS Licenses                                         12,787          2,500         10,287
                                                    ------------------------------------------
       Sub-total                                          17,824          2,794         15,030
==============================================================================================
 Totals                                             $    612,885   $    210,005   $    402,880
==============================================================================================
</TABLE>

            Note that the table above indicates $104.8 million historical
carrying value of wireless PCS property, plant and equipment. This only
represents those assets used in the VA East market (formerly PrimeCo VA - Note
6) out of the total $249.5 million of wireless PCS property, plant and
equipment. The remaining assets in the Company's VA West and WV markets were not
required to be adjusted to fair value based on the results of the SFAS No. 144
tests of recoverability.

            After adjustments for the aforementioned asset impairment charges,
the cost and net book value of the remaining goodwill and licenses with
indefinite lives at December 31, 2002 followed by the totals by reportable unit
are indicated in the following table. Additionally, the cost and net bank value
of goodwill and licenses with indefinite lives at December 31, 2001 are also
reflected:

                                       60

<PAGE>

<TABLE>
<CAPTION>
                                                                2002                           2001
                                                    ----------------------------   ----------------------------
(In thousands)                                          Cost      Net Book Value       Cost      Net Book Value
---------------------------------------------------------------------------------------------------------------
<S>                                                 <C>           <C>              <C>           <C>
Goodwill                                            $     93,540  $       86,016   $    147,116  $      135,634
PCS Radio Spectrum Licenses In Service                   107,386         107,234        446,428         423,181
---------------------------------------------------------------------------------------------------------------
       Total Indefinite Lived Assets                $    200,926  $      193,250   $    593,544  $      558,815
===============================================================================================================
Goodwill and Indefinite Lived Assets by Reporting
 Unit
Wireless PCS                                        $    107,386  $      107,234   $    472,206  $      447,108
Telephone                                                 68,472          65,463         68,472          65,463
CLEC                                                           -               -              -               -
Network                                                    4,683           4,683         27,000          25,813
Internet                                                  12,665           9,833         12,621           9,789
Other
    Wireline Cable                                         7,720           6,037          7,720           6,037
    Wireless Cable                                             -               -          4,261           3,654
    NAS                                                        -               -          1,264             951
---------------------------------------------------------------------------------------------------------------
       Total Indefinite Lived Assets                $    200,926  $      193,250   $    593,544  $      558,815
===============================================================================================================
</TABLE>

NOTE 3. SIGNIFICANT ACCOUNTING POLICIES

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

PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the
accounts of the Company, its wholly-owned subsidiaries and those limited
liability corporations where the Company, as managing member, exercises control.
All significant intercompany accounts and transactions have been eliminated.

REVENUE RECOGNITION: The Company's revenue recognition policy is to recognize
revenues when services are rendered or when products are delivered, installed
and functional, as applicable. Certain services of the Company require payment
in advance of service performance. In such cases, the Company records a service
liability at the time of billing and subsequently recognizes revenue over the
service period.

            With respect to the Company's wireline and wireless businesses, the
Company earns revenue by providing access to and usage of its networks. Local
service and airtime revenues are recognized as services are provided. Wholesale
revenues are earned by providing switch access and other switching services,
including wireless roamer management, to other carriers. Wholesale prices are
based on actual annual fixed and variable costs or are set by the applicable
tariffs. Other revenues for equipment sales are recognized at the point of sale.
PCS handset equipment is sold at prices below cost. Prices are based on the
service contract period. The Company recognizes the entire cost of the handsets
at the point of sale, rather than deferring such costs over the service contract
period.

            The Company charges activation, installation and set-up related fees
on several services. In the fourth quarter of 2000, the Company adopted
Securities and Exchange Commission ("SEC") "Staff Accounting Bulletin 101:
Revenue Recognition in Financial Statements" ("SAB 101"). This interpretative
document requires the Company to defer these types of revenues until the Company
performs the underlying service. The deferral period is determined by the
average length of service period (24 to 36 months, depending on the applicable
service). SAB 101 also allows the deferral of the related direct costs incurred
up to, but not in excess of, the revenue. The impact of adopting SAB 101 was not
material.

CASH AND CASH EQUIVALENTS: For purposes of reporting cash flows, the Company
considers all highly liquid debt instruments with an original maturity of three
months or less to be cash equivalents. The Company places its temporary cash
investments with high credit quality financial institutions. At times, such
investments may be in excess of the FDIC insurance limit.

                                       61

<PAGE>

TRADE ACCOUNTS RECEIVABLE: The Company sells its services to residential and
commercial end-users and to other communication carriers primarily in Virginia
and West Virginia. The carrying amount of the Company's trade accounts
receivable approximates their fair value. The Company executes credit and
collection policies to ensure collection of trade receivables but generally does
not require collateral on any of its sales. The Company maintains an allowance
for doubtful accounts, which management believes adequately covers all
anticipated losses with respect to trade receivables. Actual credit losses could
differ from such estimates. The Company nets bad debt expenses against
applicable operating revenues.

SECURITIES AND INVESTMENTS: The Company has investments in debt and equity
securities and partnerships. Management determines the appropriate
classification of securities at the date of purchase and continually thereafter.
The classification of those securities and the related accounting policies are
as follows:

     AVAILABLE FOR SALE SECURITIES: Securities classified as available for sale
     are primarily traded on a national exchange and are those securities that
     the Company intends to hold for an indefinite period of time but not
     necessarily to maturity. Any decision to sell a security classified as
     available for sale would be based on various factors including changes in
     market conditions, liquidity needs and other similar factors. Securities
     available for sale are stated at fair value and unrealized holding gains
     and losses, net of the related deferred tax effect, are reported as a
     separate component of shareholders' equity. Realized gains and losses and
     declines in value judged to be other-than-temporary on available-for-sale
     securities are determined on a specific identification basis.

     EQUITY METHOD INVESTMENTS: These investments consist of partnership and
     corporate investments where the Company's ownership is 20% or more, except
     where such investments meet the requirements for consolidation. Under the
     equity method, the Company's share in earnings or losses of these companies
     is included in earnings.

     INVESTMENTS CARRIED AT COST: These are investments in which the Company
     does not have significant ownership and for which there is no ready market.
     Information regarding these and all other investments is reviewed
     continuously for evidence of impairment in value.

Interest on debt securities is recognized in income as accrued and dividends on
marketable equity securities are recognized in income on the record date.
Realized gains or losses are determined on the basis of specific securities sold
and are included in earnings.

PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment is stated at cost.
Accumulated depreciation is charged with the cost of property retired, plus
removal cost, less salvage. Depreciation is determined under the straight-line
method. Buildings are depreciated over a 50-year life. Network plant and
equipment are depreciated over various lives from 3 to 50 years, with an average
life of approximately 9 years. Furniture, fixtures and other equipment are
depreciated over various lives from 5 to 24 years.

            Depreciation provisions were approximately 13.5%, 15.4%, and 11.9%
of average depreciable assets for the years 2002, 2001, and 2000, respectively.

            In June 2001, the FASB approved SFAS No. 143, Accounting for Asset
Retirement Obligations ("SFAS No. 143"). SFAS No. 143 establishes accounting
standards for recognition and measurement of a liability for an asset retirement
obligation and the associated asset retirement cost. The fair value of a
liability for an asset retirement obligation is to be recognized in the period
in which it is incurred if a reasonable estimate can be made. The associated
retirement costs are capitalized and included as part of the carrying value of
the long-lived asset and amortized over the useful life of the asset. SFAS No.
143 was effective for the Company beginning on January 1, 2003. The Company has
performed a preliminary assessment of the applicability and materiality of the
adoption of this standard. The Company has determined that this is primarily
applicable to tower sites within the wireless segment and has determined that
the adoption of the standard could be material and may result in capitalizing
costs and offsetting asset retirement obligations estimated of up to $12
million.

            In August 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets ("SFAS No. 144"), that addresses
financial accounting and reporting for the impairment or disposal of long-lived
assets. This pronouncement establishes a single accounting model, based on the
framework established in SFAS No. 121,

                                       62

<PAGE>

for the recognition and measurement of the impairment of long-lived assets to be
held and used or to be disposed of by sale. The Company adopted SFAS No. 144 at
the beginning of fiscal 2002. The Company has completed its fixed asset testing
under this standard as of December 31, 2002. From this testing, the Company
determined that impairment existed with certain of the wireless PCS segment
assets. Accordingly, an asset impairment charge was recorded which totaled $28.5
million, $16.7 million of which pertained to property, plant and equipment and
$11.8 million of which related to intangible assets with finite lives. In
addition to this, the Company reported a SFAS No. 144 $1.1 million and $10.3
million asset impairment charge of property, plant and equipment and finite
lived radio spectrum licenses, respectively, in the wireless cable business (see
Note 2).

            Radio spectrum licenses for areas where the licenses are being used
in operations had historically been classified in the "property, plant and
equipment" section of the balance sheet. In order to better conform with
industry practice, these assets, along with their related accumulated
amortization, have been reclassified to the "other assets" section of the
balance sheet for all periods presented.

INVENTORIES AND SUPPLIES: The Company's inventories and supplies consist
primarily of items held for resale such as PCS handsets, pagers, wireline
business phones and accessories. The Company values its inventory at the lower
of cost or market. Inventory cost is computed on a currently adjusted standard
cost basis (which approximates actual cost on a first-in, first-out basis). The
market value is determined by reviewing current replacement cost, marketability,
and obsolescence.

ACCOUNTING FOR INTANGIBLE ASSETS: Beginning January 1, 2002, the Company
accounts for its intangible assets under SFAS No. 142, Goodwill and Other
Intangible Assets. Under these new rules, goodwill, assembled workforce
intangible asset and other intangible assets deemed to have indefinite lives
will no longer be amortized but will be subject to annual impairment tests in
accordance with this Statement. Other intangible assets will continue to be
amortized over their useful lives. Accordingly, the Company ceased amortization
of goodwill, assembled workforce and PCS radio spectrum licenses on January 1,
2002. Based on SFAS No. 142 annual testing performed on values as of October 1,
2002, the Company reported asset impairment charges totaling $363.1 million (see
Note 2).

            Amortization of indefinite lived intangible assets was $20.4 million
($12.6 million after tax) for 2001 and $7.4 million ($4.6 million after tax) for
2000. Had SFAS No. 142 been in effect for 2000 and 2001, no amortization of
these intangible assets would have been recorded. Therefore, the income (loss)
applicable to common shares for the fiscal years 2001 and 2000 adjusted for the
impact of SFAS No. 142 was a $70.0 million ($4.25 per common share) loss in 2001
and income of $15.1 million ($1.15 per common share) in 2000.

            The Company wrote off its wireless segment tower franchise rights
and customer list in the fourth quarter of 2002, recording an impairment charge
of $11.8 million. Amortization charges recorded in 2002 related to the tower
franchise rights and the customer list prior to this write off totaled $4.1
million. The Company continued to amortize the remaining intangible assets
related to an employment agreement, non-compete agreements and customer lists
from past acquisitions which have a book value of $1.9 million as of December
31, 2002. For those intangible assets that will continue to be amortized, the
expected amortization is as follows: $.2 million in 2003, $.1 million in 2004,
$.1 million in 2005, $.1 million in 2006, $.1 million in 2007 and $1.1 million
thereafter. See discussions regarding the results of SFAS No. 142 testing in
Note 2 above.

ADVERTISING COSTS: The Company expenses advertising costs and marketing
production costs as incurred. Included in customer operations is $13.4 million,
$13.1 million and $7.1 million of advertising and marketing production expenses
for the years ended December 31, 2002, 2001 and 2000, respectively.

PENSION BENEFITS: The Company sponsors a non-contributory defined benefit
pension plan covering all employees who meet eligibility requirements. Pension
benefits vest after five years of service and are based on years of service and
average final compensation subject to certain reductions if the employee retires
before reaching age 62. The Company's funding policy has been to contribute to
the plan based on applicable regulation requirements. Contributions are intended
to provide not only for benefits based on service to date, but also for those
expected to be earned in the future.

            The Company also sponsors a contributory defined contribution plan
under Internal Revenue Code Section 401(k) for substantially all employees.
Until April 2002, the Company contributed 60% of each participant's annual

                                       63

<PAGE>

     contribution for contributions up to 6% of each participant's annual
     compensation. The employee elects the type of investment fund from the
     equity, bond and annuity alternatives offered by the plan.

RETIREMENT BENEFITS OTHER THAN PENSIONS: The Company provides certain health
care benefits for all retired employees that meet eligibility requirements. The
Company's share of the estimated costs of benefits that will be paid after
retirement is generally being accrued by charges to expense over the eligible
employee's service periods to the dates they are fully eligible for benefits.

INCOME TAXES: Deferred income taxes are provided on a liability method whereby
deferred tax assets are recognized for deductible temporary differences and
deferred tax liabilities are recognized for taxable temporary differences.
Temporary differences are the differences between the reported amounts of assets
and liabilities and their tax bases. Deferred tax assets and liabilities are
adjusted for the effects of changes in tax laws and rates on the date of
enactment.

STOCK-BASED COMPENSATION: The Company accounts for stock-based employee
compensation plans under Accounting Principles Board ("APB") Opinion No. 25,
Accounting for Stock Issued to Employees, and related interpretations, and
follows the disclosure only provisions of SFAS No. 123, Accounting for
Stock-Based Compensation. At December 31, 2002, the Company has elected to apply
the disclosure only provisions of SFAS No. 123 and the revised disclosure
requirements of SFAS No. 148.

            In December 2002, the FASB issued SFAS No. 148, Accounting for
Stock-Based Compensation -Transition and Disclosure, an Amendment of FASB
Statement No. 123. SFAS No. 148 provides alternative methods of transition for a
voluntary change to the fair value based method of accounting for stock-based
employee compensation prescribed by SFAS No. 123. SFAS No. 148 also amends the
disclosure requirements of SFAS No. 123 to require disclosure in both annual and
interim financial statements about the method of accounting for stock-based
employee compensation and the effect of the method used on reported results. As
the Company has elected to continue accounting for stock-based employee
compensation using the intrinsic value method under APB Opinion No. 25, the
Company has only adopted the revised disclosure requirements of SFAS No. 148 as
of December 31, 2002.

            Since the Company applies the disclosure only provision as noted
above, no compensation cost has been recorded. Had compensation cost been
recorded based on the fair value of awards at the grant date, the pro forma
impact on the Company's (loss) income applicable to common shares and (loss)
income per common share - basic and diluted is as follows:

<TABLE>
<CAPTION>
                                                                  2002           2001            2000
          -----------------------------------------------------------------------------------------------
          <S>                                                <C>             <C>             <C>
          (Loss) income applicable to common shares, as
           reported                                          $   (509,364)   $    (82,556)   $     10,471
          Deduct: Total stock-based employee compensation
           expense determined under fair value based
           method, net of tax                                       1,708           2,052           1,294
          -----------------------------------------------------------------------------------------------
          Pro forma net (loss) income                        $   (511,072)   $    (84,608)   $      9,177
          ===============================================================================================
          (Loss) earnings per common share:
          Basic and diluted - as reported                    $     (29.34)   $      (5.02)   $       0.80
          Basic and diluted - pro forma                      $     (29.44)   $      (5.15)   $       0.70
</TABLE>

The pro forma effects of applying SFAS No. 123 are not indicative of future
amounts since, among other reasons, the requirements of the SFAS No. 123 have
been applied only to options granted after December 31, 1994.

            The fair value of each grant is estimated at the grant date using
the Black-Scholes option-pricing model with the following assumptions: dividend
rate of 0% for 2002, 0% for 2001 and 0% to 1.44% for 2000; risk-free interest
rates of 3.04% to 5.05% for 2002, 4.26% to 5.24% for 2001 and 5.41% to 6.74% for
2000; expected lives of 6 years for 2002, 2001 and 2000; and, price volatility
of 65.7% to 92.4% for 2002, 32.7% to 50.5% for 2001 and 29.6% to 33.4% for 2000.

EARNINGS (LOSS) PER COMMON SHARE: All earnings (loss) per share amounts are
calculated in accordance with SFAS No. 128. Basic and diluted earnings (loss)
per share is presented for earnings (loss) from continuing operations, from
discontinued operations and for income (loss) available to common shares. The
numerator of the earnings (loss) from continuing operations per share
calculation, for both basic and diluted, is income (loss) from continuing
operations less dividend requirements on preferred stock. For basic earnings
(loss) per common share, the

                                       64

<PAGE>

denominator is the weighted average number of common shares outstanding during
the year. For diluted earnings (loss) per common share, the denominator is
calculated using the weighted average number of common and dilutive common
equivalent shares outstanding during the period. Common equivalent shares
consist of the incremental common shares issuable upon the exercise of stock
options and warrants (using the treasury stock method), and the incremental
common shares issuable upon the conversion of the convertible preferred stock
(using the if-converted method). Common equivalent shares are excluded from the
calculation if their effect is anti-dilutive. In the case of a loss from
continuing operations, net of preferred dividends, the denominator for the
diluted per common share calculation is average basic shares outstanding, as
using average diluted shares outstanding would result in an antidilutive effect.
See Note 16 for calculations.

FAIR VALUE OF FINANCIAL INSTRUMENTS: SFAS No. 107, Disclosure About Fair Value
of Financial Instruments, requires certain disclosures regarding the fair value
of financial instruments. Cash and cash equivalents, accounts receivable,
accounts payable, accrued liabilities and amounts due to and from affiliates are
reflected in the consolidated financial statements at fair value because of the
short-term maturity of these instruments. The fair value of other financial
instruments are based on quoted market prices or discounted cash flows based on
current market conditions.

            Interest rate swap contracts are utilized by the Company to manage
interest rate risks. The differential to be paid or received is accrued as
interest rates change and is recognized over the life of the agreements as an
adjustment to interest expense. If we terminate an agreement, the gain or loss
is recorded as an adjustment to the basis of the underlying liability and is
amortized over the remaining original life of the agreement. The Company does
not hold or issue interest rate swap agreements for trading purposes.

            In June 1998, the FASB issued SFAS No. 133, as amended by SFAS 138,
Accounting for Derivative Instruments and Hedging Activities. SFAS Nos. 133 and
138 require all derivatives to be measured at fair value and recognized as
either assets or liabilities on the Company's balance sheet. Changes in the fair
values of derivative instruments will be recognized in either earnings or
comprehensive income, depending on the designated use and effectiveness of the
instruments. The Company adopted this standard on January 1, 2001. Upon adoption
of SFAS No. 133, the Company reported the cumulative effect of adoption of $3.9
million reduction in other comprehensive income, net of $2.5 million deferred
tax benefit. For the year ended December 31, 2002, the Company reported
derivative losses of $4.2 million, net of $2.7 million deferred tax benefit. For
the year ended December 31, 2001, the Company reported derivative losses of $4.1
million, net of $2.6 million deferred tax benefit. The related $20.0 million
liability is classified in current liabilities due to defaults under the debt
relating to the interest rate swap agreements (see Note 11).

FINANCIAL STATEMENT CLASSIFICATIONS: Certain amounts on the prior year financial
statements have been reclassified, with no effect on net income, to conform to
classifications adopted in 2002.

