** **

**UNITED STATES**

**Securities and Exchange Commission**

**Washington,D.C. 20549**

**FORM 10-Q**

**(Mark One)**

** **
| **x**                                                   | **QUARTERLY REPORT PURSUANT TO SECTION 13 OR  15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934**  |
|---------------------------------------------------------|----------------------------------------------------------------------------------------------------------|
| ** **                                              | ** **                                                                                               |
| **For the  quarterly period ended March 31, 2006** |
| ** **                                              | ** **                                                                                               |
| **o**                                                   | **TRANSITION REPORT PURSUANT TO SECTION 13 OR  15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934** |

** **

**Forthe transition periodfrom            to                 **

**Commissionfile number 0-28362**

**ClearComm, L.P.**

(Exact name of registrant as specified in its charter)

 

| **Delaware**                                                                       | **66-0514434**                        |
|------------------------------------------------------------------------------------|---------------------------------------|
| (State or other jurisdiction of  incorporation or organization)                    | (I.R.S. Employer  Identification No.) |
|                                                                               |                                  |
| **City View Plaza-Suite 700  No. 48 of Road 165  Guaynabo, Puerto Rico** | **00918-1929**                        |
| (Address of principal executive offices)                                           | (Zip Code)                            |

 

Registrant’s telephone number, including area code: **(787) 810-5757**

 

Indicate by check mark whether the registrant (1) hasfiled all reports required to be filed by Section 13 or 15 (d) of theSecurities Exchange Act of 1934 during the preceding 12 months and (2) hasbeen subject to such filing requirements for the past 90 days.

Yes x      No o

 

Indicate by check mark whether the registrant is anaccelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes o      No x

 

Indicate by check mark whetherthe registrant is a shell company (as defined in Rule 12b-2 of theExchange Act).

Yes o      No x

 

 

----

ClearComm, L.P.INDEX
| PART I        |   | FINANCIAL  INFORMATION                                                                                                                                |   |   |   |
|--------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|
|               |   |                                                                                                                                                  |   |   |   |
| Item  1.           |   | Financial  Statements                                                                                                                                 |   |   |   |
|               |   |                                                                                                                                                  |   |   |   |
|               |   | Consolidated Statements of Assets, Liabilities and  Partners’Deficit as of March 31, 2006 (unaudited) and December 31,  2005 (audited) |   |   |   |
|               |   |                                                                                                                                                  |   |   |   |
|               |   | Consolidated Statements of Revenues and Expenses for  the three-month periods ended March 31, 2006 and 2005 (unaudited)                          |   |   |   |
|               |   |                                                                                                                                                  |   |   |   |
|               |   | Consolidated Statements of Changes in Partners’  Deficit for the three-month periods ended March 31, 2006 (unaudited)                       |   |   |   |
|               |   |                                                                                                                                                  |   |   |   |
|               |   | Consolidated Statements of Cash Flows for the  three-month periods ended March 31, 2006 and 2005 (unaudited)                                     |   |   |   |
|               |   |                                                                                                                                                  |   |   |   |
|               |   | Notes to Interim Consolidated Financial Statements as  of March 31, 2006 (unaudited)                                                             |   |   |   |
|               |   |                                                                                                                                                  |   |   |   |
| Item 2.            |   | Management’s Discussion and Analysis of Financial  Condition and Results of Operations                                                           |   |   |   |
|               |   |                                                                                                                                                  |   |   |   |
| Item 3.            |   | Quantitative and Qualitative Disclosure About Market  Risk                                                                                            |   |   |   |
|               |   |                                                                                                                                                  |   |   |   |
| Item 4.            |   | Controls and Procedures                                                                                                                               |   |   |   |
|               |   |                                                                                                                                                  |   |   |   |
| PART II       |   | OTHER  INFORMATION                                                                                                                                    |   |   |   |
|               |   |                                                                                                                                                  |   |   |   |
| Item  1.           |   | Legal  Proceedings                                                                                                                                    |   |   |   |
|               |   |                                                                                                                                                  |   |   |   |
| Item 4.            |   | Submission of Matters to a Vote of Limited Partners                                                                                                   |   |   |   |
|               |   |                                                                                                                                                  |   |   |   |
| Item 6.            |   | Exhibits and Reports on Form 8-K                                                                                                                 |   |   |   |
|               |   |                                                                                                                                                  |   |   |   |
| Signatures         |   |                                                                                                                                                  |   |   |   |
|               |   |                                                                                                                                                  |   |   |   |
| Exhibit Index |   |                                                                                                                                                  |   |   |   |

 

----

PART I   FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ClearComm, L.P.CONSOLIDATED STATEMENTS OF ASSETS, LIABILITIESAND PARTNERS’ DEFICIT
| ** **                                                                                                              | ** ** | **March 31,** | ** **      | **December 31,** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------|------------|--------------------|-----------------|-----------------------|------------|
| ** **                                                                                                              | ** ** | **2006**           | ** **      | **2005**              | ** ** |
| ** **                                                                                                              | ** ** | **(Unaudited)**    | ** **      | **(Audited)**         | ** ** |
| **ASSETS:**                                                                                                             | ** ** | ** **         | ** **      | ** **            | ** ** |
| **Cash  and cash equivalents**                                                                                          | ** ** | **$**              | **8,368,183**   | ** **            | **$**      | **6,609,074** | ** ** |
| **Accounts  receivable, net**                                                                                           | ** ** | **5,782,700**      | ** **      | **6,127,025**         | ** ** |
| **Accounts  receivable, other**                                                                                         | ** ** | **1,646,199**      | ** **      | **1,851,278**         | ** ** |
| **Inventories,  net**                                                                                                   | ** ** | **2,043,146**      | ** **      | **2,953,707**         | ** ** |
| **Prepaid  expenses**                                                                                                   | ** ** | **1,851,091**      | ** **      | **1,389,516**         | ** ** |
| **Leasehold  rights, net**                                                                                              | ** ** | **3,368,278**      | ** **      | **3,465,685**         | ** ** |
| **PCS  licenses, net**                                                                                                  | ** ** | **46,750,449**     | ** **      | **46,750,449**        | ** ** |
| **Deferred  financing costs**                                                                                           | ** ** | **888,264**        | ** **      | **658,660**           | ** ** |
| **Property  and equipment, net**                                                                                        | ** ** | **64,972,078**     | ** **      | **68,676,259**        | ** ** |
| ** **                                                                                                              | ** ** | ** **         | ** **      | ** **            | ** ** |
| ** **                                                                                                              | ** ** | **$**              | **135,670,388** | ** **            | **$**      | **138,481,653** | ** ** |
| ** **                                                                                                              | ** ** | ** **         | ** **      | ** **            | ** ** |
| **LIABILITIES AND PARTNERS’  DEFICIT:**                                                                            | ** ** | ** **         | ** **      | ** **            | ** ** |
| **Accounts  payable and accrued liabilities**                                                                           | ** ** | **$**              | **33,545,884**  | ** **            | **$**      | **37,256,948** | ** ** |
| **Notes  payable — short-term**                                                                                    | ** ** | **74,641,406**     | ** **      | **14,162,119**        | ** ** |
| **Notes  payable — long-term**                                                                                     | ** ** | **90,084,913**     | ** **      | **143,705,806**       | ** ** |
| ** **                                                                                                              | ** ** | ** **         | ** **      | ** **            | ** ** |
| **Unitholders’  capital (deficit) 2,768.20 Units in 2006 and 2005 and 1 General partnership  interest**  | ** ** | **(62,601,815**    | **)**           | **(56,643,220**       | **)**      |
| ** **                                                                                                              | ** ** | ** **         | ** **      | ** **            | ** ** |
| ** **                                                                                                              | ** ** | ** **         | ** **      | ** **            | ** ** |
| ** **                                                                                                              | ** ** | ** **         | ** **      | ** **            | ** ** |
| **Total  liabilities and partner’s deficit**                                                                       | ** ** | **$**              | **135,670,388** | ** **            | **$**      | **138,481,653** | ** ** |
| ** **                                                                                                              | ** ** | ** **         | ** **      | ** **            | ** ** |
| **BOOK  VALUE (DEFICIT) PER UNIT**                                                                                      | ** ** | **$**              | **(22,615**     | **)**                 | **$**      | **(20,462** | **)** |

 

Theaccompanying notes are an integral part of these consolidated statements.

