##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE
COMMISSION

Washington, D.C. 20549




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Form 10-K

|           |  |                                                                                                 
|---------- |  | ------------------------------------------------------------------------------------------------
|(Mark One) |  |                                                                                                 
|x          |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR
    15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934    
|          
|           |  | For the fiscal year ended December 31,
    2002                                                 
|          
|or        
|          
|o          |  | TRANSITION REPORT PURSUANT TO SECTION 13
    OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934
|          
|           |  | For the transition period
    from           to                                                 

Commission File Number 333-81342



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Cingular Wireless LLC

Formed under the laws of the State of
Delaware

I.R.S. Employer Identification Number
74-2955068


5565 Glenridge Connector, Atlanta, Georgia
30342

Telephone Number:
(404) 236-7895


Securities Registered Pursuant to
Section 12(b) of the Act: None

Securities Registered Pursuant to
Section 12(g) of the Act: None

Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the
past
90 days.     Yes þ          No o

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

Indicate by check mark whether the registrant is
an accelerated filer (as defined in Rule 12b-2 of the
Act.)     Yes o          No þ

The limited liability company ownership interests
of the registrant are not publicly traded. Therefore, there is
no aggregate market value for the registrants outstanding
equity that is readily determinable.



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TABLE OF CONTENTS



|                                                                                      |                                                                                               |  |  |  |  |  |  | 
|------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|TABLE OF CONTENTS                                                                    
|                                                                                      | Cautionary Language Concerning Forward-Looking Statements                                    
|PART I                                                                               
|                                                                                      | Item 1. Business                                                                             
|                                                                                      | Item 2. Properties                                                                           
|                                                                                      | Item 3. Legal Proceedings                                                                    
|                                                                                      | Item 4. Submission of Matters to a Vote of Security Holders                                  
|PART II                                                                              
|                                                                                      | Item 5. Market for Registrants Common Equity and Related Stockholders Matters               
|                                                                                      | Item 6. Selected Financial Data                                                              
|                                                                                      | Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                                                                                      | Item 7a. Quantitative and Qualitative Disclosure About Market Risk                           
|                                                                                      | Item 8. Financial Statements and Supplemental Data                                           
|CINGULAR WIRELESS LLC REPORT OF INDEPENDENT AUDITORS                                 
|CINGULAR WIRELESS LLC CONSOLIDATED STATEMENTS OF INCOME                              
|CINGULAR WIRELESS LLC CONSOLIDATED BALANCE SHEETS                                    
|CINGULAR WIRELESS LLC CONSOLIDATED STATEMENTS OF CASH FLOWS                          
|CINGULAR WIRELESS LLC CONSOLIDATED STATEMENTS OF CHANGES IN MEMBERS CAPITAL         
|CINGULAR WIRELESS LLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                     
|SBC DOMESTIC WIRELESS GROUP REPORT OF INDEPENDENT AUDITORS                           
|SBC DOMESTIC WIRELESS GROUP COMBINED STATEMENT OF OPERATIONS                         
|SBC DOMESTIC WIRELESS GROUP COMBINED STATEMENT OF CASH FLOWS                         
|SBC DOMESTIC WIRELESS GROUP COMBINED STATEMENT OF SHAREOWNERS EQUITY                
|SBC DOMESTIC WIRELESS GROUP NOTES TO COMBINED FINANCIAL STATEMENTS                   
|BELLSOUTH DOMESTIC WIRELESS GROUP REPORT OF INDEPENDENT AUDITORS                     
|BELLSOUTH DOMESTIC WIRELESS GROUP COMBINED STATEMENT OF OPERATIONS                   
|BELLSOUTH DOMESTIC WIRELESS GROUP COMBINED STATEMENT OF CASH FLOWS                   
|BELLSOUTH DOMESTIC WIRELESS GROUP COMBINED STATEMENT OF SHAREOWNERS EQUITY (DEFICIT)
|BELLSOUTH DOMESTIC WIRELESS GROUP NOTES TO COMBINED FINANCIAL STATEMENTS             
|SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS                                     
|                                                                                      | Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 
|PART III                                                                             
|                                                                                      | Item 10. Directors and Executive Officers of the Registrant                                  
|                                                                                      | Item 11. Executive Compensation                                                              
|                                                                                      | Item 12. Security Ownership of Certain Beneficial Owners and Management                      
|                                                                                      | Item 13. Certain Relationships and Related Transactions                                      
|                                                                                      | Item 14. Controls and Procedures                                                             
|                                                                                      | Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K                    
|SIGNATURES                                                                           
|302 CERTIFICATION                                                                    
|EX-2.1.1 Second Amendment to Contribution Agreemen                                   
|EX-4.1.1 First Supplemental Indenture                                                
|EX-4.2 Senior Note Due December 15, 2006                                             
|EX-4.3 Senior Note Due December 15, 2011                                             
|EX-4.4 Senior Note Due December 15, 2031                                             
|EX-10.13 Debt Subordination Agreement                                                
|EX-10.48 Officer Communication Plan                                                  
|EX-10.49 Employment Agreement/Stanley T. Sigman                                      
|EX-10.50 Employment Agreement/Stephen Carter                                         
|EX-10.51 Employment Agreement/Thaddeus Arroyo                                        
|EX-12 Computation of Ratios of Earnings                                              
|EX-21 Subsidiaries of the Company                                                    
|EX-24 Powers of Attorney                                                             
|EX-99.3 Section 906 Certification of the CEO                                         
|EX-99.4 Section 906 Certification of the CFO                                         



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##### Table of Contents






TABLE OF CONTENTS

|                                                              |  |                                                                                           |     |      |     | 
|------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------- | --- | ---- | --- | 
|                                                              |  |                                                                                           |     | Page
|                                                              |  |                                                                                           |     |     
|PART I                                                       
|Cautionary Language Concerning Forward-Looking
    Statements |  |                                                                                           | 2   |     
|Item 1.                                                       |  | Business                                                                                  |     |      | 3   | 
|Item 2.                                                       |  | Properties                                                                                |     |      | 27  | 
|Item 3.                                                       |  | Legal Proceedings                                                                         |     |      | 27  | 
|Item 4.                                                       |  | Submission of Matters to a Vote of Security
    Holders                                   |     |      | 28  | 
|PART II                                                      
|Item 5.                                                       |  | Market for Registrants Common Equity and
    Related Stockholder Matters                 |     |      | 29  | 
|Item 6.                                                       |  | Selected Financial Data                                                                   |     |      | 29  | 
|Item 7.                                                       |  | Managements Discussion and Analysis of
    Financial Condition and Results of Operations |     |      | 34  | 
|Item 7a.                                                      |  | Quantitative and Qualitative Disclosure About
    Market Risk                             |     |      | 53  | 
|Item 8.                                                       |  | Financial Statements and Supplemental Data                                                |     |      | 55  | 
|Item 9.                                                       |  | Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure  |     |      | 118 | 
|PART III                                                     
|Item 10.                                                      |  | Directors and Executive Officers of the Registrant                                        |     |      | 118 | 
|Item 11.                                                      |  | Executive Compensation                                                                    |     |      | 120 | 
|Item 12.                                                      |  | Security Ownership of Certain Beneficial Owners
    and Management                        |     |      | 127 | 
|Item 13.                                                      |  | Certain Relationships and Related Transactions                                            |     |      | 127 | 
|Item 14.                                                      |  | Controls and Procedures                                                                   |     |      | 136 | 
|PART IV                                                      
|Item 15.                                                      |  | Exhibits, Financial Statement Schedules, and
    Reports on Form 8-K                      |     |      | 137 | 
|Signatures                                                    |  |                                                                                           | 142 |     
|Certifications                                                |  |                                                                                           | 143 |     

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Cautionary Language Concerning Forward-Looking
Statements

In addition to historical information, this
document contains forward-looking statements regarding events,
financial trends and critical accounting policies and estimates
that may affect our future operating results, financial
position, and cash flows. These statements are based on
assumptions and estimates and are subject to risks and
uncertainties.

There are possible developments that could cause
our actual results to differ materially from those forecasted or
implied forward-looking statements. You are cautioned not to
place undue reliance on these forward-looking statements, which
are current only as of the date of this filing. We disclaim any
intention or obligation to update or revise any forward-looking
statements, whether as a result of new information, future
events or otherwise.

While the below list of cautionary statements is
not exhaustive, some factors, in addition to those contained
throughout this document, that could affect future operating
results, financial position and cash flows and could cause
actual results to differ materially from those expressed in the
forward-looking statements are:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the pervasive and intensifying competition in all
    markets where we operate;                                                                                                                                                                                                                                                                                                                                                                 
|
| |  | problems associated with the transition of our
    network to higher speed technologies caused by delayed
    deliveries of infrastructure equipment and handsets, cost
    overruns, perceived service degradation as more spectrum is
    devoted to new technologies, customer dissatisfaction with new
    handsets that operate on multiple networks to accommodate our
    technology migration, equipment malfunctions and other factors;
|
| |  | slow growth of our data services due to lack of
    popular applications, terminal equipment and advanced technology;                                                                                                                                                                                                                                                                                                                           
|
| |  | shortages and unavailability of spectrum for new
    services and geographic expansion;                                                                                                                                                                                                                                                                                                                                                         
|
| |  | pervasive and prolonged adverse economic
    conditions in the markets we serve;                                                                                                                                                                                                                                                                                                                                                                
|
| |  | changes in available technology that make our
    existing technology obsolete or expensive to upgrade;                                                                                                                                                                                                                                                                                                                                         
|
| |  | the final outcome of Federal Communications
    Commission (FCC) proceedings, including rulemakings, and
    judicial review, if any, of such proceedings;                                                                                                                                                                                                                                                                                      
|
| |  | enactment of additional state and federal
    regulatory laws and regulations pertaining to our operations;                                                                                                                                                                                                                                                                                                                                     
|
| |  | availability and cost of capital;                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |  | impact of industry consolidation; and                                                                                                                                                                                                                                                                                                                                                                                                           
|
| |  | the outcome of pending litigation.                                                                                                                                                                                                                                                                                                                                                                                                              

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PART I




Item 1.     Business

Overview

We are the second largest provider of wireless
voice and data communications services in the United States in
terms of customers. For the last two years, we reported:



| |   |                                                                                                                                                                                        
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | U.S. wireless cellular service and personal
    communication services, or PCS, subscribers totaling
    21.6 million at December 31, 2001 and 21.9 million at
    December 31, 2002;
|
| |  | revenues of $14.1 billion in 2001 and
    $14.7 billion in 2002; and                                                                                                                   
|
| |  | net income of $1.7 billion in 2001 and
    $1.2 billion in 2002.                                                                                                                       

We are one of the largest digital wireless
network operators in the United States.



| |   |                                                                                                                                                                                                                                                                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | We have access to licenses, either through owned
    licenses or licenses owned by joint ventures and affiliates, to
    provide cellular or PCS wireless communications services
    covering an aggregate of 231 million in population (POPs),
    or approximately 81% of the U.S. population, including in 45 of
    the 50 largest U.S. metropolitan areas.
|
| |  | We provide cellular or PCS services in 43 of the
    50 largest U.S. metropolitan areas.                                                                                                                                                                                                                                                                        
|
| |  | 100% of our networks utilize digital technology.                                                                                                                                                                                                                                                                                                                
|
| |  | At December 31, 2002, 92% of our cellular
    and PCS customers were using digital service, and in December
    2002, 99% of our cellular and PCS minutes of use were digital.                                                                                                                                                                                  

We provide a wide array of wireless services for
individual, business and governmental users. Our data services
are offered over our cellular/PCS networks and our separate
Mobitex network. On a combined basis, we had 2 million active
users of our data services at December 31, 2001 and over 5
million at December 31, 2002.

The Companys Internet website is
http://www.cingular.com.

Organizational Structure

The
Company

Our full legal name is Cingular Wireless LLC. We
are a Delaware limited liability company formed in April 2000 by
SBC Communications Inc. (SBC) and BellSouth Corporation
(BellSouth) as the operating company for their U.S. wireless
communications joint venture. In October 2000, SBC and BellSouth
contributed substantially all of their U.S. wireless businesses
to us in exchange for economic ownership interests in us of
approximately 60% and 40%, respectively. These businesses,
contributed primarily in 2000, included BellSouth Mobility,
BellSouth Mobility DCS, Cellular One, Houston Cellular,
BellSouth Wireless Data, Southwestern Bell Wireless, Pacific
Bell Wireless, Nevada Bell Wireless, Ameritech Wireless, SNET
Wireless and SBC Wireless. In January 2001, we began doing
business under the Cingular brand name. We served
customers in 37 states, the District of Columbia, Puerto Rico
and the U.S. Virgin Islands as of December 31, 2002.

Management
and Governance

SBC and BellSouth jointly control Cingular
Wireless Corporation, a holding company with no material assets
of its own other than a 0.0000001% economic interest in us. Its
main purpose is to act as our manager and thereby control our
management and operations. Our officers are appointed by its
board of directors.

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Our Business

We offer a comprehensive suite of high-quality
wireless voice and data communications services. Our services
are available in a variety of pricing plans, including national,
regional and local rate plans as well as prepaid service plans.
Our voice and data offerings are tailored to meet the
communications needs of targeted customer segments, including
youth, family, active professionals, local and regional
businesses and major national corporate accounts. The marketing
and distribution plans for our services are further targeted to
the specific geographic and demographic characteristics of each
of our markets.

Voice
Services

We offer a variety of competitive service
packages that are designed to meet the needs of various consumer
and business user segments at the local, regional and national
levels. These plans have great diversity in price, minutes,
calling scope and features.

Postpaid Service.Consumer service is generally offered
on a contract basis for one or two year periods. Under the terms
of these contracts, service is provided and billed on a monthly
basis according to the applicable pricing plan chosen. Our
wireless services include basic local wireless communications
service, long distance service and roaming services, which
enable our subscribers to utilize other carriers networks
when they are roaming outside our coverage area. We
also bill other carriers for providing roaming services to their
subscribers when they utilize our network outside the coverage
area of their wireless service provider. We had approximately
18.9 million direct postpaid contract subscribers at
December 31, 2001 and 19.8 million on December 31,
2002. In addition to basic wireless voice telephony services, we
offer many enhanced features with many of our pricing plans.
These features include caller ID, call waiting, call forwarding,
three-way calling, no answer/busy transfer and voice mail. In
some markets, we also offer complementary services for a monthly
fee, such as unlimited mobile-to-mobile calling, road-side
assistance and handset insurance.

