** **

**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, DC 20549**

** **

**FORM 10-Q**

 

**QUARTERLY REPORT PURSUANT TOSECTION 13 OR 15(d) OFTHE SECURITIES EXCHANGE ACT OF 1934**

 

**For the quarterly period endedMarch 31, 2006**

 

**CommissionFile Number**

**000-30761**

 

**UbiquiTel Inc.**

(Exact name ofCo-Registrant as specified in its charter)

 

| **Delaware**                                          | ** ** | **23-3017909**                        |
|-------------------------------------------------------|------------|---------------------------------------|
| (State of  incorporation)                             |       | (I.R.S. Employer  Identification No.) |
|                                                  |       |                                  |
| **One  West Elm Street, Suite 400, Conshohocken, PA** | ** ** | **19428**                             |
| (Address of principal  executive office)              |       | (Zip code)                            |

 

Co-Registrant’s telephonenumber:  **(610)832-3300**

 

**CommissionFile Number**

**333-39950**

 

**UbiquiTel OperatingCompany**

(Exactname of Co-Registrant as specified in its charter)

 

| **Delaware**                                          | ** ** | **23-3024747**                       |
|-------------------------------------------------------|------------|--------------------------------------|
| (State of incorporation)                              |       | (I.R.S. Employer Identification No.) |
|                                                  |       |                                 |
| **One West Elm Street,  Suite 400, Conshohocken, PA** | ** ** | **19428**                            |
| (Address of principal executive office)               |       | (Zip code)                           |

 

Co-Registrant’stelephone number:  **(610)832-3300**

 

Indicate by check mark whether eachof the co-registrants (1) has filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that each co-registrant was required tofile such reports), and (2) has been subject to such filing requirements forthe past 90 days.

 

Yes ý        Noo

 

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer, or anon-accelerated filer. See definition of “accelerated filer and largeaccelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large AcceleratedFiler ý   AcceleratedFiler o   Non-Accelerated Filer o

 

Indicate by check mark whether the registrant is a shell company (asdefined in Rule 12b-2 of the Exchange Act).

 

Yes o        Noý

 

There were 94,453,100 shares of common stock, $0.0005 par value, of UbiquiTel Inc. outstanding at May 5,2006.

 

There were 1,000 shares of common stock, $0.01 par value, of UbiquiTelOperating Company outstanding at May 5, 2006, all of which were owned byUbiquiTel Inc.

 

 

----

 

**UbiquiTel Inc. and Subsidiaries**

 

**Form 10-Q for the Quarter EndedMarch 31, 2006**

 

**INDEX**

 
| PART I.    | FINANCIAL  INFORMATION                                                                      |   |
|------------|---------------------------------------------------------------------------------------------|--------|
|       |                                                                                        |   |
| Item 1.    | Financial  Statements                                                                       |   |
|       | Consolidated  Balance Sheets as of March 31, 2006 and December 31, 2005                     |   |
|       | Consolidated  Statements of Operations for the three months ended March 31, 2006 and 2005   |   |
|       | Consolidated  Statements of Cash Flows for the three months ended March 31, 2006 and 2005   |   |
|       | Notes  to Consolidated Financial Statements                                                 |   |
|       |                                                                                        |   |
| Item 2.    | Management’s  Discussion and Analysis of Financial Condition and Results of Operations |   |
|       |                                                                                        |   |
| Item 3.    | Quantitative  and Qualitative Disclosures About Market Risk                                 |   |
|       |                                                                                        |   |
| Item 4.    | Controls and  Procedures                                                                    |   |
|       |                                                                                        |   |
|       |                                                                                        |   |
| PART II.   | OTHER INFORMATION                                                                           |   |
|       |                                                                                        |   |
| Item 1.    | Legal Proceedings                                                                           |   |
|       |                                                                                        |   |
| Item 1A.   | Risk  Factors                                                                               |   |
|       |                                                                                        |   |
| Item 2.    | Unregistered  Sales of Equity Securities and Use of Proceeds                                |   |
|       |                                                                                        |   |
| Item 3.    | Defaults  Upon Senior Securities                                                            |   |
|       |                                                                                        |   |
| Item 4.    | Submission  of Matters to a Vote of Security Holders                                        |   |
|       |                                                                                        |   |
| Item 5.    | Other Information                                                                           |   |
|       |                                                                                        |   |
| Item 6.    | Exhibits                                                                                    |   |
|       |                                                                                        |   |
|       |                                                                                        |   |
| Signatures |                                                                                        |

 

2

----

 

**Explanatory Note:**

 

The Consolidated Financial Statements included hereinare those of UbiquiTel Inc. (“UbiquiTel”). The Co-Registrants are UbiquiTel andUbiquiTel Operating Company (“Operating Company”), which is a wholly-ownedsubsidiary of UbiquiTel and the issuer of 9.875% senior notes due 2011.UbiquiTel has provided a full, unconditional, joint and several guaranty ofOperating Company’s obligations under the 9.875% senior notes due 2011. UbiquiTelhas no operations separate from its investment in Operating Company. Pursuantto Rule 12h-5 of the Securities Exchange Act, no separate financial statements andother disclosures concerning Operating Company other than narrative disclosuresset forth in Notes 6 and 7 to the Consolidated Financial Statements have beenpresented herein. As used herein and except as the context otherwise mayrequire, the “Company,” “we,” “us,” “our” or “UbiquiTel” means, collectivelyUbiquiTel, Operating Company and their consolidated subsidiary, UbiquiTelLeasing Company.

 

3

----

 

**PART I. FINANCIAL INFORMATION**

 

**Item 1. FinancialStatements**

 

# **UbiquiTel Inc. and Subsidiaries**

# **Consolidated Balance Sheets**

# **(Unaudited)**

# **(In Thousands, Except Per Share Data)**

 
| ** **                                                                                                                                                                     | ** ** | **March 31, 2006** | ** ** | **December 31, 2005** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------|------------|---------------------------------|------------|
| **ASSETS**                                                                                                                                                                     |       |                         |       |                            |       |
| CURRENT ASSETS:                                                                                                                                                                |       |                         |       |                            |       |
| Cash and cash  equivalents                                                                                                                                                     |       | $                            | 126,535    |                            | $          | 121,127 |   |
| Accounts receivable,  net of allowance for doubtful accounts of $3,354 at March 31, 2006 and $3,435  at December 31, 2005                                                      |       | 25,360                       |       | 30,082                          |       |
| Inventory                                                                                                                                                                      |       | 3,028                        |       | 4,777                           |       |
| Prepaid expenses  and other assets                                                                                                                                             |       | 16,435                       |       | 17,411                          |       |
| Deferred income  taxes                                                                                                                                                         |       | 20,325                       |       | 20,290                          |       |
| Total current  assets                                                                                                                                                          |       | 191,683                      |       | 193,687                         |       |
| PROPERTY AND  EQUIPMENT, NET                                                                                                                                                   |       | 238,071                      |       | 244,163                         |       |
| CONSTRUCTION IN  PROGRESS                                                                                                                                                      |       | 3,458                        |       | 2,169                           |       |
| DEFERRED  FINANCING COSTS, NET                                                                                                                                                 |       | 8,740                        |       | 9,184                           |       |
| GOODWILL                                                                                                                                                                       |       | 38,138                       |       | 38,138                          |       |
| INTANGIBLES, NET                                                                                                                                                               |       | 59,185                       |       | 60,261                          |       |
| DEFERRED INCOME  TAXES                                                                                                                                                         |       | 8,973                        |       | 13,038                          |       |
| OTHER LONG-TERM  ASSETS                                                                                                                                                        |       | 2,174                        |       | 2,223                           |       |
| Total assets                                                                                                                                                                   |       | $                            | 550,422    |                            | $          | 562,863 |   |
| **LIABILITIES AND STOCKHOLDERS’ EQUITY**                                                                                                                                  |       |                         |       |                            |       |
| CURRENT  LIABILITIES:                                                                                                                                                          |       |                         |       |                            |       |
| Current  maturities of long-term debt                                                                                                                                          |       | $                            | 244        |                            | $          | 240 |   |
| Accounts payable                                                                                                                                                               |       | 3,824                        |       | 11,062                          |       |
| Accrued expenses                                                                                                                                                               |       | 17,926                       |       | 18,230                          |       |
| Accrued  compensation and benefits                                                                                                                                             |       | 2,233                        |       | 4,770                           |       |
| Interest payable                                                                                                                                                               |       | 3,456                        |       | 13,825                          |       |
| Taxes payable                                                                                                                                                                  |       | 3,326                        |       | 2,677                           |       |
| Deferred revenue                                                                                                                                                               |       | 12,473                       |       | 12,455                          |       |
| Other                                                                                                                                                                          |       | 3,252                        |       | 3,165                           |       |
| Total current  liabilities                                                                                                                                                     |       | 46,734                       |       | 66,424                          |       |
| LONG-TERM DEBT,  EXCLUDING CURRENT MATURITIES                                                                                                                                  |       | 423,381                      |       | 423,475                         |       |
| OTHER LONG-TERM  LIABILITIES                                                                                                                                                   |       | 11,136                       |       | 11,357                          |       |
| Total long-term  liabilities                                                                                                                                                   |       | 434,517                      |       | 434,832                         |       |
| Total  liabilities                                                                                                                                                             |       | 481,251                      |       | 501,256                         |       |
| COMMITMENTS AND  CONTINGENCIES                                                                                                                                                 |       | —                       |       | —                          |       |
| STOCKHOLDERS’  EQUITY:                                                                                                                                                    |       |                         |       |                            |       |
| Preferred stock,  par value $0.001 per share; 10,000 shares authorized; 0 shares issued and  outstanding at March 31, 2006 and December 31, 2005                               |       | —                       |       | —                          |       |
| Common stock,  par value $0.0005 per share; 240,000 shares authorized; 94,440 and 94,209  shares issued and outstanding at March 31, 2006 and December 31, 2005,  respectively |       | 47                           |       | 47                              |       |
| Additional  paid-in-capital                                                                                                                                                    |       | 313,501                      |       | 312,305                         |       |
| Accumulated  deficit                                                                                                                                                           |       | (244,377                     | )          | (250,745                        | )          |
| Total  stockholders’ equity                                                                                                                                               |       | 69,171                       |       | 61,607                          |       |
| Total  liabilities and stockholders’ equity                                                                                                                               |       | $                            | 550,422    |                            | $          | 562,863 |   |

 

*Theaccompanying notes are an integral part of these consolidated financialstatements.*

 

4

----

 

# **UbiquiTel Inc. and Subsidiaries**

# **Consolidated Statements of Operations**

# **(Unaudited)**

# **(In Thousands, Except Per Share Data)**

 
| ** **                                                                                                         | ** ** | **Three Months Ended March 31,** | ** ** |
|--------------------------------------------------------------------------------------------------------------------|------------|------------------------------------------------------|------------|
| ** **                                                                                                         | ** ** | **2006**                                             | ** ** | **2005** | ** ** |
|                                                                                                               |       |                                                 |       |   |   |
| REVENUES:                                                                                                          |       |                                                 |       |   |   |
| Subscriber  revenue                                                                                                |       | $                                                    | 74,647     |   | $ | 66,892 |   |
| Roaming and  wholesale revenue                                                                                     |       | 30,553                                               |       | 29,606 |   |
| Service revenue                                                                                                    |       | 105,200                                              |       | 96,498 |   |
| Equipment  revenue                                                                                                 |       | 4,226                                                |       | 3,433 |   |
| Total revenues                                                                                                     |       | 109,426                                              |       | 99,931 |   |
| COSTS AND  EXPENSES:                                                                                               |       |                                                 |       |   |   |
| Cost of service  and operations (exclusive of depreciation, amortization and accretion as  shown separately below) |       | 48,134                                               |       | 44,006 |   |
| Cost of products  sold                                                                                             |       | 7,501                                                |       | 10,385 |   |
| Selling and  marketing                                                                                             |       | 14,527                                               |       | 15,926 |   |
| General and  administrative expenses                                                                               |       | 7,501                                                |       | 4,988 |   |
| Non-cash  compensation                                                                                             |       | —                                               |       | (521 | ) |
| Depreciation,  amortization and accretion                                                                          |       | 11,777                                               |       | 12,157 |   |
| Total costs and  expenses                                                                                          |       | 89,440                                               |       | 86,941 |   |
| OPERATING INCOME                                                                                                   |       | 19,986                                               |       | 12,990 |   |
| INTEREST INCOME                                                                                                    |       | 1,552                                                |       | 526 |   |
| INTEREST EXPENSE                                                                                                   |       | (10,834                                              | )          | (10,935 | ) |
| INCOME BEFORE  INCOME TAXES                                                                                        |       | 10,704                                               |       | 2,581 |   |
| INCOME TAX  EXPENSE                                                                                                |       | (4,336                                               | )          | (129 | ) |
| NET INCOME                                                                                                         |       | $                                                    | 6,368      |   | $ | 2,452 |   |
|                                                                                                               |       |                                                 |       |   |   |
| NET INCOME PER  COMMON SHARE:                                                                                      |       |                                                 |       |   |   |
| BASIC                                                                                                              |       | $                                                    | 0.07       |   | $ | 0.03 |   |
| DILUTED                                                                                                            |       | $                                                    | 0.06       |   | $ | 0.02 |   |
|                                                                                                               |       |                                                 |       |   |   |
| WEIGHTED AVERAGE  COMMON SHARES OUTSTANDING:                                                                       |       |                                                 |       |   |   |
| BASIC                                                                                                              |       | 94,280                                               |       | 93,103 |   |
| DILUTED                                                                                                            |       | 99,260                                               |       | 98,644 |   |

 

*The accompanying notes are an integral part of theseconsolidated financial statements*.

