**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**WASHINGTON,D.C. 20549

**FORM 10-Q**
| **(Mark One)**                                     | ** **                                                                                           | ** **                         | ** ** | ** ** |
|----------------------------------------------------|------------------------------------------------------------------------------------------------------|------------------------------------|------------|------------|
| **x**                                              | **QUARTERLY REPORT  PURSUANT TO SECTION 13 OR 15 OF THE SECURITIES EXCHANGE ACT OF 1934**  |
| ** **                                         | ** **                                                                                           | ** **                         | ** ** | ** ** |
| **For the  quarterly period ended March 31, 2007** |
| ** **                                         | ** **                                                                                           | ** **                         | ** ** | ** ** |
| **Or**                                             |
| ** **                                         |
| o                                                  | **TRANSITION REPORT  PURSUANT TO SECTION 13 OR 15 OF THE SECURITIES EXCHANGE ACT OF 1934** |
| ** **                                         | ** **                                                                                           | ** **                         | ** ** | ** ** |
| ** **                                         | ** **                                                                                           | ** **                         | ** ** | ** ** |
| ** **                                         | ** **                                                                                           | **For the transition period from** | **to**     | ** ** |

 

**Commission File Number 000-51844**

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**iPCS, INC.**(Exact name ofregistrant as specified in its charter)

| **Delaware**                                      |   | **36-4350876**                        |
|---------------------------------------------------|--------|---------------------------------------|
| (State or other  jurisdiction of incorporation or |   | (I.R.S. Employer  Identification No.) |
| organization)                                     |   |                                  |
|                                              |   |                                  |
| **1901 N.  Roselle Road, Schaumburg, Illinois**   |   | **60195**                             |
| (Address of  principal executive offices)         |   | (Zip code)                            |

 

**(847)885-2833**(Registrant’s telephone number, including zip code)

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Indicate by checkmark whether the registrant (1) has filed all reports required to be filedby Section 13 or 15(d) of the Securities Exchange Act of 1934 duringthe preceding 12 months (or for such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days.
|  | Yes x  No o |
|--|---------------------------------|

 

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer,or a non-accelerated filer. See definition of “accelerated filer and largeaccelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
| Large accelerated filer o | Accelerated  filer x | Non-accelerated  filer o |
|---------------------------|----------------------|--------------------------|

 

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2of the Exchange Act).
|  | Yes o  No x |
|--|---------------------------------|

 

Indicate by check mark whether the registrant hasfiled all documents and reports required to be filed by Section 12,13 or 15(d) of the Securities Exchange Act of 1934 subsequent tothe distribution of securities under a plan confirmed by a court.
|  | Yes x  No o |
|--|---------------------------------|

 

As of May  7,2007, there were 16,998,352 shares of common stock, $0.01 par value per share,outstanding.

 

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** **

**TABLE OF CONTENTS**
| PART I    |   | FINANCIAL  INFORMATION                                                                                |   | 3      |
|----------------|--------|-------------------------------------------------------------------------------------------------------|--------|--------|
|           |   |                                                                                                  |   | 3      |
| ITEM  1.       |   | FINANCIAL  STATEMENTS                                                                                 |   | 3      |
|           |   | CONSOLIDATED  BALANCE SHEETS AS OF MARCH 31, 2007 AND DECEMBER 31, 2006 (UNAUDITED)                   |   | 3      |
|           |   | CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE  MONTHS ENDED MARCH 31, 2007 AND 2006 (UNAUDITED) |   | 4      |
|           |   | CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE  MONTHS ENDED MARCH 31, 2007 AND 2006 (UNAUDITED) |   | 5      |
|           |   | NOTES TO  UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS                                                 |   | 6      |
| ITEM 2.        |   | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL  CONDITION AND RESULTS OF OPERATIONS           |   | 20     |
| ITEM 3.        |   | QUANTITATIVE  AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                           |   | 35     |
| ITEM 4.        |   | CONTROLS AND  PROCEDURES                                                                              |   | 35     |
|           |   |                                                                                                  |   |   |
| PART II   |   | OTHER  INFORMATION                                                                                    |   | 36     |
|           |   |                                                                                                  |   |   |
| ITEM  1.       |   | LEGAL  PROCEEDINGS                                                                                    |   | 36     |
| ITEM 1A.       |   | RISK FACTORS                                                                                          |   | 36     |
| ITEM 2.        |   | UNREGISTERED  SALES OF EQUITY SECURITIES AND USE OF PROCEEDS                                          |   | 39     |
| ITEM 3.        |   | DEFAULTS UPON  SENIOR SECURITIES                                                                      |   | 39     |
| ITEM 4.        |   | SUBMISSION OF  MATTERS TO A VOTE OF SECURITY HOLDERS                                                  |   | 40     |
| ITEM  5.       |   | OTHER  INFORMATION                                                                                    |   | 40     |
| ITEM 6.        |   | EXHIBITS                                                                                              |   | 41     |
|           |   |                                                                                                  |   |   |
| SIGNATURES     |   | 43                                                                                                    |
|           |   |                                                                                                  |   |   |
| CERTIFICATIONS |   |                                                                                                  |

 

 

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**PART I.FINANCIAL INFORMATION**

**ITEM 1.FINANCIAL STATEMENTS**

**iPCS, INC. ANDSUBSIDIARIESCONSOLIDATED BALANCE SHEETS**

**(UNAUDITED)**(Dollarsin thousands, except share and per share amounts)
| ** **                                                                                                                                    | ** ** | **March 31,  2007** | ** ** | **December 3 1,  2006 (a)** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------|------------|--------------------------------------------|------------|
|                                                                                                                                          |       |                     |       |                                       |       |
| **Assets**                                                                                                                                    | ** ** | ** **               | ** ** | ** **                                 | ** ** |
| Current Assets:                                                                                                                               |       |                     |       |                                       |       |
| Cash and cash  equivalents                                                                                                                    |       | $                        | 115,598    |                                       | $          | 120,499 |   |
| Accounts receivable,  net of allowance for doubtful accounts of $6,703 and $6,663, respectively                                               |       | 29,063                   |       | 29,700                                     |       |
| Receivable from Sprint  (Note 3)                                                                                                              |       | 30,336                   |       | 40,724                                     |       |
| Inventories, net of  reserves for excess/obsolescence of $189 and $243, respectively (Note 3)                                                 |       | 5,359                    |       | 4,291                                      |       |
| Assets held for sale  (Note 4)                                                                                                                |       | 1,800                    |       | -                                          |       |
| Prepaid expenses                                                                                                                              |       | 8,189                    |       | 7,468                                      |       |
| Other current assets                                                                                                                          |       | 178                      |       | 272                                        |       |
| Total current  assets                                                                                                                         |       | 190,523                  |       | 202,954                                    |       |
| Property and equipment,  net (Note 4)                                                                                                         |       | 132,794                  |       | 139,641                                    |       |
| Financing costs                                                                                                                               |       | 7,368                    |       | 7,724                                      |       |
| Customer activation  costs                                                                                                                    |       | 3,862                    |       | 3,252                                      |       |
| Intangible assets, net  of accumulated amortization of $76,218 and $68,624 respectively (Note 5)                                         |       | 123,759                  |       | 131,353                                    |       |
| Goodwill                                                                                                                                      |       | 141,783                  |       | 141,783                                    |       |
| Other assets                                                                                                                                  |       | 361                      |       | 364                                        |       |
| Total assets                                                                                                                                  |       | $                        | 600,450    |                                       | $          | 627,071 |   |
|                                                                                                                                          |       |                     |       |                                       |       |
| **Liabilities  and Stockholders’ Equity**                                                                                                | ** ** | ** **               | ** ** | ** **                                 | ** ** |
| Current Liabilities:                                                                                                                          |       |                     |       |                                       |       |
| Accounts payable                                                                                                                              |       | $                        | 4,328      |                                       | $          | 7,387 |   |
| Accrued expenses                                                                                                                              |       | 12,516                   |       | 14,340                                     |       |
| Payable to Sprint (Note  3)                                                                                                                   |       | 50,570                   |       | 58,196                                     |       |
| Deferred revenue                                                                                                                              |       | 11,139                   |       | 11,065                                     |       |
| Accrued interest                                                                                                                              |       | 10,947                   |       | 9,758                                      |       |
| Current maturities of  long-term debt and capital lease obligations (Note 6)                                                                  |       | 25                       |       | 24                                         |       |
| Total current  liabilities                                                                                                                    |       | 89,525                   |       | 100,770                                    |       |
| Customer activation fee  revenue                                                                                                              |       | 3,862                    |       | 3,252                                      |       |
| Other long-term  liabilities                                                                                                                  |       | 6,869                    |       | 6,819                                      |       |
| Long-term debt and  capital lease obligations, excluding current maturities (Note 6)                                                          |       | 301,519                  |       | 302,045                                    |       |
| Total liabilities                                                                                                                             |       | 401,775                  |       | 412,886                                    |       |
|                                                                                                                                          |       |                     |       |                                       |       |
| Commitments and  contingencies (Note 9)                                                                                                       |       |                     |       |                                       |       |
|                                                                                                                                          |       |                     |       |                                       |       |
| Stockholders’ Equity  (Deficiency):                                                                                                      |       |                     |       |                                       |       |
| Preferred stock, par  value $.01 per share; 25,000,000 shares authorized; none issued                                                         |       | —                   |       | —                                     |       |
| Common stock, par value  $.01 per share; 75,000,000 shares authorized, 16,938,265 and 16,774,060  shares issued and outstanding, respectively |       | 169                      |       | 168                                        |       |
| Additional  paid-in-capital                                                                                                                   |       | 337,788                  |       | 334,156                                    |       |
| Accumulated deficiency                                                                                                                        |       | (139,282                 | )          | (120,139                                   | )          |
| Total stockholders’  equity                                                                                                              |       | 198,675                  |       | 214,185                                    |       |
| Total liabilities and stockholders’ equity                                                                                               |       | $                        | 600,450    |                                       | $          | 627,071 |   |

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(a)             Derivedfrom the Company’s audited financial statements as of December 31, 2006.

See Notes to unaudited consolidated financialstatements.

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**iPCS,INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS**

**(UNAUDITED)**(Dollars in thousands, except per share data)

 
| ** **                                                                          | ** ** | **For the Three Months Ended** | ** ** |
|-------------------------------------------------------------------------------------|------------|----------------------------------------------------|------------|
| ** **                                                                          | ** ** | **March 31,  2007**                           | ** ** | **March 31,  2006** | ** ** |
| ** **                                                                          | ** ** | ** **                                         | ** ** | ** ** | ** ** |
| **Revenues:**                                                                       | ** ** | ** **                                         | ** ** | ** ** | ** ** |
| Service revenue                                                                     |       | $                                                  | 85,021     |   | $ | 75,406 |   |
| Roaming revenue                                                                     |       | 32,961                                             |       | 33,627 |   |
| Equipment and other                                                                 |       | 2,871                                              |       | 3,452 |   |
| Total revenues                                                                      |       | 120,853                                            |       | 112,485 |   |
| **Operating  Expenses:**                                                            | ** ** | ** **                                         | ** ** | ** ** | ** ** |
| Cost of service and roaming (exclusive of  depreciation, as shown separately below) |       | (73,415                                            | )          | (65,021 | ) |
| Cost of equipment                                                                   |       | (13,179                                            | )          | (9,529 | ) |
| Selling and marketing                                                               |       | (20,574                                            | )          | (16,760 | ) |
| General and administrative                                                          |       | (6,927                                             | )          | (7,130 | ) |
| Depreciation                                                                        |       | (11,838                                            | )          | (14,414 | ) |
| Amortization of intangible assets (Note 5)                                          |       | (7,594                                             | )          | (9,489 | ) |
| Loss on disposal of property and equipment                                          |       | (59                                                | )          | (237 | ) |
| Total operating expenses                                                            |       | (133,586                                           | )          | (122,580 | ) |
| **Operating  loss**                                                                 |       | (12,733                                            | )          | (10,095 | ) |
| Interest income                                                                     |       | 1,543                                              |       | 1,183 |   |
| Interest expense                                                                    |       | (7,970                                             | )          | (8,121 | ) |
| Other income                                                                        |       | 17                                                 |       | 33 |   |
| **Loss  before (provision for) benefit from income taxes**                          |       | (19,143                                            | )          | (17,000 | ) |
| (Provision for)  benefit from income taxes                                          |       | —                                             |       | — |   |
| **Net  loss**                                                                       |       | $                                                  | (19,143    | ) | $ | (17,000 | ) |
|                                                                                |       |                                               |       |   |   |
| Basic and  diluted loss per share of common stock                                   |       |                                               |       |   |   |
| Loss available to common stockholders                                               |       | $                                                  | (1.13      | ) | $ | (1.02 | ) |
|                                                                                |       |                                               |       |   |   |
| Weighted average  common shares outstanding                                         |       | 16,873,857                                         |       | 16,687,039 |   |

 

See Notes tounaudited consolidated financial statements.

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**iPCS,INC. AND SUBSIDIARIES****CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(UNAUDITED)(Dollars in thousands)**

 
| ** **                                                                                                               | ** ** | **For the Three Months Ended** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------------------------|------------|
| ** **                                                                                                               | ** ** | **March 31,  2007**                           | ** ** | **March 31,  2006** | ** ** |
| **Cash  Flows from Operating Activities:**                                                                               | ** ** | ** **                                         | ** ** | ** ** | ** ** |
| Net loss                                                                                                                 |       | $                                                  | (19,143    | ) | $ | (17,000 | ) |
| Adjustments to  reconcile net loss to net cash flows from operating activities:                                          |       |                                               |       |   |   |
| Loss on disposal of property and equipment                                                                               |       | 59                                                 |       | 237 |   |
| Depreciation and amortization                                                                                            |       | 19,432                                             |       | 23,903 |   |
| Non-cash interest expense, net of amortization of  debt fair value adjustment                                            |       | (162                                               | )          | (162 | ) |
| Stock-based compensation expense                                                                                         |       | 1,913                                              |       | 463 |   |
| Provision for doubtful accounts                                                                                          |       | 2,651                                              |       | 1,391 |   |
| Changes in assets and liabilities:                                                                                       |       |                                               |       |   |   |
| Accounts receivable                                                                                                      |       | (2,013                                             | )          | 2,282 |   |
| Receivable from Sprint                                                                                                   |       | 10,389                                             |       | 8,044 |   |
| Inventories, net                                                                                                         |       | (1,068                                             | )          | 258 |   |
| Prepaid expenses, other current and long term assets                                                                     |       | (1,235                                             | )          | (550 | ) |
| Accounts payable, accrued expenses and other long  term liabilities                                                      |       | (3,237                                             | )          | 894 |   |
| Payable to Sprint                                                                                                        |       | (7,626                                             | )          | (9,421 | ) |
| Deferred revenue                                                                                                         |       | 684                                                |       | 935 |   |
| Net cash flows from operating activities                                                                                 |       | 644                                                |       | 11,274 |   |
| **Cash  Flows from Investing Activities:**                                                                               | ** ** | ** **                                         | ** ** | ** ** | ** ** |
| Purchases of property and equipment                                                                                      |       | (7,262                                             | )          | (8,382 | ) |
| Proceeds from disposition of property and equipment                                                                      |       | 3                                                  |       | 194 |   |
| Net cash flows from investing activities                                                                                 |       | (7,259                                             | )          | (8,188 | ) |
| **Cash  Flows from Financing Activities:**                                                                               | ** ** | ** **                                         | ** ** | ** ** | ** ** |
| Proceeds from the exercise of stock options                                                                              |       | 1,720                                              |       | 990 |   |
| Payments on capital lease obligations                                                                                    |       | (6                                                 | )          | (3 | ) |
| Net cash flows from financing activities                                                                                 |       | 1,714                                              |       | 987 |   |
| Net increase (decrease) in cash and cash equivalents                                                                     |       | (4,901                                             | )          | 4,073 |   |
| **Cash  and cash equivalents at beginning of period**                                                                    |       | 120,499                                            |       | 110,837 |   |
| **Cash  and cash equivalents at end of period**                                                                          |       | $                                                  | 115,598    |   | $ | 114,910 |   |
|                                                                                                                     |       |                                               |       |   |   |
| **Supplemental  disclosure of cash flow information- cash paid for interest**                                            |       | $                                                  | 7,109      |   | $ | 7,109 |   |
| **Supplemental  disclosure for non-cash investing activities:**                                                          | ** ** | ** **                                         | ** ** | ** ** | ** ** |
| Capitalized interest                                                                                                     |       | $                                                  | 196        |   | $ | 47 |   |
| Accounts payable  and accrued expenses incurred for the acquisition of property, equipment and  construction in progress |       | 1,631                                              |       | 638 |   |

 

See Notes to unaudited consolidated financialstatements.

 

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**iPCS,INC. AND SUBSIDIARIESNOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**

**(1)  Business and Basis of Presentation**

iPCS, Inc.(the “Company” or “iPCS”) is a holding company that operates as a PCS Affiliateof Sprint through three wholly owned subsidiaries: iPCS Wireless, Inc.,Horizon Personal Communications, Inc. and Bright Personal CommunicationsServices, LLC. Each of these subsidiaries is a party to a separate affiliationagreement with Sprint PCS, the operator of a 100% digital personal communicationsservice (“PCS”) wireless network with licenses to provide voice and dataservice to the entire United States population using a single frequency bandand a single technology.

iPCS, Inc.was formed in March 2000 as a holding company for iPCS Wireless. iPCSWireless, as the successor to Illinois PCS, LLC, became a PCS affiliate ofSprint in 1999. Through this affiliation agreement, as amended, iPCS has theexclusive right to market and provide Sprint PCS products and services in 40markets in Illinois, Michigan, Iowa, and eastern Nebraska. On November 30,2001, the Company was acquired by AirGate PCS, Inc. (“AirGate”), anotherPCS Affiliate of Sprint. iPCS was designated as an unrestricted subsidiary ofAirGate and both companies operated as separate business entities. OnFebruary 23, 2003, the Company and its subsidiaries filed for Chapter 11bankruptcy protection. On October 17, 2003, AirGate irrevocablytransferred its ownership of iPCS to a trust, the beneficial owners of whichtrust were AirGate’s stockholders at the date of transfer. AirGate retained noownership interest in the trust or the Company. Upon the Company’s emergencefrom bankruptcy on July 20, 2004, iPCS’s common stock held by the trustwas cancelled and the trust terminated by its terms.

On July 1,2005, iPCS completed a merger with Horizon PCS, Inc. (“Horizon PCS”),another PCS Affiliate of Sprint, in which Horizon PCS merged with and intoiPCS, Inc., with iPCS, Inc. as the surviving corporation. Through itstwo affiliation agreements with Sprint PCS, two wholly owned subsidiaries ofHorizon PCS have the exclusive right to market and provide Sprint PCS productsand services in 40 markets in Ohio, Indiana, Tennessee, Michigan, New York, NewJersey, Maryland, Pennsylvania, and West Virginia.

