<PAGE>
===============================================================================


                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                          FORM 10-K/A AMENDMENT NO. 2

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

                  FOR THE FISCAL YEAR ENDED: DECEMBER 31, 2000

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

                  FOR THE TRANSITION PERIOD FROM             TO

                        Commission File Number: 0-19179

                            CT COMMUNICATIONS, INC.
             (Exact name of registrant as specified in its charter)

               NORTH CAROLINA                             56-1837282
----------------------------------------        -------------------------------
    (State or other jurisdiction of             (I.R.S. Employer Identification
     incorporation or organization)                          Number)

       68 CABARRUS AVENUE, EAST
        CONCORD, NORTH CAROLINA                              28025
----------------------------------------        -------------------------------
(Address of principal executive offices)                   (Zip Code)

       Registrant's telephone number, including area code: (704) 722-2500

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

TITLE OF EACH CLASS:                      NAME OF EXCHANGE ON WHICH REGISTERED:
--------------------                      -------------------------------------
      None                                                None

          Securities registered pursuant to Section 12(g) of the Act:
                                  COMMON STOCK
                        RIGHTS TO PURCHASE COMMON STOCK

Indicate by check mark whether the Company (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 Company 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. [ ]

         The aggregate market value of the voting stock held by nonaffiliates
of the Company is approximately $261,887,976 (based on the December 3, 2001
closing price of the Common Stock of $15.75 per share). As of December 3, 2001,
there were 18,752,570 shares of the Company's Common Stock outstanding.

                      Documents Incorporated by Reference

       Document of the Company                     Form 10-K Reference Location
-----------------------------------                ----------------------------
2001 Annual Meeting Proxy Statement                          Part III


===============================================================================


<PAGE>


                                EXPLANATORY NOTE

         Part I, Item 1, Part II, Items 6, 7 and 8, and Part IV, Item 14, of CT
Communications, Inc. Annual Report on Form 10-K for the fiscal year ended
December 31, 2000 are hereby amended in their entirety as follows:


                                     PART I


ITEM 1.  BUSINESS

         Some of the statements contained in this form 10-K discuss future
expectations, contain projections of results of operations or financial
condition or state other forward-looking information. These statements are
subject to known and unknown risks, uncertainties and other factors that could
cause the actual events to differ materially from those contemplated by the
statements. The forward-looking information is based on various factors and was
derived using numerous assumptions. In some cases, these so-called
"forward-looking statements" can be identified by the use of words such as
"may," "will," "should," "expect," "plan," "anticipate," "believe," "estimate,"
"predict," "project," "intend" or "potential" or the negative of those words
and other comparable words. Those statements however only reflect our
predictions. Actual events or results may differ substantially. Important
factors that could cause actual events or results to be materially different
from the forward-looking statements include those discussed under the heading
"Business--Risk Factors" and throughout this Form 10-K.

         References in this Form 10-K to "we," "us," "our" and "CT
Communications" mean CT Communications, Inc. and our subsidiaries and
predecessors, unless the context suggests otherwise.

GENERAL

         CT Communications, Inc. is a holding company that, through its
operating subsidiaries, provides integrated telecommunications services to
residential and business customers located primarily in North Carolina. We
offer a comprehensive package of telecommunications services, including local
and long distance telephone, Internet and data services and digital wireless
services.

         We began operations in 1897 as the Concord Telephone Company. Concord
Telephone continues to operate as an incumbent local exchange carrier ("ILEC")
in a territory covering approximately 705 square miles in Cabarrus, Stanly and
Rowan Counties, North Carolina. This area is located just northeast of
Charlotte, North Carolina along the Interstate 85 corridor, a major north/south
connector between Atlanta, Georgia and Washington, D.C. Our ILEC offers a full
range of local telephone, long distance and other enhanced services.

         In 1998, we began to operate as a competitive local exchange carrier
("CLEC") in the northern Charlotte markets contiguous to our ILEC service area.
Our CLEC business focuses on small-to-medium-size companies along the I-85
corridor, between Charlotte and Greensboro. In 2000, we expanded our
geographical focus with the opening of a CLEC office in the Greensboro, North
Carolina market. Our CLEC offers services substantially similar to those
offered by our ILEC.

         In 2000, we continued our Greenfield strategy, serving as a Satellite
Local Exchange Carrier (SLEC) in high growth communities, including those
surrounding Charlotte and Raleigh, North Carolina. We are working with
developers and builders to become the "official telecommunications provider"
for their developments, similar to the Concord Mills agreement signed with the
Mills Corporation. Under these agreements, we provide the telecommunication
infrastructure within these developments. By clustering our projects, we are
able to gain capital and service efficiencies.

         We provide long distance telephone service in the areas served by our
ILEC and CLEC. We have agreements with several interexchange carriers to
terminate traffic that originates on our network, and our switching platform
enables us to route traffic to the lowest cost provider.

         We offer Internet and data services to both ILEC and CLEC business and
residential customers. These services include dial-up and high speed dedicated
Internet access, Web hosting, Web design, electronic commerce applications and
digital subscriber line ("DSL") services. In May 1998, we significantly
expanded this business through our strategic acquisition of Vnet, a
business-oriented Internet service provider based in Charlotte. In March 2000,
we acquired Internet of Concord, a local internet service provider within our
ILEC territory. In December 2000, we further expanded our Internet and Data
Services Division through the acquisition of WebServe, Inc., a provider of Web
hosting, development and programming services.


                                       1
<PAGE>


         We offer our own branded digital wireless services through a resale
arrangement with BellSouth Corporation's Carolinas' PCS Limited Partnership
(the "DCS Partnership"). The DCS Partnership offers service throughout most of
North Carolina and South Carolina and is one of the largest regional digital
wireless networks in the Southeast. In 2000, we entered into an agreement to
partition our predefined area of the DCS Partnership, which will significantly
increase our number of wireless subscribers. The partitioning will occur in the
second quarter of 2001. Roaming agreements with other wireless carriers enable
our customers to utilize their digital wireless services throughout the United
States and in a number of foreign countries. At the end of 2000, BellSouth
Mobility merged its wireless operations with SBC to form a new wireless company
called Cingular.

         The operations of Concord Telephone are our primary business segment.
Concord Telephone accounted for approximately 71% of our operating revenues in
2000. Despite anticipated growth of other products and services, as described
below, we expect that Concord Telephone will continue to account for a
significant portion of our revenue and earnings in 2001. Additional business,
financial and competitive information about our operations is discussed below.
For other information regarding our business segments, see the Note entitled
"Segment Information" in the notes to consolidated financial statements
included elsewhere in this report.

         On February 24, 2000, the Board of Directors declared a two-for-one
stock dividend payable on April 5, 2000 to shareholders of record on March 15,
2000.

         Effective January 28, 1999, our Voting Common Stock and Class B
Nonvoting Common Stock were converted into a single class of Common Stock (the
"Recapitalization"). Pursuant to the Recapitalization, our Articles of
Incorporation were amended to (i) provide for one class of Common Stock,
consisting of 100 million authorized shares, and (ii) reclassify each issued
and outstanding share of Voting Common Stock into 4.4 shares of Common Stock
and each issued and outstanding share of Class B Nonvoting Common Stock into
4.0 shares of Common Stock. Cash was paid in lieu of issuing any fractional
shares. On July 24, 1997, the Board of Directors declared a three-for-two stock
dividend payable August 29, 1997.

         All share and per share amounts in this Annual Report on Form 10-K
have been adjusted to reflect the two-for-one stock dividend, Recapitalization
and the 1997 stock dividend.

         CT Communications, Inc. is incorporated under the laws of North
Carolina and was organized in 1993 pursuant to the corporate reorganization of
Concord Telephone into a holding company structure. Our principal executive
offices are located at 68 Cabarrus Avenue, East, Concord, North Carolina 28025
(telephone number: (704) 722-2500.)

OPERATIONS

         Our five primary business segments are described in more detail below.

         ILEC SERVICES

         Concord Telephone offers integrated telecommunications services as an
ILEC to customers served by nearly 123,000 access lines in Cabarrus, Stanly and
Rowan Counties in North Carolina. Our ILEC network facilities include nearly
15,000 fiber miles, serving nine exchanges in a host-remote switch
architecture.


                                       2
<PAGE>


         Our access line growth rate has remained strong, with growth in the
business market continuing to outpace that of the residential market. As a
result of this strong growth in the business market, we expect the percentage
of total access lines represented by business customers to continue to
increase. The following table details access line growth over the past five
years:


<TABLE>
<CAPTION>
                                                                        YEARS ENDED DECEMBER 31,
                                                   ------------------------------------------------------------------
                                                     2000          1999          1998            1997           1996
                                                   -------       -------       -------          -------        ------
<S>                                                <C>           <C>           <C>              <C>            <C>
ACCESS LINES
    Residential.............................        91,159        87,857        83,612           79,398        75,915
    Business................................        31,339        29,078        25,535           23,175        20,632
                                                   -------       -------       -------          -------        ------
    Total ILEC..............................       122,498       116,935       109,147          102,573        96,547
                                                   =======       =======       =======          =======        ======

PERCENTAGE GROWTH
    Residential.............................           3.8%          5.1%          5.3%             4.6%          3.8%
    Business................................           7.8%         13.9%         10.2%            12.3%         11.5%
    Total ILEC..............................           4.8%          7.1%          6.4%             6.2%          5.4%

PERCENT OF TOTAL
    Residential.............................          74.4%         75.1%         76.6%            77.4%         78.6%
    Business................................          25.6%         24.9%         23.4%            22.6%         21.4%
</TABLE>

         Continued high customer satisfaction remains a top priority, and our
efforts are directed accordingly. We have implemented a number of performance
and satisfaction measures in our operations and continue to survey customers
monthly to gauge loyalty and satisfaction. We hold all of our employees
accountable for service quality, and a portion of their compensation depends
upon customer survey results.

         Our ILEC sales team is structured to provide maximum flexibility for
our customers. Residential customers may personally meet with a sales and
service representative in one of our four business offices or can alternatively
take advantage of the convenience of calling into our centralized customer care
center. Our sales team provides "one-stop" shopping and residential customer
service representatives are trained in all residential applications, including
Internet and data services, digital wireless and paging services, and telephone
equipment, and will additionally address any follow-up sales and billing
concerns.

         Business customers are served by a specialized group that is trained
to manage the specialized products and services unique to the business market.
Customers with less complex needs are supported by a specialized telephone
customer care group, which develops solutions and schedules service
installations. Major business customers are assigned dedicated account
executives that are familiar with their complex applications and service
requirements.

         A centralized operations service center coordinates provisioning and
maintenance for all ILEC customers. In addition to receiving maintenance
requests, this center dispatches field personnel and monitors the status of all
service orders and maintenance requests. To ensure continued customer
satisfaction, the center is measured against targeted time intervals and the
ability to meet customer commitment dates.

         Our core ILEC network is comprised of modern digital switching
equipment and fiber optic cable with self-healing SONET ring topology. In 1996,
we began conversion to a Nortel DMS 100/200 network switching platform. We
continue to upgrade our distribution network by moving fiber and electronics
closer to the customer through the use of remote switching units. The customer
care service center operations are supported by an AS400-based service order,
trouble-ticketing, billing and collection system and a Mitel private branch
exchange with automated call distribution capabilities. At the heart of our
network is a network operations center that identifies problems as they occur
and diagnoses potential network problems before customers are impacted.

         Regulation. Our ILEC is subject to regulation by various federal,
state and local governmental bodies. We voluntarily opened our markets to
competition for local dial tone in 1997. As a result, federal regulations have
required us to permit interconnection with our network and have established our
obligations with respect to reciprocal compensation for completion of calls,
the resale of telecommunications services, the interconnection of facilities,
the provision of nondiscriminatory access to unbundled network elements, number
portability, dialing parity and access to poles, ducts, conduits and
rights-of-way. As a general matter, this ongoing regulation increases our
ILEC's business risks and may have a substantial impact on our ILEC's future
operating results. Among recent Federal Communications Commission regulatory
developments is the FCC's Third Report and Order in CC Docket No. 96-98 (the
"UNE Remand Order"), which was released on November 5, 1999. The UNE Remand
Order established a new set of unbundled


                                       3
<PAGE>


network elements ("UNEs") that ILECs are obligated to provide to competing
carriers under Sections 251(e)(3) and 251(d)(2) of the Telecommunications Act.
Among other things, the UNE Remand Order effectively requires ILECs to permit
competing carriers to "convert" resold local exchange services and, in certain
circumstances, special access services, to "combinations" of UNEs at reduced
prices. On December 9, 1999, the FCC released its Fourth Report and Order in CC
Docket No. 96-98 and Third Report and Order in CC Docket No. 98-147 ("Line
Sharing Order"). The Line Sharing Order is designed to promote competitive
entry into broadband services by requiring ILECs to provide competing carriers
with access to the high frequency portion of the telephone lines, or loops,
that an ILEC uses to provide voice communication services to its customers.
This requirement will enable competing carriers to offer advanced data
services, such as DSL services used for high-speed access to the Internet, to
the ILEC's customers, using the same telephone lines as the ILEC.

         The Federal Communications Commission (FCC) governs our ILEC's rates
for interstate access services. The Multi-Association Group Plan (MAG)
proceeding is pending with the FCC and could materially change both the manner
in which our ILEC imposes interstate access charges and the level of those
charges. This plan would lower interstate access rates charged to interexchange
carriers, while increasing the subscriber line charge to end users, and create
new flat rate per line explicit charges on interexchange carriers. We believe
this plan will not materially impact earnings if adopted in its present format,
but that may change before the plan is adopted. This plan is similar to The
Coalition for Affordable Local and Long Distance Service (i.e., CALLS), adopted
for larger price cap ILEC's, but it was proposed to address smaller
rate-of-return carriers.

         The FCC is also considering the Rural Task Force proposal by the
Federal-State Joint Board on Universal Service that would create a new explicit
universal service High Cost Fund III subsidy, which in addition to existing
universal service subsidies, would be portable to competing carriers. Our
Company currently only receives Long Term Cost Loop support and Local Switching
support.

         The outcome of all of these proceedings could have a substantial, and
potentially adverse, impact on the structure of our ILEC's access charges and
universal service subsidies and the associated revenues that our ILEC collects.

         State laws and regulations require us to comply with North Carolina
pricing regulations, file periodic reports, pay various fees and comply with
rules governing quality of service, consumer protection and similar matters.
Local regulations require us to obtain municipal franchises and to comply with
various building codes and business license requirements. These federal, state
and local regulations are discussed in more detail under "Legislative and
Regulatory Developments" under this Item 1.

         Since September 1997, our ILEC's rates for local exchange services
have been established under a price regulation plan approved by the North
Carolina Utilities Commission. Under the price regulation plan, our charges are
no longer subject to rate-base, rate-of-return regulation. Instead, the charges
for most of our local exchange services may be adjusted to reflect changes in
inflation reduced by a 2% assumed productivity offset. The price regulation
plan is also subject to adjustment for certain exogenous events outside of our
control, such as jurisdictional cost shifts or legislative mandates. In
September 2000, we received approval to rebalance our rates under the price
regulation plan.

         Competition. Several factors have resulted in rapid change and
increased competition in the local telephone market, including:

         -        growing customer demand for alternative products and
                  services,

         -        technological advances in transmitting voice, data and video,

         -        development of fiber optics and digital electronic
                  technology,

         -        a decline in the level of access charges paid by
                  interexchange carriers to local telephone companies to access
                  their local networks, and

         -        legislation and regulations designed to promote competition.

         We agreed to open our traditional service area to competition for
local dial tone service in 1997. In exchange for rate rebalancing, pricing
flexibility and simplification of rate plans in our price regulation plans. We
entered into interconnection agreements with Time Warner Communications of
North Carolina, L.P., US LEC of North Carolina, LLC, and a resale agreement
with Empire Communications Corp., to provide access to our local telephone
service market. We have received interconnection requests from several other
CLEC's. Some or all of these agreements may be finalized in 2001.


                                       4
<PAGE>


         Cable operators are also entering the local exchange market. Time
Warner currently offers telephony services in its major markets and cable
service in our core service area. Another major source of competition are the
wireless service providers serving our traditional service area.

         On January 11, 2001, the merger between Time Warner and America
Online, Inc. ("AOL"), the country's largest internet service provider, was
consummated. The post-merger company could become a formidable competitor to
our ILEC and may seek to provide consumers with a "one-stop" source for a broad
array of telecommunications, information and Internet services. AOL/Time Warner
have already stated that their proposed service offerings post-merger will
include a communications platform that combines AOL's instant messaging service
with local telephony over cable. According to AOL/Time Warner, the merger will
accelerate the availability of broadband interactive services to consumers and
drive further growth in electronic commerce. The merger may also spur further
consolidation involving telecommunications, cable and information services
providers.

         CLEC SERVICES

         Our CLEC business began in 1998 through our interconnection agreement
with BellSouth Telecommunications, Inc. in Salisbury, North Carolina and
northern Charlotte. In January 2000, we obtained approval to provide
competitive local access in South Carolina. We have entered into
interconnection agreements with BellSouth, Verizon, Sprint, and ALLTEL
Carolinas. At December 31, 2000, we were providing competitive local access to
customers served by nearly 12,000 access lines in these markets.

         Our CLEC business group employs the same sales strategy as our ILEC
business group, using locally based account executives who meet face-to-face
with business customers. Our CLEC offers an integrated combination of
communications services, including local service, long distance and enhanced
voice services, and Internet and data services. Our CLEC uses the same billing
platform as our ILEC. A significant portion of compensation for our CLEC's
sales organization is based on individual and group sales results.

         Our CLEC manages our own network elements and those elements leased
from the incumbent local carrier, utilizing the MetaSolv TBS ordering and
provisioning system. The CLEC's customer care group has received specialized
training specific to interconnection ordering and provisioning processes. We
hold these employees to the same high standards for service quality as our ILEC
customer care groups.

         We deploy a facilities-based network in our expansion markets,
collocating our own remote switching equipment with the incumbent telephone
company. We connect the local remote switches in each of our expansion markets
using a variety of fiber optic links. We typically lease appropriate network
elements from the incumbent carrier to give us greater control over the service
quality and platform for rapid expansion in the future. We expanded our
facilities-based service into the northern Charlotte markets in 1999 with the
opening of the Concord Mills Mall. As we develop a critical mass of customers
in a specific market, we will evaluate the economics of pushing our own network
elements closer to our customer base, providing even more control and
flexibility. In 1996, we installed a Nortel DMS 500 switch in Charlotte that
permits us to switch the local traffic from our CLEC and all of our long
distance traffic. The percentage of customers served on our facilities and via
Unbundled Network Elements (UNE's) has increased to 75.7% at December 31,2000
as compared to 38.7% for the same period in 1999.

         In our Greenfield markets, Charlotte and Raleigh, North Carolina, we
deploy our own remote switching equipment, as well as build a distribution
system to in effect, become the local telephone company for each new
development. We connect to our network via leased or owned fiber optic lines
back to our Nortel DMS 500 switch in Charlotte. Our focus is on the fastest
growing areas surrounding the high growth Charlotte and Raleigh markets. By
clustering several projects, we gain capital and service efficiencies that
contribute to increased profitability.

         Regulation. In general, our CLEC establishes its own rates and charges
for local services and is subject to less extensive regulation as compared to
our ILEC. However, like the ILEC, our CLEC must comply with various rules of
the North Carolina Utilities Commission governing quality of service, consumer
protection and similar matters. The FCC has jurisdiction over our CLEC
interstate services, such as access service. There are several proceedings at
the FCC that could impact the interstate access rates charged by CLEC's.

         Competition. Our CLEC competes primarily with local incumbent
telephone companies and, to a lesser extent, with other CLEC's. We also face,
and will continue to face, competition from other current and potential future
market entrants, including other CLEC's, cable television companies, electric
utilities, microwave carriers, wireless telecommunications providers, Internet
service providers and private networks built by large end-users.


                                       5
<PAGE>


         LONG DISTANCE SERVICES

         We began offering long distance services to our ILEC customers in 1992
and now provide that service to approximately 82,000 access lines. We have
agreements with several interexchange carriers to terminate traffic that
originates on our network, and our switching platform enables us to route the
traffic to the lowest cost provider. In our ILEC service area, approximately
69% of the total lines are subscribed to our own branded long distance service.

         The long distance market has become significantly more competitive.
New competitors have entered the market and prices have declined, resulting in
increased consumer demand and significant market growth. Increased competition
has also led to increased consolidation among long distance service providers.
Major long distance competitors include AT&T, Sprint and WorldCom, Inc.

         Verizon Corporation recently obtained approval to provide long
distance services in New York, and SBC Communications, Inc. has obtained
approval in Oklahoma, Kansas, and Texas. BellSouth is expected by many industry
analysts to obtain similar approvals to provide long distance service in some
southern states during 2001. These newer competitors benefit from established
local market share and from established trade names through nationwide
advertising.

         Internet telephony, a potential competitor for low cost telephone
service, is also developing. This could threaten long distance revenues as well
as ILEC and CLEC access revenues.

         INTERNET AND DATA SERVICES

         In 1995, we began providing dial-up Internet access to residential and
business customers. In May 1998, we acquired Vnet, a business-oriented Internet
service provider based in Charlotte, North Carolina. The Vnet acquisition added
approximately 5,000 Internet accounts, including 400 business accounts. In
September 1999, we added approximately 900 Internet accounts through the
acquisition of Catawba Valley Internet Partnership, an Internet service
provider based in Cherryville, North Carolina. In February 2000, we purchased
substantially all of the business assets of Internet of Concord, including
1,845 dial-up and Web hosting accounts. On December 13, 2000 we purchased
WebServe, Inc., a Charlotte, North Carolina based provider of Web design,
hosting, and programming services that expands our Web related product line. At
December 31, 2000, we had approximately 18,000 Internet customers.

         Internet Access Service. We offer a variety of dial-up and dedicated
access solutions which provide access to the Internet. We also offer a full
range of customer premise equipment required to connect to the Internet. Our
access services include:

         -        Dedicated Access. We offer a broad line of high-speed
                  dedicated access utilizing frame relay and dedicated
                  circuits, which provide business customers with direct access
                  to a full range of Internet applications.

         -        DSL Access. In late 1999, we began to offer high-speed
                  Internet access service using DSL technology. DSL technology
                  permits high speed digital transmission over the existing
                  copper wiring of regular telephone lines. Our DSL service is
                  available at speeds up to 768 Kbps. Our DSL services are
                  designed for residential users and small-to-medium sized
                  businesses to provide high quality Internet access at speeds
                  faster than an integrated services digital network ("ISDN")
                  and at flat-rate prices that are lower than traditional
                  dedicated access charges.

         -        Dial-up Access. Our dial-up services provide access to the
                  Internet through ordinary telephone lines at speeds of up to
                  56 Kbps and through digital ISDN lines at speeds of up to 128
                  Kbps.

         Web Services. We offer a variety of value-added services, including
Web hosting, Web design, collocation, virtual private networks or intranets,
remote access and security solutions, and video conferencing.

         Electronic Commerce. We provide software solutions that enable
companies to conduct electronic commerce. We offer electronic data
interchange/extraNet solutions consisting of software and services that are
designed to help businesses connect to their suppliers and customers. We also
provide Internet commerce software to allow businesses to build Web
applications for commerce-enabled Web sites, intranets and extranets. Common
features of this software include the ability to build electronic catalogs to
conduct transactions and to integrate with business systems, including
purchasing, accounting and inventory systems.


                                       6
<PAGE>


         Account executives sell Internet and data services directly to
business customers in the Charlotte and Greensboro metropolitan areas. Our
technical support staff is available 24 hours a day, seven days a week. Our
technicians design, order, configure, install and maintain all of our equipment
to suit the customer's needs. We have a customer care group dedicated to
Internet and data services.

         We provide Internet and data services primarily through our own
network in our ILEC and CLEC territories. In other areas, we use the network of
the local telephone company. We purchase access to the Internet from national
Internet backbone providers, which provide DS-3 access at all major national
access points.