1

----

ClearComm, L.P.CONSOLIDATED STATEMENTS OF REVENUES AND EXPENSES(UNAUDITED)
| ** **                                              | ** ** | **Three-Month Periods Ended** | ** **     |
|---------------------------------------------------------|------------|-----------------------------------------|----------------|
| ** **                                              | ** ** | **March 31,**                      | ** **     |
| ** **                                              | ** ** | **2006**                                | ** **     | **2005** | ** ** |
| **Revenues:**                                           | ** ** | ** **                              | ** **     | ** ** | ** ** |
| **Service revenues**                                    | ** ** | **$**                                   | **17,475,824** | ** ** | **$** | **22,878,520** | ** ** |
| **Handsets and accessories sales**                      | ** ** | **1,651,128**                           | ** **     | **737,460** | ** ** |
| ** **                                              | ** ** | ** **                              | ** **     | ** ** | ** ** |
| **Total  Revenues**                                     | ** ** | **19,126,952**                          | ** **     | **23,615,980** | ** ** |
| **Expenses:**                                           | ** ** | ** **                              | ** **     | ** ** | ** ** |
| **Operating expenses**                                  | ** ** | **23,111,820**                          | ** **     | **26,099,111** | ** ** |
| ** **                                              | ** ** | ** **                              | ** **     | ** ** | ** ** |
| **Income  from operations**                             | ** ** | **(3,984,868**                          | **)**          | **(2,483,131** | **)** |
| ** **                                              | ** ** | ** **                              | ** **     | ** ** | ** ** |
| **Interest  expense**                                   | ** ** | **(4,022,807**                          | **)**          | **(3,054,582** | **)** |
| ** **                                              | ** ** | ** **                              | ** **     | ** ** | ** ** |
| **Loss  before other income (expense)**                 | ** ** | **(8,007,675**                          | **)**          | **(5,537,713** | **)** |
| **Other Income (expense)**                              | ** ** | ** **                              | ** **     | ** ** | ** ** |
| ** **                                              | ** ** | ** **                              | ** **     | ** ** | ** ** |
| **Equity in net loss of subsidiary**                    | ** ** | **—**                              | ** **     | **(30,000** | **)** |
| ** **                                              | ** ** | ** **                              | ** **     | ** ** | ** ** |
| **Interest income**                                     | ** ** | **49,030**                              | ** **     | **32,644** | ** ** |
| ** **                                              | ** ** | ** **                              | ** **     | ** ** | ** ** |
| **Other**                                               | ** ** | **50**                                  | ** **     | **—** | ** ** |
| ** **                                              | ** ** | **—**                              | ** **     | **—** | ** ** |
| ** **                                              | ** ** | ** **                              | ** **     | ** ** | ** ** |
| **Net loss**                                            | ** ** | **$**                                   | **(7,958,595** | **)** | **$** | **(5,535,069** | **)** |
| ** **                                              | ** ** | ** **                              | ** **     | ** ** | ** ** |
| **Net loss attributable to General Partner**            | ** ** | **$**                                   | **(7,958,595** | **)** | **$** | **(5,535,069** | **)** |
| ** **                                              | ** ** | ** **                              | ** **     | ** ** | ** ** |
| **Net loss attributable to Limited Partners**           | ** ** | **$**                                   | **—**     | ** ** | **$** | **—** | ** ** |
| ** **                                              | ** ** | ** **                              | ** **     | ** ** | ** ** |
| **Net  loss per unit attributable to Limited Partners** | ** ** | **$**                                   | **—**     | ** ** | **$** | **—** | ** ** |

 

Theaccompanying notes are an integral part of these consolidated financialstatements.

2

----

ClearComm, L.P.CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS’ DEFICIT(Unaudited)FOR THE THREE-MONTH PERIOD ENDED MARCH 31, 2006
| ** **                                                                | ** ** | **Limited Partners** | ** ** | **General** | ** ** | ** **  | ** **  |
|---------------------------------------------------------------------------|------------|---------------------------|------------|-------------|------------|-------------|-------------|
| ** **                                                                | ** ** | **Units**                 | ** ** | **Amount**  | ** ** | **Partner** | ** **  | **Total** | ** ** |
| ** **                                                                | ** ** | ** **                | ** ** | ** **  | ** ** | ** **  | ** **  | ** ** | ** ** |
| **BALANCES,**December 31, 2005                                       |       | 2,768.2                   |       | —      |       | $           | (56,643,220 | ) | $ | (56,643,220 | ) |
| ** **                                                                | ** ** | ** **                | ** ** | ** **  | ** ** | ** **  | ** **  | ** ** | ** ** |
| **DILUTION  GAIN**                                                        |       |                      |       |        |       | 2,000,000   |        | 2,000,000 |   |
| ** **                                                                | ** ** | ** **                | ** ** | ** **  | ** ** | ** **  | ** **  | ** ** | ** ** |
| **Net loss for the three months period ended  March 31, 2006**  | ** ** | 2,768.2                   | ** ** | —      | ** ** | (7,958,595  | )           | (7,958,595 | ) |
|                                                                      |       |                      |       |        |       |        |        |   |   |
| **BALANCES,**March 31, 2006                                          |       | 2,768.2                   |       | —      |       | $           | (62,601,815 | ) | $ | (62,601,815 | ) |

 

Theaccompanying notes are an integral part of these consolidated financialstatements.