The unauditedconsolidated balance sheet as of March 31, 2007 and December 31, 2006, theunaudited consolidated statements of operations for the three months endedMarch 31, 2007 and 2006, the unaudited consolidated statements of cash flowsfor the three months ended March 31, 2007 and 2006 and related footnotes havebeen prepared in accordance with accounting principles generally accepted inthe United States of America for interim financial information andRule 10-01 of Regulation S-X. Accordingly, they do not include all of theinformation and footnotes required by accounting principles generally acceptedin the United States for complete financial statements. The financialinformation presented herein should be read in conjunction with the Company’s 2006Annual Report on Form 10-K which includes information and disclosures notpresented herein. All significant intercompany accounts and transactions havebeen eliminated in consolidation. In the opinion of management, the unauditedconsolidated financial statements contain all of the adjustments, consistingonly of normal recurring adjustments, necessary to present fairly, insummarized form, the consolidated financial position, results of operations andcash flows of the Company. The results of operations for the three months endedMarch 31, 2007 are not indicative of the results that may be expected for thefull year 2007.

The PCS market ischaracterized by significant risks as a result of rapid changes in technologyand increasing competition. The Company’s continuing operations are dependentupon Sprint’s ability to perform its obligations under the affiliationagreements. In addition, the Company must be able to attract and maintain asufficient customer base and achieve satisfactory growth while successfullymanaging operations to generate enough cash from operations to meet futureobligations. Changes in technology, increased competition, or the inability toobtain required financing or achieve and maintain break-even operating cashflow, among other factors, could have an adverse effect on the Company’sfinancial position and results of operations.

**(2) Summary of Significant Accounting Policies**

*LossPer Share:*

Basic and diluted lossper share for the Company are calculated by dividing the net loss by theweighted average number of shares of common stock of the Company. Thecalculation was made in accordance with SFAS No. 128, “Earnings Per Share.”The basic and diluted loss per share are the same because the inclusion of theincremental potential common shares from any assumed exercise of stock optionsis antidilutive. Potential common shares excluded from the loss per sharecomputations for each of the three months ended March 31, 2007 and 2006 were 742,616and 772,766, respectively.

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*NewAccounting Pronouncements*

In February 2007, the Financial AccountingStandards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”)No. 159, “The Fair Value Option for Financial Assets and FinancialLiabilities” (“SFAS No. 159”), to permit all entities to choose to elect, atspecified election dates, to measure eligible financial instruments at fairvalue. An entity shall report unrealized gains and losses on items for whichthe fair value option has been elected in earnings at each subsequent reportingdate, and recognize upfront costs and fees related to those items in earningsas incurred and not deferred. SFAS No. 159 applies to fiscal yearsbeginning after November 15, 2007, with early adoption permitted for anentity that has also elected to apply the provisions of SFAS No. 157, “FairValue Measurements.” An entity is prohibited from retrospectively applying SFASNo. 159, unless it chooses early adoption. SFAS No. 159 also appliesto eligible items existing at November 15, 2007 (or early adoption date).The Company is still evaluating the impact of the implementation of SFAS No.159 on its financial position, results of operations or cash flows.

In September 2006, the FASB issued Statement 157, FairValue Measurements, which defines fair value, provides guidelines for measuringfair value and expands disclosure requirements. Statement 157 does not require any new fair value measurement butapplies to the accounting pronouncements that require or permit fair valuemeasurement.  Statement 157 is effectivefor fiscal years beginning after November 15, 2007.  The Company does not anticipate that theimplementation of Statement 157 will have a material impact on its financialposition, results of operation, or cash flows.

In July 2006,FASB issued Interpretation No. 48, “Accounting for Uncertainty in IncomeTaxes” (“FIN 48”), which is effective for fiscal years beginning afterDecember 15, 2006. FIN 48 clarifies the accounting for uncertainty inincome taxes recognized in the financial statements in accordance with SFASNo. 109, “Accounting for Income Taxes”. FIN 48 prescribes a comprehensivemodel for how a company should recognize, measure, present, and disclose in itsfinancial statements uncertain tax positions that the company has taken or expectsto take on a tax return. The Company adopted FIN 48 on January 1, 2007 and itdid not have a material impact on the Company’s financial position, results ofoperations and cash flows.

**(3) Sprint Agreements**

Under the Sprintagreements, Sprint provides the Company significant support services such ascustomer service, billing, long distance transport services, national networkoperations support, inventory logistics support, use of the Sprint and SprintPCS brand name, national advertising, national distribution and productdevelopment. Additionally, the Company derives substantial roaming revenue whenwireless customers of Sprint and other PCS Affiliates of Sprint incur minutesof use in the Company’s territories and incurs expense to Sprint and to otherPCS Affiliates of Sprint when the Company’s customers incur minutes of use inthe territories of Sprint and other PCS Affiliates of Sprint. Cost of serviceand roaming transactions with Sprint include the 8% affiliation fee, longdistance, roaming expenses, billing support and customer care support. Cost ofequipment relates to inventory sold by the Company that was purchased fromSprint under the Sprint agreements. Selling and marketing transactions relateto subsidized costs on wireless handsets and commissions under Sprint’snational distribution program.

The costs incurredby the Company for the support services provided by Sprint are determined on aper-average-monthly-subscriber rate and on a per-customer-addition rate.Pursuant to the Company’s affiliation agreements with Sprint PCS, theper-average-monthly-subscriber rate was set at $7.25 for 2004, $7.00 for 2005and $6.75 for 2006 and the per-customer-addition rate was set at $23.00 in iPCSWireless’s territory and $22.00 in the Horizon/Bright territory. The agreementsalso provide that, for each three-year period after December 31, 2006,these rates will be reset based on Sprint’s reasonable costs. InFebruary 2007, Sprint notified the Company that the per average monthlycash cost per user rate (“CCPU”) would be $7.50 for 2007, $7.09 for 2008, and$6.81 for 2009, and the cost per gross customer addition (“CPGA”) rate would be$20.09 for 2007, $19.41 for 2008 and $18.58 for 2009. The Company stronglydisagrees with Sprint’s new rates, and pursuant to the terms of its affiliationagreements with Sprint, has elected to submit the determination of the newrates to binding arbitration and continue to obtain the support services fromSprint at the amounts to be determined by the arbitration panel. If the arbitrationpanel imposes rates different than the ones proposed by Sprint, then the ratesimposed by the panel would be retroactively applied to January 1, 2007.However, in the meantime, as required by the services agreements, beginning onJanuary 1, 2007, the Company began paying the rates proposed by Sprint.

The Companyderives substantial roaming revenue when wireless customers of Sprint PCS andother PCS Affiliates of Sprint use the Company’s PCS network and incurs expenseto Sprint PCS and to other PCS Affiliates of Sprint when the Company’scustomers use the Sprint PCS network outside of the Company’s territories. TheCompany’s affiliation agreements with Sprint PCS set the reciprocal roamingrate with Sprint PCS through December 31, 2006 at $0.058 per minute forvoice and 2G data, and $0.0020 per kilobyte for 3G data. Thereafter, theaffiliation agreements provide that the reciprocal roaming rates are to becalculated based upon Sprint’s retail yield for the prior year. With respect tocertain of the Company’s markets in western and eastern Pennsylvania, theCompany receives the benefit of a special reciprocal rate for voice and 2G dataof $0.10 per minute. This special rate will terminate, with respect toeach of these two sets of markets, on 

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the earlier ofDecember 31, 2011 or the first day of the calendar month which follows thefirst calendar quarter during which the Company achieves a subscriberpenetration rate of at least 7% of the Company’s covered populations in thosemarkets. In February 2007, Sprint notified the Company that effectiveJanuary 1, 2007, the reciprocal roaming rates are $0.0403 per minute for voiceand 2G data and $0.001 per kilobyte for 3G data. The Company strongly disagreeswith Sprint’s reciprocal roaming rates and intends to vigorously oppose them,including by submitting the matter to arbitration or litigation, if necessary.If the matter is submitted to an arbitration panel and the arbitration panelimposes rates different than the ones then in effect, the new rates would beretroactively applied to the appropriate period. However, in the meantime, thenew rates went into effect on January 1, 2007.

For the threemonths ended March 31, 2007 and 2006, approximately 98% and 97%, respectively,of the Company’s revenue was derived from data provided by Sprint.  For the three months ended March 31, 2007 and2006, approximately 68% and 67%, respectively, of the Company’s cost of serviceand roaming was derived from data provided by Sprint.  The Company reviews all charges from Sprintand disputes certain of these charges in cases where the Company does notreceive enough supporting detail to validate the charges or it does not believeSprint can charge the Company for certain expenses under the terms of theSprint agreements.   The Company did nothave any disputed charges at March 31, 2007 or December 31, 2006.

Amounts relatingto the Sprint agreements for the three months ended  March31, 2007 and 2006 are as follows (in thousands):

 

|                                                                     | ** ** | **For the Three Months Ended** | ** ** |
|---------------------------------------------------------------------|------------|----------------------------------------------------|------------|
| ** **                                                          | ** ** | **March 31,  2007**                           | ** ** | **March 31,  2006** | ** ** |
| **Amounts  included in the Consolidated Statements of Operations:** | ** ** | ** **                                         | ** ** | ** ** | ** ** |
| Service revenue                                                     |       | $                                                  | 85,021     |   | $ | 75,406 |   |
| Roaming revenue                                                     |       | $                                                  | 32,961     |   | $ | 33,627 |   |
| Cost of service  and roaming:                                       |       |                                               |       |   |   |
| Roaming                                                             |       | $                                                  | 24,204     |   | $ | 23,087 |   |
| Customer service                                                    |       | 13,764                                             |       | 10,679 |   |
| Affiliation fees                                                    |       | 6,701                                              |       | 6,052 |   |
| Long distance                                                       |       | 3,249                                              |       | 2,962 |   |
| Other                                                               |       | 1,756                                              |       | 1,024 |   |
| Total cost of  service and roaming                                  |       | $                                                  | 49,674     |   | $ | 43,804 |   |
| Cost of  equipment                                                  |       | $                                                  | 13,179     |   | $ | 9,529 |   |
| Selling and marketing                                               |       | $                                                  | 5,433      |   | $ | 5,157 |   |

 
| ** **                                                | ** ** | **March 31,  2007** | ** ** | **December 31,  2006** | ** ** |
|-----------------------------------------------------------|------------|--------------------------|------------|-----------------------------|------------|
| **Amounts  included in the Consolidated Balance Sheets:** | ** ** | ** **               | ** ** | ** **                  | ** ** |
| Receivable from Sprint                                    |       | $                        | 30,336     |                        | $          | 40,724 |   |
| Inventories, net                                          |       | 5,359                    |       | 4,291                       |       |
| Payable to  Sprint                                        |       | 50,570                   |       | 58,196                      |       |
|                                                           |            |                          |            |                             |            |  |  |

 

**(4) Property and Equipment**

Property and equipmentconsists of the following at March 31, 2007 and 2006 (in thousands):

8

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| ** **                                      | ** ** | **March 31,  2007** | ** ** | **December 31,  2006** | ** ** |
|-------------------------------------------------|------------|--------------------------|------------|-----------------------------|------------|
| Network assets                                  |       | $                        | 218,076    |                        | $          | 214,348 |   |
| Computer  equipment                             |       | 4,455                    |       | 4,299                       |       |
| Furniture,  fixtures, and office equipment      |       | 7,154                    |       | 7,117                       |       |
| Vehicles                                        |       | 1,958                    |       | 294                         |       |
| Construction in  progress                       |       | 11,006                   |       | 16,143                      |       |
| Total property  and equipment                   |       | 242,649                  |       | 242,201                     |       |
| Less accumulated  depreciation and amortization |       | (109,855                 | )          | (102,560                    | )          |
| Total property and  equipment, net              |       | $                        | 132,794    |                        | $          | 139,641 |   |

 

On March 21, 2006,the Company amended the payment terms of the letter of agreement with NortelNetworks to replace the Motorola equipment deployed in the Company’sPennsylvania, New York, New Jersey and Maryland markets with Nortel equipment.This amendment accelerated payments for equipment totaling $4.0 million from2007 to 2006; thereby, reducing the original timeline to complete thisproject. Because of this amendment, the estimated remaining useful life of theMotorola equipment was shortened by approximately nine months, resulting inadditional depreciation expense of approximately $2.1 million for the threemonths ended March 31, 2006.

The Company hasengaged independent agents to sell the remaining Motorola equipment from thelegacy Horizon markets on behalf of the Company. Pursuant to SFAS No. 144, “Accountingfor the Impairment or Disposal of Long-Lived Assets”, during the three monthsended March 31, 2007, the Company reclassified $1.8 million from Property andequipment, net, to Assets held for sale for that portion of the Motorolaequipment expected to be sold within the next twelve months.

**(5) Intangible Assets and Goodwill**

As a result of theCompany’s reorganization in 2004 and in accordance with fresh-start accountingunder SOP 90-7, “Financial Reporting by Entities in Reorganization under theBankruptcy Code”, the Company revalued its assets to their estimated fairvalues and the Company recorded intangible assets of $19.0 millionrelating to the fair value of the customer base and $59.5 million relatingto the fair value of the right to provide service under the Sprint affiliationagreements.

In connection withthe merger with Horizon PCS in 2005, the Company allocated portions of theHorizon PCS purchase price to identifiable intangible assets consisting of theright to provide service under the Sprint affiliation agreements, the acquiredcustomer base, and an FCC license for a small market in Ohio. The amountallocated to each of these items was $67.0 million, $53.0 million, and$1.5 million, respectively. In addition, the excess of the purchase priceover the fair value of the net assets acquired, including these identifiableintangible assets, which totaled $141.8 million, was recorded as goodwill. Thegoodwill is not deductible for income taxes.

The intangibleassets relating to the customer base are being amortized over the estimatedaverage life of a customer of 30 months. The intangible assets relating tothe right to provide service under the Sprint affiliation agreements are beingamortized over the remaining term of the respective agreements. The FCC licensewas determined to have an indefinite life as it is expected to be renewed withminimal effort and cost.

Theweighted average amortization period, gross carrying amount, accumulatedamortization and net carrying amount of intangible assets at March 31, 2007 andDecember 31, 2006 are as follows (in thousands):

 
| ** **                                                        | ** ** | **March 31, 2007**                    | ** ** |
|-------------------------------------------------------------------|------------|-------------------------------------------------|------------|
| ** **                                                        | ** ** | **Weighted Average  Amortization  Period** | ** ** | **Gross  Carrying  Amount** | ** ** | **Accumulated  Amortization** | ** ** | **Net  Carrying  Value** | ** ** |
| **Non-amortized  intangible asset:**                              | ** ** | ** **                                      | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| FCC license                                                       |       |                                            |       | $ | 1,500 |   | $ | — |   | $ | 1,500 |   |
| **Amortized  intangible assets:**                                 | ** ** | ** **                                      | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Right to provide  service under the Sprint affiliation agreements |       | 167 months                                      |       | 126,521 |   | (20,162 | ) | 106,359 |   |
| Customer base                                                     |       | 30 months                                       |       | 71,956 |   | (56,056 | ) | 15,900 |   |
|                                                              |       | 117 months                                      |       | $ | 199,977 |   | $ | (76,218 | ) | $ | 123,759 |   |

 

9

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| ** **                                                        | ** ** | **December 31, 2006**                 | ** ** |
|-------------------------------------------------------------------|------------|-------------------------------------------------|------------|
| ** **                                                        | ** ** | **Weighted Average  Amortization  Period** | ** ** | **Gross  Carrying  Amount** | ** ** | **Accumulated  Amortization** | ** ** | **Net  Carrying  Value** | ** ** |
| **Non-amortized  intangible asset:**                              | ** ** | ** **                                      | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| FCC license                                                       |       |                                            |       | $ | 1,500 |   | $ | — |   | $ | 1,500 |   |
| **Amortized  intangible assets:**                                 | ** ** | ** **                                      | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Right to provide  service under the Sprint affiliation agreements |       | 167 months                                      |       | 126,521 |   | (17,868 | ) | 108,653 |   |
| Customer base                                                     |       | 30 months                                       |       | 71,956 |   | (50,756 | ) | 21,200 |   |
|                                                              |       | 117 months                                      |       | $ | 199,977 |   | $ | (68,624 | ) | $ | 131,353 |   |

 

The amortization expense for the three months endedMarch 31, 2007 and 2006 was $7.6 million and $9.5 million, respectively.  Aggregate amortization expense relative tointangible assets for the periods shown will be as follows:
| **Year Ended December 31** | ** ** | ** ** | ** ** |
|-------------------------------------------|------------|------------|------------|
| 2007                                      |       | $          | 30,376     |   |
| 2008                                      |       | 9,176      |       |
| 2009                                      |       | 9,176      |       |
| 2010                                      |       | 9,176      |       |
| 2011                                      |       | 9,176      |       |
| Thereafter                                |       | 62,773     |       |
| Total                                     |       | $          | 129,853    |   |

 

**(6) Long-TermDebt**

Long-termdebt consists of the following at March 31, 2007 and December 31, 2006 (inthousands):
| ** **                                                                  | ** ** | **March 31,  2007** | ** ** | **December 31,  2006** | ** ** |
|-----------------------------------------------------------------------------|------------|--------------------------|------------|-----------------------------|------------|
| Senior notes  11-1/2% $165 million due 2012                                 |       | $                        | 165,000    |                        | $          | 165,000 |   |
| Senior notes  11-3/8% $125 million due 2012                                 |       | 125,000                  |       | 125,000                     |       |
| Unamortized fair  value adjustment for 11-3/8% senior notes                 |       | 11,059                   |       | 11,577                      |       |
| Capital lease  obligations                                                  |       | 485                      |       | 492                         |       |
| Total long-term  debt and capital lease obligations                         |       | 301,544                  |       | 302,069                     |       |
| Less: current  maturities                                                   |       | (25                      | )          | (24                         | )          |
| Long-term debt and  capital lease obligations, excluding current maturities |       | $                        | 301,519    |                        | $          | 302,045 |   |

 

In connection withthe merger of Horizon PCS in 2005, the allocation of the purchase priceresulted in an increase of the value of the 11-3/8% senior notes ofapproximately $14.7 million, which is recorded as long-term debt in theConsolidated Balance Sheets. This amount will be amortized over the remaininglife of the 11-3/8% senior notes as a reduction to interest expense. For eachof the three months ended March 31, 2007 and 2006, the reduction to interestexpense was approximately $0.5 million. This amortization will not increasethe principal amount due to the 11-3/8% senior note holders or reduce theamount of interest owed to the 11-3/8% senior note holders.

The indenturesgoverning the $165.0 million in aggregate principal amount of 11-1/2%senior notes and the $125.0 million in aggregate principal amount of11-3/8% senior notes contain covenants which restrict the Company’s ability toincur additional indebtedness, merge, pay dividends, dispose of its assets, andcertain other matters as defined in the indentures. However, the senior notesare subordinated to all secured indebtedness of the Company to the extent ofthe assets securing such indebtedness, and to any indebtedness of subsidiariesof the Company that do not guarantee the senior notes. For the 11-1/2% seniornotes, interest is payable semi-annually in arrears on May 1 andNovember 1 to the holders of record on the immediately precedingApril 15 and October 15. For the 11-3/8% senior notes, interest ispayable semi-annually in arrears on July 15 and January 15, to theholders of record on the immediately preceding July 1 andJanuary 1.  As discussed further inNote 11, the Company closed on a new $475 million senior note offering in April2007, and repurchased at a premium all of the $290.0 million of the Company’sthen outstanding senior notes.