         Regulation. In general, Internet and data services are not regulated
at the federal level. However, an important regulatory issue currently pending
before both the FCC and federal courts is how Internet traffic will be
classified and treated for purposes of interstate access charges and reciprocal
compensation related to local traffic. Internet service providers currently
obtain access services from local exchange carriers without having to pay the
access charges that interexchange carriers pay for equivalent service.
Currently, calls placed by end-users to Internet service providers are subject
to reciprocal compensation payments under existing interconnection agreements.
On February 26, 1999, the FCC decided that these calls are primarily
jurisdictionally interstate traffic and that the Telecommunications Act does
not require reciprocal compensation to be paid on them. The decision asserts
that because no federal rules governing inter-carrier compensation for this
traffic currently exist, the determination of whether it is subject to
reciprocal compensation may be made by state regulatory commissions. The FCC's
decision states that state commission decisions mandating the payment of
reciprocal compensation for Internet service providers' traffic may conform
with federal law. Although the FCC may re-assert jurisdictional authority and
preempt state commission findings regarding reciprocal compensation, it has not
yet shown an inclination to do so. We are uncertain as to the outcome of these
matters or the impact on our Internet business.

         In cases between BellSouth and US LEC Corp. and between BellSouth and
ICG Communications, Inc., the North Carolina Utilities Commission has ruled
that Internet traffic originating and terminating in the same calling area is
subject to local reciprocal compensation as specified in existing
interconnection agreements. Commissions in numerous other states have made
similar rulings.

         Another significant issue facing Internet service providers is whether
they will be given access to broadband systems operated by cable television
companies. Internet service providers generally believe that such mandatory
access is appropriate and would allow them to provide competitive high-speed
broadband service to more customers. For example, AOL, as the world's largest
Internet service provider, strongly advocates "open access," although it is not
currently supporting the need for government intervention to mandate open
access. Time Warner and AOL recently agreed, as part of their merger, to open
Time Warner's cable systems to competing Internet service providers. AT&T and
Mindspring Enterprise, Inc. recently have reached a similar agreement. The
issue continues to be debated and legislation has been introduced in Congress
to mandate access to broadband cable networks. However, the FCC has thus far
declined to take action on the matter. The ultimate outcome of this issue could
have a significant impact on the success of Internet service providers.

         Competition. The Internet and data services market is extremely
competitive, highly fragmented and has grown dramatically in recent years. The
market is characterized by the absence of significant barriers to entry and the
rapid growth in Internet usage among customers. Sources of competition are:

         -        access and content providers, such as AOL, the Microsoft
                  Network and Prodigy;

         -        local, regional and national Internet service providers, such
                  as PSINet, EarthLink, and Mindspring;

         -        the Internet services of regional, national and international
                  telecommunications companies, such as AT&T, BellSouth, and
                  WorldCom;

         -        online services offered by incumbent cable providers, such as
                  Time Warner; and

         -        DSL providers, such as COVAD and Northpoint.

         The recent merger of AOL/Time Warner creates further, formidable
competitive threats in the Internet and data services market. AOL/Time Warner
has announced plans to leverage their combined assets and resources post-merger
to offer a wide variety of Internet and data-related services.


                                       7
<PAGE>


         DIGITAL WIRELESS SERVICES

         Under our existing agreements with the DCS Partnership, we have the
ability to offer digital wireless services as part of our integrated services
package to customers anywhere in North Carolina and South Carolina. We offer
digital wireless services in Cabarrus, Stanly, Rowan and Iredell Counties in
North Carolina through a branded resale arrangement with the DCS Partnership.
We sell digital wireless services and products, including service packages,
long distance, features, handsets, prepaid plans, and accessories, through four
retail outlets in Concord (2), Statesville and Salisbury, North Carolina.
Digital wireless products and services are also sold through our ILEC business
offices and our direct sales force. At December 31, 2000, we served
approximately 16,300 customers, a 53% increase over the approximately 10,700
customers served at December 31, 1999. Customer attrition for 2000 averaged
2.5% per month.

         Until September 2000, we owned a limited partner interest in the DCS
Partnership, which included BellSouth Telecommunications, a subsidiary of Duke
Energy Company, a subsidiary of Progress Energy and approximately 30 other
independent telephone companies. The DCS Partnership owns a 100% digital
communications network in North Carolina and South Carolina, an area covering
approximately 12 million people. The DCS Partnership's digital wireless network
is based on Global System for Mobile Communications ("GSM") wireless
technology, which offers advanced services and functionality, secure
communications, digital voice quality and national and international roaming.
GSM technology is proven technology used by more than 390 service providers in
over 164 countries and by more than 470 million customers worldwide. GSM
provides our customers with extensive roaming capabilities both nationally and
internationally.

         The DCS Partnership is primarily responsible for the marketing
function of our digital wireless business. It develops and implements
promotions, develops and advertises pricing plans, conducts market research,
develops collateral materials, and otherwise markets the DCS Partnership's
digital wireless service throughout most of North Carolina and South Carolina.
We support the DCS Partnership's service plans and promotions through local
advertising and distribution efforts.

         Customer service is provided by specialized service representatives
trained to handle the specific requirements of our digital wireless customers.
The ordering and provisioning of digital wireless service can be performed at
our store locations or by the customer through a toll-free 800 number.

         Each independent telephone company limited partner in the DCS
Partnership has the option to partition a pre-defined service area. Our
pre-defined service area includes Cabarrus, Rowan and Stanly Counties and the
southern portion of Iredell County. Partitioning would allow us to purchase the
license, base station sites, and any customers the DCS Partnership has acquired
in the area. After partitioning, we would continue to purchase pre-defined
services from the DCS Partnership, such as switching, under an operating
agreement. The operating agreement also provides customer service and technical
performance requirements for the DCS Partnership and the partitioning telephone
company.

         In July 2000 we elected to exercise our right to partition. Once the
partitioning is effected, which will likely occur in the spring of 2001, we
will acquire 47 cell sites, approximately 10,000 additional subscribers and a
license for spectrum for Cabarrus, Rowan, and Stanly Counties and the southern
portion of Iredell County. This partitioned area contains a population of
approximately 440,000 people. The cost of partitioning is estimated to be $20
million to $25 million at the effective time of partitioning. We expect to
finance the costs associated with partitioning through additional borrowings.
While we will have ownership of the assets and customers within our partitioned
area, we will continue to purchase pre-defined services from the DCS
Partnership, such as switching, and will remain subject to certain conditions
including certain branding requirements, offering partnership service plans and
adherence to partnership technical and customer care standards.

         Regulation. The construction, operation, management and transfer of
digital wireless systems in the United States is regulated by the FCC. Digital
wireless carriers are exempt from regulation by the North Carolina Utilities
Commission. The regulation of wireless services is discussed in more detail
under "Legislative and Regulatory Developments" in this Item 1.

         Competition. Many wireless carriers compete in the Charlotte
metropolitan area, including AT&T, Nextel, Sprint PCS, ALLTEL Mobile, Verizon,
Cricket Wireless and Cingular. This competition has led to intense pressure on
the pricing of services. In 1998, several providers introduced "flat rate"
pricing which eliminated roaming charges and further reduced unit prices. We
intend to compete by providing extensive geographical coverage, high quality
technology and service, competitive pricing and capitalizing on the strength of
customers' loyalty to us based on multiple service relationships.


                                       8
<PAGE>


INVESTMENTS

         We have made several strategic investments designed to contribute to
the execution of our business strategy. The investments are described below.

         Palmetto MobileNet. In January 1998, we merged our cellular telephone
interests with Palmetto MobileNet, L.P. We own 19.8% of Palmetto MobileNet,
which holds 50% general partnership interests in 10 rural service areas
covering more than two million people in North Carolina and South Carolina.
ALLTEL Mobile is the managing partner of the 10 cellular rural service area
general partnerships.

         Maxcom. In 1996, we participated with Grupo Radio Centro in forming
Maxcom Telecomunicaciones, S.A. de C.V. (formerly Amaritel), a competitive
telecommunications company offering local, long distance and network
telecommunications services in Mexico. During 1998, we participated in an
additional $49 million private equity financing of Maxcom. The participants
were the original investors and a group of investors with international
telecommunications experience, including BankAmerica International Investment
Corporation, BancBoston Investments, Inc. and Bachow Investments Partners III,
L.P. The 1998 financing increased Maxcom's equity to $70 million, which
combined with a $100 million loan from an international bank, provided Maxcom
with up to $170 million to build the initial phases of its system. On March 10,
2000, Maxcom privately issued $275 million of senior notes, the proceeds of
which were used to prepay vendor financing and construct its next generation
platform. The system is being built primarily by Lucent Technologies, Inc.,
which is using a wide spectrum of technology, ranging from microwave to wired
fiber optic networks. Maxcom began offering commercial services in Mexico City
and Puebla, Mexico in April 1999 and had approximately 27,000 access lines at
December 31, 2000.

         On March 8, 2000, we entered into a Capital Contribution Agreement
with Maxcom and its shareholders. Under this agreement, the shareholders of
Maxcom were obligated to contribute a total of $35 million to Maxcom in
exchange for capital stock and warrants to purchase additional stock. In
connection with this agreement, we contributed $6.0 million in August 2000.

         In October 1997, we entered into an operating agreement with Maxcom,
under which we provided management expertise and strategic advice for the
venture. The operating agreement was amended as of October 1, 1999 to
accelerate the transition of management responsibilities from our employees to
Maxcom employees. The operating agreement expired on December 31, 2000. We now
primarily provide support and advisory services as requested by Maxcom. In
addition to certain advisory fees, during the term of the operating agreement,
we can earn an additional $450,000 each year plus options to acquire 250,000
shares of Maxcom Common Stock if certain operating and financial performance
goals are met.

         Wireless One. In 1995, we participated with Wireless One, Inc. in
forming Wireless One of North Carolina, LLC to develop and launch wireless
cable systems in North Carolina. Wireless One of North Carolina entered into
contracts with approximately 45 community colleges, several private schools in
North Carolina and the University of North Carolina system to provide wireless
cable services and holds the majority of the spectrum rights covering North
Carolina. In late 1998, the FCC liberalized the use of these frequencies to
include two-way data and telephone service. Wireless One of North Carolina
continuously evaluates potential uses of its frequency spectrum, including
digital video, high speed Internet and other traditional telephony services.

         In December 1999, WorldCom purchased Wireless One, Inc., which owns a
50.0% interest in Wireless One of North Carolina, for cash and stock plus the
assumption of certain liabilities. We continue to own a 49.6% interest in
Wireless One of North Carolina. We are evaluating our various alternatives with
respect to our ownership interest in Wireless One of North Carolina, including
a possible sale of our interest. We currently have no arrangements or agreement
to sell our interest.

         DCS Partnership. In 1994, we purchased a limited partner interest in
the DCS Partnership. In September of 2000, BellSouth purchased our interest for
$39.2 million.

         Passive Investments. Our passive investments consist of equity
interests in several private and public companies. We own 3.8% of ITC Holding
Company, which participated in the formation of a number of successful
telecommunications companies, including ITC-DeltaCom, Inc. (Nasdaq: "ITCD"),
Powertel, Inc.(Nasdaq: "PTEL") and MindSpring Enterprise, Inc., subsequently
acquired by EarthLink (Nasdaq: "ELNK").


                                       9
<PAGE>


         As a result of the corporate reorganization of ITC Holding Company in
1997, we received shares of ITC-DeltaCom and currently own more than 820,000
shares of ITC-DeltaCom. We sold an aggregate of 140,000 shares of ITC-DeltaCom
from time to time during 2000 and expect to continue to sell shares in 2001 as
we deem appropriate.

         During 2000, ITC Holding announced a further reorganization pursuant
to which we received 1.6 million shares of Knology, Inc. in April 2000, in a
tax-free spin-off. To maintain the tax-free nature of this transaction, we, and
other ITC Holding Company shareholders, have agreed not to sell or transfer the
Knology shares for two years following the distribution date of the shares.

         In addition, we own approximately 640,000 shares of Illuminet
Holdings, Inc., which was formed by a group of independent telephone companies,
including our ILEC, to provide billing and collection services and a national
SS7 network and now markets these services to other carriers. Illuminet
completed its initial public offering of Common Stock in October 1999 and now
trades on the Nasdaq National Market ("ILUM"). Our Illuminet shares were
subject to certain sale restrictions that expired in April 2000. We sold an
aggregate of 290,000 shares of Illuminet from time to time during 2000 and
expect to continue to sell shares in 2001 as we deem appropriate.

LEGISLATIVE AND REGULATORY DEVELOPMENTS

         The telecommunications industry is subject to federal, state and local
regulation. The application of these regulations to our business segments is
discussed above. A more general description is set forth below.

         Federal Regulations. The FCC regulates interstate and international
telecommunications services, which includes using local telephone facilities to
originate and terminate interstate and international calls. The
Telecommunications Act is intended to promote competitive development of new
service offerings, to expand public availability of telecommunications services
and to streamline regulation of the industry. Implementation of its legislative
objectives is the task of the FCC, state public utilities commissions and a
federal-state joint board. The Telecommunications Act makes all state and local
barriers to competitive entry unlawful, whether they are direct or indirect.
The Telecommunications Act directs the FCC to hold notice and comment
proceedings and to preempt all inconsistent state and local laws and
regulations. Among the numerous pending FCC proceedings are its Implementation
of the Local Competition Provisions of the Telecommunications Act of 1996
proceeding (CC Docket No.96-98), its Deployment of Wireline Services Offering
Advanced Telecommunications Capability proceeding (CC Docket No. 98-147), and
at least four proceedings relating to universal service and access charge
reform (CC Docket Nos. 94-1, 96-45, 96-262, 99-249).

         In addition to opening up local exchange markets, the
Telecommunications Act contains provisions for:

         -        updating and expanding telecommunications service guarantees;

         -        removing certain restrictions relating to former AT&T
                  operating companies (the Regional Bell Operating Companies)
                  resulting from the federal court antitrust consent decree
                  issued in 1984;

         -        the entry of telephone companies into video services; - the
                  entry of cable television operators into other
                  telecommunications industries;

         -        changes in the rules for ownership of broadcasting and cable
                  television operations; and

         -        changes in the regulations governing cable television.

         Each state retains the power to impose "competitively neutral"
requirements that are both consistent with the Telecommunications Act's
universal service provision and necessary for universal service, public safety
and welfare, continued service quality and consumer rights. Although a state
may not impose requirements that effectively function as barriers to entry or
create a competitive disadvantage, the scope of state authority to maintain
existing or adopt new requirements under this section is not clear. In
addition, before it preempts a state or local requirement as violating the
entry barrier prohibition, the FCC must hold a notice and comment proceeding.

         The FCC may forbear from applying any statutory or regulatory
provision that is not necessary to keep telecommunications rates and terms
reasonable or to protect consumers. A state may not apply a statutory or
regulatory provision that the FCC decides to


                                      10
<PAGE>


forbear from applying. In addition, the FCC must review its telecommunications
regulations every two years and repeal or modify any that it deems to be no
longer in the public interest.

         Although certain interpretive issues under the Telecommunications Act
have not yet been resolved, it is apparent that the requirements of the
Telecommunications Act have led to increased competition among providers of
local telecommunications services and have simplified the process of switching
from incumbent local exchange carrier services to those offered by competitive
access providers and competitive local exchange carriers.

         The FCC regulates wireless services through its Wireless
Telecommunications Bureau. Providers of wireless mobile radio services are
considered "common carriers" and are subject to the obligations of such
carriers, except where specifically exempted by the FCC. As a result, our
wireless operations and business plans may be impacted by FCC regulatory
activity. For example, the FCC has concluded that commercial mobile radio
service providers are entitled to enter into reciprocal compensation
arrangements with local exchange carriers. The FCC has declined at this time to
classify commercial mobile radio service providers themselves as local exchange
carriers subject to the obligations of the Telecommunications Act, but could do
so at some point in the future. Other regulatory issues currently facing
wireless carriers include issues relating to telephone number administration.
Because they are common carriers, wireless carriers are subject to FCC and
state actions regarding exhaustion, conservation or expansion of telephone
numbers and area codes. Programs to conserve or expand telephone number and
area code resources may possibly have a disproportionate impact on wireless
carriers because such carriers may not have a large reserve of spare numbers,
as wireline carriers may have, and so-called "area code overlay" programs are
sometimes imposed on wireless carriers alone, which forces their customers to
dial more digits for most local calls than wireline callers in the same area.
Within the past year, the FCC has issued an order asserting jurisdiction over
nearly all telephone numbering issues.

         A cellular licensee must apply for FCC authority to use additional
frequencies, to modify the technical parameters of existing licenses, to expand
its service territory and to provide new services. In addition to regulation by
the FCC, cellular systems are subject to certain Federal Aviation
Administration tower height regulations with respect to the siting and
construction of cellular transmitter towers and antennas. The FCC also has a
rulemaking proceeding pending to update the guidelines and methods it uses for
evaluating acceptable levels of radio frequency emissions from radio equipment,
including cellular telephones, which could result in more restrictive standards
for such devices.

         State and Local Regulation. We are also regulated by the North
Carolina Utilities Commission because we provide intrastate telephone services
within North Carolina. As a result, we must comply with North Carolina pricing
regulations, file periodic reports, pay various fees and comply with rules
governing quality of service, consumer protection and similar matters. The
rules and regulations are designed primarily to promote the public's interest
in receiving quality telephone service at reasonable prices. Our networks are
subject to numerous local regulations such as requirements for franchises,
building codes and licensing. Such regulations vary on a city by city and
county by county basis.

RISK FACTORS

         In connection with the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995, set forth below are cautionary
statements identifying important factors that could cause actual events or
results to differ materially from any forward-looking statements made by or on
behalf of us, whether oral or written. We wish to ensure that any
forward-looking statements are accompanied by meaningful cautionary statements
in order to maximize to the fullest extent possible the protections of the safe
harbor established in the Private Securities Litigation Reform Act of 1995.
Accordingly, any such statements are qualified in their entirety by reference
to, and are accompanied by, the following important factors that could cause
actual events or results to differ materially from our forward-looking
statements. For additional information regarding forward-looking statements,
please read the "Cautionary Note Regarding Forward-Looking Statements" section
beginning on page 23.

         OUR SUCCESS DEPENDS UPON OUR ABILITY TO MANAGE OUR EXPANSION.

         Our ability to continue to expand and develop our business will depend
on whether we can successfully do the following in a timely manner, at
reasonable costs and on satisfactory terms and conditions:

         -        acquire necessary equipment, software, and facilities, and
                  integrate them into our systems,

         -        evaluate markets,


                                      11
<PAGE>


         -        monitor operations,

         -        control costs,

         -        maintain effective quality controls,

         -        hire and train qualified personnel,

         -        expand internal management,

         -        enhance operating and accounting systems, and

         -        obtain any required government authorizations.

         We are making significant operating and capital investments and will
have to address numerous operating challenges. We are currently developing new
processes and operating support systems. We will need to continue developing
new marketing initiatives and hiring and training sales people responsible for
selling our services. We will also need to continue developing the billing and
collection systems necessary to integrate these services. We cannot assure you
that we can design, install, and implement these products and systems in a
timely manner to permit us to offer our new services as planned.

         In order to establish new operations, we may be required to spend
considerable amounts of capital before we generate related revenue. If these
services fail to be profitable or if we fail in any of these respects, this
failure may have a material adverse effect on our business and the price of our
Common Stock.

         OUR SUCCESS DEPENDS UPON OUR ABILITY TO ATTRACT AND RETAIN KEY
PERSONNEL.

         The efforts of a small number of key management and operating
personnel will largely determine our success. Our success also depends in part
upon our ability to hire and retain highly skilled and qualified operating,
marketing, sales, financial and technical personnel. The competition for
qualified personnel in the telecommunications services industry is intense and,
accordingly, we cannot assure you that we will be able to hire or retain
necessary personnel. If we lose the services of key personnel or if we are
unable to attract additional qualified personnel, our business and the price of
our Common Stock could be materially and adversely affected.


         WE EXPECT TO CONTINUE TO FACE SIGNIFICANT COMPETITION IN THE
TELECOMMUNICATIONS INDUSTRY.

         We operate in an increasingly competitive environment. Our current
competitors include:

         -        incumbent local exchange carriers,

         -        competitive local exchange carriers,

         -        interexchange carriers,

         -        Internet service providers,

         -        wireless telecommunications providers,

         -        cable television companies,

         -        local and regional system integrators, and

         -        resellers of telecommunications services and enhanced
                  services providers.

         The trend toward business combinations and strategic alliances within
the telecommunications industry could further increase competition. In
addition, the development of new technologies could increase competition. One
of the primary purposes of the Telecommunications Act, enacted February 8,
1996, is to promote competition, particularly in the local telephone market.
Since the enactment of the Telecommunications Act, several telecommunications
companies have indicated their intention to aggressively expand their ability
to compete in many segments of the telecommunications industry, including
segments in which we participate and expect to participate. This expansion,
should it occur, may result in more participants than can ultimately be
successful in a given market.

         We expect that increased competition will result in more competitive
pricing. Some of the companies with whom we compete are, or are affiliated
with, major telecommunications companies. 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. Any of these factors could materially adversely affect our
business and the price of our Common Stock.


                                      12
<PAGE>


         WE MUST SECURE UNBUNDLED NETWORK ELEMENTS.

         In connection with our CLEC operations, we interconnect with and use
incumbent telephone companies' networks to access our customers. Accordingly,
we depend upon the technology and capabilities of incumbent telephone companies
to meet the telecommunications needs of our CLEC customers and to maintain our
service standards. Our CLEC operations depend significantly on the quality and
availability of the incumbent telephone companies' copper lines and the
incumbent telephone companies' maintenance of these lines. We must also
maintain efficient procedures for ordering, provisioning, maintaining and
repairing lines from the incumbent telephone companies. We may not be able to
obtain the copper lines and services we require from the incumbent telephone
companies at satisfactory quality levels, rates, terms and conditions. Our
inability to do so could delay the expansion of our CLEC networks and degrade
the quality of our services to our CLEC customers. If these events occur, we
may experience a material adverse effect on our CLEC business and the price of
our Common Stock.

         Late in 1999, we began offering our DSL product to customers. To
provide unbundled DSL-capable lines that connect each end-user to our
equipment, we will rely on incumbent telephone companies. The
Telecommunications Act generally requires that charges for these unbundled
network elements be cost-based and nondiscriminatory. Charges for DSL-capable
lines and other unbundled network elements may vary based on rates proposed by
incumbent telephone companies and approved by state regulatory commissions.
Increases in these rates could result in a material adverse effect on our CLEC
business and the price of our Common Stock.

         WE ARE DEPENDENT ON OUR OPERATING SUPPORT SYSTEMS.

         Sophisticated information and processing systems are vital to our
growth and our ability to monitor costs, bill customers, process customer
orders and achieve operating efficiencies. Billing and information systems have
historically been produced by outside vendors. These systems have generally met
our needs. As we continue providing more services, we will need more
sophisticated billing and information systems. Our failure, or the failure of
vendors, to adequately identify all of our information and processing needs or
to upgrade systems as necessary could have a material adverse effect on our
business and the price of our Common Stock.

         WE MUST ADAPT TO RAPID TECHNOLOGICAL CHANGE.

         The telecommunications industry is subject to rapid and significant
changes in technology, and we rely on third parties for the development of and
access to new technology. The effect of technological changes on our business
cannot be predicted. We believe our future success will depend, in part, on our
ability to anticipate or adapt to such changes and to offer, on a timely basis,
services that meet customer demands. We cannot assure you that we will obtain
access to new technology on a timely basis or on satisfactory terms. Our
failure to obtain access to this new technology could have a material adverse
effect on our business and the price of our Common Stock.

         WE ARE SUBJECT TO A COMPLEX AND UNCERTAIN REGULATORY ENVIRONMENT.