OTHER NEW ACCOUNTING PRONOUNCEMENTS: In June 2002, the FASB issued SFAS No. 146,
Accounting for Costs Associated with Exit or Disposal Activities. SFAS No. 146
requires that a liability associated with an exit or disposal activity be
recognized at its fair value when the liability has been incurred, and
supercedes EITF Issue No. 94-3, Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity. Under EITF Issue No.
94-3, certain exit costs were accrued upon management's commitment to an exit
plan, which was generally before an actual liability had been incurred. The
Company adopted SFAS No. 146 on January 1, 2003. A restructuring charge was
reported during the first, second and fourth quarters of 2002 for $4.3 million
relating to severance costs and pension curtailment costs for employees affected
by the reduction in force, lease termination obligations associated with the
exit of certain facilities and financial restructuring legal and advisor costs.
Had the Company reported these charges under SFAS No. 146, the timing of
recognition during 2002 would have been impacted as the related liabilities
would have been recognized when incurred.

            In November 2002, the FASB issued FASB Interpretation No. 45 ("FIN
45"), Guarantor's Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others. FIN 45 requires that
upon issuance of a guarantee, a guarantor must recognize a liability for the
fair value of an obligation assumed under a guarantee. FIN 45 also requires
additional disclosures by a guarantor in its interim and annual financial
statements about the obligations associated with guarantees issued. The
recognition provisions of FIN 45 are effective for guarantees issued after
December 31, 2002, while the disclosure requirements were effective for
financial statements for periods ending after December 15, 2002. At December 31,
2002, the Company had not entered into any material arrangement

                                       65

<PAGE>

that would be subject to the disclosure requirements of FIN 45. The Company does
not believe that the adoption of FIN 45 will have a material impact on its
consolidated financial statements.

            In January 2003, the FASB issued Interpretation No. 46 ("FIN 46"),
"Consolidation of Variable Interest Entities", which clarifies the application
of Accounting Research Bulletin No. 51, Consolidated Financial Statements, to
certain entities in which equity investors do not have the characteristics of a
controlling financial interest or do not have sufficient equity at risk for the
entity to finance its activities without additional subordinated financial
support from other parties. Certain disclosure requirements of FIN 46 are
effective for financial statements of interim or annual periods issued after
January 31, 2003. FIN 46 applies immediately to variable interest entities
created, or in which an enterprise obtains an interest, after January 31, 2003.
For variable interest entities in which an enterprise holds a variable interest
that it acquired before February 1, 2003, FIN 46 applies to interim or annual
periods beginning after June 15, 2003. The Company is in the process of
evaluating the impact of FIN 46 on its consolidated financial statements.

NOTE 4. DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION

The Company manages its business segments with separable management focus and
infrastructures.

Telephone: The Company has two local telephone businesses subject to the
regulations of the State Corporation Commission of Virginia. The Company has
owned one of these for over 100 years and the other was added in early 2001 as
part of the merger with R&B Communications, Inc. ("R&B") (Note 6). These
businesses are incumbent local exchange carriers ("ILEC's") for several areas in
western Virginia, are fully integrated and are managed as one consolidated
operation. Principal products offered by this segment are local service, which
includes advanced calling features, network access, long distance toll and
directory advertising.

Network: In addition to the ILEC services, the Company directly or indirectly
owns 1,800 miles of fiber optic network and provides transport services for long
distance, Internet and private network services. The addition of R&B added 200
miles of fiber. Also, the Company added over 300 new route miles of fiber during
the second half of 2001, connecting many key cities in which the Company sells
products and services. The Company's network is connected and marketed through
Valley Network Partnership ("ValleyNet"), a partnership of three nonaffiliated
communications companies that have interconnected their networks to a 912
route-mile, nonswitched, fiber optic network. The ValleyNet network is connected
to and marketed with other adjacent fiber networks creating approximately 11,000
route-miles of connected fiber optic network serving ten states.

CLEC: The Company began offering CLEC service in 1998. Through one of its wholly
owned subsidiaries certified in Virginia, West Virginia and Tennessee, it
provided CLEC service in four markets throughout 1999 and commenced offering
CLEC services in four additional markets late in 1999. In 2001, the Company
further expanded its CLEC operation by increasing the coverage area within two
existing markets and adding six additional markets in western Virginia and West
Virginia.

Internet: The Company provides Internet access services through a local presence
in 60 markets in Virginia, West Virginia, Tennessee and North Carolina. Through
internal growth and acquisition, the Company has significantly expanded its
Internet Service Provider ("ISP") business and customer base over the last four
years. The Company offers high-speed data services, such as dedicated service
and Digital Subscriber Line ("DSL") in an increasing number of these markets
within this region. In 2001, the Company began offering residential DSL service
in twenty-four of its markets through line sharing, where the Company is not
required to lease a separate line from the incumbent provider but instead pays
an incremental fee to use bandwidth on the existing telephone line running to
the customer.

Wireless PCS: The Company's wireless PCS business carries digital phones and
services, marketed in the retail and business-to-business channels throughout
much of Virginia and West Virginia. The Company's PCS segment operates in three
primary markets: Virginia East, Virginia West and West Virginia. The Virginia
East market covers a 3.0 million populated area primarily in the Richmond and
Hampton Roads areas of Virginia through Richmond 20MHz, LLC, a wholly owned
subsidiary. The region was added in July 2000 from the PrimeCo VA acquisition
(see Note 6). The Virginia West market currently serves a 1.7 million populated
area in central and western Virginia primarily through the

                                       66

<PAGE>

Virginia PCS Alliance, L.C. ("VA Alliance"), a 97% majority owned limited
liability company. The West Virginia market is served by West Virginia PCS
Alliance, L.C. ("WV Alliance"), a 98% majority owned limited liability company,
and currently serves a 1.6 million populated area primarily in West Virginia,
but extending to parts of eastern Kentucky, southwestern Virginia and eastern
Ohio. In addition to the markets indicated above, the Company has licenses,
which are not currently active, that cover a 4.8 million populated area at
December 31, 2002.

            In addition to the end-user customer business, the Company provides
roaming services to other PCS providers and has a wholesale network access
agreement with Horizon Personal Communications, Inc. ("Horizon"). Revenue from
this service was $32.5 million, $19.1 million, and $7.0 million for the years
ended December 31, 2002, 2001 and 2000, respectively (see Note 18).

            The Company began consolidating the VA Alliance and the WV Alliance
in July 2000 and February 2001, respectively. Prior to this, these investments
were accounted for under the equity method of accounting (see Note 5).

Analog Cellular: The analog cellular business carried cellular phones and
services in the retail and business-to-business channels in the Company's
cellular territory (VA Rural Service Area No. 6, "RSA6"). The Company sold the
assets and operations of this business to Verizon in July 2000 in connection
with the PrimeCo VA acquisition (Note 6).

Summarized financial information concerning the Company's reportable segments is
shown in the following table. Wireline communications is comprised of the
telephone, network, CLEC and Internet segments. Other communications services
(indicated in the "Other" column below) includes certain unallocated corporate
related items, as well as results from the Company's paging, alarm, other
communication services and wireline and wireless cable businesses, which are not
considered separate reportable segments. Also included in the Other column in
2002 is $4.3 million of organizational and capital restructuring charges (see
Note 19).

                                       67

<PAGE>

The income statement information noted in this table excludes the directory
assistance segment (Note 7), which is accounted for as a discontinued operation.
The discontinued operation assets are reflected in the "Other" category in prior
years.

<TABLE>
<CAPTION>
                                                                            WIRELESS    ANALOG
(IN THOUSANDS)                       TELEPHONE NETWORK    CLEC   INTERNET     PCS     CELLULAR        OTHER          TOTAL
---------------------------------------------------------------------------------------------------------------------------
<S>                                  <C>      <C>       <C>      <C>       <C>           <C>       <C>            <C>
2002
Operating Revenues                   $ 47,128 $  8,449  $22,858  $ 18,481  $ 156,860   $     -     $   8,951    $   262,727

Operating (Loss) Income                24,791  (17,164)   1,996     1,450   (413,253)        -       (22,379)      (424,559)
Less:  Reconciling Items to arrive
 at EBITDA/1/, a non-GAAP measure:
  Depreciation and Amortization         7,817    3,117    3,934     3,470     61,141         -         3,445         82,924
  Asset Impairment Charges                  -   20,900        -         -    366,950         -        15,030        402,880
                                     -------- --------  -------  --------  ---------   -------     ---------    -----------
EBITDA                                 32,608    6,853    5,930     4,920     14,838         -        (3,904)        61,245
---------------------------------------------------------------------------------------------------------------------------
Total Segment Assets                  140,396   36,944   33,557    16,700    388,537         -        15,884        632,018
Corporate Assets                                                                                                     97,503

Total Assets                                                                                                    $   729,521
                                                                                                                ===========
TOTAL expenditures for long-lived
  segment assets/2/                  $  7,887 $  5,889  $ 4,156  $  2,630  $  49,330   $     -     $   3,272    $    73,164
---------------------------------------------------------------------------------------------------------------------------
2001
Operating Revenues                   $ 42,786 $  8,694  $17,346  $ 17,659  $ 118,832   $     -     $   9,746    $   215,063

Operating (Loss) Income                18,041    4,061     (629)   (2,578)   (80,115)        -          (557)       (61,777)
Less:  Reconciling items to arrive
 at EBITDA/1/, a non-GAAP measure:
Depreciation and Amortization           9,415    3,204    2,533     3,924     59,416         -         3,789         82,281
                                     -------- --------  -------  --------  ---------   -------     ---------    -----------
EBITDA                                 27,456    7,265    1,904     1,346    (20,699)        -         3,232         20,504
---------------------------------------------------------------------------------------------------------------------------
Total Segment Assets                  138,448   56,819   31,812    17,715    786,619         -        31,205      1,062,618
Corporate Assets                                                                                                    134,268
                                                                                                                -----------
Total Assets                                                                                                    $ 1,196,886
                                                                                                                ===========
Total expenditures for long-lived
 segment assets/2/                   $  6,981 $ 10,409  $ 7,973  $  1,736  $  56,362   $     -     $  19,411    $   102,872
---------------------------------------------------------------------------------------------------------------------------
2000
Operating Revenues                   $ 32,169 $  3,693  $ 8,975  $ 13,443  $  39,096   $ 5,556     $  10,587    $   113,519

Operating (Loss) Income                18,190    1,545   (1,944)   (4,474)   (33,048)    2,256            49        (17,426)
Less:  Reconciling items to arrive
 at EBITDA/1/, a non-GAAP measure:
Depreciation and Amortization           4,266      836    1,564     3,537     23,218       396         3,861         37,678
                                     -------- --------  -------  --------  ---------   -------     ---------    -----------
EBITDA                                 22,456    2,381     (380)     (937)    (9,830)    2,652         3,910         20,252
---------------------------------------------------------------------------------------------------------------------------
Total Segment Assets                   47,026   13,650   23,107    19,647    698,823         -        33,371        835,624
Corporate Assets                                                                                                    243,393
                                                                                                                -----------
Total Assets                                                                                                    $ 1,079,017
                                                                                                                ===========
Total expenditures for long-lived
 segment assets/2/                   $  4,405 $  3,444  $ 7,575  $  4,139  $  31,834   $     -     $  14,193    $    65,590
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
----------
/1/     See  discussion on use of EBITDA in the management discussion and
        analysis overview section.
/2/     Includes purchases of long-lived assets other than deferred charges and
        deferred tax assets and excludes additions from business combinations
        discussed in Note 6.

Wireless cable revenues, which are reflected within the other segment in the
table above, are reported net of programming and equipment costs of $1.2
million, $1.5 million and $1.5 million for the years ended December 31, 2002,
2001 and 2000, respectively.

            The accounting policies of the segments are the same as those
described in the significant accounting policies (Note 3). The Company evaluates
the performance of its operating segments principally on operating revenues and
EBITDA (operating income before depreciation and amortization and asset
impairment charges). Corporate functions are allocated at cost to the operating
segments and all other intercompany transactions are cost based. Segment
depreciation and amortization contains an allocation of depreciation and
amortization from corporate assets. Corporate depreciation and amortization
expense not allocated to the segments is indicated in the "Other" column in the
preceding table. Depreciation and amortization of corporate assets was $1.5
million, $1.5 million and $1.4 million of the total "Other" depreciation and
amortization for the years ended December 31, 2002, 2001 and 2000, respectively.

                                       68

<PAGE>

NOTE 5. INVESTMENTS IN WIRELESS AFFILIATES

Pursuant to the merger between NTELOS and R&B Communications effective February
13, 2001, the Company's ownership in the VA Alliance and the WV Alliance
increased to 91% and 79%, respectively (see Note 6). Prior to the merger with
R&B, the Company had a 45% and 65% ownership interest in the WV Alliance and VA
Alliance, respectively. Additional minority interest was purchased from other
members during 2001 in exchange for 320,000 shares of common stock and a cash
payment of $.2 million. The Company owned 97% and 98% of the VA Alliance and the
WV Alliance, respectively, at December 31, 2001 and thereafter.

            On July 25, 2000, the Company converted its preferred interest to
common interest and exercised its right to fund the redemption of the VA
Alliance's Series A preferred membership interest. As a result of this
redemption, the Company increased its common interest from 21% to 65% and
commenced consolidating the VA Alliance as of July 26, 2000 (Note 6). On
February 13, 2001, concurrent with the R&B merger, the Company commenced
consolidating the WV Alliance. For the year ended December 31, 2000, operating
revenues, operating loss and net loss of the VA Alliance were $23.0 million,
$20.7 million and $35.3 million, respectively, and of the WV Alliance were $13.2
million, $14.5 million and $19.4 million, respectively. The Company's share of
the VA Alliance's 2000 net loss for the period through July 26, 2000, the date
of consolidation, was $3.7 million. The Company's share of the WV Alliance 2000
net loss for the year ended December 31, 2000 was $8.6 million. Operating
revenue, operating loss and net loss for the WV Alliance for the 43 day period
ended February 13, 2001 were $2.5 million, $1.7 million and $2.9 million,
respectively. The Company's equity share of the WV Alliance losses for the
period January 1, 2001 through February 13, 2001 was $1.3 million. See Note 6
regarding step acquisition accounting.

NOTE 6. MERGER AND ACQUISITIONS

      R&B Communications Merger

Effective February 13, 2001, the Company closed on its merger with R&B
Communications. Under the terms of the merger, the Company issued approximately
3.7 million shares of its common stock in exchange for 100% of R&B's outstanding
common stock. The transaction was valued at $131.4 million, or $35.47 per share,
based on the average price for the two days preceding May 18, 2000, the date the
merger terms were agreed to and announced. The merger is being accounted for
using the purchase method of accounting. The excess of the total acquisition
cost over the fair value of the net assets acquired of approximately $95.9
million was allocated to goodwill in the telephone and network segments and will
be tested for impairment annually according to the provisions of SFAS No. 142
(see Note 2).

            R&B is an Integrated Communications Provider ("ICP") providing local
and long distance telephone service, and dial-up and high-speed Internet service
to business and residential customers in Roanoke, Virginia and the surrounding
area, as well as in the New River Valley of Virginia. This merger added
approximately 11,600, 6,400 and 2,100 customers to the telephone, CLEC and
Internet segments, respectively. Additionally, R&B has a network operation which
added 200 fiber miles.

            R&B owns a 26% membership interest in the VA Alliance and a 34%
membership interest in the WV Alliance. Effective with the merger, the Company
owned 91% and 79% of the VA Alliance and WV Alliance, respectively (see Note 5).

            Operating revenues, operating income and net loss of R&B for the
year ended December 31, 2000 were $18.9 million, $3.5 million and $7.5 million,
respectively.

                                       69

<PAGE>

      PRIMECO VA ACQUISITION

On July 26, 2000, the Company closed on the acquisition of the PCS licenses,
assets and operations of PrimeCo Personal Communications, L.P., which is located
in the Richmond and Hampton Roads areas of Virginia ("PrimeCo VA"). The Company
acquired PrimeCo VA for cash of $408.6 million, the assumption of approximately
$20.0 million of lease obligations and the transfer of a limited partnership
interest and the assets, licenses and operations of our analog wireless
operation, with a combined value of approximately $78.5 million. This
acquisition was accounted for under the purchase method of accounting. The
Company's results of operations include PrimeCo VA operating results commencing
on July 26, 2000. Costs in excess of the fair value of the net assets acquired
were allocated to identifiable intangible assets and goodwill and will be tested
for impairment annually according to the provisions of SFAS No. 142 (see Note
2). Of the total purchase price, $338 million was allocated to the fair value of
the PCS licenses. Total goodwill was $25.8 million and the value of other
intangible assets was $40.1 million.

            In connection with the PrimeCo VA acquisition, the Company exchanged
the cellular analog assets and operations of Virginia Rural Service Area No. 6
("VA RSA6") and its 22% limited partnership interest in Virginia Rural Service
Area No. 5 ("VA RSA5") as part of the consideration paid in the acquisition. The
exchange was valued at $78.5 million, in the aggregate, and resulted in a book
gain of $62.6 million, before income tax. VA RSA6's analog operations
contributed revenues and EBITDA of $5.6 million and $2.7 million, respectively,
for the period January 1, 2000 through July 25, 2000, the date of disposition.
The equity income from VA RSA5 was not material for the periods presented.

      VA AND WV ALLIANCES - STEP ACQUISITIONS

Concurrent with the closing of the PrimeCo VA acquisition and the related debt
and equity financing (Note 8), the VA Alliance redeemed its Series A preferred
membership interest for $16.8 million. This payment included consideration for
redemption of $12.9 million in principal, $2.8 million in accrued dividends and
$1.1 million in early redemption fees. The Company then exercised its right to
fund $11.4 million of this redemption in exchange for additional common
membership interest in the VA Alliance. The Company also elected to convert its
convertible preferred membership interest in the VA Alliance into a common
membership interest. These redemptions and conversions increased the Company's
common membership interest in the VA Alliance from 21% to 65%. As mentioned in
Note 5, the Company consolidated the operations of the VA Alliance as of July
26, 2000. Pursuant to this transaction, the basis in the VA Alliance was stepped
up by $43.9 million which was allocated to the PCS licenses.

            Pursuant to the merger between NTELOS and R&B Communications
effective February 13, 2001, the Company's ownership in the VA Alliance and WV
Alliance increased to 91% and 79%, respectively (Note 5), at which time the
Company began consolidating the WV Alliance. Pursuant to this transaction, the
basis in the WV Alliance was stepped up by $21.6 million which was allocated to
the PCS licenses.

            Additionally, during 2001, the Company issued 320,000 shares with an
aggregate value of $4.8 million and paid cash of $.2 million as consideration to
acquire an additional 5% of the VA Alliance and an additional 19% of the WV
Alliance from other minority interest members. The Company owned 97% of the VA
Alliance and 98% of the WV Alliance (Notes 4 and 5) at December 31, 2001 and
thereafter.

      LICENSE ACQUISITIONS/EXCHANGES

During 2001, the Company acquired PCS licenses from AT&T in southern and central
Pennsylvania and southeastern Ohio, an area with a population of approximately
2.9 million which is contiguous to the Company's existing license holdings. This
was a non-cash transaction, accounted for as a like-kind exchange, in which the
Company exchanged certain of its non-operating WCS licenses, with a book value
of $.1 million, for these PCS licenses. Accordingly, no gain or loss was
recorded on this transaction.

                                       70

<PAGE>

NOTE 7. DISPOSITIONS

      DIRECTORY ASSISTANCE SEGMENT

Effective July 11, 2000, pursuant to a stock purchase agreement dated May 17,
2000 with telegate AG, a Federal Republic of Germany corporation, the Company
sold the capital stock of CFW Information Services, Inc., through which
directory assistance operations are conducted, and sold its equity interest in
Listing Services Solutions, Inc. In exchange, the Company received $32.0 million
in cash and $3.5 million in deferred consideration that was paid in cash in
January 2001, and recognized a $26.2 million gain, before tax, ($16.0 million
after tax). As such, the directory assistance operation is treated as a
discontinued operation in these financial statements. Accordingly, the overhead
costs which had been allocated to this business segment, but were not
specifically identified and incremental to the directory assistance operation,
were reclassified as corporate expenses and included in "Other" (Note 4). These
costs totaled $.7 million for the year ended December 31, 2000. Operating
revenues, operating income and net income pertaining to the discontinued
operation for the period through July 11, 2000 were $6.8 million, $.6 million
and $.4 million, respectively.