 

5

----

 

# **UbiquiTel Inc. and Subsidiaries**

# **Consolidated Statements of Cash Flows**

# **(Unaudited)**

# **(In Thousands)**

 
| ** **                                                                         | ** ** | **Three Months Ended March 31,** | ** ** |
|------------------------------------------------------------------------------------|------------|------------------------------------------------------|------------|
| ** **                                                                         | ** ** | **2006**                                             | ** ** | **2005** | ** ** |
|                                                                               |       |                                                 |       |   |   |
| CASH FLOWS FROM  OPERATING ACTIVITIES:                                             |       |                                                 |       |   |   |
| Net income                                                                         |       | $                                                    | 6,368      |   | $ | 2,452 |   |
| Adjustments to  reconcile net income to net cash provided by operating activities: |       |                                                 |       |   |   |
| Amortization of  deferred financing costs                                          |       | 444                                                  |       | 439 |   |
| Amortization of  debt premium                                                      |       | (31                                                  | )          | (32 | ) |
| Amortization of  intangible assets                                                 |       | 1,076                                                |       | 1,076 |   |
| Depreciation and  accretion                                                        |       | 10,701                                               |       | 11,080 |   |
| Share-based  payment expense                                                       |       | 373                                                  |       | (521 | ) |
| Deferred income  taxes                                                             |       | 4,030                                                |       | 69 |   |
| Gain on disposal  of equipment                                                     |       | (132                                                 | )          | (71 | ) |
| Changes in  operating assets and liabilities exclusive of capital expenditures:    |       |                                                 |       |   |   |
| Accounts  receivable                                                               |       | 4,722                                                |       | (171 | ) |
| Inventory                                                                          |       | 1,749                                                |       | (988 | ) |
| Prepaid expenses  and other assets                                                 |       | 1,025                                                |       | (402 | ) |
| Accounts payable  and accrued expenses                                             |       | (21,635                                              | )          | (10,773 | ) |
| Net cash provided  by operating activities                                         |       | 8,690                                                |       | 2,158 |   |
| CASH FLOWS FROM  INVESTING ACTIVITIES:                                             |       |                                                 |       |   |   |
| Capital  expenditures                                                              |       | (4,046                                               | )          | (10,031 | ) |
| Net cash used in  investing activities                                             |       | (4,046                                               | )          | (10,031 | ) |
| CASH FLOWS FROM  FINANCING ACTIVITIES:                                             |       |                                                 |       |   |   |
| Proceeds from issuance  of common stock                                            |       | 85                                                   |       | 106 |   |
| Proceeds from  exercise of stock options                                           |       | 738                                                  |       | 327 |   |
| Repayment of  other long-term debt                                                 |       | (59                                                  | )          | (54 | ) |
| Net cash  provided by financing activities                                         |       | 764                                                  |       | 379 |   |
| NET INCREASE  (DECREASE) IN CASH AND CASH EQUIVALENTS                              |       | 5,408                                                |       | (7,494 | ) |
| CASH AND CASH  EQUIVALENTS, beginning of period                                    |       | 121,127                                              |       | 91,781 |   |
| CASH AND CASH  EQUIVALENTS, end of period                                          |       | $                                                    | 126,535    |   | $ | 84,287 |   |
| SUPPLEMENTAL  DISCLOSURE OF CASH FLOW INFORMATION:                                 |       |                                                 |       |   |   |
| Cash paid for  interest                                                            |       | $                                                    | 20,790     |   | $ | 20,847 |   |
| Cash paid for  income taxes                                                        |       | 196                                                  |       | 3 |   |
| SUPPLEMENTAL  DISCLOSURE OF NON-CASH INVESTING ACTIVITY:                           |       |                                                 |       |   |   |
| Network  equipment acquired but not yet paid                                       |       | $                                                    | 1,821      |   | $ | 5,372 |   |

 

*Theaccompanying notes are an integral part of these consolidated financialstatements.*

 

6

----

 

**UbiquiTelInc. and Subsidiaries**

# **Notes to Consolidated Financial Statements**

**(Unaudited)**

 

**1.****  SUMMARY OFSIGNIFICANT ACCOUNTING POLICIES**

 

**Basis of Presentation of Unaudited InterimFinancial Information**

 

The consolidated financial information as of March 31,2006 and for the three months ended March 31, 2006 and 2005 is unaudited, buthas been prepared in accordance with generally accepted accounting principlesfor interim financial information and Article 10 of Regulation S-X. Accordingly,it does not include all the information and footnotes required annually bygenerally accepted accounting principles. In the opinion of management, theinterim data reflects all adjustments necessary for a fair statement of the Company’sresults for the periods presented. Operating results for the three months endedMarch 31, 2006 are not necessarily indicative of results that may be expectedfor the entire year. This financial information should be read in conjunctionwith the audited consolidated financial statements and notes thereto for theyear ended December 31, 2005 of UbiquiTel which are included in its andOperating Company’s Joint Annual Report on Form 10-K/A for the year endedDecember 31, 2005.

 

**Principles of Consolidation and Use of Estimates**

 

The accompanying financialstatements include the accounts of UbiquiTel Inc. and its subsidiaries (seeNote 2). All significant intercompany balances and transactions have beeneliminated.

 

The preparation of financial statements in conformitywith generally accepted accounting principles requires management to makeestimates and assumptions. These estimates and assumptions affect the reportedamounts of assets and liabilities and disclosure of contingent assets andliabilities at the date of the financial statements. These assumptions alsoaffect the reported amounts of revenues and expenses during the reportingperiods. Actual results could differ from those estimates and assumptions.

 

# **Recent AccountingPronouncements**

# ** **

In May 2005, the Financial Accounting Standards Board(“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 154, “AccountingChanges and Error Corrections” (“SFAS No. 154”), which replaces AccountingPrinciples Board (“APB”) Opinion No. 20, “Accounting Changes,” and SFAS No. 3, “ReportingAccounting Changes in Interim Financial Statements-An Amendment of APB OpinionNo. 28.” SFAS No. 154 provides guidance on the accounting for and reporting ofaccounting changes and error corrections. It establishes retrospectiveapplication, or the latest practicable date, as the required method foraccounting for and reporting a change in accounting principle and a correctionof an error. SFAS No. 154 is effective for accounting changes and correctionsof errors made in fiscal years beginning after December 15, 2005. The adoptionof SFAS No. 154 did not have a material impact on the Company’s financialposition, results of operations or cash flows.

 

**2. ORGANIZATION AND NATURE OF BUSINESS**

 

**Organization and Nature of Business**

 

UbiquiTel Inc. and its subsidiaries (“UbiquiTel”or the “Company”) was formed for the purpose of becoming the exclusive providerof Sprint personal communications services (“PCS”) in certain defined midsizemarkets in the western and midwestern United States.

 

7

----

 

The Company has the exclusive right under itsmanagement agreement with Sprint PCS to provide digital wireless personalcommunications services, or PCS, under the Sprint brand name to certain marketsin the western and midwestern United States which include a total population ofapproximately 10.8 million residents covering portions of California,Nevada, Washington, Idaho, Utah, Wyoming, Indiana, Kentucky and Tennessee.Sprint has PCS licenses to cover more than 280 million people across all50 states, Puerto Rico and the U.S. Virgin Islands. The Company does not ownany PCS licenses, so generally the Company can only operate its business solong as the Company remains a PCS affiliate of Sprint Nextel Corporation andSprint Nextel and related entities continue to own the PCS licenses in theCompany’s markets. Sprint Nextel directly operates its PCS network in majormetropolitan markets and certain midsize and smaller markets throughout the UnitedStates. Sprint Nextel also has management agreements between Sprint PCS and PCSaffiliates of Sprint Nextel, who are independent companies such as the Company,pursuant to which the PCS affiliates of Sprint Nextel have constructed andmanage PCS networks under the Sprint brand name in midsize and smaller markets.See Note 8 (Recent Developments) for a discussion of Sprint Nextel Corporation’sproposed acquisition of the Company for cash in a merger transaction.

 

The consolidatedfinancial statements contain the financial information of UbiquiTel Inc.and its subsidiaries, UbiquiTel Operating Company and UbiquiTel LeasingCompany. The Company operates under one segment.

 

**3. SHARE-BASED PAYMENT EXPENSE**

 

Effective January 1, 2006, the Company adopted SFAS No.123 (revised 2004), “Share-Based Payments” (“SFAS No. 123R”), and relatedinterpretative guidance issued by the FASB and the Securities and ExchangeCommission. SFAS No. 123R requires the recognition of the cost of employeeservices received in exchange for an award of equity instruments in thefinancial statements and measurement based on the grant-date fair value of theaward. It requires the cost to be recognized over the period during which anemployee is required to provide service in exchange for the award.Additionally, compensation expense will be recognized over the remainingemployee service period for the outstanding portion of any awards for whichcompensation expense had not been previously recognized or disclosed under SFASNo. 123, “Accounting for Stock-Based Compensation” (“SFAS No. 123”). SFAS No.123R replaces SFAS No. 123 and supersedes APB Opinion No. 25, “Accounting forStock Issued to Employees” (“APB No. 25”), and its related interpretations. TheCompany previously recognized expense in accordance with the provisionsrequiring variable accounting under APB No. 25 and its related interpretationsfor previously modified stock options, all of which were fully vested as ofDecember 31, 2005. Upon the adoption of SFAS 123R, the Company discontinuedrecognizing compensation expense under variable accounting.

 

In its adoption of SFAS No. 123R, the Company hasapplied the modified prospective transition method to all past awardsoutstanding and unvested as of January 1, 2006 and is recognizing theassociated expense over the remaining vesting period of such awards based onthe fair values previously determined and disclosed as part of its pro formadisclosures under SFAS No. 123. As such, the Company is not restating theresults of prior periods.

 

As of March 31, 2006, theCompany had two share-based payment plans, which provide for equity awards andare described below. For the three months ended March 31, 2006, the share-basedpayment expense recognized in the consolidated statement of operations inaccordance with SFAS No. 123R was approximately $0.4 million. This expense wasrecognized in the same expense component in the consolidated statement ofoperations as the salary or other cash compensation paid to the employeereceiving the award. Net of income tax effects, the adoption of SFAS No. 123Rreduced the Company’s net income by approximately $0.2 million and its effecton both basic and diluted net income per common share was less than $0.01 pershare. The adoption of SFAS No. 123R did not affect the Company’s cash flowfrom operating activities or cash flow from financing activities.

 

8

----

 

# **Equity Incentive Plan**

# ** **

The Company has an equity incentive plan (“EquityIncentive Plan”) for the purpose of attracting, retaining and rewarding keyemployees, consultants and non-employee directors. A committee consisting ofindependent members of the Company’s board of directors administers the EquityIncentive Plan. The committee may grant stock options, stock appreciationrights and other equity-based awards to eligible persons, as defined in theEquity Incentive Plan, including directors. The Equity Incentive Planauthorizes up to 7,500,000 shares of common stock for issuance. Awards paid incash are not counted against the number of shares that may be issued. Stockoptions are normally granted with an exercise price equal to the fair value ofthe common stock on the date of grant. Stock options granted to employees havegenerally vested in four equal annual amounts beginning on the anniversary dateof each grant. Stock options granted to non-employee directors have generallyvested immediately, except for initial grants, which vest over three years. Alloptions granted under the Equity Incentive Plan have a maximum term of tenyears.

 

Prior to establishment ofthe Equity Incentive Plan, the Company had also granted non-qualified stockoptions to its chief executive officer pursuant to an employment agreement.These stock options were fully vested as of December 31, 2005. As such, noshare-based payment expense is recognized for these options.

 

As there were no options granted during the threemonths ended March 31, 2006, the typical disclosures required by SFAS No. 123Rregarding assumptions used in determining the fair value of options grantedduring the reporting period are excluded. For the three months ended March 31,2006, the share-based payment expense recognized for options awarded under theEquity Incentive Plan was approximately $0.4 million and consisted only of thecost associated with the unvested awards made prior to January 1, 2006, whichwas calculated based on the fair values of the granted options on theirrespective grant dates in accordance with SFAS No. 123. In accordance with therecognition provisions of SFAS No. 123R, the amount of this expense has beenadjusted to reflect an assumed forfeiture rate and is now determined based onestimated forfeitures, thereby discontinuing the previously allowable method ofcalculating expense based on the actual forfeitures.