Prepaid Service.We
offer prepaid service as an alternative to post-pay
subscriptions. As of December 31, 2002, prepaid users,
together with reseller customers (discussed below), represented
less than 10% of our total subscribers. We believe that our
prepaid service offering benefits from being part of a national
brand, particularly with regard to distribution. We are
marketing our prepaid service to distinct consumer segments such
as the youth market, families, small business customers and
other consumers who prefer to pay in advance. Our prepaid
strategy focuses on increasing the profitability of this
customer segment through offering a wider array of services and
features to increase the usage, revenue and retention of these
customers. In the fourth quarter of 2002, we introduced our
KICSM (Keep In Contact) prepaid plan. This plan
offers new handsets and popular features that had previously
been available only to our post-paid users, such as long
distance, caller ID, call waiting, voicemail and off-network
roaming. At the same time, it retains the benefits of advance
payment including no contract, no credit check, no monthly
billing and enhanced ability to control spending. In addition,
we are increasing the distribution of our prepaid offering to
include the Internet, automated replenishment services and
strategic retail partners that will allow our prepaid service to
truly be a product of convenience.

We are also improving our network infrastructure
so we can provide customers with ubiquitous service and the
latest technology (e.g., games and icons).

Consistent with the industry, we experience
higher churn rates and lower revenue per customer with prepaid
customers than our post-paid customers; however, these impacts
are generally offset by the lower cost of acquiring new prepaid
customers, including lower handset subsidies, higher revenue per
minute earned and absence of payment defaults.

Reseller Service.We
offer wholesale services to resellers, who purchase wireless
services from us for resale to their customers. These customers
do not comprise a significant revenue source for us. The number
of subscribers to our service served through resellers has
declined by 45% this year, primarily because WorldCom, Inc.
decided to exit the reseller business.

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Equipment Sales.We
sell a wide variety of handsets, or phones, manufactured by
various suppliers for use with our service. We also sell
accessories, such as handset faceplates and carrying cases,
hands-free devices, batteries, battery chargers and other items.
Handsets and accessories are also sold to agents and other
third-party distributors for resale.

Data
Services

General.Wireless
data, although its revenues are and for the foreseeable future
are expected to be only a small portion of our overall revenue
base, is the fastest growing area of our business. We are
upgrading our network and coordinating with equipment
manufacturers and applications developers to take advantage of
continued growth in wireless data services.

We had over 5 million customers actively
using our data services at December 31, 2002, approximately
817,000 of which we served with advanced applications over our
separate Mobitex data network, with the rest using services we
offer over our cellular and PCS networks.

Wireless Data Services Offered over our
Mobitex Data Network.We offer
value-added wireless data applications to businesses and
individuals who have a need for timely data communications to
maintain a competitive advantage or increase personal
productivity. We are a leader in providing end-to-end wireless
data services for complex businesses such as transportation,
telecommunications, utilities and other businesses. Our Mobitex
data network covers over 90% of the U.S. metropolitan
population, and provides coverage in 99 of the 100 largest
metropolitan areas.

We provide wireless access to corporate business
applications for our customers who have mobile field personnel.
Our wireless solutions allow sales managers to access corporate
e-mail when away from the office and technicians to solve
problems and access corporate databases from the field. These
same businesses can also perform remote monitoring of devices as
well as temporary or permanent wireless point-of-sale
transaction processing.

We also provide individuals and mobile
professionals with the ability to access information from web
sites, conduct mobile commerce transactions (e.g., trade stocks,
check bank statements and buy products) and send and receive
Internet e-mail, all through a hand-held, wireless device.

We sell our customers terminal equipment, such as
BlackberryTM hand-held pagers, and specialized
devices for use in field/sales force automation, delivery truck
and fixed location applications. In addition to collecting
equipment fees, we enter into customer contracts with flat or
usage-based fees.

Wireless Data Services Offered through our
Cellular and PCS Networks.We
currently offer wireless e-mail services, short messaging and
other data services throughout our cellular and PCS networks. We
have over 15 million customers that have been provisioned
with wireless Internet and short messaging data services as part
of their wireless service. An example of these services is
XpressMailSM service, which allows businesses to
access their Microsoft Exchange ServerTM or Lotus
NotesTM corporate e-mail and other desktop
applications in real time from Internet-enabled mobile phones or
from BlackberryTM handheld devices. We also offer
wireless Internet access for use on our digital cellular and PCS
networks, including a streamlined mobile Internet portal service
called My Wireless WindowSM.

Our wireless Internet service gives customers
access to timely, personalized information such as news,
weather, sports, stocks, directions, restaurant reviews, movie
show times, yellow and white pages directories, games and
graphics through their wireless handsets. In addition, it allows
customers to shop on-line and check e-mail from anywhere and at
any time wireless service is available. We are also developing a
wide range of more advanced data applications for use over our
cellular and PCS networks and plan to offer wireless Internet
access services using other devices, such as personal digital
assistants and personal computers. Our goal is to provide an
array of high quality, productivity-enhancing wireless data
services across our cellular and PCS networks through the use of
GPRS and EDGE technologies (see definitions of GPRS and EDGE in
the following Our Network section), similar to those
we currently offer across our Mobitex data network.

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Our Network

Licenses

We have access to licenses to provide cellular
and PCS wireless services, both voice and data. We provide both
analog and digital cellular services over the 850 MHz band and
digital PCS services over the 1900 MHz band. We also have 900
MHz licenses to provide data services over the Mobitex data
network. We obtained access to spectrum through application
lotteries, mergers, acquisitions, exchanges, ventures, FCC
auctions and uncontested application grants of cellular licenses.

Coverage

We have access to cellular/PCS licenses in 45 of
the 50 largest U.S. metropolitan areas, covering an aggregate of
231 million POPs, or approximately 81% of the of U.S.
population, and operate in 43 of the top 50 markets across the
country. In addition, we have signed numerous roaming agreements
to ensure our customers can receive wireless service in
virtually all areas in the United States where cellular/PCS
wireless service is available. Our cellular/PCS networks are
substantially built out. Our Mobitex data network covers 90% of
the U.S. metropolitan POPs, including the 50 largest U.S.
metropolitan areas.

See  Regulatory
Environment  Factors Relating to Our Industry
for FCC build-out requirements.



| |           
| | ----------
| | Technology

We offer analog and digital service in our
cellular markets and digital service in our PCS markets. We
believe that digital technology offers many advantages over
analog technology, including substantially increased network
capacity, lower operating costs per unit, reduced susceptibility
to fraud and the opportunity to provide improved data
transmissions. Digital service also provides clear benefits to
our customers, including extended battery life, improved voice
quality, greater call security and lower per-minute costs.
Digital service enables enhanced features and services, such as
interactive messaging, facsimile, e-mail and wireless
connections to computer/data networks and the Internet. A
majority of our analog subscribers have migrated from analog to
digital service, which benefits us and our customers. For the
month of December 2002, digital usage accounted for 99% of our
total usage based on minutes.

Our networks utilize two digital voice
technologies  Global System for Mobile
Communications, or GSM, and Time Division Multiple
Access, or TDMA. TDMA and GSM technologies work by
dividing a single radio frequency into multiple time slots so it
can support multiple calls. GSM is expected to offer three to
four times the capacity of TDMA technology and provides
economies of scale due to its predominant global use.
International roaming with a single GSM phone is also possible
if it has the capability of roaming over different frequencies.
Therefore, we are in the process of converting all of our
markets to GSM technology. In order to facilitate the ability of
our customers to use our entire network, we are selling new
handsets, referred to as GAIT phones. The new GAIT
phones operate on TDMA, GSM and analog networks. These phones
are priced slightly higher than current commercial handsets of
similar form, features and performance. We expect to have
covered 90% of our POPs with GSM voice technology by the end of
2003 and expect to complete the process in 2004. We will use
both TDMA and GSM technologies for a number of years to
accommodate customer migration to GSM service.

We offer data-only services over our proprietary
Mobitex network. This network utilizes a packet-switched
always on technology.

We also offer data services over our cellular and
PCS networks. Our GSM networks are already equipped with
high-speed always on packet switched technology
called General Packet Radio Service, or GPRS, which
allows users to access the network almost instantly. GPRS is
being added concurrently with GSM technology to our TDMA voice
networks. We plan to deploy an even faster technology called
Enhanced Data Rates for Global Evolution, or EDGE,
beginning in 2003, primarily through software upgrades.

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| |                  
| | -----------------
| | Spectrum Capacity

We currently own licenses for spectrum in the 850
MHz and 1900 MHz bands. We expect that the demand for our
wireless services will grow over the next several years as the
demand for both traditional wireless voice services and wireless
data and Internet services increases significantly. We
anticipate needing access to additional spectrum in selected
densely populated markets to meet expected demand for existing
services and throughout our network to provide full third
generation 3G services beyond EDGE.

In order to acquire access to additional
spectrum, we may participate in future FCC auctions, which will
likely include other radio frequency bands. In addition to the
auction process, our alternatives for acquiring access to
additional spectrum are expected to include spectrum exchanges
with and purchases from other wireless carriers, mergers and
acquisitions, joint ventures and alliances. See Regulatory
Environment and Factors Relating to Our
Business  If we fail to obtain access to additional
radio spectrum, we may not be able to expand the geographic
reach of Cingular-branded services, increase our customer base
in areas we currently serve or meet the anticipated demand for
new services.

We also hold licenses for spectrum in the
900 MHz band that we use in our Mobitex data network. There
are no FCC auctions for additional 900 MHz spectrum
currently planned; therefore any additional spectrum we access
will be through acquisitions or joint ventures with private
parties.

From time to time, we exchange or purchase
licenses for spectrum and enter into joint ventures to share
networks. Joint ventures such as those described below allow us
to enter new markets more quickly and for substantially less
capital costs. See Managements Discussion and
Analysis of Financial Condition and Results of
Operations  Liquidity and Capital
Resources  Capital Expenditures and Other
Investments for further information regarding such joint
ventures.

Joint Ventures and Spectrum
Exchanges



| |           
| | ----------
| | Salmon PCS

In November 2000, we and Crowley Digital
Wireless, LLC formed Salmon to bid as a designated entity under
the FCCs rules for PCS licenses in part reclaimed from
bankrupt carriers and reauctioned by the FCC in proceedings that
concluded in January 2001. As of December 31, 2002, we had
an approximately 80% non-controlling equity interest in Salmon,
with the balance owned by Crowley Digital. Salmon is controlled
by Crowley Digital, which in turn is controlled by
George D. Crowley, Jr. Mr. Crowley is the
chairman and chief executive officer of Crowley Digital and the
chairman and chief executive officer of Salmon. At the
conclusion of the auction proceedings, the FCC granted to Salmon
45 auctioned licenses, which cover over 11 million POPs. As
a result, we have access to licenses covering an aggregate
231 million POPs, including in 45 of the 50 and 87 of the
100 largest U.S. metropolitan areas. Salmon was the
successful bidder for 34 other licenses reclaimed from
carriers in bankruptcy and auctioned by the FCC. In December
2002, the FCC released Salmon from its purchase obligation and
returned Salmons remaining down payment on the 34 other
licenses. The U.S. Supreme Court subsequently invalidated
the auction results as to the challenged licenses, but the
FCCs grant of the 45 unchallenged licenses was not
affected by this decision.

In November 2000, Salmon entered into a
management agreement for a term of eight years, which became
effective in October 2001 when the 45 licenses were
granted. Under this agreement, Salmon hired us to act as the
manager of its PCS systems, subject to its oversight and
control. In addition, pursuant to a trademark license agreement,
Salmon has elected to use our trademarks in its business to
offer Cingular-branded services.

Crowley Digital has the right to put its interest
in Salmon to us at a price in cash equal to its initial
investment plus a specified rate of return. The put right can
only be exercised at certain times, and we estimate that the
earliest exercise period will begin in September 2005 and the
latest exercise period will end in April 2008. We estimate that
the present value of this put obligation was approximately
$126 million as of December 31, 2002. This obligation
is included in Other noncurrent liabilities in our
consolidated balance sheets.

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We entered into a credit agreement with Salmon
under which, until November 2006, we will provide through
secured loans, upon Salmons request, substantially all of
the capital Salmon will require to pay for the licenses, build
out its system and fund working capital requirements. Loans are
repayable no later than May 2008, with interest at a rate of 9%
per annum, or 14% per annum if Salmon terminates the management
agreement or trademark agreement.



| |                                         
| | ----------------------------------------
| | Transactions with T-Mobile USA,
    Inc.

In May 2001, we and T-Mobile USA, Inc. (formerly
VoiceStream Wireless) exchanged FCC licenses covering
approximately 36 million POPs each. We received licenses
covering 10 MHz of spectrum for the five boroughs of New
York City, all of Long Island as well as parts of upstate New
York, northeast Pennsylvania, St. Louis, Detroit, Vermont, New
Jersey and Connecticut. In exchange, we transferred to T-Mobile
licenses covering 10 MHz of spectrum out of the 30 MHz
of spectrum that we had in the California and Nevada markets. As
a result of the exchange, we gained access to spectrum covering
over 20 million additional POPs in the northeastern United
States.