         The telecommunications industry is regulated by the FCC, state
regulatory commissions and municipalities. Federal and state regulations and
regulatory trends in the direction of reduced regulation have had, and are
likely to have, both positive and negative effects on us and our ability to
compete. Federal or state regulatory changes and any resulting increase in
competition may have a material adverse effect on our businesses and on the
price of our Common Stock.

         WE ARE DEPENDENT ON INTERCONNECTION AGREEMENTS, PERMITS AND
RIGHTS-OF-WAY.

         Our success will depend, in part, on our ability to implement existing
interconnection agreements and enter into and implement new interconnection
agreements as we expand into new markets. Interconnection agreements are
subject to negotiation and interpretation by the parties to the agreements and
are subject to state regulatory commission, FCC and judicial oversight. We
cannot assure you that we will be able to enter into interconnection agreements
in a timely manner on terms favorable to us. We must also maintain existing and
obtain new local permits, including rights to utilize underground conduit and
pole space and other rights-of-way. We cannot assure you that we will be able
to maintain our existing permits and rights or to obtain and maintain other
permits and rights needed to implement our business plan on acceptable terms.
Cancellation or non-renewal of our interconnection agreements, permits,
rights-of-way or other arrangements could materially adversely affect our
business and the price of our Common


                                      13
<PAGE>


Stock. In addition, the failure to enter into and maintain any required
arrangements for a new market may affect our ability to develop that market.

         THE SUCCESS OF OUR INTERNET AND DATA SERVICES BUSINESS DEPENDS ON
MAINTAINING "PEERING" AND OTHER ARRANGEMENTS.

         The profitability of our Internet and data services, such as Internet
access, may be adversely affected if we are unable to maintain "peering"
arrangements with Internet service providers on favorable terms. In the past,
major Internet service providers routinely exchanged traffic with other
Internet service providers that met technical criteria on a "peering" basis.
This means that each Internet service provider accepted traffic routed to
Internet addresses on their system from their "peers" on a reciprocal basis,
without payment of compensation. Recently, Internet service providers have been
restricting the use of peering arrangements with other providers and have been
imposing charges for accepting traffic from providers other than their "peers."
Although we currently have peering arrangements with national Internet backbone
providers, we cannot assure you that we will be able to maintain "peer" status
with these providers, or that we will be able to terminate traffic on their
networks at favorable prices. A failure to maintain adequate and favorable
"peering" arrangements may have a material adverse effect on our Internet
business and the price of our Common Stock.

         OUR LONG DISTANCE SERVICES ARE AFFECTED BY OUR ABILITY TO ESTABLISH
EFFECTIVE TERMINATION AGREEMENTS.

         We offer long distance services as part of the integrated package of
telecommunications services that we provide our customers. We have relied on
and will continue to rely on other carriers to provide transport and
termination services for portions of our long distance traffic. These
agreements typically provide for the termination of long distance services on a
per-minute basis and may contain minimum volume commitments. Negotiation of
these agreements involves estimates of future supply and demand for transport
capacity, as well as estimates of the calling patterns and traffic levels of
our future customers. If we fail to meet our minimum volume commitments, we may
be obligated to pay underutilization charges. If we underestimate our need for
transport capacity, we may be required to obtain capacity through more
expensive means. These failures may result in a material adverse effect on our
business and the price of our Common Stock.

         THE MARKET PRICE OF OUR COMMON STOCK HAS BEEN AND MAY BE VOLATILE.

         Our Common Stock has traded on the Nasdaq National Market only since
January 29, 1999. Since that time, the trading market for our Common Stock has
been characterized by limited liquidity, low volume and price volatility.

         In addition, the following factors, among others, may cause the price
of our Common Stock to fluctuate:

         -        sales by our current shareholders of large amounts of our
                  Common Stock,

         -        new legislation or regulation,

         -        variations in our revenue, net income and cash flows,

         -        the difference between our actual results and the results
                  expected by investors and analysts,

         -        announcements of new service offerings, marketing plans or
                  price reductions by us or our competitors,

         -        technological innovations, and

         -        mergers, acquisitions or strategic alliances.

         Further, stock markets recently have experienced significant price and
volume fluctuations that have affected growth companies such as
telecommunications companies. The fluctuations in the market prices of the
stocks of many companies have not been directly related to the operating
performance of those companies. These market fluctuations may materially
adversely affect the price of our Common Stock.

         OUR ACQUISITIONS, JOINT VENTURES AND STRATEGIC ALLIANCES MAY NOT BE
SUCCESSFUL.

         We may acquire other companies as a means of expanding into new
markets, developing new services or supplementing existing businesses. We
cannot predict whether or when any acquisitions may occur or the likelihood of
a material transaction being completed on favorable terms. These types of
transactions involve risks, including:

         -        difficulties assimilating acquired operations and personnel,

         -        disruptions of our ongoing businesses,


                                      14
<PAGE>


         -        diversion of resources and management time,

         -        the possibility that uniform management and operating systems
                  and procedures may not be maintained,

         -        increased regulatory burdens,

         -        new markets in which we may have limited or no experience,
                  and

         -        possible impairment of relationships with employees or
                  customers.

         Also, we cannot assure you that we could obtain financing for an
acquisition on satisfactory terms or that the acquired business would perform
as expected.

         We have formed and may in the future form various strategic alliances,
joint ventures and other similar arrangements. The other parties to these
existing or future arrangements, however, may at times have economic, business
or legal interests or goals that are inconsistent with our goals or those of
the strategic alliance, joint venture or similar arrangement. In addition, a
joint venture partner may be unable to meet its economic or other obligations
to the venture. A disagreement with our strategic allies or joint venture
partners over certain business actions or the failure of a partner to meet its
obligations to the venture could adversely affect our business and the price of
our Common Stock.

         ANTI-TAKEOVER PROVISIONS MAY LIMIT THE ABILITY OF SHAREHOLDERS TO
EFFECT A CHANGE IN CONTROL OF CT COMMUNICATIONS.

         Our articles of incorporation contain provisions for staggered terms
of directors, removal of directors for cause only, supermajority voting for
certain business combinations and the availability of authorized but unissued
shares of Common Stock. Also, we have adopted a shareholders' rights plan in
which each stockholder is entitled to purchase additional shares of Common
Stock at a specified purchase price upon the occurrence of certain events
related to a potential change in our control. These provisions may have the
effect of deterring transactions involving a change in our control or
management, including transactions in which shareholders might receive a
premium for their shares.

EMPLOYEES

         At December 31, 2000, we had approximately 687 employees. None of our
employees are represented by a labor union, and we consider relations with our
employees to be good.

EXECUTIVE OFFICERS OF THE COMPANY

         The following is a list of our executive officers as of March 1, 2001,
including such person's name, age, positions and offices held with CT
Communications, the period served in such positions or offices and, if such
person served in such position or office for less than five years, the prior
employment of such person.

         L. D. Coltrane, III, age 82, has been a director since 1965 and became
President and Chairman of the Board in 1986. He retired as President in 1988.
He is the father of Michael R. Coltrane.

         Michael R. Coltrane, age 54, has been President, Chief Executive
Officer and a director since 1988. Prior to joining us in 1988, Mr. Coltrane
served as Executive Vice President of First Charter National Bank for more than
six years and as Vice President of a large regional bank for more than 10
years. Mr. Coltrane is Vice Chairman of Maxcom Telecomunicaciones, S.A. de
C.V., a director of the general partner of Palmetto MobileNet, L.P., a director
of Northeast Medical Center, Vice Chairman of First Charter Corporation, the
parent company of First Charter National Bank and Chairman of the United States
Telecom Association. Mr. Coltrane is the son of L.D. Coltrane, III.

         Barry R. Rubens, age 41, has been a Senior Vice President, the Chief
Financial Officer, Secretary and Treasurer since 1995. He was Vice
President-External Affairs from 1992 to 1995. Mr. Rubens serves on the
executive committee of BellSouth Carolinas PCS, LLC, as a director of Maxcom,
as a director of Carolinas FiberNet and as an officer and board member of
Wireless One of North Carolina, LLC. Prior to joining us, Mr. Rubens was a
senior manager with Ernst & Young's telecommunications practice in Washington,
D.C.


                                      15
<PAGE>


         Michael R. Nash, age 48, has been a Senior Vice President since
January 1999 and has primary responsibility for our network technology and
network operations. From 1995 to 1998, he was a Vice President of Standard
Telephone Company. From 1974 to 1995, he was an operations director of
BellSouth Telecommunications, Inc.

         Amy M. Justis, age 36, has been Vice President of Finance since
September 1999. From March 1999 to September 1999, she was the Director of
Finance of the Network and Carrier Services Division (North Operations) of
BellSouth Telecommunications, Inc., a telecommunications provider. From 1994 to
March 1999, she was the Manager of Finance of the Network and Carrier Services
Division of BellSouth Telecommunications, Inc.


                                    PART II


ITEM 6.  SELECTED FINANCIAL DATA


         The following table sets forth our selected historical consolidated
financial data. We derived the data as of and for the five years ended December
31, 2000, 1999, 1998, 1997 and 1996 from our audited consolidated financial
statements and related notes. This data should be read in conjunction with our
audited consolidated financial statements and related notes for the years ended
December 31, 2000, 1999 and 1998 and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere in this
report.


<TABLE>
<CAPTION>
                                                                     YEARS ENDED DECEMBER 31,
                                        ----------------------------------------------------------------------------------------
                                            2000              1999               1998             1997                  1996
                                        -------------     -------------     -------------     -------------        -------------

<S>                                     <C>               <C>               <C>               <C>                  <C>
Income Statement Data
   Operating revenues ..............    $ 115,655,333     $ 105,591,594     $  91,725,394     $  78,483,514        $  67,054,006
   Operating expenses ..............      100,149,049        83,223,191        70,272,414        58,390,372           51,349,967
                                        -------------     -------------     -------------     -------------        -------------

     Operating income ..............       15,506,284        22,368,403        21,452,980        20,093,142           15,704,039
   Other income (expense)(1) .......       52,501,742        16,397,523           855,899         1,645,866            1,341,053
   Income taxes ....................      (27,228,578)      (15,697,657)       (8,926,469)       (7,898,159)          (6,583,671)
                                        -------------     -------------     -------------     -------------        -------------

Net income .........................       40,779,448        23,068,269        13,382,410        13,840,849           10,461,421
   Dividends on preferred stock.....           26,518            26,210            28,457            73,073               92,535
                                        -------------     -------------     -------------     -------------        -------------
Earnings for common stock ..........    $  40,752,930     $  23,042,059     $  13,353,953     $  13,767,776        $  10,368,886
                                        =============     =============     =============     =============        =============
Basic Per Share Data(2)
   Weighted average common
     shares outstanding ............       18,833,807        18,705,886        18,454,032        18,152,422           18,103,462
   Earnings ........................    $        2.16     $        1.23     $         .72     $         .76(1)     $         .58
Diluted Per Share Data(2)
   Weighted average common
     shares outstanding ............       18,930,980        18,857,726        18,553,008        18,222,878           18,156,770
   Earnings ........................    $        2.15     $        1.22     $         .72     $         .76(1)     $         .57
Dividends Per Share(2) .............    $         .26     $         .26     $         .24     $         .24        $         .23
Balance Sheet Data (end of
   period)
   Book value -- year end ..........    $        9.28     $        9.32     $        6.41     $        5.31        $        4.42
   Total assets ....................    $ 259,522,281     $ 257,695,210     $ 183,634,358     $ 147,339,429        $ 115,063,963
   Long-term debt (excluding
     current maturities) ...........    $  34,000,000     $  20,000,000     $  20,000,000     $  11,239,000        $   2,014,000
   Redeemable preferred stock
     (excluding current
     maturities) ...................    $     100,000     $     112,500     $     125,000     $     137,500        $     150,000
</TABLE>

---------
(1)      Other income in 1997 includes an extraordinary item of $2,239,045, net
         of income taxes of $1,493,312 (or $.12 per basic and diluted share),
         because of the discontinuance of SFAS No. 71.


                                      16
<PAGE>


(2)      Share data is based on the weighted average number of shares
         outstanding after giving retroactive effect to a 2-for-1 stock
         dividend effective May 3, 1996, a 3-for-2 stock dividend effective
         August 1, 1997, the Recapitalization effective January 28, 1999 and
         the 2-for-1 stock dividend effective April 5, 2000. Dividends declared
         have been restated to give retroactive effect to these events.

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

         The following discussion of our financial condition and results of
operations should be read in conjunction with the consolidated financial
statements and related notes and the selected financial data included elsewhere
in this report.

OVERVIEW

         We are a growing provider of telecommunications services to
residential and business customers located primarily in North Carolina. We
offer an integrated package of telecommunications services consisting of local
and long distance telephone services, Internet and data services, and digital
wireless products and services.

         We have worked to expand our ILEC business in recent years by adding
additional telecommunications services to our integrated service packages,
emphasizing customer service and taking advantage of the strong demographic
growth in our service area. Another key component to our business strategy is
to grow our CLEC, Internet and data services, and digital wireless businesses.
We significantly expanded our Internet and data services in May 1998 through
our acquisition of Vnet and further expanded in September 1999 and in February
2000 through our acquisitions of Catawba Valley Internet Partnership and
Internet of Concord. In December 2000, we acquired WebServe, a Charlotte, NC
based web design and hosting company. Webserve will provide additional
capabilities in programming and web design that should complement our existing
products and services.

         We devoted substantial effort in the past three years to developing
business plans, enhancing our management team and board of directors, and
designing and developing our business support and operating systems.
Development of these areas has required significant investment of capital and
start-up expenses. We believe that through these investments, we are
positioning ourselves to achieve our strategic objectives.

         Our primary focus is to maximize our ILEC business in our current
markets by cross-selling integrated products and packages and growing our
customer base through our CLEC, Internet and data services, and digital
wireless businesses. We will also consider strategic acquisitions and
investments as opportunities arise.


                                      17
<PAGE>


         During 2000 we managed our internal financial reporting along certain
business segments. We have identified those five that are reportable segments
under generally accepted accounting principles. Selected data by business
segment, excluding intersegment revenue and expense, was as follows for the
years ended December 31, 2000, 1999 and 1998:


<TABLE>
<CAPTION>
                                                                                          YEARS ENDED DECEMBER 31,
                                                                                --------------------------------------------
                                                                                  2000              1999             1998
                                                                                ---------         ---------         --------
                                                                                               (IN THOUSANDS)

<S>                                                                             <C>               <C>               <C>
OPERATING REVENUES:
   ILEC ................................................................        $  82,353         $  76,653         $ 70,647
   CLEC ................................................................            4,447             2,613              493
   Long distance services ..............................................           13,832            14,291           13,391
   Internet and data services ..........................................            6,899             5,717            3,369
   Digital wireless services ...........................................            7,674             5,193            3,151
   Other ...............................................................              450             1,125              674
                                                                                ---------         ---------         --------
     Consolidated operating revenues ...................................        $ 115,655         $ 105,592         $ 91,725
                                                                                =========         =========         ========

Operating Expenses (excluding depreciation and amortization):
   ILEC ................................................................        $  42,209         $  41,931         $ 38,459
   CLEC ................................................................           14,047             4,870            2,063
   Long distance services ..............................................            7,896             8,619            9,101
   Internet and data services ..........................................            7,225             5,320            2,908
   Digital wireless services ...........................................            9,441             6,866            4,196
   Other ...............................................................              620               493              704
                                                                                ---------         ---------         --------
     Consolidated operating expenses (excluding depreciation and
         amortization) .................................................        $  81,438         $  68,099         $ 57,431
                                                                                =========         =========         ========

OPERATING EBITDA (1):
   ILEC ................................................................        $  40,144         $  34,722         $ 32,188
   CLEC ................................................................           (9,600)           (2,257)          (1,570)
   Long distance services ..............................................            5,936             5,672            4,289
   Internet and data services ..........................................             (326)              397              462
   Digital wireless services ...........................................           (1,767)           (1,674)          (1,045)
   Other ...............................................................             (170)              633              (30)
                                                                                ---------         ---------         --------
     Consolidated EBITDA ...............................................        $  34,217         $  37,493         $ 34,294
                                                                                =========         =========         ========

OPERATING INCOME:
   ILEC ................................................................        $  25,149         $  21,872         $ 20,657
   CLEC ................................................................          (10,750)           (2,498)          (1,626)
   Long distance services ..............................................            4,812             4,836            3,701
   Internet and data services ..........................................           (1,691)             (530)             (92)
   Digital wireless services ...........................................           (1,823)           (1,737)          (1,100)
   Other ...............................................................             (191)              425              (87)
                                                                                ---------         ---------         --------
     Consolidated operating income .....................................        $  15,506         $  22,368         $ 21,453
                                                                                =========         =========         ========

SUMMARY CONSOLIDATED CASH FLOW DATA:
     Net cash provided by operating activities .........................        $   4,704         $  18,092         $ 23,671
     Net cash used in investing activities .............................          (12,779)          (15,662)         (24,353)
     Net cash provided by (used in) financing activities ...............           14,574            (3,794)           3,606
</TABLE>

---------
(1)      Operating EBITDA represents earnings before interest, income taxes,
         depreciation and amortization and is commonly used in the
         telecommunications industry to analyze companies on the basis of
         operating performance, leverage and liquidity. Operating EBITDA is
         presented because management believes it provides financial results
         for the core operations of each business entity or


                                      18
<PAGE>


         segment and, as a result, excludes non-core activities such as
         investment income. Management believes that investors may use this
         data to analyze and compare other communications companies with us in
         terms of operating performance, leverage and liquidity. Operating
         EBITDA is not a measure of financial performance under generally
         accepted accounting principles and should not be construed as a
         substitute for consolidated net income as a measure of performance, or
         for cash flow as a measure of liquidity. Operating EBITDA as
         calculated by us is not necessarily comparable to similarly captioned
         amounts of other companies.

RESULTS OF OPERATIONS

    Year Ended December 31, 2000 Compared to Year Ended December 31, 1999.

         Operating revenues increased $10.0 million or 9.5% for the year ended
December 31, 2000 when compared to 1999.

         Excluding intersegment revenues, ILEC revenue was $82.4 million, a
$5.7 million or 7.4% increase over 1999, primarily resulting from increased
access revenue. The two primary factors behind increased access revenue are an
increase in minutes and an increase in local revenue based on access line
growth of 5% from December 31, 1999 to December 31, 2000. Custom call features
revenue increased 15% due to increased telemarketing and sales efforts. Higher
equipment sales also contributed to the increase.

         CLEC operating revenues were $4.4 million, representing a $1.8 million
or 70.2% increase over last year. The increase is due to the additional CLEC
access lines placed in service during the past twelve months as we have
continued our expansion into the Charlotte and Greensboro, North Carolina
markets. At December 31, 2000 we had over 11,800 CLEC lines in service, an
increase of more than 8,000 from December 31, 1999.

         Long distance services (LD) revenue was $13.8 million, which is
comparable to revenue during 1999. Despite the increase in the number of
pre-subscribed access lines and a corresponding increase in minutes, revenue
has remained flat due to the introduction of new, more competitive long
distance price plans in the fourth quarter of 1999. These plans have resulted
in a decline in the average revenue per minute. We expect long distance revenue
to remain steady.

         Internet and data services (ISP) revenue contributed $6.9 million for
the year ended December 31, 2000, an increase of $1.2 million or 20.7% over
1999. This increase was driven by an increase in customers across all service
offerings within the segment, particularly DSL customers. Additionally, 1,845
customers were added in February 2000 through the acquisition of Internet of
Concord.

         Digital wireless services (DCS) contributed $7.7 million to revenue, a
$2.5 million or 47.8% increase over the year ended December 31, 1999 due to an
increased number of customers. During 2000, our wireless customers increased by
5,600 to more than 16,300. Much of this growth has come as a result of the
strong residential and business development within our service area.

         Operating expenses, exclusive of depreciation and amortization,
increased $13.3 million or 19.6% for the year ended December 31, 2000 when
compared to 1999.

         Excluding intersegment expenses, ILEC expenses were $42.2 million,
consistent with amounts for the year ended December 31, 1999.

         CLEC operating expenses were $14.0 million compared with $4.9 million
during 1999. CLEC operating expenses have risen significantly in 2000 due to
the CLEC expansion program described above. These expenses are expected to be
funded primarily through cash flows from operations, existing cash, cash
equivalents and short-term investments, sales of investment securities, and
available lines of credit.

         Long distance services operating expenses were $7.9 million, a $.7
million or 8.4% decrease over the year ended December 31, 1999. This decrease
was mainly due to a decline in carrier transport and termination expense due to
lower rates on negotiated contracts.

         Internet and data services operating expenses were $7.2 million, a
$1.9 million or 35.8% increase over the same period last year. This increase
was mainly due to the increase in ISP customers and additional personnel added
during 2000.


                                      19
<PAGE>


         Digital wireless services operating expenses were $9.4 million, a $2.6
million or 37.5% increase over 1999. This increase was mainly due to the costs
associated with the increase in wireless subscribers.

         Depreciation expense increased $3.6 million or 23.7% to $18.7 million
for the year ended December 31, 2000 when compared to 1999. This increase
reflects an increase in the depreciable assets.

         Other income (expenses) increased $36.1 million when compared to the
year ended December 31, 1999. This increase results from the following:

         -        A $39.2 million pre-tax gain from the sale of the
                  Registrant's 1.96% interest in the BellSouth DCS Partnership,

         -        $11.4 million pretax income from sales of ITC-DeltaCom and
                  Illuminet stock in 2000 compared with $15.8 million pretax
                  income from sales of ITC-DeltaCom in 1999,

         -        Income from the Palmetto MobileNet cellular partnership of
                  $5.8 million for the year ended December 31, 2000 compared
                  with $4.8 million in 1999, and

         -        Higher other expenses, primarily due to a $0.8 increase in
                  interest expense during 2000.

    Year Ended December 31, 1999 Compared to Year Ended December 31, 1998.

         Operating revenues increased $13.9 million or 15.1% to $105.6 million
for the year ended December 31, 1999 compared to 1998.

         Excluding intersegment revenues, ILEC revenue was $76.7 million, a
$6.0 million or 8.5% increase over 1998. This growth arose primarily from
increased demand for local service and increased custom call feature revenue as
a result of telemarketing and sales efforts. Approximately 7,800 new access
lines were connected to the network in 1999, bringing the total number of local
access lines in our ILEC's three-county service area to 116,935. Higher
equipment sales also contributed to this increase.

         CLEC revenue contributed $2.6 million, a $2.1 million increase over
1998, driven by the addition of 1,900 access lines, bringing the total CLEC
lines in service to nearly 3,600. The CLEC operation added nearly 1,000 access
lines at Concord Mills Mall for 100% of the retailers in the second half of the
year. The revenue in this area and in new CLEC markets is expected to continue
to grow.

         Long distance services revenue, derived from providing long distance
communications between designated areas, was $14.3 million compared to $13.4
million in 1998, an increase of $0.9 million or 6.7%. This increase is a result
of increased sales and marketing efforts and increased calling volume.

         Internet and data services revenue was $5.7 million, a $2.3 million or
69.7% increase over 1998. This increase was driven by the acquisition of Vnet,
an Internet service provider, in the second quarter of 1998, coupled with an
increase in the number of dial-up, web hosting and dedicated high speed
customers. In 1999, customers grew in number from nearly 13,300 to nearly
17,000. Approximately 900 customers were added through the acquisition of
Catawba Valley Internet Partnership in September 1999. In addition, 1,845
customers were added in February 2000 through the acquisition of Internet of
Concord.

         Digital wireless services revenue was $5.2 million, a $2.0 million or
64.8% increase over 1998. This growth is related to the increased number of
subscribers. Over 4,200 net customers were added during 1999, bringing the
total number of subscribers to 10,700, a 64.9% increase over 1998.

         Operating expenses increased $13.0 million or 18.4% to $83.2 million
for the year ended December 31, 1999 compared to 1998.