      TOWERS

In January 2002, the Company sold 24 communications towers for $8.2 million. In
November 2001, the Company sold 46 towers in the Virginia East market for $15.6
million. In early 2000, the Company sold 151 towers for $47.4 million. In
connection with these transactions, the Company has certain future leaseback and
other commitments. Accordingly, the gain on these sales has been deferred for
financial reporting purposes and is being amortized over a ten year expected
leaseback period. The remaining unamortized deferred gains totaled $22.2 million
on December 31, 2002.

      OTHER NON-STRATEGIC ASSET SALES

In the first quarter of 2002, the Company sold certain excess PCS licenses for
proceeds of $2.4 million, recognizing a $2.0 million gain. In April 2002, the
Company sold certain excess PCS radio spectrum licenses for proceeds of $12.0
million, recognizing a $2.8 million gain. In July 2002, the Company sold certain
other PCS radio spectrum licenses for proceeds of $3.6 million, recognizing a
$3.6 million gain.

            In May 2002, the Company sold its 3% minority partnership interest
in America's Fiber Network LLC for proceeds of $2.6 million, recognizing a $.2
million loss on the transaction reported in other (expense) income on the
Consolidated Statements of Operations. Concurrently, the Company purchased the
use of approximately 700 new route miles of fiber contiguous to, or an extension
of, the Company's existing fiber for $2.6 million.

            In July 2002, the Company agreed to terms with telegate AG, the
purchaser of NTELOS' directory assistance operation in 2000, to release telegate
AG from certain building lease obligations related to that transaction. In
consideration, the Company received $.9 million in cash and $.2 million in
furniture and fixtures. This $1.1 million settlement was reported in operating
revenues within the other communications services line. The original lease term
was five years with annual lease revenue of $.8 million, which was reported in
operating revenues within the other communication services line as well. In
2002, prior to the termination settlement, the Company recorded lease revenue of
$.5 million.

            During the year ended December 31, 2002, the Company sold various
investments for $1.6 million, which approximated the related investment carrying
values. Additionally, during the second quarter of 2002, the Company recognized
a $1.1 million permanent impairment loss associated with its investment in
WorldCom, Inc. which is classified in other income (expense) in the consolidated
statements of operations.

            In December 2001, the Company sold certain PCS licenses in
Kingsport, Tennessee to Lafayette Communications for $11.6 million, recognizing
a gain before taxes of $8.6 million. In the second and third quarters of 2001,
the Company sold all its holdings in Illuminet, Inc. for proceeds of $30.6
million, recognizing a gain before taxes of $23.0 million.

                                       71

<PAGE>

NOTE 8. LONG-TERM DEBT IN DEFAULT (AT DECEMBER 31, 2002) AND OTHER LONG-TERM
DEBT

Long-term debt in default (at December 31, 2002) and other long-term debt
consist of the following as of December 31:

<TABLE>
<CAPTION>
(In thousands)                                                                               2002             2001
----------------------------------------------------------------------------------------------------------------------
<S>                                                                                     <C>               <C>
Variable rate Senior Secured Term Loans due from 2004 to 2008                           $     260,500     $    225,000
6.25% to 7.0% Notes payable secured by certain PCS radio spectrum
 licenses with original maturities from 2000 through 2006                                       8,180           12,035
5.0% to 6.05% Notes payable secured by certain assets with original
 maturities from 2008 through 2021                                                              6,712            7,308
13.0% Unsecured Senior Notes, issued at 98.61% of par value, with an
 effective interest rate of 13.25% due in 2010, net of unamortized
 discount of $8.6 million and $9.5 million for the fiscal years
 ended 2002 and 2001, respectively                                                            271,416          270,492
13.5% Unsecured Subordinated Notes, issued at par, due in 2011, net of
 unamortized discount of $9.2 million and $10.5 million for the
 fiscal years ended 2002 and 2001, respectively                                                85,765           84,545
Net present value of long-term capital leases due 2001 to 2005                                 10,149           13,036
----------------------------------------------------------------------------------------------------------------------
                                                                                              642,722          612,416
Less current portion - long-term debt in default in 2002 and scheduled
   maturities                                                                                 623,762                -
----------------------------------------------------------------------------------------------------------------------
Long-term debt                                                                          $      18,960     $    612,416
======================================================================================================================
</TABLE>

LONG-TERM DEBT IN DEFAULT AND OTHER LONG-TERM DEBT

On March 4, 2003 the Company and certain of its subsidiaries filed voluntary
petitions for reorganization under Chapter 11 of the United States Bankruptcy
Code (see Note 1). In addition, the Company did not make the scheduled
semi-annual interest payments due on February 18, 2003 on its 13% senior notes
due 2010 ("Senior Notes") and 13.5% subordinated notes due 2011 ("Subordinated
Notes") of $18.2 million and $6.4 million, respectively. As a result of the
bankruptcy filing, a default for non-payment of these interest payments and
non-compliance with a debt to capitalization covenant under its Senior Secured
Term Loans (also referred to as "Senior Credit Facility"), the Company has
classified borrowings under its Senior Credit Facility, Senior Notes and
Subordinated Notes as current liabilities within the caption "Long-term debt in
default and scheduled maturities".

            In July 2000, the Company obtained financing through issuance of
Senior Notes for $280 million, Subordinated Notes for $95 million, Senior Credit
Facility of up to $325 million and various preferred stock offerings of $250
million. These financing transactions closed concurrent with or just prior to
the PrimeCo VA acquisition. The Company used the proceeds of the financing
vehicles to fund the PrimeCo VA acquisition, to repay substantially all of its
existing indebtedness and that of the Alliances, and for future expansion. Prior
to this closing, the Company had entered into a bridge financing arrangement
which was not utilized. Accordingly, the Company expensed $6.5 million in bridge
financing and other commitment fees in 2000.

            The Senior Notes were issued at 98.61% of par value and contain a
13.0% coupon rate, with an effective rate of 13.25%. They mature in August 2010.
Under the terms of the Senior Note Indenture, the Company purchased investments
in restricted cash instruments in July 2000 totaling $69.1 million. These
instruments were required specifically for the purpose of funding the first four
semi-annual interest payments due in 2001 and 2002 against these notes. The
Senior Notes are redeemable at a redemption price of up to 106.5%, reducing to
100% by August 2008, and contain various financial covenants. Additionally, the
Senior Notes were issued with warrants to purchase an aggregate of 504,000
shares of the Company's common stock at a price of $47.58 per share. The
warrants were valued at $6.9 million using the Black-Scholes option-pricing
model, are exercisable and expire August 2010. The Senior Notes were recorded
net of the $3.9 million discount associated with the issue price and $6.9
million for the related warrants. The

                                       72

<PAGE>

discounts and the reduction relating to the warrants are being accreted and this
accretion is reflected as interest expense in the statements of operations. The
accretion period for the discount and reduction for warrants is through 2008 and
2010, respectively. Total accretions were $.9 million for both 2002 and 2001 and
$.4 million for 2000.

            The Subordinated Notes were issued at par and contain a 13.5% coupon
rate. They mature in February 2011. These notes are subordinate to all senior
indebtedness, including the Senior Notes. These notes contain early redemption
features similar to the Senior Notes. The Subordinated Notes were issued with
warrants to purchase an aggregate of 300,000 shares of the Company's common
stock at a price of $0.01 per share. These warrants were valued at $12.2 million
using the Black-Scholes option-pricing model, are exercisable one year from July
2000 and expire February 2011. The Subordinated Notes were recorded net of the
$12.2 million for the related warrants which are being accreted through 2011 and
are reflected as interest expense in the statements of operations. Total
accretions were $1.2 million for both 2002 and 2001 and $.5 million for 2000.

            The Company has borrowed $261 million as of December 31, 2002 and
$225 million as of December 31, 2001 of the $325 million Senior Credit Facility.
The loans contain a tranche A term loan of $50 million, tranche B term loan of
$100 million, tranche C term loan of $75 million and a revolving credit facility
of $100 million. Commitment fees are incurred on the unused portion of the
revolving credit facility. Commitment fees incurred for the three years ended
December 31, 2000, 2001 and 2002 were $.4 million, $.8 million and $.6 million,
respectively. The Senior Credit Facility loans began maturing in 2002, with a
$.5 million principal payment on the tranche B term loan made in the second half
of 2002. The loans bear interest at rates of 3% to 4% above the Eurodollar rate
or 2.5% to 3% above the federal funds rates. The loans contain certain financial
covenants and restrictions as to their use. The Company was in default of the
debt to total capitalization covenant requirement at December 31, 2002. This
covenant was not met due to the significant asset impairment charges recognized
in the fourth quarter of 2002. Accordingly, due to this and other issues noted
above, access to the Senior Credit Facility was restricted and the debt, along
with the other debt instruments containing cross-default provisions were listed
as current obligations at December 31, 2002.

            The Company has incurred loan origination fees and other closing
costs related to the above financing totaling $19.9 million which are classified
as deferred charges on the Company's balance sheet. These costs are being
amortized to interest expense over the life of the respective instrument.
Amortization of these costs were $2.5 million, $2.2 million and $.9 million for
the fiscal years ended 2002, 2001 and 2000, respectively.

            In September 1996, the VA Alliance entered into two 7.0% installment
notes with the Federal Communications Commission ("FCC") related to licenses
awarded in the PCS radio spectrum Block "C" auction. Interest only was payable
quarterly through September 30, 2002. Commencing December 31, 2002, principal
and interest is payable in equal quarterly installments of $.5 million through
June 30, 2006.

            At December 31, 2001 the Company classified borrowings under its
notes payable and lines of credit as long-term, since the Company had the
ability and the intent to refinance these borrowings with existing lines of
credit that have a maturity of beyond one year.

            The Company's blended interest rate on its long-term debt as of
December 31, 2002, 2001, and 2000 is 11.0%, 11.7%, and 10.4%, respectively.

            As of December 31, 2002, aggregate maturities of long-term debt for
each of the next five years, based on the contractual terms of the instruments
is as follows: $9.6 million in 2003, $17.3 million in 2004, $16.2 million in
2005, $21.3 million in 2006, $47.7 million in 2007 and $548.6 million
thereafter. These maturities have not been adjusted to reflect any changes or
acceleration that may occur as a result of the aforementioned events of default
or the filing for Chapter 11.

CAPITAL LEASES

In conjunction with the PrimeCo VA acquisition (Note 6), the Company entered
into a series of sublease agreements with PrimeCo Personal Communications L.P.
("PrimeCo PCS") for certain digital switching and network equipment which was
valued at $53 million and is included with network plant and equipment. During
1997 and 1996, PrimeCo VA entered into a series of sale/leaseback transactions
("Master Lease Agreements") with various Japanese banks and leasing companies to
finance the acquisition of the network equipment.

                                       73

<PAGE>

            The Master Lease Agreements provide for the payment of basic rent,
supplemental rent, and purchase option payments. The Company's sublease
agreements provide for fixed rent and purchase options payments, in fixed US
dollar amounts, to coincide with PrimeCo PCS's obligations under the Master
Lease Agreements. The sublease agreements have been recorded as capital leases
using an 11.33% discount rate on all future minimum payments due under the
leases.

            Future minimum lease payments under the capital leases are $4.7
million in 2003, $6.8 million in 2004, and $.1 million in 2005. At December 31,
2002, the net present value of these future minimum lease payments is $10.2
million, which is net of amounts representing interest of $1.4 million, $.9
million of which relates to 2003. The portion of this obligation due in 2003 is
$3.7 million and is classified in current liabilities (included in the long-term
debt in default and scheduled maturities line on the Consolidated Balance
Sheets), while the remaining $6.5 million due in years after 2003 is classified
as long-term debt.

            The entire net present value of minimum lease payments was
classified as non-current at December 31, 2001 as the Company had the ability
and intent to pay the current portion ($3.7 million) with existing long-term
debt. In addition to the above payment obligations, the sublease agreements
include certain general and tax indemnifications in favor of PrimeCo PCS and its
affiliates. These indemnifications address loss claims arising from the
operation of the sublease agreements as well as flow through indemnifications
from the Master Lease Agreements.

NOTE 9. REDEEMABLE, CONVERTIBLE PREFERRED STOCK

Redeemable, convertible preferred stock consists of the following as of December
31:

<TABLE>
<CAPTION>
    (In thousands)                                                                            2002            2001
    -------------------------------------------------------------------------------------------------------------------
    <S>                                                                                  <C>              <C>
    8.5% Series B redeemable, convertible preferred stock, net of
     unamortized discount of $5.8 million ($6.5 million for 2001)                        $     132,071    $     120,314
    5.5% Series C redeemable, convertible preferred stock, net of
     unamortized discount of $2.8 million ($3.2 million for 2001)                              154,093          145,433
    -------------------------------------------------------------------------------------------------------------------
                                                                                         $     286,164    $     265,747
    ===================================================================================================================
</TABLE>

            During the third quarter of 2000, the Company completed preferred
stock offerings consisting of Series B convertible, redeemable preferred stock
("Series B preferred") of $112.5 million, Series C convertible, redeemable
preferred stock ("Series C preferred") of $60.3 million, and Series D redeemable
preferred stock ("Series D preferred") of $77.2 million. The Series B preferred
converts to common stock at $41 per share, contains warrants to purchase an
aggregate of 500,000 shares of the Company's common stock at a price of $50 per
share and pays an 8.5% per annum dividend payable semi-annually on June 30 and
December 31. The related warrants have been valued at $3.8 million using the
Black-Scholes option-pricing model, are exercisable one year from July 2000, and
expire February 2011. In December 2000, the shareholders approved the conversion
of the 18% Series D preferred into Series C preferred, modified the conversion
and dividend terms of the Series C preferred and modified other various terms of
the Series B preferred and Series C preferred. As a result of the shareholder
approval, the Series C preferred is convertible to common stock at $45 per share
and pays a 5.5% per annum dividend payable semi-annually on June 30 and December
31. Under restrictions related to the Company's long-term debt, dividends are
currently paid in-kind and therefore are added to the carrying value of the
preferred stock. The Company has accreted the value of the Series B preferred
for dividends in-kind for a total of $25.3 million as of December 31, 2002
($14.3 million and $4.3 million at December 31, 2001 and 2000, respectively).
Series C preferred has been accreted for dividends in-kind totaling $19.4
million as of December 31, 2002 ($11.1 million and $3.3 million at December 31,
2001 and 2000, respectively). Accordingly, the $19.3 million and $17.8 million
dividend requirements in the fiscal years 2002 and 2001, respectively ($7.6
million in 2000), have not been reflected in our Statements of Cash Flows. The
preferred stock becomes redeemable in 2010 for $250 million plus cumulative
unpaid dividends.

            Closing costs associated with the Series B and Series C preferred
stock totaled $7.5 million. These costs, along with the value assigned to the
warrants noted above, are netted against preferred stock on the balance sheet
and are accreted over the term between the date the preferred stocks were issued
and the date they become convertible. Accretion

                                       74

<PAGE>

of these costs are included in the dividend requirements on preferred stock on
the Statements of Operations and totaled $1.1 million for the fiscal years end
2002 and 2001 ($.5 million in 2000).

NOTE 10. SUPPLEMENTARY DISCLOSURES OF CASH FLOW INFORMATION

            The following information is presented as supplementary disclosures
for the Consolidated Statements of Cash Flows for the period ended December 31:

<TABLE>
<CAPTION>
    (In thousands)                                                  2002              2001              2000
    -------------------------------------------------------------------------------------------------------------
    <S>                                                        <C>               <C>               <C>
    Cash payments (receipts) for:
       Interest, net of capitalized interest of $327 in
        2002, $1,320 in 2001, and $1,313 in 2000               $      $36,187    $       29,392    $       31,280
       Income taxes                                            $       (1,038)   $       (2,216)   $        1,340
    -------------------------------------------------------------------------------------------------------------
</TABLE>

            In July 2001, the Company announced the signing of a definitive
merger agreement to acquire Conestoga Enterprises, Inc. ("CEI"). In November
2001, CEI announced that it had signed a conditional agreement to merge with a
third party, believing this transaction to be superior to the original merger
agreement with NTELOS Inc. Subsequently, management of the Company terminated
its original merger agreement with CEI in December 2001. Under the terms of the
merger agreement, the Company received a $10 million termination fee. The
Company recorded a $2.2 million gain on this transaction, which is included in
other income, net of financing and commitment fees and legal and other costs
associated with the transaction.

            In February 2001, the Company closed on the non-cash merger
transaction with R&B, resulting in the issuance of 3.7 million common shares of
the Company in exchange for the common shares of R&B (Note 6).

            Concurrent with closing the PrimeCo VA acquisition and
aforementioned financing (Notes 6, 8 and 9), $149.4 million of the amount
borrowed under the Senior Credit Facility was loaned to the Alliances, which
they used to repay their indebtedness to the Rural Telephone Finance Cooperative
("RTFC"). Additionally, of the total proceeds obtained from all financing
sources, the Company paid $408.6 million to PrimeCo as part of the acquisition
consideration, paid $43.0 million of outstanding borrowings under previously
existing lines of credit, placed $69.1 million in escrow to be used to fund the
first four interest payments on the Senior Notes, acquired additional common
ownership interest in the VA Alliance for $11.4 million, and incurred
approximately $36.0 million in transaction fees and costs and issued warrants
valued at $22.9 million relating to all of the transactions discussed herein. Of
the total transaction fees and costs, $6.5 million has been recognized as bridge
financing costs with the majority of the remainder to be recognized through
amortization and accretion over the expected life of the related asset or debt
obligation.

NOTE 11. FINANCIAL INSTRUMENTS

            The Company is exposed to market risks with respect to certain of
the financial instruments that it holds. See Note 1 for a discussion of the
bankruptcy filing on March 4, 2003 which could result in a material change in
the fair value of the financial instruments. The following is a summary by
balance sheet category:

CASH AND SHORT-TERM INVESTMENTS: The carrying amount approximates fair value
because of the short-term maturity of those instruments.

LONG-TERM INVESTMENTS: The fair values of investments are based on quoted market
prices for those investments which are actively traded. For investments where
there are no quoted market prices, a reasonable estimate of fair value could not
be made without incurring excessive costs. Of the investments carried under the
cost method, $8.3 million, or 95% of the total, are high quality instruments.
Additional information regarding the Company's investments is included in Notes
5 and 12.

INTEREST RATE SWAPS: During September 2000, in accordance with conditions of the
Senior Notes, the Company entered into two interest rate swap agreements with
aggregate notional amounts of $162.5 million, with maturities of up to 5 years,
to manage its exposure to interest rate movements by effectively converting a
portion of its long-term debt

                                       75

<PAGE>

from variable to fixed rates. The net face amount of interest rate swaps subject
to variable rates as of December 31, 2002 and 2001 was $162.5 million. These
agreements involve the exchange of fixed rate payments for variable rate
payments without the effect of leverage and without the exchange of the
underlying face amount. Fixed interest rate payments are at a per annum rate of
6.76%. Variable rate payments are based on one month US dollar LIBOR. The
weighted average LIBOR rate applicable to these agreements was 1.382% and 1.876%
as of December 31, 2002 and 2001, respectively. The notional amounts do not
represent amounts exchanged by the parties, and thus are not a measure of
exposure of the Company. The amounts exchanged are normally based on the
notional amounts and other terms of the swaps. Interest rate differentials paid
or received under these agreements are recognized over the one-month maturity
periods as adjustments to interest expense. The fair values of our interest rate
swap agreements are based on dealer quotes. The fair value of the interest rate
swap agreements at December 31, 2002 and 2001 was a liability of $20.0 million
and $13.1 million, respectively. The interest rate swap liability at December
31, 2002 has been classified as a current liability as a result of the
bankruptcy filing and a cross-default as a result of non-compliance with the
debt to capitalization rates under the Senior Credit Facility (see Note 8).