**(7) Income Taxes**

The Company’seffective income tax rate for the interim periods presented is based onmanagement’s estimate of the Company’s effective tax rate for the applicableyear and differs from the federal statutory income tax rate primarily due tonondeductible permanent differences, state income taxes and changes in thevaluation allowance for deferred income taxes. In assessing the realizabilityof deferred tax assets, management considers whether it is more likely than notthat some 

10

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portion or all of thedeferred tax assets will not be realized. The ultimate realization of deferredtax assets is dependent upon the generation of future taxable income during theperiods in which those temporary differences become deductible. No benefit forfederal income taxes has been recorded for the three months ended March 31,2007 and 2006 as the net deferred tax asset generated, primarily from temporarydifferences related to the net operating loss, was offset by a full valuationallowance because it is not considered more likely than not that these benefitswill be realized due to the Company’s losses since inception.

**(8) Stock-Based Compensation**

The Company hastwo long-term incentive plans currently in place.  The iPCS 2004 long-term incentive plan, asamended (the “iPCS Plan”), was approved by the Company’s board of directors asprovided by the Company’s plan of reorganization. The Horizon PCS 2004 stockincentive plan, as amended (the “Horizon Plan”), was assumed by the Company inits merger with Horizon PCS in 2005.

**iPCSPlan. **Under the iPCSPlan, the Company may grant to employees, directors and consultants of theCompany or its subsidiaries incentive and non-qualified stock options, stockappreciation rights, restricted and unrestricted stock awards and cashincentive awards. All of the stock options and restricted stock awarded to dateunder the iPCS Plan have a ten-year life with vesting on a quarterly basis overfour years for employees, and over one year for directors. The iPCS Plan hasbeen amended twice to increase the number of shares available for issuancethereunder.  On May 5, 2005, the iPCSPlan was amended to increase the number of shares available for issuance by250,000 shares, and on September 28, 2006, the iPCS Plan was amended toincrease the number of shares available for issuance by 500,000 shares.  In connection with the second amendment tothe iPCS Plan, the Horizon Plan (discussed below) was amended to decrease thenumber of shares available for issuance thereunder by 211,227.  Each of these amendments was approved by theCompany’s stockholders.  Giving effect tothese amendments, the total number of shares that may be awarded under the iPCSPlan is 1.75 million shares of common stock, of which amount, 582,879 sharesremain available for awards as of March 31, 2007.

**HorizonPlan. **Under theHorizon Plan, the Company may grant to employees, directors and consultants ofthe Company or its subsidiaries incentive or non-qualified stock options orstock appreciation rights. All of the stock options issued to date under theHorizon Plan have a ten-year life and vest equally in six-month increments overthree years from the date of grant. As discussed above, in connection with themost recent amendment to the iPCS Plan, the Horizon Plan was amended todecrease the number of shares available for issuance thereunder by211,227.  This amendment was approved bythe Company’s stockholders.  Givingeffect to this amendment, the total number of shares that may be granted underthe Horizon Plan is 551,000 shares of common stock, which equals the number ofshares underlying awards previously made under the Horizon Plan.

During the threemonths ended March 31, 2007, the Company awarded 209,050 stock options tomanagement and the board of directors at exercise prices of $50.41 and $52.60,which were the closing prices on the date of grants.  The fair value of each grant is estimated atthe grant date using the Black Scholes option pricing method.  There were no grants awarded during the threemonths ended March 31, 2006.  The tablebelow outlines the assumptions used for the options granted during the threemonths ended March 31, 2007:

 
| ** **               | ** ** | **For the Three Months Ended  March 31, 2007** | ** ** |
|--------------------------|------------|------------------------------------------------------------------------------|------------|
| ** **               | ** ** | **Range**                                                                    | ** ** | **Weighted Average** | ** ** |
| Risk free  interest rate |       | 4.45% to 4.81%                                                               |       | 4.47 | % |
| Volatility               |       |                                                                         |       | 38.00 | % |
| Dividend yield           |       |                                                                         |       | 0.00 | % |
| Expected life in  years  |       |                                                                         |       | 5.92 |   |
| Fair value price         |       |                                                                         |       | $ | 22.33 |   |
|                          |            |                                                                              |            |  |  |  |

 

11

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EffectiveJanuary 24, 2007, Alan Morse ceased to be the Company’s Chief OperatingOfficer.  As a result of his separation,Mr. Morse received one additional year of vesting of his options.  With this agreement, the modification of hisoption awards resulted in a new measurement date.  The fair value of the options prior to themodification was zero. The fair value of the options subsequent to themodification resulted in an additional $0.6 million of stock-based compensationexpense recorded in the three months ended March 31, 2007.  The table below outlines the weighted averageassumptions used for the options modified: 

|                         | ** ** | **For Three Months  Ended March 31,  2007** | ** ** |
|-------------------------|------------|-----------------------------------------------------------------|------------|
|                    |       |                                                            |       |
| Risk free interest rate |       | 5.13                                                            | %          |
| Volatility              |       | 38.00                                                           | %          |
| Dividend yield          |       | 0.00                                                            | %          |
| Expected life in years  |       | 0.25                                                            |       |
| Fair value price        |       | $                                                               | 25.99      |   |
|                         |            |                                                                 |            |  |

 

Thefollowing table shows stock-based compensation expense by type of share-basedaward for the three months ended March 31, 2007 and 2006 included in theconsolidated statements of operations (in thousands):

 

|                                                               | ** ** | **For the Three Months Ended** | ** ** |
|---------------------------------------------------------------|------------|----------------------------------------------------|------------|
| ** **                                                    | ** ** | **March 31, 2007**                       | ** ** | **March 31, 2006** | ** ** |
| Restricted stock                                              |       | $                                                  | 201        |   | $ | 25 |   |
| Amortization of  unearned compensation of stock option awards |       | 207                                                |       | 91 |   |
| Fair value expense of  stock option awards                    |       | 1,505                                              |       | 347 |   |
| Total stock-based compensation                                |       | $                                                  | 1,913      |   | $ | 463 |   |

 

Thefollowing table shows the total remaining unrecognized compensation costrelated to: restricted stock grants, unearned compensation of stock optionawards, and fair value expense of stock option awards; as well as the weightedaverage remaining required service period over which such costs will berecognized:

|                                               | ** ** | **Total Remaining  Unrecognized  Compensation Cost (in millions)** | ** ** | **Weighted Average  Remaining Required  Service Period  (in years)** | ** ** |
|-----------------------------------------------|------------|-----------------------------------------------------------------------------------|------------|------------------------------------------------------------------------------------------|------------|
| Restricted stock                              |       | $                                                                                 | 2.8        |                                                                                     | 3.64       |   |
| Unearned compensation  of stock option awards |       | 0.1                                                                               |       | 0.50                                                                                     |       |
| Fair value expense of stock option awards     |       | 5.7                                                                               |       | 3.06                                                                                     |       |
|                                               |            |                                                                                   |            |                                                                                          |            |  |

 

Stock-basedcompensation expense is included in the consolidated statements of operationsas follows (in thousands):

 

|                                | ** ** | **For the Three Months Ended** | ** ** |
|--------------------------------|------------|----------------------------------------------------|------------|
| ** **                     | ** ** | **March 31,  2007**                           | ** ** | **March 31,  2006** | ** ** |
| Cost of service and  roaming   |       | $                                                  | 88         |   | $ | 32 |   |
| Sales and marketing            |       | 147                                                |       | 69 |   |
| General and  administrative    |       | 1,678                                              |       | 362 |   |
| Total stock-based compensation |       | $                                                  | 1,913      |   | $ | 463 |   |

 

A summary of activity related to the Company’s stock option plans is asfollows:

12

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| ** **                        | ** ** | **Number of Shares** | ** ** | **Weighted Average  Exercise Price** | ** ** | **Weighted  Average  Remaining  Contractual Life  (in years)** | ** ** | **Aggregate  Intrinsic Value  (In thousands)** | ** ** |
|-----------------------------------|------------|--------------------------------|------------|------------------------------------------------|------------|--------------------------------------------------------------------------|------------|----------------------------------------------------------|------------|
| Outstanding at December  31, 2006 |       | 650,603                        |       | $                                              | 15.57      |                                                                     |       |                                                     |       |   |
| Granted                           |       | 209,050                        |       | 50.54                                          |       |                                                                     |       |                                                     |       |
| Exercised                         |       | (108,505                       | )          | (15.85                                         | )          |                                                                     |       |                                                     |       |
| Forfeited                         |       | (8,532)                        |       | (40.50                                         | )          |                                                                     |       |                                                     |       |
| Outstanding at March  31, 2007    |       | 742,616                        |       | $                                              | 25.08      |                                                                     | 7.82       |                                                     | $          | 18,076 |   |
| Exercisable at March 31, 2007     |       | 361,131                        |       | $                                              | 18.18      |                                                                     | 6.96       |                                                     | $          | 11,158 |   |

 

A summary of activity related to the Companys’ restricted shares is asfollows:
| ** **                              | ** ** | **Shares** | ** ** | **Weighted Average  Fair Value Price** | ** ** |
|-----------------------------------------|------------|------------|------------|-------------------------------------------------------|------------|
| Restricted shares at  December 31, 2006 |       | 7,552      |       | $                                                     | 22.67      |   |
| Granted                                 |       | 55,700     |       | 50.53                                                 |       |
| Vested                                  |       | (4,644     | )          | (43.23                                                | )          |
| Restricted shares at March 31, 2007     |       | 58,608     |       | $                                                     | 47.52      |   |

 

13

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**(9) Commitments and Contingencies**

*(a) Commitments*

On December 29,2006, the Company signed a letter of agreement with Nortel Networks to purchaseEV-DO Rev. A equipment and services totaling $17.1 million in aggregate. The$17.1 million commitment consists of a non-cancelable purchase of $8.9 millionof equipment and services and an option to purchase an additional $8.2 millionof equipment and services.  As of December 31,2006, the Company has submitted a non-cancelable purchase order for the $8.9million, and therefore has no further commitment under this letter ofagreement. However, if the Company elects to exercise its option to purchaseany additional equipment and services from Nortel Networks under this letter ofagreement, the Company will be required to purchase the entire additional $8.2million of equipment and services.  Inaddition, if the Company elects to exercise this option after November 30,2007, the Company will be required to pay an additional $1.0 million. As ofMarch 31, 2007, the Company has paid $4.1 million of the $8.9 millioncommitment and has received equipment totaling $2.2 million.

*(b)Litigation*

On July 15,2005, iPCS Wireless, Inc., a wholly owned subsidiary of iPCS, Inc.,filed a complaint against Sprint and Sprint PCS in the Circuit Court of CookCounty, Illinois. On July 22, 2005, Horizon PersonalCommunications, Inc. and Bright Personal Communications Services, LLC,wholly owned subsidiaries of iPCS, Inc., filed a complaint against Sprintand Sprint PCS and Nextel Communications, Inc. in the Court of Chancery ofthe State of Delaware, New Castle County. The complaints allege, among otherthings, that Sprint’s conduct following the consummation of the merger betweenSprint and Nextel, would breach its exclusivity obligations under the Company’saffiliation agreements, as amended. The Company sought, among other things, atemporary restraining order (a TRO), a preliminary injunction and a permanentinjunction enjoining Sprint and those acting in concert with it from engagingin conduct that would violate the Company’s affiliation agreements with SprintPCS.

On July 28,2005, iPCS, Inc. and certain of its wholly owned subsidiaries entered intoa Forbearance Agreement with Sprint relating to the complaints filed againstSprint. The Forbearance Agreement sets forth the Company’s agreement that itwould not seek a TRO or a preliminary injunction against Sprint so long asSprint operates subject to the limitations set forth in the ForbearanceAgreement. Although the Forbearance Agreement expired on January 1, 2006in the territory managed by iPCS Wireless and on August 4, 2006 in theterritory managed by Horizon Personal Communications and Bright PersonalCommunications Services, Sprint committed to continue to abide by the terms ofthe Forbearance Agreement in the territory managed iPCS Wireless during thependency of Sprint’s appeal of the Illinois court final order (discussedbelow).

The trial in theDelaware court occurred in January 2006. On August 4, 2006, theDelaware court issued its decision and, on September 7, 2006 issued afinal order and judgment effecting its decision. The final order and judgmentprovides that:

·         Sprint will violate theimplied duty of good faith and fair dealing if it offers iDEN products andservices using the same Sprint brand and marks that plaintiffs (HorizonPersonal Communications and Bright Personal Communications Services) have usedor are using in connection with their sale of Sprint PCS Products and Services(the “Sprint pcs brand and/or marks”) or a brand or mark confusingly similar tothe Sprint pcs brand or marks in plaintiffs’ Service Areas. Sprint may re-brandthe legacy Nextel stores in plaintiffs’ Service Areas, but it must do so in away that does not create a likelihood of confusion in the minds of consumers asto the sponsor of the store or which products and services are available in it,and it may not use the new Sprint logo.

·         Within plaintiffs’Service Areas, Sprint and those acting in concert with it are enjoined from:

·        offering iDEN products andservices that use the same or confusingly similar brands or marks as the Sprintpcs brand or marks; provided that Sprint is not enjoined or otherwiseprohibited from conducting national advertising offering iDEN products andservices that use the same or similar brands and marks as the Sprint pcs brandsor marks, subject to appropriate disclaimers regarding availability in certainmarkets; and

·        re-branding the legacyNextel stores with the new Sprint logo or the same or confusingly similarbrands or marks as the Sprint pcs brand and marks.

· Inlight of certain operational and confidentiality representations made bySprint, plaintiffs’ claims and requests for relief against such future Sprintbehavior were deemed not ripe for adjudication and therefore denied. If,however, Sprint in the future breaches these representations, the court willpromptly entertain a request for appropriate relief.

·         Plaintiffs’ claims fortortious interference and civil conspiracy against Nextel were dismissed withprejudice.

The trial in theIllinois court was held for 25 days between early March and earlyJuly 2006. On August 14, 2006, the Illinois court issued its decisionand on September 20, 2006 issued a final order effecting its decision. Thefinal order provides that:

14

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·         Within 180 days of thedate of the final order, Sprint and those acting in concert with it must ceaseowning, operating, and managing the Nextel wireless network in iPCS Wireless’sterritory.

·         Sprint shall continue tocomply with all terms and conditions of the Forbearance Agreement.

OnSeptember 28, 2006, Sprint appealed the ruling of the Illinois trial courtto the Appellate Court of Illinois, First Judicial District. In earlyOctober 2006, Sprint requested a stay of the Illinois trial court’s orderpending appeal and an accelerated appeal. On October 13, 2006, theIllinois appellate court denied Sprint’s request for an accelerated appeal andordered a stay of the Illinois trial court’s order pending appeal on thecondition that (i) Sprint continue to comply with the ForbearanceAgreement and (ii) Sprint comply with the September 7, 2006 order ofthe Delaware court. Accordingly, Sprint must comply with the ForbearanceAgreement, as well as the order of the Delaware court, in iPCS Wireless’sterritory pending a decision from the Illinois appellate court.

As of the datehereof, the parties have completed the briefing stage of the appeal and areawaiting the scheduling of oral arguments followed by a decision.  The Company expects a decision from theappelate court as soon as later this year or early 2008.

Inaddition to the foregoing, from time to time, the Company is involved invarious legal proceedings relating to claims arising in the ordinary course ofbusiness. The Company is not currently a party to any such legal proceedings,the outcome of which, individually or in the aggregate, is expected to have amaterial adverse effect on the Company’s business, financial condition orresults of operations.

*(c)**             FCC Licenses*

SprintPCS holds the licenses necessary to provide wireless services in the Company’sterritory. The Federal Communications Commission (“FCC”) requires thatlicensees like Sprint PCS maintain control of their licensed spectrums and notdelegate control to third-party operators or managers without FCC consent andare subject to renewal and revocation by the FCC. Certain Sprint PCS wirelesslicenses in the Company’s territory are scheduled to expire in April and June2007.  Sprint has renewed licensesexpiring in April 2007 and has filed renewal applications for those licensesexpiring in June 2007. All licenses that were scheduled to expire in April 2007were renewed for additional ten-year terms, except that one such license wasrenewed for an additional eight years. The FCC has adopted specific standardsthat apply to wireless personal communications services license renewals. Anyfailure by Sprint PCS or the Company to comply with these standards couldresult in the non-renewal of the Sprint PCS licenses for the Company’sterritory. Additionally, if Sprint PCS does not demonstrate to the FCC thatSprint PCS has met the construction requirements for each of its wirelesspersonal communications services licenses, it can lose those licenses. IfSprint PCS loses its licenses in the Company’s territory for any of thesereasons, the Company would not be able to provide wireless services withoutobtaining rights to other licenses. If Sprint PCS loses its licenses in anotherterritory, Sprint PCS or the applicable PCS Affiliate or Sprint would not beable to provide wireless services without obtaining rights to other licensesand the Company’s ability to offer nationwide calling plans would be dimishedand potentially more costly.