 

As of March 31, 2006, the total unrecognizedshare-based payment expense related to unvested options was approximately $3.1million, which is expected to be recognized over a weighted-average period ofapproximately 2.1 years. The Company’s policy is to recognize share-basedpayment expense on a straight-line basis over the option award’s requisiteservice period, which is generally the vesting period, provided that thisexpense is at least equal to the portion of the grant-date value of the awardthat is vested as of the date of the Company’s consolidated balance sheet.

 

In determining the fair value of each option grantedunder the Equity Incentive Plan, the Company uses the Black-Scholes model,which involves the determination of assumptions that become inputs into themodel. The primary inputs are expected volatility, expected term of the option,risk-free interest rate and dividend yield. Expected volatility is based on thehistorical performance of the Company’s common stock. Historical data ofexercise behavior is used to estimate the average number of years that anoption will remain outstanding prior to its exercise, factoring in the vestingperiod, contractual life of the option and post-vesting employment terminationbehavior. The risk-free interest rate is the implied yield available as of thegrant date on U.S. Treasury zero-coupon issues with a remaining term equal tothe option’s expected term. As the Company has never paid dividends and has notdeclared any intentions of doing so, the dividend yield is assumed to be zero.

 

9

----

 

The following table presents a summary of the optionactivity under the Equity Incentive Plan and any other share-based paymentarrangements involving Company stock options for the three months ended March31, 2006:

 
| ** **                             | ** ** | **Number of  Options** | ** ** | **Weighted Average  Exercise Price** | ** ** | **Weighted-Average  Remaining  Contractual Term** | ** ** | **Aggregate Intrinsic  Value (in thousands)** | ** ** |
|----------------------------------------|------------|-----------------------------|------------|------------------------------------------------|------------|--------------------------------------------------------|------------|--------------------------------------------------------------|------------|
| Outstanding at  January 1, 2006        |       | 7,356,375                   |       | $                                              | 2.55       |                                                   |       |                                                         |       |   |
| Granted                                |       | —                      |       | —                                         |       |                                                   |       |                                                         |       |
| Exercised                              |       | (220,225                    | )          | 3.35                                           |       |                                                   |       |                                                         |       |
| Forfeited                              |       | (158,050                    | )          | 4.39                                           |       |                                                   |       |                                                         |       |
| Expired                                |       | (100                        | )          | 3.52                                           |       |                                                   |       |                                                         |       |
| Outstanding at  March 31, 2006         |       | 6,978,000                   |       | $                                              | 2.49       |                                                   | 5.8 years  |                                                         | $          | 53,130 |   |
|                                   |       |                        |       |                                           |       |                                                   |       |                                                         |       |
| Options  exercisable at March 31, 2006 |       | 4,529,442                   |       | $                                              | 1.73       |                                                   | 4.7 years  |                                                         | $          | 37,918 |   |

 

The intrinsic value forstock options outstanding and exercisable is defined as the difference betweenthe market value of the Company’s common stock as of the end of the period andthe option’s exercise price. The aggregate intrinsic value of and cash receivedfrom options exercised during the three months ended March 31, 2006 wasapproximately $1.3 million and $0.7 million, respectively. As the Company has anet operating loss carryforward for income tax purposes, there were no benefitsrealized from income tax deductions for stock options exercised.

 

**EmployeeStock Purchase Plan**

 

Under the terms of theCompany’s employee stock purchase plan (the “ESP Plan”), during any calendaryear there are four quarterly offering periods beginning January 1st,April 1st, July 1st and October 1st,during which eligible employees can participate and purchase shares of theCompany’s common stock. The purchase price is the lower of 85% of the fairmarket value of the common stock on the first trading day of the offeringperiod or 85% of the fair market value of the common stock on the last tradingday of the offering period. For the three months ended March 31, 2006, thenumbers of shares purchased under the ESP Plan was 11,308 and the cash receivedfrom employee purchases of common stock was approximately $0.1 million. TheCompany recognized share-based payment expense for awards under the ESP Planusing the same methodology as it employs for options awarded under the EquityIncentive Plan. Share-based payment expense for the three months ended March31, 2006 was approximately $20,000.

 

**Stock-Based Compensation ExpensePrior to January 1, 2006**

 

Prior to January 1, 2006,the Company recognized stock-based compensation expense in accordance with theappropriate provisions of APB No. 25 and related interpretations requiringvariable accounting for the Company’s previously modified stock options, all ofwhich were fully vested as of December 31, 2005. Under variable accounting, quarterlyincreases or decreases in the share price of the Company’s common stockresulted in expense or reduction in expense, as reflected in non-cashcompensation in the Company’s consolidated statements of operations. TheCompany provided pro forma disclosure of stock-based compensation expense inaccordance with SFAS No. 148, “Accounting for Stock-BasedCompensation-Transition and Disclosure,” as if the fair value method of SFAS123 had been applied to stock-based compensation. Pro forma compensation expensedetermined in accordance with SFAS No. 123 did not consider potentialforfeitures, but was based on actual forfeitures as they occurred. Thefollowing table illustrates the effect on net income and net income per shareif the Company had applied the fair value recognition provisions of SFAS No.123 for the three months ended March 31, 2005:

 

10

----

 
| ** **                                                                                                                    | ** ** | **Three Months Ended  March 31, 2005**        | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------|------------|
| ** **                                                                                                                    | ** ** | **(In Thousands, Except Per  Share Amounts)** | ** ** |
|                                                                                                                          |       |                                                              |       |
| Net income, as  reported                                                                                                      |       |                                                              | $          | 2,452 |   |   |
| Add: stock-based  employee compensation included in reported net income, net of related income  tax                           |       |                                                              | (521       | ) |   |
| Deduct: total  stock-based employee compensation expense determined under fair value-based  method, net of related income tax |       |                                                              | (450       | ) |   |
| Pro forma net  income                                                                                                         |       |                                                              | $          | 1,481 |   |   |
|                                                                                                                          |       |                                                              |       |   |   |
| Basic net income  per share:                                                                                                  |       |                                                              |       |   |   |
| As reported                                                                                                                   |       |                                                              | $          | 0.03 |   |   |
| Pro forma                                                                                                                     |       |                                                              | $          | 0.02 |   |   |
|                                                                                                                          |       |                                                              |       |   |   |
| Diluted net  income per share:                                                                                                |       |                                                              |       |   |   |
| As reported                                                                                                                   |       |                                                              | $          | 0.02 |   |   |
| Pro forma                                                                                                                     |       |                                                              | $          | 0.02 |   |   |

 

**4. BASIC AND DILUTED NET INCOME PERSHARE**

 

The Company computes net income per common share inaccordance with SFAS No. 128, “Earnings per Share” (“SFAS No. 128”). Inaccordance with SFAS No. 128, incremental potential common shares from stockoptions and warrants are included in the calculation of diluted net income pershare except when the effect would be antidilutive.

 

The calculations for basic and diluted net income pershare were as follows:

 
| ** **                                                    | ** ** | **Three Months Ended March 31,**                  | ** ** |
|---------------------------------------------------------------|------------|-----------------------------------------------------------------------|------------|
| ** **                                                    | ** ** | **2006**                                                              | ** ** | **2005** | ** ** |
| ** **                                                    | ** ** | **(In Thousands, Except Per Share Amounts)** | ** ** |
| Basic                                                         |       |                                                                  |       |   |   |
| Net income                                                    |       | $                                                                     | 6,368      |   | $ | 2,452 |   |
| Weighted average  common shares outstanding                   |       | 94,280                                                                |       | 93,103 |   |
| Net income per  share                                         |       | $                                                                     | 0.07       |   | $ | 0.03 |   |
|                                                          |       |                                                                  |       |   |   |
| Diluted                                                       |       |                                                                  |       |   |   |
| Net income                                                    |       | $                                                                     | 6,368      |   | $ | 2,452 |   |
| Weighted average  common shares outstanding                   |       | 94,280                                                                |       | 93,103 |   |
| Effect of  dilutive options                                   |       | 4,980                                                                 |       | 5,541 |   |
| Weighted average  common shares outstanding assuming dilution |       | 99,260                                                                |       | 98,644 |   |
| Net income per  share                                         |       | $                                                                     | 0.06       |   | $ | 0.02 |   |

 

11

----

 

The following table summarizes the securities that areexcluded from the diluted net income per share calculation, as amounts wouldhave an antidilutive effect.

 
| ** **    | ** ** | **Three Months Ended March 31,** | ** ** |
|---------------|------------|------------------------------------------------------|------------|
| ** **    | ** ** | **2006**                                             | ** ** | **2005** | ** ** |
| Stock options |       | —                                               |       | 20,000 |   |
| Warrants      |       | 3,579,000                                            |       | 3,665,183 |   |
| Total         |       | 3,579,000                                            |       | 3,685,183 |   |

 

**5. PROPERTY AND EQUIPMENT**

 

Property and equipmentconsisted of the following:

 
| ** **                       | ** ** | **March 31, 2006** | ** ** | **December 31, 2005** | ** ** |
|----------------------------------|------------|------------------------------|------------|---------------------------------|------------|
| ** **                       | ** ** | **(In Thousands)**      | ** ** |
| Network  equipment               |       | $                            | 387,362    |                            | $          | 383,371 |   |
| Vehicles                         |       | 1,715                        |       | 1,594                           |       |
| Furniture and office  equipment  |       | 5,578                        |       | 5,551                           |       |
| Computer  equipment and software |       | 10,743                       |       | 10,647                          |       |
| Leasehold  improvements          |       | 5,634                        |       | 5,284                           |       |
| Land                             |       | 130                          |       | 130                             |       |
| Buildings                        |       | 4,670                        |       | 4,670                           |       |
|                             |       | 415,832                      |       | 411,247                         |       |
| Accumulated  depreciation        |       | (177,761                     | )          | (167,084                        | )          |
| Property and  equipment, net     |       | $                            | 238,071    |                            | $          | 244,163 |   |

 

Depreciation expense wasapproximately $10.7 million and $11.1 million for the three months ended March31, 2006 and 2005, respectively.

 

**6. LONG-TERM DEBT**

 

Long-term debt outstanding was as follows:

 
| ** **                                          | ** ** | **March 31, 2006** | ** ** | **December 31, 2005** | ** ** |
|-----------------------------------------------------|------------|------------------------------|------------|---------------------------------|------------|
| ** **                                          | ** ** | **(In Thousands)**      | ** ** |
| 9.875% senior  notes                                |       | $                            | 420,000    |                            | $          | 420,000 |   |
| Plus: premium                                       |       | 679                          |       | 710                             |       |
| Building  mortgage                                  |       | 2,946                        |       | 3,005                           |       |
| Total long-term  debt                               |       | 423,625                      |       | 423,715                         |       |
| Less: current  maturities                           |       | 244                          |       | 240                             |       |
| Total long-term  debt, excluding current maturities |       | $                            | 423,381    |                            | $          | 423,475 |   |

 

# **Notes**

# ** **

During 2004, Operating Company issued $420.0 millionaggregate principal amount of 9.875% senior notes due March 1, 2011 (“9.875%Senior Notes”), in transactions exempt from the registration requirements ofthe Securities Act. The 9.875% Senior Notes were subsequently registered underthe Securities Act. Interest on the 9.875% Senior Notes is payable semiannuallyon March 1 and September 1 at semiannual payments of approximately $20.7 million.

 

12

----

 

The 9.875% Senior Notes are redeemable in whole or inpart on or after March 1, 2007. Prior to March 1, 2007, Operating Company mayredeem up to 35% of the aggregate principal amount of the 9.875% Senior Noteswith net cash proceeds of a sale of its equity or a contribution to its commonequity capital, provided that at least 65% of the principal amount of 9.875%Senior Notes originally issued under the indenture remains outstanding aftergiving effect to such redemption and such redemption occurs within 45 days ofthe date of such sale of equity interests or contribution. The indenturegoverning the 9.875% Senior Notes contains customary covenants, includingcovenants limiting indebtedness, dividends and distributions on, andredemptions and repurchases of, capital stock and other similar payments, theacquisition and disposition of assets, and transactions with affiliates orrelated persons. The indenture governing the 9.875% Senior Notes provides forcustomary events of default, including cross defaults, judgment defaults andevents of bankruptcy. Operating Company is permitted to issue additional 9.875%Senior Notes under the indenture from time to time.

 

The Company presently isin compliance with all covenants associated with the 9.875% Senior Notes.UbiquiTel has fully and unconditionally guaranteed Operating Company’sobligations under the 9.875% Senior Notes.

 

The Company may from timeto time purchase outstanding 9.875% Senior Notes in the open market, inprivately negotiated transactions or otherwise in accordance with its debtinstruments and applicable law.