3

----

ClearComm,L.P.CONSOLIDATED STATEMENTS OF CASH FLOWS(UNAUDITED)
| ** **                                                                            | ** ** | **Three-Month Period Ended** | ** ** |
|---------------------------------------------------------------------------------------|------------|----------------------------------------|------------|
| ** **                                                                            | ** ** | **March 31,**                     | ** ** | **March 31,** | ** ** |
| ** **                                                                            | ** ** | **2006**                               | ** ** | **2005** | ** ** |
| **CASH FLOWS FROM OPERATING  ACTIVITIES:**                                            | ** ** | ** **                             | ** ** | ** ** | ** ** |
| Net loss                                                                              |       | $                                      | (7,958,595 | ) | $ | (5,535,069 | ) |
| Adjustments to reconcile net loss to net cash provided  by operating activities— |       |                                   |       |   |   |
| Depreciation and amortization                                                         |       | 4,261,738                              |       | 4,571,468 |   |
| Equity in losses of unconsolidated subsidiary                                         |       | —                                 |       | 30,000 |   |
| Bad debt expense                                                                      |       | 1,399,032                              |       | 2,188,569 |   |
| FCC Interest paid directly by ABN AMRO                                                |       | 284,166                                |       | — |   |
| Amortization of deferred financing costs                                              |       | 423,730                                |       | — |   |
| Capitalized interest                                                                  |       | 1,059,343                              |       | — |   |
| Changes in  operating assets and liabilities—                                    |       |                                   |       |   |   |
| Increase in accounts receivable, before write-offs                                    |       | (849,628                               | )          | (3,867,113 | ) |
| Decrease in insurance claim receivable                                                |       | —                                 |       | 300,000 |   |
| Decrease in inventories                                                               |       | 910,561                                |       | 1,725,980 |   |
| Increase in prepaid expenses                                                          |       | (461,575                               | )          | (357,227 | ) |
| Decrease accounts payable and accrued liabilities                                     |       | (3,536,492                             | )          | (2,296,563 | ) |
| Decrease in accounts payable to related parties                                       |       | 284,804                                |       | 294,681 |   |
| (Decrease) Increase in accrued interest                                               |       | (203,604                               | )          | 1,969,232 |   |
| Increase in deferred income                                                           |       | 552,173                                |       | 196,216 |   |
| Total adjustments                                                                     |       | 4,124,248                              |       | 4,755,243 |   |
| Net cash used in operating activities                                                 |       | (3,834,346                             | )          | (779,826 | ) |
| **CASH FLOWS FROM INVESTING  ACTIVITIES:**                                            | ** ** | ** **                             | ** ** | ** ** | ** ** |
| Proceeds from the sale of property                                                    |       | —                                 |       | 475,161 |   |
| Acquisition of property and equipment                                                 |       | (350,818                               | )          | (178,642 | ) |
| Net cash provided by (used in) investing activities                                   |       | (350,818                               | )          | 296,519 |   |
| **CASH FLOWS FROM FINANCING  ACTIVITIES:**                                            | ** ** | ** **                             | ** ** | ** ** | ** ** |
| Proceeds from issuance of preferred stock                                             |       | 2,000,000                              |       | — |   |
| Proceeds from issuance of note payable                                                |       | 5,000,000                              |       |   |   |
| Payments for deferred financing costs                                                 |       | (653,333                               | )          |   |   |
| Principal payments of capital lease obligations                                       |       | (116,365                               | )          | (49,664 | ) |
| Payment of note payable                                                               |       | (286,029                               | )          | (575,000 | ) |
| Net cash provided by (used in) financing activities                                   |       | 5,944,273                              |       | (624,664 | ) |
| **NET  INCREASE IN CASH AND CASH EQUIVALENTS**                                        |       | 1,759,109                              |       | (1,107,971 | ) |
| **CASH  AND CASH EQUIVALENTS, beginning of period**                                   |       | 6,609,074                              |       | 10,612,430 |   |
| **CASH  AND CASH EQUIVALENTS, end of period**                                         |       | $                                      | 8,368,183  |   | $ | 9,504,459 |   |
| ** **                                                                            | ** ** | ** **                             | ** ** | ** ** | ** ** |
| **SUPPLEMENTAL DISCLOSURES OF  CASH FLOWS INFORMATION:**                              | ** ** | ** **                             | ** ** | ** ** | ** ** |
| **INTEREST  PAID**                                                                    |       | $                                      | 3,167,068  |   | $ | 1,085,350 |   |

 

**SUPPLEMENTALSCHEDULE OF NON-CASH INVESTING AND FINANCING TRANSACTIONS:**

 

During the periodended March 31, 2005, interest expense from TEM-PR totaling $184,830 was capitalizedinto long-term debt.

4

----

CLEARCOMM, L.P.NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, 2006(UNAUDITED)

1.                                       BASISOF PRESENTATION AND INTRODUCTION

The unaudited interim consolidated financialstatements presented herein have been prepared in accordance with accountingprinciples generally accepted in the United States for interim financialstatements and with the instructions to Form 10-Q and Regulation S-Xpertaining to interim financial statements. Accordingly, they do not includeall information and footnotes required by accounting principles generallyaccepted in the United States for complete financial statements. The unauditedinterim consolidated financial statements reflect all adjustments, consistingof normal recurring adjustments and accruals which, in the opinion ofmanagement, are considered necessary for a fair presentation of the Partnership’sfinancial position at March 31, 2006 and results of operations and cashflows for the three-month periods ended March 31, 2006 and 2005. Theunaudited interim consolidated financial statements should be read inconjunction with the summary of significant accounting policies and notes toconsolidated financial statements included in the Partnership’s Annual Reporton Form 10-K for the year ended December 31, 2005. Results ofoperations for interim periods are not necessarily indicative of the resultsthat may be expected for the full year.

ClearComm, L.P. (the “Partnership”) is a limitedpartnership organized on January 24, 1995 under the laws of the State ofDelaware. The Partnership was formed to file applications with the FederalCommunications Commission (“FCC”) under personal communications service (“PCS”)frequency Block C, originally restricted to minorities, small businesses anddesignated entities, to become a provider of broadband PCS.

ThePartnership, through its majority-owned subsidiary, NewComm Wireless Services, Inc.(“NewComm”), owns and operates a state-of-the-art PCS network in Puerto Rico(the “Puerto Rico Network”). The Partnership directly or indirectly throughNewComm owns two 15 MHz C-Block PCS licenses covering the entire island ofPuerto Rico (the “Puerto Rico Licenses”) and owned four 15 MHz licenses inCalifornia (the “California Licenses,” which were sold in a transactionapproved by the FCC).

On November 30,2005, the Agreement of Limited Partnership of the Partnership (the “PartnershipAgreement”) was amended to extend the date the Partnership will terminate to December 31,2010. The Partnership will dissolve on such date (unless terminated earlier orunless the Partnership Agreement is amended to change such date). ThePartnership Agreement also provides for a reasonable time to wind-up theaffairs of the Partnership in case of termination.

SuperTel Communications Corp. (“SuperTel”), a PuertoRico corporation, is the General Partner. Its total share of the income andlosses of the Partnership is 25% in accordance with the Partnership Agreement. Approximately1,600 limited partners also invested in the Partnership through a privateplacement.

NewCommWireless Services, Inc.

ThePartnership established its Puerto Rico network by forming a wholly ownedsubsidiary, NewComm, on January 29, 1999. On February 4, 1999, thePartnership and NewComm entered into an agreement with TEM, whereby the Partnershipcontributed its two Puerto Rico Licenses to NewComm and TEM provided NewComm a$19,960,000 loan to develop the Puerto Rico Licenses. NewComm commencedproviding PCS services in Puerto Rico in September 1999.

ThePartnership was the fifth entrant into the Puerto Rico wirelesstelecommunications market. It currently provides wireless coverage in the areaswhere 95% of the Puerto Rico wireless traffic occurs and is expanding. ThePartnership has established points of sale in all major shopping districts andhas over 200 points of sale throughout Puerto Rico. The Partnership believesthat it currently has approximately 7% of the Puerto Rico wireless market.

ThePartnership’s Puerto Rico Network operates under the image and brand name “MoviStar.”  MoviStar is the PCS brand name of theTelefónica Group in Spain and certain other countries in Latin America.

ThePuerto Rico Network is a state-of-the-art Code Division Multiple Access (“CDMA”)network. Pursuant to a roaming agreement with Sprint PCS, MoviStar customershave mainland U.S. coverage. Lucent Technologies, Inc. (“Lucent”) builtthe Puerto Rico Network on behalf of NewComm. The Partnership continuesoptimizing the network to maintain and offer better quality service to itscustomers.

In each of November 2000, December 2000, andMarch 2001, NewComm received $5,000,000, from Syndicated CommunicationsVenture Partners IV, L.P. (“Syncom”), a third party, in exchange forapproximately 4.92% ownership in NewComm. Syncom has contributed $25 million toNewComm in exchange for approximately 8.2% ownership interest in NewComm. Thelast $10 million installment was contributed in November 2002.