**(10) ConsolidatingFinancial Information**

The11-1/2 % senior notes and the 11-3/8 % senior notes are fully, unconditionallyand joint and severally guaranteed by the Company’s domestic restrictedsubsidiaries, including iPCS Wireless, Inc.,iPCS Equipment, Inc., Horizon Personal Communications, Inc., andBright Personal Communications Services, LLC, which are wholly ownedsubsidiaries of iPCS, Inc. The following consolidating financial informationas of March 31, 2007 and December 31, 2006 and for the three months ended March31, 2007 and 2006 is presented for iPCS, Inc., iPCS Wireless, Inc.,iPCS Equipment, Inc., Horizon Personal Communications, Inc., andBright Personal Communications Services, LLC (in thousands):

 

15

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**iPCS, Inc. and SubsidiariesCondensed Consolidating Balance Sheetas of March 31, 2007**
| ** **                                                        | ** ** | **iPCS Inc.** | ** ** | **iPCS  Wireless** | ** ** | **iPCS  Equipment** | ** ** | **Horizon  Per Com** | ** ** | **Bright** | ** ** | **Eliminations** | ** ** | **iPCS  Consolidated** | ** ** |
|-------------------------------------------------------------------|------------|--------------------|------------|--------------------|------------|---------------------|------------|---------------------------|------------|------------|------------|------------------|------------|------------------------|------------|
| Cash and cash  equivalents                                        |       | $                  | —     |               | $          | 85,258              |       | $                         | —     |       | $          | 29,891           |       | $                      | 449        |   | $ | — |   | $ | 115,598 |   |
| Other current assets                                              |       | 142,601            |       | 71,502             |       | 41,497              |       | 102,673                   |       | 81,345     |       | (364,693         | )          | 74,925                 |       |
| Total current assets                                              |       | 142,601            |       | 156,760            |       | 41,497              |       | 132,564                   |       | 81,794     |       | (364,693         | )          | 190,523                |       |
| Property and equipment,  net                                      |       | —             |       | 63,703             |       | 4,607               |       | 47,580                    |       | 16,962     |       | (58              | )          | 132,794                |       |
| Goodwill and intangible  assets, net                              |       | —             |       | 48,233             |       | —              |       | 161,595                   |       | 55,714     |       | —           |       | 265,542                |       |
| Other non-current  assets                                         |       | 4,565              |       | 1,955              |       | —              |       | 4,390                     |       | 681        |       | —           |       | 11,591                 |       |
| Investment in  subsidiaries                                       |       | 239,370            |       | —             |       | —              |       | —                    |       | —     |       | (239,370         | )          | —                 |       |
| Total assets                                                      |       | $                  | 386,536    |               | $          | 270,651             |       | $                         | 46,104     |       | $          | 346,129          |       | $                      | 155,151    |   | $ | (604,121 | ) | $ | 600,450 |   |
| Current liabilities                                               |       | $                  | 22,861     |               | $          | 232,161             |       | $                         | 25         |       | $          | 131,772          |       | $                      | 67,457     |   | $ | (364,751 | ) | $ | 89,525 |   |
| Long-term debt                                                    |       | 165,000            |       | 461                |       | —              |       | 104,004                   |       | 32,054     |       | —           |       | 301,519                |       |
| Other long-term  liabilities                                      |       | —             |       | 4,460              |       | —              |       | 5,669                     |       | 602        |       | —           |       | 10,731                 |       |
| Total liabilities                                                 |       | 187,861            |       | 237,082            |       | 25                  |       | 241,445                   |       | 100,113    |       | (364,751         | )          | 401,775                |       |
| Stockholders’ equity  (deficiency)                           |       | 198,675            |       | 33,569             |       | 46,079              |       | 104,684                   |       | 55,038     |       | (239,370         | )          | 198,675                |       |
| Total liabilities and stockholders’ equity (deficiency) |       | $                  | 386,536    |               | $          | 270,651             |       | $                         | 46,104     |       | $          | 346,129          |       | $                      | 155,151    |   | $ | (604,121 | ) | $ | 600,450 |   |

 

**iPCS, Inc. and SubsidiariesCondensed Consolidating Balance Sheetas of December 31, 2006**
| ** **                                                        | ** ** | **iPCS Inc.** | ** ** | **iPCS  Wireless** | ** ** | **iPCS  Equipment** | ** ** | **Horizon  Per Com** | ** ** | **Bright** | ** ** | **Eliminations** | ** ** | **iPCS  Consolidated** | ** ** |
|-------------------------------------------------------------------|------------|--------------------|------------|--------------------|------------|---------------------|------------|---------------------------|------------|------------|------------|------------------|------------|------------------------|------------|
| Cash and cash  equivalents                                        |       | $                  | —     |               | $          | 85,474              |       | $                         | —     |       | $          | 34,823           |       | $                      | 202        |   | $ | — |   | $ | 120,499 |   |
| Other current assets                                              |       | 139,294            |       | 73,621             |       | 38,200              |       | 94,771                    |       | 72,499     |       | (335,930         | )          | 82,455                 |       |
| Total current assets                                              |       | 139,294            |       | 159,095            |       | 38,200              |       | 129,594                   |       | 72,701     |       | (335,930         | )          | 202,954                |       |
| Property and equipment,  net                                      |       | —             |       | 64,773             |       | 6,375               |       | 51,960                    |       | 16,597     |       | (64              | )          | 139,641                |       |
| Intangible assets, net                                            |       | —             |       | 49,259             |       | —              |       | 166,609                   |       | 57,268     |       | —           |       | 273,136                |       |
| Other non-current  assets                                         |       | 4,790              |       | 1,756              |       | —              |       | 4,079                     |       | 715        |       | —           |       | 11,340                 |       |
| Investment in  subsidiaries                                       |       | 253,001            |       | —             |       | —              |       | —                    |       | —     |       | (253,001         | )          | —                 |       |
| Total assets                                                      |       | $                  | 397,085    |               | $          | 274,883             |       | $                         | 44,575     |       | $          | 352,242          |       | $                      | 147,281    |   | $ | (588,995 | ) | $ | 627,071 |   |
| Current liabilities                                               |       | $                  | 17,900     |               | $          | 232,247             |       | $                         | 42         |       | $          | 127,688          |       | $                      | 58,887     |   | $ | (335,994 | ) | $ | 100,770 |   |
| Long-term debt                                                    |       | 165,000            |       | 468                |       | —              |       | 104,400                   |       | 32,177     |       | —           |       | 302,045                |       |
| Other long-term  liabilities                                      |       | —             |       | 4,088              |       | —              |       | 5,402                     |       | 581        |       | —           |       | 10,071                 |       |
| Total liabilities                                                 |       | 182,900            |       | 236,803            |       | 42                  |       | 237,490                   |       | 91,645     |       | (335,994         | )          | 412,886                |       |
| Stockholders’ equity  (deficiency)                           |       | 214,185            |       | 38,080             |       | 44,533              |       | 114,752                   |       | 55,636     |       | (253,001         | )          | 214,185                |       |
| Total liabilities and stockholders’ equity (deficiency) |       | $                  | 397,085    |               | $          | 274,883             |       | $                         | 44,575     |       | $          | 352,242          |       | $                      | 147,281    |   | $ | (588,995 | ) | $ | 627,071 |   |

 

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**iPCS, Inc.and SubsidiariesCondensed Consolidating Statement of OperationsFor the Three Months Ended March 31, 2007**
| ** **                                         | ** ** | **iPCS Inc.** | ** ** | **iPCS  Wireless** | ** ** | **iPCS  Equipment** | ** ** | **Horizon  Per Com** | ** ** | **Bright** | ** ** | **Eliminations** | ** ** | **iPCS  Consolidated** | ** ** |
|----------------------------------------------------|------------|--------------------|------------|--------------------|------------|---------------------|------------|---------------------------|------------|------------|------------|------------------|------------|------------------------|------------|
| Total revenues                                     |       | $                  | —     |               | $          | 65,511              |       | $                         | 686        |       | $          | 35,981           |       | $                      | 19,361     |   | $ | (686 | ) | $ | 120,853 |   |
| Cost of revenues                                   |       | —             |       | (47,429            | )          | —              |       | (27,116                   | )          | (12,735    | )          | 686              |       | (86,594                | )          |
| Selling and  marketing                             |       | —             |       | (11,005            | )          | —              |       | (6,665                    | )          | (2,904     | )          | —           |       | (20,574                | )          |
| General and  administrative                        |       | (549               | )          | (4,071             | )          | (1                  | )          | (1,543                    | )          | (763       | )          | —           |       | (6,927                 | )          |
| Depreciation and  amortization                     |       | —             |       | (7,013             | )          | (851                | )          | (8,694                    | )          | (2,874     | )          | —           |       | (19,432                | )          |
| Gain (loss) on  disposal of property and equipment |       | —             |       | (711               | )          | 680                 |       | (33                       | )          | (1         | )          | 6                |       | (59                    | )          |
| Total operating expenses                           |       | (549               | )          | (70,229            | )          | (172                | )          | (44,051                   | )          | (19,277    | )          | 692              |       | (133,586               | )          |
| Other, net                                         |       | (4,968             | )          | 206                |       | 1,032               |       | (1,998                    | )          | (682       | )          | —           |       | (6,410                 | )          |
| Loss in  subsidiaries                              |       | (13,632            | )          | —             |       | —              |       | —                    |       | —     |       | 13,632           |       | —                 |       |
| Net income (loss)                                  |       | $                  | (19,149    | )                  | $          | (4,512              | )          | $                         | 1,546      |       | $          | (10,068          | )          | $                      | (598       | ) | $ | 13,638 |   | $ | (19,143 | ) |

 

**iPCS, Inc. and SubsidiariesCondensed Consolidating Statement of OperationsFor the Three Months Ended March 31, 2006**
| ** **                                         | ** ** | **iPCS Inc.** | ** ** | **iPCS  Wireless** | ** ** | **iPCS  Equipment** | ** ** | **Horizon  Per Com** | ** ** | **Bright** | ** ** | **Eliminations** | ** ** | **iPCS  Consolidated** | ** ** |
|----------------------------------------------------|------------|--------------------|------------|--------------------|------------|---------------------|------------|---------------------------|------------|------------|------------|------------------|------------|------------------------|------------|
| Total revenues                                     |       | $                  | —     |               | $          | 63,735              |       | $                         | 1,279      |       | $          | 31,974           |       | $                      | 16,776     |   | $ | (1,279 | ) | $ | 112,485 |   |
| Cost of revenues                                   |       | —             |       | (42,741            | )          | —              |       | (22,685                   | )          | (10,403    | )          | 1,279            |       | (74,550                | )          |
| Selling and  marketing                             |       | —             |       | (8,834             | )          | —              |       | (5,260                    | )          | (2,666     | )          | —           |       | (16,760                | )          |
| General and  administrative                        |       | (554               | )          | (3,729             | )          | (1                  | )          | (2,673                    | )          | (173       | )          | —           |       | (7,130                 | )          |
| Depreciation and  amortization                     |       | —             |       | (8,672             | )          | (1,395              | )          | (11,012                   | )          | (2,824     | )          | —           |       | (23,903                | )          |
| Gain (loss) on  disposal of property and equipment |       | —             |       | (205               | )          | 17                  |       | (55                       | )          | —     |       | 6                |       | (237                   | )          |
| Total operating expenses                           |       | (554               | )          | (64,181            | )          | (1,379              | )          | (41,685                   | )          | (16,066    | )          | 1,285            |       | (122,580               | )          |
| Other, net                                         |       | (4,968             | )          | 33                 |       | 794                 |       | (2,037                    | )          | (727       | )          | —           |       | (6,905                 | )          |
| Loss in  subsidiaries                              |       | (11,484            | )          | —             |       | —              |       | —                    |       | —     |       | 11,484           |       | —                 |       |
| Net income (loss)                                  |       | $                  | (17,006    | )                  | $          | (413                | )          | $                         | 694        |       | $          | (11,748          | )          | $                      | (17        | ) | $ | 11,490 |   | $ | (17,000 | ) |

 

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**iPCS, Inc.and SubsidiariesCondensed Consolidating Statement of Cash FlowsFor the Three Months Ended March 31, 2007**
| ** **                                             | ** ** | **iPCS Inc.** | ** ** | **iPCS  Wireless** | ** ** | **iPCS  Equipment** | ** ** | **Horizon  Per Com** | ** ** | **Bright** | ** ** | **Eliminations** | ** ** | **iPCS  Consolidated** | ** ** |
|--------------------------------------------------------|------------|--------------------|------------|--------------------|------------|---------------------|------------|---------------------------|------------|------------|------------|------------------|------------|------------------------|------------|
| Operating activities                                   |       | $                  | —     |               | $          | 4,755               |       | $                         | (1,596     | )          | $          | (3,372           | )          | $                      | 857        |   | $ | — |   | $ | 644 |   |
| Investing activities                                   |       | —             |       | (6,685             | )          | 1,596               |       | (1,560                    | )          | (610       | )          |             |       | (7,259                 | )          |
| Financing activities                                   |       | —             |       | 1,714              |       | —              |       | —                    |       | —     |       | —           |       | 1,714                  |       |
| Increase (decrease) in  cash and cash equivalents      |       | —             |       | (216               | )          | —              |       | (4,932                    | )          | 247        |       | —           |       | (4,901                 | )          |
| Cash and cash  equivalents at beginning of period |       | —             |       | 85,474             |       | —              |       | 34,823                    |       | 202        |       | —           |       | 120,499                |       |
| Cash and cash equivalents at end of period             |       | $                  | —     |               | $          | 85,258              |       | $                         | —     |       | $          | 29,891           |       | $                      | 449        |   | $ | — |   | $ | 115,598 |   |

 

**iPCS, Inc.and SubsidiariesCondensed Consolidating Statement of Cash FlowsFor the Three Months Ended March 31, 2006**
| ** **                                             | ** ** | **iPCS Inc.** | ** ** | **iPCS  Wireless** | ** ** | **iPCS  Equipment** | ** ** | **Horizon  Per Com** | ** ** | **Bright** | ** ** | **Eliminations** | ** ** | **iPCS  Consolidated** | ** ** |
|--------------------------------------------------------|------------|--------------------|------------|--------------------|------------|---------------------|------------|---------------------------|------------|------------|------------|------------------|------------|------------------------|------------|
| Operating activities                                   |       | $                  |       |               | $          | 10,355              |       | $                         | 150        |       | $          | 326              |       | $                      | 443        |   | $ | — |   | $ | 11,274 |   |
| Investing activities                                   |       | —             |       | (3,360             | )          | (150                | )          | (3,961                    | )          | (717       | )          | —           |       | (8,188                 | )          |
| Financing activities                                   |       |               |       | 987                |       | —              |       | —                    |       | —     |       | —           |       | 987                    |       |
| Increase in cash or  cash equivalents                  |       | —             |       | 7,982              |       | —              |       | (3,635                    | )          | (274       | )          | —           |       | 4,073                  |       |
| Cash and cash  equivalents at beginning of period |       | —             |       | 68,993             |       | —              |       | 41,099                    |       | 745        |       | —           |       | 110,837                |       |
| Cash and cash equivalents at end of period             |       | $                  | —     |               | $          | 76,975              |       | $                         | —     |       | $          | 37,464           |       | $                      | 471        |   | $ | — |   | $ | 114,910 |   |

 

**(11) SubsequentEvents**

On April 23, 2007, the Company closed its offeringof $475 million in aggregate principal amount of senior secured  notes, consisting of $300 million inaggregate principal amount of First Lien Senior Secured Floating Rate Notes (“FirstLien Notes”) due 2013 and $175 million in aggregate principal amount of SecondLien Senior Secured Floating Rate Notes (“Second Lien Notes” and together withthe First Lien Notes, the “Secured Notes”) due 2014 in a private placementtransaction pursuant to Rule 144A and Regulation S under the Securities Act of1933, as amended. The Secured Notes are senior secured obligations of theCompany and are unconditionally guaranteed on a senior secured basis by all theCompany’s existing and future domestic restricted subsidiaries.

Interest on the First Lien Notes will accrue at anannual rate equal to three-month LIBOR plus 2.125% and will be payablequarterly in cash in arrears on February 1, May 1, August 1, November 1 of eachyear, commencing on August 1, 2007. Interest on the Second Lien Notes will accrue at an annual rate equal tothree-month LIBOR plus 3.25% and will be payable quarterly in arrears onFebruary 1, May 1, August 1, November 1 of each year, commencing on August 1,2007.  Following the first interestpayment on August 1, 2007, the Company may elect  to pay interest on the Second Lien Notesentirely in cash or entirely by increasing the principal amount of the SecondLien Notes (“PIK Interest”).  PIKInterest on the Second Lien Notes will accrue at an annual rate equal tothree-month LIBOR plus 4.0%.

The Company used a portion of the proceeds of the Secured Notes offeringto repurchase all of its outstanding 11 1⁄2% notes and 11 3/8% notes (see Note6), as well as to pay the related fees and expenses of the offering.  In connection with Secured Notes offering,the Company will record additional expenses in the three months ended June 30,2007, of approximately $34.2 million related to the tender offer premium andconsent payments,  $7.4 million ofadditional interest expense to write off the remaining applicable deferredfinancing costs for the old notes and a reduction to interest expense of  

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approximately$10.9 million to write off the remaining outstanding unamortized balance of thepurchase price fair value allocation to the 11 3/8% notes recorded in July 2005related to the Horizon PCS merger (see Note 6).

The Company also intends to use the remaining net proceeds from theSecured Notes offering, together with approximately $58.0 million ofits available cash, to pay a special cash dividend to common stockholders. OnApril 26, 2007, the Board of Directors of the Company declared a special cashdividend of $11.00 per share, or approximately $187.0 million in theaggregate, payable to all holders of record of the Company’s common stock onMay 8, 2007.  The dividend will be paidon May 16, 2007.

On May 2, 2007, the Compensation Committee of the Board of Directors ofthe Company approved a resolution such that each stock option (collectively,the “Options”) that is outstanding under the iPCS Plan and the HorizonPlan  (see Note 8), on the trading dayimmediately preceding the trading day designated by The Nasdaq Stock Market asthe ex-dividend date (the “Adjustment Date”) shall be adjusted as followseffective as of the opening of business on the ex-dividend date:

·                  The number of shares of stock then subject toeach Option shall be adjusted by dividing the number of shares of stock thensubject to the Option by the Adjustment Factor; and

·                  The exercise price of each Option shall beadjusted by multiplying the exercise price by the Adjustment Factor.

The“Adjustment Factor” was 0.78282 and is equal to one minus the percentagereduction in the closing sale price of a share of stock on the Adjustment Datereported by the Nasdaq Stock Market at the regular hours closing price (“ClosingPrice”) as compared to the Closing Price of a share of stock on the AdjustmentDate minus $11.00.  In addition, on theEx-Dividend Date, the Adjustment Factor will also be applied to the number ofshares under the iPCS Plan and the Horizon Plan reserved for issuance; therebyincreasing the number of shares available to issue by such AdjustmentFactor.  With these modifications, theCompany will record additional stock-based compensation expense ofapproximately $6.7 million, of which approximately $3.2 million will berecorded as of the date of modification and the remainder will be recognizedover the remaining vesting period for the options.

 

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**ITEM2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OFOPERATIONS**

As used in thisquarterly report on Form 10-Q, unless the context otherwise requires:(i) ”Sprint PCS” refers to the affiliated entities of Sprint NextelCorporation that are party to our affiliation agreements; (ii) ”Sprint”refers to Sprint Nextel Corporation and its affiliates; (iii) a “PCSAffiliate of Sprint” is an entity whose sole or predominant business isoperating (directly or through one or more subsidiaries) a personalcommunications service business pursuant to affiliation agreements with SprintSpectrum L.P. and/or its affiliates or their successors; (iv) ”Sprint PCSproducts and services” refers to digital wireless personal communicationsservices, including wireless voice and data services, and related retailproducts, including handsets, in any case, offered under the Sprint brand name;and (v) ”our subscribers” refers to Sprint PCS subscribers who reside inour territory, excluding reseller subscribers.

Statements in thisquarterly report on Form 10-Q regarding Sprint or Sprint PCS are derivedfrom information contained in our affiliation agreements with Sprint PCS,periodic reports and other documents filed by Sprint with the SEC. Thisquarterly report on Form 10-Q contains trademarks, service marks and tradenames of companies and organizations other than us. Other than with respect toSprint PCS, our use or display of other parties’ trade names, trademarks orproducts is not intended to and does not imply a relationship with, orendorsement or sponsorship of us by, the trade name or trademark owners.

The following isan analysis of our results of operations, liquidity and capital resources andshould be read in conjunction with the unaudited Consolidated FinancialStatements and notes related thereto included in this Form 10-Q. To theextent that the following Management’s Discussion and Analysis containsstatements which are not of a historical nature, such statements areforward-looking statements which involve risks and uncertainties. These risksinclude, but are not limited to the risk and uncertainties listed in the nextsection entitled “Forward-Looking Statements” and other factors discussedelsewhere herein and in our other filings with the SEC.

**Forward-LookingStatements**

This quarterlyreport on Form 10-Q contains statements about future events andexpectations that are “forward-looking statements.” These statements relate tofuture events or our future financial performance, and involve known andunknown risks, uncertainties and other factors that may cause our actualresults, levels of activity, performance or achievements to be materiallydifferent from any future results, levels of activity, performance orachievements expressed or implied by these forward-looking statements. In somecases, you can identify forward-looking statements by terminology such as “may,”“will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,”“predicts,” “potential,” or the negative use of these terms or other comparableterminology. Any statement in this report that is not a statement of historicalfact may be deemed to be a forward-looking statement. These forward-lookingstatements include:

·                     statementsregarding our anticipated revenues, expense levels, liquidity and capitalresources and operating losses; and

·                     statementsregarding expectations or projections about markets in our territory.