 

**7. WHOLLY-OWNEDOPERATING SUBSIDIARY**

 

UbiquiTel has fully and unconditionally guaranteedOperating Company’s obligations under the 9.875% Senior Notes (seeNote 6). UbiquiTel has no independent assets or operations separate fromits investment in Operating Company. UbiquiTel Leasing Company is a minorsubsidiary.

 

**8. RECENT DEVELOPMENTS**

 

On April 19, 2006, UbiquiTel entered into an agreementand plan of merger (“Merger Agreement”) with Sprint Nextel Corporation (“SprintNextel”) and Eagle Merger Sub Inc., a wholly owned subsidiary of Sprint Nextel(“Merger Sub”), pursuant to which Merger Sub will merge with and into UbiquiTel(the “Merger”), with UbiquiTel surviving the Merger. Upon completion of theMerger, UbiquiTel will be a wholly owned subsidiary of Sprint Nextel. In theMerger, each issued and outstanding share of UbiquiTel’s common stock will beconverted into the right to receive $10.35 per share in cash. In addition,options to acquire UbiquiTel common shares, whether vested or unvested, will becancelled and option holders will receive the excess, if any, of $10.35 pershare over the option exercise price for each share subject to the option, lessany applicable withholding taxes. The total consideration for the acquisitionof UbiquiTel is approximately $1.3 billion, which includes the assumption ofapproximately $300 million in net debt.

 

Contemporaneously with the execution of the MergerAgreement, Sprint Nextel, UbiquiTel and certain of their respective affiliatesentered into a settlement agreement and mutual release (“Settlement Agreement”).Under the terms of the Settlement Agreement, the parties agreed to file amotion to stay the existing litigation between them (UbiquiTel Inc. et al. v.Sprint Corporation et al., C.A. No. 1489-N) in the Delaware Court of Chancery,described further below. In addition, the parties agreed that at the effectivetime of the Merger, they will cooperate in taking all action necessary to causethe dismissal of the litigation. The Settlement Agreement also contains mutualreleases that will become effective at the effective time of the Merger.Furthermore, during the period between the signing of the Merger Agreement andthe effective time of the Merger (or termination of the Merger Agreement, ifapplicable), the Settlement Agreement prohibits, among other things, UbiquiTelfrom seeking relief against Sprint Nextel through any suit or proceeding for anyclaim, including any claim for breach of any exclusivity provision of existingcommercial contracts, although the Settlement Agreement permits UbiquiTel toseek relief through any suit or proceeding for any other claim arising duringthat period under such commercial contracts or any claim arising

 

13

----

 

under the MergerAgreement or the Settlement Agreement.

 

The board of directors of UbiquiTel unanimously (1)approved the Merger Agreement, the Merger and the Settlement Agreement, (2)determined that the consideration to be paid in the Merger is fair to UbiquiTel’sstockholders and (3) resolved to recommend that UbiquiTel’s stockholdersapprove the Merger, the Merger Agreement and the transactions contemplated bythe Merger Agreement. The board of directors may change its recommendation ifit receives a superior proposal and certain conditions specified in the MergerAgreement are met.

 

The Merger is expected to be completed in the secondquarter of 2006, subject to receipt of approval of UbiquiTel’s stockholders andapplicable regulatory approvals, as well as other customary closing conditions.The Merger Agreement also provides that, upon termination of the MergerAgreement under specified circumstances involving a competing proposal,UbiquiTel may be required to pay Sprint Nextel a termination fee of $35million.

 

On April 19, 2006, Sprint Nextel also entered into astockholders agreement (“Stockholders Agreement”) with each of UbiquiTel’sexecutive officers and directors, who collectively have the power to voteapproximately 9% of UbiquiTel’s outstanding common stock. Pursuant to the termsof the Stockholders Agreement, these stockholders have agreed, among otherthings, to vote their shares in favor of the Merger and not to transfer suchshares prior to the completion of the Merger, subject to the terms andconditions contained in the Stockholders Agreement.

 

The foregoing descriptions of the Merger Agreement andthe Settlement Agreement are qualified in their entirety by reference to suchdocuments, which are filed as Exhibits 2.1 and 10.1, respectively, to UbiquiTel’sCurrent Report on Form 8-K dated April 19, 2006 filed with the Securities andExchange Commission (“SEC”).

 

Previously, on December 15, 2004, Sprint Corporation(together with its subsidiaries, “Sprint”) and Nextel Communications, Inc. (“Nextel”)announced that they had entered into a definitive agreement to consummate amerger of equals. At that time, Nextel operated a competitive wireless mobilitycommunications network and business in markets in which UbiquiTel also provideswireless mobility communications network products and services under the Sprintand affiliated brands. Since the closing of the merger in August 2005, SprintNextel, as the merged entity, has operated the legacy Nextel business incompetition with UbiquiTel in approximately 80% of UbiquiTel’s market areas.Upon the closing of Sprint Nextel’s planned acquisition of Nextel’s affiliate,Nextel Partners, Inc., in the near future, Sprint Nextel will operate thelegacy Nextel business in competition with UbiquiTel in virtually all of itsmarket areas.

 

Following the announcement of the merger in late 2004,Sprint advised its PCS affiliates, including UbiquiTel, that it wished to reachmutually agreeable arrangements with the PCS affiliates regarding the potentialimpact of the Sprint-Nextel merger and integration of the Sprint and Nextelwireless businesses on the PCS affiliates and their rights under the managementagreements between Sprint PCS and the PCS affiliates. Despite UbiquiTel’sefforts to reach renegotiated arrangements with Sprint prior to the closing ofthe merger, UbiquiTel did not achieve this outcome and, to UbiquiTel’sknowledge, Sprint Nextel has not entered into such arrangements with any PCSaffiliate.

 

On July 12, 2005, UbiquiTel filed in the DelawareCourt of Chancery an action against Sprint Corporation, Sprint Spectrum L.P.,WirelessCo, L.P., Sprint Communications Company L.P., Sprint Telephony PCS,L.P., Sprint PCS License, L.L.C. and Nextel alleging that, among other things,following the consummation of the Sprint-Nextel merger, which subsequentlyoccurred on August 12, 2005, Sprint would breach its exclusivity andconfidentiality obligations to UbiquiTel under its written agreements withSprint and Sprint PCS, and that Nextel improperly interfered with UbiquiTel’sexclusivity rights under those agreements. The action further alleges thatSprint and Nextel conspired to deprive UbiquiTel of the exclusivity commitmentsin those agreements and to use UbiquiTel’s confidential business informationavailable to Sprint under those agreements to advantage Nextel’s business,which

 

14

----

 

is directlycompetitive with UbiquiTel’s wireless business in its markets. The complaintseeks, among other things, a court order requiring Sprint Nextel to comply withthe exclusivity provisions of those agreements. A copy of the complaint wasfiled as Exhibit 99.1 to UbiquiTel’s Current Report on Form 8-K dated July 12,2005 filed with the SEC. The court consolidated the trial of UbiquiTel’s actionwith a similar case brought by Horizon Personal Communications, Inc. and BrightPersonal Communications Services, LLC, which are subsidiaries of iPCS, Inc.,another PCS affiliate of Sprint Nextel. The consolidated nine-day trialoccurred in January 2006. OnApril 4, 2006, the vice chancellor presiding over the actions heard oralarguments on the merits of the case, but did not issue a ruling. On April 19,2006, simultaneously with Sprint Nextel and UbiquiTel executing the MergerAgreement, UbiquiTel, Sprint and Nextel entered into the Settlement Agreement,pursuant to which UbiquiTel’s litigation against Sprint and Nextel will bedismissed if the Merger closes. On April 20, 2006, the court entered an orderjointly submitted by the parties staying the litigation until the earlier of(i) December 31, 2006, or (ii) the termination of the Merger Agreement.

 

Shortly after filing thecomplaint in July 2005, UbiquiTel entered into a forbearance agreement withSprint imposing certain restrictions on, among other things, the operations ofthe legacy Nextel wireless business in UbiquiTel’s markets and the use anddissemination of UbiquiTel’s confidential business information. The forbearanceagreement and the restrictions it imposes remain effective at this time and areanticipated to remain effective for the period that the Merger is pending. Ifthe Merger is not consummated, then the forbearance agreement would expire whenthe vice chancellor issues a final ruling in the litigation, unless modifiedearlier by the court. Copies of the forbearance agreement and anamendment to the forbearance agreement were filed as Exhibit 99.1 to UbiquiTel’sCurrent Reports on Form 8-K dated July 29, 2005 and December 2, 2005,respectively, filed with the SEC.

 

Over the past three quarters, Sprint Nextel hasacquired five PCS affiliates of Sprint Nextel, including the largest affiliate,Alamosa Holdings, Inc. Prior to Sprint Nextel’s acquisition of those PCSaffiliates, four of the PCS affiliates had filed suit against Sprint relatingto the merger of Sprint and Nextel. Five PCS affiliates remain, including iPCSand UbiquiTel. See “Item 1A. Risk Factors,” in Part II of this report foradditional information and risks concerning the recent developments betweenSprint Nextel and UbiquiTel.

 

15

----

 

**Item 2. Management’s Discussion and Analysisof Financial Condition and Results of Operations**

 

**Forward-LookingStatements**

 

This JointQuarterly Report on Form 10-Q includes forward-looking statements that involveknown and unknown risks, uncertainties and other factors. Our actual resultscould differ materially from the results anticipated in these forward-lookingstatements. Risk factors that could cause actual results to differ from thosecontained in the forward-looking statements include, but are not limited to:

 

•                                          UbiquiTel’sdependence on its affiliation with Sprint;

 

•                                          theimpact of the Sprint-Nextel merger on UbiquiTel’s affiliation with Sprint aswell as Sprint’s competitiveness in the wireless industry;

 

•                                          theoutcome of UbiquiTel’s, and any other PCS affiliate of Sprint’s, litigationwith Sprint concerning the Sprint-Nextel merger;

 

•                                          changesin Sprint’s affiliation strategy as a result of the Sprint-Nextel merger or anyother merger involving Sprint Nextel;

 

•              thecompetitiveness of and changes in Sprint’s pricing plans, products andservices;

 

•              increasedcompetition in UbiquiTel’s markets;

 

•              ratesof penetration in the wireless communications industry;

 

•              thepotential to experience a high rate of customer turnover;

 

•              customerquality;

 

•              potentialdeclines in roaming and wholesale revenue;

 

•                                          UbiquiTel’sreliance on the timeliness, accuracy and sufficiency of financial and otherdata and information received from Sprint;

 

•              theability of Sprint to provide back office, customer care and other services;

 

•              UbiquiTel’sdebt level;

 

•              adequacyof bad debt and other reserves;

 

•              themarketability, liquidity and price volatility of UbiquiTel’s common stock;

 

•              UbiquiTel’sability to manage anticipated growth and rapid expansion;

 

•              changesin population;

 

•              changesor advances in technology;

 

•                                          effectsof mergers and consolidations within the wireless communications industry andunexpected

 

16

----

 

announcements or developments from others in the wirelesscommunications industry; and

 

•              generaleconomic and business conditions.

 

These and other applicable risks are described under“Part I, Item 1A. Risk Factors” and elsewhere in UbiquiTel’s and OperatingCompany’s Joint Annual Report on Form 10-K/A for the year ended December 31,2005 filed with the Securities and Exchange Commission, and under the caption“Cash Flows, Liquidity and Capital Resources” in this Item 2 and elsewhere in this Joint Quarterly Report on Form10-Q, including in Note 8 (Recent Developments) to the Notes to ConsolidatedFinancial Statements in Part 1, Item 1, and in Part II, Item 1A, of thisreport. Investors are referred to UbiquiTel’s and Operating Company’ssubsequent filings with the Securities and Exchange Commission for other riskfactors. We assume no obligation to publicly update or revise anyforward-looking statement made in this report, whether as a result of newinformation, future events, changes in assumptions or otherwise, after the dateof this report. All written or oral forward-looking statements attributable tous are expressly qualified in their entirety by these cautionary statements.

 

**Use of Certain Terms**

 

In 2003, we initiated a reseller program under whichmobile virtual network operators (MVNOs) use our network and resell wirelessservice under a private label. In this report, unless the context indicatesotherwise, all references to “subscribers” or “customers” and other operatingmetrics mean subscribers or customers excluding reseller subscribers.

 

### **Overview**

### ** **

UbiquiTel Inc. and its subsidiaries (“UbiquiTel”or the “Company”) was formed for the purpose of becoming the exclusive providerof Sprint personal communications services (“PCS”) in certain defined midsizemarkets in the western and midwestern United States.