5

----

On March 2,2002, the Partnership sold approximately 4.08% of NewComm to a group ofinvestors led by Fleet Development Ventures (the “Fleet Group”) for $13 million.The Partnership and TEM contributed approximately $9 million each to NewComm inthe form of equity and convertible debt, respectively. The Partnership and TEMhave committed an additional $10 million each to close the Project FinanceFacility.

Under the Partnership’s direction, the Board ofDirectors of NewComm terminated TEM as manager under the management agreementon October 28, 2004. TEM alleged unlawful and wrongful termination of thetechnology and management agreement. The Partnership on behalf of NewComm wasproactively seeking compensation for damages caused by the mismanagement of TEMeither by settlement or within the arbitration process. On April 21, 2005,NewComm and its shareholders entered into a Settlement Agreement and MutualRelease with TEM (the “Settlement Agreement”) in which all the parties resolvedall outstanding disputes. As a result Telefónica no longer provides managementservices to NewComm but has extended significant financial support in theform of guarantees / lines of credit (see Settlement Agreement in Part 4,Item 2 below).

On April 21,2005 NewComm reorganized its capital structure by collapsing its many classesof common stock into a single class of common stock.

On August 5,2005, NewComm made effective a Series A Convertible ParticipatingPreferred Stock purchase agreement between itself and its investors to fundcash flow deficiencies. On February 16 2006, NewComm made effective anotherSeries A Convertible Participating Preferred Stock purchase agreementbetween itself and its investors to fund cash flow deficiencies.

Immediately after the February 16,2006 closing, the authorized capital of NewComm is:

1.               50,024.695 shares of preferred convertible ofwhich:

o                 12.372 designated as Series A-1convertible participating preferred

o                 12.323 designated as Series A-2convertible participating preferred

o                 25,645.165 designated as Series A-3convertible participating preferred

o                 24,354.835 designated as Series A-4convertible participating preferred

2.               52,044.142 shares of common stock, 2,019.447of which are issued and outstanding and 50,024.695 are reserved for theissuance upon the conversion of the Series A Convertible Preferred Stock.

NewComm’s Shareholderspossess the following ownership interests in NewComm, as of March 31,2006:

|                                        | ** ** | **Common  Shares** | ** ** | **%**   | ** ** | **Shares  Fully Diluted** | ** ** | **%**   | ** ** |
|----------------------------------------|------------|--------------------|------------|---------|------------|--------------------------------|------------|---------|------------|
| ClearComm, L.P.                        |       | 793.063            |       | 39.27%  |       | 30,804.147                     |       | 59.19%  |       |
| SynComm Venture  Partners IV, L.P.     |       | 145.680            |       | 7.21%   |       | 13,921.050                     |       | 26.75%  |       |
| Fleet  Development Ventures, LLC       |       | 28.077             |       | 1.39%   |       | 30.299                         |       | 0.06%   |       |
| Opportunity  Capital Partners IV, L.P. |       | 28.077             |       | 1.39%   |       | 3,852.772                      |       | 7.40%   |       |
| Power  Equities, Inc.             |       | 16.846             |       | 0.83%   |       | 2,428.170                      |       | 4.67%   |       |
| TEM Puerto Rico  Inc.                  |       | 1,007.704          |       | 49.90%  |       | 1,007.704                      |       | 1.94%   |       |
|                                   |       |               |       |    |       |                           |       |    |       |
|                                   |       | 2,019.447          |       | 100.00% |       | 52,044.142                     |       | 100.00% |       |

 

InternetSurfing Stores of P.R., Inc. - (eMilios)

On April 16,2002, the Partnership entered into a Shareholders’ Agreement to form ajoint venture with eMilios International, L.L.C., a Florida limited liabilitycompany, to promote and establish in Puerto Rico the eMilios concept. The jointventure was formed under a Puerto Rico corporation named Internet SurfingStores of Puerto Rico, Inc. (“ISS”). The Partnership owns 49% and eMiliosInternational owns 51% of ISS.

Due tolack of support of eMilios International and lackluster results in Puerto Rico,the Partnership wrote off its investment in the project in 2005. ThePartnership is contemplating unwinding the operations of ISS this year.

6

----

2.             FINANCING REQUIREMENTS

The accompanying consolidated financial statementshave been prepared on a going concern basis, which contemplates the realizationof assets and the satisfaction of liabilities in the normal course of business.The Partnership commenced operations in September 1999 and has incurredlosses amounting to $7.9 million for the three-month period ended March 31,2006 and incurred operating losses of $5 million for the three month periodended March 31, 2005. It also has working capital deficits and partners’capital deficit of $149.5 million and $62.6 million, respectively, as of March 31,2006. The Partnership is likely to continue incurring losses until such time asits subscriber base generates revenue in excess of the Partnership’s expenses. Developmentof a significant subscriber base is likely to take time, during which thePartnership must finance its operations by means other than its revenues.

Aspart of an agreement with TEM, NewComm entered into a contract with Lucent thatrequired Lucent to build a network that uses the CDMA protocol. The total costof the network was approximately $125 million. During June 2003, NewCommand Lucent entered into a Senior Credit Agreement (the “Senior Credit Agreement”)which refinanced the existing promissory note balance due under the CDMAnetwork construction payable. The interest rate was set at 8% per annum and thematurity date was extended to September 2009. The note payable isguaranteed by a security agreement covering most of NewComm’s assets, asdefined.

On July 1, 2005, Lucent assigned and transferredto D.B Zwirn Special Opportunities Fund, LTD (“D.B Zwirn”) 100% of Lucent’srights and obligations under the original credit agreement. On February 16,2006, NewComm and D.B Zwirn amended and restated the Senior Credit Agreement.The new outstanding principal balance is $60,539,828, including some accruedand unpaid interest, and $5,000,000.00 in additional principal made availableat the time of closing. The maturity date is March 31, 2007. The facilitybears interest at a rate per annum equal to LIBOR + 700 basis points.Additionally, the facility accrues pay-in-kind (PIK) interest on the aggregateprincipal amount, payable upon maturity, acceleration or repayment. The PIKinterest is based on a grid that ranges from 2% to 4%, depending on quarterlyEBITDA results. The maturity date on the facility was January 31, 2006.The Senior Credit Agreement with D.B Zwirn includes various affirmative, negativeand financial covenants. As of March 31, 2006, NewComm was in compliancewith all the requirements under such covenants.

Pursuantto the Settlement Agreement, and with respect to the FCC debt, TEM has securedthe repayment of this debt by means of a subordinated line of credit guaranteedas described on the Settlement Agreement. This debt relates to the Partnershipacquisition of its PCS licenses The Partnership owes the United States federalgovernment approximately $14.1 million plus accrued interest at 6.5% as of March 31,2006.

Atotal of $73.8 million in accounts payable to TEM and T-Móviles was convertedinto equity as a result of the Settlement Agreement on April 20, 2005. Thisconversion has significantly decreased the Partnership’s accounts payable bysaid amount and increased NewComm’s capital account from $44.5 million to $118million.

Managementbelieves that cash and cash equivalents on hand, anticipated growth inrevenues, capital contributions and the additional indebtness incurred with D.BZwirn will be adequate to fund its operations, at a minimum, through the end of2006. However, in the absence of improved operating results and cash flows, NewCommmay face liquidity problems to fund its operations and meet its obligations. However,and because of the existence of these matters, substantial doubt exists as tothe Company’s ability to continue operating as a going concern. Theaccompanying financial statements do not include any adjustments that mightresult should the Company face liquidity issues to fund its operations and meetits obligations.