            Neither the Company nor the counterparties, which are prominent
banking institutions, are required to collateralize their respective obligations
under these swaps. The Company is exposed to loss if one or more of the
counterparties default. At December 31, 2002, the Company had no exposure to
credit loss on interest rate swaps. The Company does not believe that any
reasonably likely change in interest rates would have a material adverse effect
on the financial position, the results of operations or cash flows of the
Company. All interest rate swaps are reviewed with and, when necessary, are
approved by the Company's Board of Directors.

DEBT INSTRUMENTS: The fair value of our Senior Notes due in 2010, which are
traded on open markets, is based on dealer quotes for those instruments. The
Senior Notes have traded well below their book values, with the values noted in
the table below being indicative of the values during much of the period since
issuance. The Company's management believes that the risk of the fair value
exceeding the carrying value of this debt in the foreseeable future is unlikely
due to the current trading level, as well as market and industry conditions.

            On December 31, 2002, the Company's Senior Credit Facility totaled
$260.5 million, $98 million over the swap agreements. Therefore, the Company had
variable rate exposure related to this amount over the swap agreement as noted
above. In the table below, the Company assumed the fair value of the Senior
Credit Facility to be equal to the face value.

            The fair value of the Company's Senior Notes was determined based on
the most recent trading prices prior to year-end 2002. The Company assumed that
the fair value of the Subordinated Notes were discounted similar to that of the
Senior Notes. The fair value of all other long-term debt, which is not traded on
open markets, is estimated based on the effective rates of the Senior Credit
Facility (after giving effect of the interest rate swap), the Subordinated Notes
and the Senior Notes. The fair values represent estimates of possible value,
which may not be realized in the future (see Note 3).

                                       76

<PAGE>

            The following table indicates the difference between face amount,
carrying amount and fair value of the Company's financial instruments at
December 31, 2002 and 2001:

<TABLE>
<CAPTION>
      Financial Instruments (In thousands)                      Face amount     Carrying amount        Fair value
      -------------------------------------------------------------------------------------------------------------
      <S>                                                     <C>               <C>                 <C>
      December 31, 2002
      Nonderivatives:

      Financial assets:
          Cash and short-term investments                     $        12,216   $          12,216   $        12,216
          Restricted cash
          Long-term investments for which it is:
           Practicable to estimate fair value                 $           N/A   $           8,593   $         8,593
           Not practicable to estimate fair value                         N/A                 103               103

      Financial liabilities:
          Marketable long-term debt* in default               $       280,000   $         271,416   $        84,000
          Non-marketable long-term debt*                              380,540             371,306           311,237

          Derivatives relating to debt:
          Interest rate swaps                                 $       162,500** $          20,012   $        20,012

      December 31, 2001
      Nonderivatives:

      Financial assets:
          Cash and short-term investments                     $         7,293   $           7,293   $         7,293
          Restricted cash                                              18,069              18,069            18,069
          Long-term investments for which it is:
            Practicable to estimate fair value                $           N/A   $          10,346   $        10,346
            Not practicable to estimate fair value                        N/A               3,617             3,617

      Financial liabilities:
          Marketable long-term debt                           $       280,000   $         270,492   $       196,000
          Non-marketable long-term debt                               352,379             341,924           320,219

          Derivatives relating to debt:
          Interest rate swaps                                 $       162,500*  $          13,102   $        13,102
</TABLE>

*  A majority of which is in default at December 31, 2002 (Note 8)
** Notional amount

                                       77

<PAGE>

NOTE 12. SECURITIES AND INVESTMENTS

            Investments consist of the following as of December 31:

<TABLE>
<CAPTION>
                                                                                                    Carrying Values
   (In thousands)                                        Type of Ownership                         2002        2001
   ------------------------------------------------------------------------------------------------------------------
   <S>                                                   <C>                                     <C>         <C>
   AVAILABLE FOR SALE:

   WorldCom, Inc.                                        Equity Securities                       $      -    $    916
   Other                                                 Equity Securities                             44         231
   ------------------------------------------------------------------------------------------------------------------
                                                                                                       44       1,147

   COST METHOD:

   Restricted investments                                Cooperative subordinated capital           7,829       7,829
                                                           certificates

   America's Fiber Network, LLC (see Note 7)             Partnership Interest                           -       2,437
   Cash surrender value of life insurance policies       Guaranteed rate government securities        720       1,699
   Other                                                 Equity securities                            103         851
   ------------------------------------------------------------------------------------------------------------------
                                                                                                    8,652      12,816
                                                                                                 --------------------
                                                                                                 $  8,696    $ 13,963
   ==================================================================================================================
</TABLE>

            The Company acquired RTFC subordinated capital certificates ("SCC")
of $7.5 million concurrent with the tranche C Senior Credit Facility borrowings
of $75 million. The debt instrument required the Company to purchase SCC's equal
to 10% of the tranche C term loan of the Senior Credit Facility. The SCC's are
nonmarketable securities and are stated at historical cost and are included in
restricted investments. As the RTFC loans are repaid, the SCC's will be refunded
through a cash payment to maintain a 10% SCC to outstanding loan balance ratio.

            Changes in the unrealized gain (loss) on available for sale
securities during the years ended December 31, 2002 and 2001, reported as a
separate component of shareholders' equity (deficit), are as follows:

<TABLE>
<CAPTION>
   (In thousands)                                                                   2002           2001          2000
   ----------------------------------------------------------------------------------------------------------------------
   <S>                                                                          <C>            <C>           <C>
   Unrealized gain (loss), beginning balance                                    $      (195)   $     8,458   $     35,869
   Realization of gain due to sale of investment                                         -          (8,458)             -
   Unrealized holding losses during the year                                           (321)          (319)       (21,927)
   Reclassification of unrealized loss due to investment impairment                     509             -               -
   ----------------------------------------------------------------------------------------------------------------------
   Unrealized loss, ending balance                                                       (7)          (319)        13,942
   Deferred tax effect related to net unrealized holding gains                           -             124         (5,484)
   ----------------------------------------------------------------------------------------------------------------------
   Unrealized loss, included in shareholders' equity (deficit)                  $        (7)   $      (195) $       8,458
   ======================================================================================================================
</TABLE>

                                       78

<PAGE>

NOTE 13. INCOME TAXES

The components of income tax expense are as follows for the years ended December
31:

<TABLE>
<CAPTION>
(In thousands)                                                        2002              2001               2000
                                                                 ----------------------------------------------------
<S>                                                              <C>               <C>                <C>
Current tax expense:
         Federal                                                 $            -    $             -    $             -
         State                                                              957                781                411
                                                                 ----------------------------------------------------
                                                                            957                781                411
                                                                 ----------------------------------------------------
Deferred tax (benefit) expense:
         Federal                                                       (137,775)           (29,829)               754
         State                                                          (25,131)            (5,484)               161
         Valuation allowance for temporary differences                  155,485                  -                  -
                                                                 ----------------------------------------------------
                                                                         (7,421)           (35,313)               915
                                                                 ----------------------------------------------------
                                                                 $       (6,464)   $       (34,532)   $         1,326
                                                                 ====================================================

Income tax (benefit) expense from continuing operations          $       (6,464)   $       (34,532)   $         1,326
Income tax expense from discontinued operation                                -                  -                252
Income tax expense from gain on sale of discontinued operation                -                  -             10,205
                                                                 ----------------------------------------------------
                                                                 $       (6,464)   $       (34,532)   $        11,783
                                                                 ====================================================
</TABLE>

Total income tax (benefit) expense was different than an amount computed by
applying the graduated statutory federal income tax rates to income before
taxes. The reasons for the differences are as follows for the years ended
December 31:

<TABLE>
<CAPTION>
(In thousands)                                                        2002              2001               2000
---------------------------------------------------------------------------------------------------------------------
<S>                                                              <C>               <C>                <C>
Computed tax at statutory rate                                   $     (173,394)   $       (35,865)   $           685
Gain on sale of investments                                                 -                2,091                  -
State income taxes, net of federal income tax benefit                   (15,713)            (4,072)               372
Nondeductible asset impairments                                          26,951                -                  -
Nondeductible amortization                                                  -                2,218                273
Valuation allowance for temporary differences                           155,485                -                  -
Other, net                                                                  207              1,096                 (4)
                                                                 ----------------------------------------------------
                                                                 $       (6,464)   $       (34,532)   $         1,326
                                                                 ====================================================
</TABLE>

                                       79

<PAGE>

Net deferred income tax assets and liabilities consist of the following
components at December 31:

<TABLE>
<CAPTION>
           (In thousands)                                                               2002             2001
           ---------------------------------------------------------------------------------------------------
           <S>                                                                  <C>              <C>
           Deferred income tax assets:
           Retirement benefits other than pension                               $       4,238    $       3,978
           Pension and minimum pension liability                                        2,749              657
           Net operating loss of acquired companies                                     6,504            6,504
           Net operating loss                                                         110,107           53,028
           Alternative minimum tax credit carryforwards                                   709              709
           Licenses                                                                    56,921                -
           Interest rate swap                                                           7,784            5,097
           Debt issuance and discount                                                   2,791            2,749
           Accrued expenses                                                             3,393            3,223
           Federal and state tax credits                                                  403              403
           Unrealized loss on securities available for sale                                --              124
           Other                                                                        1,307            1,923
                                                                                ------------------------------
           Gross deferred tax assets                                                  196,906           78,395
           Valuation allowance                                                       (156,704)              --
                                                                                ------------------------------
                                                                                       40,202           78,395
                                                                                ------------------------------
           Deferred income tax liabilities:
           Property and equipment                                                      32,418           41,712
           Licenses                                                                        --           38,540
           Other                                                                           --              343
                                                                                ------------------------------
                                                                                       32,418           80,595
                                                                                ------------------------------

           Net deferred income tax assets (liabilities)                         $       7,784    $      (2,200)
                                                                                ==============================
</TABLE>

A valuation allowance is provided to reduce the deferred tax assets to a level
which, more likely than not under the rules of SFAS No. 109, will be realized.

            The Company had alternative minimum tax ("AMT") credit carryforwards
of $.7 million which have been reflected as deferred tax assets. AMT credits may
generally be carried forward indefinitely and used in future years to the extent
the Company's regular tax liability exceeds the AMT liability for such future
years.

            For tax purposes, the Company had available, at December 31, 2001
net operating loss ("NOL") carryforwards, excluding NOL's from acquired
companies, for regular income tax purposes of approximately $150 million. The
Company is anticipating that the 2002 NOL will be approximately $120 million,
which will expire in 2022. The Company also had federal and state investment tax
credit carryforwards for tax purposes of approximately $.4 million, which expire
during 2019. As a result of the R&B acquisition, both R&B, and likely the
Company, experienced ownership changes during 2001 under Section 382 of the
Internal Revenue Code ("IRC"); however, such changes should not place any
material limitation on the ability to use the pre-acquisition net operating loss
carryovers of either R&B or the Company. Depending on the outcome of the
restructuring of the Company's debt and equity securities under the bankruptcy
filing (see Note 1), the restructuring could result in a substantial reduction
in the amount of existing NOL carryovers and could result in limitations on the
Company's ability to use remaining carryovers and built-in losses in future
years. The reduction of or potential limitation on the Company's ability to use
such favorable tax attributes could adversely affect our financial position in
future years.

NOTE 14. SHAREHOLDER RIGHTS PLAN

In February 2000, the Company adopted a new ten-year shareholder rights plan
("Rights Plan") that provides a right to common shareholders to acquire a unit
of preferred stock of the Company at a purchase price of $162. The new Rights
Plan, amended as of July 11, 2000, replaces the Company's prior plan which was
adopted in 1990 and expired in

                                       80

<PAGE>

February 2000. The right to purchase preferred stock is exercisable only upon
the occurrence of certain events, such as if a third party acquires 15% or more
of the Company's common stock, without prior approval of the Board of Directors,
except for Welsh, Carson, Anderson & Stowe, provided that it is in compliance
with our amended and restated shareholders' agreement. In such event, other
shareholders are entitled to receive, upon exercise of the right and payment of
the purchase price, common stock or preferred stock at the option of the Company
having a value equal to twice the amount of the purchase price. To date, no
shares have been issued under the Rights Plan.

NOTE 15. PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS

The Company sponsors several qualified and nonqualified pension plans and other
postretirement benefit plans for its employees. The following tables provide a
reconciliation of the changes in the plans' benefit obligations and fair value
of assets over the two-year period ending December 31, 2002, a statement of the
funded status as of December 31 of each year, and the classification of amounts
recognized in the Consolidated Balance Sheets:

<TABLE>
<CAPTION>
                                                     Defined Benefit Pension Plan       Other Postretirement Benefit Plan
(in thousands)                                          2002            2001                 2002               2001
--------------------------------------------------------------------------------------------------------------------------
<S>                                                <C>              <C>                <C>                 <C>
CHANGE IN BENEFIT OBLIGATIONS:
Benefit obligations, beginning                     $       22,803   $        20,987    $          9,168    $         8,478
Service cost                                                1,450             1,058                 175                172
Interest cost                                               1,619             1,555                 661                624
Amendment                                                      -                300                  -                  -
Actuarial loss (gain)                                       1,922                88                (465)                40
Benefits paid                                              (1,198)           (1,185)               (190)              (176)
Curtailment gain                                               -                 -                  363                 30
Early retirement program cost                               1,098                -                   -                  -
--------------------------------------------------------------------------------------------------------------------------
     Benefit obligations, ending                   $       27,694   $        22,803    $          9,712    $         9,168
==========================================================================================================================

CHANGE IN PLAN ASSETS:
Fair value of plan assets, beginning               $       20,223   $        20,938    $             -     $            -
Actual return (loss) on plan assets                        (2,636)              470                  -                  -
Employer contribution                                          -                 -                  190                176
Benefits paid                                              (1,198)           (1,185)               (190)              (176)
--------------------------------------------------------------------------------------------------------------------------
     Fair value plan assets, ending                $       16,389   $        20,223    $              -    $             -
==========================================================================================================================

FUNDED STATUS:
Funded status                                      $      (11,305)  $        (2,580)   $         (9,712)   $        (9,168)
Unrecognized net actuarial loss (gain)                      6,711               179              (1,183)            (1,092)
Unrecognized prior service cost                               659               712                   -                  -
--------------------------------------------------------------------------------------------------------------------------
     Accrued benefit cost                          $       (3,935)  $        (1,689)   $        (10,895)   $       (10,260)
==========================================================================================================================

RECOGNIZED IN CONSOLIDATED BALANCE SHEET:
Intangible pension asset                           $          659   $            -
Additional minimum pension liability                       (3,792)               -
-----------------------------------------------------------------------------------
Minimum pension liability adjustment- reduction
   of shareholders' equity (deficit)               $        3,133   $            -
===================================================================================
</TABLE>

SFAS No. 87, Employers' Accounting For Pensions, requires the Company to
recognize a minimum pension liability equal to the amount by which the actuarial
present value of the accumulated benefit obligations exceeds the fair value of
plan assets. In 2002, the Company recorded $3.8 million to recognize the minimum
pension liability. A corresponding amount is required to be recognized as an
intangible asset to the extent of the unrecognized prior service cost and
unrecognized net transition obligation. Any excess of the minimum pension
liability above the intangible asset is recorded as a separate component and
reduction of shareholders' equity (deficit). The tax benefit associated with the
minimum pension liability is subject to the valuation reserve discussed in Note
13.

                                       81

<PAGE>

The Company's matching contributions to the defined contribution plan were $0.2
million, $0.8 million, and $0.6 million for the years ended December 31, 2002,
2001 and 2000, respectively. The Company ceased matching contributions to the
defined contribution plan for the period April 1, 2002 through March 31, 2003 as
part of the actions taken in the operational restructuring plan (Note 19).

The accumulated benefit obligation of the Company's nonqualified pension plan
was approximately $5.8 million, $3.9 million and $1.1 million at December 31,
2002, 2001 and 2000, respectively, and has been classified with retirement
benefits other than pensions. All of the Company's plans for postretirement
benefits other than pensions also have no plan assets.

On July 11, 2000, the Company disposed of one of its business lines (see Note
7). The sale was considered a partial plan termination and participants were
100% vested as of July 10, 2000. Under the provisions of SFAS No. 88, Accounting
for Settlements and Curtailments of Defined Benefit Pension Plans and for
Termination Benefits, the Company recognized a $198,000 net curtailment gain in
2000. This gain is reported in discontinued operations.

The following table provides the components of net periodic benefit cost for the
plans:

<TABLE>
<CAPTION>
                                              Defined Benefit Pension Plan               Other Post Employment Benefit Plan
(In thousands)                            2002           2001            2000              2002          2001          2000
------------------------------------------------------------------------------------------------------------------------------
<S>                                   <C>            <C>            <C>                <C>            <C>           <C>
Service cost                          $     1,450    $      1,058   $        889       $       175    $      172    $      190
Interest cost                               1,619           1,555          1,426               661           624           604
Expected return on plan assets             (1,975)         (2,046)        (2,025)                -             -             -
Amortization of transition
   obligations                                  -              12             15                 -             -             -
Amortization of prior service cost             54              49             42                 -             -             -
Recognized net actuarial gain                   -               -            (49)              (12)          (28)           (7)
Early retirement cost                       1,098               -              -                 -             -             -
Curtailment gain (loss)                         -               -            (48)                -            30             -
------------------------------------------------------------------------------------------------------------------------------
     Net periodic benefit cost        $     2,246    $        628   $        250       $       824    $      798    $      787
==============================================================================================================================
</TABLE>

      The prior-service costs are amortized on a straight-line basis over the
      average remaining service period of active participants. Gains and losses
      in excess of 10% of the greater of the benefit obligation and the
      market-related value of assets are amortized over the average remaining
      service period of active participants.

      The Company has multiple nonpension postretirement benefit plans. The
      health care plan is contributory, with participants' contributions
      adjusted annually. The life insurance plans are also contributory.
      Eligibility for the life insurance plan has been restricted to active
      pension participants age 50-64 as of January 5, 1994. The accounting for
      the plans anticipates that the Company will maintain a consistent level of
      cost sharing for the benefits with the retirees.

      The assumptions used in the measurements of the Company's benefit
      obligations are shown in the following table:

<TABLE>
<CAPTION>
                                              Defined Benefit Pension Plan               Other Post Employment Benefit Plan
Assumptions as of December 31             2002           2001            2000              2002          2001          2000
------------------------------------------------------------------------------------------------------------------------------
<S>                                   <C>            <C>            <C>                <C>            <C>           <C>
Discount rate                                6.75%           7.25%          7.50%             6.75%         7.25%         7.50%
Expected return on plan assets               9.00%          10.00%         10.00%               --            --            --
Rate of compensation increase                3.50%           4.75%          4.75%               --            --            --
==============================================================================================================================
</TABLE>

During 2002, the Company offered an early retirement incentive to eligible
employees, resulting in 23 employees accepting early retirement at a cost to the
plan of $1.1 million. During 2001, the plan was amended to reflect the increase
in the IRC Sec. 415 limits. The result of this amendment was an increase of $.3
million in the projected benefit obligation.