 

We have the exclusive right under our managementagreement with Sprint PCS to provide digital wireless personal communicationsservices, or PCS, under the Sprint brand name to certain markets in the westernand midwestern United States which include a total population of approximately10.8 million residents covering portions of California, Nevada,Washington, Idaho, Utah, Wyoming, Indiana, Kentucky and Tennessee. Sprint hasPCS licenses to cover more than 280 million people across all 50 states,Puerto Rico and the U.S. Virgin Islands. We do not own any PCS licenses, sogenerally we can only operate our business so long as we remain a PCS affiliateof Sprint Nextel Corporation and Sprint Nextel and related entities continue toown the PCS licenses in our markets. Sprint Nextel directly operates its PCSnetwork in major metropolitan markets and certain midsize and smaller marketsthroughout the United States. Sprint Nextel also has management agreementsbetween Sprint PCS and PCS affiliates of Sprint Nextel, who are independentcompanies such as us, pursuant to which the PCS affiliates of Sprint Nextelhave constructed and manage PCS networks under the Sprint brand name in midsizeand smaller markets. There are five PCS affiliates of Sprint Nextel, includingus. See Note 8 (Recent Developments) to the Notes to Consolidated FinancialStatements in Part I, Item 1, of this report for a discussion of Sprint NextelCorporation’s proposed acquisition of the Company for cash in a mergertransaction.

 

As of March31, 2006, we had approximately 451,700 subscribers excluding resellers andapproximately 150,600 reseller subscribers, for a total subscriber base ofapproximately 602,300. As of March 31, 2006, our network covered approximately8.3 million residents which represented approximately 77% of the licensedpopulation in our markets.

 

As a PCS affiliate of Sprint, we do not own thelicenses to operate our network and instead pay Sprint for,

 

17

----

 

among other things, the use of its licenses. Under our managementagreement with Sprint PCS, Sprint is entitled to receive 8.0% of billed revenuefrom Sprint PCS subscribers based in our markets less current period bad debts,net of bad debt recoveries, from Sprint PCS subscribers based in our marketsand fees from wireless service providers other than Sprint PCS when theirsubscribers roam into our network. We are entitled to 100% of revenuescollected from the sale of handsets and accessories from our stores and onroaming revenues received when Sprint PCS customers from a different territorymake a wireless call on our PCS network and outbound non-Sprint PCS roamingbilled to subscribers based in our markets. We are responsible for building,owning and managing the portion of the PCS network located in our markets underthe Sprint brand name. Our results of operations are dependent on the SprintPCS network and, to a lesser extent, on the networks of other PCS affiliates ofSprint Nextel.

 

As a PCS affiliate of Sprint Nextel, we purchase a full suite ofsupport services from Sprint Nextel including billing, customer care,collections and national platform services. We pay a monthly per subscriberrate for these services which is reset every three years. The current period forthe service rates ends December 31, 2006, and the rates are due to be reset forthe three-year period ending on December 31, 2009. Sprint Nextel has notifiedus of proposed fees for these services for the next three-year period pursuantto our services agreement. We are presently in discussions with Sprint Nextelregarding its proposal. If we and Sprint Nextel cannot agree to new rates forthese services for the upcoming three-year period, we have the option tocontinue to purchase the services and have an arbitrator determine the new rateor self-provision or procure those services elsewhere, subject to certainrights and procedures relating to our ability to transition only customer careand collection services beginning in 2008. We have access to these servicesduring the term of our management agreement unless Sprint provides us at leastnine months’ advance notice of its intention to terminate any particularsignificant service. If Sprint terminates service, our operations may beinterrupted or restricted.

 

**Adoptionof New Accounting Standard for Share-Based Payment Expense**

 

EffectiveJanuary 1, 2006, we adopted Statement of Financial Accounting Standards(“SFAS”) No. 123 (revised 2004), “Share-Based Payments” (“SFAS No. 123R”), andrelated interpretative guidance issued by the Financial Accounting StandardsBoard (“FASB”) and the Securities and Exchange Commission. SFAS No. 123Rrequires the recognition of the cost of employee services received in exchangefor an award of equity instruments in the financial statements and measurementbased on the grant-date fair value of the award. It requires the cost to berecognized over the period during which an employee is required to provideservice in exchange for the award. Additionally, compensation expense will berecognized over the remaining employee service period for the outstandingportion of any awards for which compensation expense had not been previouslyrecognized or disclosed under SFAS No. 123, “Accounting for Stock-BasedCompensation” (“SFAS No. 123”). SFAS No. 123R replaces SFAS No. 123 andsupersedes Accounting Principles Board (“APB”) Opinion No. 25, “Accounting forStock Issued to Employees” (“APB No. 25”), and its related interpretations. Wepreviously recognized expense in accordance with the provisions requiringvariable accounting under APB No. 25 and its related interpretations forpreviously modified stock options, all of which were fully vested as ofDecember 31, 2005. Upon the adoption of SFAS 123R, we discontinued recognizingcompensation expense under variable accounting.

 

In ouradoption of SFAS No. 123R, we have applied the modified prospective transitionmethod to all past awards outstanding and unvested as of January 1, 2006 andare recognizing the associated expense over the remaining vesting period ofsuch awards based on the fair values previously determined and disclosed aspart of our pro forma disclosures under SFAS No. 123. As such, we are notrestating the results of prior periods.

 

For the threemonths ended March 31, 2006, the share-based payment expense recognized in theconsolidated statement of operations in accordance with SFAS No. 123R wasapproximately $0.4 million. This expense was recognized in the same expensecomponent in the consolidated statement of operations as the salary or othercash compensation paid to the employee receiving the award. Net of income taxeffects, the adoption of SFAS No. 123R reduced our net income by approximately$0.2 million and its effect on both basic and diluted net income per

 

18

----

 

common share was less than$0.01 per share. The adoption of SFAS No. 123R did not affect our cash flowfrom operating activities or cash flow from financing activities.

 

As there wereno stock options granted during the three months ended March, 31, 2006,share-based payment expense recognized for options consisted only of the costassociated with the unvested awards made prior to January 1, 2006, which wascalculated based on the fair values of the granted options on their respectivegrant dates in accordance with SFAS No. 123. In accordance with the recognitionprovisions of SFAS No. 123R, the amount of this expense has been adjusted toreflect an assumed forfeiture rate and is now determined based on estimated forfeitures,thereby discontinuing the previously allowable method of calculating expensebased on the actual forfeitures.

 

As of January1, 2006, the total unrecognized share-based payment expense related to unvestedoptions was approximately $3.5 million, which is expected to be recognized overa weighted-average period of approximately 2.3 years.

 

**Critical Accounting Policies and Estimates**

 

Thepreparation of our consolidated financial statements requires us to makeestimates and judgments that affect the reported amounts of assets,liabilities, revenues and expenses, and related disclosures of contingentliabilities. The methods, estimates and judgments we use in applying ouraccounting policies have a significant impact on the results we report in ourconsolidated financial statements. Some of our accounting policies require usto make subjective judgments, often as a result of the need to make estimatesof matters that are inherently uncertain. On an ongoing basis, we evaluate ourestimates, including, but not limited to, those related to long-lived assets,goodwill, lease transactions, property and equipment, bad debt, inventoryvaluation, income taxes, deferred revenue and contingencies. We base ourestimates on historical experience and on various other assumptions we believeto be reasonable under the circumstances, the results of which form the basisfor making judgments about the carrying values of assets and liabilities thatare not readily apparent from other sources. Actual results may differ from theseestimates under different assumptions or conditions. Some of the most criticalaccounting policies, including those that require a significant amount ofestimation or judgment in their application, include:

 

***Revenue Recognition:***

 

 We recognize revenues whenservices have been rendered or products have been delivered, the price to thebuyer is fixed and determinable, and collectibility is reasonably assured. Weaccount for rebates, discounts and other sales incentives as a reduction torevenue. Subscriber revenue consists of monthly recurring service charges forvoice and data services and monthly non-recurring charges for local, longdistance, travel and roaming airtime usage and data usage in excess of thepre-subscribed usage plan received from our subscribers, cancellation and latefee revenues and surcharges, less reductions for billing adjustments andcredits. Equipment revenue includes sales of handsets and accessories. Ourrevenue recognition policies are consistent with the guidance in Emerging IssuesTask Force Issue No. 00-21, “Accounting for Revenue Arrangements withMultiple Deliverables,” and Staff Accounting Bulletin No. 104, “RevenueRecognition.”

 

We recognizerevenue from our subscribers as they use the service. We pro-rate accessrevenue over the billing period and record airtime usage in excess of thepre-subscribed usage plan. Our subscribers pay an activation fee to us whenthey initiate service. Non-refundable, up-front activation fees billed in ourdirect sales channel are included in equipment revenue in the consolidatedstatement of operations to the extent that the aggregate activation fee andhandset proceeds received from a subscriber do not exceed the fair value of thehandset sold.

 

Roaming and wholesale revenue includes reseller revenue, Sprint PCStravel revenue and non-Sprint PCS roaming revenue. We record Sprint PCS travelrevenue on a per minute rate for voice services and on a per kilobit

 

19

----

 

rate for data services whenSprint PCS subscribers based outside our markets use our network. We recordnon-Sprint PCS roaming revenue when non-Sprint PCS subscribers use our network.We record reseller revenue when reseller subscribers use our network. Minutesand kilobytes are sold at wholesale rates.

 

Equipment revenue consists of proceeds from sales of handsets andaccessories, which are recorded at the time of sale. Revenues from sales ofhandsets and accessories represent a separate earnings process from servicerevenues because sales of handsets and accessories do not require customers tosubscribe to wireless services. Equipment revenue also includes an allocationof the arrangement consideration from activation revenue received as part ofrevenue arrangements with multiple deliverables.

 

We participate in the Sprint national and regional distributionprograms in which national retailers such as RadioShack, Best Buy and Costcosell Sprint PCS products and services. In order to facilitate the sale ofSprint PCS products and services, national retailers purchase wireless handsetsfrom Sprint Nextel for resale and receive compensation from Sprint Nextel forSprint PCS products and services sold. For industry competitive reasons, Sprintsubsidizes the price of these handsets by selling the handsets at a price belowcost. Under our agreements with Sprint PCS, when a national retailer sells aSprint PCS handset purchased from Sprint to a subscriber in our markets, we areobligated to reimburse Sprint for the handset subsidy. We do not receive anyrevenues from sales of handsets and accessories by national retailers. For anew subscriber activation and a handset upgrade to an existing subscriber, weinclude these handset subsidy charges in cost of products sold in theconsolidated statements of operations.

 

***Valuation ofAccounts Receivable and Inventories:***

 

**Reserve for Doubtful Accounts**—Estimatesare used in determining our allowance for bad debt and are based both on ourhistorical collection experience, current trends and credit policy and on apercentage of our accounts receivables by aging category. In determining thesepercentages, we look at historical write-offs of our receivables. We also lookat current trends in the credit quality of our customer base and changes in thecredit policies. Sub-prime credit class customers are required to make adeposit ranging from $125 to $250 that can be credited against future billings.Under our Sprint PCS service plans, sub-prime credit class customers also aresubject to account spending limits, ranging from $125 to $250 depending on thecredit quality of the customer, to control credit exposure. If our estimates ofbad debt are insufficient for any reason, our operating income and availablecash would be reduced.

 

**Provision for Obsolete/Excess Inventory**—Werecord a provision for obsolete or excess handset and accessories inventory formodels and accessories that are no longer manufactured and defective models andaccessories that have been returned by customers. If the estimate of obsoleteinventory is understated, our operating income would be reduced.

 

***Long-Lived Assetsand Goodwill:***

 

SFASNo. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,”requires that long-lived assets be reviewed for impairment whenever events orchanges in circumstances indicate that the carrying amount of an asset may notbe recoverable. Recoverability is assessed based on the future cash flowsexpected to result from the use of the asset and its eventual disposition. Ifthe sum of the undiscounted cash flows is less than the carrying value of theasset, an impairment loss is recognized. Any impairment loss, if indicated, ismeasured as the amount by which the carrying amount of the asset exceeds thefair value of the asset. SFAS No. 142, “Goodwill and Other IntangibleAssets,” requires that goodwill and certain intangible assets resulting frombusiness combinations be reviewed for recoverability, and that annual tests forimpairment of goodwill and intangible assets that have indefinite useful livesbe performed. Any write-offs would result in a charge to earnings and areduction in equity in the period taken. As of October 31, 2005, wecompleted our annual impairment review and determined that no impairment chargewas required.

 

In thepreparation of our recoverability assessments, our critical assumptions andestimates involve primarily our projections of future cash flows. Though weincorporate various assumptions and estimates regarding key performancemeasures in determining projections of future cash inflows and cash outflows,the uncertainty attached to any assumption or estimate or the aggregationthereof has not resulted in significant variations when comparing previouslyprojected cash flows to the actual results. This is primarily due to predictablerecurring revenue streams that occur in our industry and sufficient history toproject the effects of customer turnover, or churn. Sensitivity analyses arealso performed on the assumptions and estimates to determine the effect ofunexpected changes on our projections of future cash flows and any significanteffects are assessed in terms of their probability of occurrence and thefinancial impact on our projections.