Subsequently, in November 2001, we and T-Mobile
formed a jointly-controlled venture to allow the companies to
share network infrastructure in the California, Nevada and New
York City markets. Each of our respective existing networks in
these markets, which use GSM technology and cover approximately
56 million POPs, have been contributed to the venture. Both
companies have access to the ventures network
infrastructure, and pursuant to the terms of the ventures
commercial arrangements, are able to provide our respective
customers access to a weighted average spectrum depth of
39 MHz in these markets. We and T-Mobile buy network
services from the venture but each of us retained ownership and
control of our own licenses. Funding for capital investments and
cash operating expenses of the venture is generally made by us
and T-Mobile on a pro rata basis based on network traffic. We
also independently market our unique services to customers using
our own brand name and utilize our own sales, marketing, billing
and customer care operations. In July 2002, we began marketing
and providing service in the New York City market and T-Mobile
began providing service in California and Nevada through the
venture. Our participation in this venture gives our customers
access to more spectrum and is expected to result in more robust
networks and lower operating expenses and capital expenditures
than if we had constructed our own network.



| |                                                    
| | ---------------------------------------------------
| | Joint Venture with AT&T Wireless
    Services, Inc.

In January 2002, we entered into an agreement
with AT&T Wireless to form a jointly-controlled and
equally-owned venture to build out a GSM voice network with
GPRS/EDGE data technologies along a number of major highways in
order to ensure availability of GSM/GPRS/EDGE service to our
customers, and reduce incollect roaming expenses we pay to other
carriers, when our customers travel on those highways. We and
AT&T Wireless will each buy services from the venture and
provide services under our own brand names. In March 2003, we
and AT&T Wireless contributed licenses and assets of equal
value. We do not expect capital contributions by either party to
exceed $85 million.



| |                                     
| | ------------------------------------
| | Spectrum Swap with AT&T
    Wireless

In December 2002, we announced an agreement to
transfer to AT&T Wireless our wireless license and
operations in Kauai, Hawaii and wireless licenses in Alabama,
Idaho, Oklahoma, Mississippi and Washington. In return, we will
receive wireless licenses in Alabama, Arkansas, Georgia,
Kentucky, Louisiana, Mississippi, Tennessee and Texas. We expect
this transaction to close in the first half of 2003 and the
associated gain is not material. As a result, our licensed
coverage area will increase by approximately 1 million POPs.

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Competition

There is substantial and increasing competition
in all aspects of the wireless communications industry. We
compete for customers based principally on our service
offerings, price, call quality, coverage area and customer
service.

Our competitors are principally large providers
of cellular, PCS and other wireless communications services. We
also compete with smaller companies, resellers and wireline
telephone service providers. Some of our competitors have
greater financial, technical, marketing, distribution and other
resources than we do. In addition, some of the other large
providers have more extensive coverage areas than we do. Some of
the indirect retailers who sell our services also sell our
competitors services. Moreover, we may experience
significant competition from companies that provide similar
services using other communications technologies and services.
Some of these technologies and services are now operational and
others are being developed or may be developed in the future.

Consolidation, alliances and business ventures
may increase competition. Consolidation and the formation of
alliances and business ventures within the wireless
communications industry have occurred and we expect that this
trend will continue. We have numerous other competing wireless
providers in our markets. Consolidation may create larger,
better-capitalized competitors with substantial financial,
technical, marketing, distribution and other resources to
compete with our product and service offerings. Competitors with
more complete nationwide footprints may be able to offer
nationwide services and plans more economically due to economies
of scale and less dependence on roaming arrangements. In
addition, global combinations of wireless carriers 
such as the alliance between AT&T Wireless and NTT DoCoMo
Inc. of Japan, the joint venture between Sprint and Virgin
Group, Verizon Wireless, which is a joint venture between
Verizon and Vodafone plc, and mergers and acquisitions, such as
the acquisition of T-Mobile by Deutsche Telekom  may
give some domestic competitors better access to international
technologies, marketing expertise and strategies and diversified
sources of capital. Other large, national wireless carriers have
affiliations with a number of smaller, regional wireless
carriers that offer wireless services under the same national
brand, thereby expanding the national carriers perceived
national scope. In addition, infrastructure sharing ventures,
while facilitating our entry into new markets, also allow our
partners to compete with us in those markets.

Governmental policy at all levels favors robust
competition. For example, under current FCC rules, six or more
PCS licensees, two cellular licensees and one or more enhanced
specialized mobile radio, or ESMR, licensees may
operate in each geographic area. This structure has resulted in
the presence of multiple competitors in our markets and makes it
challenging for us to attract new customers and retain existing
ones. In addition, specialized mobile radio, or SMR,
dispatch system operators have constructed two-way ESMR digital
mobile communications systems on existing SMR frequencies in
many cities throughout the United States, including most of the
markets in which we operate.

Our ability to compete successfully will depend,
in part, on the quality of our network and marketing efforts and
on our ability to anticipate and respond to various competitive
factors affecting the industry. These factors include the
introduction of new services and technologies, changes in
consumer preferences, demographic trends, economic conditions,
pricing strategies of competitors and our ability to take
advantage of our wireless/wireline service area overlap with SBC
and BellSouth. As a result of competition, we have in the past
and may in the future be required to:



| |   |                                                                                                          
| | - | ---------------------------------------------------------------------------------------------------------
| |  | reduce prices for our services and products;                                                             
|
| |  | restructure our service packages to provide more
    services without increasing prices;                 
|
| |  | further upgrade our network infrastructure and
    the handsets we offer;                                
|
| |  | increase our advertising, promotional spending,
    commissions and other customer acquisition costs; and
|
| |  | increase our spending to retain customers.                                                               

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See Factors Relating to Our
Business  Substantial competition in all aspects of
our business could continue to cause reduced pricing and have
adverse effects on our profit margins.

Business Strategies

Our business strategies are to:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Expand our Customer Base Profitably.Recent surveys indicate that we have
    firmly established our brand, showing approximately 79% brand
    awareness at December 31, 2002, similar to the brand
    recognition of competitors who have been in the marketplace with
    their brand substantially longer than we have. We believe that
    we can capitalize on this brand recognition and our extensive
    distribution capabilities to attract new customers, including
    those customers switching service from other wireless carriers.
    We can offer new innovative product plans that provide both
    favorable economics and customer value such as our current
    rollover plans. We also benefit from having the
    largest wireless/wireline service area overlap in the United
    States as a result of our affiliation with SBC and BellSouth. We
    intend to further capitalize upon this strength and expand our
    distribution and bundled product offerings with SBC and
    BellSouth as well as explore future opportunities to integrate
    wireless/wireline services.                     
|
| |  | Reduce Costs and Enhance Service by Leveraging
    Our Large Scale and National Scope.Since our formation, we have made
    progress in realizing cost savings, including lowering of
    equipment costs resulting from our combined purchasing power,
    integration of support and billing systems, reduction of roaming
    rates and consolidation of customer care facilities, headquarter
    offices and distribution centers. With major integration
    projects completed, we are positioned to realize the savings
    from these efforts while deploying better tools to serve our
    customers.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| |  | Increase the Capacity, Speed and Functionality
    of our Cellular and PCS Networks by Deploying a Common Voice and
    Data Technology Throughout our Networks.Over 50% of our POPs had access to GSM
    voice and GPRS data technology as of December 31, 2002. We
    plan to have these technologies deployed in 90% of our markets,
    including all of our major markets, by the end of 2003, with the
    remaining coverage areas to be completed in 2004. In addition,
    we intend to transition our GPRS data capabilities to EDGE as
    software and handsets become available. This enhancement will
    significantly improve data speeds and spectral efficiency and
    will be primarily completed through software upgrades.                                                                                                                                                                                                                                                                                                                                                                                   
|
| |  | Develop and Promote Advanced Wireless Data
    Applications Over Multiple Communications Devices.We currently provide advanced data
    services over our Mobitex and cellular/PCS networks, including
    interactive messaging and wireless Internet access. Our Mobitex
    data network service also includes specialized business
    applications for transportation, telecommunications, banking,
    utilities and other businesses including mobile field personnel
    management, remote monitoring, point of sale and other mobile
    commerce applications. The deployment of GPRS and EDGE
    throughout the cellular/PCS networks enables us to further
    expand data applications to our broad base of voice customers
    using handsets, personal computers and personal digital
    assistants.                                                                                                                                                                                                                                                                                                               
|
| |  | Expand our Existing Network Footprint and
    Capacity Where Economical by Obtaining Access to Additional
    Spectrum, Primarily Through Ventures, Alliances and Spectrum
    Exchanges and Purchases.We plan to
    further expand our digital network service and promote
    deployment of GSM technology so that our subscribers can enjoy
    seamless coverage, consistent features and high-quality service,
    regardless of their location. We will be opportunistic in the
    expansion of our network and services. Where economical, we will
    pursue acquisition of spectrum from private ownership or through
    FCC auctions. We can also gain access through innovative means
    such as the spectrum swap we recently announced with AT&T
    Wireless involving our license and properties in Kauai, Hawaii
    and licenses throughout the United States. We also have the
    ability to expand our service through network sharing ventures
    such as our venture with T-Mobile that allows the companies to
    share network infrastructures in the California, Nevada and New
    York City markets.

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| |  |                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | In January 2002, we entered into an agreement
    with AT&T Wireless to build out a GSM voice network with
    GPRS/EDGE data technologies along a number of major interstate
    highways predominately in mid-western and western states. See
    Our Network. We are also actively working with other
    carriers to facilitate a strong GSM/GPRS/EDGE footprint across
    the continental United States.

Marketing

We are focusing our marketing strategy on
promoting the Cingular brand, providing compelling products and
services, delivering high-quality service and customer care,
leveraging our extensive distribution network and
cross-marketing with SBC and BellSouth. With 21.9 million
cellular and PCS customers at December 31, 2002, we also
have the opportunity to provide value-added services to a large
customer base.

Our advertising will utilize integrated,
multi-media tools including television, radio, newspaper,
outdoor, Internet and point of sale. Our advertising objectives
include: (1) increasing new customer growth by attracting
prospective customers to a Cingular sales channel, and
(2) aiding customer retention by reinforcing the value of
an existing relationship with Cingular. In less than two years,
Cingular has developed a widely recognized national brand
identity, on par with our major competitors. In 2003, we will
leverage our brand identity by presenting more compelling and
market specific reasons to choose Cingular.

Our marketing strategy is to aggressively sell
our voice services based on three basic calling plan structures
offered throughout our service areas: Cingular
HomeSM, Super HomeSM and Cingular
NationSM rate plans. The plans differ in terms of the
geographic areas that are included as the local calling areas.
The costs and terms of each plan depend on the subscribers
location and the plan selected. We have targeted plans to
specific segments: Family Talk®, a shared minutes plan with
unlimited mobile-to-mobile calling; KICSM (Keep In
Contact), our prepaid product for those preferring to pay as
they use; Minute Manager, a new spending limits program being
introduced nationwide; and a host of plans targeted to various
segments of the business-to-business market. In addition, our
GSM/GPRS migration is underway, making advanced features,
products and services available to customers around the country.

Our marketing plans also address the growing
communications needs of our existing customers, thereby
increasing customer retention. We target specific customer
segments with tailored services and offer them a range of
high-quality handsets and enhanced features, including wireless
data services, additional wireless phones, accessories and new
products. In addition, customers in good standing who are
renewing a post-paid contract are automatically eligible to
upgrade their handsets every two years at the current
promotional pricing and can switch to a different service plan
that better meets their needs at any time.

Our strategy for data offerings is to leverage
the marketing and operational experience that we have gained as
a leader in wireless data services and match our customers
needs with our existing data products or with customized
solutions. We offer an entire suite of new products aimed at
enhancing the customer experience, including picture messaging
through multimedia messaging services, short messaging services,
games and polyphonic ringtones. While we have traditionally
marketed our business data offerings to larger organizations, we
also continue to focus on small and medium-sized businesses.

Sales and Distribution

Our sales and distribution strategy seeks to
tailor the mix of direct, indirect and resale distribution
channels to match customer shopping preferences to increase
customer growth and satisfaction while reducing customer
acquisition and retention costs. As of December 31, 2002,
we had over 69,000 distribution points of presence.
These included approximately 1,200 company-owned stores and
kiosks, 8,000 authorized agent locations, more than 58,000
national retail points of distribution, including those
distributing prepaid services, and more than 1,800 direct
business-to-business salespeople. In addition, we have access to
the distribution channels of SBC and BellSouth as both sales
channels and bundlers of our wireless services with their
wireline product offerings. SBCs Total
ConnectionsSM and BellSouth

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AnswersSM product offerings offer a
combination of local phone service and features, long distance,
Internet access and Cingular Wireless services, with the
customer receiving one consolidated bill. In addition to these
traditional channels, we will continue to utilize and expand
other channels, such as the Internet and telemarketing.


Customer Care and Satisfaction

The cost of adding new subscribers is one of the
most significant cost elements in the wireless industry.
Therefore, satisfying and retaining existing customers are
critical to the financial performance of wireless operators. The
goal of our customer care, retention and satisfaction programs
is to ensure customer convenience and ease of use and to
cultivate long-term relationships with our customers. We offer
our customers a full range of options for making requests and
inquiries to maximize convenience. We also offer complete
customer care during extended business hours and emergency
service after business hours, as well as a number of other
services designed to enhance our relationship with our
customers. The centralization of call centers previously
operated by the wireless businesses of SBC and BellSouth was
completed in 2002. This consolidation has allowed Cingular to
reduce customer service expense while improving our level of
service to our customers.

We continue to pursue opportunities to enhance
customer satisfaction and resolve issues quickly. For some
customer segments, such as for our major corporate accounts, we
have dedicated response teams that operate in specialty call
centers. In 2002, we began testing knowledge-based information
systems for customer care representatives and global call
routing, which directs inquiries to the appropriate customer
care representatives while balancing call volume among centers.
During 2003 this technology will be expanded to our collection
centers. Additionally, we will continue to invest in customer
service to provide a higher level of service at a lower overall
cost. Initiatives in 2003 will include enhancement of our voice
response systems, improved Internet self service and additional
tools such as case management to better meet our customers needs.