                                       82

<PAGE>

         The Company reviews the assumptions noted in the above table on an
annual basis. These assumptions were changed in 2002 from those used in the
prior two years to reflect anticipated future changes in the underlying economic
factors used to determine these assumptions. For measurement purposes, a 10.0%
annual rate of increase in the per capita cost of covered health care benefits
was assumed for 2002. The rate was assumed to decrease gradually each year to a
rate of 5.0% for 2010 and remain at that level thereafter.

            Assumed health care cost trend rates have a significant effect on
the amounts reported for the health care plans. The effect of a 1% change on the
total of service and interest cost components of net periodic postretirement
health care benefit cost would be $0.1 million for a 1% increase and $0.1
million for a 1% decrease. Additionally, the effect of a 1% change on the health
care component of the accumulated postretirement benefit obligations would be
$1.3 million for a 1% increase and $1.0 million for a 1% decrease.

NOTE 16. EARNINGS PER SHARE

            The computations of basic and diluted earnings per share from
continuing operations for each of the three years ended December 31 were as
follows:

<TABLE>
<CAPTION>
(In thousands)                                                                  2002               2001                2000
----------------------------------------------------------------------------------------------------------------------------------
   <S>                                                                    <C>                 <C>                 <C>
         Numerator:
   Income (loss) from continuing operations                               $       (488,947)   $        (63,713)   $          2,270
   Preferred stock dividend                                                        (20,417)            (18,843)             (8,168)
----------------------------------------------------------------------------------------------------------------------------------
   Numerator for basic and diluted earnings (loss) per share              $       (509,364)   $        (82,556)   $         (5,898)
==================================================================================================================================
         Denominator:
   Number of common shares at the beginning of the year                             17,209              13,132              13,060
   Weighted-average common shares issued during the year                               149               3,310                  46
----------------------------------------------------------------------------------------------------------------------------------
   Denominator for basic and diluted earnings (loss) per share                      17,358              16,442              13,106
     from continuing operations
==================================================================================================================================
</TABLE>

For additional information regarding the preferred stock and stock options, see
Notes 9 and 17, respectively. The following options and warrants were
outstanding during each year, but were not included in the computation of
diluted earnings per share due to the fact that the results from continuing
operations were a loss (therefore, any addition to the shares results in an
antidilutive effect) or because the exercise price was greater than the average
market price of the common shares for the year and, therefore, the effect would
be antidilutive:

<TABLE>
<CAPTION>
(In thousands)                                                                      2002               2001                 2000
----------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                  <C>                 <C>                 <C>
Number of common stock equivalents antidilutive due to a loss from continuing
operations:
     Options                                                                            43                  21                 165
     Warrants                                                                          300                 300                 300
----------------------------------------------------------------------------------------------------------------------------------
Number of shares antidilutive as exercise price was greater than average market
   price of the common shares for the year:
     Options                                                                         1,352                 937                 368
     Warrants                                                                        1,004               1,004               1,004
     Redeemable, convertible preferred stock                                         6,847               6,395               5,973
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                       83

<PAGE>

NOTE 17. STOCK PLANS

The Company's 1997 Stock Compensation Plan ("Option Plan"), as amended, provides
for the grant of stock options, stock appreciation rights ("SARS"), stock awards
and performance shares to officers and certain key management employees. A
maximum of 2.5 million shares of common stock may be issued under the Option
Plan by means of the exercise of options or SARS, the grant of stock awards
and/or the settlement of performance shares. The Company's Non-Employee
Director's Stock Option Plan ("Director's Plan"), as amended, provides for the
grant of stock options to a non-employee director and provides the non-employee
director the opportunity to receive stock options in lieu of a retainer fee. A
maximum of 125,000 shares of common stock may be issued upon the exercise of
options granted under the Director's Plan. Hereinafter the Option Plan and
Directors Plan may be referred to as the "Plans". Stock options must be granted
under the Plans at not less than 100% of fair value at the date of grant and
have a maximum life of ten years from the date of grant. Options and other
awards under the Plans may be exercised in compliance with such requirements as
determined by a committee of the Board of Directors.

            A summary of the status of the stock option Plans at December 31,
2002, 2001 and 2000 and changes during the years ended on those dates are as
follows:

<TABLE>
<CAPTION>
                                                   2002                      2001                    2000
-------------------------------------------------------------------------------------------------------------------
                                                         WEIGHTED                 Weighted                 Weighted
                                                          AVERAGE                  Average                  Average
                                                         EXERCISE                 Exercise                 Exercise
Options                                    SHARES          PRICE      Shares        Price     Shares        Price
-------------------------------------------------------------------------------------------------------------------
<S>                                       <C>            <C>          <C>         <C>        <C>           <C>
Outstanding at beginning of year          1,146,001      $  25.24     826,113     $  28.26    522,901      $  20.59
Granted                                     544,657          4.03     389,367        18.17    409,017         36.26
Exercised                                      -             -        (27,671)       23.31    (76,720)        18.10
Forfeited                                  (120,742)        20.09     (41,808)       25.92    (29,085)        29.66
-------------------------------------------------------------------------------------------------------------------
Outstanding at end of year                1,569,916      $  18.28   1,146,001     $  25.24    826,113      $  28.26
-------------------------------------------------------------------------------------------------------------------
Exercisable at end of year                  656,591      $  25.09     476,135     $  25.52    262,104      $  20.52
Weighted average fair value per option
of options granted during the year                       $   2.75                 $   7.96                 $  14.61
===================================================================================================================
</TABLE>

The following table summarizes information about stock options outstanding at
December 31, 2002:

<TABLE>
<CAPTION>
                                                         Options Outstanding                            Options Exercisable
------------------------------------------------------------------------------------------------------------------------------
                                                              Weighted-
                                                               Average             Weighted-                        Weighted-
                                            Number of         Remaining        Average Exercise     Number of        Average
Range of Exercise Prices                      Shares       Contractual Life          Price            Shares      Exercise Price
------------------------------------------------------------------------------------------------------------------------------
<S>                                         <C>                    <C>           <C>                  <C>         <C>
$   .53 - $  3.98                             221,950              9 years       $        2.65          1,435     $       2.66
$  4.34 - $ 15.49                             304,797              9 years       $        5.13         20,904     $      14.45
$ 15.53 - $ 20.18                             278,769              7 years       $       16.64        135,269     $      17.28
$ 20.37 - $ 22.625                            338,767              6 years       $       21.62        216,299     $      21.75
$ 23.00 - $ 40.25                             256,533              7 years       $       30.05        212,384     $      29.49
$ 40.50 - $ 45.06                             169,100              7 years       $       40.69         70,300     $      40.73
------------------------------------------------------------------------------------------------------------------------------
$   .53 - $ 45.06                           1,569,916              8 years       $       18.28        656,591     $      25.09
</TABLE>

The Company had a non-compensatory Employee Stock Purchase Plan ("ESPP") that
qualifies under IRC Section 423. A total of 840,000 shares of common stock could
have been issued under the ESPP and there were 258,350 shares remaining at
December 31, 2002. Under the ESPP, qualified employees can use up to 10% of
their gross wages to purchase the Company's common stock at a price 10% less
than the market price on the purchase date. The Company's board of directors
suspended participation in the ESPP effective January 1, 2003.

NOTE 18. COMMITMENTS AND CONTINGENCIES

      OPERATING LEASES

The Company has several operating leases for administrative office space, retail
space, tower space, channel rights, and equipment, certain of which have renewal
options. The leases for retail and tower space have initial lease periods of
three to thirty years. These leases are associated with the operation of
wireless digital PCS services primarily in Virginia and

                                       84

<PAGE>

West Virginia. The leases for channel rights relate to the Company's wireless
cable operations and have initial terms of three to ten years. The equipment
leases have an initial term of three years. Rental expense for operating leases
was $14.7 million, $14.4 million and $5.6 million in 2002, 2001 and 2000,
respectively. The total amount committed under these lease agreements is: $13.2
million in 2003, $12.6 million in 2004, $9.0 million in 2005, $5.2 million in
2006, $3.6 million in 2007 and $21.7 million for the years thereafter.

      OTHER COMMITMENTS AND CONTINGENCIES

            In connection with an amendment to the Sprint/Horizon network
services agreement which provides for scheduled wholesale revenue minimums over
the 30 months commencing July 1, 2001, the Company committed to upgrading the
Alliances' network to 3G-1XRTT technology capable of handling high-speed data
applications. The Company had capital outlays of $38 million through the end of
2002 related to this upgrade. The upgrade is expected to be completed in 2003
with total estimated capital outlays related to this project being $45 million.
Revenue from this services agreement was $32.5 million, $19.1 million, and $7.0
million for the years ended December 31, 2002, 2001 and 2000, respectively

            Pursuant to the terms of the Sprint/Horizon network services
agreement, the Company has billed Horizon for wholesale minutes of use of its
wireless PCS network. Horizon withheld payment of approximately $1.2 million
from the billings covering October 2002 through December 2002, alleging
overbilling by the Company. In addition, Horizon has alleged that the Company
has overbilled Horizon by approximately $4.8 million for the period from 1999
through September 2002. Management disagrees with Horizon's allegations. The
Company is seeking to resolve this dispute and has recognized as wholesale
revenue amounts collected to date from revenues earned through December 31,
2002. The wholesale network services agreement provides for arbitration if the
companies cannot settle disputes that arise under the agreement.

            On March 28, 2003, Horizon filed its Form 10-K for the year ending
December 31, 2002. This document disclosed that there was substantial doubt
about Horizon's ability to continue as a going concern because of the
probability that Horizon will violate one or more of its debt covenants in 2003.
The Company's future wholesale revenues under the wholesale network services
agreement with Horizon could be materially impacted if Horizon was to be unable
to continue as a going concern. No other single customer accounted for more than
10% of the Company's consolidated revenues in any of the three years during the
period ended December 31, 2002.

            The Company entered into an asset purchase agreement for the sale of
the Company's wireline cable business for $8.7 million. Also included in this
agreement was a fiber optic Indefeasible Right to Use ("IRU") agreement for some
joint use fibers owned by the ILEC segment. The Company expects the gain or loss
on this sale to be minimal. Additionally, the Company has entered into an asset
purchase agreement for the sale of the Company's Portsmouth call center building
for $6.9 million. The agreements are subject to bankruptcy court approval and
ordinary closing terms and conditions, including FCC approval of the wireline
cable disposition. The net book value of the Portsmouth call center assets was
$8.1 million at December 31, 2002. The Company will record $1.2 million of
accelerated deprecation during 2003 prior to the planned disposition.

            In addition to the items discussed above, the Company is
periodically involved in disputes and legal proceedings arising from normal
business activities. In the opinion of management, resolution of these matters
will not have a materially adverse effect on the financial position or future
results of operations of the Company and adequate provision for any probable
losses has been made in our financial statements.

            Other than the commitments noted separately above, the Company has
commitments for capital expenditures of approximately $10 million as of December
31, 2002, all of which are expected to be incurred in fiscal 2003.

NOTE 19. RESTRUCTURING CHARGE

In March 2002, the Company approved a plan that would reduce its workforce by
approximately 15% through the offering of early retirement incentives, the
elimination of certain vacant and budgeted positions and the elimination of some
jobs. A total of 96 current employees left the Company as a result of these
actions. The employees impacted were

                                       85

<PAGE>

primarily in management, operations, engineering and a number of other support
functions. The plan also involved exiting certain facilities in connection with
the workforce reduction and centralizing certain functions.

            Restructuring charges were reported during the first, second and
fourth quarters of 2002 totaling $4.3 million relating to severance costs and
pension curtailment costs for employees affected by the reduction in force
activity, lease termination obligations associated with the exit of certain
facilities and financial restructuring legal and advisor costs (see Notes 1 and
3). At December 31, 2002, $1.5 million remained accrued of the total operational
restructuring costs relating to the early retirement program ($1.1 million cost
- see Note 15) and certain obligations pursuant to employment contracts and
salary continuation plans.

NOTE 20. PRO FORMA FINANCIAL INFORMATION (UNAUDITED)

The pro forma unaudited results of operations for the years ended December 31,
2001, assuming consummation of the transactions more fully described in Notes 6,
7, 8 and 9 as of January 1, 2001 are as follows:

<TABLE>
<CAPTION>
      (In thousands, except per share data)                 2001               2000
      ----------------------------------------------------------------------------------
      <S>                                             <C>                <C>
      Operating revenues                              $       220,230    $       179,715
      Operating expenses other than depreciation
      and amortization                                        199,829            174,546
      Depreciation and amortization                            83,647             71,087
      Operating loss                                          (63,246)           (65,918)
      Net loss                                                (64,127)           (87,323)
      Dividend requirements on preferred stock                 19,843             18,598
      Loss applicable to common shares                $       (84,000)   $      (105,921)
      Net loss per common share:
      Basic and diluted                               $         (4.93)   $         (6.30)
</TABLE>

As described in the notes referred to above, these unaudited pro forma results
include the results of operations for NTELOS Inc., the VA Alliance, the WV
Alliance, PrimeCo VA, and R&B Communications and exclude the discontinued
operation (directory assistance business), the VA RSA6 analog cellular business
and the RSA5 equity investment earnings. Additionally, it assumes all related
financing and preferred equity transactions described in Notes 8 and 9 occurred
on January 1, 2001.

            These unaudited pro forma results have been prepared for comparative
purposes only and do not purport to be indicative of the results of operations
which would have actually resulted had the transactions been in effect on
January 1, 2001 or 2000, or of future results of operations.

                                       86

<PAGE>

                         REPORT OF INDEPENDENT AUDITORS

The Board of Directors and
   Shareholders of NTELOS Inc.

We have audited the accompanying consolidated balance sheets of NTELOS Inc. and
Subsidiaries as of December 31, 2002 and 2001, and the related consolidated
statements of operations, shareholders' equity (deficit), and cash flows for the
years then ended. Our audits also included the financial statement schedule as
of and for the years ended December 31, 2002 and 2001 listed in the Index at
Item 15(a). These financial statements and schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits. The consolidated
financial statements of NTELOS Inc. and Subsidiaries for the year ended December
31, 2000 were audited by other auditors whose report dated February 22, 2001
expressed an unqualified opinion on those statements.

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 consolidated financial position of NTELOS Inc. and
Subsidiaries at December 31, 2002 and 2001, and the consolidated results of
their operations and their cash flows for the years then ended in conformity
with accounting principles generally accepted in the United States. Also, in our
opinion, the related financial statement schedule as of and for the years ended
December 31, 2002 and 2001, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As more fully described in
Note 1, the Company has incurred recurring operating losses and has a working
capital deficit. In addition, on March 4, 2003, the Company filed a petition for
relief under Chapter 11 of the U.S. Bankruptcy Code. These conditions raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 1. The
financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts
and classification of liabilities that may result from the outcome of this
uncertainty.

As discussed in Notes 2 and 3 to the financial statements, effective January 1,
2002 the Company adopted Financial Accounting Standards Board Statement No. 142,
Goodwill and Other Intangible Assets.

/s/ Ernst & Young LLP

McLean, Virginia
April 11, 2003

                                       87

<PAGE>

                          INDEPENDENT AUDITOR'S REPORT

To the Board of Directors
NTELOS Inc.
Waynesboro, Virginia

            We have audited the accompanying consolidated statements of
operations, shareholders' equity, and cash flows of NTELOS Inc. and subsidiaries
for the year 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 audit in accordance with auditing standards
generally accepted in the United States of America. Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.

            In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the results of operations of
NTELOS Inc. and subsidiaries, changes in their shareholders' equity, and their
cash flows for the year ended December 31, 2000, in conformity with accounting
principles generally accepted in the United States of America.

/s/ McGladrey & Pullen, LLP

Richmond, Virginia
February 22, 2001

                                       88

<PAGE>

QUARTERLY REVIEW
NTELOS INC. AND SUBSIDIARIES

<TABLE>
<CAPTION>
                                                      FIRST                SECOND              THIRD            FOURTH
(In thousands, except per share amounts)             QUARTER               QUARTER            QUARTER           QUARTER
--------------------------------------------------------------------------------------------------------------------------
<S>                                             <C>                  <C>               <C>                <C>
2002
Operating Revenues                              $            60,021  $         64,894  $         68,102   $         69,710
Operating Loss/2/                                           (15,080)           (6,375)           (3,317)          (399,787)
Gain on Sale of Assets/3/                                     1,955             2,782             3,735                  -
Net Loss                                                    (30,664)          (22,854)          (16,068)          (419,361)
Dividend requirements on preferred stock                      5,019             5,019             5,190              5,189
Loss Applicable to Common Shares                            (35,683)          (27,873)          (21,258)          (424,550)
Loss per Common Share - Diluted                               (2.07)            (1.61)            (1.23)            (24.09)
EBITDA/1/                                                     8,015            14,283            18,004             20,943
--------------------------------------------------------------------------------------------------------------------------
Stock Price Range                               $        3.55-15.61  $      1.11-4.42  $      0.14-1.66   $      0.21-0.73
--------------------------------------------------------------------------------------------------------------------------

Reconciliation of Operating Loss to EBITDA (a
 non-GAAP measure)/1/
Operating Loss                                  $           (15,080) $         (6,375) $         (3,317)  $       (399,787)
Depreciation and Amortization                                23,095            20,658            21,321             17,850
Asset Impairment Charges                                          -                 -                 -            402,880
                                                --------------------------------------------------------------------------
EBITDA/1/                                      $             8,015  $         14,283  $         18,004   $         20,943
--------------------------------------------------------------------------------------------------------------------------

2001
Operating Revenues                              $            47,460  $         54,681  $         56,093   $         56,829
Operating Loss                                              (13,969)          (13,170)          (16,077)           (18,561)
Equity Loss from WV PCS Alliance/4/                          (1,286)                -                 -                  -
Gain on Sale of Assets/5/                                         -               706            22,261              8,878
Net Loss                                                    (17,254)          (18,975)           (8,550)           (18,934)
Dividend requirements on preferred stock                      4,687             4,690             4,849              4,617
Loss Applicable to Common Shares                            (21,941)          (23,665)          (13,399)           (23,551)
Loss per Common Share - Diluted                               (1.46)            (1.40)            (0.79)             (1.39)
EBITDA/1/                                                     3,886             5,213             7,075              4,330
--------------------------------------------------------------------------------------------------------------------------
Stock Price Range                               $     5.4375-24.875  $     7.02-30.06  $     6.85-26.75   $      .66-15.49
--------------------------------------------------------------------------------------------------------------------------

Reconciliation of Operating Loss to EBITDA (a
 non-GAAP measure)/1/
Operating Loss                                  $           (13,969) $        (13,170) $        (16,077)  $        (18,561)
Depreciation and Amortization                                17,853            18,387            23,150             22,891
                                                --------------------------------------------------------------------------
EBITDA/1/                                       $             3,884  $          5,217  $          7,073   $          4,330
--------------------------------------------------------------------------------------------------------------------------
</TABLE>

/1/   Operating income (loss) before depreciation and amortization and asset
      impairment charges. See Management's Discussion and Analysis for
      additional factors to consider in using this measure.
/2/   During the fourth quarter 2002, the Company reported asset impairment
      charges totaling $402.9 million in the Wireless PCS segment, the Network
      segment and in the wireless cable business as determined from its annual
      SFAS No. 142 and SFAS No. 144 impairment testing. (Note 2)
/3/   The Company sold certain PCS licenses for total proceeds of $18.0 million,
      recognizing a $8.5 million gain during the first three quarters of 2002.
      (Note 7)
/4/   The WV Alliance was consolidated into operations effective February 13,
      2001 in connection with the Company increasing its common ownership
      interest from 45% to 78%. (Note 5)
/5/   The Company sold all of its holdings in Illuminet Holdings, Inc.,
      recognizing a pre-tax gain of $23.0 million ($14.3 million after-tax or
      $.86 per share) and sold certain excess PCS licenses, recognizing a
      pre-tax gain of $8.6 million ($5.3 million after-tax or $.32 per share).
      (Notes 7 and 12)

                                       89

<PAGE>

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

            The following table sets forth certain information, as of March 18,
2003, with respect to the executive officers and directors of the Company. All
officers and directors hold office until their respective successors are elected
and qualified or until their earlier resignation or removal.