Although webelieve that the expectations reflected in such forward-looking statements arereasonable, we can give no assurance that such expectations will prove to becorrect. Important factors with respect to any such forward-looking statements,including certain risks and uncertainties that could cause actual results todiffer materially from our expectations, include, but are not limited to:

·                     ourdependence on our affiliation with Sprint;

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·                     the impactand final outcome of our litigation and arbitration against Sprint, Nextel andSprint PCS, as well as the impact and outcome of the other litigation involvingSprint, Sprint PCS and another PCS Affiliate of Sprint;

·                     changes inSprint’s affiliation strategy as a result of the Sprint/Nextel merger andSprint’s acquisitions of other PCS Affiliates of Sprint;

·                     the abilityof Sprint PCS to alter the terms of our affiliation agreements with it,including fees paid or charged to us and other program requirements;

·                     ourdependence on back office services, such as billing and customer care, providedby Sprint PCS, and the costs we incur to obtain such services;

·                     changes oradvances in technology in general, or specifically related to Sprint and itsaffiliates;

·                     competitionin the industry and markets in which we operate;

·                     our abilityto attract and retain skilled personnel;

·                     our potentialneed for additional capital or the need for refinancing any existingindebtedness;

·                     our potentialinability to expand our services and related products in the event ofsubstantial increases in demand for these services and related products;

·                     changes ingovernment regulation;

·                     thecompetitiveness and impact of Sprint PCS’s pricing plans and PCS products andservices on us;

·                     oursubscriber credit quality;

·                     the potentialfor us to experience a continued high rate of subscriber turnover;

·                     inaccuraciesin our financial information provided to us by Sprint PCS;

·                     our failureto maintain effective internal controls to satisfy the requirements ofSection 404 of the Sarbanes-Oxley Act, which requires annual managementassessments of the effectiveness of internal control over financial reporting;

·                     our rates ofpenetration in the wireless industry and in our territories;

·                     oursignificant level of indebtedness;

·                     adequacy ofbad debt and other reserves;

·                     ouranticipated future losses;

·                     oursubscriber purchasing patterns;

·                     subscribersatisfaction with our network and operations, including with services providedto us by Sprint, such as billing and customer care;

·                     availabilityof an adequate supply of subscriber equipment to Sprint PCS and to usspecifically;

·                     risks relatedto future growth and expansion, including subscriber growth;

·                     generaleconomic and business conditions;

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·                     additionalterrorist attacks; and

·                     effects ofmergers and consolidations within the wireless telecommunications industry,particularly business combinations involving Sprint Nextel or affiliates ofSprint Nextel, and unexpected announcements or developments from others in thewireless telecommunications industry.

**NewAccounting Pronouncements**

In February 2007, the Financial AccountingStandards Board (“FASB”) issued SFAS No. 159, “The Fair Value Option forFinancial Assets and Financial Liabilities” (“SFAS No. 159”), to permitall entities to choose to elect, at specified election dates, to measureeligible financial instruments at fair value. An entity shall report unrealizedgains and losses on items for which the fair value option has been elected inearnings at each subsequent reporting date, and recognize upfront costs andfees related to those items in earnings as incurred and not deferred. SFASNo. 159 applies to fiscal years beginning after November 15, 2007,with early adoption permitted for an entity that has also elected to apply theprovisions of SFAS No. 157, “Fair Value Measurements.” An entity isprohibited from retrospectively applying SFAS No. 159, unless it choosesearly adoption. SFAS No. 159 also applies to eligible items existing atNovember 15, 2007 (or early adoption date). We are still evaluating theimpact of the implementation of SFAS No. 159 on our financial position, resultsof operations or cash flows.

In September 2006, the FASB issued Statement 157, FairValue Measurements, which defines fair value, provides guidelines for measuringfair value and expands disclosure requirements. Statement 157 does not require any new fair value measurement butapplies to the accounting pronouncements that require or permit fair valuemeasurement.  Statement 157 is effectivefor fiscal years beginning after November 15, 2007. We do not anticipate thatthe implementation of Statement 157 will have a material impact on ourfinancial position, results of operation, or cash flows.

In July 2006,the FASB issued Interpretation No. 48, “Accounting for Uncertainty inIncome Taxes” (“FIN 48”), which is effective for fiscal years beginning afterDecember 15, 2006. FIN 48 clarifies the accounting for uncertainty inincome taxes recognized in the financial statements in accordance with SFASNo. 109, “Accounting for Income Taxes”. FIN 48 prescribes a comprehensivemodel for how a company should recognize, measure, present, and disclose in itsfinancial statements uncertain tax positions that the company has taken orexpects to take on a tax return. We adopted FIN 48 on January 1, 2007 and itdid not have a material impact on our financial position, results of operationsand cash flows.

**Definitionsof Operating Metrics**

In this “Management’sDiscussion and Analysis of Financial Condition and Results of Operations”section, we provide certain financial measures that are calculated inaccordance with accounting principles generally accepted in the United States (“GAAP”)and as adjusted to GAAP (“non-GAAP”) to assess our financial performance. Inaddition, we use certain non-financial terms that are not measures of financialperformance under GAAP. Terms such as net subscriber additions and churn areterms used in the wireless telecommunications industry. The non-GAAP financialmeasures of average revenue per user (“ARPU”) and cost per gross addition (“CPGA”)reflect standard measures of performance commonly used in the wirelesstelecommunications industry. The non-financial terms and the non-GAAP measuresreflect wireless telecommunications industry conventions and are commonly usedby the investment community for comparability purposes. The non-GAAP financialmeasures included in this “Management’s Discussion and Analysis of FinancialCondition and Results of Operations” are reconciled below in “Reconciliation ofNon-GAAP Financial Measures” and, together with the non-financial terms, aresummarized as follows:

·                     Netsubscriber additions for the period represented is calculated as the gross newsubscribers acquired in the period less the number of subscribers deactivatedplus the net subscribers transferred in or out of our markets during theperiod.

·                     Averagemonthly churn is a measure of the rate at which subscribers based in ourterritory deactivate service on a voluntary or involuntary (credit-related)basis. We calculate average monthly churn based on the number of subscribersdeactivated during the period (net of transfers out of our territory and thosewho deactivated within 30 days of activation) as a percentage of ouraverage monthly subscriber base during the period divided by the number ofmonths during the period.

·                     ARPU,or average revenue per user, is a measure of the average monthly servicerevenue earned from subscribers based in our territory. This measure iscalculated by dividing subscriber revenues in our consolidated statement ofoperations by the number of our average monthly subscribers during the perioddivided by the number of months in the period.

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·                     CPGA,or cost per gross addition, is a measure of the average cost we incur to add anew subscriber in our territory. These costs include handset subsidies on newsubscriber activations, commissions, rebates and other selling and marketingcosts. We calculate CPGA by dividing (a) the sum of cost of products soldless product sales revenues associated with transactions with new subscribers,and selling and marketing expenses, net of stock-based compensation expense,during the measurement period, by (b) the total number of subscribers activatedin our territory during the period.

·                     Licensedpopulation represents the number of residents in the markets in our territoryfor which we have an exclusive right to provide wireless mobilitycommunications services under the Sprint brand name. The number of residentslocated in our territory does not represent the number of wireless subscribersthat we serve or expect to serve in our territory.

·                     Coveredpopulation represents the number of residents covered by our portion of thewireless network of Sprint. The number of residents covered by our network doesnot represent the number of wireless subscribers that we serve or expect toserve in our territory.

In this “Management’sDiscussion and Analysis of Financial Condition and Results of Operations,”unless the context indicates otherwise, all references to “subscribers” or “customers”and other operating metrics mean subscribers or customers excluding subscribersof resellers known as Mobile Virtual Network Operators, or MVNOs, that use ournetwork and resell wireless service under private brands.

**BusinessOverview**

As a PCS Affiliateof Sprint, we have the exclusive right to provide digital wireless personalcommunications services, or PCS, under the Sprint brand name in 80 marketsincluding markets in Illinois, Michigan, Pennsylvania, New York, Indiana, Iowa,Ohio and Tennessee. The territory includes key markets such as Grand Rapids(MI), Fort Wayne (IN), the Tri-Cities region of Tennessee (Johnson City,Kingsport and Bristol), Scranton (PA), Saginaw-Bay City (MI), and the QuadCities region of Illinois and Iowa (Bettendorf and Davenport, IA, and Molineand Rock Island, IL). We own and are responsible for building, operating andmanaging the portion of the 100% digital, 100% PCS wireless network of Sprint PCSlocated in our territory. We offer national calling plans designed by SprintPCS as well as local plans tailored to our markets. Our PCS network is designedto offer a seamless connection with the wireless network of Sprint PCS. Wemarket Sprint PCS products and services through a number of distributionoutlets located in our territory, including our company-owned retail stores,co-branded dealers, major national retailers and local third partydistributors. As of March 31, 2007, our licensed territory had a totalpopulation of approximately 15.0 million residents, of which our wirelessnetwork covered approximately 11.4 million residents, and we hadapproximately 590,900 subscribers.

We recognizerevenues from the provision of wireless telecommunications services to oursubscribers, proceeds from the sale of handsets and accessories throughchannels controlled by us and roaming fees. Sprint PCS retains 8% of allservice revenue collected from our subscribers (not including product sales orroaming charges billed to our subscribers) and 8% of all fees collected fromother wireless service providers when their subscribers roam onto our network.We report the amount retained by Sprint PCS as an operating expense. Inaddition, Sprint PCS bills our subscribers for taxes, handset insurance andUniversal Service Fund charges which we do not record. Sprint PCS collectsthese amounts from the subscribers and remits them to the appropriate entity.

***Relationship with Sprint***

Our relationshipwith Sprint is the most significant relationship we have. The terms of ourrelationship are set forth in our affiliation agreements with Sprint PCS.Pursuant to these affiliation agreements, we agreed to offer PCS services usingSprint’s spectrum under the Sprint brand name on a wireless network built andoperated at our own expense. We believe that our strategic relationship withSprint PCS provides significant competitive advantages. In particular, webelieve that our affiliation agreements with Sprint PCS allow us to offer highquality, nationally branded wireless voice and data services for lower cost andlower capital requirements than would otherwise be possible.

Sprint’s mergerwith Nextel, which closed in August, 2005, has thrust our relationship withSprint into a state of uncertainty, the resolution of which may have a materialadverse effect on our business. As discussed in “—Commitments and Contingencies”below, Sprint’s merger with Nextel has been the subject of two separatelawsuits that we filed against Sprint in July 2005. Although we havereceived final orders in both lawsuits, Sprint has appealed the Illinois order.

 

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Accordingly, the final outcome of the dispute is stillunknown pending appeal. In addition to our complaints, a number of other PCSAffiliates of Sprint also filed complaints against Sprint, Sprint PCS andNextel, including AirGate PCS (a wholly owned subsidiary of AlamosaHoldings, Inc.), UbiquiTel, Inc., U.S. Unwired, Inc., Gulf CoastWireless, Inc., Enterprise Communications Partnership and Northern PCSServices, LLC. With the exception of Northern PCS, whose complaint remainsoutstanding, Sprint has acquired each of these other PCS Affiliates of Sprintand the complaints have been dismissed.

We do not know thefinal outcome of our litigation against Sprint. If we do not prevail, Sprintmay engage in conduct that has a material adverse effect on our business andoperations. We intend to continue to enforce our rights to the fullest extent,but there is no assurance that we will prevail.

Effective January1, 2007, Sprint increased its rates for certain back-office services Sprintprovides to us.  We strongly disagreewith these rates and have submitted the matter to arbitration.  Likewise, Sprint also decreased thereciprocal roaming rates we receive for voice and data when subscribers ofSprint PCS and other PCS Affiliates of Sprint roam onto our network.  We strongly disagree with Sprint’s newroaming rates and plan to vigorously oppose them, including by submitting thematter to arbitration or litigation if necessary. See discussion belowregarding both these rate issues with Sprint in “—Commitments and Contingencies.”

 **ConsolidatedResults of Operations**

***Summary***

For thethree months ended March 31, 2007 and 2006, our net loss was $19.1 million and$17.0 million, respectively.  The highernet loss for the three months ended March 31, 2007 was due primarily to highersubscriber acquisition costs and a 49% lower roaming margin from Sprint.  The higher subscriber acquisition costs ofapproximately $7.0 million reflected the substantial increase in grossadditions for the quarter, growing from 57,400 for the three months ended March31, 2006 to 75,700 for the three months ended March 31, 2007.  The lower roaming margin was due to the lowerreciprocal roaming rates with Sprint and a $4.5 million increase in 3G roamingdata expense paid to Sprint.  Theincrease in data expense was the result of higher kilobyte usage by oursubscribers despite the lower reciprocal rate. These increased costs were partially offset with lower depreciation andamortization costs.

 Presented below is more detailed comparativedata and discussion regarding our consolidated results of operations for thethree months ended March 31, 2007 versus the three months ended March 31, 2006.

***For the Three Months Ended March 31, 2007 compared to theThree Months Ended March 31, 2006***

Results of operationsfor any period less than one year are not necessarily indicative of results ofoperations for a full year.

Management usesseveral key performance metrics to analyze the operations of our business.Below is a table setting forth the metrics that we use for the relevant timeperiods:
| ** **                | ** ** | **As of and For the  Three Months Ended  March 31, 2007** | ** ** | **As of and For the  Three Months Ended  March 31, 2006** | ** ** |
|---------------------------|------------|---------------------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------|------------|
| Total  Subscribers        |       | 590,900                                                                                           |       | 508,300                                                                                           |       |
| Net Subscriber  Additions |       | 29,700                                                                                            |       | 13,000                                                                                            |       |
| Churn                     |       | 2.3                                                                                               | %          | 2.6                                                                                               | %          |
| ARPU                      |       | $                                                                                                 | 49.30      |                                                                                              | $          | 50.10 |   |
| CPGA                      |       | $                                                                                                 | 371        |                                                                                              | $          | 369 |   |

 

***Net Subscriber Additions.***     Netsubscriber additions increased by 16,700, or 129%, in the three months endedMarch 31, 2007 compared to the three months ended March 31, 2006. In 2007,strong handset promotions, an increased number of net ported-in subscribersfrom other wireless carriers, and an increase of 29 exclusive co-branded dealerlocations helped to drive new subscriber growth while the effectiveness offamily add-a-phone plans helped to reduce churn, both of which contributed tothe increase in net subscriber additions in the three months ended March 31,2007 compared to the same period in 2006.

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***Churn.***     Churnfor the three months ended March 31, 2007 of 2.3% decreased from 2.6% for thethree months ended March 31, 2006 due to improvements in both voluntary churnand churn from credit-related deactivations. At March 31, 2007 approximately90% of our subscribers were under contract compared to 88% at March 31, 2006.

***Average Revenue Per User.***     ARPUfor the three months ended March 31, 2007 compared to the same three months in2006 decreased by $0.80.  We continue toexperience decreasing voice revenue offset by increasing data revenue. Averagemonthly voice revenue per subscriber decreased 6% from $42.51 in the threemonths ended March 31, 2006 compared to $40.10 in the three months ended March31, 2007 which can be partially attributed to the continued growth of thefamily add-a-phone plans.  While thesecustomers are not as likely to switch to another wireless company, or churn,their average revenue per user is lower due to the lower monthly recurringcharge on add-a- phone rate plans. Average monthly data revenue increased from $7.25 in the three monthsended March 31, 2006 to $9.04 for the three months ended March 31, 2007. Datarevenue continues to increase due to the popularity of our data products,including text messaging, downloading ringers, taking and receiving pictures,playing games and browsing the Internet.

***Cost Per Gross Addition.***     CPGAincreased slightly from $369 for the three months ended March 31, 2006 to  $371 for the three months ended March 31,2007.  Due to a 32% increase in grossadditions in the three months ended March 31, 2007 compared to this same periodin 2006, fixed costs for gross additions dropped $31 per addition while thevariable costs of commissions and subsidy costs increased $33 per grossaddition in the three month period ended March 31, 2007 compared to 2006. AtMarch 31, 2007, we operated 38 retail stores and managed 94 exclusiveco-branded dealers compared to 38 retail stores and 65 exclusive co-brandeddealers at March 31, 2006.

***Reconciliation of Non-GAAP Financial Measures (All Revenuesand Expenses in Thousands)***

Weutilize certain financial measures that are not calculated in accordance withGAAP to assess our financial performance. A non-GAAP financial measure isdefined as a numerical measure of financial performance that (a) excludesamounts, or is subject to adjustments that have the effect of excluding amounts,that are included in the comparable measure calculated and presented inaccordance with GAAP in the statement of income or statement of cash flows; or(b) includes amounts, or is subject to adjustments that have the effect ofincluding amounts, that are excluded from the comparable measure so calculatedand presented. The non-GAAP financial measures discussed in “—Results ofOperations” are ARPU and CPGA. A description of each of these non-GAAPfinancial measures is provided in “—Definition of Operating Metrics.” Thefollowing tables reconcile the non-GAAP financial measures with ourconsolidated financial statements presented in accordance with GAAP, excludingsubscriber data:
| ** **           | ** **   | **For the Three  Months Ended  March 31,  2007** | ** **   | **For the Three  Months Ended  March 31,  2006** | ** **   |
|----------------------|--------------|----------------------------------------------------------------------|--------------|----------------------------------------------------------------------|--------------|
| ***ARPU***           | *** *** | *** ***                                                         | *** *** | *** ***                                                         | *** *** |
| Service revenue      |         | $                                                                    | 85,021       |                                                                 | $            | 75,406 |   |
| Average  subscribers |         | 574,823                                                              |         | 501,705                                                              |         |
| ARPU                 |         | $                                                                    | 49.30        |                                                                 | $            | 50.10 |   |

 

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ARPU,which is utilized by most wireless companies to determine recurring monthlyrevenue on a per subscriber basis, is used by analysts and investors to comparerelative subscriber revenue across the wireless industry. We use ARPU to assistin evaluating past selling performance and the success of specific rate planpromotions. We also use ARPU as a basis to forecast future service revenues.
| ** **                                      | ** **   | **For the Three  Months Ended  March 31,  2007** | ** **   | **For the Three  Months Ended  March 31,  2006** | ** **   |
|-------------------------------------------------|--------------|----------------------------------------------------------------------|--------------|----------------------------------------------------------------------|--------------|
| ***CPGA***                                      | *** *** | *** ***                                                         | *** *** | *** ***                                                         | *** *** |
| Selling and  Marketing:                         |         | $                                                                    | 20,574       |                                                                 | $            | 16,760 |   |
| plus: Equipment costs, net of cost of upgrades  |         | 10,250                                                               |         | 6,905                                                                |         |
| less: Equipment revenue, net of upgrade revenue |         | (2,577                                                               | )            | (2,421                                                               | )            |
| less: Stock-based compensation expense          |         | (147                                                                 | )            | (69                                                                  | )            |
| CPGA costs                                      |         | $                                                                    | 28,100       |                                                                 | $            | 21,175 |   |
| Gross adds                                      |         | 75,658                                                               |         | 57,385                                                               |         |
| CPGA                                            |         | $                                                                    | 371          |                                                                 | $            | 369 |   |

 

CPGA is utilizedby most wireless companies to determine their cost to acquire a new subscriber.CPGA is used by analysts and investors to compare us to other wirelesscompanies. We use CPGA to evaluate past selling performance, the success ofspecific promotions and as a basis to determine the amount of time we mustretain a new subscriber before we recover this cost. In addition, we use CPGAas a basis for budgeting.