         Excluding intersegment expenses, ILEC operating expenses were $41.9
million, a $3.5 million or 9.0% increase over 1998 driven by an increase in
personnel, higher contracted services expenses related to the telephone plant
growth and increased reciprocal compensation charges. Depreciation and
amortization increased to $12.9 million, a $1.3 million or 11.4% increase over
1998 related to the increase in depreciable assets.

         CLEC and long distance services operating expenses were $13.5 million,
a $2.3 million or 20.8% increase over 1998. This increase was driven by
additional marketing and service expenses related to line growth and higher
access expense as a result of


                                      20
<PAGE>


higher toll revenue. Depreciation and amortization increased to $1.1 million, a
$0.4 million or 67.2% increase over 1998 due to the addition of plant to serve
the CLEC lines at Concord Mills Mall and additional plant in service primarily
for the anticipated increase of our CLEC operations.

         Internet and data services operating expenses were $5.3 million, a
$2.4 million or 83.0% increase over 1998 due to higher network expenses, the
addition of sales and technical personnel along with the full year of expenses
for Vnet. Depreciation and amortization increased to $0.9 million, a $0.4
million or 67.4% increase over 1998 due to the full year of goodwill
amortization expense related to the acquisition of Vnet.

         Digital wireless services operating expenses were $6.9 million, a $2.7
million or 63.6% increase over 1998. This increase was driven by the opening of
a new retail store and an increased number of customers.

         Other income (expenses) increased to $16.4 million, a $15.5 million
increase over 1998. This increase reflects:

         -        $0.7 million related to lower losses associated with the
                  BellSouth DCS partnership ($0.5 million) and the investment
                  in US Telecom Holdings ($0.5 million), partially offset by
                  lower earnings from Palmetto MobileNet ($0.3 million); and

         -        An increase in interest, dividend and gain on sale of
                  investments due to the pre-tax gains for the sale of
                  ITC-DeltaCom stock of $17.8 million in 1999, versus $1.9
                  million in 1998.

The increase was partially offset by higher other expenses due to higher
interest expense in 1999.

         Net income was $23.1 million in 1999, a $9.7 million or 72.4% increase
over 1998.

LIQUIDITY AND CAPITAL RESOURCES

         We had net cash provided by operating activities for the year ended
December 31, 2000 of $4.7 million. Our primary use of cash during this period
was for additions to our telephone plant of $54.1 million, purchases of
investment securities of $8.2 million, acquisitions of $6.8 million, purchases
of investments in unconsolidated companies of $6.7 million, and payment of
dividends of $4.9 million.

         Working capital was $7.7 million on December 31, 2000, compared to
$8.1 million at December 31, 1999. Current assets increased by $8.0 million in
the year ended December 31, 2000 primarily due to increases in accounts
receivable, cash and materials. Current liabilities increased $8.4 million in
the year ended December 31, 2000 due to an increase in accounts payable and $5
million of short-term borrowings.

         We have significant cash requirements due to growth in our service
area, planned improvements to our existing plant and equipment, and our
geographic expansion. Capital expenditures for the year ended December 31, 2000
and December 31, 1999 were $54.1 million and $27.6 million, respectively, for
network improvements, including upgrades to the switching platform, CLEC
expansion, and improvements in the outside plant including poles, aerial cable
and buried cable. Our capital expenditures in 2001 are expected to be
approximately $84.5 million, as follows:

         -        $20.0 million for partitioning of the BellSouth DCS network

         -        $14.5 million for construction of the new CTC corporate
                  center

         -        $24.0 million for ILEC network facilities, outside plant,
                  network switching, and other telecommunications assets,

         -        $4.3 million for CLEC network expansion,

         -        $13.0 million for new "Greenfield" projects,

         -        $3.4 million for management information systems hardware and
                  software upgrades and additions,

         -        $2.7 million for DCS wireless cell sites,


                                      21
<PAGE>


         -        $2.0 million for internet and high speed data services
                  equipment, and

         -        $0.6 million for long distance services equipment.

         Other anticipated uses of cash in 2001 include additional investments
in unconsolidated companies. We have elected to exercise our right to partition
certain territories in the DCS Partnership, the resulting net cost is expected
to be between $20.0 million and $24.0 million and is planned for the Spring of
2001. We expect to fund these costs through additional borrowings under our
credit facility.

         We have an unsecured revolving credit facility with a syndicate of
banks for $60.0 million, of which $34 million was outstanding on December 31,
2000 The interest rate on the credit facility is variable based on LIBOR plus a
spread based on our ratio of debt to EBITDA. The LIBOR interest rate on
December 31, 2000 was approximately 6.8% and the applicable spread was 0.5%.
The credit facility provides for quarterly payments of interest until maturity
on December 31, 2003. We entered into an interest rate swap transaction in
March 1999 to fix $10.0 million of the outstanding principal at a rate of 5.9%
plus a spread, currently 0.5%. In addition, we have two $5.0 million revolving
credit facilities with Rural Telephone Finance Cooperative (RTFC) and First
Charter National Bank at interest rates not to exceed a specified prime rate
plus 1.5% and minus 1.5%, respectively. As of December 31, 2000, we had $5
million outstanding under the First Charter facility and no amounts outstanding
under the RTFC facility.

         We intend to enter into an agreement with CoBank to administer a $140
million credit facility comprised of a $50 million senior unsecured 14-year
term loan and a $90 million 5-year revolving credit facility. We plan on
closing on this agreement early in the second quarter of 2001.

         We believe our existing sources of liquidity, cash provided by
operations, new or existing credit facilities and the sale of investment
securities will satisfy our anticipated working capital and capital expenditure
requirements for the foreseeable future.

ACCOUNTING CONSIDERATIONS

         In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities". SFAS No. 133 requires that all
derivative instruments be recorded on the balance sheet at their fair value.
Changes in the fair value of derivatives are recorded each period in current
operations or other comprehensive income, depending upon whether a derivative
is designated as part of a hedge transaction and, if it is, the type of hedge
transaction. The effective date for SFAS No. 133 is for fiscal years beginning
after June 15, 2000, though earlier adoption is encouraged and retroactive
application is prohibited. The Company adopted the standard effective January
1, 2001. The Company anticipates that, due to limited use of derivative
instruments, the adoption of SFAS No. 133 will not have a material impact on
the consolidated financial statements.

         In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial
Statements". SAB 101 summarizes certain of the staff's views in applying
generally accepted accounting principles to revenue recognition and deferred
costs in financial statements. SAB 101 was effective beginning in the fourth
quarter of 2000 and did not materially impact the Company's financial position
or results of operations.


                                      22
<PAGE>


CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

         This report contains certain "forward-looking statements," as defined
in Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, that 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,
uncertainties and assumptions about us, including, among other things:

         -        changes in industry conditions created by the
                  Telecommunications Act and related state and federal
                  legislation and regulations,

         -        recovery of the substantial costs which will result from the
                  implementation of our new businesses,

         -        retention of our existing customer base and our ability to
                  attract new customers,

         -        rapid changes in technology, and

         -        actions of our competitors.

         These forward-looking statements are principally contained in the
following sections of this report:

         -        Item 1. Business; and

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

         In addition, in those and other portions of this report, the words and
phrases such as "expects, "estimates," "intends," "plans," "believes,"
"projection," "will continue" and "is anticipated" are intended to identify
forward-looking statements.

         These forward-looking statements may differ materially from actual
results because they involve estimates, assumptions and uncertainties. In
making these forward-looking statements, we claim the protection of the safe
harbor for forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995. We undertake no obligation to update or revise
any forward-looking statements, whether as a result of new information, future
events or otherwise. All forward-looking statements should be viewed with
caution.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         Our consolidated financial statements (as amended), the financial
statement schedules required to be filed with this report and the report of
independent public accountants are set forth on pages F-1 through F-35 of this
report. The selected quarterly financial data required by this Item is included
in Note 16 of our consolidated financial statements (as amended).


                                      23
<PAGE>


                                    PART IV


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

         (a)      Documents filed as part of this report

                  (1)      Financial Statements: The following financial
         statements, together with the report thereon of independent auditors,
         are included in this report as set forth in Item 8:

                  -        Consolidated balance sheets as of December 31, 2000
                           and 1999;

                  -        Consolidated statements of income for the years
                           ended December 31, 2000, 1999 and 1998;

                  -        Consolidated statements of cash flows for the years
                           ended December 31, 2000, 1999 and 1998;

                  -        Consolidated statements of stockholders' equity for
                           the years ended December 31, 2000, 1999 and 1998;

                  -        Consolidated statements of comprehensive income for
                           the years ended December 31, 2000, 1999 and 1998;
                           and

                  -        Notes to consolidated financial statements for the
                           years ended December 31, 2000, 1999 and 1998 Report
                           of Independent Public Accountants;

                  (2)      Consolidated Financial Statement Schedules:
         Financial statement schedules are omitted because the required
         information for Schedule II is included. All other financial statement
         schedules are not applicable.

                  (3)      Financial Statements of Palmetto MobileNet, L.P. are
         set forth on pages F-36 through F-56 of this report.

                  (4) Exhibits: A complete listing of exhibits required is set
         forth in the Company's Annual Report on Form 10-K, filed on March 30,
         2001.

         (b)      Reports on Form 8-K

         On October 27, 2000, the Company filed a Current Report on Form 8-K
announcing financial results for the three-month period and nine-month period
ended September 30, 2000.

         (c)      Exhibits

         See (a)(4), above.

         (d)      Financial statement schedules

         See (a)(2), above.


                                      24
<PAGE>


                                   SIGNATURES

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


                                    CT COMMUNICATIONS, INC.


                                    By:  /s/Amy M. Justis
                                       ----------------------------------------
                                         Amy M. Justis
                                         Vice President of Finance and
                                         Chief Accounting Officer

                                    Date:  December 18, 2001


                                      25
<PAGE>


                    CT COMMUNICATIONS, INC. AND SUBSIDIARIES

                    Consolidated Financial Statements Index

                        December 31, 2000, 1999 and 1998


(1)      Consolidated Financial Statements

         The following financial statements, together with independent
         auditors' report thereon, are included:


<TABLE>
         <S>                                                                                          <C>
         -        Independent Auditors' Report                                                              F - 2

         -        Consolidated balance sheets as of December 31, 2000 and 1999                         F - 3 and F - 4

         -        Consolidated statements of income for the years ended
                  December 31, 2000, 1999, and 1998                                                         F - 5

         -        Consolidated statements of comprehensive income for the years
                  ended December 31, 2000, 1999 and 1998                                                     F-6

         -        Consolidated statements of stockholders' equity for the years ended
                  December 31, 2000, 1999, and 1998                                                    F - 7 and F - 8

         -        Consolidated statements of cash flows for the years ended
                  December 31, 2000, 1999, and 1998                                                         F - 9

         -        Notes to consolidated financial statements for the years ended
                  December 31, 2000, 1999, and 1998                                                   F - 10 to F - 34
</TABLE>

(2)      Consolidated Financial Statement Schedule

         The following financial statement schedule is included:


<TABLE>
         <S>                                                                                               <C>
         -        Schedule II - Valuation and Qualifying Accounts                                          F - 35
</TABLE>

       Other schedules are omitted because the required information is included
in the financial statements or is not applicable.


                                      F-1
<PAGE>


                          INDEPENDENT AUDITORS' REPORT


The Board of Directors and Stockholders
CT Communications, Inc.:


We have audited the consolidated financial statements of CT Communications,
Inc. and subsidiaries as listed in the accompanying index. In connection with
our audits of these consolidated financial statements, we also have audited the
financial statement schedule as listed in the accompanying index. These
consolidated financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and financial statement
schedule based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of CT Communications,
Inc. and subsidiaries as of December 31, 2000 and 1999, and the results of
their operations and their cash flows for each of the years in the three-year
period ended December 31, 2000, in conformity with accounting principles
generally accepted in the United States of America. Also in our opinion, the
related financial statement schedule, when considered in relation to the
consolidated financial statements taken as a whole, presents fairly, in all
material respects, the information set forth therein.


                                             /S/  KPMG  LLP


Charlotte, North Carolina
February 23, 2001


                                      F-2
<PAGE>


                    CT COMMUNICATIONS, INC. AND SUBSIDIARIES

                          Consolidated Balance Sheets

                           December 31, 2000 and 1999


<TABLE>
<CAPTION>
                                                                               2000                     1999
                                                                          -------------              -----------

<S>                                                                       <C>                        <C>
                            ASSETS
Current assets:
    Cash and cash equivalents                                             $   8,060,015                1,561,778
    Accounts receivable, net of allowance for doubtful
       accounts of $239,732 in 2000 and $107,500 in 1999                     18,987,133               14,859,359
    Notes receivable                                                                 --                1,513,500
    Other accounts receivable                                                   197,046                2,260,038
    Materials and supplies                                                    3,476,188                2,551,724
    Deferred income taxes                                                       134,875                  154,669
    Prepaid expenses and other assets                                         1,139,921                1,097,875
                                                                          -------------              -----------

                Total current assets                                         31,995,178               23,998,943
                                                                          -------------              -----------

Investment securities                                                        23,900,094               81,950,045
Other investments                                                               484,363                    9,363
Investments in unconsolidated companies                                      38,310,831               31,683,635


Property and equipment:
       Land, buildings, and general equipment                                49,007,911               38,873,719
       Central office equipment                                             105,679,164               83,054,096
       Poles, wires, cables and conduit                                     106,279,321               95,335,716
       Construction in progress                                              10,058,370                2,426,293
                                                                          -------------              -----------
                                                                            271,024,766              219,689,824
       Less accumulated depreciation                                       (119,241,009)            (105,514,615)
                                                                          -------------              -----------

                Net property and equipment                                  151,783,757              114,175,209
                                                                          -------------              -----------


Intangible and other assets, net                                             13,048,058                5,878,015




                                                                          $ 259,522,281              257,695,210
                                                                          =============              ===========
</TABLE>


See accompanying notes to consolidated financial statements.


                                      F-3
<PAGE>


<TABLE>
<CAPTION>
                                                                              2000                      1999
                                                                          -------------              -----------


<S>                                                                       <C>                        <C>
                 LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
    Current portion of long-term debt and redeemable
       preferred stock                                                    $      12,500                   12,500
    Accounts payable                                                         11,232,108                6,955,346
    Short-term borrowings                                                     5,000,000                       --
    Customer deposits and advance billings                                    2,294,164                2,094,334
    Accrued payroll                                                           1,968,699                2,450,067
    Income taxes payable                                                         87,202                1,019,221
    Accrued pension cost                                                      1,000,933                1,020,639
    Other accrued liabilities                                                 2,724,648                2,321,594
                                                                          -------------              -----------
                Total current liabilities                                    24,320,254               15,873,701
                                                                          -------------              -----------

Long-term debt                                                               34,000,000               20,000,000
                                                                          -------------              -----------

Deferred credits and other liabilities:
    Deferred income taxes                                                    13,605,547               34,507,475
    Investment tax credits                                                      574,425                  689,310
    Postretirement benefits other than pension                               10,612,354               10,551,111
    Other                                                                       942,686                  795,011
                                                                          -------------              -----------
                                                                             25,735,012               46,542,907
                                                                          -------------              -----------
Redeemable preferred stock, 4.8% series; authorized 5,000 shares;
    issued and outstanding 1,125 and 1,250
    shares in 2000 and 1999, respectively                                       100,000                  112,500
                                                                          -------------              -----------

                Total liabilities                                            84,155,266               82,529,108
                                                                          -------------              -----------


Stockholders' equity:
    Preferred stock not subject to mandatory redemption:
       5% series, $100 par value; 3,356 shares
          outstanding in 2000 and 1999                                          335,600                  335,600
       4.5% series, $100 par value; 614 shares
          outstanding in 2000 and 1999                                           61,400                   61,400
    Common stock,
       18,846,541 and 18,760,930 shares outstanding in
          2000 and 1999, respectively                                        42,574,584               40,705,827
    Other capital                                                               298,083                  298,083
    Unearned compensation                                                      (836,005)              (1,074,726)
    Other accumulated comprehensive income                                   10,298,820               48,059,889
    Retained earnings                                                       122,634,533               86,780,029
                                                                          -------------              -----------
                Total stockholders' equity                                  175,367,015              175,166,102
                                                                          -------------              -----------




                                                                          $ 259,522,281              257,695,210
                                                                          =============              ===========
</TABLE>


                                      F-4
<PAGE>


                    CT COMMUNICATIONS, INC. AND SUBSIDIARIES

                       Consolidated Statements of Income

                 Years ended December 31, 2000, 1999, and 1998


<TABLE>
<CAPTION>
                                                                                2000                 1999                 1998
                                                                            -------------         ------------         -----------

Operating revenues
<S>                                                                         <C>                     <C>                 <C>
    Telephone                                                               $ 100,632,143           93,557,382          84,530,303
    Wireless and internet                                                      14,573,190           10,909,212           6,520,091
    Other                                                                         450,000            1,125,000             675,000
                                                                            -------------         ------------         -----------
          Total operating revenues                                            115,655,333          105,591,594          91,725,394

Operating expenses
    Operations and support (excluding depreciation and amortization)           62,113,449           51,681,103          41,848,084
    Selling, general, and administrative                                       13,954,994           11,853,074          12,398,959
    Cost of sales (excluding depreciation and amortization)                     5,369,906            4,564,751           3,184,810
    Depreciation and amortization                                              18,710,700           15,124,263          12,840,561
                                                                            -------------         ------------         -----------

          Total operating expenses                                            100,149,049           83,223,191          70,272,414
                                                                            -------------         ------------         -----------

          Operating income                                                     15,506,284           22,368,403          21,452,980
                                                                            -------------         ------------         -----------

Other income (expenses):
    Equity in income of unconsolidated companies, net                           5,423,408            1,149,234             431,088
    Interest, dividend income and gain on sale
       of investments                                                          51,668,402           17,823,337           1,916,446
    Other expenses, principally interest                                       (4,590,068)          (2,575,048)         (1,491,635)
                                                                            -------------         ------------         -----------
          Total other income                                                   52,501,742           16,397,523             855,899
                                                                            -------------         ------------         -----------

          Income before income taxes                                           68,008,026           38,765,926          22,308,879

Income taxes                                                                   27,228,578           15,697,657           8,926,469
                                                                            -------------         ------------         -----------

          Net income                                                           40,779,448           23,068,269          13,382,410

Dividends on preferred stock                                                       25,518               26,210              28,457
                                                                            -------------         ------------         -----------

Earnings for common stock                                                   $  40,753,930           23,042,059          13,353,953
                                                                            =============         ============         ===========

Basic earnings per common share,
    Earnings per common share                                               $        2.16                 1.23                0.72
                                                                            =============         ============         ===========

Diluted earnings per common share,
    Earnings per common share                                               $        2.15                 1.22                0.72
                                                                            =============         ============         ===========

Basic weighted average shares outstanding                                      18,833,807           18,705,886          18,454,032
                                                                            =============         ============         ===========

Diluted weighted average shares outstanding                                    18,930,980           18,851,850          18,553,008
                                                                            =============         ============         ===========
</TABLE>


See accompanying notes to consolidated financial statements.


                                      F-5
<PAGE>


                    CT COMMUNICATIONS, INC. AND SUBSIDIARIES

                Consolidated Statements of Comprehensive Income

                 Years ended December 31, 2000, 1999, and 1998


<TABLE>
<CAPTION>
                                                              2000                    1999                    1998
                                                          ------------             -----------             -----------

<S>                                                       <C>                       <C>                     <C>
Net income                                                $ 40,779,448              23,068,269              13,382,410

Other comprehensive income:
    Unrealized holding gains (losses) on
       available-for-sale securities                       (30,464,737)             45,097,588               7,645,533

    Less reclassification adjustment for gains
       realized in net income                               (7,296,332)            (10,138,447)               (714,228)
                                                          ------------             -----------             -----------

Comprehensive income                                      $  3,018,379              58,027,410              20,313,715
                                                          ============             ===========             ===========
</TABLE>


See accompanying notes to consolidated financial statements.


                                      F-6
<PAGE>

                    CT COMMUNICATIONS, INC. AND SUBSIDIARIES

                Consolidated Statements of Stockholders' Equity

                 Years ended December 31, 2000, 1999, and 1998


<TABLE>
<CAPTION>
                                                     5% SERIES     4.5% SERIES
                                                     PREFERRED      PREFERRED       COMMON          OTHER
                                                       STOCK          STOCK         STOCK          CAPITAL
                                                     ---------     -----------    -----------      -------

<S>                                                  <C>           <C>            <C>              <C>
Balances at December 31, 1997                        $ 363,100       121,800       31,162,056      298,083
Net income                                                  --            --               --           --
Issuance of 219,818 shares of common stock                  --            --        6,559,335           --
Issuance of 111,114 shares for
     exercise of stock options                              --            --          425,619           --
Repurchases of shares:
     191 shares of 5% preferred                        (19,100)           --            3,079           --
     590 shares of 4.5% preferred                           --       (59,000)          27,824           --
     9,570 shares of common                                 --            --         (308,275)          --
Dividends declared:
     5% preferred                                           --            --               --           --
     4.8% preferred                                         --            --               --           --
     4.5% preferred                                         --            --               --           --
     Common stock                                           --            --               --           --
Other comprehensive income                                  --            --               --           --
Restricted stock compensation, net of
     $385,316 earned during the year                        --            --               --           --
                                                     ---------      --------      -----------      -------
Balances at December 31, 1998                          344,000        62,800       37,869,638      298,083
                                                     ---------      --------      -----------      -------

Net income                                                  --            --               --           --
Issuance of 55,185 shares of common stock                   --            --        2,157,170           --
Issuance of 25,228 for exercise of stock options            --            --          411,888           --
Repurchases of shares:
     84 shares of 5% preferred                          (8,400)           --            2,772           --
     14 shares of 4.5% preferred                            --        (1,400)             560           --
     717 shares of common                                   --            --          (40,308)          --
Dividends declared:
     5% preferred                                           --            --               --           --
     4.8% preferred                                         --            --               --           --
     4.5% preferred                                         --            --               --           --
     Common stock                                           --            --               --           --
Tax benefit from exercise of stock
     options                                                --            --          304,107           --
Other comprehensive income                                  --            --               --           --
Restricted stock compensation, net of
     $607,247 earned during the year                        --            --               --           --
                                                     ---------      --------      -----------      -------

Balances at December 31, 1999                        $ 335,600        61,400       40,705,827      298,083
                                                     ---------      --------      -----------      -------


<CAPTION>
                     OTHER                            TOTAL
    UNEARNED     COMPREHENSIVE      RETAINED       STOCKHOLDERS'
  COMPENSATION       INCOME         EARNINGS         EQUITY
  ------------   -------------    -----------      -------------
  <C>            <C>              <C>              <C>
     (817,903)      6,169,443      59,671,874        96,968,453
           --              --      13,382,410        13,382,410
           --              --              --         6,559,335
           --              --              --           425,619
           --              --              --           (16,021)
           --              --              --           (31,176)
           --              --              --          (308,275)
           --              --         (19,398)          (19,398)
           --              --          (5,382)           (5,382)
           --              --          (3,677)           (3,677)
           --              --      (4,420,570)       (4,420,570)
           --       6,931,305              --         6,931,305
      120,565              --              --           120,565
   ----------      ----------     -----------      ------------
     (697,338)     13,100,748      68,605,257       119,583,188
   ----------      ----------     -----------      ------------
           --              --      23,068,269        23,068,269
           --              --              --         2,157,170
           --              --              --           411,888
           --              --              --            (5,628)
           --              --              --              (840)
           --              --              --           (40,308)
           --              --         (16,843)          (16,843)
           --              --          (6,575)           (6,575)
           --              --          (2,792)           (2,792)
           --              --      (4,867,287)       (4,867,287)
           --              --              --           304,107
           --      34,959,141              --        34,959,141
     (377,388)             --              --          (377,388)
   ----------      ----------     -----------      ------------
   (1,074,726)     48,059,889      86,780,029       175,166,102
   ----------      ----------     -----------      ------------
</TABLE>


See accompanying notes to consolidated financial statements.