<TABLE>
<CAPTION>
Name                                                 Office                                      Age
-----------------------    -----------------------------------------------------               ------
<S>                        <C>                                                                    <C>
J. S. Quarforth            Chief Executive Officer and Director                                   48
J. A. Layman               President and Chairman of the Board                                    51
C. A. Rosberg              Executive Vice President and Chief Operating Officer and Director      50
W. C. Catlett              Senior Vice President-Corporate Development                            43
D. R. Maccarelli           Senior Vice President-Wireline Engineering and Operations              50
M. McDermott               Senior Vice President-Legal and Regulatory Affairs                     48
M. B. Moneymaker           Senior Vice President and Chief Financial Officer, Treasurer and       45
                           Secretary
D. M. Persing              Senior Vice President                                                  51
William W. Gibbs, V        Director                                                               62
A. William Hamill          Director                                                               55
John B. Mitchell, Sr.      Director                                                               62
John B. Williamson, III    Director                                                               48
</TABLE>

            Mr. Quarforth became Chief Executive Officer of NTELOS and its
subsidiaries in May 1999 and has been a director since 1987. From May 1990 to
May 1999, Mr. Quarforth served as President and Chief Executive Officer and
served as Chairman of the Board from May 1999 to February 13, 2001. Mr.
Quarforth is also a director of Virginia Financial Group, Inc. Staunton,
Virginia.

            Mr. Layman became President and Chairman of the Board of NTELOS on
February 13, 2001, when our merger with R&B Communications became effective.
Prior to our merger with R&B Communications, Mr. Layman was Chief Executive
Officer and a director of R&B Communications. Mr. Layman serves as a director
for RGC Resources, Inc., MPHASE Technologies, Inc. and the Bank of Fincastle.

            Mr. Rosberg became Executive Vice President and Chief Operating
Officer of NTELOS in February 2001 and has been a director since 1992. From May
1, 1999 to February 13, 2001, when our merger with R&B Communications became
effective, Mr. Rosberg served as President and Chief Operating Officer. From May
1, 1990 to May 1, 1999, he served as Senior Vice President.

            Mr. Catlett became Senior Vice President - Corporate Development in
May 2000. From May 1997 to April 2000, he served as Vice President - Strategy
and Business Development and from January 1994 to April 1997 as Director of
Business Development. From April 1992 until January 1994, he

                                       90

<PAGE>

served as Planning and Regulatory Manager and from May 1990 until April 1992 as
Revenue Requirements Manager.

            Mr. Maccarelli became Senior Vice President - Wireline Engineering
and Operations in May 2002. From February 2001 to May 2002, he served as Senior
Vice President and Chief Technology Officer and from January 1994 to February
2001 he served as Senior Vice President. From January 1993 to December 1993, he
served as Vice President - Network Services. From June 1974 to December 1992, he
held numerous leadership positions with Bell Atlantic. These positions
encompassed operations, engineering, regulatory and business development.

            Ms. McDermott became Senior Vice President of Legal and Regulatory
Affairs on August 31, 2001. From March 2000 to August 3, 2001, she served as
Senior Vice President and General Counsel of Pathnet Telecommunications, Inc. On
April 2, 2001, Pathnet Telecommunications, Inc. filed a Voluntary Petition under
Chapter 11 of the United States Bankruptcy Code with the United States
Bankruptcy Court for the District of Delaware. From April 1998 to March 2000,
she served as Senior Vice President/Chief of Staff for Government Relations for
the Personal Communications Industry Association. From May 1994 to April 1998,
she served as Vice President - Legal and Regulatory Affairs for the United
States Telecom Association.

            Mr. Moneymaker became Senior Vice President and Chief Financial
Officer, Treasurer and Secretary in May 2000. From May 1999 to April 2000, he
served as Vice President and Chief Financial Officer, Treasurer and Secretary.
From May 1998 to April 1999, he served as Vice President and Chief Financial
Officer. From October 1995 to April 1998, he served as Vice President of
Finance. Previously, he was a Senior Manager for Ernst and Young from October
1989 until October 1995.

            Ms. Persing became Senior Vice President in April 2000. From May
1998 to April 2000, she served as Vice President - Human Resources. From
December 1995 to March 1998, she was employed by PrimeCo Personal Communications
as Vice President of Customer Care. From June 1974 to January 1994, she held
numerous leadership positions with AT&T. These positions encompassed customer
care, directory assistance, human resources, network engineering, software
development and large project management. From August 1994 to November 1995, she
served as operations manager for NTELOS' directory assistance operation.

            Mr. Gibbs became a director of NTELOS in 1977. Mr. Gibbs is
President of Comprehensive Computer Consultants, Staunton, Virginia.

            Mr. Hamill became a director of NTELOS in January 2001. Mr. Hamill
is President of H3 Companies LLC, an investments and advisory firm. From 1999
until May 2001, he served as Executive Vice President and Chief Financial
Officer of United Dominion Realty Trust Inc., Richmond, Virginia. Prior to
joining United Dominion, Mr. Hamill served as Executive Vice President and Chief
Financial Officer of Union Camp Corporation, Wayne, New Jersey, from June 1996
to April 1999 and was previously a managing director of Corporate Finance with
Morgan Stanley & Co. Incorporated, New York. Mr. Hamill is a director of SOLA
International Inc.

            Mr. Mitchell became a director of NTELOS in 1989. Mr. Mitchell is
President and Chairman of the Board of Hammond-Mitchell, Inc., a construction
contractor in Covington, Virginia.

            Mr. Williamson became a director of NTELOS on February 13, 2001. Mr.
Williamson is Chairman of the Board, President and Chief Executive Officer of
RGC Resources, Inc., Roanoke, Virginia. He has served as Chairman since January
2002 and as President and Chief Executive Officer

                                       91

<PAGE>

since February 1998. Prior to that time, Mr. Williamson was Vice President of
RGC Resources. Mr. Williamson was a director of R&B Communications before our
merger with R&B Communications.

            SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Based on a review of the forms and written representations received by us
pursuant to Section 16(a) of the Securities Exchange Act of 1934, we believe
that during 2002 our directors and executive officers complied with all
applicable Section 16 filing requirements with the exception of Mr. Gibbs, who
did not timely file a Form 4 with respect to a transaction on February 20, 2002
involving the sale of 4,000 shares.

ITEM 11.  EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

            The following tables set forth information as to compensation paid
to the chief executive officer and the next four most highly compensated
executive officers of the Company, the named executive officers, for 2002, with
comparisons to 2001 and 2000 information, as well as information as to option
grants and exercises:

<TABLE>
<CAPTION>
                                                                          LONG TERM
                                                                         COMPENSATION
                                                                         ------------
                                               ANNUAL COMPENSATION          AWARDS
-------------------------------------------------------------------------------------------------------
   Name and                                                                 Options/      All Other
Principal Position                      Year     Salary      Bonus(1)         SARs      Compensation(2)
-----------------------------------   ------   ---------    ---------    ------------   ---------------
<S>                                     <C>    <C>          <C>                <C>       <C>
James S. Quarforth                      2002   $ 362,447           --          84,000   $        11,866
Chief Executive Officer                 2001     330,836      123,865          39,730            21,406
                                        2000     296,700      225,022          51,700            14,283
J. Allen Layman(3)                      2002     299,031           --          46,000            56,470
President and                           2001     269,069    1,084,200          52,850             4,097
Chairman of the Board

Carl A. Rosberg                         2002     242,824           --          38,000             3,991
Executive Vice President and            2001     222,296       60,000          17,730            12,160
Chief Operating Officer                 2000     201,500       83,748          21,675            10,015

Michael B. Moneymaker                   2002     189,165           --          24,000             3,666
Senior Vice President,                  2001     170,553       48,350           9,740             9,747
Chief Financial Officer,                2000     146,250       80,620          15,925             6,992
Treasurer and Secretary

Mary McDermott(4)                       2002     170,666           --          18,000             5,222
Senior Vice President                   2001      50,894       11,500          10,000               212
Legal and Regulatory Affairs
</TABLE>

                                       92

<PAGE>

(1)         Based on 2002 Company operating performance objectives, NTELOS'
board of directors approved payment of bonuses under the Company's 2002
management incentive plan in December 2003, subject to the Company's emergence
from bankruptcy and Court approval. In light of the Cases, the board of
directors has determined not to approve such bonuses for the Company's officers.
Based on 2001 Company performance objectives, each of the executive officers is
eligible to receive a bonus for 2001. NTELOS' board of directors, in its
discretion, has elected to defer such bonuses until such time as the Company
emerges from bankruptcy, subject to Court approval.

(2)         In 2002, we made contributions to the savings plan of $4,041 for
James S. Quarforth, $4,084 for J. Allen Layman, $2,377 for Carl A. Rosberg,
$2,115 for Michael B. Moneymaker, and $4,035 for Mary McDermott. Contributions
were also made to the deferred compensation plan of $5,570 for James S.
Quarforth, $3,713 for J. Allen Layman, $568 for Michael B. Moneymaker, and $261
for Mary McDermott. In addition, we made the group life insurance premium
payments of $1,044 for James S. Quarforth, $1,023 for J. Allen Layman, $832 for
Carl A. Rosberg, $647 for Michael B. Moneymaker, and $585 for Mary McDermott and
accidental death and dismemberment payments of $72 for James S. Quarforth, $88
for J. Allen Layman, $72 for Carl A. Rosberg, $53 for Michael B. Moneymaker and
$50 for Mary McDermott. In addition, we made additional life insurance premium
payments of $1,139 for James S. Quarforth, $47,562 for J. Allen Layman, $710 for
Carl A. Rosberg, $279 for Michael B. Moneymaker, and $291 for Mary McDermott.

            In 2001, we made contributions to the savings plan of $4,829 for
James S. Quarforth, $6,120 for Carl A. Rosberg, and $2,518 for Michael B.
Moneymaker. Contributions were also made to the deferred compensation plan of
$15,461 for James S. Quarforth, $3,269 for J. Allen Layman, $5,261 for Carl A.
Rosberg, $6,662, and for Michael B. Moneymaker. In addition, we made the group
life insurance premium payments of $1,044 for James S. Quarforth, $767 for J.
Allen Layman, $717 for Carl A. Rosberg, $522 for Michael B. Moneymaker, and $195
for Mary McDermott and accidental death and dismemberment payments of $72 for
James S. Quarforth, $61 for J. Allen Layman, $62 for Carl A. Rosberg, $45 for
Michael B. Moneymaker and $17 for Mary McDermott.

            In 2000, we made contributions to the savings plan of $5,414 for
James S. Quarforth, $6,120 for Carl A. Rosberg, and $2,417 for Michael B.
Moneymaker. Contributions were also made to the deferred compensation plan of
$7,777 for James S. Quarforth, $2,869 for Carl A. Rosberg, and $3,837 for
Michael B. Moneymaker. In addition, we made the group life insurance premium
payments of $1,032 for James S. Quarforth, $970 for Carl A. Rosberg, and $697
for Michael B. Moneymaker and accidental death and dismemberment payments of $60
for James S. Quarforth, $56 for Carl A. Rosberg, $41 and for Michael B.
Moneymaker.

(3)         Mr. Layman became an officer of NTELOS effective as of February 13,
2001, in connection with our merger with R&B Communications, Inc. Mr. Layman's
employment agreement, effective as of the merger closing, provided that he would
receive a signing bonus of $1,000,000.

(4)         Ms. McDermott became an officer of NTELOS effective as of August 31,
2001.

OPTION/SAR GRANTS TABLE

        OPTION/SAR GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
                                                                                  Potential Realizable Value At
                                                                                  Assumed Rates of Stock Price
                                             Individual Grants                    Appreciation For Option Term
                          ---------------------------------------------------   -------------------------------
                                        % of Total
                           Options/    Options/SARs    Exercise
                             SARs       Granted to     or Base
                          Granted(1)   Employees in     Price     Expiration
          Name             (Shares)     Fiscal Year   per Share      Date            5%(2)             10%(2)
-----------------------   ----------   ------------   ---------   -----------     -----------       -----------
<S>                           <C>              <C>       <C>        <C>           <C>               <C>
James S. Quarforth            42,000           16.1%     4.3400     2/26/2012     $   114,660       $   290,640
                              42,000                     2.6600      5/1/2012          70,140           178,080
</TABLE>

                                       93

<PAGE>

<TABLE>
<S>                           <C>               <C>      <C>        <C>                <C>              <C>
J. Allen Layman               23,000            8.8%     4.3400     2/26/2012          62,790           159,160
                              23,000                     2.6600      5/1/2012          38,410            97,520

Carl A. Rosberg               19,000            7.3%     4.3400     2/26/2012          51,870           131,480
                              19,000                     2.6600      5/1/2012          31,730            80,560

Michael B. Moneymaker         12,000            4.6%     4.3400     2/26/2012          32,760            83,040
                              12,000                     2.6600      5/1/2012          20,040            50,880

Mary McDermott                 9,000            3.4%     4.3400     2/26/2012          24,570            62,280
                               9,000                     2.6600      5/1/2012          15,030            38,160
</TABLE>

(1)   No SARs were granted in tandem with stock options.
(2)   In order to realize the potential value set forth, the price per share of
our common stock would be $7.07 and $11.26, respectively, at the end of the
ten-year option term for options granted February 26, 2002. The price per share
of our common stock would be $4.33 and $6.90, respectively, at the end of the
ten-year option term for options granted May 1, 2002.

OPTION/SAR EXERCISES AND YEAR END VALUE TABLE

      AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR, AND FISCAL YEAR
                              END OPTION/SAR VALUE

<TABLE>
<CAPTION>
                                                                                      Value of Unexercised
                                                              Number of Securities        In-The-Money
                                                             Underlying Unexercised       Options/SARS
                                                             Options/SARS at Fiscal    at Fiscal Year End
                               Shares Acquired     Value     Year End Exercisable/        Exercisable/
             Name                on Exercise     Realized        Unexercisable            Unexercisable
----------------------------   ---------------   ---------   -------------------      --------------------
<S>                                 <C>          <C>            <C>       <C>             <C>        <C>
James S. Quarforth                  0            $    0         152,033   144,797         $  0       $  0
J. Allen Layman                     0                 0          13,212    85,638            0          0
Carl A. Rosberg                     0                 0          77,108    64,797            0          0
Michael B. Moneymaker               0                 0          42,610    38,805            0          0
Mary McDermott                      0                 0           2,500    25,500            0          0
</TABLE>

            The closing price on December 31, 2002 was $0.37 and was used in
calculating the value of unexercised options.

PENSION PLAN/DEFINED BENEFIT PLAN DISCLOSURE

            The following table reflects the estimated aggregate retirement
benefits to which certain of our executive officers, including each of the named
executive officers in the Summary Compensation Table, are expected to be
entitled under the provisions of our non-contributory, funded employee
retirement plan and the executive supplemental retirement plan (the "Plans").
The table illustrates the amount of aggregate annual retirement benefits payable
under the Plans for an executive retiring in 2002 at age 65 computed on a
straight life annuity. The amount of benefit assumes that the executive has
completed a minimum of 15 years of service. The supplemental benefit amount will
not be paid for service of less than 7 years. Additional aggregate benefits are
not earned for service in addition to 35 years. Amounts listed will be reduced
by social security benefits and offset by employer 401(k) contributions.

                                       94

<PAGE>

                     Annual Retirement Benefits Payable for
                           Respective Years of Service

<TABLE>
<CAPTION>
       Average
       Annual
    Compensation           15 years          20 years          25 years         30 years         35 years
    ------------           --------          --------          --------         --------         --------
      <S>                 <C>               <C>               <C>              <C>              <C>
      $ 200,000           $ 100,000         $ 115,000         $ 130,000        $ 145,000        $ 160,000
        275,000             137,500           158,125           178,750          199,375          220,000
        350,000             175,000           201,250           227,500          253,750          280,000
        425,000             212,500           244,375           276,250          308,125          340,000
        500,000             250,000           287,500           325,000          362,500          400,000
        575,000             287,500           330,625           373,750          416,875          460,000
        650,000             325,000           373,750           422,500          471,250          520,000
</TABLE>

            The number of credited years of service for James S. Quarforth, J.
Allen Layman, Carl A. Rosberg, Michael B. Moneymaker, and Mary McDermott is 23
years, 2 years, 14 years, 7 years and 1 year, respectively.

DIRECTOR COMPENSATION

            In 2002, non-employee directors received a monthly retainer fee of
$1,900, $1,000 of which is payable in options for common stock pursuant to the
Non-Employee Directors' Stock Plan. Upon election by December 15 of the
preceding year, non-employee directors may elect to receive all, or a portion of
the remaining $900 monthly retainer fee in options for our common stock pursuant
to our Non-Employees Directors' Stock Plan. Commencing January 1, 2001,
non-employee directors received a fee of $875 for each board meeting attended.

EMPLOYEE ARRANGEMENTS

            We have entered into employment agreements with our named executive
officers, James S. Quarforth, J. Allen Layman, Carl A. Rosberg, Michael B.
Moneymaker and Mary McDermott. Each was approved by the non-employee members of
the board of directors.

            Messrs. Quarforth, Rosberg and Moneymaker and Ms. McDermott entered
into employment agreements with us in December 2001. Mr. Layman entered into his
employment agreement effective as of the closing of our merger with R&B
Communications, Inc., on February 13, 2001. The term of the employment agreement
with Mr. Quarforth is 36 months, with Mr. Layman is 60 months, with Mr. Rosberg
is 30 months, and with each of Mr. Moneymaker and Ms. McDermott is 24 months.

            In addition to base salary and annual incentive bonuses, the
executives are entitled to participate in our long-term stock-based incentive
compensation program and all other employee benefit plans, including our
executive supplemental retirement plan.

            NTELOS may terminate the executive's employment agreement for
continued disability or, upon written notice, for cause. The executive may
terminate the agreement, upon prior written notice, for good reason. "Cause"
generally means any of the following: gross or willful misconduct; willful and
repeated failure to comply with the lawful directives of the board of directors;
any criminal act or act of dishonesty or fraud that has a material adverse
impact on the Company or its subsidiaries or any fraud, dishonesty or
misappropriation involving the Company or its subsidiaries; material breach of
the terms of any confidentiality, non-competition, non-solicitation or
employment agreement with the Company; acts of malfeasance or negligence;
material failure to perform the duties and responsibilities of his or her
position; grossly negligent conduct; or activities materially damaging the
Company or its subsidiaries. "Good reason" generally means any of the following:
base salary or target incentive payments are reduced; responsibilities are
diminished; relocation of more than 50 miles (25 miles with respect to Mr.
Layman) is required; deferred compensation is withheld; benefits diminish
following a change of control; directed by the board of directors or an officer
to engage in conduct that is illegal; material breach of the Company's
obligations under the agreement; or, with respect to Mr. Layman, any purported
termination that does not satisfy the requirements of the agreement; or, with
respect to Messrs. Quarforth, Rosberg

                                       95

<PAGE>

and Moneymaker and Ms. McDermott, failure to increase the executive's
compensation consistent with performance ratings.