***Revenues.***

Thefollowing table sets forth a breakdown of revenues by type:
| ** **                                                                         | ** ** | **For the Three  Months Ended  March 31,  2007** | ** ** | **For the Three  Months Ended  March 31,  2006** | ** ** |
|------------------------------------------------------------------------------------|------------|----------------------------------------------------------------------|------------|----------------------------------------------------------------------|------------|
|                                                                               |       |                                                                 |       |                                                                 |       |
| Service revenue                                                                    |       | $                                                                    | 85,021     |                                                                 | $          | 75,406 |   |
| Roaming revenue  from subscribers of Sprint PCS and other PCS affiliates of Sprint |       | 26,518                                                               |       | 28,717                                                               |       |
| Roaming revenue  from other wireless carriers                                      |       | 2,336                                                                |       | 2,088                                                                |       |
| Reseller revenue                                                                   |       | 4,107                                                                |       | 2,822                                                                |       |
| Equipment  revenue                                                                 |       | 2,859                                                                |       | 3,447                                                                |       |
| Other revenue                                                                      |       | 12                                                                   |       | 5                                                                    |       |
| Total revenues                                                                     |       | $                                                                    | 120,853    |                                                                 | $          | 112,485 |   |

 

·                    ***Service revenue.***   Servicerevenue is comprised of the monthly recurring charges for voice and data usageand the monthly non-recurring charges for voice and data minutes over plan,long distance, roaming usage charges, other feature revenues and late paymentfee and early cancellation fee revenues. Deductions for billing adjustments andpromotional credits are recorded as a reduction to service revenue. For thethree months ended March 31, 2007 compared to the three months ended March 31,2006, service revenue increased by $9.6 million, or 13%, with the increasein average subscribers contributing a $10.8 million increase in revenue offsetwith a decrease of $1.2 million due to the decrease in ARPU.

·                    ***Roaming revenue from subscribers ofSprint PCS and other PCS Affiliates of Sprint.***   We receiverevenue on a per minute basis for voice traffic and per kilobyte basis for datatraffic when subscribers of Sprint PCS and other PCS Affiliates of Sprintuse our network.  In addition, we receive toll revenue for any longdistance calls made by these subscribers while roaming on our network. For thethree months ended March 31, 2006, the reciprocal roaming rate for inbound andoutbound roaming was $0.058 per minute for voice traffic ($0.10 per minute incertain markets in eastern and western Pennsylvania) and $0.0020 per kilobytefor data traffic. These rates were in effect through December 31, 2006;provided, however that the special rate for certain of our Pennsylvania marketswill terminate on the earlier to occur of December 31, 2011 or the date that weachieve a subscriber penetration rate of at least 7% of our covered populationin these markets. Effective January 1, 2007, these rates were reset to 

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$.0403 per minute for voice traffic and $.001 per kilobyte for datatraffic. For the three months ended March 31, 2007 compared to the three monthsended March 31, 2006, roaming revenue from subscribers of Sprint PCS and otherPCS Affiliates of Sprint decreased by $2.2 million, or 8%.  Voice roamingrevenue decreased by $3.9 million due mainly to the decrease in the rate offsetwith a 3% increase in minutes of use. Data roaming revenue increased by $1.7 millions due mainly to a 150%increase in data usage. We continue to experience increased growth in kilobytedata usage from subscribers of Sprint PCS and other PCS Affiliates of Sprint asmore subscribers utilize data products with their handsets. Roaming minutes andkilobytes from subscribers of Sprint PCS and other PCS Affiliates ofSprint for the three months ended March 31, 2007 were 0.4 billion and6.3 billion, respectively, compared to 0.4 billion and 2.5 billion for thethree months ended March 31, 2006, respectively.

·                    ***Roaming revenue from other wirelesscarriers.***   We receive roaming revenue from wirelesscarriers other than Sprint and other PCS Affiliates of Sprint when subscribersof such other wireless carriers roam in our territory. We do not haveagreements with these other wireless carriers. Instead, we rely on roamingarrangements Sprint PCS has negotiated with them. We are paid on a per minutebasis for voice traffic pursuant to these agreements.  For the threemonths ended March 31, 2007 compared to the three months ended March 31, 2006,roaming revenue from other wireless carriers increased by $0.2 million, or 12%. For the three months ended March 31, 2007, roaming minutes were42.3 million compared to 19.0 million for the same period in2006.  The average per minute ratedecreased from $0.11 per minute for the three months ended March 31, 2006 to$0.06 per minute for the three months ended March 31, 2007.  Roaming minutes increased while the averageper minute rate decreased due mainly to a new roaming agreement Sprint signedwith Alltel in mid-2006.  This agreementhas increased the number of roaming minutes we receive from Alltel, but at arate significantly lower than what we had received in the first quarter of2006.

·                    ***Reseller revenue.***   ThroughSprint PCS we allow resellers, known as MVNOs, such as Virgin Mobile, to useour network. Pursuant to these arrangements, we are paid on a per minute andper kilobyte basis. For the three months ended March 31, 2007 compared to thethree months ended March 31, 2006, reseller revenue increased$1.3 million, or 46%, due mainly to a 32% increase in resellersubscribers.  At March 31, 2007, we hadapproximately 245,200 reseller subscribers compared to approximately 185,500 atMarch 31, 2006.

·                     ***Equipment revenue.***   Equipmentrevenue is derived from the sale of handsets and accessories to new customersand from current customers who upgrade their handsets through our retail andlocal distribution channels, in each case, net of sales incentives, rebates andan allowance for returns. Through June 18, 2006, our handset return policyallowed customers to return their handsets for a full refund within14 days after the date of purchase. With respect to handsets sold aftersuch date, we allow customers to return their handsets for a full refund within30 days after the date of purchase.  Forthe three months ended March 31, 2007 compared to the three months ended March31, 2006, equipment revenue decreased by $0.6 million due mainly to lowerequipment revenue related to upgrades.

·                     ***Other revenue.***   Forthe three months ended March 31, 2007, other revenue consisted of equipmentleasing revenue and restocking fees for handsets returned by our exclusiveco-branded dealers.  For the three monthsended March 31, 2006, other revenue consisted entirely of restocking fees forhandsets returned by our exclusive co-branded dealers.

***Cost of Service and Roaming.***   Costof service and roaming includes network operations expense, roaming expenserelating to when our subscribers roam either on other Sprint PCS networks orother wireless carriers’ networks, back-office customer services provided bySprint PCS, the provision for doubtful accounts, long distance expense, the 8%affiliation fee due to Sprint PCS for collected revenues and stock-basedcompensation expense. Network operations expenses include salaries and benefitsfor network personnel, cell site rent, utilities and maintenance expenses, feesrelating to the connection of our cell sites to our switches and othertransport and facility expenses. Roaming expense is our cost of our subscribersusing Sprint PCS and other wireless carriers’ networks. Roaming expense onthe Sprint PCS network is at the reciprocal rates as described above under “—Roamingrevenue from subscribers of Sprint PCS and other PCS Affiliates of Sprint.”Roaming expense when our subscribers use other wireless carriers networks is atrates as determined by the roaming agreements signed by Sprint PCS withthese other wireless carriers. Cost of service and roaming was $73.4 millionfor the three months ended March 31, 2007 compared to $65.0 million for thethree months ended March 31, 2006. Of this $8.4 million increase, $2.8 million,or 34% of the total increase was due to higher average subscribers coupled withan increased  cash cost per user feecharged by Sprint.  Effective January 1,2007, this rate increased from $6.75 per subscriber per month to $7.50 persubscriber per month. In the three months ended March 31, 2007 compared to2006, bad debt expense increased $1.3 million due to higher average write-offsand an overall deterioration of our customer aging. Roaming expense with 

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Sprint increased $1.1million; however voice roaming expense decreased $3.3 million due to thedecrease in the reciprocal rate with Sprint, while data roaming expenseincreased $4.5 million due to a 285% increase in kilobyte usage in the threemonths ended March 31, 2007 compared to this same period in 2006.  The remaining increase was due to the relatedcosts of servicing a larger network and larger subscriber base.

At March 31, 2007,our network consisted of 1,621 leased cell sites and five switches.  At March 31, 2006, our network consisted of1,515 cell sites and five switches.

***Cost of Equipment.***   Cost ofequipment includes the cost of handsets and accessories sold or upgraded fromour retail and local distribution channels. Cost of equipment for the threemonths ended March 31, 2007 and the three months ended March 31, 2006 was$13.2 million and $9.5 million, respectively, an increase of $3.7million.  Cost of equipment for newactivations increased $3.3 million, or 48%, in the three months ended March 31,2007 compared to the same period in 2006 due to a 48% increase in activationsfrom our retail and local distribution channels. The remaining increase was dueto higher equipment costs related to upgrades.

***Selling and Marketing.  ***Sellingand marketing expense includes the costs to operate our retail stores,advertising and promotional expenses, commissions, equipment subsidies andrebate expenses relating to new subscriber additions from national thirdparties and other Sprint-controlled channels and stock-based compensationexpense. Selling and marketing expense for the three months ended March 31,2007 and March 31, 2006 was $20.6 million and $16.8 million, respectively.  The increase of $3.8 million was due tohigher variable costs related to handset subsidy, commissions and fees paid toSprint for each new activation, all of which totaled $3.2 million.  This increase was a direct result of a 32%increase in subscriber additions in the three months ended March 31, 2007compared to 2006. For the three months ended March 31, 2007 compared to thethree months ended March 31, 2006, salaries and benefits increased $0.5 milliondue to 34 additional employees hired to support the growth in our retail andexclusive branded dealer channels.

***General and Administrative.  ***Generaland administrative expenses include administrative salaries and benefits, legalfees, insurance expense, other professional expenses and stock-basedcompensation expenses.  For the three months ended March 31, 2007, generaland administrative expenses totaled $6.9 million compared to $7.1 million forthe three months ended March 31, 2006, a decrease of $0.2 million or 3%.  Results for the three months ended March 31,2006 included approximately $0.1 million in merger integration expenses and$3.1 million in Sprint litigation expenses. This compares to $0 and $0.7 million, respectively, for the three monthsended March 31, 2007.   Stock-basedcompensation expense included in general and administrative totaledapproximately $1.7 million for the three months ended March 31, 2007compared to $0.4 million for the three months ended March 31, 2006.  Included in the stock-based compensationexpense of $1.7 million for the three months ended March 31, 2007 was $0.6million related to a modification to option award agreements held by our formerchief operating officer in connection with his separation in January 2007.  In the three months ended March 31, 2007, wealso incurred $0.4 million of severance expense related to this termination.

***Depreciation and Amortization.  ***Forthe three months ended March 31, 2007 and March 31, 2006, depreciation andamortization expense totaled $19.4 million and $23.9 million,respectively. Of these amounts, amortization of intangibles totaled$7.6 million and $9.5 million for these same periods, respectively.At December 31, 2006, the intangible asset related to the iPCS Wirelesssubscriber base was fully amortized which decreased the amortization in 2007.Depreciation expense totaled $11.8 million for the three months ended March 31,2007 compared to $14.4 million for the three months ended March 31, 2006, adecrease of  $2.6 million.  During the three months ended March 31, 2006,we recorded additional depreciation expense of $2.1 million  due to a reduction in the remaining usefullives of Motorola equipment being replaced in the Pennsylvania, Maryland, NewYork and New Jersey markets.

***Interest Income.  ***For threemonths ended March 31, 2007 and the three months ended March 31, 2006, interestincome totaled $1.5 million and $1.2 million, respectively. The increasewas due to higher average invested cash balances and higher average yieldsearned on invested funds for the three months ended March 31, 2007 compared tothe three months ended March 31, 2006.

***Interest Expense.***   For the threemonths ended March 31, 2007 and 2006, interest expense was $8.0 million and$8.1 million, respectively.  Interestexpense consists of interest on our 11-1/2% senior notes and 11-3/8% seniornotes, net of capitalized interest. In the three months ended March 31, 2007,we capitalized interest of approximately $0.2 million compared to $47,000 inthe three months ended March 31, 2006.

 

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**`               Liquidity and Capital Resources**

On April 23, 2007, we closed our offering of $475million in aggregate principal amount of senior secured notes, consisting of$300 million in aggregate principal amount of First Lien Senior SecuredFloating Rate Notes (“First Lien Notes”) due 2013 and $175 million in aggregateprincipal amount of Second Lien Senior Secured Floating Rate Notes (“SecondLien Notes” and together with the First Lien Notes, the “Secured Notes”) due2014 in a private placement transaction pursuant to Rule 144A and Regulation Sunder the Securities Act of 1933, as amended. The Secured Notes are seniorsecured obligations and are unconditionally guaranteed on a senior securedbasis by all of our existing and future domestic restricted subsidiaries.

Interest on the First Lien Notes will accrue at anannual rate equal to three-month LIBOR plus 2.125% and will be payablequarterly in cash in arrears on February 1, May 1, August 1, November 1 of eachyear, commencing on August 1, 2007. Interest on the Second Lien Notes will accrue at an annual rate equal tothree-month LIBOR plus 3.25% and will be payable quarterly in arrears onFebruary 1, May 1, August 1, November 1 of each year, commencing on August 1,2007.  Following the first interestpayment on August 1, 2007, we may elect to pay interest on the Second Lien Notes entirely in cash (“CashInterest”) or entirely by increasing the principal amount of the Second LienNotes (“PIK Interest”). PIK Interest on the Second Lien Notes will accrue at anannual rate equal to three-month LIBOR plus 4.0%.

We used a portion of the proceeds of the Secured Notes offering torepurchase all of our outstanding 11 1⁄2% notes and 11 3/8% notes, as well as topay the related fees and expenses of the offering.  We also intend to use the remaining netproceeds from the Secured Notes offering, together with approximately $58.0 millionof our available cash, to pay a special cash dividend to common stockholders.On April 26, 2007, our Board of Directors declared a special cash dividend of$11.00 per share, or approximately $187.0 million in the aggregate,payable to all holders of record  of ourcommon stock on May 8, 2007.  Thedividend will be paid on May 16, 2007.

After this dividend payment, we will be completely dependent on availablecash on hand and operating cash flow to operate our business and fund ourcapital needs.  We believe our availablecash and operating cash flow will be sufficient to operate our business andfund our capital needs for the foreseeable future.  However, our liquidity is dependent on anumber of factors influencing our forecast of earnings and operating cashflows, including those discussed below in -“Recent Trends, Risks andUncertainties That May Affect Operating Results, Liquidity and CapitalResources”.

***Significant Sources of Cash***

We generated$0.6 million in operating cash flows for the three months ended March 31,2007, compared to $11.3 million for the three months ended March 31, 2006,a decrease of $10.6 million. The decrease was due to higher net losses and adecrease in non-cash items of $4.1 million, an increase in net working capitalfrom Sprint of $4.1 million, offset with a decrease in other working capitalitems of $10.6 million.

For the threemonths ended March 31, 2007 we received $1.7 million in proceeds from theexercise of options representing approximately 108,500 shares.   This is compared to $1.0 million in proceedsfrom the exercise of options representing approximately 43,100 shares in thethree months ended March 31, 2006  Inaddition, for the three months ended March 31, 2006, we received approximately$0.2 from the sale of used equipment.

***Significant Uses of Cash***

Cash flows usedfor investing activities for the three months ended March 31, 2007 included$7.3 million for capital expenditures.  Included in this total was$5.7 million for new cell site construction and other network-relatedcapital expenditures including $2.7 million for EVDO Rev. A equipment, and$1.6 million for new stores, store improvements,  IT and other corporate-related capitalexpenditures.

Cash flows usedfor investing activities for the three months ended March 31, 2006 included$8.4 million for capital expenditures. Included in this total was $5.1 million for the Nortel swap in ourHorizon PCS markets, $1.5 million for new cell site construction and otherrelated network capital expenditures, $0.8 million for new store and storeimprovements and $1.0 million for IT and other corporate-related capitalexpenditures.

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Principal paymentson the Secured Notes discussed above  arenot due until 2013 and 2014.  However, we expect that our annual cashinterest payments will increase as a result of the larger principal amount ofthe Secured notes.  In addition, theinterest rates on our new notes are variable, and the amount of our interestpayments will be impacted by a change in interest rates.

***Recent Trends, Risks and Uncertainties ThatMay Affect Operating Results, Liquidity and Capital Resources***

We have identifiedthe following important trends and factors (as well as risks and uncertaintiesassociated with such items) that could impact our future financialperformance.  This section should be read in conjunction with the “RisksRelated to Our Business, Strategy and Operations” section found in Item 1Aof Part I of our annual report on Form 10-K, filed with the SEC onMarch 16, 2007 as updated by our risk factors included in Item 1A of Part II ofthis quarterly report.

·        Tothe extent that we continue to seek to accelerate our subscriber additions, wewill incur significant upfront subscriber acquisition expenses (including thecustomer handset subsidy, commissions and promotional expenses) that initiallywill result in increased losses and reduced levels of cash flows from operatingactivities. In the three months ended March 31, 2007, we incurred $7.0 millionmore of subscriber acquisition costs compared to the same period in 2006 due to32% more gross additions.  At the sametime, competition in the wireless industry remains intense as more competitorsenter the market via MVNO or other relationships with existing carriers, orthrough the acquisition of new wireless spectrum, such as the FCC’s AdvancedWireless Services (AWS) spectrum auction in 2006 and additional auctions ofspectrum.  Unlimited minute and pre-paid plans, neither of which wecurrently offer, also continue to increase in popularity, offering consumersmore alternatives.  Accordingly, we may incur higher per subscriberacquisition expenses and/or offer more aggressive rate plans in order tomaintain or achieve our planned growth.  Alternatively, we may not be ableto maintain or achieve our planned growth in subscribers or obtain sufficientrevenue to achieve and sustain profitability.

·        We may experience a highchurn rate, which may be increasing in the future due to credit-relateddeactivatons, increased competitive advertising, the relative attractiveness ofcompetitors’ phones and pricing plans and continuing brand confusion related tothe Sprint Nextel merger.   While our churn decreased in the threemonths ended March 31, 2007 compared to the same period in 2006, it is stillhigher than our competition.  If churncontinues to remain high or increases over the long-term, we would lose thecash flows attributable to these subscribers and have greater than projectedlosses.

·         The voice portion of ARPU continues to decrease. The wirelessindustry is very competitive and continued pressure in pricing is expected inthe future as a result of, among other things, increased focus on family plans.Although we believe that family plans should improve churn, these plans tend tolower voice revenue on a per subscriber basis. Although the data portion ofARPU continues to partially offset the decrease in voice ARPU, and is expectedto continue to do so, declining voice ARPU resulting in lower overall ARPU willmake it more difficult to obtain sufficient revenue to achieve or sustainprofitability.