Environmental Matters

We are subject to various federal, state and
local environmental protection and health and safety laws and
regulations, and we incur costs to comply with those laws.
Environmental laws hold current or previous owners or operators
of businesses and real property potentially liable for
contamination on that property, even if they did not know of and
were not responsible for the contamination. Environmental laws
may also impose liability on any person who disposes or arranges
for the disposal of hazardous substances for contamination at
the disposal site, regardless of whether the disposal site is
owned or operated by such person. Although we do not currently
anticipate that the costs of complying with environmental laws,
including costs for remediating contaminated properties, if any,
will materially adversely affect us, we cannot ensure that we
will not incur material costs or liabilities in the future due
to the discovery of new facts or conditions, the occurrence of
new releases of hazardous materials or a change in environmental
laws.

Employees

As of December 31, 2002, we had
approximately 33,800 employees.

Approximately 17,300 of our employees are
represented by the Communications Workers of America, with
contracts expiring on various dates between February 2004 and
January 2007. Most of the contracts contain no-strike clauses.
We are contractually required to maintain a position of
neutrality and to allow card-check procedures with respect to
unionization and will support the determination of our
employees. In those areas where our employees are unionized, we
have in place contracts that we believe provide us with the
flexibility to run our business in an increasingly competitive
environment.

We consider our relationship with our employees
and the Communications Workers of America to be very good.

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Seasonality

Historically, we have experienced a trend of
generating a higher number of customer additions in the fourth
quarter of each year as compared to the other three quarters.
Numerous factors contribute to this trend such as the increasing
use of retail distribution, which generally experiences growth
due to the holiday shopping season, the timing of product
introductions, competitive pricing, and aggressive marketing. As
competition has increased, these seasonal trends have become
less pronounced. In the fourth quarter of 2002, customer
additions were lower than the previous three quarters.

Intellectual Property

We own the rights to the Cingular
brand name. We rely on a combination of copyright, patent,
trademark, trade secret and other intellectual property rights,
together with confidentiality and/or license agreements with our
employees, customers and others to protect our proprietary
rights. For more information on licenses granted by our parent
companies to us and licenses we grant to them, see
Item 13. Certain Relationships and Related
Transactions.

Regulatory Environment

The FCC regulates the licensing, construction,
operation, acquisition and transfer of wireless systems in the
United States pursuant to the Communications Act of 1934 and its
associated rules, regulations and policies.

To obtain the authority to have the exclusive use
of radio frequency spectrum in an area within the United States,
wireless communications systems must be licensed by the FCC to
operate the wireless network and mobile devices in assigned
spectrum segments and must comply with the rules and policies
governing the use of the spectrum as adopted by the FCC. These
rules and policies, among other things, (1) regulate our
ability to acquire and hold radio spectrum licenses,
(2) impose technical obligations on the operation of our
network, (3) impose requirements on the ways we provide
service to and communicate with our customers, (4) regulate
the interconnection of our network with the networks of other
carriers, (5) obligate us to permit resale of our services
by resellers, if we offer resale opportunities, and to serve
roaming customers of other wireless carriers and (6) impose
a variety of fees and charges on our business that are used to
finance numerous regulatory programs and a substantial part of
the FCCs budget.

Licenses are issued for only a fixed period of
time, typically 10 years. Consequently, we must
periodically seek renewal of those licenses. The FCC will award
a renewal expectancy to a wireless licensee that has provided
substantial service during its past license term and has
substantially complied with applicable FCC rules and policies
and the Communications Act. The FCC has routinely renewed
wireless licenses in the past. However, the Communications Act
provides that licenses may be revoked for cause and license
renewal applications denied if the FCC determines that a renewal
would not serve the public interest. Violations of FCC rules may
also result in monetary penalties or other sanctions. FCC rules
provide that applications competing with a license renewal
application may be considered in comparative hearings and
establish the qualifications for competing applications and the
standards to be applied in hearings.

Wireless systems are subject to Federal Aviation
Administration and FCC regulations governing the location,
lighting and construction of transmitter towers and antennas and
are subject to regulation under federal environmental laws and
the FCCs environmental regulations, including limits on
radio frequency radiation from mobile handsets and towers.
Zoning and land use regulations, including compliance with
historic preservation requirements, also apply to tower siting
and construction activities.

Two-way Voice and Data
Services.We hold geographic service
area licenses granted by the FCC to provide cellular and PCS
services. A cellular system operates on one of two 25 MHz
frequency blocks in the 850 MHz band that the FCC allocates
for cellular radio service. Cellular systems principally are
used for two-way mobile voice applications, although they may be
used for data applications and fixed wireless

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services as well. Cellular licenses are issued
for either metropolitan statistical areas or rural service
areas, two in each area. At present, no entity may hold
overlapping cellular licenses in the same rural service area
without a waiver from the FCC.


A broadband PCS system operates under licenses
issued in the 1900 MHz band. PCS systems generally are used
for two-way voice applications, although they may carry two-way
data communications and fixed wireless services as well. For the
purpose of awarding PCS licenses, the FCC has divided the United
States into 51 large regions called major trading areas, or
MTAs, which are comprised of 493 smaller
regions called basic trading areas, or BTAs. The FCC
awarded two PCS licenses for each major trading area, known as
the A and B blocks, and four licenses
for each BTA known as the C, D,
E and F blocks. Thus, generally, six PCS
licenses are authorized in each area, together with two cellular
licenses. The two MTA licenses authorize the use of 30 MHz
of PCS spectrum. One of the basic trading area licenses is for
30 MHz of spectrum (the C block), and the other
three are for 10 MHz each. The FCC permits a licensee to
split its license and assign a portion, on either a geographic
or frequency basis or both, to another party or parties.

We must satisfy a range of FCC-specified coverage
requirements. For example, a cellular licensee was permitted
five years following the grant of its license to provide service
to its desired coverage area. The area it served with a
specified minimum signal strength became its licensed service
area. Failure to provide that coverage to the boundaries of its
initially licensed service area resulted in reduction of the
relevant license area by the FCC. All 30 MHz PCS licensees
must construct facilities that offer coverage to one-third of
the population of the service area within five years of the
original license grants and to two-thirds of the population
within 10 years. All 15 MHz and 10 MHz PCS
licensees must construct facilities that offer coverage to
one-fourth of the population of the licensed area or make
a showing of substantial service in their license area
within five years of the original license grants. A licensee
that fails to meet the coverage requirements may be subject to
forfeiture of its license.

We use common carrier point-to-point microwave
facilities and dedicated facilities leased from communications
companies or other common carriers to connect our wireless cell
sites and to link them to the main switching office. The FCC
licenses point-to-point microwave facilities separately and they
are subject to regulation as to technical parameters and
service. Microwave licenses must also be renewed every
10 years.

Mobitex Wireless Data Services.In 1996, the FCC commenced auctioning
market area licenses for the 900 MHz spectrum that we use to
provide most of our business data services. The market area
licensee is required to protect the incumbent licensee from
interference from the new market area license, but the market
area licensee did not have any relocation obligation. We were
awarded market area licenses (per transmitter
licenses) for primarily the same geographic areas where we were
the incumbent licensee, although we did not obtain market area
licenses for all of our per transmitter licenses. In order to
keep these market area licenses, we were obligated to either
(1) provide service to 66% of the population in the market
area by December 31, 2002 or (2) demonstrate by
December 31, 2002 that we have made a substantial
service showing in those market areas. With respect to
nearly half of our Mobitex licenses, we have provided service to
at least 66% of the population in those areas. In October 2001,
the FCC declared that we could satisfy the December 31,
2002 substantial service requirement if our
build-out in six markets covered at least 30% of the population
in six markets and we, at least, maintained the level of
coverage we then projected for our other markets. We notified
the FCC in December 2002 that we had met the substantial
service requirement in these markets. We expect FCC
approval of that showing in the first quarter of 2003. See
Factors Relating to Our Industry  Our
operations are subject to substantial governmental regulation,
which could significantly increase our costs and increase
churn for additional information relating to the
regulation of our operations.

Transfers and Assignments of Wireless
Licenses.The Communications Act and
the FCC rules require the FCCs prior approval of the
assignment or transfer of control of a license for a wireless
system. Before we can complete any such purchase or sale, we
must file appropriate applications with the FCC, and the public
is by law granted a period of time, typically 30 days, to
oppose or comment on them. In

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addition, the FCC has established transfer
disclosure requirements that require licensees who assign or
transfer control of a license acquired through an auction within
the first three years of their license terms to file associated
sale contracts, option agreements, management agreements or
other documents disclosing the total consideration that the
licensee would receive in return for the transfer or assignment
of its license. Non-controlling minority interests in an entity
that holds an FCC license generally may be bought or sold
without FCC approval. However, notification and expiration or
earlier termination of the applicable waiting period under
Section 7A of the Clayton Act by either the
U.S. Federal Trade Commission or the U.S. Department
of Justice may be required, as well as notification of state or
local regulatory authorities having competent jurisdiction, if
we sell or acquire wireless systems.


Foreign Ownership.Under existing law, no more than 20% of an FCC licensees
capital stock may be owned, directly or indirectly, or voted by
non-U.S. citizens or their representatives, by a foreign
government or its representatives or by a foreign corporation.
If an FCC licensee is controlled by another entity, as is the
case with our ownership structure, up to 25% of that
entitys capital stock may be owned or voted by
non-U.S. citizens or their representatives, by a foreign
government or its representatives or by a foreign corporation.

Foreign ownership above the 25% level may be
allowed should the FCC find such higher levels not inconsistent
with the public interest. The FCC has ruled that higher levels
of foreign ownership, even up to 100%, are presumptively
consistent with the public interest with respect to investors
from certain nations, which are countries that are signatories
to the World Trade Organization Agreement on Basic
Telecommunications Services. However, the FCC, in adopting that
strong presumption, did note the possibility exists that entry
by a foreign carrier could be so detrimental as to require the
imposition of conditions on entry by such a carrier or even a
denial of entry. In addition, the FCC stated it would accord
deference to legitimate national security, law enforcement,
foreign policy and trade concerns raised by other federal
agencies as part of the FCCs analysis of whether to grant
a particular authorization. The FCC has done that in certain
cases where the U.S. Department of Justice and the
U.S. Federal Bureau of Investigation have raised concerns,
requiring the carrier to configure its network(s) to be capable
of complying with lawful U.S. process and to make available
in the United States certain call and subscriber data. Foreign
ownership by entities from countries other than World Trade
Organization member countries must meet a more stringent
standard, and there is no assurance that the FCC would find a
grant of such an application to be in the public interest. If
our foreign ownership were to exceed the permitted level
(through foreign ownership of our owners, their transfers of
ownership in us or issuances of Class A common stock by our
manager), the FCC could revoke our FCC licenses, although we
could seek a declaratory ruling from the FCC allowing the
foreign ownership or take other actions to reduce our foreign
ownership percentage in order to avoid the loss of our licenses.
We have no knowledge of any present foreign ownership that
exceeds these limitations.

Spectrum
Acquisitions.Two of the ways by which
we can attempt to meet our needs for additional spectrum are by
acquiring spectrum licenses held by others or by accessing new
spectrum being auctioned and licensed by the FCC. The
Communications Act requires the FCC to award new licenses for
commercial wireless services to applicants through a competitive
bidding process. Therefore, if we need additional spectrum, we
plan to acquire the spectrum, indirectly through joint
arrangements, or directly in an auction for any new licenses
that may become available or by purchasing existing licensed
facilities and incorporating them into our system, provided that
we are permitted to do so under FCC rules.

The FCC has announced that it will auction
spectrum in the 700 MHz band. There are numerous television
operators that currently occupy UHF television
channels 52-69 in this band. Although these stations have
been awarded a second channel to establish digital service, they
also have the right to continue operation on the current channel
through at least 2006, and potentially longer if various
conditions are not met. Absent adoption of new federal
legislation or rules that lead to clearing of the
700 MHz band earlier than current law requires, or the
development of band-clearing mechanisms by these operators for
relocation, this spectrum would be of limited use in the
short-term for mobile services.

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There are additional spectrum bands that may be
suitable for our business, but this spectrum has not been
allocated nor are auctions of this spectrum imminent.