            If any of Messrs. Quarforth, Rosberg or Moneymaker or Ms. McDermott
is terminated, other than for cause, or if any one of them terminates the
agreement for good reason, he or she is entitled to (1) base salary for a period
of time thereafter equal to the term of his or her employment agreement, and (2)
target incentive payments for the same period and standard termination payments.

            The agreements with Messrs. Quarforth, Rosberg and Moneymaker and
Ms. McDermott provide for certain benefits if we have a change in control during
the term of the agreement followed by (1) termination of the executive's
employment without cause, or (2) resignation of the executive for good reason
(even if such termination or resignation occurs after the term of the
agreement). If Messrs. Quarforth, Rosberg or Moneymaker or Ms. McDermott is
terminated within 30 months (36 months with respect to Mr. Quarforth) of a
change in control, he or she will receive severance benefits, including three
years' base salary and target incentive payments. Any severance pay due to the
executive will be paid in a lump sum on a net present value basis. In addition,
the employment agreements with Messrs. Quarforth, Rosberg and Moneymaker and Ms.
McDermott provide that we will pay additional amounts to the executive to
compensate him or her for excise taxes and penalties imposed on the severance
pay.

            If Mr. Layman is terminated, other than for cause, or if Mr. Layman
terminates the agreement for good reason, Mr. Layman is entitled to (1) an
amount equal to the base salary he would have been entitled to receive for the
period between his termination and the end of the term of the agreement, and (2)
the standard termination payments and pro rata incentive payments for the fiscal
year in which the termination occurs. Upon a change in control, if Mr. Layman's
employment is terminated by us without cause or by Mr. Layman with good reason,
he will only be entitled to the compensation and benefits set forth in the
management continuity agreement described below.

            Mr. Layman's management continuity agreement provides for certain
benefits if we have a change of control followed by (1) his termination without
cause prior to the fifth anniversary of the change of control date, or (2) his
resignation for good reason prior to the fifth anniversary of the change of
control date. If Mr. Layman is terminated within 24 months of a change in
control, he will receive severance benefits equal to the greater of (1) the
amount he would be entitled to under his employment agreement if it is in effect
immediately prior to his termination, (2) two year's compensation or (3) the
severance benefit available to employees of the Company who are similarly
situated to Mr. Layman on the termination date. This agreement is for a term
ending on February 13, 2006.

            The agreements with Messrs. Quarforth, Layman, Rosberg and
Moneymaker and Ms. McDermott provide that during the term of the agreement and
for a period of 24 months (60 months with respect to Mr. Layman) after his or
her employment with the Company ends, the executive will not compete, directly
or indirectly, with the Company. In addition, pursuant to non-solicitation
provisions, the executive may not solicit certain current and former employees
during the term of their agreements and for 24 months (60 months with respect to
Mr. Layman) thereafter. Following the end of Mr. Layman's agreement and as long
as he is not in violation of these non-competition and non-solicitation
provisions, we will pay him $250,000 annually, with adjustments for an increase
in the Consumer Price Index, for 60 months.

            Our Executive Supplemental Retirement Plan provides that
participation in the plan may not be rescinded by the Company so long as the
participant remains employed with the Company. The definition of change of
control provides that any payment required under the plan following a change of
control be paid in a lump sum in cash on an actuarial basis. As amended, "change
of control" generally means (i) any person or entity, acquires direct or
indirect ownership of more than 30% of the combined

                                       96

<PAGE>

voting power of NTELOS, except Welsh, Carson, Anderson & Stowe may own up to 40%
of the then outstanding securities or up to 37.5 % of the voting securities
(provided that it is in compliance with the amended and restated shareholders
agreement); (ii) during any period of two consecutive years, individuals who
constitute the board of directors, and any new director whose election was
approved by a majority of the directors who either (a) were directors at the
beginning of the period or (b) were so elected, cease for any reason to
constitute at least a majority of the board of directors; (iii) our shareholders
approve a merger or consolidation with another entity and the merger or
consolidation is consummated, other than (a) a merger or consolidation where our
voting securities outstanding immediately prior to the merger or consolidation
continue to represent 50% of the combined voting power of the surviving entity
or (b) a merger or consolidation effected to recapitalize the Company where no
person acquires more than 30% of the combined voting power of our then
outstanding securities; (iv) our shareholders approve a plan of complete
liquidation or an agreement for the sale of all or substantially all of our
assets and such liquidation or sale is consummated; or (v) the sale or
disposition of all or substantially all of the assets of one or more of our
material lines of business (with respect to participants who are employed in
such material line of business and whose employment is terminated by the Company
or the acquiror prior to the third anniversary of the sale or who terminates for
good reason prior to the third anniversary).

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

            No member of the Compensation Committee of the Board was, during the
2002 fiscal year, an officer or employee of the Company or any of its
subsidiaries, or was formerly an officer of the Company or any of its
subsidiaries.

            During the Company's 2002 fiscal year, no executive officer of the
Company served as (i) a member of the compensation committee (or other board
committee performing equivalent functions) of another entity, one of whose
executive officers served on the Compensation Committee of the Company, (ii) a
director of another entity, one of whose executive officers served on any of
such committees, or (iii) a member of the compensation committee (or other board
committee performing equivalent functions) of another entity, one of whose
executive officers served as a director of the Company.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED SHAREHOLDER MATTERS

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

            The following table presents information, as of March 18, 2003,
regarding the beneficial ownership of our common stock by:

            .       each person known to us to be a beneficial owner of five
                    percent or more of our common stock;

            .       each director;

            .       each executive officer; and

            .       all directors and executive officers as a group.

            Under Securities and Exchange Commission rules, beneficial ownership
of our common stock includes any shares as to which a person, directly or
indirectly, has or shares voting power or investment power and also any shares
as to which a person has the right to acquire such voting or investment power
within 60 days through the exercise of an option, warrant, right of conversion
of a security or otherwise.

                                       97

<PAGE>

Unless otherwise indicated in the footnotes to this table, each of the
beneficial owners named in the table has sole voting and investment power with
respect to their shares of our common stock. Unless otherwise noted, the address
for each of our directors and executive officers is c/o NTELOS Inc., 401 Spring
Lane, Suite 300, Waynesboro, Virginia 22980. As of April 7, 2003, we had
17,780,248 shares of common stock outstanding, and 17,697,996 common shares
outstanding and entitled to vote. Our Series B and Series C preferred stock also
votes with our common stock on an as-converted basis. Accordingly, for purposes
of calculating the percentage of total voting power below, we have included in
the number of outstanding shares of common stock the shares of common stock
outstanding and entitled to vote and a total of 6,855,258 shares, on an
as-converted basis, of our Series B and Series C preferred stock.

<TABLE>
<CAPTION>
                                                                 Number of Shares        Percentage of
Name and Address of Beneficial Owner                          Beneficially Owned (1)   Total Voting Power
------------------------------------                          ----------------------   ------------------
<S>                                                                  <C>                     <C>
Welsh, Carson, Anderson & Stowe (2)                                  6,463,796               26.3%
William W. Gibbs, V (3)                                                160,165                 *
A. William Hamill (4)                                                   10,504                 *
J. Allen Layman (5)                                                    792,057                3.2%
John B. Mitchell, Sr. (6)                                               16,726                 *
James S. Quarforth (7)                                                 245,820                 *
Carl A. Rosberg (8)                                                    130,791                 *
John B. Williamson, III (9)                                              8,865                 *
Warren C. Catlett (10)                                                  41,578                 *
David R. Maccarelli (11)                                                73,066                 *
Mary McDermott (12)                                                      4,750                 *
Michael B. Moneymaker (13)                                              82,627                 *
Don Marie Persing (14)                                                  35,079                 *
All directors and executive officers as a group (12 persons)         1,602,028                6.5%
</TABLE>

* Less than one percent

      (1)   Includes shares held by spouses, children, trusts, and companies in
            which the director or officer owns a controlling interest and over
            which the director or officer has voting and investment power.
      (2)   Welsh, Carson, Anderson & Stowe has the power to vote 24.4% of the
            votes entitled to be cast, voting on an as-converted basis. Welsh,
            Carson, Anderson & Stowe IX, L.P. each own 2,963,334 shares
            beneficially and of record. These shares include 237,128 shares
            owned beneficially and of record by individuals who are members of
            the limited liability company that serves as the sole general
            partner of Welsh, Carson, Anderson & Stowe VIII, L.P. and Welsh,
            Carson, Anderson & Stowe IX, L.P., including individuals employed by
            its investment advisor. Each of Welsh, Carson, Anderson & Stowe VIII
            L.P. and Welsh, Carson, Anderson & Stowe IX, L.P. disclaim
            beneficial ownership of all shares except to the extent owned of
            record by them. The address for Welsh, Carson, Anderson & Stowe
            VIII, L.P. and Welsh, Carson, Anderson & Stowe IX, L.P. is 320 Park
            Avenue, Suite 2500, New York, New York 10022. These shares also
            include 300,000 shares which WCAS Capital Partners III, L.P. has the
            right to acquire through the exercise of warrants.
      (3)   Includes 4,406 shares that Mr. Gibbs has the right to acquire
            through the exercise of stock options.
      (4)   Includes 6,504 shares that Mr. Hamill has the right to acquire
            through the exercise of stock options.
      (5)   Includes 29,203 shares that Mr. Layman has the right to acquire
            through the exercise of stock options.
      (6)   Includes 6,306 shares that Mr. Mitchell has the right to acquire
            through the exercise of stock options.
      (7)   Includes 187,071 shares that Mr. Quarforth has the right to acquire
            through the exercise of stock options.
      (8)   Includes 92,883 shares that Mr. Rosberg has the right to acquire
            through the exercise of stock options.
      (9)   Includes 5,876 shares that Mr. Williamson has the right to acquire
            through the exercise of stock options.
      (10)  Includes 38,900 shares that Mr. Catlett has the right to acquire
            through the exercise of stock options.
      (11)  Includes 66,150 shares that Mr. Maccarelli has the right to acquire
            through the exercise of stock options.
      (12)  Includes 4,750 shares that Ms. McDermott has the right to acquire
            through the exercise of stock options.
      (13)  Includes 51,724 shares that Mr. Moneymaker has the right to acquire
            through the exercise of stock options.
      (14)  Includes 30,835 shares that Ms. Persing has the right to acquire
            through the exercise of stock options.

                                       98

<PAGE>

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

            The following table provides information as of December 31, 2002
regarding shares of our common stock that may be issued under our existing
equity compensation plans.

                                           EQUITY COMPENSATION PLAN INFORMATION

<TABLE>
<CAPTION>
                                                  A                               B                               C
                                     ----------------------------------------------------------------------------------------------
                                                                                                          Number of securities
                                                                                                     remaining available for future
                                         Number of securities                                                issuance under
                                            to be issued                    Weighted-average            equity compensation plans
                                     upon exercise of outstanding    exercise price of outstanding        (excluding securities
                                     options, warrants and rights    options, warrants and rights       reflected in column (A))
                                     ----------------------------    ----------------------------       ------------------------
<S>                                           <C>                           <C>                                  <C>
Equity compensation plans approved
 by security holders..........                1,569,916                     $    18.28                          1,117,249
Equity compensation plans not
 approved by security
 holders(1)...................                  581,650                             --                            258,350
</TABLE>

(1) All regular full-time employees of the Company and its subsidiaries are
entitled to participate in the Amended and Restated Employee Stock Purchase Plan
("ESPP"). To participate, employees must deliver an executed subscription
agreement no later than 10 calendar days prior to the last business day of the
month. Purchases are made under the ESPP on the last trading day of the month.
The purchase price for shares purchased directly from the Company is 10% less
than the average of the high and low sales price on the issue date and, for
shares purchased on the market or otherwise, 90% of the average of all shares
purchased for the ESPP for the applicable period. Effective January 1, 2003, the
NTELOS board of directors suspended participation in the ESPP until further
notice.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

            In February 2001, we engaged in a merger whereby R&B Communications
became a wholly-owned subsidiary. Effective May 2000, R&B Communications entered
into a lease agreement with Layman Family, LLC. Under the terms of the
agreement, R&B Communications leases a 34,000 square foot building from Layman
Family, LLC for a term of 20 years at a rental rate of $15 per square foot. Mr.
Layman, our President and a director, is the manager of Layman Family, LLC.

ITEM 14. CONTROLS AND PROCEDURES

(a)         EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

            The Company's chief executive officer and chief financial officer,
after evaluating the effectiveness of the Company's "disclosure controls and
procedures" (as defined in the Securities Exchange Act of 1934 Rules 13a-14(c)
and 15-d-14(c)) as of a date ("Evaluation Date") within 90 days before the
filing of this annual report on Form 10-K, have concluded that as of the
Evaluation Date, the Company's disclosure controls and procedures were adequate
and designed to ensure that material information relating to the Company and its
consolidated subsidiaries would be made known to them by others within those
entities.

(b)         CHANGE IN INTERNAL CONTROLS

            There were no significant changes in our internal controls or, to
our knowledge, in other factors that could significantly affect our disclosure
controls and procedures subsequent to the Evaluation Date.

                                       99

<PAGE>

                                     PART IV

Item 15.    EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)         (1)     FINANCIAL STATEMENTS

            The following financial statements of NTELOS Inc. are set forth in
            Part II, Item 8 of this Form 10-K:

            Consolidated Balance Sheets at December 31, 2002 and 2001.

            Consolidated Statements of Operations for the years ended December
            31, 2002, 2001 and 2000.

            Consolidated Statements of Cash Flows for the years ended December
            31, 2002, 2001 and 2000.

            Consolidated Statements of Shareholders' Equity (Deficit) for the
            years ended December 31, 2002, 2001 and 2000.

            Notes to Consolidated Financial Statements.

            Reports of Independent Auditors.

            (2)     FINANCIAL STATEMENT SCHEDULES

            (A) Financial information of subsidiaries not consolidated and 50
            percent or less owned entities.

            None.

            (B) The following financial statement schedule is included herein by
            reference as Exhibit 99.1 of this Form 10-K:

            Schedule II, Valuation and Qualifying Accounts

(3)         EXHIBITS

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

   3.1         Amended and Restated Articles of Incorporation effective as of
               December 4, 2000 (incorporated by reference to Form 10-K of
               NTELOS Inc., Exhibit 3.1, for the year ended December 31, 2000).

   3.2*        Amended and Restated Bylaws effective as of February 13, 2001,
               including amendments through February 25, 2003.

   4.1         Rights Agreement, dated February 26, 2000 (incorporated by
               reference to Form 8-A of NTELOS Inc., Exhibit 4, dated February
               29, 2000).

   4.1.1       Amendment No. 1 to the Rights Agreement, dated July 11, 2000,
               between NTELOS Inc. and Registrar and Transfer Company
               (incorporated by reference to Form 8-A/A of NTELOS Inc., Exhibit
               4.1, dated August 10, 2000).

   4.2         Senior Notes Indenture, dated July 26, 2000, by and among NTELOS
               Inc. and The Bank of New York (incorporated by reference to Form
               8-K of NTELOS Inc., Exhibit 4.1, dated

                                       100

<PAGE>

               August 4, 2000).

   4.3         Subordinated Notes Indenture, dated July 26, 2000, by and among
               NTELOS Inc. and The Bank of New York (incorporated by reference
               to Form 8-K of NTELOS Inc., Exhibit 4.2, dated August 4, 2000).

   4.4         Warrant Agreement, dated July 11, 2000, between NTELOS Inc. and
               Welsh, Carson, Anderson & Stowe VIII, L.P. and other Purchasers
               as set forth in Schedule I (incorporated by reference to Form 8-K
               of NTELOS Inc., Exhibit 4.5 dated August 4, 2000).

   4.5         Warrant Agreement, dated July 26, 2000, between NTELOS Inc. and
               The Bank of New York (incorporated by reference to Form 8-K of
               NTELOS Inc., Exhibit 4.3, dated August 4, 2000).

   4.6         Warrant Agreement, dated July 26, 2000, between NTELOS Inc. and
               WCAS Capital Partners III, L.P. (incorporated by reference to
               Form 8-K of NTELOS Inc., Exhibit 4.4, dated August 4, 2000).

   4.7         Warrant Registration Rights Agreement, dated July 26, 2000,
               between NTELOS Inc., Morgan Stanley & Co. Incorporated, First
               Union Securities, Inc. and SunTrust Equitable Securities
               Corporation (incorporated by reference to Form S-4 of NTELOS
               Inc., Exhibit 4.5, dated October 26, 2000).

   4.8         Registration Rights Agreement, dated July 26, 2000, by and among
               NTELOS Inc., Morgan Stanley & Co. Incorporated, First Union
               Securities, Inc. and SunTrust Equitable Securities Corporation
               (incorporated by reference to Form S-4 of NTELOS Inc., Exhibit
               4.3, dated October 26, 2000).

   4.9         Registration Rights Agreement, dated July 26, 2000, by and
               between NTELOS Inc. and LTSE Holdings Corporation (incorporated
               by reference to Form 10-K of NTELOS Inc., Exhibit 4.9, for the
               year ended December 31, 2000).

   4.10        Amended and Restated Shareholders Agreement, dated October 23,
               2000 between NTELOS Inc. and Welsh, Carson, Anderson & Stowe
               VIII, L.P. and Welsh, Carson, Anderson & Stowe IX, L.P., and
               other persons listed on the signature page (incorporated by
               reference to Form 10-K of NTELOS Inc., Exhibit 4.10, for the year
               ended December 31, 2000).

   4.10.1      Modification, dated November 8, 2002, to the Amended and Restated
               Shareholders Agreement, dated October 23, 2000, between NTELOS
               Inc. and Welsh, Carson, Anderson & Stowe VIII, L.P. and Welsh,
               Carson, Anderson & Stowe IX, L.P., and other persons listed on
               the signature page (incorporated by reference to Form 8-K of
               NTELOS Inc., Exhibit 99.1, dated November 6, 2002).

   4.11        Subscription Agreement, dated as of April 10, 2003, among NTELOS
               Inc., debtor in possession, and the participating senior
               noteholders identified therein (incorporated by reference to Form
               8-K of NTELOS Inc., Exhibit 99.2, dated April 10, 2003).

   10.1        Credit Agreement, dated July 26, 2000, between NTELOS Inc.,
               Morgan Stanley & Co. Incorporated, as Administrative Agent, the
               Subsidiary Guarantors and the other Agents and Lenders party
               thereto (incorporated by reference to Form S-4 of NTELOS Inc.,
               Exhibit 10.1, dated October 26, 2000).

                                       101

<PAGE>

   10.1.1      Amendment No. 1 dated July 23, 2001, to the Credit Agreement,
               dated July 26, 2000, between NTELOS Inc., Morgan Stanley & Co.
               Incorporated, as Administrative Agent, the Subsidiary Guarantors
               and the other Agents and Lenders party thereto (incorporated by
               reference to Form S-4 of NTELOS Inc., Exhibit 99.4, dated
               September 18, 2001).

   10.1.2      Amendment No. 2 dated November 14, 2001, to the Credit Agreement,
               dated July 26, 2000, between NTELOS Inc., Morgan Stanley & Co.
               Incorporated, as Administrative Agent, the Subsidiary Guarantors
               and the other Agents and Lenders party thereto (incorporated by
               reference to Form 10-K of NTELOS Inc., Exhibit 10.1.2, for the
               year ended December 31, 2000).