·         We may experience higher costs to acquire subscribers. To the extentthat we increase our distribution, we will increase the fixed costs in oursales and marketing organization. In addition, we may increase our marketingexpenses and pay higher commissions in an effort to attract and acquire newsubscribers. Also, more aggressive promotional efforts may lead to higherhandset subsidies. With a higher CPGA, subscribers must remain our subscribersfor a longer period of time at a stable ARPU for us to recover thoseacquisition costs.

·         Our operating costs continue to increase due to our larger number ofsubscribers served, the increased size of our PCS network, increases in roamingusage by subscribers based in our territory and an increase in collectedrevenue, upon which our 8% affiliation fee is calculated. If our subscriberbase continues to increase, our operating costs will continue toincrease. Our bad debt expense has been increasing and, to the extent thatour subscriber base includes a higher number of sub-prime credit subscribers,may continue to increase in the future. In addition, we may incur significantwireless handset costs for existing subscribers who upgrade to a new handset aspart of our promotional efforts to reduce churn. Outbound roaming kilobyteshave been growing rapidly and are expected to continue to grow reflectingincreased usage of data applications, thereby increasing our roaming expenses.As also discussed below in “—Commitments and Contingencies,” the costs we incurfor certain back office services we obtain from Sprint increased on January 1,2007. We expect to continue to incur 

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substantial costs related to our litigationand arbitration with Sprint. At the same time, a large portion of our ongoingnetwork and general and administrative expenses are fixed. We believe that weneed to add more subscribers to recognize increased economies of scale in ourbusiness. If we are unable to add more subscribers or continue to improve theefficiencies in our operating costs, results will be negatively affected.

·         A substantial portion of our revenue (approximately 27% for thethree  months ended March 31, 2007) isderived from roaming revenue from subscribers of Sprint PCS based outside ourterritory. Despite an increase in roaming voice minutes of use and roaming datakilobytes of use, our roaming revenue from Sprint PCS for the three monthsended March 31, 2007 was negatively impacted by a lower reciprocal roamingrate that went into effect on January 1, 2007. In addition, there has beena significant slow down in Sprint PCS’s subscriber growth during the past 18months which may adversely affect the growth in our roaming revenue from SprintPCS, thereby reducing our ratio of  inbound to outbound roaming. Thisratio declined in the first quarter of 2007 as compared to the same period in2006 as well as a similar decrease in calendar year 2006, as compared to fiscalyear 2005.  We expect it to continue todecline in the future, as well. If we receive less roaming traffic on ournetwork, our results of operations will be negatively affected.

·        As we continue to add capacity and coverage and to upgrade our PCSnetwork, we will incur significant capital expenditures. We incurredapproximately $44.5 million in capital expenditures in the fiscal year endedDecember 31, 2006. In the three months ended March 31, 2007, we incurred$7.3 million in capital expenditures.  Weanticipate that total capital expenditures for 2007 will be between $38.0million and $42.0 million, of which, approximately $10.0 million will be spentfor EVDO Rev. A deployment. Prior to 2007, we have deployed EV-DO technology ina small portion of our service area. During the first half of 2007 we will beselectively deploying additional EV-DO Rev. A technology but we may decide toexpand our deployment during the year which may significantly increase ouranticipated capital expenditures and operating expenses beyond our currentplans. Unforeseen changes in technology and changes in our plans to upgrade orexpand our network may require us to spend more money than we expected and havea negative effect on our cash flow.

·         We rely on Sprint for anumber of important functions, including but not limited to, customer service,billing, long-distance transport services, national network operations,support, inventory logistics support, national advertising, productdevelopment, and financial information. Failure of Sprint to provide these andother services on a timely and cost efficient manner would negatively impactour results of operations. Sprint may also make decisions that could reduce ourrevenues, increase our expenses and/or our capital expenditure requirements andmake our affiliate relationships with Sprint less advantageous than expected.For example, effective January 1, 2007, the rate that we pay for certainback-office functions that we purchase from Sprint increased by approximately10%. See “—Commitments and Contingencies” below.

·         We may not be able toaccess the credit or equity markets for additional capital if the liquiditydiscussed above is not sufficient for the cash needs of our business. If theneed for additional capital arises due to our actual results differingsignificantly from our business plan or for any other reason, we may be unableto raise additional capital.

***Commitments and Contingencies***

A substantialportion of our revenue is derived from roaming revenue when subscribers ofSprint PCS and other PCS Affiliates of Sprint roam onto our network.  Effective January 1, 2007, the roaming ratepaid to us by Sprint PCS and other PCS Affiliates of Sprint for voice is $0.043per minute of use for the majority of our markets, and for data is $0.001 perkilobyte in all of our markets.  Thiscompares with roaming rates in 2006 of $0.058 minute for voice and $.002 perkilobyte. These rates were fixed through December 31, 2006 and, now will changeannually to equal 90% of Sprint PCS’s retail yield for voice usage and datausage from the prior year.   Such areduction in the reciprocal roaming rates may have a material adverse effect onour business.  We expect to engage indiscussions with Sprint about its proposed rates.  We strongly disagree with Sprint’s estimatednew roaming rates and intend to vigorously oppose them, including by submittingthe matter to arbitration or litigation if necessary.  If the matter is submitted to an arbitrationpanel and the arbitration panel imposes a rate different than the one then ineffect, the new rate would be retroactively applied to the appropriate period.However, in the meantime, we began paying the new rates on January 1,2007.

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We purchase certaincustomer-related back-office services, such as customer billing and customercare, from Sprint PCS pursuant to our affiliation agreement with SprintPCS.  Depending on the type of serviceprovided, we incur these costs on either a per user basis (these services arereferred to as “CCPU services”) or on a per gross subscriber addition basis(these services are referred to as “CPGA services”).  The total cost for these services is recordedas an operating expense.  For the threemonths ended March 31, 2007 and 2006, these expenses were approximately $13.0million and $10.2 million, respectively.  Because we incur thesecosts on a per subscriber basis, we expect the aggregate cost for such servicesto increase as the number of our subscribers increases.  Our affiliationagreements with Sprint PCS set the monthly rate per subscriber charged to us bySprint for the CCPU services at $7.25 during 2004, $7.00 for 2005 and $6.75 for2006, and the per gross addition rate for the CPGA services at $23.00 for iPCSWireless and $22.00 for Horizon.  Ouraffiliation agreements with Sprint PCS provide that beginning on January 1,2007, the monthly rate for these services are reset by Sprint PCS to the amountnecessary to recover Sprint PCS’s reasonable costs for providing suchservices.  Effective January 1, 2007, thecosts we incur for the CCPU services increased from $6.75 per average monthlysubscriber to $7.50 for 2007, $7.09 for 2008 and $6.81 for 2009, and the costswe incur for the CPGA services decreased to $20.09 for 2007, $19.41 for 2008and $18.58 for 2009. Our affiliation agreements provide that, if we disagreewith Sprint on its proposed new rates, we have the right to obtain theback-office services from a third party, self-provide the services or submitthe determination of the new rates to arbitration.  We strongly disagree with Sprint’s new ratesand intend to vigorously oppose them.  Wehave engaged in discussions with Sprint about its new rates; however, we havenot been able to reach agreement on acceptable rates, and therefore, havesubmitted the matter to arbitration.  Ifthe arbitration panel imposes a rate different than the one then in effect, thenew rate would be retroactively applied to the appropriate period.  However, in the meantime, as of  January 1, 2007, we are required to pay thenew higher rate.

Although SprintPCS has not done so, it may elect to terminate any service provided under ourservices agreements upon nine months’ prior written notice, but if we wouldlike to continue receiving such service, Sprint PCS has agreed that it willassist us in developing that function internally or locating a third-partyvendor that will provide that service. Although Sprint PCS has agreed in suchan event to reimburse us for expenses we incur in transitioning to any serviceinternally or to a third-party, if Sprint PCS terminates a service for which wehave not developed or are unable to develop a cost-effective alternative, ouroperating costs may increase beyond our expectations and our operations may beinterrupted or restricted. We do not currently have a contingency plan ifSprint PCS terminates a service we currently receive from it.

On July 15, 2005,iPCS Wireless, Inc., a wholly owned subsidiary of iPCS, Inc., filed a complaintagainst Sprint and Sprint PCS in the Circuit Court of Cook County, Illinois. OnJuly 22, 2005, Horizon Personal Communications, Inc. and Bright PersonalCommunications Services, LLC, wholly owned subsidiaries of iPCS, Inc., filed acomplaint against Sprint and Sprint PCS and Nextel Communications, Inc. in theCourt of Chancery of the State of Delaware, New Castle County. The complaintsallege, among other things, that following the consummation of the mergerbetween Sprint and Nextel, Sprint will breach its exclusivity obligations underour affiliation agreements, as amended. We sought, among other things, atemporary restraining order (a TRO), a preliminary injunction and a permanentinjunction enjoining Sprint and those acting in concert with it from engagingin certain conduct post-closing that would violate our affiliation agreementswith Sprint PCS.

On July 28, 2005,iPCS, Inc. and certain of its wholly owned subsidiaries entered into aForbearance Agreement with Sprint relating to the complaints filed againstSprint. The Forbearance Agreement sets forth our agreement that we would notseek a TRO or a preliminary injunction against Sprint so long as Sprintoperates the Nextel business subject to the limitations set forth in theAgreement.  Although the ForbearanceAgreement expired on January 1, 2006 in the territory managed by iPCS Wirelessand on August 4, 2006 in the territory managed by Horizon PersonalCommunications and Bright Personal Communications Services, Sprint committed tocontinue to abide by the terms of the Forbearance Agreement in the territorymanaged iPCS Wireless during the pendency of Sprint’s appeal of the Illinoiscourt (discussed below).

The trial in theDelaware court began in January 2006.  OnAugust 4, 2006, the Delaware court issued its decision and, on September 7,2006 issued a final order and judgment effecting its decision. The final orderand judgment provides that:

·                  Sprint willviolate the implied duty of good faith and fair dealing if it offers iDENproducts and services using the same Sprint brand and marks that plaintiffs(Horizon Personal Communications and Bright Personal Communications Services)have used or are using in connection with their sale of Sprint PCS Products andServices (the “Sprint pcs brand and/or marks”) or a brand or mark confusinglysimilar to the Sprint pcs brand or marks in plaintiffs’ Service Areas.  Sprint may re-brand the legacy Nextel storesin plaintiffs’ Service Areas, but 

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it must do so in a way that does not create a likelihood of confusionin the minds of consumers as to the sponsor of the store or which products andservices are available in it, and it may not use the new Sprint logo.

·                  Withinplaintiffs’ Service Areas, Sprint and those acting in concert with it areenjoined from:

·                  offeringiDEN products and services that use the same or confusingly similar brands ormarks as the Sprint pcs brand or marks; provided that Sprint is not enjoined orotherwise prohibited from conducting national advertising offering iDENproducts and services that use the same or similar brands and marks as theSprint pcs brands or marks, subject to appropriate disclaimers regardingavailability in certain markets; and

·                  re-brandingthe legacy Nextel stores with the new Sprint logo or the same or confusinglysimilar brands or marks as the Sprint pcs brand and marks.

·                  Inlight of certain operational and confidentiality representations made bySprint, plaintiffs’ claims and requests for relief against such future Sprintbehavior were deemed not ripe for adjudication and therefore denied.  If, however, Sprint in the future breachesthese representations, the court will promptly entertain a request forappropriate relief.

·                  Plaintiffs’claims for tortious interference and civil conspiracy against Nextel weredismissed with prejudice.

The trial in theIllinois court was held for 25 days between early March and early July2006.  On August 14, 2006, the Illinoiscourt issued its decision and on September 20, 2006 issued a final ordereffecting its decision.  The final orderprovides that:

·                  Within 180 daysof the date of the final order, Sprint and those acting in concert with it mustcease owning, operating, and managing the Nextel wireless network in iPCSWireless’s territory.

·                  Sprint shallcontinue to comply with all terms and conditions of the Forbearance Agreement.

On September 28,2006, Sprint appealed the ruling of the Illinois trial court to the AppellateCourt of Illinois, First Judicial District. In early October 2006, Sprint requested a stay of the Illinois trialcourt’s order pending appeal and an accelerated appeal.  On October 13, 2006, the Illinois appellatecourt denied Sprint’s request for an accelerated appeal and ordered a stay ofthe Illinois trial court’s order pending appeal on the condition that (i)Sprint continue to comply with the Forbearance Agreement and (ii) Sprint complywith the September 7, 2006 order of the Delaware court.  Accordingly, Sprint must comply with theForbearance Agreement, as well as the order of the Delaware court, in iPCSWireless’s territory pending a decision from the Illinois appellate court.

As of the datehearof, the parties have completed the briefing stage of the appeal and areawaiting the scheduling of oral arguments followed by a decision.  The Company expects a decision from theappellate court as soon as later this year or early 2008.

***Nortel Networks Equipment Agreements***

OnDecember 29, 2006, we signed a letter of agreement with Nortel Networks topurchase EV-DO Rev. A equipment and services totaling up to $17.1 million inthe aggregate. The $17.1 million commitment consists of a non-cancelablepurchase of $8.9 million of equipment and services and an option to purchase anadditional $8.2 million of equipment and services. Prior to December 31,2006 we submitted a non-cancelable purchase order for $8.9 million of equipmentand services and, therefore, have no further commitments under this letter ofagreement. However, if we elect to exercise our option to purchase anyadditional equipment and services from Nortel Networks under this letter ofagreement, then we are required to purchase the entire additional $8.2 millionof equipment and services. In addition, if we elect to exercise this optionafter November 30, 2007, we will be required to pay an additional $1.0million.  As of March 31, 2007, we havepaid $4.1 million of the $8.9 million commitment and have received equipmenttotaling $2.2 million.

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**Off-BalanceSheet Arrangements**

Other than theoperating lease commitments included above, we have no off-balance sheetarrangements that would have a current or future material effect on thefinancial condition, changes in financial condition, revenues, expenses,results of operations, liquidity, capital expenditures or capital resources.

**Seasonality**

Our business issubject to seasonality because the wireless telecommunications industryhistorically has been dependent on fourth calendar quarter results. Among otherthings, the industry relies on moderately higher subscriber additions andhandset sales in the fourth calendar quarter as compared to the other threecalendar quarters. A number of factors contribute to this trend, including: theuse of retail distribution, which is heavily dependent upon the year-endholiday shopping season; the timing of new product and service announcementsand introductions; competitive pricing pressures; and aggressive marketing andpromotions. In addition, our roaming revenue and roaming expense is subject toseasonality because of decreased travel of wireless subscribers into ourterritory during the winter months.

**CriticalAccounting Policies**

Our financialstatements are prepared in conformity with accounting principles generallyaccepted in the United States and require us to select appropriate accountingpolicies.  The assumptions and judgments we use in applying our accountingpolicies have a significant impact on our reported amounts of assets,liabilities, revenue and expenses.  While we believe that the assumptionsand judgments used in our estimates are reasonable, actual results may differfrom these estimates under different assumptions or conditions.

We have identifiedthe most critical accounting policies upon which our financial statusdepends.  The critical policies were determined by considering accountingpolicies that involve the most complex or subjective decisions or assessments.We also have other policies considered key accounting policies; however, thesepolicies do not meet the definition of critical accounting policies becausethey do not generally require us to make estimates or judgments that arecomplex or subjective.  Our critical accounting policies include thefollowing:

·                    Revenuerecognition

·                    Allowance fordoubtful accounts

·                    Long-livedasset recovery

·                    Intangibleassets

·                    Income taxes

·                    Stock-basedcompensation expense

Additional informationregarding these critical accounting policies can be found in the “Management’sDiscussion and Analysis of Financial Condition and Results of Operations”section of our Annual Report on Form 10-K for the year ended December31, 2006, filed with the SEC on March 16, 2007.

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**ITEM3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

We do not engagein commodity futures trading activities and do not enter into derivativefinancial instrument transactions for trading or other speculative purposes. Wealso do not engage in transactions in foreign currencies that could expose usto market risk.

**ITEM4.   CONTROLS AND PROCEDURES**

Each of our ChiefExecutive Officer and Chief Financial Officer has evaluated the effectivenessof our disclosure controls and procedures (as such term is defined inRules 13a-14(c) and 15d-14(c) under the Exchange Act) as of theend of the period covered by this quarterly report. Based on such evaluation,such officers have concluded that, as of the end of the period covered by thisquarterly report, our disclosure controls and procedures are effective inalerting them on a timely basis to material information relating to us(including our consolidated subsidiaries) required to be included in ourreports filed or submitted under the Exchange Act.

We place relianceon Sprint PCS to adequately design its internal controls with respect to theprocesses established to provide financial information and other information tous and the other PCS Affiliates of Sprint. To address this issue, Sprintengages an independent registered public accounting firm to perform a periodicevaluation of these controls and to provide a “Report on Controls Placed inOperation and Tests of Operating Effectiveness for Affiliates” under guidanceprovided in Statement of Auditing Standards No. 70. This report isprovided bi-annually to us.

There have been nochanges in our internal control over financial reporting (as such term isdefined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act)during the quarter ended March 31, 2007 that have materially affected, or arereasonably likely to materially affect, our internal control over financialreporting.

 

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**PART II.   OTHERINFORMATION**

**ITEM1.   LEGAL PROCEEDINGS**

See  — “Management’sDiscussion and Analysis of Financial Condition and Results of Operations—Commitments and Contingencies” of this report.

In addition to theabove, from time to time, we are involved in various legal proceedings relatingto claims arising in the ordinary course of business.  We are not currently a party to any suchlegal proceedings, the outcome of which, individually or in the aggregate, isexpected to have a material adverse effect on our business, financial conditionor results of operations.

**ITEM1A.   RISK FACTORS**

You shouldcarefully consider the risks and uncertainties described in Part I, Item1A. Risk Factors in our Annual Report on Form 10-K for the year endedDecember 31, 2006 and the other information in our subsequent filings with theSEC, including this Quarterly Report on Form 10-Q. Our business, financialcondition, results of operations and stock price could be materially adverselyaffected by any of these risks. The risks described in our Annual Report onForm 10-K, as updated by this Quarterly Report on Form 10-Q, are not theonly ones facing us. Additional risks and uncertainties that are currentlyunknown to us or that we currently consider to be immaterial may also impairour business or adversely affect our financial condition, results of operationsand stock price.

Set forth below are updated versions of the followingthree risk factors that were included in our Annual Report on Form 10-K:

·                  *Our substantial leverage couldadversely affect our ability to incur additional indebtedness if needed andcould negatively affect our ability to service our debt.*

·                  *The merger between Sprint andNextel and the outcome of our litigation relating thereto may have an adverseeffect on us in ways that would be beyond our control.*

·                  *We may experience a high rate ofsubscriber turnover, which would adversely affect our financial performance.*

***Our substantial leverage could adverselyaffect our ability to incur additional indebtedness if needed and could negativelyaffect our ability to service our debt.***

We are highly leveraged. In April 2007 we closed our offering of $475million of new senior secured notes. The indentures governing these notes giveus the flexibility to incur additional indebtedness secured on a pari passubasis with our first lien notes of up to $50.0 million without otherwisecomplying with any financial ratios. In addition, subject to the limitscontained in the indentures governing our notes, we may be able to incursubstantial additional indebtedness from time to time, including additional first lien indebtedness and additional second lienindebtedness to finance working capital,capital expenditures, investments or acquisitions, or for other purposes. If wedo so, the risks related to our high level of debt could intensify.