                                      F-7
<PAGE>

                    CT COMMUNICATIONS, INC. AND SUBSIDIARIES

                Consolidated Statements of Stockholders' Equity

                 Years ended December 31, 2000, 1999, and 1998


<TABLE>
<CAPTION>
                                                     5% SERIES   4.5% SERIES
                                                     PREFERRED    PREFERRED      COMMON          OTHER
                                                       STOCK        STOCK        STOCK          CAPITAL
                                                     ---------   -----------   -----------      -------

<S>                                                  <C>         <C>           <C>              <C>
Net income                                                 --         --              --           --
Issuance of 63,490 shares of common stock                  --         --       1,576,013           --
Issuance of 45,998 for exercise of stock options           --         --         491,980           --
Repurchases of shares:
     23,877 shares of common                               --         --        (527,802)          --
Dividends declared:
     5% preferred                                          --         --              --           --
     4.8% preferred                                        --         --              --           --
     4.5% preferred                                        --         --              --           --
     Common stock                                          --         --              --           --
Tax benefit from exercise of stock
     options                                               --         --         328,566           --
Other comprehensive income (loss)                          --         --              --           --
Restricted stock compensation, net of
     $1,247,670 earned during the year                     --         --              --           --
                                                     --------     ------     -----------      -------

Balances at December 31, 2000                        $335,600     61,400      42,574,584      298,083
                                                     ========     ======     ===========      =======


<CAPTION>
                     OTHER                            TOTAL
    UNEARNED     COMPREHENSIVE      RETAINED       STOCKHOLDERS'
  COMPENSATION       INCOME         EARNINGS         EQUITY
  ------------   -------------    -----------      -------------
  <C>            <C>              <C>              <C>
        --               --        40,779,448        40,779,448
        --               --                --         1,576,013
        --               --                --           491,980
        --               --                --          (527,802)
        --               --           (16,780)          (16,780)
        --               --            (5,975)           (5,975)
        --               --            (2,763)           (2,763)
        --               --        (4,899,426)       (4,899,426)
        --               --                --           328,566
        --      (37,761,069)               --       (37,761,069)
   238,721               --                --           238,721
  --------      -----------      ------------      ------------
  (836,005)      10,298,820       122,634,533       175,367,015
  ========      ===========      ============      ============
</TABLE>


See accompanying notes to consolidated financial statements.


                                      F-8
<PAGE>


                    CT COMMUNICATIONS, INC. AND SUBSIDIARIES

                     Consolidated Statements of Cash Flows

                 Years ended December 31, 2000, 1999, and 1998


<TABLE>
<CAPTION>
                                                                             2000              1999               1998
                                                                         ------------       ------------       ------------

<S>                                                                      <C>                <C>                <C>
Cash flows from operating activities:
    Net income                                                           $ 40,779,448       $ 23,068,269       $ 13,382,410
    Adjustments to reconcile net income to
       net cash provided by operating activities:
       Depreciation and amortization                                       18,710,700         15,124,263         12,840,561
       Postretirement benefits                                                 61,243              1,907            523,076
       Gain on sale of investment securities                              (11,364,204)       (15,806,746)        (1,113,546)
       Gain on sale of investment in unconsolidated company               (39,214,000)                --                 --
       Undistributed income of unconsolidated companies                    (5,423,408)        (1,149,234)          (431,088)
       Deferred income taxes and tax credits                                  115,244          1,446,326          4,138,338
       Changes in operating assets and liabilities, net of effects
          of acquisitions in 2000 and 1999:
             Accounts and notes receivable                                   (256,262)        (3,715,640)        (4,306,651)
             Materials and supplies                                          (924,464)          (219,767)           364,475
             Other current assets                                            (920,567)           313,167           (402,502)
             Accounts payable                                               3,865,444         (1,642,045)        (1,519,073)
             Customer deposits and advance billings                           199,830            201,828             83,531
             Accrued liabilities                                             (321,981)          (148,487)           703,974
             Income taxes payable                                            (603,453)           618,485           (592,014)
                                                                         ------------       ------------       ------------
                Net cash provided by operating activities                   4,703,570         18,092,326         23,671,491
                                                                         ------------       ------------       ------------

Cash flows from investing activities:
    Capital expenditures, net                                             (54,089,521)       (27,584,002)       (24,789,296)
    Purchases of investments in unconsolidated companies                   (6,682,448)        (5,331,115)        (4,375,949)
    Purchases of investment securities                                     (8,664,541)       (11,883,346)          (100,919)
    Proceeds from sale of investment in unconsolidated companies           39,214,000                 --                 --
    Proceeds from sale of investment securities                            19,238,469         25,949,049          1,806,648
    Partnership capital distribution                                        4,970,065          3,442,882          3,609,252
    Notes receivable collections, net                                              --                 --           (503,000)
    Acquisitions, net of cash                                              (6,765,425)          (255,000)                --
                                                                         ------------       ------------       ------------
                Net cash used in investing activities                     (12,779,401)       (15,661,532)       (24,353,264)
                                                                         ------------       ------------       ------------

Cash flows from financing activities:
    Repayment of long-term debt                                                    --                 --        (21,281,889)
    Proceeds from new debt                                                         --                 --         29,422,889
    Proceeds from short-term revolving credit facility                      5,000,000                 --                 --
    Net proceeds from credit facility                                      14,000,000                 --                 --
    Redemption of preferred stock                                             (12,500)           (12,500)           (12,500)
    Dividends paid                                                         (4,924,944)        (4,893,497)        (4,449,027)
    Repurchases of common and preferred stock                                 (34,100)           (46,776)          (385,863)
    Proceeds from common stock issuances                                      545,612          1,159,189            312,731
                                                                         ------------       ------------       ------------
                Net cash provided by (used in) financing activities        14,574,068         (3,793,584)         3,606,341
                                                                         ------------       ------------       ------------

Net increase (decrease) in cash and cash equivalents                        6,498,237         (1,362,790)         2,924,568

Cash and cash equivalents - beginning of year                               1,561,778          2,924,568                 --
                                                                         ------------       ------------       ------------
Cash and cash equivalents - end of year                                  $  8,060,015          1,561,778          2,924,568
                                                                         ============       ============       ============
Supplemental cash flow information:
    Cash paid for income taxes                                           $ 28,253,130       $ 13,545,442       $  4,827,202
    Cash paid for interest                                               $  1,981,391       $  1,100,899       $  1,093,473
</TABLE>


See accompanying notes to consolidated financial statements.


                                      F-9
<PAGE>


                    CT COMMUNICATIONS, INC. AND SUBSIDIARIES

                Consolidated Statements of Stockholders' Equity

                 Years ended December 31, 2000, 1999, and 1998


(1)      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         (A)      PRINCIPLES OF CONSOLIDATION AND ORGANIZATION

                  These consolidated financial statements include the accounts
                  of CT Communications, Inc. (the Company), a holding company,
                  and its wholly-owned subsidiaries, The Concord Telephone
                  Company ("CTC"), CTC Long Distance Services, Inc. ("CTC
                  LDS"), CT Cellular, Inc., Carolina Personal Communications,
                  Inc. (dba "CTC Wireless, Inc."), CT Wireless Cable, Inc., CTC
                  Exchange Services, Inc., CT Global Telecommunications, Inc.
                  ("CTGT"), CT Communications Northeast Trust, CT
                  Communications Northeast, Inc., CT Communications Northeast
                  Wireless Trust and CTC Internet Services, Inc. All
                  significant intercompany accounts and transactions have been
                  eliminated in consolidation.

                  CT Communications, Inc. and subsidiaries operate entirely in
                  the communications industry. Concord Telephone, the Company's
                  principal subsidiary, provides local telephone service as
                  well as telephone and equipment rental to customers who are
                  primarily residents of Cabarrus, Stanly and Rowan counties in
                  North Carolina. The Company also provides long distance
                  service via CTC LDS. CT Cellular owns and accounts for
                  investments in a limited partnership which provides cellular
                  mobile telephone services to various counties in North and
                  South Carolina. CTC Wireless accounts for the retail
                  operations and services provided in relation to personal
                  communications services, a new wireless telecommunications
                  system which includes voice, data interface and paging. CT
                  wireless Cable accounts for an investment in Wireless One of
                  North Carolina, LLC, which participates in the wireless cable
                  television market in North Carolina. CTC Exchange Services
                  provides competitive local telephone service in North
                  Carolina. CTGT was formed to build telecommunications
                  networks outside of the United States. CT Communications
                  Northeast Trust and CT Communications Northeast, Inc. hold
                  the Company's investment securities and investments in
                  unconsolidated companies. CTC Internet Services, Inc.
                  provides internet services to customers in North Carolina.

         (B)      RECLASSIFICATIONS

                  In certain instances, amounts previously reported in the 1999
                  and 1998 consolidated financial statements have been
                  reclassified to conform with the 2000 consolidated financial
                  statement presentation. Such reclassifications have no effect
                  on net income or retained earnings as previously reported.

         (C)      PROPERTY AND EQUIPMENT

                  Telephone plant in service is stated at original cost and
                  includes certain indirect costs consisting of payroll taxes,
                  pension and other fringe benefits.

                  Maintenance, repairs, and minor renewals are primarily
                  charged to maintenance expense accounts. Additions, renewals,
                  and betterments are charged to telephone plant accounts.
                  Within


                                     F-10
<PAGE>


                    CT COMMUNICATIONS, INC. AND SUBSIDIARIES

                Consolidated Statements of Stockholders' Equity

                 Years ended December 31, 2000, 1999, and 1998


                  Concord Telephone Company, the original cost of depreciable
                  property retired is removed from telephone plant accounts and
                  charged to accumulated depreciation, which is credited with
                  the salvage less removal cost. Under this method, no gain or
                  loss is calculated on ordinary retirements of depreciable
                  property. For all other companies, the original cost and
                  accumulated depreciation are removed from the accounts and
                  any gain or loss included in the results of operations.

                  Depreciation is calculated using the straight-line method
                  over the estimated useful lives of the respective assets as
                  follows:


<TABLE>
                           <S>                                         <C>
                           Buildings and equipment                     3 to 30 years
                           Central office equipment                    7 to 10 years
                           Poles, wires, cables and conduit            10 to 30 years
</TABLE>

         (D)      INVESTMENT SECURITIES

                  Investment securities at December 31, 2000 and 1999 consist
                  of state, county and municipal debt securities, and corporate
                  equity securities. The Company classifies its debt and equity
                  securities in one of three categories: trading,
                  available-for-sale, or held-to-maturity. Trading securities
                  are bought and held principally for the purpose of selling
                  them in the near term. Held-to-maturity securities are those
                  securities in which the Company has the ability and intent to
                  hold until maturity. All other securities not included in
                  trading or held-to-maturity are classified as
                  available-for-sale.

                  Trading and available-for-sale securities are recorded at
                  fair value. Held-to-maturity securities are recorded at
                  amortized cost, adjusted for the amortization or accretion of
                  premiums or discounts. Unrealized holding gains and losses on
                  trading securities are included in earnings. Unrealized
                  holding gains and losses, net of the related tax effect, on
                  available-for-sale securities are excluded from earnings and
                  are reported as a separate component of other comprehensive
                  income until realized. Realized gains and losses from the
                  sale of available-for-sale securities are determined on a
                  specific identification basis.


                                     F-11
<PAGE>

                    CT COMMUNICATIONS, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                       December 31, 2000, 1999, and 1998


                  A decline in the market value of any available-for-sale or
                  held-to-maturity security below cost that is deemed to be
                  other than temporary results in a reduction in carrying
                  amount to fair value. The impairment is charged to earnings
                  and a new cost basis for the security is established.
                  Premiums and discounts are amortized or accreted over the
                  life of the related held-to-maturity security as an
                  adjustment to yield using the effective interest method.
                  Dividend and interest income are recognized when earned.

                  At December 31, 2000 and 1999, all securities are classified
                  as available-for-sale securities.

         (E)      INVESTMENTS IN UNCONSOLIDATED COMPANIES

                  The Company has interests in several partnerships and
                  corporations that operate in the communications industry.
                  Investments in unconsolidated companies over which the
                  Company has the ability to exercise significant influence are
                  accounted for by the equity method.

         (F)      MATERIALS AND SUPPLIES

                  Materials and supplies are determined principally at the
                  lower of average cost or market. Cost of sales are charged at
                  average cost.

         (G)      INCOME TAXES

                  Income taxes are accounted for under the asset and liability
                  method. Deferred tax assets and liabilities are recognized
                  for the future tax consequences attributable to differences
                  between the financial statement carrying amounts of existing
                  assets and liabilities and their respective tax bases and
                  operating loss and tax credit carryforwards. Deferred tax
                  assets and liabilities are measured using enacted tax rates
                  expected to apply to taxable income in the years in which
                  those temporary differences are expected to be recovered or
                  settled. The effect on deferred tax assets and liabilities of
                  a change in tax rates is recognized in income in the period
                  that includes the enactment date.

                  Investment tax credits related to telephone plant have been
                  deferred and amortized as a reduction of federal income tax
                  expense over the estimated useful lives of the assets giving
                  rise to the credits. Unamortized deferred investment tax
                  credits are treated as temporary differences.

         (H)      REVENUE RECOGNITION

                  Revenues are recognized when services are provided regardless
                  of the period in which they are billed. Revenues from sales
                  of telephone equipment are recognized upon delivery to the
                  customer for direct-sale leases while revenues from
                  sales-type leases are recognized upon delivery to the
                  customer in an amount equal to the present value of the
                  minimum rental payments under the fixed non-cancelable lease
                  term. The deferred finance charges applicable to these leases
                  are recognized over the terms of the leases using the
                  effective interest method.


                                     F-12
<PAGE>


                    CT COMMUNICATIONS, INC. AND SUBSIDIARIES

                Consolidated Statements of Stockholders' Equity

                 Years ended December 31, 2000, 1999, and 1998


                  The cost of wireless handsets exceeds the sales price. Costs
                  in excess of revenues for handset sales are recognized upon
                  delivery of equipment to the customer. Revenues are deferred
                  and the related cost of sales equal to revenues are
                  capitalized and amortized over the average life of customer
                  service contracts.

                  Installation fees are deferred and the related costs are
                  capitalized and amortized over the estimated life of the
                  customer.

         (I)      INTANGIBLES

                  Intangibles consist primarily of goodwill representing the
                  excess of the purchase price of acquisitions over the fair
                  value of the net assets acquired. Goodwill is amortized using
                  the straight line method over 10 to 15 years. The Company
                  assesses the recoverability of this intangible asset by
                  determining whether the amortization of the goodwill balance
                  over its remaining life can be recovered through undiscounted
                  future operating cash flows of the acquired operation.
                  Amortization expense for the years ended December 31, 2000,
                  1999 and 1998 amounted to $809,823, $679,340 and $432,359,
                  respectively. Accumulated amortization at December 31, 2000
                  and 1999 was $1,901,491 and $1,091,668, respectively.

         (J)      CASH EQUIVALENTS

                  For purposes of the statement of cash flows, the Company
                  considers all short-term investments with original maturities
                  at the date of purchase of three months or less to be cash
                  equivalents.

         (K)      USE OF 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.

         (L)      IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE
                  DISPOSED OF

                  The Company reviews long-lived assets and certain
                  identifiable intangibles for impairment whenever events or
                  changes in circumstances indicate that the carrying amount of
                  an asset may not be recoverable. Recoverability of assets to
                  be held and used is measured by a comparison of the carrying
                  amount of an asset to future net cash flows expected to be
                  generated by the asset. If such assets are considered to be
                  impaired, the impairment to be recognized is measured by the
                  amount by which the carrying amount of the assets exceed the
                  fair value of the assets. Assets to be disposed of are
                  reported at the lower of the carrying amount or fair value
                  less costs to sell.


                                     F-13
<PAGE>


                    CT COMMUNICATIONS, INC. AND SUBSIDIARIES

                Consolidated Statements of Stockholders' Equity

                 Years ended December 31, 2000, 1999, and 1998


         (M)      STOCK OPTION PLANS

                  The Company applies the intrinsic value-based method of
                  accounting prescribed by Accounting Principles Board ("APB")
                  Opinion No. 25, "Accounting for Stock Issued to Employees,"
                  and related interpretations including FASB Interpretation No.
                  44, "Accounting for Certain Transactions involving Stock
                  Compensation an interpretation of APB Opinion No. 25" issued
                  in March 2000 to account for its fixed plan stock options.
                  Under this method, compensation expense is recorded on the
                  date of grant only if the current market price of the
                  underlying stock exceeded the exercise price. Statement of
                  Financial Accounting Standards (SFAS) No. 123, "Accounting
                  for Stock-Based Compensation," established accounting and
                  disclosure requirements using a fair value-based method of
                  accounting for stock-based employee compensation plans. As
                  allowed by SFAS 123, the Company has elected to continue to
                  apply the intrinsic value-based method of accounting
                  described above, and has adopted the disclosure requirements
                  of SFAS 123.

         (O)      RECENT ACCOUNTING PRONOUNCEMENTS

                  During 2000, the Company adopted the Securities and Exchange
                  Commission Staff Accounting Bulletin (SAB) No. 101, "Revenue
                  Recognition in Financial Statements" which sets forth
                  guidelines for accounting and disclosures related to revenue
                  recognition. Adoption of SAB No. 101 had no material impact
                  on the Company's financial statements.

(2)      NOTES RECEIVABLE

         At December 31, 1999, the Company had notes receivable of $1,513,500
         due from US Telecom Holdings, Inc. ("USTH") with interest at 9.75%.
         The notes and interest were collected in 2000.

(3)      INVESTMENT SECURITIES

         The amortized cost, gross unrealized holding gains, gross unrealized
         holding losses and fair value for the Company's investments by major
         security type and class of security at December 31, 2000 and 1999,
         were as follows:


<TABLE>
<CAPTION>
                                                                  Gross               Gross
                                                               Unrealized          Unrealized
                                         Amortized               Holding             Holding                 Fair
                                            Cost                  Gains               Losses                 Value
                                         ----------            ----------          ----------             ----------

         <S>                             <C>                   <C>                 <C>                    <C>
         At December 31, 2000
         Available-for-sale:
         Equity securities               $7,843,313            16,827,470            (770,689)            23,900,094
                                         ==========            ==========            ========             ==========

         At December 31, 1999
         Available-for-sale:
         Equity securities               $7,019,143            75,152,748            (221,846)            81,950,045
                                         ==========            ==========            ========             ==========
</TABLE>


                                     F-14
<PAGE>


                    CT COMMUNICATIONS, INC. AND SUBSIDIARIES

                Consolidated Statements of Stockholders' Equity

                 Years ended December 31, 2000, 1999, and 1998


         In 2000, 1999, and 1998 proceeds from the sale of investment
         securities available for sale were $19,238,469, $25,949,049, and
         $1,806,648 and included in income were gross realized gains of
         $12,164,249, $16,189,174, and $1,274,437 and gross realized losses of
         $800,045, $382,428, and $160,981, respectively.

(4)      INVESTMENTS IN UNCONSOLIDATED COMPANIES

         Investments in unconsolidated companies consist of the following:


<TABLE>
<CAPTION>
                                                     2000
                                                   OWNERSHIP
                                                   PERCENTAGE                2000                   1999
                                                   ----------             -----------            ----------

<S>                                                <C>                    <C>                   <C>
Equity Method:
   Palmetto MobileNet, L.P.                          19.84%                12,472,551            11,678,889
   Wireless One of North
     Carolina, LLC                                   49.64%                 8,874,129             8,613,074
   BellSouth Carolinas PCS, LP                          --                         --                    --
   Other                                            Various                   110,140                41,016

Cost Method:
   ITC Holding Company                                3.80%                 2,215,534             2,724,129
   Maxcom Telecomunicaciones,
     S.A. de C.V                                     16.20%                14,638,477             8,610,277
   Other                                            Various                        --                16,250
                                                                          -----------            ----------
                                                                          $38,310,831            31,683,635
                                                                          ===========            ==========
</TABLE>

         Palmetto MobileNet, L.P. is a partnership that holds interests in 10
         cellular rural service areas (RSA's) in North and South Carolina. The
         Company's investment in Palmetto MobileNet is accounted for within its
         CT Cellular, Inc. subsidiary. Alltel Mobile is the managing partner of
         the 10 RSA's. The Company uses the equity method to account for its
         investment because the Company exercises significant influence over
         Palmetto MobileNet's operating and financial activities through the
         Company's ownership interest in the corporate general partner of
         Palmetto MobileNet.

         The purpose of Wireless One of North Carolina, LLC is to develop and
         deploy broadband wireless services in North Carolina. The Company uses
         the equity method to account for its investment because the Company
         exercises significant influence over the operating and financial
         activities of Wireless One of North Carolina, LLC.

         BellSouth Carolinas PCS, L.P. is in the business of providing digital
         personal communications services that competes with cellular phone
         service. During 2000, the Company sold its interest in this
         partnership and recognized a gain of $39,214,000 before income taxes.
         Also during 2000, the Company elected to exercise its right to
         partition its predefined area of BellSouth Carolinas PCS, L.P. This
         partitioning is planned during 2001 with an estimated cost of $20-$25
         million.


                                     F-15
<PAGE>


                    CT COMMUNICATIONS, INC. AND SUBSIDIARIES

                Consolidated Statements of Stockholders' Equity

                 Years ended December 31, 2000, 1999, and 1998


         ITC Holding Company has participated in the formation of several
         telecommunications companies. During 2000, ITC Holding reorganized and
         as a result we received 1,600,000 shares of Knology, Inc. Under the
         reorganization agreement we have agreed not to sell or transfer the
         shares for two years. During 1997 ITC Holding restructured and as a
         result the Company received shares in ITC-DeltaCom. The investment in
         ITC-DeltaCom is included in available-for-sale equity securities in
         note 3.

         Maxcom Telecomunicaciones, S.A. de C.V. ("Maxcom", formerly known as
         Amaritel, S.A. de C.V.) is creating a competitive telecommunications
         company offering local, long distance, and network telecommunications
         services in Mexico. The Company's investment in Maxcom is through its
         subsidiary, CTGT. During 2000, the Company contributed an additional
         $6,028,200 in connection with a Capital Contribution Agreement between
         Maxcom and its shareholders.

         Included in the Company's share of earnings from unconsolidated
         companies accounted for under the equity method for 2000 were total
         losses of $340,319 and total income of $5,763,727. 100% of the income
         was attributable to Palmetto MobileNet, L.P.

         Summarized audited financial position information for Palmetto
         MobileNet, L.P. as of December 31, 2000 is as follows: current assets
         - $13,462,575; property and other non-current assets - $106,369,147;
         current liabilities - $1,550,782; partners' capital - $113,782,560.
         Summarized audited combined results of operations for this entity for
         the year ended December 31, 2000, is as follows: revenues -
         $30,255,306; operating income - $29,999,952 and net income -
         $30,737,566.

         Summarized audited financial position information for Palmetto
         MobileNet, L.P. as of December 31, 1999 is as follows: current assets
         - $20,217,143; property and other non-current assets - $95,014,152;
         current liabilities - $1,335,296; partners' capital - $108,071,296.
         Summarized audited combined results of operations for this entity for
         the year ended December 31, 1999, is as follows: revenues -
         $27,644,685; operating income - $27,435,124 and net income -
         $27,629,373.