   10.1.3      Amendment No. 3 dated March 6, 2002 to the Credit Agreement,
               dated July 26, 2000, between NTELOS Inc., Morgan Stanley & Co.
               Incorporated, as Administrative Agent, the Subsidiary Guarantors
               and the other Agents and Lenders party thereto (incorporated by
               reference to Form 8-K of NTELOS Inc., Exhibit 10.1, dated March
               7, 2002).

   10.1.4      Amendment No. 4 and Waiver No. 1 dated November 29, 2002 to the
               Credit Agreement, dated July 26, 2000, between NTELOS Inc.,
               Morgan Stanley & Co. Incorporated, as Administrative Agent, the
               Subsidiary Guarantors and the other Agents and Lenders party
               thereto (incorporated by reference to Form 8-K of NTELOS Inc.,
               Exhibit 10.1, dated November 29, 2002).

   10.1.5*     Amendment No. 5 dated January 14, 2003 to the Credit Agreement,
               dated July 26, 2000, between NTELOS Inc., Morgan Stanley & Co.
               Incorporated, as Administrative Agent, the Subsidiary Guarantors
               and the other Agents and Lenders party thereto.

   10.1.6*     Amendment No. 6 dated February 28, 2003 to the Credit Agreement,
               dated July 26, 2000, between NTELOS Inc., Wachovia Bank, National
               Association (successor to Morgan Stanley & Co. Incorporated), as
               Administrative Agent, the Subsidiary Guarantors and the other
               Agents and Lenders party thereto.

   10.2*       Revolving Credit and Guaranty Agreement, dated March 6, 2003,
               between NTELOS Inc., debtor-in-possession, Wachovia Bank,
               National Association, as Administrative Agent and Collateral
               Agent, Wachovia Securities Inc. and the Subsidiary Guarantors
               thereunder.

   10.3        Form of Employment Agreement with executive officers of NTELOS
               Inc. (incorporated by reference to Form 10-K of NTELOS Inc.,
               Exhibit 10.2, for the year ended December 31, 2001).

   10.4        Employment Agreement with J. Allen Layman, effective February 13,
               2001 (incorporated by reference to Form 10-K of NTELOS Inc.,
               Exhibit 10.8, for the year ended December 31, 2000).

   10.5        Management Continuity Agreement between J. Allen Layman and
               NTELOS Inc. (incorporated by reference to Form 10-K of NTELOS
               Inc., Exhibit 10.7, for the year ended December 31, 2000).

   10.6        Form of Incentive Stock Option Agreement with NTELOS Inc.
               (incorporated by reference to Form 10-K of NTELOS Inc., Exhibit
               10.5 for the year ended December 31, 2001).

   10.7        Amendment to Executive Supplemental Retirement Plan (incorporated
               by reference to Form

                                       102

<PAGE>

               10-K of NTELOS Inc., Exhibit 10.6, for the year ended December
               31, 2001).

   10.8        Amended and Restated Employee Stock Purchase Plan (incorporated
               by reference to Form S-8 of NTELOS Inc., Exhibit 4.1, dated
               September 30, 2002).

   10.9        Plan Support Agreement, dated as of April 10, 2003, between
               NTELOS Inc., debtor-in-possession, and the Supporting Lenders
               identified therein (incorporated by reference to Form 8-K of
               NTELOS Inc., Exhibit 99.1, dated April 10, 2003).

   21.1*       Subsidiaries of NTELOS Inc.

   23.1*       Consent of Ernst & Young LLP

   23.2*       Consent of McGladrey & Pullen, LLP

   99.1*       Financial Statement Schedule

   99.2*       Certification of Chief Executive Officer and Chief Financial
               Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to
               Section 906 of the Sarbanes-Oxley Act of 2002.

         ----------
          * filed herewith.

(b)         Reports on Form 8-K.

            On November 8, 2002, NTELOS filed a Current Report on Form 8-K
            attaching a press release announcing that it engaged UBS Warburg as
            its financial advisor to analyze its business plan for 2003 and
            beyond and to address its capital structure. NTELOS also announced
            that it entered into a Modification, dated November 8, 2002, to the
            Amended and Restated Shareholders Agreement, dated October 23, 2000,
            which was filed as an attachment thereto.

            On November 12, 2002, NTELOS filed a Current Report on Form 8-K
            updating its guidance for the year 2002.

            On November 29, 2002, NTELOS filed a Current Report on Form 8-K
            attaching Amendment No. 4 and Waiver No. 1 to the $325 million
            Credit Agreement, dated as of July 26, 2000, as amended.

                                       103

<PAGE>

                                   SIGNATURES

            Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized in City of
Waynesboro, Commonwealth of Virginia, on April 14, 2003.


                                        NTELOS Inc.
                                        a Virginia corporation
                                        (Registrant)

                                        By: /s/ James S. Quarforth
                                            ------------------------------------
                                            James S. Quarforth
                                            Chief Executive Officer

<PAGE>

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

<TABLE>
<CAPTION>
           SIGNATURE                             TITLE                        DATE
-------------------------------   ------------------------------------   --------------
<S>                               <C>                                    <C>
/s/ James S. Quarforth            Chief Executive Officer and Director   April 14, 2003
-------------------------------   (Principal Executive Officer)
James S. Quarforth

/s/ Michael B. Moneymaker         Chief Financial Officer                April 14, 2003
-------------------------------   (Principal Financial and Accounting
Michael B. Moneymaker             Officer)

/s/ William W. Gibbs, V           Director                               April 14, 2003
-------------------------------
William W. Gibbs, V

/s/ A. William Hamill             Director                               April 14, 2003
-------------------------------
A. William Hamill

/s/ J. Allen Layman               Director                               April 14, 2003
-------------------------------
J. Allen Layman

/s/ John B. Mitchell, Sr.         Director                               April 14, 2003
-------------------------------
John B. Mitchell, Sr.

/s/ Carl A. Rosberg               Director                               April 14, 2003
-------------------------------
Carl A. Rosberg

/s/ John B. Williamson, III       Director                               April 14, 2003
-------------------------------
John B. Williamson, III
</TABLE>

<PAGE>

            Certification of the Chief Executive Officer

            I, James S. Quarforth, certify that:

1.          I have reviewed this annual report on Form 10-K of NTELOS Inc.;

2.          Based on my knowledge, this annual report does not contain any
            untrue statement of a material fact or omit to state a material fact
            necessary to make the statements made, in light of the circumstances
            under which such statements were made, not misleading with respect
            to the period covered by this annual report;

3.          Based on my knowledge, the financial statements, and other financial
            information included in this annual report, fairly present in all
            material respects the financial condition, results of operations and
            cash flows of the registrant as of, and for, the periods presented
            in this annual report;

4.          The registrant's other certifying officers and I are responsible for
            establishing and maintaining disclosure controls and procedures (as
            defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
            and have:

            (a)     designed such disclosure controls and procedures to ensure
            that material information relating to the registrant, including its
            consolidated subsidiaries, is made known to us by others within
            those entities, particularly during the period in which this annual
            report is being prepared;

            (b)     evaluated the effectiveness of the registrant's disclosure
            controls and procedures as of a date within 90 days prior to the
            filing date of this annual report (the "Evaluation Date"); and

            (c)     presented in this annual report our conclusions about the
            effectiveness of the disclosure controls and procedures based on our
            evaluation as of the Evaluation Date;

5.          The registrant's other certifying officers and I have disclosed,
            based on our most recent evaluation, to the registrant's auditors
            and the audit committee of the registrant's board of directors (or
            persons performing the equivalent functions):

            (a)     all significant deficiencies in the design or operation of
            internal controls which could adversely affect the registrant's
            ability to record, process, summarize and report financial data and
            have identified for the registrant's auditors any material
            weaknesses in internal controls; and

            (b)     any fraud, whether or not material, that involves management
            or other employees who have a significant role in the registrant's
            internal controls; and

6.          The registrant's other certifying officers and I have indicated in
            this annual report whether or not there were significant changes in
            internal controls or in other factors that could significantly
            affect internal controls subsequent to the date of our most recent
            evaluation, including any corrective actions with regard to
            significant deficiencies and material weaknesses.

Date:  April 14, 2003                   By: /s/ James S. Quarforth
                                           -------------------------------------
                                            James S. Quarforth
                                            Chief Executive Officer

<PAGE>

            Certification of the Chief Financial Officer

            I, Michael B. Moneymaker, certify that:

1.          I have reviewed this annual report on Form 10-K of NTELOS Inc.;

2.          Based on my knowledge, this annual report does not contain any
            untrue statement of a material fact or omit to state a material fact
            necessary to make the statements made, in light of the circumstances
            under which such statements were made, not misleading with respect
            to the period covered by this annual report;

3.          Based on my knowledge, the financial statements, and other financial
            information included in this annual report, fairly present in all
            material respects the financial condition, results of operations and
            cash flows of the registrant as of, and for, the periods presented
            in this annual report;

4.          The registrant's other certifying officers and I are responsible for
            establishing and maintaining disclosure controls and procedures (as
            defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant
            and have:

            (a)     designed such disclosure controls and procedures to ensure
            that material information relating to the registrant, including its
            consolidated subsidiaries, is made known to us by others within
            those entities, particularly during the period in which this annual
            report is being prepared;

            (b)     evaluated the effectiveness of the registrant's disclosure
            controls and procedures as of a date within 90 days prior to the
            filing date of this annual report (the "Evaluation Date"); and

            (c)     presented in this annual report our conclusions about the
            effectiveness of the disclosure controls and procedures based on our
            evaluation as of the Evaluation Date;

5.          The registrant's other certifying officers and I have disclosed,
            based on our most recent evaluation, to the auditors and the audit
            committee of the registrant's board of directors (or persons
            performing the equivalent functions):

            (a)     all significant deficiencies in the design or operation of
            internal controls which could adversely affect the registrant's
            ability to record, process, summarize and report financial data and
            have identified for the registrant's auditors any material
            weaknesses in internal controls; and

            (b)     any fraud, whether or not material, that involves management
            or other employees who have a significant role in the registrant's
            internal controls; and

6.          The registrant's other certifying officers and I have indicated in
            this annual report whether or not there were significant changes in
            internal controls or in other factors that could significantly
            affect internal controls subsequent to the date of our most recent
            evaluation, including any corrective actions with regard to
            significant deficiencies and material weaknesses.

Date:  April 14, 2003                   By: /s/ Michael B. Moneymaker
                                           -------------------------------------
                                            Michael B. Moneymaker
                                            Chief Financial Officer

<PAGE>

                                  EXHIBIT INDEX

Exhibit No.    Description
-----------    -----------------------------------------------------------------
   3.1         Amended and Restated Articles of Incorporation effective as of
               December 4, 2000 (incorporated by reference to Form 10-K of
               NTELOS Inc., Exhibit 3.1, for the year ended December 31, 2000).

   3.2*        Amended and Restated Bylaws effective as of February 13, 2001,
               including amendments through February 25, 2003.

   4.1         Rights Agreement, dated February 26, 2000 (incorporated by
               reference to Form 8-A of NTELOS Inc., Exhibit 4, dated February
               29, 2000).

   4.1.1       Amendment No. 1 to the Rights Agreement, dated July 11, 2000,
               between NTELOS Inc. and Registrar and Transfer Company
               (incorporated by reference to Form 8-A/A of NTELOS Inc., Exhibit
               4.1, dated August 10, 2000).

   4.2         Senior Notes Indenture, dated July 26, 2000, by and among NTELOS
               Inc. and The Bank of New York (incorporated by reference to Form
               8-K of NTELOS Inc., Exhibit 4.1, dated August 4, 2000).

   4.3         Subordinated Notes Indenture, dated July 26, 2000, by and among
               NTELOS Inc. and The Bank of New York (incorporated by reference
               to Form 8-K of NTELOS Inc., Exhibit 4.2, dated August 4, 2000).

   4.4         Warrant Agreement, dated July 11, 2000, between NTELOS Inc. and
               Welsh, Carson, Anderson & Stowe VIII, L.P. and other Purchasers
               as set forth in Schedule I (incorporated by reference to Form 8-K
               of NTELOS Inc., Exhibit 4.5 dated August 4, 2000).

   4.5         Warrant Agreement, dated July 26, 2000, between NTELOS Inc. and
               The Bank of New York (incorporated by reference to Form 8-K of
               NTELOS Inc., Exhibit 4.3, dated August 4, 2000).

   4.6         Warrant Agreement, dated July 26, 2000, between NTELOS Inc. and
               WCAS Capital Partners III, L.P. (incorporated by reference to
               Form 8-K of NTELOS Inc., Exhibit 4.4, dated August 4, 2000).

   4.7         Warrant Registration Rights Agreement, dated July 26, 2000,
               between NTELOS Inc., Morgan Stanley & Co. Incorporated, First
               Union Securities, Inc. and SunTrust Equitable Securities
               Corporation (incorporated by reference to Form S-4 of NTELOS
               Inc., Exhibit 4.5, dated October 26, 2000).

   4.8         Registration Rights Agreement, dated July 26, 2000, by and among
               NTELOS Inc., Morgan Stanley & Co. Incorporated, First Union
               Securities, Inc. and SunTrust Equitable Securities Corporation
               (incorporated by reference to Form S-4 of NTELOS Inc., Exhibit
               4.3, dated October 26, 2000).

   4.9         Registration Rights Agreement, dated July 26, 2000, by and
               between NTELOS Inc. and LTSE Holdings Corporation (incorporated
               by reference to Form 10-K of NTELOS Inc., Exhibit 4.9, for the
               year ended December 31, 2000).

<PAGE>

   4.10        Amended and Restated Shareholders Agreement, dated October 23,
               2000 between NTELOS Inc. and Welsh, Carson, Anderson & Stowe
               VIII, L.P. and Welsh, Carson, Anderson & Stowe IX, L.P., and
               other persons listed on the signature page (incorporated by
               reference to Form 10-K of NTELOS Inc., Exhibit 4.10, for the year
               ended December 31, 2000).

   4.10.1      Modification, dated November 8, 2002, to the Amended and Restated
               Shareholders Agreement, dated October 23, 2000, between NTELOS
               Inc. and Welsh, Carson, Anderson & Stowe VIII, L.P. and Welsh,
               Carson, Anderson & Stowe IX, L.P., and other persons listed on
               the signature page (incorporated by reference to Form 8-K of
               NTELOS Inc., Exhibit 99.1, dated November 6, 2002).

   4.11        Subscription Agreement, dated as of April 10, 2003, among NTELOS
               Inc., debtor in possession, and the participating senior
               noteholders identified therein (incorporated by reference to Form
               8-K of NTELOS Inc., Exhibit 99.2, dated April 10, 2003).

   10.1        Credit Agreement, dated July 26, 2000, between NTELOS Inc.,
               Morgan Stanley & Co. Incorporated, as Administrative Agent, the
               Subsidiary Guarantors and the other Agents and Lenders party
               thereto (incorporated by reference to Form S-4 of NTELOS Inc.,
               Exhibit 10.1, dated October 26, 2000).

   10.1.1      Amendment No. 1 dated July 23, 2001, to the Credit Agreement,
               dated July 26, 2000, between NTELOS Inc., Morgan Stanley & Co.
               Incorporated, as Administrative Agent, the Subsidiary Guarantors
               and the other Agents and Lenders party thereto (incorporated by
               reference to Form S-4 of NTELOS Inc., Exhibit 99.4, dated
               September 18, 2001).

   10.1.2      Amendment No. 2 dated November 14, 2001, to the Credit Agreement,
               dated July 26, 2000, between NTELOS Inc., Morgan Stanley & Co.
               Incorporated, as Administrative Agent, the Subsidiary Guarantors
               and the other Agents and Lenders party thereto (incorporated by
               reference to Form 10-K of NTELOS Inc., Exhibit 10.1.2, for the
               year ended December 31, 2000).

   10.1.3      Amendment No. 3 dated March 6, 2002 to the Credit Agreement,
               dated July 26, 2000, between NTELOS Inc., Morgan Stanley & Co.
               Incorporated, as Administrative Agent, the Subsidiary Guarantors
               and the other Agents and Lenders party thereto (incorporated by
               reference to Form 8-K of NTELOS Inc., Exhibit 10.1, dated March
               7, 2002).

   10.1.4      Amendment No. 4 and Waiver No. 1 dated November 29, 2002 to the
               Credit Agreement, dated July 26, 2000, between NTELOS Inc.,
               Morgan Stanley & Co. Incorporated, as Administrative Agent, the
               Subsidiary Guarantors and the other Agents and Lenders party
               thereto (incorporated by reference to Form 8-K of NTELOS Inc.,
               Exhibit 10.1, dated November 29, 2002).

   10.1.5*     Amendment No. 5 dated January 14, 2003 to the Credit Agreement,
               dated July 26, 2000, between NTELOS Inc., Morgan Stanley & Co.
               Incorporated, as Administrative Agent, the Subsidiary Guarantors
               and the other Agents and Lenders party thereto.

   10.1.6*     Amendment No. 6 dated February 28, 2003 to the Credit Agreement,
               dated July 26, 2000, between NTELOS Inc., Wachovia Bank, National
               Association (successor to Morgan Stanley & Co. Incorporated), as
               Administrative Agent, the Subsidiary Guarantors and the other
               Agents and Lenders party thereto.

<PAGE>

   10.2*       Revolving Credit and Guaranty Agreement, dated March 6, 2003,
               between NTELOS Inc., debtor-in-possession, Wachovia Bank,
               National Association, as Administrative Agent and Collateral
               Agent, Wachovia Securities Inc. and the Subsidiary Guarantors
               thereunder.

   10.3        Form of Employment Agreement with executive officers of NTELOS
               Inc. (incorporated by reference to Form 10-K of NTELOS Inc.,
               Exhibit 10.2, for the year ended December 31, 2001).

   10.4        Employment Agreement with J. Allen Layman, effective February 13,
               2001 (incorporated by reference to Form 10-K of NTELOS Inc.,
               Exhibit 10.8, for the year ended December 31, 2000).

   10.5        Management Continuity Agreement between J. Allen Layman and
               NTELOS Inc. (incorporated by reference to Form 10-K of NTELOS
               Inc., Exhibit 10.7, for the year ended December 31, 2000).

   10.6        Form of Incentive Stock Option Agreement with NTELOS Inc.
               (incorporated by reference to Form 10-K of NTELOS Inc., Exhibit
               10.5 for the year ended December 31, 2001).

   10.7        Amendment to Executive Supplemental Retirement Plan (incorporated
               by reference to Form 10-K of NTELOS Inc., Exhibit 10.6, for the
               year ended December 31, 2001).

   10.8        Amended and Restated Employee Stock Purchase Plan (incorporated
               by reference to Form S-8 of NTELOS Inc., Exhibit 4.1, dated
               September 30, 2002).

   10.9        Plan Support Agreement, dated as of April 10, 2003, between
               NTELOS Inc., debtor-in-possession, and the Supporting Lenders
               identified therein (incorporated by reference to Form 8-K of
               NTELOS Inc., Exhibit 99.1, dated April 10, 2003).

   21.1*       Subsidiaries of NTELOS Inc.

   23.1*       Consent of Ernst & Young LLP

   23.2*       Consent of McGladrey & Pullen, LLP

   99.1*       Financial Statement Schedule

   99.2*       Certification of Chief Executive Officer and Chief Financial
               Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to
               Section 906 of the Sarbanes-Oxley Act of 2002.

      ----------
       * filed herewith.