Recent Regulatory Developments.The FCC does not specify the rates we
may charge for our services nor does it require us to file
tariffs for our U.S. wireless operations. However, the
Communications Act states that an entity, such as us, that
provides commercial mobile radio services is a common carrier
and is thus subject to the requirements of the Act that it not
charge unjust or unreasonable rates nor engage in unreasonable
discrimination. The FCC may invoke these provisions to regulate
the rates, terms and conditions under which we provide service.
In addition, the Act defines a commercial mobile radio service
provider as a telecommunications carrier, which makes it subject
to a number of other regulatory requirements in its dealings
with other carriers and subscribers. The following requirements
impose restrictions on our business and increase our costs as
well as the costs of other wireless carriers:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The FCC eliminated the spectrum cap wireless
    license aggregation limits, effective January 1, 2003. As
    yet, it has not replaced the spectrum cap with published rules
    or guidelines setting forth how the FCC will review
    carriers spectrum aggregations. The FCC also eliminated
    the prohibition on ownership of both cellular licenses by a
    single entity in metropolitan markets. Certain acquisitions of
    spectrum would remain subject to approval of the U.S. Department
    of Justice.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| |  | The FCC has imposed rules for making emergency
    911 services available by cellular, PCS and other commercial
    mobile radio service providers, including enhanced 911 services
    that provide the callers communications number and
    approximate location. These rules require us to make significant
    investments in our network, to reach agreements with vendors of
    911 equipment, and to deliver location information to state and
    local public safety dispatch agencies. Commercial mobile radio
    service providers are required to take actions enabling them to
    relay a callers automatic number identification and cell
    site if requested to do so by a public safety dispatch agency,
    if necessary at the providers own cost. Providers are
    required to transmit the geographic coordinates of the
    customers location within accuracy parameters set forth by
    the FCC, either by means of network-based or handset-based
    technologies. Providers may not demand cost recovery as a
    condition of doing so, although they are permitted to negotiate
    cost recovery if it is not mandated by the state or local
    governments. Because of the unavailability of vendor equipment
    that could reasonably be relied upon to comply with the
    FCCs location accuracy rules or to be deployed in time to
    meet the FCCs timeline, we filed in 2001 requests for
    waivers from these rules with the FCC, as have other wireless
    carriers. With respect to our analog cellular and TDMA networks,
    in 2002, we entered into a consent decree with the FCC that sets
    forth certain deployment benchmarks for our network-based
    location solution. We agreed to make certain contributions to
    the U.S. Treasury, starting at $300,000 for the failure to meet
    a benchmark contained in the consent decree, up to a maximum of
    $1.2 million for successive failures. In addition, we have
    agreed to submit quarterly progress updates. The FCC issued an
    order in early October 2001 granting our waiver request to
    deploy a handset-based technology for our GSM networks. The FCC
    set a timetable for compliance that we have not met and cannot
    meet, given the status of equipment availability from vendors.
    We have asked the FCC to reconsider that decision. There may be
    penalties levied for our non-compliance, absent reconsideration
    by the FCC. We recently informed the FCC that we will deploy a
    network-based location technology, which holds the promise of
    greater location accuracy, and that we intend to pursue
    discussion about a consent decree for our location technology
    deployment in our GSM networks.
|
| |  | The FCC has established federal universal service
    requirements that affect commercial mobile radio service
    operators. Under the FCCs rules, commercial mobile radio
    service providers are potentially eligible to receive universal
    service subsidies for the first time; however, they are also
    required to contribute to the federal universal service fund and
    may be required to contribute to state universal service funds.
    Contributions into the federal fund are based on the interstate
    and international revenues generated by the properties owned by
    a commercial mobile radio service provider. For 2002, we paid
    into the federal universal service fund approximately
    $129 million. Because the amount that we are required to
    pay into the fund is based on revenues generated by our
    properties,                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | we anticipate that this amount should continue to
    increase over time. We recover most of this expense from our
    customers. Many states also are moving forward to develop state
    universal service fund programs. A number of these state funds
    require contributions, varying greatly from state to state, from
    commercial mobile radio service providers. If these programs
    expand they will impose a correspondingly growing expense on our
    business.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |  | The FCC has adopted rules regulating the use of
    telephone numbers by wireless and other providers as part of an
    effort to achieve more efficient number utilization. Wireless
    carriers were required to be able to participate in this
    number pooling, beginning in November 2002. In
    addition, the FCC adopted rules on number portability that will
    enable customers to keep their wireline or wireless number when
    switching to another carrier. These rules require wireless
    carriers to offer number portability to their customers,
    beginning in November 2003. Verizon Wireless and the Cellular
    Telecommunications and Internet Association have appealed that
    obligation. We and other wireless carriers are supporting
    elimination of that obligation because Congress did not grant
    the FCC authority to impose number portability on wireless
    carriers. In addition, given current industry churn rates, the
    lack of wireless number portability has not deterred consumers
    from switching carriers.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |  | The FCC has adopted rules requiring wireless
    providers to provide functions to facilitate electronic
    surveillance by law enforcement officials pursuant to the
    Communications Assistance for Law Enforcement Act of 1995. These
    obligations are likely to result in significant costs to us for
    the purchase, installation and maintenance of network software
    and other equipment needed.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |  | The Communications Act and the FCCs rules
    grant various rights and impose various obligations on
    commercial mobile radio service providers when they interconnect
    with the facilities of local exchange carriers. Generally,
    commercial mobile radio service providers are entitled to
    reciprocal compensation in connection with the
    termination of wireline-originated local traffic, in which they
    are entitled to collect the same charges for terminating
    wireline-to-wireless local traffic on their system similar to
    the charges that the local exchange carriers levy for
    terminating wireless-to-wireline local calls. Interconnection
    agreements are typically negotiated by carriers, but in the
    event of a dispute, state public utility commissions, courts and
    the FCC all have a role in enforcing the interconnection
    provisions of the Act. Although we have interconnection
    agreements in place with the major local exchange carriers in
    virtually all of our service areas, those agreements are subject
    to modification, expiration or termination in accordance with
    their terms. Moreover, we are negotiating and must continue to
    negotiate interconnection agreements with a number of
    independent telephone companies in our service areas. Until
    these agreements are concluded, we must accrue for contractual
    liabilities associated with the resulting unpaid invoices from
    those companies. Additionally, as we expand our coverage
    footprint, we will be required to negotiate interconnection
    arrangements with other wireline carriers.
|
| |  | In August 2000, the FCC addressed the extent to
    which the Communications Act limits plaintiffs in class action
    lawsuits against commercial mobile radio service providers to
    recover damages and obtain other remedies based on alleged
    violations of state consumer protection statutes and common law.
    It held that the Act did preempt state rate regulation as a
    matter of law, but that whether a specific damage award is
    prohibited would depend on the facts of a particular case. A
    request for reconsideration of the ruling was recently denied by
    the FCC. This ruling might promote the filing of additional
    class actions against the industry and increase the potential
    for damages awards by courts.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| |  | In 1999, the FCC adopted rules to govern customer
    billing by carriers. It adopted additional detailed billing
    rules for landline telecommunications service providers and is
    considering whether to extend these rules to commercial mobile
    radio services providers. The FCC may require that more billing
    detail be provided to consumers, which could add to the expense
    of the billing process as systems are modified to conform to any
    new requirements. The FCC recently decided that the carriers
    that pass through their mandatory universal service contribution
    to their customers may not                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | recover amounts greater than their mandatory
    contributions from their customers. Adoption of this approach
    could increase the complexity of our billing processes and
    restrict our ability to efficiently bill customers for services.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| |  | In 1999, the FCC adopted an order that determines
    the obligations of telecommunications carriers to make their
    services accessible to individuals with disabilities. The order
    requires wireless and other providers to offer equipment and
    services that are accessible to and useable by persons with
    disabilities. While the rules exempt telecommunications carriers
    from meeting general disability access requirements if these
    results are not readily achievable, it is not clear how the FCC
    will construe this exemption. Accordingly, the rules may require
    us to make material changes to our network, product line or
    services at our expense.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| |  | Recently the FCC reallocated 30 MHz of
    spectrum from the 2 GHz Mobile Satellite Service
    (MSS) for fixed and mobile services. The FCC now
    proposes to combine the 1990-2000 MHz portion of that
    spectrum, which is adjacent to the upper limit of the
    base-to-mobile portion of the PCS C Block, with the currently
    unlicensed PCS spectrum at 1910-1920 MHz, which is adjacent
    to the upper limit of the mobile-to-base portion of the PCS C
    Block, to create a new PCS G Block. If adopted by
    the FCC, the new PCS G Block could be licensed to
    other wireless competitors. One plan would grant the PCS
    G block to Nextel in return for it relinquishing
    certain of its spectrum in the 700/800/900 MHz bands to
    alleviate public safety interference concerns. Another plan
    would grant the spectrum in specific locations to Multipoint
    Distribution Service licensees who are being displaced by the
    FCC to make room for new Advanced Wireless Service spectrum
    allocations in the 2 GHz band. Other possible allocations,
    including the auctioning of that paired spectrum, may be
    considered by the FCC in its decision making process.
|
| |  | The FCC also recently decided to allow MSS
    licensees in three separate MSS bands to add an ancillary
    terrestrial component to their existing or proposed mobile
    satellite offering. The FCC has conditioned the deployment of
    the terrestrial offering such that it has to be integrated with
    the satellite offering of a licensee. In addition, satellites
    must be launched and operational before the terrestrial service
    can be initiated. It is likely that the satellite proponents
    will ask the FCC to minimize or eliminate these conditions which
    could permit them to forego their satellite service in favor of
    deploying a terrestrial network and offering service in direct
    competition with our cellular and PCS services.                                                                                                                                                                                                                                                                                                                                                                                                                                               

State Regulation and Local
Approvals.With the rapid growth and
penetration of wireless services has come a commensurate surge
of interest on the part of state legislatures and state public
utility commissions and local governmental authorities in
regulating our industry. This interest has taken the form of
efforts to regulate customer billing, termination of service
arrangements, advertising, filing of informational
tariffs, certification of operation, use of handsets when
driving and many other areas. We anticipate that this trend will
continue. It will require us to devote legal and other resources
to working with the states to respond to their concerns while
minimizing any new regulation that could increase our costs of
doing business.

While the Communications Act generally preempts
state and local governments from regulating entry of, or the
rates charged by, wireless carriers, it also permits a state to
petition the FCC to allow it to impose commercial mobile radio
service rate regulation when market conditions fail adequately
to protect subscribers and such service is a replacement for a
substantial portion of the telephone landline exchange service
within a state. No state currently has such a petition on file.
In addition, the Act does not expressly preempt the states from
regulating the terms and conditions of wireless
service.

Several states have invoked this terms and
conditions authority to impose or propose various consumer
protection regulations on the wireless industry.
Californias proposed rules are potentially quite costly.
States also may impose their own universal service support
requirements on wireless and other communications carriers,
similar to the requirements that have been established by the
FCC. At the local level, wireless facilities typically are
subject to zoning and land use regulation. Neither local nor
state governments may categorically prohibit the construction of
wireless facilities in any community or take

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actions, such as indefinite moratoria, which have
the effect of prohibiting construction. Nonetheless, securing
state and local government approvals for new tower sites has
been and is likely to continue to be difficult, lengthy and
costly.


In addition, state commissions have become
increasingly aggressive in their efforts to conserve telephone
numbering resources. These efforts may impact wireless service
providers disproportionately by imposing additional costs or
limiting access to numbering resources. Examples of state
conservation methods include number pooling, number rationing
and code sharing. In many markets, the supply of new numbers is
inadequate to meet growing customer demands, but states have
been and continue to be reluctant to deploy new area codes.

Further, states have become more active in
imposing new taxes on wireless carriers, such as gross receipts
taxes, and fees for items such as the use of public rights of
way. These taxes and fees are generally passed through to our
customers and result in higher costs to our subscribers.

Factors Relating to Our Business

If our new management reorganization and
marketing initiatives are not successful, we could continue to
lose market share and financial growth could
decline.Over the last two quarters of
2002, we have lost market share as our customer base has
declined slightly and our revenue growth has declined. We
believe that this reflects, to some extent, the persistent
economic weakness throughout the country and other external
factors, such as the decision of WorldCom to exit the reseller
business, which resulted in a net loss for the year of over
400,000 high-margin resale customers served through WorldCom,
266,000 of which occurred after WorldCom exited the reseller
business.

We believe, however, that a number of internal
business initiatives in 2002 exacerbated these conditions,
including:



| |   |                                                                                                                                                                        
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | centralization of the marketing and sales
    organizations, which reduced our effectiveness in responding to
    regional and local product and service opportunities;
|
| |  | other merger-related changes, such as billing
    system integration and inventory and customer care
    consolidation, that may have impacted customers; and          
|
| |  | a shift to sales plan initiatives designed to
    improve cash flow rather than overall market share.                                                                  

In early 2003, we reorganized our marketing and
sales organizations and began addressing pricing and sales plan
strategies intended to strengthen our competitive position in
the industry. Our ability to attract customers of other carriers
is becoming increasingly important given the approximate 50%
wireless industry penetration rate. We believe we must provide
quality products and services that meet the specific needs of
customers in each market and continuously improve the quality of
our network and customer care in order to maximize our
competitive strengths.

Substantial competition in all aspects of our
business could continue to cause reduced pricing and have
adverse effects on our profit margins.There is substantial and increasing competition in all aspects
of the wireless communications industry. Competition continues
to intensify as wireless carriers include more equipment
discounts and bundled services in their offerings, including
more minutes and free long distance and roaming. This
contributes to downward pressure on revenues and profit margins
and we expect this trend to continue. Our competitors are
principally five other national carriers doing business as
Verizon Wireless, AT&T Wireless, Sprint PCS, Nextel
Communications and T-Mobile, respectively, and a large number of
regional providers of cellular, PCS and other wireless
communications services, resellers and wireline telephone
service providers.

Sprint Corporation has stated that it intends to
hire Gary Forsee, a former Class B director of our manager
and chairman of its board, to act as the chief executive officer
of Sprint. BellSouth and we are suing Mr. Forsee and Sprint to
prevent this, and Mr. Forsee was removed from this board
position on February 21, 2003. (See Legal
Proceedings for a discussion of this litigation.) The
failure to prevail in

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these proceedings could result in substantial
harm to our competitive position as a result of the confidential
information Mr. Forsee has received as a director of our
manager.


FCC regulations and government policy in general
promote robust competition, and future rules or changes to
existing rules could increase this trend. See Regulatory
Environment  Recent Regulatory Developments for
a discussion of many such regulations.

Many of our competitors have substantial
financial, technical, marketing, distribution and other
resources. As a response to the intensifying competition, the
need for cost reduction and the requirements for additional
radio spectrum, we believe that the industry will consolidate to
some extent in the next several years. This may produce larger
and more formidable competitors with greater financial ability
to continue to reduce prices to increase their customer base. As
a result, our market share and profit margins may decrease.

For more information about the competitive
environment we encounter, see Business 
Competition.

We may encounter obstacles in implementing our
network technology migration, which could result in a loss of
customers, slower customer growth and lower
profitability.We are upgrading our
networks with new technologies. We are adding GSM equipment
throughout our TDMA markets to provide a common voice standard
and are adding high-speed GPRS and EDGE technologies across our
entire network. As of December 31, 2002, over 50% of our
POPs had access to GSM/GPRS technology.

A number of factors beyond our control could
disrupt a timely and cost-effective transition to these
technologies. We depend on suppliers to deliver the required
hardware and software on schedule and according to
specifications. We also depend on the availability of skilled
personnel to assist us in the installation work. Furthermore,
EDGE software is new and is just being tested in our network. If
it does not perform as anticipated and cannot be delivered to us
for installation, our implementation schedule and ability to
offer third generation, or 3G, technologies, could
be significantly delayed. Any of these obstacles could result in
a loss of customers, slower customer growth and lower
profitability.