3.             RECENT ACCOUNTING PRONOUNCEMENTS

In May 2005, theFASB issued Interpretation No. 47, Accounting for Conditional AssetRetirement Obligations (an interpretation of FASB Statement No. 143) (FIN47). This Interpretation clarifies that the term conditional asset RetirementObligations, refers to a legal obligation to perform an asset retirementactivity in which the timing and (or) method of settlement are conditional on afuture event that may or may not be within the control of the entity.The obligation to perform the asset retirement activity is unconditionaleven though uncertainty may exist about the timing and (or) method ofsettlement. Accordingly, an entity is required to recognize the fair value of aliability for the conditional asset retirement obligation when incurred and theuncertainty about the timing and (or method) of settlement should be factoredinto the measurement of the liability when sufficient information exists. ThisInterpretation is effective no later than December 31, 2005. Retrospectiveapplication of interim financial information is permitted but is not required.Additionally, companies shall recognize the cumulative effect of initiallyapplying this Interpretation as a change in accounting principle. The Partnershipand NewComm (collectively, the “Company”) adopted this new pronouncementeffective December 31, 2005. The impact of the Company’s financialstatements as a result of adopting this new statement is not material.

7

----

4.             LEGAL PROCEEDINGS

From time to time the Partnership is involved inlitigation arising from the ordinary course of business, some of which isongoing. The General Partner does not believe that any litigation involving thePartnership will have a material adverse effect on the Partnership’s businessor financial condition.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-lookingStatements

This Quarterly Report on Form 10-Q andfuture filings by the Partnership on Form 10-Q, Form 10-Kand Form 8-K and future oral and written statements by thePartnership may include certain forward-looking statements, including (withoutlimitation) statements with respect to anticipated future operating andfinancial performance, growth opportunities and growth rates, acquisition anddivestiture opportunities, and other similar forecasts and statements ofexpectation. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,”“seeks,” “estimates,” and “should,” and variations of these words and similarexpressions, are intended to identify these forward-looking statements. Forward-lookingstatements by the Partnership are based on estimates, projections, beliefs andassumptions of management and are not guarantees of future performance. ThePartnership disclaims any obligation to update or revise any forward-lookingstatement based on the occurrence of future events, the receipt of newinformation, or otherwise.

Actualfuture performance, outcomes and results may differ materially from thoseexpressed in forward-looking statements made by the Partnership as a result ofa number of important factors. Examples of these factors include, withoutlimitation: rapid technological developments and changes in thetelecommunications industry; ongoing deregulation (and the resulting likelihoodof significantly increased price and product/service competition) in thetelecommunications industry as a result of the Telecommunications Act of 1996and other similar federal and state legislation and the federal and state rules andregulations enacted pursuant to that legislation; regulatory limitations on thePartnership’s ability to compete in the telecommunications services industry;and continuing consolidation in the telecommunications services industry. Inaddition to these factors, actual future performance, outcomes and results maydiffer materially because of other, more general factors including, withoutlimitation, general industry and market conditions and growth rates, domesticand international economic conditions, governmental and public policy changesand the continued availability of financing in the amounts, at the terms and onthe conditions necessary to support the Partnership’s future business.

Introduction

Theinformation contained in this Part I, Item 2 updates, and should be readin conjunction with, information set forth in Part II, Items 7 and 8, inthe Company’s Annual Report on Form 10-K for the year ended December 31,2005, in addition to the interim consolidated financial statements andaccompanying notes presented in Part 1, Item 1 of this Quarterly Report onForm 10-Q.

The Partnership was formed in January 1995 and ismanaged by its General Partner, SuperTel Communications Corp. The Partnershipwas organized to acquire, own, consult and operate PCS licenses in the Block Cband and to take advantage of the benefits that the FCC has set aside forentrepreneurs. The Partnership owns the Puerto Rico Licenses, which consist oftwo 15 MHz PCS licenses covering Puerto Rico. The California Licenses, whichconsist of four 15 MHz PCS licenses covering the California cities of Eureka,Redding, Modesto, and Merced were sold and transferred to Metro PCS on April 15,2004 for a $10,900,000 cash payment. The license covering Visalia-Porterville,California, had been previously sold and transferred to Leap Wireless on June 8,2001 in exchange for a $9,500,000 cash payment.

The Partnership commenced commercial operations of itsPCS network in Puerto Rico on September 24, 1999 when it began offeringwireless services in Puerto Rico to the public. Prior to that date, its incomehad consisted of interest earnings only.

The Partnership established its Puerto Rico network byforming a wholly owned subsidiary, NewComm, on January 29, 1999. On February 4,1999, the Partnership and NewComm entered into an agreement with TEM, wherebythe Partnership contributed its two Puerto Rico Licenses to NewComm and TEMprovided NewComm a $19,960,000 loan to develop the Puerto Rico Licenses. TEM’sloan was made pursuant to a secured convertible promissory note (the “Note”)which would be convertible into 49.9% of NewComm’s equity. The Note, however,could not be converted until the FCC authorized TEM to hold more than a 25%equity interest in NewComm. By means of a Stock Purchase Agreement executed on March 12,2002 (the “Stock Purchase Agreement”), the Partnership agreed to sell sharesequal to 0.2% in NewComm to TEM conditioned to obtaining permanent financing anda clear exit path for the Partnership. This transaction was subsequentlyapproved by the Department of Homeland Security and the FCC.

8

----

In August 2004, the Partnership retained theservices of a consulting firm (other than its external auditors) to audit theoperations and performance of NewComm under the management of TEM. The resultsof the audit were reported to the Board of Directors of NewComm on September 30,2004, with the conclusion that TEM had not performed adequately. Under thePartnership’s direction, the Board of Directors of NewComm terminated TEM asmanager under the management agreement on October 28, 2004. TEM allegedunlawful and wrongful termination of the technology and management agreement.The Partnership, on behalf of NewComm, was proactively seeking compensation fordamages caused by the mismanagement of TEM either by settlement or within thearbitration process.

On April 21, 2005, NewComm and its shareholdersentered into a Settlement Agreement and Mutual Release in which all the partiesresolved all outstanding disputes. The parties agreed to:

–                 Amutual waiver and release between all parties.

–                 Paymentof $4,392,978.55 in full satisfaction of the technology transfer fee due to TEMunder the technology transfer agreement through issuance of a convertiblepromissory note and capitalization.

–                 Paymentof $2,239,492.21 in full satisfaction of the management fee due to TEM underthe management agreement through issuance of a convertible promissory note andcapitalization.

–                 Paymentto ClearComm and TEM of $11,447,758.28 and $11,396,338.88 respectively in fullsatisfaction of the loans granted for purposes of meeting the matured portionof the FCC debt through issuance of a convertible promissory note and capitalization.

–                 Inaddition, $62.4 million in other notes and interest payable to TEM wereconverted to equity, for a total equity conversion of $ 80.5 million inaccounts payable to TEM and TEM Puerto Rico Inc. Upon conversion of allconvertible promissory notes, TEM Puerto Rico Inc. received an aggregate amountof shares of the Company equal to 49.9% and the other stockholders hold anaggregate amount of shares of NewComm equal to 50.1%.

–                 Forgivenessfrom TEM of $1,859,068.97 corresponding to all amounts outstanding with TMmas(a TEM affiliate) under the SCL agreements.

–                 Agreementon premium to be paid by TEM/TEM Puerto Rico Inc. to the other shareholdersupon a potential liquidation or a change in control. TEM and/or TEM Puerto RicoInc. shall pay a premium from the liquidation/sale proceeds that in any eventwill not exceed 16.6% of the equity valuation.