                                     F-16
<PAGE>


                    CT COMMUNICATIONS, INC. AND SUBSIDIARIES

                Consolidated Statements of Stockholders' Equity

                 Years ended December 31, 2000, 1999, and 1998


(5)      ACQUISITIONS

         On December 13, 2000, the Company acquired WebServe, Inc. (WebServe) a
         regional web services company based in Charlotte, North Carolina for
         $5,971,000. This transaction was structured as a stock purchase and
         WebServe will operate as part of the Company's subsidiary, CTC
         Internet Services, Inc. Pursuant to the purchase, the Company has
         acquired all of the outstanding shares of WebServe. This transaction
         was accounted for under the purchase method of accounting and the
         total purchase has been allocated to assets and liabilities assumed as
         follows:


<TABLE>
         <S>                                                   <C>
         Accounts receivable                                   $   258,000
         Prepaid expenses                                          13,000
         Property, plant and equipment                             37,000
         Goodwill                                               5,969,000
         Other intangibles                                         17,000
         Accounts payable                                        (319,000)
         Other liabilities                                         (4,000)
                                                               -----------

         Total purchase price                                  $ 5,971,000
                                                               ===========
</TABLE>

         The purchase agreement includes contingent purchase payments of up to
         $5,000,000, based on 2001 performance levels. Goodwill from the
         acquisition is being amortized over 10 years.

         In February 2000, the Company acquired Internet of Concord, an
         internet provider based in Concord, NC for $795,000. Goodwill from the
         acquisition is being amortized over 10 years. The total purchase price
         has been allocated to assets acquired as follows:


<TABLE>
         <S>                                      <C>
         Accounts receivable                      $  33,000
         Property, plant and equipment              223,000
         Goodwill                                   631,000
         Accounts payable                           (92,000)
                                                  ---------
                                                  $ 795,000
                                                  =========
</TABLE>

         On September 30, 1999, the Company acquired Catawba Valley Internet
         Services, an internet provider based in Cherryville, NC for $255,000.
         The total purchase price has been allocated to assets acquired as
         follows:


<TABLE>
         <S>                                                                              <C>
         Property, plant and equipment                                                    $ 25,000
         Goodwill                                                                          230,000
                                                                                          --------
                                                                                          $255,000
                                                                                          ========
</TABLE>

         Results of operations for the acquired entities have been included
         from the date of acquisition. Pro forma results for these entities are
         not material to the consolidated financial statements.


                                     F-17
<PAGE>


                    CT COMMUNICATIONS, INC. AND SUBSIDIARIES

                Consolidated Statements of Stockholders' Equity

                 Years ended December 31, 2000, 1999, and 1998


(6)      FAIR VALUE OF FINANCIAL INSTRUMENTS

         The following methods and assumptions were used to estimate the fair
         value of the company's financial instruments:

                  Cash and cash equivalents, accounts receivable, notes
                  receivable, other assets, accounts payable and accrued
                  expenses - the carrying amount approximates fair value
                  because of the short maturity of these instruments.

                  Investment Securities - debt and equity securities are
                  carried at quoted market value.

                  Debt Instruments - the fair value of the Company's long-term
                  debt is estimated by discounting the scheduled payment
                  streams to present value based on current rates for similar
                  instruments of comparable maturities.

         Based on the methods and assumptions noted above, the estimated fair
         values of the Company's financial instruments approximate carrying
         amounts at December 31, 2000 and 1999 due to the variability in
         interest rates of the underlying instruments not subject to an
         interest rate swap agreement.

(7)      DEBT INSTRUMENTS

         Long-term debt at December 31 consists of the following:

<TABLE>
                                                                                   2000                1999
                                                                                -----------         ----------

             <S>                                                                <C>                 <C>
             Line of credit with interest at LIBOR plus .5% (7.31% at
                December 31, 2000) due December 31, 2003                        $34,000,000         20,000,000
                                                                                ===========         ==========
</TABLE>

         The Company has an available line of credit totaling $60,000,000, of
         which $34,000,000 was outstanding at December 31, 2000. The Company is
         in compliance with all debt covenants or has obtained a waiver as of
         December 31, 2000.

         The Company has an interest rate swap agreement with a financial
         institution to hedge $10,000,000 of the outstanding credit line. Under
         the agreement, the Company pays interest on the $10,000,000 at a fixed
         rate of 5.9% plus an applicable spread (.5% at December 31, 2000), in
         return for receiving interest at LIBOR plus .5%. The fair value of
         this agreement at December 31, 2000 is ($42,983).

         In addition, the Company has two $5.0 million revolving credit
         facilities with Rural Telephone Finance Corporation (RTFC) and First
         Charter National Bank. As of December 31, 2000, we had $5 million
         outstanding under the First Charter facility and no amounts
         outstanding under the RTFC facility. The First Charter facility bears
         interest at LIBOR plus 1.25% (7.87% at December 31, 2000).

         Interest expense recognized in 2000, 1999, and 1998 was $2,157,360,
         $1,404,359, and $1,228,381. During 2000, interest capitalized into
         construction in progress was $85,044.


                                     F-18
<PAGE>


                    CT COMMUNICATIONS, INC. AND SUBSIDIARIES

                Consolidated Statements of Stockholders' Equity

                 Years ended December 31, 2000, 1999, and 1998


(8)      REDEEMABLE PREFERRED STOCK

         The 4.8% redeemable preferred stock is callable at a redemption price
         of $100 a share plus accumulated dividends. Sinking fund requirements
         in the next five years are $12,500 annually.

         There have been no changes in the 4.8% series preferred stock in the
         three years ended December 31, 2000, other than the annual sinking
         fund requirement of $12,500.

(9)      COMMON STOCK AND PREFERRED STOCK NOT SUBJECT TO MANDATORY REDEMPTION

         There are 100,000,000 shares of voting common stock, no par value,
         authorized.

         On April 5, 2000 the Company effected a two-for-one stock dividend to
         stockholders of record at March 15, 2000. All share amounts have been
         retroactively restated for all years presented.

         On January 28, 1999, the Company's shareholders approved a plan of
         recapitalization for its common stock. On that date, the Company's
         Articles of Incorporation were amended to provide for one class of
         common stock, rather than the two existing classes of Voting Common
         Stock and Class B Nonvoting Common Stock. Each outstanding share of
         Voting Common Stock has been automatically converted into 4.4 shares
         of common stock, and each outstanding share of Class B Nonvoting
         Common Stock has been automatically converted into 4.0 shares of
         common stock. The foregoing financial statements and footnotes have
         been adjusted to reflect the recapitalization. Earnings per share,
         dividends per share and weighted average shares outstanding have been
         retroactively restated for all years presented.

         The Company has a stockholders' rights plan that entitles each
         stockholder the right to purchase additional shares of common stock at
         a specified price upon the occurrence of certain events related to a
         potential change in control.

         Cash dividends per share of common stock are as follows: $.26 in 2000,
         $.26 in 1999; and $.24 in 1998.

         Preferred stock is comprised of cumulative $100 par value 5% and 4.5%
         series stock. There are 17,000 shares of the 5% series stock
         authorized. There are 2,000 shares of the 4.5% series stock
         authorized.

(10)     STOCK COMPENSATION PLANS

         At December 31, 2000, the Company has five stock-based compensation
         plans, which are described below. The Company applies APB Opinion No.
         25 and related Interpretations in accounting for its plans.
         Accordingly, no compensation cost has been recognized for its fixed
         stock option plans and its stock purchase plan. Had compensation cost
         for the Company's stock-based compensation plans been determined
         consistent with SFAS No. 123, the Company's net income and earnings
         per share would have been reduced to the pro forma amounts indicated
         below:


                                     F-19
<PAGE>


                    CT COMMUNICATIONS, INC. AND SUBSIDIARIES

                Consolidated Statements of Stockholders' Equity

                 Years ended December 31, 2000, 1999, and 1998


<TABLE>
<CAPTION>
                                                                          2000               1999
                                                                       -----------        ----------

             <S>                                    <C>                <C>                <C>
             Net income                             As Reported        $40,753,930        23,042,059
                                                    Pro forma          $39,940,808        22,808,536

             Basic earnings per common
                 share                              As Reported        $      2.16              1.23
                                                    Pro forma          $      2.12              1.22

             Diluted earnings per common
                 share                              As Reported        $      2.15              1.22
                                                    Pro Forma          $      2.11              1.21
</TABLE>

         The Company has an Executive Stock Option Plan (the Plan) to allow key
         employees to increase their holdings of the Company's common stock.
         90,000 shares of common stock were reserved for issuance under the
         Plan. At December 31, 2000, all shares reserved for issuance have been
         granted. Options are granted at prices determined by the Board of
         Directors, generally the most recent sales price at the date of grant,
         and must be exercised within five years of the date of grant. Options
         are exercisable immediately when granted. Activity under the Plan for
         each of the years in the three-year period ended December 31, 2000, is
         as follows:


<TABLE>
<CAPTION>
                                                                             WEIGHTED
                                                                              AVERAGE
                                                          NUMBER             EXERCISE
                                                        OF OPTIONS            PRICE
                                                        ----------           --------

        <S>                                             <C>                  <C>
        Options outstanding and exercisable at
            December 31, 1997                              41,792             $   7
               Options granted                                 --                --
               Options exercised                          (16,936)                6
                                                          -------             -----

        Options outstanding and exercisable at
            December 31, 1998                              24,856                 7
               Options granted                                 --                --
               Options exercised                          (17,656)                7
                                                          -------             -----

        Options outstanding and exercisable at
           December 31, 1999,                               7,200                 7
               Options granted                                 --                --
               Options exercised                            7,200                 7
                                                          -------             -----

        Options outstanding and exercisable at
           December 31, 2000                                   --             $  --
                                                          =======             =====
</TABLE>


                                     F-20
<PAGE>


                    CT COMMUNICATIONS, INC. AND SUBSIDIARIES

                Consolidated Statements of Stockholders' Equity

                 Years ended December 31, 2000, 1999, and 1998


         The Company has a comprehensive Stock option plan (the Plan) to allow
         key employees to increase their holdings of the Company's common
         stock. Under the Plan, 180,000 shares of common stock have been
         reserved for issuance. At December 31, 2000, the number of common
         stock reserved for issuance but ungranted was 480 shares. Options are
         granted at prices determined by the Board of Directors, generally the
         most recent sales price at the date of grant, and must be exercised
         within ten years of the date of grant. Options become exercisable over
         periods from six months to four years after the grant date.

         Activity under the Plan for each of the years in the three-year period
         ended December 31, 2000 is as follows:


<TABLE>
<CAPTION>
                                                                              WEIGHTED
                                                                               AVERAGE
                                                           NUMBER             EXERCISE
                                                         OF OPTIONS            PRICE
                                                         ----------           --------

        <S>                                              <C>                  <C>
        Options outstanding and exercisable at
             December 31, 1997                             172,312             $   9
             Options granted                                    --                 9
             Options exercised                              (5,312)                9
             Options forfeited                             (10,616)                9
                                                           -------             -----

        Options outstanding and exercisable at
             December 31, 1998                             156,384                 9
             Options granted                                    --                --
             Options exercised                             (30,128)                9
             Options forfeited                              (7,984)                9
                                                           -------             -----

        Options outstanding and exercisable at
             December 31, 1999                             118,272             $   9
                                                           -------             -----
             Options granted                                    --                --
             Options exercised                             (27,632)                9
             Options forfeited                              (1,768)                9
                                                           -------             -----

        Options outstanding and exercisable at
             December 31, 2000                              88,872             $   9
                                                           =======             =====
</TABLE>

         As of December 31, 2000 and 1999, the 88,872 and 118,272 options
         outstanding have exercise prices between $8 and $9 and a
         weighted-average remaining contractual life of 5.0 and 6.5 years,
         respectively.


                                     F-21
<PAGE>


                    CT COMMUNICATIONS, INC. AND SUBSIDIARIES

                Consolidated Statements of Stockholders' Equity

                 Years ended December 31, 2000, 1999, and 1998


         The Company has a Restricted Stock Award Program (the Program) to
         provide deferred compensation and additional equity participation to
         certain executive management and key employees. The aggregate amount
         of common stock that may be awarded to participants under the Program
         is 180,000 shares. The Company records deferred compensation in the
         amount of the fair market value of the stock granted and amortizes
         this amount on a straight line basis over the restricted period,
         generally 1 to 10 years. In 2000, 1999 and 1998, respectively, the
         Company granted 41,039, 48,436 and 16,168 shares to participants with
         a weighted-average fair value of $25, $20 and $17. Deferred
         compensation at December 31, 2000 and 1999, respectively was $836,005
         and $1,074,726, which is disclosed net of accumulated amortization of
         $1,247,670 and $607,247, in the consolidated statements of
         stockholders' equity.

         In 1996, a Director Compensation Plan (the Plan) was approved to
         provide each member of the Board of Directors the right to receive the
         Director's compensation in shares of common stock or cash, at the
         Director's discretion. An aggregate of 90,000 shares have been
         reserved for issuance under the Plan. All compensation for a Director
         who elects to receive shares of stock in lieu of cash will be
         converted to shares of stock based upon the fair market value of the
         common stock on the grant date. The initial grant date is the first
         day that is six months and one day following the Directors election.
         All subsequent compensation shall be converted to shares of common
         stock based upon the fair market value of the common stock on the date
         such compensation is paid or made available to the Director. During
         2000, 1999 and 1998, the Company granted 6,810, 9,056 and 5,216
         shares, respectively, with an average fair market value of $27, $19
         and $17, respectively.

         During 1997, the CT Communications, Inc. Omnibus Stock Compensation
         Plan (the Plan) was approved. Under the Plan, 800,000 shares of common
         stock have been reserved for issuance. The Plan provides for awards of
         stock, stock options and stock appreciation rights. At December 31,
         2000, the number of shares of common stock reserved for issuance but
         ungranted was 428,997 shares. Options are granted at prices determined
         by the Board of Directors, generally the most recent sales price at
         the date of grant, and must be exercised within ten years of the date
         of grant.


                                     F-22
<PAGE>


                    CT COMMUNICATIONS, INC. AND SUBSIDIARIES

                Consolidated Statements of Stockholders' Equity

                 Years ended December 31, 2000, 1999, and 1998


         Activity under the Plan for the year ended December 31, 2000 is as
         follows:


<TABLE>
<CAPTION>
                                                                                WEIGHTED
                                                                                 AVERAGE
                                                            NUMBER              EXERCISE
                                                          OF OPTIONS             PRICE
                                                          ----------            --------

         <S>                                              <C>                   <C>
         Options outstanding and exercisable at
            December 31, 1997                                    --             $    --
            Options granted                                  64,464                  17
            Options exercised                                    --                  --
            Options forfeited                                    --                  --
                                                           --------             -------

         Options outstanding and exercisable at
            December 31, 1998                                64,464                  17
            Options granted                                 108,646                  20
            Options exercised                                (2,672)                  9
            Options forfeited                                (9,504)                 18
                                                           --------             -------

         Options outstanding and exercisable at
            December 31, 1999                               160,934                  19
            Options granted                                 220,703                  29
            Options exercised                               (11,066)                 18
            Options forfeited                               (13,306)                 27
                                                           --------             -------

         Options outstanding and exercisable at
            December 31, 2000                               357,265             $    24
                                                           ========             =======
</TABLE>


         As of December 31, 2000 and 1999, the 357,265 and 160,934 options
         outstanding have exercise prices of between $9 and $31 and a
         weighted-average remaining contractual life of 8.6 and 9.2 years,
         respectively.

         The per share fair value of stock options granted in 2000, 1999, and
         1998 was $12, $16, and $13 at the date of grant. The fair value of
         each option grant is estimated on the date of grant using the
         Black-Scholes option-pricing model with the following weighted-average
         assumptions: 1999 and 1998 - dividend yield of 1.5%; expected
         volatility of 20%; risk-free interest rate of 6%, and expected lives
         of 10 years; 2000 - dividend yield of 2.0%; expected volatility of
         40%; risk-free interest rate of 7%, and expected lives of 6 years.


                                     F-23
<PAGE>


                    CT COMMUNICATIONS, INC. AND SUBSIDIARIES

                Consolidated Statements of Stockholders' Equity

                 Years ended December 31, 2000, 1999, and 1998


(11)     EMPLOYEE STOCK PURCHASE PLAN

         The Company approved the Employee Stock Purchase Plan in 1997 (the
         Plan) which authorized 96,000 shares of common stock to be offered to
         all employees eligible to buy shares. Purchase price of shares is 100%
         of fair market value with the option to finance up to 100% of purchase
         by payroll deduction over a period of up to 24 months at 6% interest.
         Under the Plan, 2,294 and 39,002 shares were issued at a purchase
         price of $25 and $22 per share in 2000 and 1999, respectively.

(12)     EMPLOYEE BENEFIT PLANS

         (A)      PENSION PLAN AND SAVINGS PLAN

                  The Company has a trusteed, defined benefit, noncontributory
                  pension plan covering substantially all of its employees. The
                  benefits are based on years of service and the employee's
                  highest five consecutive plan years of compensation.
                  Contributions to the plan are based upon the Entry Age Normal
                  Method with Frozen Initial Liability and comply with the
                  funding requirements of the Employee Retirement Income
                  Security Act. Since the plan is adequately funded, there have
                  been no contributions made in 2000 or 1999. Plan assets are
                  invested primarily in common stocks, long-term bonds and U.S.
                  treasury notes.

                  The following table sets forth the funded status of the
                  Company's pension plan and amounts recognized in the
                  Company's financial statements at December 31, 2000 and 1999.


<TABLE>
<CAPTION>
                                                              DECEMBER 31,             DECEMBER 31,
                                                                 2000                     1999
                                                              ------------             ------------

<S>                                                           <C>                      <C>
CHANGE IN BENEFIT OBLIGATION
    Benefit obligation at end of prior plan year              $(30,445,246)            $(30,046,553)
    Service cost                                                (1,154,426)                (983,130)
    Interest cost                                               (2,298,923)              (2,130,187)
    Actuarial gain/(loss)                                       (1,040,006)               1,194,249
    Actual distributions                                         1,672,629                1,520,375
                                                              ------------             ------------
    BENEFIT OBLIGATION AT END OF YEAR                         $(33,265,972)            $(30,445,246)
                                                              ============             ============

CHANGE IN PLAN ASSETS
    Plan assets at fair value at beginning of year            $ 41,784,077             $ 42,428,520
    Actual return on plan assets                                 2,378,668                  875,932
    Actual distributions                                        (1,672,629)              (1,520,375)
                                                              ------------             ------------
    PLAN ASSETS AT FAIR VALUE AT END OF YEAR                  $ 42,490,116             $ 41,784,077
                                                              ============             ============

(ACCRUED)/PREPAID PENSION COST
    Funded status                                             $  9,224,144             $ 11,338,831
    Unrecognized net actuarial gain                             (9,645,469)             (11,739,787)
    Unrecognized prior service cost                                (27,993)                 (31,492)
    Unrecognized transition asset                                 (132,125)                (198,191)
                                                              ------------             ------------
    NET AMOUNT RECOGNIZED                                     $   (581,443)            $   (630,639)
                                                              ============             ============
</TABLE>


                                     F-24
<PAGE>


                    CT COMMUNICATIONS, INC. AND SUBSIDIARIES

                Consolidated Statements of Stockholders' Equity

                 Years ended December 31, 2000, 1999, and 1998


                  The Company also has an unqualified Supplemental Executive
                  Retirement Plan. Accrued costs related to this plan were
                  $419,490 and $390,000 at December 31, 2000 and 1999,
                  respectively.

                  Net pension cost for 2000, 1999, and 1998 included the
                  following:


<TABLE>
<CAPTION>
                                                            2000                    1999                   1998
                                                         -----------             ----------             ----------

        <S>                                              <C>                     <C>                    <C>
        Service cost, benefits earned during
         the period                                      $ 1,154,426                983,130                776,031
        Interest cost on projected benefit
         obligation                                        2,298,923              2,130,187              1,961,462
        Expected return on plan assets                    (3,073,583)            (3,116,292)            (3,539,124)
        Net amortization and deferral                       (428,967)              (497,819)               (37,895)
                                                         -----------             ----------             ----------

        Net periodic pension credit                      $   (49,201)              (500,794)              (839,526)
                                                         ===========             ==========             ==========
</TABLE>

                  The weighted average discount rate of 7.5% in 2000, 1999 and
                  1998 and the rate of increase in future compensation levels
                  of 5% in 2000, 1999 and 1998 were used in determining the
                  actuarial present value of the projected benefit obligations
                  at the end of the year. The assumed long-term rate of return
                  on pension plan assets was 7.5% in 2000, 1999 and 1998.

         (B)      EMPLOYEE SAVINGS PLAN

                  The Company has a 401(k) salary savings plan which provides
                  that employees may contribute a portion of their salary to
                  the plan on a tax deferred basis. The Company's match of a
                  portion of the employee's contribution totaled $516,452,
                  $336,208 and $256,960 in 2000, 1999, and 1998, respectively.

         (C)      EMPLOYEE STOCK OWNERSHIP PLAN

                  The Employee Stock Ownership Plan of The Concord Telephone
                  Company (the Plan) was originally a defined contribution plan
                  sponsored by the Company. The Company was responsible for all
                  contributions to the Plan. Contributions were in the form of
                  Company stock or cash used to purchase Company stock. Prior
                  to the Tax Reform Act of 1986 (the Act), the Company was
                  eligible for certain tax credits as a result of the Plan
                  contributions. Subsequent to the Act, these tax credits were
                  no longer available. As a result, the plan has been frozen.
                  As of January 1, 1987, no more contributions can be made into
                  the plan and no employee may become eligible to participate.


                                     F-25
<PAGE>


                    CT COMMUNICATIONS, INC. AND SUBSIDIARIES

                Consolidated Statements of Stockholders' Equity

                 Years ended December 31, 2000, 1999, and 1998


         (D)      POSTRETIREMENT BENEFITS

                  In addition to the Company's defined benefit pension plan,
                  the Company sponsors a health care plan that provides
                  postretirement medical benefits and life insurance coverage
                  to full-time employees who meet minimum age and service
                  requirements. The plan is contributory with respect to
                  coverage for beneficiaries. The Company's policy is to fund
                  the cost of medical benefits on a cash basis.

                  The Company has adopted Statement of Financial Accounting
                  Standards No. 106, "Employers' Accounting for Postretirement
                  Benefits Other Than Pensions," and has elected to amortize
                  the transition liability over 15 years. The Statement
                  requires the accrual, during the years that an employee
                  renders the necessary service, of the expected cost of
                  providing those benefits to the employee and employee's
                  beneficiaries and covered dependents.

                  The following table presents the plan's accumulated
                  postretirement benefit obligation reconciled with amounts
                  recognized in the Company's balance sheets at December 31,
                  2000 and 1999:


<TABLE>
<CAPTION>
                                                                     DECEMBER 31,             DECEMBER 31,
                                                                         2000                    1999
                                                                     ------------             -----------

        <S>                                                          <C>                      <C>
        CHANGE IN BENEFIT OBLIGATION
            Benefit obligation at end of prior plan year               (8,772,120)             (9,288,899)
            Service cost                                                 (154,217)               (180,650)
            Interest cost                                                (671,537)               (617,603)
            Amendments                                                         --                 455,422
            Actuarial gain/(loss)                                        (309,097)                843,840
            Other                                                         134,342                  15,770
                                                                     ------------             -----------
            BENEFIT OBLIGATION AT END OF YEAR                        $ (9,772,629)             (8,772,120)
                                                                     ============             ===========

        (ACCRUED)/PREPAID POSTRETIREMENT COST
            Funded status                                              (9,772,629)             (8,772,120)
            Unrecognized net actuarial gain                            (1,887,326)             (2,935,543)
            Unrecognized prior service cost                            (2,011,385)             (2,514,231)
            Unrecognized transition obligation                          3,058,986               3,670,783
                                                                     ------------             -----------
            NET AMOUNT RECOGNIZED                                    $(10,612,354)            (10,551,111)
                                                                     ============             ===========
</TABLE>


                                     F-26
<PAGE>


                    CT COMMUNICATIONS, INC. AND SUBSIDIARIES

                Consolidated Statements of Stockholders' Equity

                 Years ended December 31, 2000, 1999, and 1998


                  Net periodic postretirement benefit cost for 2000, 1999 and
                  1998 includes the following components:


<TABLE>
<CAPTION>
                                                     2000                 1999                 1998
                                                  ---------             --------             --------

        <S>                                       <C>                   <C>                  <C>
        Service cost                              $ 154,217              180,650              180,087
        Interest cost                               671,537              617,603              608,299
        Amortization of transition
          obligation over 15 years                  611,797              611,798              611,798
        Amortization of gain                       (126,924)            (112,358)            (101,181)
        Amortization of prior service
          cost                                     (502,846)            (502,847)            (502,847)
                                                  ---------             --------             --------

        Net periodic postretirement
          benefit cost                            $ 807,781              794,846              796,156
                                                  =========             ========             ========
</TABLE>

         For measurement purposes, a 9.0% percent annual rate of increase in
         the per capita cost of covered benefits (i.e., health care cost trend
         rate) was assumed for 2000 and the rate was assumed to decrease
         annually to 5.5% by the year 2003 and to remain level thereafter. The
         health care cost trend rate assumption has a significant effect on the
         amounts reported. For example, increasing the assumed health care cost
         trend rates by one percentage point in each year would increase the
         accumulated postretirement benefit obligation as of December 31, 2000,
         to approximately $10,514,553 and the aggregate of the service and
         interest cost components of net periodic postretirement benefit cost
         for the year ended December 31, 2000 to approximately $969,576.
         Decreasing the assumed health care cost trend rates by one percentage
         point in each year would decrease the accumulated postretirement
         benefit obligation as of December 31, 2000, to approximately
         $8,024,261 and the aggregate of the service and interest cost
         components of net periodic postretirement benefit cost for the year
         ended December 31, 2000 to approximately $710,621.