As we dedicate more resources to new
technology, our TDMA offerings could become less attractive,
resulting in a loss of customers and reduced
profitability.Our TDMA network is
extensive, serving 82% of our customers at December 31,
2002. We expect to continue operating our TDMA network for the
foreseeable future as customers migrate to GSM/GPRS technology.
Due to our decision to overlay our TDMA network with GSM
technology, we may choose not to upgrade our TDMA network with
the same robust features that may be provided on our
competitors networks. Furthermore, as more spectrum is
dedicated to GSM, our remaining TDMA customers may experience
difficulties in using our services. In addition, as we introduce
and market GSM service, we may price GSM products and services
at more attractive levels than TDMA products and services to
encourage our customers to migrate to GSM. All of these
potential developments could drive our TDMA customers to our
competitors instead of to our GSM offerings and thereby reduce
our market share and profitability.

If we fail to obtain access to additional
radio spectrum, we may not be able to expand the geographic
reach of Cingular-branded services, increase our customer base
in areas we currently serve or meet the anticipated demand for
new services.We need more licensed
spectrum to support high speed data and other advanced services,
to expand our geographic reach, to meet an increasing volume of
customer usage and to increase our customer base. If we cannot
obtain access to new markets through auctions, spectrum
exchanges, other acquisitions, joint ventures or other means, it
could have a significant, adverse impact on our ability to grow
our business. In addition, an inability to add spectrum in some
of our existing markets could adversely affect the quality of
service if the demand for wireless communications continues to
increase at a rapid rate. There are no spectrum auctions
scheduled in the near future at which we could obtain needed
spectrum, and there can be no assurance that we will be able to
obtain access to additional spectrum from secondary market
sources on acceptable terms. Therefore, we cannot assure that we
will be successful in obtaining access to the additional
spectrum needed to expand our geographic coverage and meet the
growing needs of our business.

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The variety of handsets that will operate on
both TDMA and GSM networks is currently limited, may be more
expensive than current handsets and may have operational
inefficiencies, all of which could impede our GSM service
offerings and could lead to increased
churn.Our voice technology upgrade
plans depend heavily on the deployment of new dual mode TDMA/GSM
handsets, referred to as GAIT phones. Utilizing new
technology, these phones are intended to allow our customers to
use GSM service without losing the ability to operate on our
existing TDMA and analog networks in areas where we have not
overlaid GSM technology. Because the variety of GAIT phones is
more limited than GSM phones, they may not be readily accepted
by customers and could impede our efforts to migrate our
customer base from TDMA to GSM. Also, because GAIT phones will
be required by only a limited number of carriers on an interim
basis to support a transition from TDMA to GSM networks, they
may not be produced in sufficient quantities when needed, and
they may not achieve desirable economies of scale.

If we cannot reduce the roaming and long
distance charges we pay to other wireless carriers, our margins
may decline.Wireless system operators
agree to provide roaming service to subscribers from
other compatible wireless systems who are temporarily located in
or traveling through their service areas. We believe that the
ability to provide national service to segments of customers is
critical to maintaining our competitive position. Since our
network does not cover the entire United States, and since our
subscribers can currently only access our entire network using
GAIT phones due to the different technologies that we use, we
have entered into roaming agreements with other providers to
permit our subscribers to use their networks. Additionally, GSM
coverage in the United States is currently not as widely
available compared to other technologies such as TDMA. We may
not be able to expand our footprint or reduce the roaming and
long distance charges that we pay to other wireless carriers,
and, as a result, our services may become less profitable or the
coverage area or pricing we offer relative to our competitors
may not be as attractive.

Our choice for the next generation of
technology, EDGE, is a new technology and could quickly become
obsolete and/or not commercially accepted, which could result in
a delay in offering new services.Several wireless providers have announced that they will
introduce new third generation, or 3G, wireless
services in the United States within the next several years. We
expect that 3G services will combine the attributes of faster
speed, greater data capability, better portability and greater
functionality than services provided over current networks. We
have chosen EDGE as our next generation technology, but we
believe that there will be multiple, competing technological
standards, several options within each standard,
vendor-proprietary variations and rapid technological
innovation. Other technologies could emerge as preferred data
networks for some services and, if those technologies are widely
accepted, we may miss the opportunity to offer those services
because of our technology choice. There is a risk that EDGE
could be inadequate or become obsolete. In addition, EDGE could
receive less active support from equipment vendors and/or be
less commercially accepted by users, which could be detrimental
to our competitive position, financial condition and results of
operations.

We are committing a substantial amount of
capital to upgrade our cellular and PCS networks to offer
advanced data services, but there can be no assurance that
widespread demand for these services will
develop.While demand for our advanced
data services is growing, it is currently a small portion of our
revenues. Wide market acceptability of these services is
constrained by slower network speeds in areas where we have not
installed GPRS technology. In addition, continued growth in
wireless data services is dependent on other factors, such as
increased development and availability of popular applications
and improved availability of handsets and other wireless devices
with features, functionality and pricing desired by customers.
We do not expect that there will be widespread demand for
advanced wireless data services in the near future or that data
revenues will constitute a significant portion of our total
revenues in the near future, and there can be no assurance that
this demand will develop at a level that will allow us to earn a
reasonable return on our investment. See Our business
expansion and network upgrade will require substantial
additional capital and we cannot assure you that we will be able
to finance them for additional information regarding our
future capital expenditures.

Because some of our operations are conducted
through joint ventures with other companies, we cannot control
all aspects of our business, and disputes with our partners may
impede our plans to establish

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Cingular as a nationwide
brand. Despite our commitments to
provide substantial funds to Salmon, we do not have control of
Salmons management committee, and even though Salmon has
hired us to manage its network, subject to its oversight and
control, it can terminate us as manager. In addition, we have
ventures with T-Mobile and AT&T Wireless to share
infrastructure and save us a large portion of the cost of
building and maintaining our own network in certain areas where
we own wireless licenses, such as in California, Nevada and the
New York metropolitan area. If we experience disagreements with
our partners, it could adversely affect our ability to serve our
customers in those areas and profitably grow our business. See
Business  Joint Ventures and Spectrum
Exchanges for information on these ventures.


Our network sharing venture with T-Mobile may
impede our ability to compete effectively in the covered
territories.We share network
infrastructure in California, Nevada and New York City with
T-Mobile. If the combined demand for service through the joint
venture far exceeds the network capacity, temporary degradation
of service and loss of customers may result until capacity is
increased.

Our business expansion and network upgrade
will require substantial additional capital and we cannot assure
you that we will be able to finance
them.The operation of our business
and the upgrading and expansion of our network will require
substantial amounts of capital such as:



| |   |                                                                                                                                                                                                                                           
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | we will require substantial capital for
    acquisitions of systems, spectrum licenses, build-out of
    infrastructure, our network migration and upgrade plan and
    network capacity expansion;                                       
|
| |  | upon Salmons request, we will lend Salmon
    additional secured debt capital to finance the build-out of its
    networks and operations;                                                                                               
|
| |  | we will provide funding to our current and
    potential infrastructure ventures with T-Mobile and AT&T
    Wireless; and                                                                                                                 
|
| |  | we will be required to make distributions to SBC
    and BellSouth under our limited liability company agreement to
    cover tax liabilities that may arise from their interests in us
    to the extent that we generate taxable income.

The actual amount of capital required may vary
materially from our current estimates. Unforeseen delays, cost
overruns, regulatory changes, engineering and technological
changes, legal costs and judgments and other factors may also
require additional funds.

As a result of the cash needs described above, we
may need to incur significant amounts of additional debt or to
raise equity. Our credit ratings have been downgraded within the
past 18 months by two of the credit rating agencies, and
incurring substantial amounts of additional debt or failing to
improve our operating performance could result in negative
rating actions in the future, which could increase our cost of
borrowing. In addition, we may not be able to obtain debt or
equity funds on satisfactory terms from the capital markets,
from other sources or from SBC or BellSouth, neither of which
has any obligation to provide us additional funding. The failure
to obtain financing could result in, among other things:



| |   |                                                                                                                                       
| | - | --------------------------------------------------------------------------------------------------------------------------------------
| |  | delay or abandonment of our business development
    and expansion or network upgrade plans; or                                       
|
| |  | failure to meet regulatory build-out requirements
    or to continue to provide service in all or portions of some of
    our markets,

any of which could result in slower business
growth and loss of competitive position. For more information
relating to our access to capital and the capital we will
require, see Managements Discussion and Analysis of
Financial Condition and Results of Operations 
Liquidity and Capital Resources  Capital Expenditures
and Other Investments and  Debt
Service.

Acquisitions may be costly and time consuming
to integrate.One element of our
strategy is to expand the geographic coverage of our network,
which we may achieve by obtaining access to additional spectrum
through FCC auctions, spectrum exchanges with or purchases from
other wireless providers, acquiring wireless carriers or forming
joint ventures or alliances with the existing businesses of
other wireless providers. These efforts may require substantial
additional financing. In addition, we may encounter difficulties
in integrating existing operations that we may acquire into our
own operations

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because of different technologies, services or
service offerings. These transactions could prove costly or
time-consuming and could divert our managements attention
from operating our business.


Failure of certain of our key suppliers to
deliver equipment and services could adversely affect our
ability to operate our business.We
depend upon various key suppliers to provide us with equipment
and services that we need to continue our network upgrade and
operate our business. Some of these suppliers are experiencing
financial and business difficulties, and if these suppliers fail
to provide equipment or service to us on a timely basis, we may
be unable to provide services to our customers in a competitive
manner. If we are unable to obtain the hardware and software we
need to build out licensed territories, our licenses may be at
risk of termination for failure to satisfy the requirements
contained in our FCC licenses regarding the construction of our
networks.

We have a major relationship with Research in
Motion Limited, or RIM, to purchase Blackberry
hand-held devices for use in our data communications business. A
trial court has recently held that these devices infringe
several patents. If it is ultimately held that RIM cannot
distribute these devices, it could cause a loss of revenue from
and disruption to our mobile data business.

Difficulties in completing the integration of
the companies that form our business could adversely affect us
in many ways.Prior to our formation,
the domestic wireless units of SBC and BellSouth had their own
management teams, wireless networks, operational and technical
groups, marketing and distribution channels and information,
billing and other systems. We have accomplished a significant
level of integration, but more remains to be done. The
continuing integration of network, information, customer care,
billing and financial systems of our predecessor units is
critical to achieving our operational and financial goals. This
involves considerable effort, and there is a risk that the
process could be more costly and time-consuming than planned and
could delay the introduction of productivity enhancements and
measurement tools. In addition, we may not be able to maximize
cost savings and the quality of our customer care and other
operations may be negatively impacted during the transition, all
of which could have a material adverse effect on our operating
results and financial condition.

The potential impact of unionization and
organizing activities, which we expect to increase, could
adversely affect our costs and results of
operations.All of our businesses,
excluding ventures, are subject to various agreements with the
Communications Workers of America. These agreements contain
provisions requiring us to maintain neutrality if the union
conducts an organizing campaign and requiring us to allow
employees to vote to unionize by presenting authorization cards
rather than participating in a more difficult secret ballot
process conducted by the National Labor Relations Board. In an
effort to gain recognition in the areas not already covered by a
contract, union activity may increase. We believe that no other
national wireless provider currently employs a unionized
workforce to any significant extent. At the expiration of the
agreements, a work stoppage could prevent us from providing
service to our customers in the area covered by the expired
contract and possibly result in customer loss and a reduction in
revenue. For more information on employment-related matters, see
Business  Employees and Directors
and Executive Officers below.

Factors Relating to Our Industry

We may be adversely affected by the
significant changes that we expect the wireless communications
industry to undergo.The wireless
communications industry is experiencing significant changes.
These include evolving industry standards, ongoing improvements
in the capacity and quality of digital technology, shorter
development cycles for new services, evolution to 3G standards
and changes in end-user needs and preferences. Also, alternative
technologies may develop for the provision of services to
customers that may provide wireless communications services or
alternative services superior to those available from us.
Accordingly, there can be no assurance that technological
changes will not materially adversely affect us.

A high rate of churn would negatively impact
our business.Wireless communications
services providers, including us, experience varying rates of
lost customers, referred to as churn. We believe
that customers change wireless providers for the following
reasons: service offerings, price, call quality, coverage

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area and customer service. A high rate of churn
would adversely affect our results of operations because of loss
of revenue and because the cost of adding a new subscriber,
which generally includes a commission expense and/or a handset
subsidy, is a significant factor in income and profitability for
participants in the wireless industry. We believe industry-wide
churn will increase with the implementation of wireless number
portability, the FCC rule that provides for cellular customers
to retain their phone numbers if they change carriers, as
described under Business  Regulatory
Environment  Recent Regulatory Developments. We
expect to incur significant expenses to improve subscriber
retention and reduce churn. We may also be required to subsidize
product upgrades and/or reduce pricing to match
competitors initiatives and to retain customers.


Our industry will continue to be adversely
affected if the economic slowdown
persists.The economies of the United
States and many other nations are suffering from a significant
and prolonged economic slowdown, and wireless companies,
including us, have experienced slower growth. There can be no
assurance that such a slowdown will not continue to adversely
affect the industry.

New spectrum available through government
auctions will likely be in a frequency band different from our
current frequency bands, and if we acquire spectrum in a new
frequency band, greater inefficiencies and costs may
result.Our network currently consists
of infrastructure that provides communications over cellular and
PCS frequencies. Our Mobitex data network is operated over a
separate frequency. It is likely that new spectrum available
through government auctions will be in yet another frequency
band. Handsets that utilize spectrum in multiple frequencies are
currently under development but they may cost more than
currently available handsets. Also, there are operational
inefficiencies and added costs required to accommodate such
disparate spectrum, and we may lose customers if we must upgrade
them to new handsets to permit seamless roaming over new
multi-frequency networks.