 

20

----

 

Intangibleassets consist of the unamortized cost of a Sprint PCS management agreementacquired in a business combination. Intangible assets are amortized over theirestimated useful life. As of December 31, 2005, the remaining useful life ofthe acquired Sprint PCS management agreement was approximately 14 years. Ifthere was a reduction in the useful life of this asset, our operating incomewould be reduced.

 

***Share-Based PaymentExpense:***

 

In thedetermination of share-based payment expense at an option’s grant date inaccordance with SFAS No. 123R, various assumptions are made with respect to theinputs to the determination of fair value of stock options under theBlack-Scholes model and expected rates of forfeiture. The process ofdetermining expected volatility, expected option term, risk-free interest rateand expected forfeiture rate involves analyzing and employing historical data.We analyze each input’s sensitivity to change, considering various outcomesthat are reasonably likely to occur. Events or circumstances requiring the change inthe estimated forfeiture rate can result in an adjustment of this estimate,which would result in an adjustment of the grant-to-date share-based paymentexpense to be reflective of this new estimate in the period of the change.Similarly, in the period that the option grant’s requisite service (or vesting)period expires, the cumulative share-based payment expense is adjusted torecognize the effect of the actual forfeitures that had occurred.

 

***Lease Transactions:***

 

We leaseoffice space, retail stores, land for radio communications sites, leased spaceon radio communications sites and office equipment under operating leases. Ouraccounting for an operating lease transaction as of the lease’s inceptioninvolves judgments in determining the number of lease renewal periods to beincluded in the lease term, in addition to the initial non-cancelable term,used in recognizing rent expense on a straight-line basis. This judgmentconsiders various factors that we would consider at the time of opting to renewsuch leases, particularly whether any nonrenewal could result in an economicdetriment to us or the forgoing of an economic benefit available to us.Additionally, the lease term can impact the determination of the period overwhich depreciable assets associated with operating leases are depreciated.

 

If a leasewith a lease term containing one or more renewal periods is not renewed afterthe initial term has expired, then the carrying values of the deferred rentliability resulting from straight-line recognition of rent expense and anylease-related assets reflected in the consolidated balance sheet would bewritten off and reflected in our results of operations in the period suchnonrenewal occurred.

 

***Income Taxes:***

 

As part of the process of preparing our consolidatedfinancial statements, we are required to estimate our income taxes in each ofthe jurisdictions in which we operate. This process involves managementestimating the actual current income tax expense together with assessingtemporary differences resulting from differing treatment of items for tax andaccounting purposes in accordance with the provisions of SFAS No. 109,“Accounting for Income Taxes.” These differences result in deferred income taxassets and liabilities, which are included in the consolidated balance sheets.

 

***Sprint Charges andPayments:***

 

We review all charges and payments from Sprint and dispute items ifappropriate based upon our interpretation of our agreements with Sprint and werecord estimates primarily based on our historical trends and our estimate ofthe amount which we believe we will remit to or receive from Sprint after thedisputed item or items have been settled.

 

21

----

 

**Recent AccountingPronouncements**

 

In May 2005,the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections” (“SFASNo. 154”), which replaces APB Opinion No. 20, “Accounting Changes,” and SFASNo. 3, “Reporting Accounting Changes in Interim Financial Statements-AnAmendment of APB Opinion No. 28.” SFAS No. 154 provides guidance on theaccounting for and reporting of accounting changes and error corrections. Itestablishes retrospective application, or the latest practicable date, as therequired method for accounting for and reporting a change in accountingprinciple and a correction of an error. SFAS No. 154 is effective foraccounting changes and corrections of errors made in fiscal years beginningafter December 15, 2005. Our adoption of SFAS No. 154 did not have a materialimpact on our financial position, results of operations or cash flows.

 

**Results ofOperations**

 

We provide a financial measure that is calculated inaccordance with accounting principles generally accepted in the United States(GAAP) and adjustments to GAAP (non-GAAP) to assess our financial performance.In addition, we use certain non-financial terms that are not measures offinancial performance under GAAP. Terms such as customer net additions andchurn are terms used in the wireless communications industry. The non-GAAPfinancial measure average revenue per user reflects a standard measure ofliquidity, profitability and performance. The non-financial terms and thenon-GAAP measure reflect wireless communications industry conventions and arecommonly used by the investment community for comparability purposes. Thenon-GAAP measure included in this report is reconciled below in “—Liquidity andCapital Resources—Reconciliation of non-GAAP financial measure.”

 

### ***Analysis of the three months ended March 31, 2006compared to the three months ended March 31, 2005***

### ** **

***Customer NetAdditions***

 

As of March 31, 2006, we provided personal communications services toapproximately 451,700 customers compared to approximately 412,900 customers asof March 31, 2005. During the three months ended March 31, 2006, we added 3,800net new subscribers compared to 14,400 net new subscribers for the three monthsended March 31, 2005. The decrease was primarily attributable to lower grosscustomer additions of approximately 4,600 primarily resulting from the effects ofaggressive handset promotions by certain competitors and customer confusionresulting from the Sprint-Nextel merger, and 6,000 more customer disconnectsprimarily due to a larger subscriber base and higher voluntary churn. We expectcustomer net additions in 2006 to continue to be less than 2005 levels.

 

# ***Churn***

# ** **

Churn is the monthly rate of customer turnoverexpressed as the percentage of customers of the beginning customer base thatboth voluntarily and involuntarily discontinued service during the period.Churn is computed by dividing the number of customers that discontinued serviceduring the month, net of 30 day returns, by the beginning customer base for theperiod. Churn for the three months ended March 31, 2006 was approximately 2.8%compared to approximately 2.6% for the three months ended March 31, 2005.Voluntary churn increased 0.2% primarily due to the impact of aggressivehandset promotions by certain competitors and lower service levels experiencedat Sprint Nextel call centers. We expect churn in 2006 to continue at higherlevels than in 2005.

 

***Average Revenue PerUser (ARPU)***

 

Average revenue per user (ARPU) summarizes the average monthlysubscriber revenue per customer. ARPU is computed by dividing subscriberrevenue by the average subscribers for the period. During each of the threemonths ended March 31, 2006 and 2005, our ARPU was approximately $55. Data ARPUincreased $4 to $9 for the three months ended March 31, 2006 compared to thethree months ended March 31, 2005, offset by the decline in

 

22

----

 

voice ARPU of $4 to $46 for thesame periods. We expect this trend to continue throughout the remainder of2006.

 

***Revenues***

 

•                  *Subscriber Revenue*. Subscriber revenue during the threemonths ended March 31, 2006 and 2005 was approximately $74.6 million and $66.9million, respectively. Subscriber revenue consists of monthly recurring servicecharges for voice and data usage and monthly non-recurring charges for local,long distance, travel and roaming airtime usage and data usage in excess of thepre-subscribed usage plan amount received from our subscribers, cancellationand late fee revenues and surcharges, less reductions for billing adjustmentsand billing corrections. Our customers’ charges are dependent on their rateplans, based on the number of minutes and data usage included in their plans.The increase in subscriber revenue was primarily attributable to the effect ofthe increase in our subscriber base. We expect subscriber revenue to continue togrow at a slightly slower rate than that experienced in 2005.

 

•                  *Roaming and Wholesale Revenue.* Roaming andwholesale revenue consists of Sprint PCS travel revenue, non-Sprint PCS roamingrevenue and reseller revenue. Travel revenue is generated on a per minute ratefor voice services or on a per kilobit rate for data services when a Sprint PCSsubscriber based outside our markets uses our network. An additional longdistance rate per minute is generated when that customer initiates a call fromour network to call outside the local calling area. Non-Sprint PCS roamingrevenue is generated when a non-Sprint PCS subscriber uses our network.Reseller revenue is generated when a reseller subscriber uses our PCS network.We have reseller programs with several companies, including Virgin Mobile USAand Qwest Communications.

 

Roaming andwholesale revenue during the three months ended March 31, 2006 and 2005 wasapproximately $30.6 million and $29.6 million, respectively. The increase inroaming and wholesale revenue was due to increases in Sprint PCS travelrevenues for voice and data services of approximately $1.1 million and $2.6million, respectively, partially offset by a decrease in non-Sprint PCS roamingrevenue of approximately $2.8 million. The increase in Sprint PCS travelrevenue was primarily due to increases in travel minutes of use and data usageof 8% and 103%, respectively. The decrease in non-Sprint PCS roaming revenuewas primarily due to a reduction in roaming minutes of use with a significant roamingpartner. Despite approximately 18% growth in reseller minutes, resellerrevenues were comparable to the amount recorded in the prior year due to areduction in the reseller rate with a significant reseller. We expect roamingand wholesale revenue in 2006 to continue to grow at a slower rate than thatexperienced in 2005.

 

•                  *Equipment Revenue*. Equipment revenue is generated from thesale of handsets and accessories and is recorded at the time of sale. We recordand retain 100% of the revenue from the sale of handsets and accessories, netof rebates, discounts and other sales incentives, as equipment revenue.Equipment revenue recorded during the three months ended March 31, 2006 and2005 totaled approximately $4.2 million and $3.4 million, respectively. Theincrease in equipment revenue was primarily attributable to reductions inhandset promotional discounts.

 

***Cost of Service andOperations***

 

•*                  NetworkOperations Expenses*. Network operations expenses include radiocommunications site lease costs, utilities, network control maintenance,network control site leases, engineering personnel, transport facilities andinterconnection charges. Network operations expenses totaled approximately$16.3 million during the three months ended March 31, 2006 comparedto approximately $16.5 million during the three months ended March 31,2005.

 

•                  *Travel and Roaming Expenses*. We pay SprintPCS travel fees on a per minute rate for voice services or on a per kilobitrate for data services when our customers use the Sprint PCS network outsideour markets and we

 

23

----

 

incur additional long distance fees when our customers call longdistance originating outside our markets. We also pay roaming fees to otherwireless providers when our customers use their network. Travel and roamingexpenses totaled approximately $15.5 million and $12.5 million for the threemonths ended March 31, 2006 and 2005, respectively. Voice travel expenseincreased approximately $1.1 million due to a larger subscriber base. Datatravel expense increased approximately $1.4 million due primarily to anincrease in travel data usage per subscriber. Roaming expense increasedapproximately $0.5 million due primarily to an increase in roaming usage persubscriber.

 

•                  *Bad Debt Expense.*Baddebt expense during the three months ended March 31, 2006 and 2005 wasapproximately $1.1 million and $1.0 million, respectively. We expect bad debtexpense to continue to grow proportionately with the growth of subscriberrevenue.

 

•                  *Sprint Operating Expenses.*Sprint operating expenses duringthe three months ended March 31, 2006 and 2005 were approximately $15.2 millionand $14.0 million, respectively. Sprint operating expenses included Sprintmanagement fee expense and other fees we paid to Sprint for the use of itssupport services, including billing and collections services and customer care.The increase in Sprint operating expenses was primarily attributable to theeffect of the increase in our subscriber base.

 

***Cost of Products Sold***

 

The cost ofproducts sold includes the costs of handsets and accessories and totaledapproximately $7.5 million and $10.4 million during the three months endedMarch 31, 2006 and 2005, respectively. The cost of handsets generally exceedsthe sales price because we subsidize the cost of handsets to subscribers,consistent with industry practice. Handset subsidies on units sold by thirdparties totaled approximately $1.4 million and $2.9 million for the threemonths ended March 31, 2006 and 2005, respectively. The decrease in cost ofproducts sold was primarily due to the effects of sales of less expensivehandset models of approximately $1.3 million and the decrease in gross customeradditions of approximately $0.7 million.

 

***Selling andMarketing***

 

Selling andmarketing expenses relate to our distribution channels, sales representatives,sales support personnel, retail stores, advertising programs and commissions.We incurred selling and marketing expenses of approximately $14.5 million and$15.9 million during the three months ended March 31, 2006 and 2005,respectively. The decrease in selling and marketing expenses was primarilyattributable to lower compensation and benefit expenses of approximately $1.0million primarily from the restructuring of the sales and marketing functionsthat was completed in the third quarter of 2005.

 

***General and Administrative***

 

We incurred general and administrativeexpenses totaling approximately $7.5 million and $5.0 million during the threemonths ended March 31, 2006 and 2005, respectively. For the three months endedMarch 31, 2006, general and administrative expenses included expenses incurredin connection with our litigation against Sprint Nextel of approximately $2.8million.

 

***Non-CashCompensation***

 

Prior to ouradoption of SFAS No. 123R on January 1, 2006, we applied the provisions of APBNo. 25 and related interpretations in accounting for our equity incentive plan.A reduction in the exercise price of certain previously issued stock optionsresulted in variable accounting for these options during the years 2002 through2005. During the three months ended March 31, 2005, the decrease in the fairmarket value of our common stock resulted

 

24

----

 

in a credit to non-cash compensationexpense of approximately $0.5 million. Upon the adoption of SFAS No. 123R, wediscontinued recognizing non-cash compensation expense under variableaccounting.