         The weighted-average discount rate used in determining the accumulated
         postretirement benefit obligation was 7.5% in 2000, 1999, and 1998.


                                     F-27
<PAGE>


                    CT COMMUNICATIONS, INC. AND SUBSIDIARIES

                Consolidated Statements of Stockholders' Equity

                 Years ended December 31, 2000, 1999, and 1998


(13)     INCOME TAXES

         Total income taxes for the years ended December 31, 2000, 1999, and
         1998 were allocated as follows:


<TABLE>
<CAPTION>
                                                                  2000                 1999                   1998
                                                               -----------          ----------              ---------

         <S>                                                   <C>                  <C>                     <C>
         Income from continuing operations                     $ 27,228,578         15,697,657              8,926,469
                                                               ============         ==========              =========

         Stockholders' equity, for unrealized
                  holding gain on debt and equity
                  securities recognized for
                  financial reporting purposes                 $(21,112,259)        19,459,133              3,605,700
                                                               ============         ==========              =========
</TABLE>

         Income tax expense (benefit) attributable to income from continuing
         operations for the years ended December 31, 2000, 1999, and 1998,
         consists of:


<TABLE>
<CAPTION>
                                                      2000                   1999                 1998
                                                  ------------           -----------           ---------

         <S>                                      <C>                     <C>                  <C>
         Current:
         Federal                                  $ 21,696,356            11,360,031           3,896,673
         State                                       4,943,018             2,860,578           1,104,868
         Foreign                                       475,206               328,290                  --
                                                  ------------           -----------           ---------
                                                    27,114,580            14,548,899           5,001,541
                                                  ------------           -----------           ---------

         Deferred:
         Federal, net of investment tax
           credit amortization                         732,676             1,653,076           3,284,653
         State                                        (143,472)             (504,318)            640,275
         Foreign                                      (475,206)                   --                  --
                                                  ------------           -----------           ---------
                                                       113,998             1,148,758           3,924,928
                                                  ------------           -----------           ---------

               Total                              $ 27,228,578            15,697,657           8,926,469
                                                  ============           ===========           =========
</TABLE>


                                     F-28
<PAGE>


                    CT COMMUNICATIONS, INC. AND SUBSIDIARIES

                Consolidated Statements of Stockholders' Equity

                 Years ended December 31, 2000, 1999, and 1998


         Income tax expense attributable to income from continuing operations
         differs from the amounts computed by applying the U.S. federal income
         tax rate of 35 percent to pretax income from continuing operations as
         a result of the following:


<TABLE>
<CAPTION>
                                                        2000                  1999                 1998
                                                    ------------           -----------           ----------

         <S>                                        <C>                     <C>                  <C>
         Amount computed at statutory rate          $ 23,802,809            13,568,077            7,808,108
         State income taxes, net of federal
           income tax benefit                          2,233,351               880,998              974,343
         Increase in valuation allowance                 859,553               650,571              160,000
         Nontaxable interest income                      (17,071)               (2,823)              (2,166)
         Amortization of federal investment
           tax credit                                   (114,885)             (114,885)            (114,885)
         Goodwill                                        501,074               454,636                   --
         Other, net                                      (36,252)              261,083              101,069
                                                    ------------           -----------           ----------

         Income tax expense                         $ 27,228,578            15,697,657            8,926,469
                                                    ============           ===========           ==========
</TABLE>

         The tax effects of temporary differences that give rise to significant
         portions of deferred tax assets and deferred tax liabilities as of
         December 31, 2000 and 1999 were as follows:


<TABLE>
<CAPTION>
                                                                            2000                     1999
                                                                        ------------             -----------

         <S>                                                            <C>                       <C>
         Deferred tax assets:
            Accrued postretirement and pension benefits                    4,505,018               4,633,699
            Accrued incentive                                                421,028                 461,652
            Intangibles                                                       59,067                  59,382
            State net operating loss carryforwards                         2,060,124               1,200,571
            Other accrued expenses and allowances                            134,875                 123,562
            Deferred revenue                                                 262,323                 415,130
            Foreign tax credit                                               475,206                      --
            Other/investments                                                767,244                   1,959
                                                                        ------------             -----------
            Total gross deferred tax assets                                8,684,885               6,895,955
                                                                        ------------             -----------

            Less valuation allowance                                      (2,060,124)             (1,200,571)
                                                                        ------------             -----------

            Net deferred tax assets                                        6,624,761               5,695,384
                                                                        ------------             -----------
         Deferred tax liabilities:
            Property and equipment, primarily related to
               depreciation differences                                   14,337,471              12,811,864
            Unrealized gain on securities                                  5,757,962              26,870,221
            Other                                                                 --                 366,105
                                                                        ------------             -----------
            Total gross deferred tax liabilities                          20,095,433              40,048,190
                                                                        ------------             -----------

            Net deferred tax liability                                  $ 13,470,672              34,352,806
                                                                        ============             ===========
</TABLE>


                                     F-29
<PAGE>


                    CT COMMUNICATIONS, INC. AND SUBSIDIARIES

                Consolidated Statements of Stockholders' Equity

                 Years ended December 31, 2000, 1999, and 1998


         The valuation allowance for deferred tax assets as of January 1, 2000
         and 1999 was $2,060,124 and $1,200,571, respectively. The net change
         in the total valuation allowance for the years ended December 31, 2000
         and 1999 was an increase of $859,553 and $646,571, respectively. In
         assessing the realizability of deferred tax assets, management
         considers whether it is more likely than not that some portion or all
         of the deferred tax assets will not be realized. The ultimate
         realization of deferred tax assets is dependent upon the generation of
         future taxable income during the periods in which those temporary
         differences become deductible. Management considers the scheduled
         reversal of deferred tax liabilities, projected future taxable income,
         and tax planning strategies in making this assessment. Based upon the
         level of historical taxable income and projections for future taxable
         income over the periods which the deferred tax assets are deductible,
         management believes it is more like than not the Company will realize
         the benefits of these deductible differences, net of the existing
         valuation allowances at December 31, 2000. The amount of the deferred
         tax asset considered realizable, however, could be reduced in the near
         term if estimates of future taxable income during the period are
         reduced.

         At December 31, 2000, the Company has net operating loss carryforwards
         for state income tax purposes of approximately $31,965,000 which will
         expire in the years 2001-2015.

(14)     SEGMENT INFORMATION

         Effective December 31, 1998, the Company adopted FAS 131, "Disclosures
         about Segments of an Enterprise and Related Information." The Company
         has five reportable segments, each of which are strategic businesses
         that are managed separately due to certain fundamental differences
         such as regulatory environment or services offered. The segments and a
         description of their businesses are as follows: the incumbent local
         exchange carrier (ILEC) which provides local telephone services, the
         competitive local exchange carrier (CLEC) which provides competitive
         local telephone services to customers outside the ILEC's operating
         area, the long distance company (LD), the internet and data services
         company (ISP) which provides dial-up and high-speed internet access,
         web design, hosting and other data related services, and the wireless
         company (DCS). Palmetto MobileNet, L.P. is a limited partnership with
         interests in wireless phone service in North and South Carolina. The
         Company has an equity interest in Palmetto MobileNet, L.P. through CT
         Cellular, Inc. Results for Palmetto MobileNet, L.P. are consolidated
         with CT Cellular, Inc. for presentation within the footnote
         (Palmetto). Accounting policies of the segments are the same as those
         described in the summary of significant accounting policies. The
         Company evaluates performance based on operating profit before other
         income (expenses) and income taxes. Intersegment sales are accounted
         for as if the transactions were to third parties. All segments provide
         services within North and South Carolina.


                                     F-30
<PAGE>


                    CT COMMUNICATIONS, INC. AND SUBSIDIARIES

                Consolidated Statements of Stockholders' Equity

                 Years ended December 31, 2000, 1999, and 1998


<TABLE>
<CAPTION>
DECEMBER 31, 2000                ILEC         CLEC         LD           ISP         DCS       PALMETTO       OTHER         TOTAL
-----------------            ------------   ---------  ----------   ---------    ---------   ----------    ---------    -----------
<S>                          <C>            <C>        <C>          <C>          <C>         <C>             <C>        <C>
External revenues            $ 82,352,804   4,447,138  13,832,201   6,899,436    7,673,754   30,255,306      450,000    145,910,639
Intersegment revenues           5,399,829          --          --          --       60,370           --           --      5,460,199
Depreciation & amortization    14,994,870   1,150,320   1,123,599   1,365,215       55,615    3,308,518       21,081     22,019,218
Operating profit (loss)        25,149,019 (10,750,245)  4,812,255  (1,690,928)  (1,822,464)  29,999,952     (191,353)    45,506,236
Equity in income of
  unconsolidated companies             --          --          --          --           --           --     (340,319)      (340,319)
Segment assets                148,503,440  18,429,275   5,364,772   8,211,079    1,059,111  119,831,722   39,643,773    341,043,172
Investment in
  unconsolidated companies             --          --          --          --           --           --   25,838,280     25,838,280
Capital expenditures           35,635,113  14,830,214   1,504,087   1,386,013       15,442    6,047,020      718,652     60,136,541
</TABLE>


<TABLE>
<CAPTION>
DECEMBER 31, 1999                ILEC         CLEC         LD           ISP         DCS       PALMETTO       OTHER         TOTAL
-----------------            ------------   ---------  ----------   ---------    ---------   ----------    ---------    -----------
<S>                          <C>            <C>        <C>          <C>          <C>         <C>           <C>          <C>
External revenues            $ 76,653,009   2,613,320  14,291,053   5,716,709    5,192,503   27,644,685    1,125,000    133,236,279
Intersegment revenues           3,930,503          --          --          --       46,139           --           --      3,976,642
Depreciation & amortization    12,850,014     240,887     835,554     926,913       63,022    3,241,000      207,873     18,365,263
Operating profit (loss)        21,871,878  (2,497,748)  4,836,605    (530,236)  (1,736,895)  27,435,124      424,799     49,803,527
Equity in income of
  unconsolidated companies     (2,431,299)         --          --          --           --           --   (1,278,910)    (3,710,209)
Segment assets                120,460,989   4,781,745   4,883,247   7,651,954      825,416  115,275,823   87,363,696    341,242,870
Investment in
  unconsolidated companies             --          --          --          --           --           --   20,004,746     20,004,746
Capital expenditures           22,338,130   3,271,801     434,400   1,144,353       82,166           --      313,152     27,584,002
</TABLE>


<TABLE>
<CAPTION>
DECEMBER 31, 1998                ILEC         CLEC         LD           ISP         DCS       PALMETTO       OTHER         TOTAL
-----------------            ------------   ---------  ----------   ---------    ---------   ----------    ---------    -----------
<S>                          <C>              <C>      <C>          <C>          <C>         <C>             <C>        <C>
External revenues            $ 70,646,748     492,522  13,391,033   3,369,305    3,150,786   23,390,795      675,000    115,116,189
Intersegment revenues           5,017,641          --          --          --           --           --           --      5,017,641
Depreciation & amortization    11,530,611      55,082     588,888     553,765       55,196    3,241,000       57,019     16,081,561
Operating profit (loss)        20,657,610  (1,625,567)  3,700,801     (92,089)  (1,100,312)  23,147,601      (87,463)    44,600,581
Equity in income of
  unconsolidated companies     (2,895,492)         --          --          --           --           --   (1,797,542)    (4,693,034)
Segment assets                110,709,780     907,993   4,199,439   7,329,775      645,805  109,243,574   30,051,772    263,088,138
Investment in
  unconsolidated companies      1,896,667          --          --          --           --           --   17,630,798     19,527,465
Capital expenditures           21,248,732     693,211   1,977,488     852,368       11,910           --        5,587     24,789,296
</TABLE>


                                     F-31
<PAGE>


                    CT COMMUNICATIONS, INC. AND SUBSIDIARIES

                Consolidated Statements of Stockholders' Equity

                 Years ended December 31, 2000, 1999, and 1998


Reconcilation to net income before tax:


<TABLE>
<CAPTION>
                                               DECEMBER 31, 2000       DECEMBER 31, 1999  DECEMBER 31, 1998
                                               -----------------       -----------------  -----------------

         <S>                                   <C>                     <C>                <C>
         Segment operating profit                $  45,506,236             49,803,527        44,600,581
         Palmetto MobileNet, L.P.                  (29,999,952)           (27,435,124)      (23,147,601)
         Total other income                         52,501,742             16,397,523           855,899
                                                 -------------           ------------      ------------
         Net income before tax                   $  68,008,026             38,765,926        22,308,879
                                                 =============           ============      ============
</TABLE>

Reconcilation to total revenues:


<TABLE>
<CAPTION>
                                               DECEMBER 31, 2000       DECEMBER 31, 1999  DECEMBER 31, 1998
                                               -----------------       -----------------  -----------------

         <S>                                   <C>                     <C>                <C>
         Segment revenues                        $ 145,910,639            133,236,279       115,116,189
         Palmetto MobileNet, L.P.                  (30,225,306)           (27,644,685)      (23,390,795)
                                                 -------------           ------------      ------------
         Total revenues                          $ 115,685,333            105,591,594        91,725,394
                                                 =============           ============      ============
</TABLE>

Reconcilation to total depreciation and amortization:


<TABLE>
<CAPTION>
                                               DECEMBER 31, 2000       DECEMBER 31, 1999  DECEMBER 31, 1998
                                               -----------------       -----------------  -----------------

         <S>                                   <C>                     <C>                <C>
         Segment depreciation & amortization     $  22,019,218             18,365,263        16,081,561
         Palmetto MobileNet, L.P.                   (3,308,518)            (3,241,000)       (3,241,000)
                                                 -------------             ----------      ------------
         Total depreciation & amortization       $  18,710,700             15,124,263        12,840,561
                                                 =============             ==========        ==========
</TABLE>

Reconcilation to total equity in income of unconsolidated companies:


<TABLE>
<CAPTION>
                                               DECEMBER 31, 2000       DECEMBER 31, 1999  DECEMBER 31, 1998
                                               -----------------       -----------------  -----------------
         <S>                                   <C>                     <C>                <C>
         Segment equity in income of
           unconsolidated companies              $    (340,319)            (3,710,209)       (4,693,034)
         Equity in income of
           Palmetto MobileNet, L.P.                  5,763,727              4,859,443         5,124,122
                                                 -------------             ----------        ----------
         Total equity in income of
           unconsolidated companies              $   5,423,408              1,149,234           431,088
                                                 =============             ==========        ==========
</TABLE>

Reconcilation to total investment in unconsolidated companies:


<TABLE>
<CAPTION>
                                               DECEMBER 31, 2000       DECEMBER 31, 1999  DECEMBER 31, 1998
                                               -----------------       -----------------  -----------------
         <S>                                   <C>                     <C>                <C>
         Segment investment in
           unconsolidated companies              $  25,838,280             20,004,746        19,527,465
         Investment in
           Palmetto MobileNet, L.P.                 12,472,551             11,678,889        10,262,329
                                                 -------------             ----------        ----------
         Total investment in
           unconsolidated companies              $  38,310,831             31,683,635        29,789,794
                                                 =============             ==========        ==========
</TABLE>

Reconcilation to total assets:


<TABLE>
<CAPTION>
                                               DECEMBER 31, 2000       DECEMBER 31, 1999  DECEMBER 31, 1998
                                               -----------------       -----------------  -----------------

         <S>                                   <C>                     <C>                <C>
         Segment assets                          $ 341,043,172            341,242,870       263,088,138
         Investment in unconsolidated companies     38,310,831             31,683,635        29,789,794
         Palmetto MobileNet, L.P.                 (119,831,722)          (115,231,295)     (109,243,574)
                                                 -------------           ------------      ------------
         Total assets                            $ 259,522,281            257,695,210       183,634,358
                                                 =============            ===========       ===========
</TABLE>


                                     F-32
<PAGE>


                    CT COMMUNICATIONS, INC. AND SUBSIDIARIES

                Consolidated Statements of Stockholders' Equity

                 Years ended December 31, 2000, 1999, and 1998


(15)     RECONCILIATION OF BASIC AND DILUTED WEIGHTED AVERAGE SHARES
         OUTSTANDING


<TABLE>
             <S>                                                                                <C>
             2000:
                Basic weighted average shares outstanding                                       18,833,807
                Effect of dilutive securities:
                    Stock options                                                                   97,173
                                                                                                ----------

                 Diluted weighted average shares outstanding                                    18,930,980
                                                                                                ==========

             1999:
                Basic weighted average shares outstanding                                       18,705,886
                Effect of dilutive securities:
                    Stock options                                                                  145,964
                                                                                                ----------

                 Diluted weighted average shares outstanding                                    18,851,850
                                                                                                ==========

             1998:
                Basic weighted average shares outstanding                                       18,454,032
                Effect of dilutive securities:
                    Stock options                                                                   98,976
                                                                                                ----------

                 Diluted weighted average shares outstanding                                    18,553,008
                                                                                                ==========
</TABLE>


                                     F-33
<PAGE>

                    CT COMMUNICATIONS, INC. AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                        December 31, 2000, 1999 and 1998



(16)     SUMMARY OF INCOME STATEMENT INFORMATION (UNAUDITED)

         A summary of quarterly income statement information for the years
         ended December 31, 2000 and 1999, follows:


<TABLE>
<CAPTION>
                                                               2000 QUARTERS ENDED
                                     -----------------------------------------------------------------------
                                      MARCH 31             JUNE 30             SEPT. 30            DEC. 31
                                     -----------          ----------          ----------          ----------

<S>                                  <C>                  <C>                 <C>                 <C>
Operating revenues                   $27,942,307          28,867,848          28,640,072          30,205,106
Income before other income
  (expenses) and income
  taxes                                5,040,578           4,463,723           3,246,939           2,755,044
Net income                             5,301,007           4,868,664          27,333,773           3,276,004
Basic earnings per common
  share                              $       .28                 .26                1.45                 .17
                                     ===========          ==========          ==========          ==========
Diluted earnings per common
  share                              $       .28                 .26                1.44                 .17
                                     ===========          ==========          ==========          ==========
</TABLE>


<TABLE>
<CAPTION>
                                                               1999 QUARTERS ENDED
                                     -----------------------------------------------------------------------
                                      MARCH 31             JUNE 30             SEPT. 30            DEC. 31
                                     -----------          ----------          ----------          ----------

<S>                                  <C>                  <C>                 <C>                 <C>
Operating revenues                   $25,332,224          26,101,594          26,594,439          27,563,337
Income before other income
  (expenses) and income
  taxes                                5,239,392           5,643,778           5,851,158           5,634,075
Net income                             3,870,048           9,142,801           5,014,811           5,040,609
Basic earnings per common
  share                              $       .21                 .49                 .27                 .27
                                     ===========          ==========          ==========          ==========
Diluted earnings per common
  share                              $       .21                 .49                 .27                 .27
                                     ===========          ==========          ==========          ==========
</TABLE>


                                     F-34
<PAGE>


                                                                    Schedule II


                    CT COMMUNICATIONS, INC. AND SUBSIDIARIES

                       Valuation and Qualifying Accounts

                 Years Ended December 31, 2000, 1999, and 1998


<TABLE>
<CAPTION>
                 COLUMN A                             COLUMN B            COLUMN C           COLUMN D           COLUMN E
------------------------------------------            ---------          ---------         -----------        ------------
                                                                                           DEDUCTIONS
                                                      BALANCE,           ADDITIONS             FROM             BALANCE,
                                                      BEGINNING            CHARGED           RESERVES          END OF YEAR
               DESCRIPTION                            OF YEAR            TO INCOME          (SEE NOTE)        (SEE NOTE B)
------------------------------------------            ---------          ---------         -----------        ------------

<S>                                                   <C>                <C>               <C>                <C>
Valuation and qualifying accounts deducted
  from assets to which they apply:

Allowance for uncollectible accounts:

Year ended December 31, 2000                          $107,500            690,834            638,602            239,732
                                                      ========            =======            =======            =======

Year ended December 31, 1999                          $107,500            603,458            603,458            107,500
                                                      ========            =======            =======            =======

Year ended December 31, 1998                          $100,000            433,747            426,247            107,500
                                                      ========            =======            =======            =======
</TABLE>


Note:    Represents balances written-off as uncollectible less collections on
         balances previously written off of $188,399, $170,132 and $202,512 for
         2000, 1999, and 1998, respectively. Balance at December 31, 2000
         includes $80,000 assumed in the acquisition of WebServe accounted for
         as a purchase in 2000.


                                     F-35
<PAGE>


                            Palmetto MobileNet, L.P.
                       Consolidated Financial Statements
                  Years Ended December 31, 2000, 1999 and 1998


                                    CONTENTS


<TABLE>
<S>                                                                                                        <C>
Report of Independent Auditors                                                                                  F - 37

Consolidated Financial Statements

Consolidated Balance Sheets                                                                                     F - 38
Consolidated Statements of Income and Partners' Equity                                                          F - 39
Consolidated Statements of Cash Flows                                                                           F - 40
Notes to Consolidated Financial Statements                                                                 F - 41 to F - 46
</TABLE>


                                     F-36
<PAGE>


                         REPORT OF INDEPENDENT AUDITORS


To the Partners of
Palmetto MobileNet, L.P.

We have audited the accompanying consolidated balance sheets of Palmetto
MobileNet, L.P. as of December 31, 2000 and 1999, and the related consolidated
statements of income and partners' equity, and cash flows for each of the three
years ended December 31, 2000, 1999, and 1998. These financial statements are
the responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audits. We did
not audit the financial statements of certain RSA partnerships, the investments
in which, as discussed in Note 3 to the financial statements, are accounted for
by the equity method of accounting. The investments in these RSA partnerships
were $99,916,083 and $94,565,607 as of December 31, 2000 and 1999,
respectively, and the equity in their net income was $30,255,306, $27,644,685,
and $23,390,795 for the years 2000, 1999, and 1998, respectively. The financial
statements of the RSA partnerships were audited by other auditors whose reports
were furnished to us, and our opinion on the consolidated financial statements
of Palmetto MobileNet, L.P., insofar as it relates to the amounts included for
the RSA partnerships, is based solely on the reports of the other auditors.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audits to obtain reasonable assurance about whether the consolidated
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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Palmetto MobileNet,
L.P. as of December 31, 2000 and 1999, and the results of its operations and
its cash flows for the years ended December 31, 2000, 1999, and 1998 in
conformity with accounting principles generally accepted in the United States.

                           /s/  Bauknight Pietras & Stormer, P.A.