Concern about alleged health risks relating to
radio frequency energy may harm our
prospects.A number of studies have
been conducted to examine the health effects of wireless phone
use, and some persons have construed some of the studies as
indicating that wireless phone use causes adverse health
effects. Some media reports have also suggested that radio
frequency energy from wireless handsets, accessories and cell
sites may be associated with various health problems, including
cancer. In addition, lawsuits have been filed against us and
other participants in the wireless industry alleging actual and
potential adverse health consequences as a result of wireless
phone usage. Some of these lawsuits allege other related claims,
including negligence, strict liability, conspiracy and the
misrepresentation of or failure to disclose these alleged health
risks. If consumers health concerns over radio frequency
energy increase, they may be discouraged from using wireless
handsets, and regulators may impose restrictions on the location
and operation of cell sites. These concerns could have an
adverse effect on the wireless communications industry and
expose wireless providers to further litigation, which, even if
not successful, can be costly to defend. Additional studies of
radio frequency energy are ongoing and new studies are
anticipated. Any negative findings in these studies could
increase the risks described above. In addition, an adverse
outcome or settlement in the existing and/or any further
litigation against us or any other provider of wireless services
could have a material adverse effect on our results of
operations, financial condition and/or prospects. See
Business  Legal Proceedings.

State and local legislation regarding wireless
phone use while driving may adversely affect
us.Many states and municipalities
have proposed, and several, including New York state, have
enacted, legislation that requires the use of a hands-free
accessory while driving an automobile, which may discourage use
and could decrease our revenues from customers who now use their
phones when driving. Such legislation, if adopted and enforced
in the areas we serve, may reduce, in the short term, sales,
usage and revenues. In addition, allegations that using wireless
phones while driving may impair drivers attention in
certain circumstances may lead to potential litigation relating
to traffic accidents and further governmental regulation, which
could adversely affect our results of operations.

Our operations are subject to substantial
government regulation, which could significantly increase our
costs and increase churn.Many aspects
of our business are regulated to varying degrees by the FCC and
some state and local regulatory agencies. The adoption or change
of regulations could significantly increase

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our costs and increase churn. For example, the
FCC, together with the Federal Aviation Administration,
regulates tower marking and lighting. In addition, the FCC and
the states are increasingly looking to the wireless industry to
fund various initiatives, including universal service programs,
telephone number portability, services for the hearing-impaired
and emergency 911 networks. Furthermore, many states have
imposed significant taxes on the wireless industry and are
regulating customer billing matters. We are also subject to
environmental protection and health and safety regulation,
including limits on radio frequency energy from wireless
handsets and towers. The failure to comply with any of these
regulations, even if hardware and software solutions are not
readily available from manufacturers and suppliers, can result
in significant penalties and repercussions. For more information
about the regulatory environment and about recent government
regulation that we are subject to, see
Business  Regulatory Environment 
Recent Regulatory Developments.


A number of our FCC licenses to provide
wireless services are subject to renewal and potential
revocation in the event that we violate applicable
laws.A number of our licenses are
subject to renewal, generally some each year, upon the
expiration of the 10-year period for which they are granted, and
we cannot assure you that the FCC will renew them. In addition,
FCC rules require all wireless licensees to meet specified
build-out requirements, and failure to comply with these and
other requirements in a given license area could result in
termination or cancellation of our license for that license area
or the imposition of fines by the FCC. If any of our licenses
are forfeited or revoked, we would not be able to provide
service in that area unless we contract to resell wireless
services of another provider or utilize roaming agreements.

Equipment failure and disasters may adversely
affect our operations.A major
equipment failure or a disaster that affects our mobile
telephone switching offices, microwave links, third-party owned
local and long distance networks on which we rely, our cell
sites or other equipment or the networks of other providers on
which our subscribers roam could have a material adverse effect
on our operations. While we have insurance coverage for some of
these events, our inability to operate our wireless system even
for a limited time period may result in a loss of subscribers or
impair our ability to attract new subscribers, which would have
a material adverse effect on our business, results of operations
and financial condition.

The restricted supply of new telephone numbers
could limit or delay our growth.The
supply of new telephone numbers in some areas of the United
States is near exhaustion due, in large part, to competitive
wireline carriers having obtained large blocks of numbers and
rapidly growing customer demand for additional numbers for
wireless handsets and pagers as well as for second voice lines,
Internet access and private branch exchange systems, or private
telephone networks used within enterprises. Many states have
imposed restrictions on carriers access to additional
numbers, creating shortages and delay in obtaining needed number
resources. If we are unable to obtain a sufficient supply of new
telephone numbers, our ability to increase our subscriber base
would be adversely affected.

Factors Relating to Our Arrangements with SBC
and BellSouth

SBC and BellSouth may transfer their
controlling interests in us and cease to be subject to certain
obligations that benefit us, including exclusivity
provisions.Under our limited
liability company agreement and the stockholders agreement
among our manager, SBC and BellSouth, each of SBC and BellSouth
will cease to be subject to many of the restrictions imposed on
it in the limited liability company agreement that benefit and
protect us, such as restrictions on competition and acquisitions
of other wireless businesses, once its ownership interest falls
below 10%. Although both SBC and BellSouth are subject to a
number of transfer restrictions, as described under
Certain Relationships and Related Transactions 
Our Limited Liability Company Agreement  Transfers of
LLC Units and Common Stock, each of them may, under the
circumstances described in our limited liability company
agreement, sell its interests in us and its common stock in our
manager to third parties, subject to a right of first refusal of
the respective other party, or spin-off or split-off its
interests in us or its stock in our manager to its shareholders.
In addition, we may lose any competitive advantage we currently
gain from our resale and agency relationships with SBC and
BellSouth.

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SBC and BellSouth may compete with us in the
areas of fixed wireless voice and data services, and may resell
our services under their own brand names inside their service
territories after specified future
dates.SBC and BellSouth have agreed
in our limited liability company agreement to engage in the
provision of U.S. mobile wireless voice and data services only
through us and our subsidiaries, but the agreement is subject to
significant exceptions, including an exception that permits them
to market and sell fixed wireless voice and fixed wireless data
services and to market and sell wireless services in areas in
which we, our subsidiaries or Salmon are not providing services
pursuant to FCC licenses. SBC and BellSouth may also amend the
agreement to provide that they can engage in other competitive
activities, such as wireless data service commonly referred to
as Wi-Fi. SBC and BellSouth are permitted to resell our services
under their own brand names outside their service territories.
In addition, if BellSouth or SBC terminates its wireless agency
agreement on or after October 2, 2003, it may resell our
wireless services in its respective service territories. See
Certain Relationships and Related Transactions 
Resale Agreements and  Wireless Agency
Agreements.

The arrangements that we have with SBC and
BellSouth were established by SBC and BellSouth, and may not be
as advantageous as similar agreements negotiated with
unaffiliated third parties.We have
entered into various agreements with SBC and BellSouth and their
respective affiliates that are material to the conduct of our
business, and we may enter into additional agreements with them
in the future. For example, we have entered into resale and
agency agreements with SBC and BellSouth that include pricing
and other terms. Although we believe that these agreements, as a
whole, are as advantageous to us as those that could otherwise
be obtained, we have no independent verification that these
agreements are as advantageous as similar agreements negotiated
with unaffiliated third parties. See Certain Relationships
and Related Transactions.

Under the terms of agreements with SBC and
BellSouth, the scope of our potential business is limited, which
could hurt the growth of our business.We have agreed with SBC and BellSouth that, without their
consent, we may not enter into any business other than the U.S.
mobile wireless voice and data business. These restrictions
could limit our ability to grow our business through initiatives
such as expansion into international markets and acquisitions of
wireless providers that are also engaged in other businesses
outside of our permitted activities. These restrictions may also
preclude us from pursuing other attractive related or unrelated
business opportunities. See Certain Relationships and
Related Transactions  Our Limited Liability Company
Agreement.

SBC and BellSouth control all important
decisions affecting our governance and our operations and may
fail to agree on important matters.Under the terms of our limited liability company agreement, our
management is exclusively vested in our manager. Both the board
of directors and the strategic review committee of our manager
are comprised of four directors: two elected by SBC and two
elected by BellSouth. Substantially all important decisions of
our manager must be approved by its strategic review committee.
It is possible that the committee may be deadlocked regarding
matters that are very important to us. Although deadlocks are to
be resolved by the chief executive officers of SBC and
BellSouth, if they cannot agree, inaction may result, which
could, among other things, result in us losing important
opportunities. For more information on our governance, including
the strategic review committee, see Certain Relationships
and Related Transactions  Our Limited Liability
Company Agreement.

SBC and BellSouth may have conflicts of
interest with us.Conflicts of
interest may arise between us and SBC and BellSouth when we are
faced with decisions that could have different implications for
us and SBC or BellSouth, including technology decisions,
financial budgets, repayment of member loans from SBC and
BellSouth, the payment of distributions by us and other matters.
They may also take action that favors their businesses and the
interests of their shareholders over our wireless business and
the interests of our debtholders. Because SBC and BellSouth
control us, conflicts of interest could be resolved in a manner
adverse to us. Therefore, we may not always be able to use our
resources in the best interest of advancing our business.

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Item 2.     Properties

We lease our corporate headquarters buildings in
Atlanta, Georgia. We also maintain administrative and sales
offices, customer care call centers, retail sales locations,
switching centers, cell tower sites and data centers throughout
the United States. Most locations are generally leased to
provide maximum flexibility. Switching centers and data centers
are frequently owned due to their critical role in our
operations and high set-up and relocation costs.

As of December 31, 2002, we operated a
direct distribution channel comprised of approximately 1,200
company-operated stores and kiosks. We have one central handset
and accessory distribution center located in Memphis, Tennessee.
Network properties included approximately 150 switches and
20,000 cell sites.

We believe that our facilities are in good
operating condition and are currently suitable and adequate for
our business operations.




Item 3.     Legal
Proceedings

From time to time we are a party to various legal
actions and claims relating to matters that are incidental to
the conduct of our business, including the following matters.

In 1993, Westside Cellular, Inc., d/b/a Cellnet
of Ohio (Cellnet), a reseller, filed a complaint
against Cincinnati SMSA Limited Partnership
(Cincinnati) with the Ohio Public Utilities
Commission (PUC) alleging that it had violated certain PUC
requirements related to resale of airtime on a wholesale basis.
We currently have a 53% controlling interest in Cincinnati.
Following the PUC decision against Cincinnati, Cellnet filed a
complaint against Cincinnati and its affiliate, Ameritech Mobile
Communications LLC, for damages, now alleged to approximate
$350 million, in the Cuyahoga County Common Pleas Court,
relying upon Ohio law that permits it to seek damages for
violation of PUC orders. Under Ohio law, any such damages found
by a jury would be trebled. In an opinion issued on
December 30, 2002, the Ohio Supreme Court rejected
Cincinnatis federal and state law arguments challenging
the PUC decision and affirmed the PUC decision and remanded the
case to the Common Pleas Court for a trial on damages.
Cincinnati will present evidence and arguments that Cellnet has
not sustained any damages as a result of Cincinnatis
conduct. Cincinnati also plans to file a petition for
certiorariwith the U.S. Supreme Court asking that Court
to review and reverse the Ohio Supreme Courts decision,
which would moot any finding of damages and terminate this
litigation. It cannot yet be determined whether Cincinnati will
be found liable for damages and, if so, in what amount or
whether the U.S. Supreme Court will agree to review and reverse
the decision of the Ohio Supreme Court.

BellSouth and we have been advised that Gary
Forsee, BellSouths vice chairman  domestic
operations and a former Class B director of our manager and
the chairman of its board of directors, intends to join Sprint
Corporation as its chief executive officer. Mr. Forsee was
removed as our director on February 21, 2003, and BellSouth
and we have sued Mr. Forsee in the Fulton County Superior
Court of Georgia to enforce the non-compete and confidentiality
provisions of Mr. Forsees employment contract with
BellSouth with respect to his proposed employment by Sprint. The
court found the non-compete provision invalid, but that issue is
currently on appeal. The court ordered arbitration on the
confidentiality provision and granted a temporary restraining
order preventing Mr. Forsee from accepting employment at
Sprint until at least March 12, 2003. BellSouth and we have
also sued Sprint in the U.S. District Court for the Northern
District of Georgia alleging, among other things, tortuous
interference with contractual relations, threatened
misappropriation of trade secrets and unfair competition.

Cingular and various affiliated entities are
subject to state government inquiries over marketing practices
in the cellular industry, and are defendants in a number of
purported class actions brought on behalf of subscribers
throughout the country, regarding common law and statutory
claims of misrepresentation, inadequate disclosure, unfair trade
practices or breach of contract related to our advertising,
promotions, sales, billing and collection practices. These
include claims relating to the practice or alleged practice, and
alleged nondisclosure, of rounding up of partial minutes of
airtime usage to full minute increments, send-to-end billing,
negative options, ring time billing, first incoming minute free

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feature, monthly charges for bundled minutes,
below cost sales, early disconnection charges, charges for local
and toll calls, price discrimination and other practices and
charges, as well as the adequacy of our wireless coverage and
the quality of service. The actions are in various stages of the
investigation and litigation processes. Plaintiffs in most of
these putative class actions have not specified the alleged
damages they seek. Cingular and various affiliated entities are
also defendants in a lawsuit alleging patent infringement. On
March 30, 2000, Freedom Wireless, Inc. filed suit in U.S.
District Court for the Northern District of California against
various entities, alleging that the defendants were infringing
or contributing to the infringement of a patent held by
plaintiff related to prepaid wireless service technology. The
case has been transferred to the U.S. District Court for the
District of Massachusetts. Plaintiff has amended its complaint
to add another patent to the action. The plaintiff seeks
unspecified monetary damages as well as injunctive relief. This
case is at a preliminary stage.


Cingular and various affiliated entities are
defendants in a number of cases in various courts involving
claims by former agents and resellers who allege that we
breached our contracts with those agents and resellers, have
tortuously interfered with their contractual relationships with
others by terminating our relationships with them and have
engaged in unfair competition. Some of the complaints have
further alleged that we are a franchisor under applicable state
franchise law and have violated franchise laws in our
relationship with them. State franchise laws often provide for
treble damages for violations. We believe that we are not a
franchisor under state law in these cases.