 

***Depreciation,Amortization and Accretion***

 

Depreciation, amortization and accretion expense forthe three months ended March 31, 2006 and 2005 totaled approximately $11.8million and $12.2 million, respectively. As we accelerated depreciation ofcertain minicell base stations during the years 2003 through the end of 2005,depreciation expense for the three months ended March 31, 2005 includeddepreciation expense of approximately $1.2 million related to these assets, allof which became fully depreciated as of December 31, 2005. The effect of thisdecrease in depreciation expense for the three months ended March 31, 2006 waspartially offset by higher depreciation expense resulting from net additions toour network equipment during the previous twelve months.

 

***Interest Income***

 

For the threemonths ended March 31, 2006 and 2005, interest income was approximately $1.6million and $0.5 million, respectively. Interest income increased as a resultof maintaining higher average cash and cash equivalent balances and earningmore interest due to higher interest rates as compared to the same period in 2005.

 

***Interest Expense***

 

Interestexpense totaled approximately $10.8 million and $10.9 million during the threemonths ended March 31, 2006 and 2005, respectively. We expect interest expensefor the remainder of 2006 to continue to be comparable to the amount recordedin 2005.

 

***Income Taxes***

 

For the three months ended March 31, 2006 and 2005, werecognized income tax expense of approximately $4.3 million and $0.1 million,respectively. During the fourth quarter of 2005, we released the valuationallowance on our deferred income tax assets, which primarily consisted of thetax benefit of our net operating loss carryforwards. As such, we are nowrecognizing income tax expense based on the estimated effective annual federaland state income tax rates applied to our pre-tax income, even though we do notexpect to pay cash income taxes during 2006, other than the requiredalternative minimum tax and state income tax payments, as a result of theutilization of some portion of our net operating loss carryforwards. Ourestimated effective annual federal and state income tax rate for 2006 isapproximately 39%.

 

**CashFlows, Liquidity and Capital Resources**

 

A significantportion of our revenues is generated from customers who subscribe to servicefrom us, our resellers or Sprint Nextel on contracts that range from one to twoyears. Our cash flow from operating activities will fluctuate with the size ofour subscriber base and indirectly from the size of Sprint Nextel’s PCSsubscriber base and the recurring subscriber, reseller and roaming revenuestreams generated from Sprint PCS customers. Net cash provided by operatingactivities was approximately $8.7 million and $2.2 million for the three monthsended March 31, 2006 and 2005, respectively. We expect cash flows from operatingactivities will continue to grow during the remainder of 2006 and in futureperiods at a pace consistent with changes in our subscriber base and that ofour resellers and roaming partners.

 

Since 2004, wehave funded all of our capital expenditures through cash flows from operatingactivities and expect to continue to do so in 2006 and in future years. Weexpect annual capital expenditures for 2006 to be comparable to the amountsrecorded in 2005.

 

25

----

 

In February2005, we announced a network coverage expansion, expected to be completed in2006. As part of this expansion, we entered into an agreement with an equipmentvendor to acquire network equipment. The agreement provides for a minimumpurchase commitment of $18 million in each of the years 2006 through 2008 forall network equipment and performance services that we purchase.

 

In December2004, Sprint announced its intention to deploy the next generation of CDMAtechnology known as EV-DO throughout its network. EV-DO technology is expectedto generate higher network data speeds and allow the introduction of new dataproducts and features. While Sprint has not required the implementation ofEV-DO by us or its other PCS affiliates, we began deploying EV-DO in selectedmarkets in the third quarter of 2005 and covered approximately 10% of thepopulation in our markets at the end of 2005 for an approximate cost of $3.5million.

 

During 2004,Operating Company issued $420.0 million aggregate principal amount of 9.875%senior notes due March 1, 2011 (“9.875% Senior Notes”). Interest on the 9.875%Senior Notes is payable semiannually on March 1 and September 1, requiringannual payments of approximately $41.5 million. The 9.875% Senior Notes areredeemable in whole or in part on or after March 1, 2007. UbiquiTel has fullyand unconditionally guaranteed Operating Company’s obligations under the 9.875%Senior Notes.

 

Under theindenture governing the 9.875% Senior Notes, Operating Company is permitted toissue additional notes from time to time. Prior to March 1, 2007, OperatingCompany may redeem up to 35% of the aggregate principal amount of the 9.875%Senior Notes with net cash proceeds of a sale of its equity or a contributionto its common equity capital, provided that at least 65% of the principalamount of 9.875% Senior Notes originally issued under the indenture remainsoutstanding after giving effect to such redemption and such redemption occurswithin 45 days of the date of such sale of equity interests or contribution. Wedo not have any current plans to sell equity interests of Operating Company ormake any capital contributions to its common equity capital and, as such, donot currently anticipate exercising this optional redemption right.

 

We presentlyare in compliance with all covenants in the indenture associated with the9.875% Senior Notes. We may from time to time purchase outstanding 9.875%Senior Notes and/or shares of UbiquiTel common stock in the open market, inprivately negotiated transactions or otherwise in accordance with our debtagreements and applicable law.

 

As of March31, 2006, we had approximately $144.9 million of working capital, including$126.5 million in cash and cash equivalents. Management expects cash and cashequivalents, combined with cash flow from operating activities, to besufficient to meet capital expenditures needs and service debt requirementsthrough March 31, 2007 and into the foreseeable future.

 

Whilemanagement does not anticipate the need to raise additional capital to meet ouroperating or capital expenditure requirements in the foreseeable future, ourfunding status is dependent on a number of factors influencing projections ofoperating cash flows, including those related to gross new customer additions,customer turnover, revenues, marketing costs, bad debt expense and roaming andreseller revenue. Management believes our financial position will be sufficientto meet the cash requirements of the business including capital expenditures,cash interest and working capital needs. We from time to time evaluate optionsfor additional financings to supplement our liquidity position and maintainmaximum financial flexibility. However, if actual results differ significantlyfrom these assumptions, our liquidity position could be adversely affected andwe could be in a position that would require us to raise additional capital,which may not be available or may not be available on acceptable terms.

 

26

----

 

***Reconciliation ofnon-GAAP financial measure***

 

We utilize a financial measure that is not calculated in accordancewith accounting principles generally accepted in the United States, or GAAP, toassess our financial performance. A non-GAAP financial measure is defined as anumerical measure of a company’s financial performance that (a) excludesamounts, or is subject to adjustments that have the effect of excludingamounts, that are included in the comparable measure calculated and presentedin accordance with GAAP in the statement of income or statement of cash flows;or (b) includes amounts, or is subject to adjustments that have the effectof including amounts, that are excluded from the comparable GAAP measure socalculated and presented. The non-GAAP financial measure discussed in “—Resultsof Operations” is average revenue per user (ARPU). A description of thisnon-GAAP financial measure is provided where the particular measure isdiscussed in “—Results of Operations—Analysis of the three months ended March31, 2006 compared to the three months ended March 31, 2005,” and the followingtable reconciles the non-GAAP financial measure with our unaudited consolidatedfinancial statements presented in accordance with GAAP (excluding subscriberdata).

 

| ** **                          | ** ** | **Three Months Ended March 31,** | ** ** |
|-------------------------------------|------------|------------------------------------------------------|------------|
| **Average revenue per user (ARPU)** | ** ** | **2006**                                             | ** ** | **2005** | ** ** |
| Subscriber revenue                  |       | $                                                    | 74,647,000 |   | $ | 66,892,000 |   |
|                                |       |                                                 |       |   |   |
| Average subscribers                 |       | 449,400                                              |       | 404,300 |   |
|                                |       |                                                 |       |   |   |
| ARPU                                |       | $                                                    | 55         |   | $ | 55 |   |

 

We believe ARPU, which calculates the average monthlyservice revenue per customer, is a useful measure to assist in evaluating ourpast and forecasting our future subscriber revenue. In addition, it provides agauge to compare our subscriber revenue to that of other wirelesscommunications providers, although other wireless communications providers mayinclude or exclude certain items from their calculations which may make thecomparison less meaningful.

 

***Inflation***

 

We believethat inflation has not had, and will not have, a material adverse effect on ourresults of operations.

 

***Seasonality***

 

Our businessis seasonal because the wireless industry is moderately dependent on fourthquarter results. Among other things, the industry relies on higher customeradditions and handset sales in the fourth quarter as compared to the other threefiscal quarters. The factors contributing to this trend include the increasinguse of retail distribution, which is dependent on year-end holiday shopping,the timing of new product and service offerings, competitive pricing pressuresand aggressive marketing and promotions during the holiday season. Theincreased level of activity requires a greater use of our available financialresources during this period.

 

**Item 3. Quantitative and QualitativeDisclosures About Market Risk**

 

Market risk isthe potential loss arising from adverse changes in market prices and rates,including interest rates. The interest rate on our notes is fixed at 9.875%. Wehave not entered into derivatives or other financial instruments for trading,speculative or hedging purposes, though we may do so from time to time if suchinstruments are available to us on acceptable terms and prevailing marketconditions are accommodating. No principal repayments on our notes are dueuntil March 2011.

 

27

----

 

**Item 4. Controls and Procedures**

 

**Evaluation of Disclosure Controls andProcedures**

 

Our management, under thesupervision and with the participation of our Chief Executive Officer and ChiefFinancial Officer (who serves as our principal financial and accountingofficer), conducted an evaluation of our “disclosure controls and procedures”(as defined in the Securities Exchange Act of 1934 (“Exchange Act”) Rules13a-15(e) or 15d-15(e)) as of March 31, 2006. Based on that evaluation, ourChief Executive Officer and Chief Financial Officer concluded that ourdisclosure controls and procedures were effective as of March 31, 2006.

 

**Changes in Internal Control Over FinancialReporting**

 

Therewere no changes in our internal control over financial reporting identified inconnection with the evaluation required by paragraph (d) of Exchange Act Rules13a-15 or 15d-15 that occurred during the three months ended March 31, 2006that have materially affected, or are reasonably likely to materially affect,our internal control over financial reporting.

 

Managementis responsible for all of our disclosure controls and procedures and internalcontrol over financial reporting including those relating to functionsoutsourced to a third party, Sprint Nextel Corporation, and including controlsover the information flow to and from the third party service organization. Wealso are responsible for assessing the identified controls over financialreporting over the outsourced operations. We place reliance on Sprint Nextel to adequately design its internalcontrols with respect to the processes established to provide financialinformation and other information to us and the other PCS affiliates of SprintNextel. To address this issue, Sprint Nextel engages its independent auditorsto perform a periodic evaluation of these controls and to provide a “Report onControls Placed in Operation and Tests of Operating Effectiveness forAffiliates” under guidance provided in Statement of Auditing Standards No. 70(“SAS 70”). This report is provided semi-annually to us and we have placedreliance on this SAS 70 report for assessing the identifiedcontrols over financial reporting over the outsourced operations.

 

**PART II. OTHERINFORMATION**

 

# **Item 1.**    LegalProceedings

# ** **

See Note 8(Recent Developments) to the Notes to Consolidated Financial Statements in PartI, Item 1, of this report with respect to the agreement and plan of mergerdated April 19, 2006 (“Merger Agreement”) we have entered into with SprintNextel Corporation in connection with Sprint Nextel’s proposed acquisition ofthe Company for cash in a merger transaction. A copy of the Merger Agreementwas filed as Exhibit 2.1 to UbiquiTel’s Current Report on Form 8-K dated April19, 2006 filed with the Securities and Exchange Commission (“SEC”) reportingthat UbiquiTel and Sprint Nextel Corporation had entered into the MergerAgreement.

 

On July 12, 2005, UbiquiTel filed in the DelawareCourt of Chancery an action against Sprint Corporation, Sprint Spectrum L.P.,WirelessCo, L.P., Sprint Communications Company L.P., Sprint Telephony PCS,L.P., Sprint PCS License, L.L.C. (collectively, “Sprint”), and NextelCommunications, Inc. (“Nextel”) alleging that, among other things, followingthe consummation of the Sprint-Nextel merger, which subsequently occurred onAugust 12, 2005, Sprint would breach its exclusivity and confidentialityobligations to us under our written agreements with Sprint and Sprint PCS, andthat Nextel improperly interfered with our exclusivity rights under thoseagreements. The action further alleges that Sprint and Nextel conspired todeprive us of the exclusivity commitments in those agreements and to use ourconfidential business information available to Sprint under those agreements toadvantage Nextel’s business, which is directly competitive with our wirelessbusiness in our markets. The complaint seeks, among other things, a court orderrequiring Sprint Nextel to comply with the exclusivity provisions of thoseagreements. A copy

 

28

----

 

of the complaintwas filed as Exhibit 99.1 to UbiquiTel’s Current Report on Form 8-K dated July12, 2005 filed with the SEC. The court consolidated the trial of UbiquiTel’saction with a similar case brought by Horizon Personal Communications, Inc. andBright Personal Communications Services, LLC, which are subsidiaries of iPCS,Inc., another PCS affiliate of Sprint Nextel. The consolidated nine-day trialoccurred in January 2006. OnApril 4, 2006, the vice chancellor presiding over the actions heard oralarguments on the merits of the case, but did not issue a ruling. On April 19,2006, simultaneously with Sprint Nextel Corporation and UbiquiTel executing theMerger Agreement, UbiquiTel, Sprint and Nextel entered into a settlementagreement and mutual release (“Settlement Agreement), pursuant to whichUbiquiTel’s litigation against Sprint and Nextel will be dismissed if themerger closes. A copy of the Settlement Agreement was filed as Exhibit10.1 to UbiquiTel’s Current Report on Form 8-K dated April 19, 2006 filed withthe SEC. On April 20, 2006, the courtentered an order jointly submitted by the parties staying the litigation untilthe earlier of (i) December 31, 2006, or (ii) the termination of the MergerAgreement.