Our substantial indebtedness could adverselyaffect our financial health by, among other things:

·   increasing our vulnerability to adverse economicconditions;

·        limiting our ability to obtain any additional financing we may need tooperate, develop and expand our business;

·        limiting our flexibility in planning for, or reacting to, changes in ourbusiness and the industry in which we operate;

·        requiring us to dedicate a substantial portion of any cash flow from ouroperating activities to service our debt, which reduces the fundsavailable for operations and future business opportunities; and

·        potentially making us more highly leveraged than our competitors, whichcould decrease our ability to compete in our industry;

·        making it more difficult for us to satisfy our obligations with respectto the notes and our other debt; and

·        increasing our cost ofborrowing.

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The ability to make payments onour debt will depend upon our future operating performance, which is subject to general economic and competitiveconditions, the outcome of our litigation and arbitration proceedings against Sprint, and to financial,business and other factors, many of which we cannot control. If the cash flow from our operating activities isinsufficient, we may take actions, such as delaying or reducing capital expenditures, attempting torestructure or refinance our debt, selling assets or operations or seekingadditional equity capital. Any or all of these actions may not be sufficient toallow us to service our debt obligations. Further, we may be unable to take anyof these actions on satisfactory terms in a timely manner or at all. Wemay need to refinance all or a portion of our indebtedness on or before maturity. We may not be able to refinance any ofour indebtedness on commercially reasonable terms or at all. Our failure to generate sufficient funds topay our debts or to successfully undertake any of these actions could,among other things, result in our bankruptcy.

***The merger between Sprint and Nexteland the outcome of our litigation relating thereto may have an adverse effecton us in ways that would be beyond our control.***

We have been, andcontinue to be engaged in litigation with Sprint regarding its merger with Nextel. Although the Delaware rulingis final, the Illinois ruling is not, as Sprint has appealed the ruling.

The Delaware ruling does not protect us from all of the ways in whichSprint may operate the legacy Nextelbusiness in a manner that would have a material adverse effect on us. To theextent that Sprint desires to exploit limitations of the Delaware ruling, ourbusiness may be adversely affected. For example, the ruling provides that Sprint may engage in limited re-branding of thelegacy Nextel stores in our service area. We do not know how or if Sprint willattempt to re-brand the legacy Nextel stores in our service area. Additionally,in light of certain representations that Sprint made to the Delaware court, theruling does not impose additionalrestrictions on Sprint’s use of our confidential information. It is difficultfor us to monitor Sprint’s compliance with its representations as toconfidentiality. If we believe that Sprint is violating the Delaware ruling, wemay need to enforce the ruling through contempt proceedings in Delaware. On December 11, 2006, we filed a motionfor contempt against Sprint in the Delaware court, which was denied without limiting our right toseek clarification of the final ruling or pursue additional relief with respect to Sprint’s use of certainbrands and marks (such as “Fair & Flexible”) to offer iDEN productsand services in the former Horizon PCS markets. We cannot predict the outcomeof these proceedings.

With respect tothe Illinois ruling, we cannot predict the outcome of the appeal. If we do notprevail on appeal, Sprint may be permittedto operate the legacy Nextel business in our territory in a manner that has an adverse effect on our business andoperations. If we do not prevail on appeal, our stock price may beadversely affected. Additionally, the Illinois ruling has been stayed pendingappeal. As a condition of the stay, Sprint must continue to comply with theForbearance Agreement—which by its terms has expired—andthe Delaware ruling in iPCS Wireless’s service area. As noted above, theDelaware ruling does not protect usfrom all of the ways in which Sprint may operate the legacy Nextel business ina manner that would have a materialadverse effect on us. The protections afforded by the Forbearance Agreementare limited as well.

Notwithstanding the rulings and the ForbearanceAgreement, Sprint’s ownership and operation of the legacy Nextel business in our territory has, amongother things, caused customer confusion in our territory that is havingan adverse effect on our business and operations.

On March 15, 2007, Shenandoah Telecommunications Company (“Shentel”)announced that its wholly ownedsubsidiary, which is a PCS Affiliate of Sprint, entered into revisedaffiliation agreements with Sprintwhich settled all of its outstanding claims arising out of the Sprint Nextel mergerand the subsequent acquisition bySprint of Nextel Partners, Inc. Among other things, the revised affiliationagreements modify Shentel’s exclusivity in its service area, transfersto Shentel the Sprint operated Nextel stores locatedin its service area, allows Shentel to sell Sprint Nextel iDEN phones in itsservice area and requires Shentel to provide local iDEN customer service. Inaddition, the revised affiliation agreements provide Shentel and Sprint theright under certain circumstances to participate in future wireless serviceofferings within Shentel’s service area. The revised affiliation agreementswith Shentel also substitute a new monthly Net Service Fee, which simplifies the methods used to settle revenueand expenses between Shentel and Sprint. In lieu of the current fees forvoice and data roaming and CCPU and CPGA, Shentel is now required to pay Sprint a percentage of its billedrevenue, which is currently 8.8%. The new Net Service Fee is designed toapproximate the current settlements adjusted to reflect the new pricing forvoice and data roaming and CCPU andCPGA. The Net Service Fee is also net of the expected annual cost to provide local customer service support to Sprint iDENcustomers in its service area. The Net Service Fee is fixed until 2010, and can only be adjusted if theactual Net Service Fee (calculated by the same methods employed in setting the original rate) increasesor decreases by more than two full percentage points. After 2010, either Shentel or Sprint may request a changeif the Net Service Fee increases or decreases by more than one full percentage point. The Net ServiceFee is capped at 12%, subject to certain exceptions.

We do not know whether it ispossible to reach agreement on mutually satisfactory terms for revised affiliation agreements, particularly in light ofour lawsuits. Any such revised affiliation agreements may require us to modify our exclusivity, make 

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significant payments to lease or acquire assetsrelating to the legacy Nextel networkin our territory, purchase legacy Nextel subscribers in our territory and/orcommit to a further build-out and expansion of our PCS network beyondwhat is required under our existing affiliationagreements with Sprint PCS. There is no assurance that we will have adequatefunds on hand or the ability to borrow such funds in order to acquire thenetwork assets or subscribers or to otherwise modify our PCS network. In addition, any borrowing would increase ourexisting substantial leverage.

We believe that our stockprice has been, and continues to be, affected by market speculation involvingpotential changes in our relationship with Sprint as a result of the Sprint-Nextelmerger and the final outcome of our disputes with Sprint, including our pendinglitigation and arbitration proceedings against Sprint. We believe that themarket speculation has been further fueled by changes in the relationshipsbetween Sprint and other PCS Affiliates of Sprint, including Sprint’sacquisition of six other PCS Affiliates of Sprint since August 2005.Accordingly, the price of our common stock has been, and may continue to be,volatile.

Moreover, as a result ofSprint’s acquisitions of PCS Affiliates, Sprint may not devote as much of its personnel and resources to us and the other threePCS Affiliates of Sprint, which may have a material adverse effect onour business and results of operations.

***Wemay experience a high rate of subscriber turnover, which would adversely affectour financial performance.***

The wireless telecommunications industry in general, and Sprint PCS andthe PCS Affiliates of Sprint inparticular, including us, have experienced a high rate of subscriber turnover,commonly known as churn. We believe this higher churn rate has resultedfrom Sprint PCS’s programs for marketing its services to sub-prime credit subscribers and Sprint PCS’focus on adding subscribers from the consumer segment of the industry, rather than the business segment. Asa result, we have seen an increase in bad debt expense related to oursubscribers which also leads to higher churn. Additionally, significantcompetition in our industry andgeneral economic conditions may cause our future churn rate to be higher thanour historical rate. Factors that may contribute to higher churninclude:

·           inability or unwillingnessof subscribers to pay, resulting in credit-related deactivations, whichaccounted for approximately 43% of our subscriber deactivations for the fiscalyear ended March 31, 2007;

·        subscriber mix and credit class, particularly sub-prime creditsubscribers, which accounted for approximately 26% of our subscriberbase as of March 31, 2007;

·        attractiveness of our competitors’ products, services and pricing,coupled with the wireless local number portability (“WLNP”) requirementenabling subscribers to keep their telephone numbers and thereby, makingturnover easier;

·        network performance andcoverage relative to our competitors;

·        customer service;

·        failure by Sprint or us to offer competitive rates, service offerings,handset pricing and customer retention benefits to existing customers;

·        any increased prices forservices in the future;

·   customer confusion as a result of the Sprint-Nextel merger;and

·          any future changes by usin the products and services we offer or in the terms under which we offer ourproducts or services, especially to sub-prime credit subscribers.

A high rate of subscriber turnover could adversely affect ourcompetitive position, liquidity, financial position, results of operations andour costs of, or losses incurred in, obtaining new subscribers, especiallybecause we subsidize most of the costs of initial purchases of handsets bysubscribers. As a result of losses related to lower credit quality subscribers,our bad debt expense was $2.7 million for the three months ended March 31, 2007compared with $1.4 million for the three months ended March 31, 2006.

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**ITEM 2.   UNREGISTEREDSALES OF EQUITY SECURITIES AND USE OF PROCEEDS**

None.

**ITEM3.   DEFAULTS UPON SENIOR SECURITIES**

None.

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**ITEM4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**

None.

**ITEM5.   OTHER INFORMATION**

None

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**ITEM6.   EXHIBITS**
| 3.1    |   | Second Restated Certificate of Incorporation of  iPCS, Inc. (Incorporated by reference to Exhibit 3.1 to the  Form 8-K filed by iPCS, Inc. on July 1, 2005)                                                                                                                                                                                                                                                                   |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 3.2    |   | Amended and Restated Bylaws of iPCS, Inc.  (Incorporated by reference to Exhibit 3.2 to the Form 10-Q filed by iPCS,  Inc. on February 14, 2006)                                                                                                                                                                                                                                                                                                  |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 3.3    |   | Certificate of Incorporation of iPCS  Wireless, Inc. (Incorporated by reference to Exhibit 3.4 to the  Form S-4 filed by iPCS, Inc. on January 8, 2001)                                                                                                                                                                                                                                                                       |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 3.4    |   | Bylaws of iPCS Wireless, Inc. (Incorporated by  reference to Exhibit 3.5 to the Form S-4 filed by iPCS, Inc.  on January 8, 2001)                                                                                                                                                                                                                                                                                             |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 3.5    |   | Certificate of Incorporation of iPCS  Equipment, Inc. (Incorporated by reference to Exhibit 3.6 to the  Form S-4 filed by iPCS, Inc. on January 8, 2001)                                                                                                                                                                                                                                                                      |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 3.6    |   | Bylaws of iPCS Equipment, Inc. (Incorporated by  reference to Exhibit 3.7 to the Form S-4 filed by iPCS, Inc.  on January 8, 2001)                                                                                                                                                                                                                                                                                            |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 3.7    |   | Articles of Incorporation of Bright Personal  Communications Services, LLC. (Incorporated by reference to Exhibit 3.7  to the Form S-1 filed by iPCS, Inc. on August 11, 2005)                                                                                                                                                                                                                                                     |
| 3.8    |   | Bylaws of Bright Personal Communications Services,  LLC (Incorporated by reference to Exhibit 3.8 to the Form S-1 filed  by iPCS, Inc. on August 11, 2005)                                                                                                                                                                                                                                                                         |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 3.9    |   | Articles of Incorporation of Horizon Personal  Communications, Inc. (Incorporated by reference to Exhibit 3.9 to  the Form S-1 filed by iPCS, Inc. on August 11, 2005)                                                                                                                                                                                                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 3.10   |   | Bylaws of Horizon Personal Communications, Inc.  (Incorporated by reference to Exhibit 3.10 to the Form S-1 filed by  iPCS, Inc. on August 11, 2005)                                                                                                                                                                                                                                                                          |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 4.1    |   | Amended and Restated Common Stock Registration  Rights Agreement, dated as of June 30, 2005, by and among iPCS, Inc.,  affiliates of Silver Point Capital, affiliates of AIG Global Investment  Corp., the Timothy M. Yager 2001 Trust, Apollo Investment Fund IV, L.P. and  Apollo Overseas Partners IV, L.P. (Incorporated by reference to  Exhibit 99.1 to the Form 8-K filed by iPCS, Inc. with the SEC  on July 1, 2005) |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 4.2    |   | Indenture dated as of April 30, 2004, by and  among, iPCS Escrow Company, iPCS, Inc., iPCS Wireless, Inc., iPCS  Equipment, Inc. and U.S. Bank National Association (Incorporated by  reference to Exhibit 4.1 to the Form S-4 filed by iPCS, Inc. with  the SEC on August 5, 2004)                                                                                                                            |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 4.3    |   | Indenture, dated as of July 19, 2004, by and  among Horizon PCS Escrow Company, Horizon PCS, certain subsidiary guarantors  and U.S. Bank National Association, as Trustee (Incorporated by reference to  Exhibit 4.1 to the Form S-4 filed by Horizon PCS, Inc. with  the SEC on March 19, 2005)                                                                                                                             |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 4.4    |   | First Supplemental Indenture, dated as of June 30,  2005, by and between U.S. Bank National Association, as Trustee, and  iPCS, Inc. (Incorporated by reference to Exhibit 4.2 to the  Form 8-K filed by iPCS, Inc. with the SEC on July 1, 2005)                                                                                                                                                                             |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 4.5    |   | Second Supplemental Indenture, dated as of  July 15, 2005, by and among iPCS, Inc., iPCS Wireless, Inc.,  iPCS Equipment, Inc., Bright PCS Holdings, Inc. and U.S. Bank  National Association, as Trustee (Incorporated by reference to  Exhibit 4.5 to the Form 10-Q filed by iPCS, Inc. on  February 14, 2006)                                                                                          |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 4.6    |   | First Supplemental Indenture, dated as of  July 15, 2005, by and among iPCS, Inc., Bright Personal  Communications Services, LLC, Horizon Personal Communications, Inc.,  Bright PCS Holdings, Inc. and U.S. Bank National Association, as Trustee  (Incorporated by reference to Exhibit 4.6 to the Form 10-Q filed by iPCS,  Inc. on February 14, 2006)                                                                          |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                   |

 

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| 4.7    |   | First Lien Indenture, dated as of April 23, 2007, by  and among iPCS, Inc., the Guarantors and U.S. Bank National Association, as  trustee (Incorporated by reference to Exhibit 99.3 to the Form 8-K filed by  iPCS, Inc. on April 25, 2007)                                                               |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                        |
| 4.8    |   | Second Lien Indenture, dated as of April 23, 2007, by  and among iPCS, Inc., the Guarantors and U.S. Bank National Association, as  trustee (Incorporated by reference to Exhibit 99.4 to the Form 8-K filed by  iPCS, Inc. on April 25, 2007)                                                              |
|   |   |                                                                                                                                                                                                                                                                                                        |
| 4.9    |   | Second Supplemental Indenture, dated as of April 19,  2007, by and among iPCS, Inc., the Guarantors and U.S. Bank National  Association, as trustee (Incorporated by reference to Exhibit 99.11 to the  Form 8-K filed by iPCS, Inc. on April 25, 2007)                                                     |
|   |   |                                                                                                                                                                                                                                                                                                        |
| 4.10   |   | Third Supplemental Indenture, dated as of April 19,  2007, by and among iPCS, Inc., the Guarantors and U.S. Bank National  Association, as trustee (Incorporated by reference to Exhibit 99.12 to the  Form 8-K filed by iPCS, Inc. on April 25, 2007)                                                      |
|   |   |                                                                                                                                                                                                                                                                                                        |
| 10.1   |   | Purchase Agreement, dated April 11, 2007, by and  among iPCS, Inc., the Guarantors, Banc of America Securities LLC, UBS  Securities LLC and Jefferies & Company, Inc. (Incorporated by reference  to Exhibit 99.2 to the Form 8-K filed by iPCS, Inc. on April 25, 2007)                                |
|   |   |                                                                                                                                                                                                                                                                                                        |
| 10.2   |   | First Lien Registration Rights Agreement, dated as  of April 23, 2007, by and among iPCS, Inc., the Guarantors, Banc of America  Securities LLC, UBS Securities LLC and Jefferies & Company, Inc.  (Incorporated by reference to Exhibit 99.5 to the Form 8-K filed by iPCS,  Inc. on April 25, 2007)   |
|   |   |                                                                                                                                                                                                                                                                                                        |
| 10.3   |   | Second Lien Registration Rights Agreement, dated as  of April 23, 2007, by and among iPCS, Inc., the Guarantors, Banc of America  Securities LLC, UBS Securities LLC and Jefferies & Company, Inc.  (Incorporated by reference to Exhibit 99.6 to the Form 8-K filed by iPCS,  Inc. on April 25, 2007)  |
|   |   |                                                                                                                                                                                                                                                                                                        |
| 10.4   |   | First Lien Security Agreement, dated as of April 23,  2007, made by iPCS, Inc. and the Guarantors in favor of U.S. Bank National  Association, as collateral agent (Incorporated by reference to Exhibit 99.7  to the Form 8-K filed by iPCS, Inc. on April 25, 2007)                                       |
|   |   |                                                                                                                                                                                                                                                                                                        |
| 10.5   |   | Second Lien Security Agreement, dated as of April  23, 2007, made by iPCS, Inc. and the Guarantors in favor of U.S. Bank  National Association, as collateral agent (Incorporated by reference to  Exhibit 99.8 to the Form 8-K filed by iPCS, Inc. on April 25, 2007)                                      |
|   |   |                                                                                                                                                                                                                                                                                                        |
| 10.6   |   | Intercreditor Agreement, dated as of April 23, 2007,  between U.S. Bank National Association, as first lien collateral agent and  U.S. Bank National Association, as second lien collateral agent agent  (Incorporated by reference to Exhibit 99.9 to the Form 8-K filed by iPCS,  Inc. on April 25, 2007) |
|   |   |                                                                                                                                                                                                                                                                                                        |
| 31.1   |   | Certification of Chief Executive Officer pursuant to  Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as  amended                                                                                                                                                                |
|   |   |                                                                                                                                                                                                                                                                                                        |
| 31.2   |   | Certification of Chief Financial Officer pursuant to  Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as  amended                                                                                                                                                                |
|   |   |                                                                                                                                                                                                                                                                                                        |
| 32.1   |   | Certification Pursuant to 18 U.S.C.  Section 1350                                                                                                                                                                                                                                                      |

 

 

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**SIGNATURES**

Pursuantto the requirements of the Securities Exchange Act of 1934, the registrant hasduly caused this report to be signed on its behalf by the undersigned thereuntoduly authorized.
|                                | iPCS, Inc. |
|--------------------------------|-----------------|
|                           |            |
|                           | By:             | /s/ TIMOTHY M. YAGER |
|                           | * *        | Timothy M. Yager |
|                           | * *        | President and Chief  Executive Officer (Principal Executive Officer) |
|                           |            |   |
| Date:   May 10, 2007 |            |   |
|                           | By:             | /s/ STEBBINS B. CHANDOR, JR. |
|                           | * *        | Stebbins B. Chandor, Jr. |
|                           |            | Executive Vice President  and   Chief Financial Officer (Principal Financial Officer) |
|                           |            |   |
| Date:   May 10, 2007 |            |   |

 

 

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