April 27, 2001
Columbia, South Carolina


                                     F-37
<PAGE>


                            Palmetto MobileNet, L.P.
                          Consolidated Balance Sheets


<TABLE>
<CAPTION>
                                                               DECEMBER 31,
                                                       2000                    1999
                                                   ------------            ------------
<S>                                                <C>                     <C>
ASSETS
Current assets:
  Cash and cash equivalents                        $ 13,421,848            $ 20,217,143
  Accounts receivable                                    40,727                      --
                                                   ------------            ------------
Total current assets                                 13,462,575              20,217,143

Land, building and improvements, net                  5,979,502                      --

Interests in RSA partnerships                        99,916,083              94,565,607

Other assets:
  Rural Telephone Finance Cooperative
    Subordinated Capital Certificates                   473,562                 448,545
                                                   ------------            ------------

Total assets                                       $119,831,722            $115,231,295
                                                   ============            ============

LIABILITIES AND PARTNERS' EQUITY
Current liabilities:
  Accounts payable -- PMN, Inc.                    $    141,334            $    125,219
  Accounts payable and accrued expenses                 151,571                  22,558
  Accrued interest                                       31,367                  37,596
  Current portion of long-term debt                   1,226,510               1,149,923
                                                   ------------            ------------
Total current liabilities                             1,550,782               1,335,296

Long-term debt, net of current portion                4,498,380               5,824,703

Partners' equity                                    113,782,560             108,071,296
                                                   ------------            ------------

Total liabilities and partners' equity             $119,831,722            $115,231,295
                                                   ============            ============
</TABLE>


See accompanying notes.


                                     F-38
<PAGE>


                            Palmetto MobileNet, L.P.
             Consolidated Statements of Income and Partners' Equity


<TABLE>
<CAPTION>
                                                                            YEARS ENDED DECEMBER 31,
                                                               2000                      1999                       1998
                                                           -------------             -------------             -------------

<S>                                                        <C>                       <C>                       <C>
Equity in earnings of RSA partnership interests            $  30,255,306             $  27,644,685             $  23,390,795

Management fee                                                  (255,354)                 (209,561)                 (243,194)
                                                           -------------             -------------             -------------
Income from operations                                        29,999,952                27,435,124                23,147,601

Revenue from real estate rentals                                 410,982                        --                        --
Cost of rental revenues                                         (229,420)                       --                        --
                                                           -------------             -------------             -------------
Income from real estate rentals                                  181,562                        --                        --

Other income (expense):
  Interest expense                                              (392,850)                 (464,708)                 (561,851)
  Investment income                                            1,046,335                   665,013                   485,851
  Other                                                          (97,433)                   (6,056)                  179,637
                                                           -------------             -------------             -------------
Net income                                                    30,737,566                27,629,373                23,251,238

Partners' equity, beginning of year                          108,071,296               100,449,714                36,438,703
Contribution of partners' equity                                      --                    11,689                        --
Equity exchanged for partnership interests                            --                        --                57,699,333
Distributions to partners                                    (25,026,302)              (20,019,480)              (16,939,560)
                                                           -------------             -------------             -------------

Partners' equity, end of year                              $ 113,782,560             $ 108,071,296             $ 100,449,714
                                                           =============             =============             =============
</TABLE>


See accompanying notes.


                                     F-39
<PAGE>


                            Palmetto MobileNet, L.P.
                     Consolidated Statements of Cash Flows


<TABLE>
<CAPTION>
                                                                                  YEARS ENDED DECEMBER 31,
                                                                   2000                     1999                    1998
                                                               ------------             ------------             ------------
<S>                                                            <C>                      <C>                      <C>
OPERATING ACTIVITIES
Net income                                                     $ 30,737,566             $ 27,629,373             $ 23,251,238
Adjustments to reconcile net income to net cash
  provided by (used in) operating activities:
    Equity in earnings of RSA partnership interests             (30,255,306)             (27,644,685)             (23,390,795)
    Depreciation                                                     67,518                       --                       --
    Changes in operating assets and liabilities:
      Accounts receivable                                           (40,727)                      --                       --
      Accounts payable and accrued expenses                         138,899                  (59,368)                 (15,305)
                                                               ------------             ------------             ------------
Net cash provided by (used in) operating activities                 647,950                  (74,680)                (154,862)

INVESTING ACTIVITIES
Investment in RSA partnership interests                                  --                       --                 (393,221)
Proceeds from RSA partnership distributions                      24,904,830               29,692,902               25,341,231
Purchase of land, building and improvements                      (6,047,020)                      --                       --
Costs of acquisition                                                     --                       --                 (300,838)
Refund of investment in Rural Telephone Finance
  Cooperative Subordinated Capital Certificates                          --                       --                   51,455
                                                               ------------             ------------             ------------
Net cash provided by investing activities                        18,857,810               29,692,902               24,698,627

FINANCING ACTIVITIES
Repayments of long-term debt                                     (1,274,753)              (1,078,119)                (918,151)
Additional partnership capital received                                  --                   11,689                       --
Distributions of partnership capital                            (25,026,302)             (20,515,855)             (16,443,185)
                                                               ------------             ------------             ------------
Net cash used in financing activities                           (26,301,055)             (21,582,285)             (17,361,336)
                                                               ------------             ------------             ------------

Net change in cash and cash equivalents                          (6,795,295)               8,035,937                7,182,429
Cash and cash equivalents, beginning of year                     20,217,143               12,181,206                4,998,777
                                                               ------------             ------------             ------------

Cash and cash equivalents, end of year                         $ 13,421,848             $ 20,217,143             $ 12,181,206
                                                               ============             ============             ============
</TABLE>


See accompanying notes.


                                     F-40
<PAGE>


                            Palmetto MobileNet, L.P.
                   Notes to Consolidated Financial Statements
                           December 31, 2000 and 1999


1.       DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Palmetto MobileNet, L.P. (the "Partnership") is a South Carolina limited
partnership and is a general partner in ten general partnerships formed to
provide cellular telephone service in certain Rural Service Areas ("RSA") in
South Carolina and North Carolina. These partnerships' operations are managed
by affiliates of ALLTEL Communications, Inc.

During 2000, the Partnership formed HamptonNet, LLC, a wholly-owned subsidiary,
for the purpose of owning and operating commercial rental real estate located
in Columbia, South Carolina.

CONSOLIDATION

The financial statements include the accounts of the Partnership and its
wholly-owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated.

CASH EQUIVALENTS

The Partnership considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.

The Partnership maintains its cash and cash equivalent balances in one
financial institution located in Columbia, South Carolina. At December 31, 2000
and 1999, cash equivalents of $10,100,000 and $17,600,000, respectively,
consist of investments in repurchase agreements.

INTERESTS IN RSA PARTNERSHIPS

Investments in the RSA general partnerships are accounted for using the equity
method, under which the Partnership's share of earnings of these partnerships
is reflected in income as earned and distributions are credited against the
interests in the partnerships when received.

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 disclosures 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.

INCOME TAXES

Palmetto MobileNet, L.P. is a South Carolina limited partnership and,
therefore, is not subject to income taxes. Each partner includes in income its
distributive share of the Partnership's taxable income or loss.


                                     F-41
<PAGE>


                            Palmetto MobileNet, L.P.
                   Notes to Consolidated Financial Statements
                           December 31, 2000 and 1999


2.       ACQUISITION

In January 1998, the Partnership entered into an agreement to acquire 100% of
the members equity of CT Cellular Holdings 4/5, L.L.C., 100% of the members
equity of CT Cellular Holdings 15, L.L.C. and a 51% interest in Ellerbe-Concord
Cellular Company (a North Carolina general partnership) in exchange for 28,300
units of Partnership equity valued at approximately $57,700,000. The
transaction has been recorded using purchase accounting. The financial results
of CT Cellular Holdings 4/5, L.L.C., CT Cellular Holdings 15, L.L.C., and
Ellerbe-Concord Cellular Company have been included in the accompanying
financial statements for the periods beginning January 1, 1998 (the date of
acquisition). The acquisition has been accounted for as a non-cash investing
and financing activity in the accompanying statement of cash flows.

As a result of the above transaction, the Partnership obtained a 50% interest
in North Carolina RSA 5 Cellular Partnership and a 50% interest in North
Carolina RSA 15 Cellular Partnership. Consistent with investments in other
general partnerships, these interests are accounted for using the equity
method. The investments in these partnerships, which are recorded at cost less
accumulated amortization, exceed the underlying equity in net assets by
approximately $11,116,000 and $37,512,000, respectively.

Approximately $48,627,000 of cost in excess of underlying equity in net assets
is being amortized over a 15 year period. Accumulated amortization, which has
been recorded as a reduction in the interest in RSA partnerships and a
reduction in the equity in earnings of RSA partnership interests, was
approximately $9,725,000 and $6,483,000 at December 31, 2000 and 1999
respectively. Amortization expense for the years ended December 31, 2000, 1999
and 1998 was approximately $3,241,000 annually.

3.       INTERESTS IN RSA PARTNERSHIPS

Interests in RSA partnerships which are all engaged in providing cellular
telephone service to rural areas of South Carolina and North Carolina, are:

South Carolina RSA No. 2 Cellular General Partnership (50% owned)
South Carolina RSA No. 3 Cellular General Partnership (50% owned)
South Carolina RSA No. 4 Cellular General Partnership (50% owned)
South Carolina RSA No. 5 Cellular General Partnership (50% owned)
South Carolina RSA No. 6 Cellular General Partnership (50% owned)
South Carolina RSA No. 7 Cellular General Partnership (50% owned)
South Carolina RSA No. 8 Cellular General Partnership (50% owned)
South Carolina RSA No. 9 Cellular General Partnership (50% owned)
North Carolina RSA 5 Cellular Partnership (50% owned)
North Carolina RSA 15 Cellular Partnership (50% owned)


                                     F-42
<PAGE>


                            Palmetto MobileNet, L.P.
                   Notes to Consolidated Financial Statements
                           December 31, 2000 and 1999


3.       INTERESTS IN RSA PARTNERSHIPS (CONTINUED)

Summarized combined financial information for the RSA partnerships follows:

At December 31:


<TABLE>
<CAPTION>
                                   2000                    1999
                               ------------            ------------

<S>                            <C>                     <C>
Current assets                 $ 29,776,462            $ 19,007,806
Noncurrent assets               106,798,800              96,892,187
Current liabilities              14,546,503              11,055,823
Partners' equity                122,028,759             104,844,170
</TABLE>

For the years ended December 31:


<TABLE>
<CAPTION>
                          2000                    1999                     1998
                      ------------            ------------            ------------

<S>                   <C>                     <C>                     <C>
Net sales             $223,352,629            $185,006,365            $163,628,528
Net income              66,994,235              61,772,996              53,265,210
</TABLE>


The Partnership's equity in the combined net income of the RSA partnerships was
$33,497,118, $30,886,498, and $26,632,605 for the years ended December 31,
2000, 1999, and 1998, respectively.

During 2000, the RSA's changed their method of accounting for revenues. The
cumulative effect of retroactively applying this accounting change to periods
prior to 2000 resulted in a one-time, non-cash charge of approximately $2.6
million, which was included in net income for the RSA's for the year ended
December 31, 2000.

Market values of these partnership interests are not readily available.


                                     F-43
<PAGE>


                            Palmetto MobileNet, L.P.
                   Notes to Consolidated Financial Statements
                           December 31, 2000 and 1999


4.       LAND, BUILDING AND IMPROVEMENTS, NET

Land, building and improvements consisted of the following:


<TABLE>
<CAPTION>
                                             2000                   1999            1998
                                          ----------              --------        --------

<S>                                       <C>                     <C>             <C>
Land                                      $1,000,000              $   --          $   --
Land improvements                             50,000                  --              --
Building                                   4,997,020                  --              --
                                          ----------              ------          ------
                                           6,047,020                  --              --
Less, accumulated depreciation               (67,518)                 --              --
                                          ----------              ------          ------

                                          $5,979,502              $   --          $   --
                                          ==========              ======          ======
</TABLE>


The building and improvements are depreciated on a straight-line basis over the
estimated useful lives of the assets.

The Partnership has entered into operating leases with a related party and
other third parties for substantially all of the space available in the
building. Lease terms range from 5 to 10 years plus various renewal options.
Most leases contain fixed monthly rental amounts plus provisions for
reimbursement of certain costs of operating the property.

Total minimum annual rentals under the terms of executed leases are as follows:


<TABLE>
<CAPTION>
                        RELATED
                         PARTY                OTHERS                TOTAL
                      ----------            ----------            ----------

<S>                   <C>                   <C>                   <C>
2001                  $  200,158            $  812,052            $1,012,210
2002                     200,158               504,265               704,423
2003                     200,158               432,054               632,212
2004                     200,158               283,170               483,328
2005                     200,158               203,830               403,988
Thereafter             1,000,790               934,221             1,935,011
                      ----------            ----------            ----------
                      $2,001,580            $3,169,592            $5,171,172
                      ==========            ==========            ==========
</TABLE>


                                     F-44
<PAGE>


                            Palmetto MobileNet, L.P.
                   Notes to Consolidated Financial Statements
                           December 31, 2000 and 1999


5.       LONG-TERM DEBT

The Partnership has a $10 million term loan agreement and a $3 million working
capital line of credit agreement with the Rural Telephone Finance Cooperative
(the "RTFC"). The terms of the agreements require the Partnership to maintain a
specified amount of RTFC Subordinated Capital Certificates ("SCC's"). The
Partnership had $473,562 and $448,545 of SCC's at December 31, 2000 and 1999,
respectively.

The debt is collateralized by a first lien on the assets of the Partnership
other than the Partnership's equity interests in the ten RSA partnership
investments. The term loan provides for varying quarterly payments of
principal, plus interest at fixed rates ranging from 5.85% to 6.50%. The terms
of the line of credit agreement provide for interest to be paid quarterly at
the RTFC's published variable interest rate. No funds have been advanced
against the line of credit agreement. At December 31, 2000 and 1999, $5,724,890
and $6,974,626 were outstanding under the financing agreement.

Under the terms of the financing agreement, the Partnership is required to
maintain a specified debt service coverage ratio. The Partnership was in
compliance with this covenant at December 31, 2000.

The carrying amount of the Company's long-term debt approximates fair value.

Cash paid for interest totaled $399,079, $471,965, and $567,935 for the years
ended December 31, 2000 1999, and 1998, respectively.

Maturities of long-term debt are as follows:


<TABLE>
<S>                                <C>
2001                               $ 1,226,510
2002                                 1,308,198
2003                                 1,395,326
2004                                 1,488,257
2005                                   306,599
                                   ------------
                                   $ 5,724,890
                                   ============
</TABLE>


6.       RELATED PARTY TRANSACTIONS

The business affairs of Palmetto MobileNet, L.P. are managed by its 0.8%
general partner, PMN, Inc. For the years ended December 31, 2000, 1999, and
1998, approximately $255,000, $210,000, and $243,000 were paid to the general
partner to perform this function.


                                     F-45
<PAGE>


                            Palmetto MobileNet, L.P.
                   Notes to Consolidated Financial Statements
                           December 31, 2000 and 1999


7.       COMMITMENTS AND CONTINGENCIES

Pursuant to each RSA general partnership agreement, Palmetto MobileNet, L.P. is
subject to requests for additional capital.

The Internal Revenue Service ("IRS") is performing examinations of the records
of a significant number of the RSA partnerships, in which the Partnership has
ownership interests, for the years ended December 31, 1991 to 1996.

For certain RSA's, agreement has been reached with the IRS in 2000 as to
certain adjustments which, when assessed, will be allocated to each partner to
be included in their taxable income.

For certain other RSA's, the IRS has completed its audits and has issued "60
Day Letters" indicating adjustments they plan to make to the RSA tax returns.
The RSA partnerships are vigorously contesting the IRS audit findings and, as a
result, the amount of final adjustment, if any, cannot be determined at this
time. The final adjustments, if any, from the IRS examinations will ultimately
be allocated to each partner to be included in their taxable income.


                                     F-46
<PAGE>


REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



To the Partners of North Carolina RSA 5 Cellular Partnership:

We have audited the accompanying balance sheets of North Carolina RSA 5
Cellular Partnership (a North Carolina general partnership) as of December 31,
2000 and 1999, and the related statements of operations, changes in partners'
capital and cash flows for the years then ended. These financial statements are
the responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of North Carolina RSA 5 Cellular
Partnership as of December 31, 2000 and 1999, and the results of its operations
and its cash flows for the years then ended in conformity with accounting
principles generally accepted in the United States.

As explained in Note 2 to the financial statements, effective January 1, 2000,
the Partnership changed its method of accounting for certain revenues.


                                             /s/ ARTHUR ANDERSEN LLP


Little Rock, Arkansas,
February 2, 2001.


                                     F-47
<PAGE>


REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



To the Partners of North Carolina RSA 15 Cellular Partnership:

We have audited the accompanying balance sheets of North Carolina RSA 15
Cellular Partnership (a North Carolina general partnership) as of December 31,
2000 and 1999, and the related statements of operations, changes in partners'
capital and cash flows for the years then ended. These financial statements are
the responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of North Carolina RSA 15 Cellular
Partnership as of December 31, 2000 and 1999, and the results of its operations
and its cash flows for the years then ended in conformity with accounting
principles generally accepted in the United States.

As explained in Note 2 to the financial statements, effective January 1, 2000,
the Partnership changed its method of accounting for certain revenues.


                                    /s/ ARTHUR ANDERSEN LLP


Little Rock, Arkansas,
February 2, 2001.


                                     F-48
<PAGE>


REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



To the Partners of South Carolina RSA No. 2 Cellular General Partnership:

We have audited the accompanying balance sheets of South Carolina RSA No. 2
Cellular General Partnership (a South Carolina general partnership) as of
December 31, 2000 and 1999, and the related statements of operations, changes
in partners' capital and cash flows for the years then ended. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of South Carolina RSA No. 2
Cellular General Partnership as of December 31, 2000 and 1999, and the results
of its operations and its cash flows for the years then ended in conformity
with accounting principles generally accepted in the United States.

As explained in Note 2 to the financial statements, effective January 1, 2000,
the Partnership changed its method of accounting for certain revenues.


                                    /s/ ARTHUR ANDERSEN LLP


Little Rock, Arkansas,
February 2, 2001.


                                     F-49
<PAGE>


REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



To the Partners of South Carolina RSA No. 3 Cellular General Partnership:

We have audited the accompanying balance sheets of South Carolina RSA No. 3
Cellular General Partnership (a South Carolina general partnership) as of
December 31, 2000 and 1999, and the related statements of operations, changes
in partners' capital and cash flows for the years then ended. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of South Carolina RSA No. 3
Cellular General Partnership as of December 31, 2000 and 1999, and the results
of its operations and its cash flows for the years then ended in conformity
with accounting principles generally accepted in the United States.

As explained in Note 2 to the financial statements, effective January 1, 2000,
the Partnership changed its method of accounting for certain revenues.


                                    /s/ ARTHUR ANDERSEN LLP


Little Rock, Arkansas,
February 2, 2001.


                                     F-50
<PAGE>


REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



To the Partners of South Carolina RSA No. 4 Cellular General Partnership:

We have audited the accompanying balance sheets of South Carolina RSA No. 4
Cellular General Partnership (a South Carolina general partnership) as of
December 31, 2000 and 1999, and the related statements of operations, changes
in partners' capital and cash flows for the years then ended. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of South Carolina RSA No. 4
Cellular General Partnership as of December 31, 2000 and 1999, and the results
of its operations and its cash flows for the years then ended in conformity
with accounting principles generally accepted in the United States.

As explained in Note 2 to the financial statements, effective January 1, 2000,
the Partnership changed its method of accounting for certain revenues.


                                    /s/ ARTHUR ANDERSEN LLP


Little Rock, Arkansas,
February 2, 2001.


                                     F-51
<PAGE>


REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



To the Partners of South Carolina RSA No. 5 Cellular General Partnership:

We have audited the accompanying balance sheets of South Carolina RSA No. 5
Cellular General Partnership (a South Carolina general partnership) as of
December 31, 2000 and 1999, and the related statements of operations, changes
in partners' capital and cash flows for the years then ended. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of South Carolina RSA No. 5
Cellular General Partnership as of December 31, 2000 and 1999, and the results
of its operations and its cash flows for the years then ended in conformity
with accounting principles generally accepted in the United States.

As explained in Note 2 to the financial statements, effective January 1, 2000,
the Partnership changed its method of accounting for certain revenues.


                                    /s/ ARTHUR ANDERSEN LLP


Little Rock, Arkansas,
February 2, 2001.


                                     F-52
<PAGE>


REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



To the Partners of South Carolina RSA No. 6 Cellular General Partnership:

We have audited the accompanying balance sheets of South Carolina RSA No. 6
Cellular General Partnership (a South Carolina general partnership) as of
December 31, 2000 and 1999, and the related statements of operations, changes
in partners' capital and cash flows for the years then ended. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of South Carolina RSA No. 6
Cellular General Partnership as of December 31, 2000 and 1999, and the results
of its operations and its cash flows for the years then ended in conformity
with accounting principles generally accepted in the United States.

As explained in Note 2 to the financial statements, effective January 1, 2000,
the Partnership changed its method of accounting for certain revenues.


                                    /s/ ARTHUR ANDERSEN LLP


Little Rock, Arkansas,
February 2, 2001.


                                     F-53
<PAGE>


REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



To the Partners of South Carolina RSA No. 7 Cellular General Partnership:

We have audited the accompanying balance sheets of South Carolina RSA No. 7
Cellular General Partnership (a South Carolina general partnership) as of
December 31, 2000 and 1999, and the related statements of operations, changes
in partners' capital and cash flows for the years then ended. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of South Carolina RSA No. 7
Cellular General Partnership as of December 31, 2000 and 1999, and the results
of its operations and its cash flows for the years then ended in conformity
with accounting principles generally accepted in the United States.

As explained in Note 2 to the financial statements, effective January 1, 2000,
the Partnership changed its method of accounting for certain revenues.


                                    /s/ ARTHUR ANDERSEN LLP


Little Rock, Arkansas,
February 2, 2001.


                                     F-54
<PAGE>


REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



To the Partners of South Carolina RSA No. 8 Cellular General Partnership:

We have audited the accompanying balance sheets of South Carolina RSA No. 8
Cellular General Partnership (a South Carolina general partnership) as of
December 31, 2000 and 1999, and the related statements of operations, changes
in partners' capital and cash flows for the years then ended. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of South Carolina RSA No. 8
Cellular General Partnership as of December 31, 2000 and 1999, and the results
of its operations and its cash flows for the years then ended in conformity
with accounting principles generally accepted in the United States.

As explained in Note 2 to the financial statements, effective January 1, 2000,
the Partnership changed its method of accounting for certain revenues.


                                    /s/ ARTHUR ANDERSEN LLP


Little Rock, Arkansas,
February 2, 2001.


                                     F-55
<PAGE>


REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



To the Partners of South Carolina RSA No. 9 Cellular General Partnership:

We have audited the accompanying balance sheets of South Carolina RSA No. 9
Cellular General Partnership (a South Carolina general partnership) as of
December 31, 2000 and 1999, and the related statements of operations, changes
in partners' capital and cash flows for the years then ended. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of South Carolina RSA No. 9
Cellular General Partnership as of December 31, 2000 and 1999, and the results
of its operations and its cash flows for the years then ended in conformity
with accounting principles generally accepted in the United States.

As explained in Note 2 to the financial statements, effective January 1, 2000,
the Partnership changed its method of accounting for certain revenues.


                                    /s/ ARTHUR ANDERSEN LLP


Little Rock, Arkansas,
February 2, 2001.


                                     F-56
<PAGE>


                               INDEX TO EXHIBITS


<TABLE>
<CAPTION>
Exhibit No.                    Description
-----------                    -----------
<S>               <C>
   23.1           Consent of KPMG LLP.
   23.2           Consent of Bauknight Pietras & Stormer, P.A.
   23.3           Consent of Arthur Andersen LLP
</TABLE>