 

Shortly after filing the complaintin July 2005, UbiquiTel entered into a forbearance agreement with Sprintimposing certain restrictions on, among other things, the operations of thelegacy Nextel wireless business in our markets and the use and dissemination ofour confidential business information. The forbearance agreement and therestrictions it imposes remain effective at this time and are anticipated toremain effective for the period that the merger is pending. If the merger isnot consummated, then the forbearance agreement would expire when the vicechancellor issues a final ruling in the litigation, unless modified earlier bythe court. Copies of the forbearance agreement and an amendment to theforbearance agreement were filed as Exhibit 99.1 to UbiquiTel’s Current Reportson Form 8-K dated July 29, 2005 and December 2, 2005, respectively, filed withthe SEC.

 

See “Item 1A. Risk Factors,” in this Part II of thisreport for additional information and risks concerning recent developmentsbetween Sprint Nextel and us.

 

**Item 1A. Risk Factors**

 

There have been no material changes in our risk factors from thosedisclosed in Part I, Item 1A to our Annual Report on Form 10-K/A for the yearended December 31, 2005 other than changes to the risk factors below entitled *“The merger between Sprint and Nextel, the outcome ofour litigation relating thereto and other developments between Sprint Nexteland us and other PCS affiliates may have an adverse effect on us”*and*“Our stock price has been and may continueto be volatile and stockholders may not be able to sell their shares at orabove the price they paid for them.”* In addition, we also added twonew risk factors as a result of the proposed merger with Sprint Nextel: *“Failure to complete the merger could negativelyimpact the stock price and the future business and financial results ofUbiquiTel because of, among other things, the market disruption that wouldoccur as a result of uncertainties relating to a failure to complete the merger”*and “*The Merger Agreement limitsour ability to pursue an alternative acquisition proposal to the merger andrequires us to pay a termination fee of $35 million if we do.”*****The risk factors disclosed inour Annual Report on Form 10-K/A, as updated below, in addition to the otherinformation set forth in this report, could materially affect our business,financial condition or results. Additional risks and uncertainties notcurrently known to us or that we deem to be immaterial also may adverselyaffect our business, financial condition or results.

 

**Risks Related to Our Business, Strategy andOperations**

 

***The merger betweenSprint and Nextel, the outcome of our litigation relating thereto and otherdevelopments between Sprint Nextel and us and other PCS affiliates may have anadverse effect on us***

 

Although wehave entered into the Settlement Agreement with Sprint Nextel in connectionwith our proposed merger with Sprint Nextel (see Note 8 (Recent Developments) to the Notesto Consolidated Financial Statements in Part I, Item 1, of this report),the Settlement Agreement will terminate if the merger is not completed

 

29

----

 

by December 31, 2006 or theMerger Agreement is terminated in accordance with its terms. If the SettlementAgreement is terminated and the stay of the litigation is lifted, we cannotpredict the outcome of our litigation against Sprint Nextel. We do not knowhow Sprint Nextel will operate the legacy Nextel business, which is a wirelessbusiness that is competitive with ours in our markets, after expiration of theforbearance agreement or if the court issues a ruling in the litigationfavoring Sprint.

 

We are highly dependent on Sprint roamingrevenues to supplement our core subscriber business. Roaming revenues fromSprint represented 73% of roaming and wholesale revenues in 2005 and 22% ofservice revenues and produced margins of approximately 85%. If Sprint divertsSprint PCS roaming traffic from our network to the network of the legacy Nextelbusiness in our markets through the development, introduction and sale ofhandsets that operate on both networks or through other network ortechnological changes, this would have a material adverse effect on our profitability and cashflows from operations, and our stock price may be adversely affected.

 

Notwithstanding the limitations theforbearance agreement imposes on Sprint Nextel, Sprint Nextel’s ownership andoperation of the legacy Nextel business in our markets has, among other things,caused customer confusion in our markets and has had a negative impact on oursubscriber growth and subscriber revenues. If, following the expiration of theforbearance agreement or a ruling in the litigation favoring Sprint, SprintNextel engages in additional detrimental conduct, some examples of whichinclude the following, subscriber growth and revenues could be further adverselyaffected:

 

•                  changing thebranding of the legacy Nextel operations, products and services in our marketsthat compete with us to the Sprint brands utilized by us to sell Sprint PCSproducts and services under our management agreement, including branding ofdistribution points such as retail stores and national retailers operating inour markets, advertising, marketing materials, product branding and branding ofservices and rate plans;

 

•                  sharing ourconfidential business information with persons at Sprint Nextel who areinvolved in the business and operations of the legacy Nextel business thatcompetes with us;

 

•                  inducing andfacilitating our Sprint PCS customers to transition their wireless service toNextel through methods such as direct marketing, advertising, waivers of earlytermination fees, and customer service interactions;

 

•                  withholdinginformation from us regarding its future technology, product or pricingplanning; and

 

•                  devoting lesspersonnel and resources to the remaining PCS affiliates, including us, as aresult of Sprint Nextel’s acquisition of more than fifty percent of thesubscriber base managed by PCS affiliates prior to the Sprint-Nextel merger.

 

If we donot prevail in our litigation with Sprint Nextel, upon the expiration of theforbearance agreement Sprint Nextel may operate the legacy Nextel business inour markets in a manner that would have an adverse effect on our business andoperations, and our stock price may be adversely affected.

 

***Our stock price hasbeen and may continue to be volatile and stockholders may not be able to selltheir shares at or above the prices they paid for them***

 

The market price of our common stock is subject to wide fluctuations inresponse to factors such as the following, some of which are beyond ourcontrol:

 

•                  changes in ourrelationship with Sprint Nextel, including our proposed merger with SprintNextel and

 

30

----

 

the outcome of our litigation against Sprint Nextel if the merger isnot completed;

 

•                  changes in therelationships of other PCS affiliates with Sprint Nextel, including SprintNextel’s acquisitions over the past three quarters of five PCS affiliates ofSprint Nextel;

 

•                  quarterly variationsin our operating results;

 

•                  operatingresults that vary from the expectations of securities analysts and investors;

 

•                  changes inexpectations as to our future financial performance, including financialestimates by securities analysts and investors;

 

•                  announcements bySprint Nextel concerning its relationships with its PCS affiliates and theintegration of the Sprint and Nextel businesses, as well as developments orchanges in its business, financial condition or results of operations, or inits expectations as to future financial performance;

 

•                  actual orpotential defaults in debt agreements by us or other PCS affiliates of SprintNextel;

 

•                  announcements oftechnological innovations or changes to, or new, products and services bySprint Nextel or our competitors;

 

•                  changes inresults of operations, market valuations and investor perceptions of SprintNextel, other PCS affiliates of Sprint Nextel or of other companies in thetelecommunications industry in general and the wireless industry in particular,including our competitors;

 

•                  changes in lawsand regulations;

 

•                  announcements bythird parties of significant claims or proceedings against us;

 

•                  announcements byus or our competitors of significant contracts, acquisitions, strategicpartnerships, joint ventures or capital commitments; and

 

•                  general economicand competitive conditions.

 

**Risks Related to the Merger with Sprint NextelCorporation**

 

***Failure tocomplete the merger could negatively impact the stock price and the futurebusiness and financial results of UbiquiTel because of, among other things, themarket disruption that would occur as a result of uncertainties relating to afailure to complete the merger***

 

Although we have agreed to use our commerciallyreasonable efforts to obtain stockholder approval of the proposal relating tothe merger, there is no assurance that this proposal will be approved, andthere is no assurance that we will receive the necessary regulatory approvalsor satisfy the other conditions to the completion of the merger. If the mergeris not completed for any reason, we will be subject to several risks, includinghaving had the focus of management directed toward the merger andintegration planning instead of on our core business and other opportunitiesthat could have been beneficial to UbiquiTel. In addition, we would not realize any of the expected benefits ofhaving completed the merger.

 

To the extent that the current market price of ourcommon stock reflects a market assumption that the merger will be completed,the price of our common stock may decline if the merger is not completed. Inaddition, our business may be harmed, and the price of our stock may decline asa result, to the extent that subscribers, suppliers and others believe that wecannot compete in the marketplace as effectively without the merger orotherwise remain uncertain about our future prospects in the absence of themerger. For example, current and prospective employees of UbiquiTel mayexperience uncertainty about their future roles with Sprint Nextel and chooseto pursue other opportunities that could adversely affect UbiquiTel if themerger is not completed. This may adversely affect the

 

31

----

 

ability of us to attract andretain key management, marketing and technical personnel, which could harm ourbusiness and results.

 

In addition, if the merger is not completed and ourboard of directors determines to seek another merger or business combination,there can be no assurance that a transaction creating stockholder valuecomparable to the value perceived to be created by the merger will be availableto us.

 

If the merger is not completed, we cannot assure ourstockholders that these risks will not materialize or materially adverselyaffect our business, financial results, financial condition and stock price.

 

***The MergerAgreement limits our ability to pursue an alternative acquisition proposal tothe merger and requires the payment of a termination fee of $35 million if wedo***

 

The Merger Agreement prohibits us from soliciting,initiating, encouraging or facilitating certain alternative acquisitionproposals with any third party, subject to exceptions set forth in the MergerAgreement. The Merger Agreement also provides for the payment of a terminationfee of $35 million if the Merger Agreement is terminated in certaincircumstances in connection with a third party initiating a competingacquisition proposal for us. These provisions limit our ability to pursueoffers from third parties that could result in greater value to ourstockholders. The obligation to make the termination fee payment also maydiscourage a third party from pursuing an alternative acquisition proposal.

 

**Item 2. Unregistered Sales of EquitySecurities and Use of Proceeds**

 

None.

 

**Item 3. Defaults Upon Senior Securities**

 

None.

 

**Item 4. Submission of Matters to a Vote ofSecurity Holders**

 

None.

 

**Item 5. Other Information**

 

None.

 

32

----

 

**Item 6.****  Exhibits**

 

**Exhibits:**

 
| **Exhibit No.** | ** ** | **Description**                                                                                                                                                                       |
|-----------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|            |       |                                                                                                                                                                                  |
| 31.1            |       | Certification  Pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section  302 of the Sarbanes-Oxley Act of 2002.                                                  |
|            |       |                                                                                                                                                                                  |
| 31.2            |       | Certification  Pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section  302 of the Sarbanes-Oxley Act of 2002.                                                  |
|            |       |                                                                                                                                                                                  |
| 32.1            |       | Certification  Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 9.06 of  the Sarbanes-Oxley Act of 2002 (furnished pursuant to Item 601(b)(32) of  Regulation S-K). |
|            |       |                                                                                                                                                                                  |
| 32.2            |       | Certification  Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 9.06 of  the Sarbanes-Oxley Act of 2002 (furnished pursuant to Item 601(b)(32) of  Regulation S-K). |

 

33

----

 

**SIGNATURES**

 

Pursuant to the requirements of the SecuritiesExchange Act of 1934, the registrant has duly caused this report to be signedon its behalf by the undersigned thereunto duly authorized.

 
|         | CO-REGISTRANTS:             |                                          |
|--------------|-----------------------------|-----------------------------------------------|
|         |                        |                                          |
|         | UBIQUITEL INC.              |                                          |
|         | UBIQUITEL OPERATING COMPANY |
|         |                        |                                          |
|         |                        |                                          |
|         | By:                         | /s/ DONALD A. HARRIS                          |   |
|         |                        | Donald A. Harris                              |
|         |                        | Chairman of the Board, President              |
|         |                        | and Chief Executive Officer                   |
|         |                        | (Principal Executive Officer)                 |
|         |                        |                                          |
|         |                        |                                          |
|         | By:                         | /s/ JAMES J. VOLK                             |   |
|         |                        | James J. Volk                                 |
|         |                        | Chief Financial  Officer                      |
|         |                        | (Principal  Financial and Accounting Officer) |
|         |                        |                                          |
| May 10, 2006 |                        |                                          |
|              |                             |                                               |  |  |

 

34

----