–                 Inthe event that as of September 30, 2006, NewComm’s net income, asdetermined in accordance with U.S. generally accepted accounting principles andmeasured on the basis of EBITDA for the twelve-month period then ended, is lessthan $10,970,000, TEM may require that the Partnership, and NewComm’sshareholders, together with TEM Puerto Rico, sell their respective interests inNewComm to a third party.

–                 Amendthe Stock Purchase Agreement in order to extend by 3 1⁄2 years, to approximately October 2008,TEM Puerto Rico’s option to buy a majority interest in NewComm and to clarifythe procedures that would apply upon the sale of NewComm to a third-partypurchaser in the event that neither TEM Puerto Rico, nor the Partnershipexercised its rights under the Sale Agreement to purchase NewComm.

–                 Enterinto a License Brand Agreement that allows the Partnership to use the MoviStarbrand name free of cost for 5 years.

 

The effectiveness of the Settlement Agreement wasconditioned upon the satisfaction of certain events, including the following:

–                 TEMPuerto Rico becoming the holder of 49.9% of NewComm’s capital stock.

–                 Thetermination of the Joint Venture Agreement, the Management Agreement, and theTechnology Transfer Agreement, each of which involved NewComm and included TEMas a party.

–                 Theamendment of the Stock Purchase Agreement, the Sale Agreement, dated March 12,2002 (the “Sale Agreement”), among NewComm, TEM Puerto Rico, the Partnership,and the other shareholders of NewComm, and the Shareholders Agreement, dated March 12,2002 (the “Shareholders Agreement”), among the Partnership, NewComm, TEM PuertoRico, and the other shareholders of NewComm.

–                 TEM’sentry into a line of credit to be used to pay the balance of NewComm’sindebtedness to the FCC; and an extension or refinancing of NewComm’s bridgeloan from ABN Amro Bank, N.V.

On April 21,2005 NewComm reorganized its capital structure by collapsing its many classesof common stock into a single class of common stock.

Subsequently, on August 5,2005, NewComm made effective a Series A Convertible ParticipatingPreferred Stock purchase agreement between itself and its investors to fund cashflow deficiencies. On February 16 2006, NewComm made effective another Series AConvertible Participating Preferred Stock purchase agreement between itself andits investors to fund cash flow deficiencies.

9

----

Immediately after the February 16,2006 closing, the authorized capital of the Company is:

1.               50,024.695 shares of preferred convertible ofwhich:

o                 12.372 are designated as Series A-1convertible participating preferred

o                 12.323 are designated as Series A-2convertible participating preferred

o                 25,645.165 are designated as Series A-3convertible participating preferred

o                 24,354.835 are designated as Series A-4convertible participating preferred

2.               52,044.142 shares of common stock, 2,019.447of which are issued and outstanding and 50,024.695 are reserved for theissuance upon the conversion of the Series A Convertible Preferred Stock.

Resultsof Operations

Three-monthperiod ended March 31, 2006 compared with three-month period ended March 31,2005.

Set forth below is a summary of the results of operationsbefore other income and expenses for the periods indicated:

|                                         | ** ** | **Three-Month Periods Ended** | ** **     | ** **     | ** ** |
|-----------------------------------------|------------|-----------------------------------------|----------------|----------------|------------|
| ** **                              | ** ** | **March 31,**                      | ** **     | ** **     | ** ** |
| ** **                              | ** ** | **2006**                                | ** **     | **2005**       | ** ** | **Change** | ** ** |
| **Revenues:**                           | ** ** | ** **                              | ** **     | ** **     | ** ** | ** ** | ** ** |
| **Service revenues**                    | ** ** | **$**                                   | **17,475,824** | ** **     | **$**      | **22,878,520** | ** ** | **-24%** | ** ** |
| **Handsets and accessories sales**      | ** ** | **1,651,128**                           | ** **     | **737,460**    | ** ** | **124%** | ** ** |
| ** **                              | ** ** | ** **                              | ** **     | ** **     | ** ** | ** ** | ** ** |
| **Total  Revenues**                     | ** ** | **19,126,952**                          | ** **     | **23,615,980** | ** ** | **-19%** | ** ** |
| **Expenses:**                           | ** ** | ** **                              | ** **     | ** **     | ** ** | ** ** | ** ** |
| **Operating expenses**                  | ** ** | **23,111,820**                          | ** **     | **26,099,111** | ** ** | **-11%** | ** ** |
| ** **                              | ** ** | ** **                              | ** **     | ** **     | ** ** | ** ** | ** ** |
| **Income  (loss) from operations**      | ** ** | **(3,984,868**                          | **)**          | **(2,483,131** | **)**      | **60%** | ** ** |
| ** **                              | ** ** | ** **                              | ** **     | ** **     | ** ** | ** ** | ** ** |
| **Interest  expense**                   | ** ** | **(4,022,807**                          | **)**          | **(3,054,582** | **)**      | **32%** | ** ** |
| ** **                              | ** ** | ** **                              | ** **     | ** **     | ** ** | ** ** | ** ** |
| **Loss  before other income (expense)** | ** ** | **(8,007,675**                          | **)**          | **(5,537,713** | **)**      | **45%** | ** ** |
|                                         |            |                                         |                |                |            |  |  |  |  |

 

Revenues

The Partnership’s revenues for the three-month periodended March 31, 2006 decreased by 19% or $5 million from $23.6 million to$19.1 as compared to the same period in 2005. Total revenues include service aswell as handset and accessories revenues. Service revenues for the three-monthperiod ended March 31, 2006 decreased by 24% or $5 million when comparedto the same period in 2005; while handset and accessories sales increased by124% or .9 million. The increase in handsets and accessories revenues is mainlydue to handset units pricing adjustments and to the elimination of pricingsubsidy previously given for the purchase of handsets. The decrease in servicerevenues is related to a net decrease in the customer base during the quarteras compared to the same period in 2005. As the Partnership is in transitionfrom offering traditional contract plans with subsidized handsets to a simplerunlimited “no contract, no subsidy” handset offering, the indirect channel hasdecreased its total sales. The Partnership is preparing to market its new modelwhereby the consumer receives the best value offer without hidden costs andpenalties, but pays a full cost price for the handset.

10

----

Expenses

The following table shows the variances for the threemonth period ended March 31, 2006 as compared to the same period in 2005:

|                                                                     | ** ** | **Three-Month Periods Ended** | ** **     | ** **    | ** ** |
|---------------------------------------------------------------------|------------|-----------------------------------------|----------------|---------------|------------|
| ** **                                                          | ** ** | **March 31,**                      | ** **     | ** **    | ** ** |
| ** **                                                          | ** ** | **2006**                                | ** **     | **2005**      | ** ** | **Change** | ** ** |
|                                                                |       |                                    |           |          |       |   |   |
| **Cost of  handset and accesories**                                 | ** ** | **$**                                   | **3,753,190**  | ** **    | **$**      | **4,685,012** | ** ** | **-20%** | ** ** |
| **Interconnection  expense**                                        | ** ** | **626,037**                             | ** **     | **795,577**   | ** ** | **-21%** | ** ** |
| **Sales  and dealers commissions**                                  | ** ** | **1,145,882**                           | ** **     | **2,034,700** | ** ** | **-44%** | ** ** |
| **Salaries  and benefits**                                          | ** ** | **3,955,605**                           | ** **     | **3,913,919** | ** ** | **1%** | ** ** |
| **Selling  and advertising expense**                                | ** ** | **296,080**                             | ** **     | **710,503**   | ** ** | **-58%** | ** ** |
| **Legal  and professional services**                                | ** ** | **547,853**                             | ** **     | **391,782**   | ** ** | **40%** | ** ** |
| **Depreciation**                                                    | ** ** | **4,691,393**                           | ** **     | **4,571,468** | ** ** | **3%** | ** ** |
| **Provision  for doubtful accounts**                                | ** ** | **1,399,032**                           | ** **     | **2,188,569** | ** ** | **-36%** | ** ** |
| **Rent  expense**                                                   | ** ** | **2,119,032**                           | ** **     | **1,793,093** | ** ** | **18%** | ** ** |
| **Taxes,  other than income**                                       | ** ** | **966,414**                             | ** **     | **1,042,232** | ** ** | **-7%** | ** ** |
| **Network  operation and maintenance**                              | ** ** | **1,954,836**                           | ** **     | **1,940,708** | ** ** | **1%** | ** ** |
| **Other  expenses**                                                 | ** ** | **1,515,519**                           | ** **     | **1,170,182** | ** ** | **30%** | ** ** |
| **Management  fee to General Partner**                              | ** ** | **125,000**                             | ** **     | **68,750**    | ** ** | **82%** | ** ** |
| **Consulting  and legal services rendered by related parties** | ** ** | **15,947**                              | ** **     | **792,616**   | ** ** | **-98%** | ** ** |
| ** **                                                          | ** ** | ** **                              | ** **     | ** **    | ** ** | ** ** | ** ** |
| **Total  Expenses**                                                 | ** ** | **$**                                   | **23,111,820** | ** **    | **$**      | **26,099,111** | ** ** | **-11%** | ** ** |

 

Expenses for the three-month period ended March 31,2006 totaled $23,111,820 as compared to $26,099,111 for the same period in 2005.During such first quarter of 2006, the Partnership’s expenses decreased by 11%or $3 million.

The overalldecrease in expenses of $3 million is mainly due to a decrease of 44% in salesand dealers commissions account. This account reflects lower than expecteddealer commissions that resulted from lower average commissions and theincreased distribution of handsets through direct channels rather than indirectchannel. In addition, there was a reduction of 36% in the provision for doubtfulaccounts due to a shift from postpaid customers to paid-in-advance customerplans that significantly reduced delinquency and increased overall collectioneffectiveness. Cost of sales for handsets decreased 20% due to a lower averagepurchase price for terminals.

Incomefrom Operations

Income from operations reflects the ability of thePartnership to generate positive cash flows from its operations, which does nottake into consideration expenses such as amortization, depreciation andinterest that must be reported for generally accepted accounting principles(GAAP) to arrive to the net income or loss.

Loss from operations for the three month period ended March 31,2006 of $3,984,868 shows an unfavorable variance of 60% or $1.5 million ascompared to the loss from operations for the same period in 2005. This increasein loss from operations is related to the overall reduction in servicerevenues.

Interest expense for the three month period ended March 31,2006 of $4 million ($3 million in 2005) and depreciation expense of $4.6million ($4.6 million in 2005) reduce the income from operations and result ina net loss before other income of $8,007,675 for the first quarter of 2006($5,535,713 in 2005); an overall increase in net loss of 45% when compared to 2005.The increase in interest expense is mainly attributable to additional debtincurred during the period and the effect of the pay in kind (PIK) interestthat did not affect the first quarter of 2005.

Depreciation expense remains constant as no major fixedassets have been acquired during the quarter.

11

----

Three-monthperiod ended March 31, 2005 compared with three-month period ended March 31,2004.

Set forth below is a summary of the results of operations before otherincome and expenses for the periods indicated:

|                                         | ** ** | **Three-Month Periods Ended** | ** **     | ** **     | ** ** |
|-----------------------------------------|------------|-----------------------------------------|----------------|----------------|------------|
| ** **                              | ** ** | **March 31,**                      | ** **     | ** **     | ** ** |
| ** **                              | ** ** | **2005**                                | ** **     | **2004**       | ** ** | **Change** | ** ** |
| **Revenues:**                           | ** ** | ** **                              | ** **     | ** **     | ** ** | ** ** | ** ** |
| **Service revenues**                    | ** ** | **$**                                   | **22,878,520** | ** **     | **$**      | **26,878,225** | ** ** | **-15%** | ** ** |
| **Handsets and accessories sales**      | ** ** | **737,460**                             | ** **     | **1,436,596**  | ** ** | **-49%** | ** ** |
| ** **                              | ** ** | ** **                              | ** **     | ** **     | ** ** | ** ** | ** ** |
| **Total  Revenues**                     | ** ** | **23,615,980**                          | ** **     | **28,314,821** | ** ** | **-17%** | ** ** |
| **Expenses:**                           | ** ** | ** **                              | ** **     | ** **     | ** ** | ** ** | ** ** |
| **Operating expenses**                  | ** ** | **26,099,111**                          | ** **     | **30,565,872** | ** ** | **-15%** | ** ** |
| ** **                              | ** ** | ** **                              | ** **     | ** **     | ** ** | ** ** | ** ** |
| **Income  (loss) from operations**      | ** ** | **(2,483,131**                          | **)**          | **(2,251,051** | **)**      | **10%** | ** ** |
| ** **                              | ** ** | ** **                              | ** **     | ** **     | ** ** | ** ** | ** ** |
| **Interest  expense**                   | ** ** | **(3,054,582**                          | **)**          | **(2,366,767** | **)**      | **29%** | ** ** |
| ** **                              | ** ** | ** **                              | ** **     | ** **     | ** ** | ** ** | ** ** |
| **Loss before  other income (expense)** | ** ** | **$**                                   | **(5,537,713** | **)**          | **$**      | **(4,617,818** | **)** | **20%** | ** ** |

 

Revenues

ThePartnership’s revenues for the three-month period ended March 31, 2005decreased by 17% or $4.7 million from $28.3 million to $23.6 as compared to thesame period in 2004. Total revenues include service as well as handset andaccessories revenues. Service revenues for the three-month period ended March 31,2005 decreased by 15% or $4 million when compared to the same period in 2004while handset and accessories sales decreased by 49% or .7 million. Thedecrease in handsets and accessories revenues is mainly due to handset unitspricing adjustments. The decrease in service revenues is related to a netdecrease in the customer base during the quarter as compared to the same periodin 2004.

Expenses

The following table shows the variances for the threemonth period ended March 31, 2005 as compared to the same period in 2004:

|                                                                | ** ** | **Three-Month Periods Ended** | ** **     | ** **    | ** ** |
|----------------------------------------------------------------|------------|-----------------------------------------|----------------|---------------|------------|
| ** **                                                     | ** ** | **March 31,**                      | ** **     | ** **    | ** ** |
| ** **                                                     | ** ** | **2005**                                | ** **     | **2004**      | ** ** | **Change** | ** ** |
|                                                           |       |                                    |           |          |       |   |   |
| **Cost of  handset and accesories**                            | ** ** | **$**                                   | **4,685,012**  | ** **    | **$**      | **5,938,964** | ** ** | **-21%** | ** ** |
| **Interconnection  expense**                                   | ** ** | **795,577**                             | ** **     | **975,554**   | ** ** | **-18%** | ** ** |
| **Sales  and dealers commissions**                             | ** ** | **2,034,700**                           | ** **     | **2,846,832** | ** ** | **-29%** | ** ** |
| **Salaries  and benefits**                                     | ** ** | **3,913,919**                           | ** **     | **4,034,411** | ** ** | **-3%** | ** ** |
| **Selling  and advertising expense**                           | ** ** | **710,503**                             | ** **     | **1,456,666** | ** ** | **-51%** | ** ** |
| **Legal  and professional services**                           | ** ** | **391,782**                             | ** **     | **713,352**   | ** ** | **-45%** | ** ** |
| ** **                                                     | ** ** | **4,571,468**                           | ** **     | **4,304,462** | ** ** | **6%** | ** ** |
| **Provision  for doubtful accounts**                           | ** ** | **2,188,569**                           | ** **     | **2,346,800** | ** ** | **-7%** | ** ** |
| **Rent  expense**                                              | ** ** | **1,793,093**                           | ** **     | **1,635,825** | ** ** | **10%** | ** ** |
| **Taxes,  other than income**                                  | ** ** | **1,042,232**                           | ** **     | **1,008,538** | ** ** | **3%** | ** ** |
| **Network  operation and maintenance**                         | ** ** | **1,940,708**                           | ** **     | **1,566,547** | ** ** | **24%** | ** ** |
| **Other  expenses**                                            | ** ** | **1,170,182**                           | ** **     | **2,341,278** | ** ** | **-50%** | ** ** |
| **Management  fee to General Partner**                         | ** ** | **68,750**                              | ** **     | **68,750**    | ** ** | **0%** | ** ** |
| **Consulting  and legal services rendered by related parties** | ** ** | **792,616**                             | ** **     | **1,327,894** | ** ** | **-40%** | ** ** |
| ** **                                                     | ** ** | ** **                              | ** **     | ** **    | ** ** | ** ** | ** ** |
| **Total  Expenses**                                            | ** ** | **$**                                   | **26,099,111** | ** **    | **$**      | **30,565,872** | ** ** | **-15%** | ** ** |

 

12

----

Expensesfor the three-month period ended March 31, 2005 totaled $26,099,111 ascompared to $30,565,872 for the same period in 2004. During such first quarterof 2005, the Partnership’s expenses decreased by 15% or $4.5 million.

Theoverall decrease in expenses of $4.5 million is mainly due to a decrease of 21%in the cost of handsets and accessories sold, combined with an increase innetwork maintenance costs, and rent. The decrease in cost of handsets sold isdue to a lower average purchase price for terminals. In addition, the handsetsubsidy, whereby the cost of acquiring handset is greater that the pricecharged to customers, was significantly reduced during the quarter.

Income fromOperations

Incomefrom operations reflects the ability of the Partnership to generate positivecash flows from its operations, which does not take into consideration expensessuch as amortization, depreciation and interest that must be reported forgenerally accepted accounting principles (GAAP) to arrive to the net income orloss.

Lossfrom operations for the three month period ended March 31, 2005 of$2,483,131 shows a favorable variance of 10% or $200,000 as compared to theloss from operations for the same period in 2004. This reduction in loss fromoperations is related to the overall reduction of expenses during the quarterwhich compensated the decrease in revenues.

Interestexpense for the three month period ended March 31, 2005 of $3 million($2.4 million in 2004) and depreciation expense of $4.6 million ($4.6 millionin 2004) reduce the income from operations and result in a net loss beforeother income of $5,037,712 for the first quarter of 2004 ($4,617,818 in 2004);an overall increase in net loss of 9% when compared to 2004. The increase ininterest expense is mainly attributable to additional debt incurred during theperiod.

Depreciationexpense remains constant as no major fixed assets have been acquired during thequarter.

Liquidityand Capital Resources

As of March 31,2006, the Partnership had cash and cash equivalents amounting to $8,368,183,which are mostly related to proceeds from the sale of the Visalia-Portervilleand California licenses in prior periods and the Fleet Transaction.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUTMARKET RISK

The Partnership’s exposure to market risk throughderivative financial instruments and other financial instruments is notmaterial because the Partnership does not use derivative financial instrumentsand does not have foreign currency exchange risks. The Partnership invests cashbalances in excess of operating requirements in short-term money market funds. Asof March 31, 2006, the Partnership had cash equivalents and short-terminvestments of approximately $8,368,183 consisting of cash and highly liquid,short-term investments in money market funds.

ThePartnership’s cash and cash equivalents will increase or decrease by animmaterial amount if market interest rates increase or decrease, and therefore,its exposure to interest rate changes has been immaterial. The Partnership’sloans payable to the FCC have a fixed interest rate of 6.5% and therefore arenot exposed to interest rate risks. The TEM Note has been converted into equityas described on the Settlement Agreement.

ITEM 4. CONTROLS AND PROCEDURES

The Partnership’s Chief Executive Officer, Javier O.Lamoso, and the Partnership’s Chief Financial Officer, Edileen Salicrup, haveevaluated the Partnership’s disclosure controls and procedures within 90 daysof the filing of this report.

Mr. Lamoso and Ms. Salicrup have concludedthat the Partnership’s disclosure controls and procedures provide reasonableassurance that the Partnership can meet its disclosure obligations. The Partnership’sdisclosure controls and procedures are based upon a roll-up of financial andnon-financial information concerning the Partnership and NewComm. The reportingprocess is designed to ensure that information required to be disclosed by thePartnership in the reports that it files or submits with the Commission isrecorded, processed, summarized and reported within the time periods specifiedin the Commission’s rules and forms.

13

----

PART II: OTHERINFORMATION

ITEM 1. LEGAL PROCEEDINGS

Informationregarding legal proceedings is disclosed in Part I, Item 1, Notes toInterim Consolidated Financial Statements (unaudited), Section 4, and ishereby incorporated into Part II, Item 1 by this reference.

##### ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF LIMITED PARTNERS

On September 16, 2005 the Partnership’s GeneralPartner, SuperTel Communications Corp., initiated a consent solicitation amongits partners proposing to extend the Partnership’s termination date until December 31,2010. By November 30, 2005, the final day of the solicitation period, atotal of 2,072.7 Partnership Units were voted representing 74.96% of the2,765.20 Partnership Units outstanding and entitled to vote. Of the PartnershipUnits voted, 1,920.6 Partnership Units (92% of the participants) voted in favorof the extension, 129.3 Partnership Units voted against the extension and 22.8abstained. As a result, the Partnership’s partners approved the amendment tothe Partnership’s Agreement of Limited Partnership, as previously amended, toextend the latest date on which the Partnership will dissolve from December 31,2005 to December 31, 2010.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)                                  Listof Exhibits

Exhibit 31.1:  Certification of Chief Executive Officerpursuant to Rule 13a-14(a)/15d-14(a).

Exhibit 31.2:  Certification of Chief Financial Officerpursuant to Rule 13a-14(a)/15d-14(a).

Exhibit 32.1:  Certification Pursuant to Section 1350of Chapter 63 of Title 18 of the United States Code.

Exhibit 32.2:  Certification Pursuant to Section 1350of Chapter 63 of Title 18 of the United States Code.

(b)                                  Noreports on Form 8-K have been filed during the quarter for whichthis report is filed.

ITEMS 2, 3 and 5 are not applicable and have beenomitted.

SIGNATURES

Pursuant to therequirements of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned, thereuntoduly authorized.
|                          |   |   | ClearComm, L.P.               |
|--------------------------|--------|--------|-------------------------------|
|                     |   |   |                          |   |
|                     |   |   |                          |   |
|                     | By:    |   | SuperTel Communications Corp. |
|                     | Its:   |   | General Partner               |
|                     |   |   |                          |   |
| Date:  May 22, 2006 |   |   | By:                           | /s/ Javier O. Lamoso |
|                     |   |   | Name:                         | Javier O. Lamoso |
|                     |   |   | Title:                        | President |

 

14

----