While more research needs to be conducted and is
being conducted on the subject, the research conducted to date
does not demonstrate that use of a wireless phone has any
adverse health effects, according to the U.S. Food and Drug
Administrations Center for Devices and Radiological Health
(FDA). The FDA stated in July 2001: The available
scientific evidence does not show that any health problems are
associated with using wireless phones. There is no proof,
however, that wireless phones are absolutely safe. The FDA
shares regulatory responsibility for wireless phones with the
FCC. The FCC relies on the FDA and other health agencies for
safety questions about wireless phones. The FDA is party to the
Cooperative Research and Development Agreement with the Cellular
Telecommunications and Internet Association, of which we and
other wireless companies are members. Pursuant to this
agreement, the parties have agreed to support research regarding
wireless phone safety. Cingular and various affiliated entities
are defendants in lawsuits alleging personal injuries, including
brain cancer, from wireless phone use. Cingular and various
affiliated entities are also defendants in purported class
actions that allege adverse health effects caused by wireless
phone use and also allege fraudulent conduct, participation in
conspiracies and other wrongful conduct by wireless phone
manufacturers, service providers and others. Plaintiffs seek
various forms of relief, including compensatory and punitive
damages, and/or injunctive and equitable relief. See
Factors Relating to Our Industry  Concern about
alleged health risks relating to radio frequency energy may harm
our prospects for a discussion of how this litigation
could adversely affect our business operations.

While complete assurance cannot be given as to
the outcome of any legal actions and claims, we believe that any
financial impact would not be material to our results of
operations, financial position or cash flows.




Item 4.     Submission
of Matters to a Vote of Security Holders

None

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PART II

(Dollars in Millions)






|        |                                                                           
|------- | --------------------------------------------------------------------------
|Item 5. | Market for Registrants Common Equity and
    Related Stockholders Matters

There is no established trading market for our
ownership interests. SBC owns approximately 60% of our ownership
interests and BellSouth owns approximately 40% of our ownership
interests. Cingular Wireless Corporation, our manager, owns the
remaining 0.0000001% ownership interest in us.

We are required to make periodic distributions to
our members on a pro rata basis in accordance with each
members ownership interest in amounts sufficient to permit
members to pay the tax liabilities resulting from allocations of
income tax items from us. During 2001, we made distributions to
members of $47 million related to 2000 tax liabilities and
$592 million related to 2001 tax liabilities. Since we did
not generate taxable income to the members in 2002, we made no
distributions in 2002.

Additionally, we are required to distribute to
our members 50% of our excess cash, as defined in
our operating agreement, at the end of each fiscal year. Excess
cash consists of funds generated from our operations, less
forecasted cash needs for the upcoming fiscal year and
distributions made to the members for their tax payments. In
2000, 2001 and 2002, we were not required to make any
distributions of excess cash to the members and do not
anticipate being required to make any such distributions in 2003.

We have no outstanding equity compensation plans.




Item 6.     Selected
Financial Data

The following selected financial data should
be read in conjunction with the consolidated financial
statements and the notes thereto contained herein in
Item 8. Financial Statements and Supplemental
Data, the information contained herein in
Item 7. Managements Discussion and Analysis of
Financial Condition and Results of Operations, the
information contained herein in Item 1.
Business  Factors Relating to our
Business,  Factors Relating to our Industry
and  Factors Relating to Our Arrangements with SBC
and BellSouth. Historical results are not necessarily
indicative of future results.

Selected Historical Financial
Information  Cingular Wireless LLC

The following table presents selected historical
consolidated financial and operating data of Cingular Wireless
LLC from the date of its formation, April 24, 2000. The
data presented in this table is derived from the historical
financial statements and related notes which are included in
this document. The results for the period April 24, 2000 to
December 31, 2000 presented below include the contributed
SBC and BellSouth Domestic Wireless Groups wireless
operations from October 2, 2000; there were no meaningful
results of operations of Cingular Wireless LLC prior to that
date.

|                                                                          |  |                                            |       |              |  |      |        |  |  |   |        | 
|------------------------------------------------------------------------- |  | ------------------------------------------ | ----- | ------------ |  | ---- | ------ |  |  | - | ------ | 
|                                                                          |  |                                            |       |             
|                                                                          |  | Period from                                |       | Year Ended  
|                                                                          |  | April 24, 2000                             |       | December 31,
|                                                                          |  | to December 31,                            |       |             
|                                                                          |  | 2000                                       |       | 2001         |  | 2002
|                                                                          |  |                                            |       |              |  |     
|                                                                          |  |                                           
|                                                                          |  | (Dollars in millions, except for operating
|                                                                          |  | data)                                     
|Statement of Operations Data                                              |  |                                            |       |              |  |      |        |  |  |   |        | 
|Total operating revenue                                                   |  | $                                          | 3,055 |              |  | $    | 14,108 |  |  | $ | 14,727 | 
|Total operating expenses(1)                                               |  |                                            | 2,674 |              |  |      | 11,560 |  |  |   | 12,206 | 
|                                                                          |  |                                            |       |              |  |      |        |  |  |   |        | 
|Operating income                                                          |  |                                            | 381   |              |  |      | 2,548  |  |  |   | 2,521  | 
|Income before income taxes and cumulative effect
    of accounting change |  |                                            | 128   |              |  |      | 1,700  |  |  |   | 1,251  | 
|Net income(2)                                                             |  |                                            | 127   |              |  |      | 1,692  |  |  |   | 1,207  | 

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|                                                                    |  |                                            |        |              |  |      |        |   |  |   |        |  
|------------------------------------------------------------------- |  | ------------------------------------------ | ------ | ------------ |  | ---- | ------ | - |  | - | ------ | -
|                                                                    |  |                                            |        |             
|                                                                    |  | Period from                                |        | Year Ended  
|                                                                    |  | April 24, 2000                             |        | December 31,
|                                                                    |  | to December 31,                            |        |             
|                                                                    |  | 2000                                       |        | 2001         |  | 2002
|                                                                    |  |                                            |        |              |  |     
|                                                                    |  |                                           
|                                                                    |  | (Dollars in millions, except for operating
|                                                                    |  | data)                                     
|Balance Sheet Data                                                  |  |                                            |        |              |  |      |        |   |  |   |        |  
|Total assets                                                        |  | $                                          | 17,981 |              |  | $    | 22,530 |   |  | $ | 24,122 |  
|Total debt                                                          |  |                                            | 12,399 |              |  |      | 12,531 |   |  |   | 12,591 |  
|Cash Flow Data                                                      |  |                                            |        |              |  |      |        |   |  |   |        |  
|Net cash provided by operating activities                           |  | $                                          | 1,062  |              |  | $    | 3,665  |   |  | $ | 3,592  |  
|Net cash used in investing activities                               |  |                                            | (1,218 | )            |  |      | (3,945 | ) |  |   | (3,585 | )
|Net cash provided by financing activities                           |  |                                            | 282    |              |  |      | 721    |   |  |   | 334    |  
|Capital expenditures(3)                                             |  |                                            | 959    |              |  |      | 3,156  |   |  |   | 3,085  |  
|Other Operating Data                                                |  |                                            |        |              |  |      |        |   |  |   |        |  
|Licensed cellular/PCS POPs (in millions) (end of
    period)(4)     |  |                                            | 189    |              |  |      | 219    |   |  |   | 219    |  
|Total cellular/PCS subscribers (in millions) (end
    of period)(5) |  |                                            | 18.6   |              |  |      | 21.6   |   |  |   | 21.9   |  
|Net additions, cellular/PCS subscribers (in
    millions)           |  |                                            | 0.7    |              |  |      | 1.9    |   |  |   | 0.4    |  
|Cellular/PCS subscriber churn(6)                                    |  |                                            | 2.8    | %            |  |      | 2.9    | % |  |   | 2.8    | %
|Average cellular/PCS revenue per subscriber unit
    (ARPU)(7)      |  | $                                          | 51.14  |              |  | $    | 52.26  |   |  | $ | 51.47  |  
|EBITDA (in millions)(8)                                             |  | $                                          | 802    |              |  | $    | 4,469  |   |  | $ | 4,371  |  
|EBITDA margin(9)                                                    |  |                                            | 28.5   | %            |  |      | 34.2   | % |  |   | 31.8   | %
|Ratio of earnings to fixed charges(10)                              |  |                                            | 1.49   |              |  |      | 2.73   |   |  |   | 2.12   |  



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | In November 2001, depreciation expense related to
    the transfer of assets with our network infrastructure venture
    with T-Mobile USA, Inc. (formerly known as VoiceStream Wireless
    Corporation) was reclassified as a component of equity in net
    loss of affiliates and thus is no longer included in operating
    expenses.                                                                                                                                                                                           
|   
|(2) | Fiscal 2002 includes a cumulative effect of
    accounting change in accounting principle of $32 upon the
    adoption of SFAS No. 142. See Note 4 to the audited
    financial statements.                                                                                                                                                                                                                                                                                                                                           
|   
|(3) | Capital expenditures do not include capital
    expenditures and cash contributions related to the
    Companys infrastructure venture with T-Mobile.                                                                                                                                                                                                                                                                                                                                                                                
|   
|(4) | Licensed POPs refers to the number of people
    residing in areas where we have licenses to provide cellular or
    PCS service.                                                                                                                                                                                                                                                                                                                                                                                                     
|   
|(5) | Cellular/PCS subscribers include customers served
    through reseller agreements. In 2001, cellular/PCS subscribers
    include customers associated with additional wireless businesses
    contributed by our members.                                                                                                                                                                                                                                                                                                             
|   
|(6) | Cellular/PCS subscriber churn is calculated by
    dividing the aggregate number of cellular/PCS subscribers who
    cancel service during each month in a period by the total number
    of cellular/PCS subscribers at the beginning of each month in
    that period.                                                                                                                                                                                                                                                              
|   
|(7) | ARPU is defined as cellular/PCS service revenues
    during the period divided by average cellular/PCS subscribers
    during the period.                                                                                                                                                                                                                                                                                                                                                                                             
|   
|(8) | EBITDA is defined as operating income plus
    depreciation and amortization. EBITDA is not presented as an
    alternative measure of operating results or cash flows from
    operations, as determined in accordance with generally accepted
    accounting principles, but because we believe it is a widely
    accepted indicator of our ability to incur and service debt and
    make capital expenditures. EBITDA does not give effect to cash
    used for debt service requirements and distributions and thus
    does not

30



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|    |                                                                                                                                                                                                                     
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | reflect funds available for dividends,
    reinvestment or other discretionary uses. In addition, EBITDA as
    presented herein may not be comparable to similarly titled
    measures reported by other companies.
|   
|(9) | EBITDA margin is defined as EBITDA divided by
    service revenues.                                                                                                                                                 



|     |                                                                                                                                                                                                                                                                          
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(10) | Earnings consist of income before income taxes,
    extraordinary gain (loss), cumulative effect of accounting
    changes and fixed charges. Fixed charges include interest
    expense, capitalized interest and the portion of rent expense
    representing interest.

Selected Historical Financial
Information  SBC Domestic Wireless Group

The following table presents selected historical
consolidated financial and operating data of the SBC Domestic
Wireless Group. The statement of operations and cash flow data
for the years ended December 31, 1998 and 1999 and the
period ended October 2, 2000 is derived from the audited
financial statements of the SBC Domestic Wireless Group. We
derived the remaining financial data from the SBC Domestic
Wireless Groups unaudited financial statements. You should
read those statements for a further explanation of the selected
financial data set forth below. You should also read our
Managements Discussion and Analysis of Financial
Condition and Results of Operations.

The historical financial information includes the
results of operations and cash flows for the SBC Domestic
Wireless Group for all periods, retroactively restated to
reflect the mergers of SBC with the wireless businesses of
Pacific Telesis Group (PAC), Southern New England
Telecommunications Corporation (SNET) and Ameritech Corporation
(Ameritech) as poolings of interests. Historical financial
information also includes the results of operations and cash
flows for acquisitions from their date of acquisition and
includes the results of operations and cash flows from various
disposed assets until their date of disposition. You should also
read our Managements Discussion and Analysis of
Financial Condition and Results of Operations 
Presentation of Financial Information.

|                                                                                                             |  |                                  |       |            |  |      |        |   |  |   |        |  
|------------------------------------------------------------------------------------------------------------ |  | -------------------------------- | ----- | ---------- |  | ---- | ------ | - |  | - | ------ | -
|                                                                                                             |  |                                  |       |           
|                                                                                                             |  | Year Ended                       |       | Period    
|                                                                                                             |  | December 31,                     |       | Ended     
|                                                                                                             |  |                                  |       | October 2,
|                                                                                                             |  | 1998                             |       | 1999       |  | 2000
|                                                                                                             |  |                                  |       |            |  |     
|                                                                                                             |  |                                 
|                                                                                                             |  | (Dollars in millions, except for
|                                                                                                             |  | operating data)                 
|Statement of Operations Data                                                                                 |  |                                  |       |            |  |      |        |   |  |   |        |  
|Total operating revenue                                                                                      |  | $                                | 6,507 |            |  | $    | 7,376  |   |  | $ | 6,100  |  
|Total operating expenses                                                                                     |  |                                  | 5,428 |            |  |      | 6,074  |   |  |   | 4,812  |  
|                                                                                                             |  |                                  |       |            |  |      |        |   |  |   |        |  
|Operating income                                                                                             |  |                                  | 1,079 |            |  |      | 1,302  |   |  |   | 1,288  |  
|Income before provision for income taxes,
    extraordinary gain and cumulative effect of accounting changes |  |                                  | 663   |            |  |      | 929    |   |  |   | 917    |  
|Net income(1)(2)(3)                                                                                          |  |                                  | 388   |            |  |      | 1,921  |   |  |   | 586    |  
|Cash Flow Data                                                                                               |  |                                  |       |            |  |      |        |   |  |   |        |  
|Net cash provided by operating activities(4)                                                                 |  | $                                | 1,762 |            |  | $    | 1,861  |   |  | $ | 620    |  
|Net cash provided by (used in) investing
    activities                                                      |  |                                  | (978  | )          |  |      | 1,268  |   |  |   | (2,528 | )
|Net cash provided by (used in) financing
    activities                                                      |  |                                  | (755  | )          |  |      | (3,083 | ) |  |   | 1,965  |  
|Capital expenditures                                                                                         |  |                                  | 978   |            |  |      | 988    |   |  |   | 704    |  

31



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|                                                                    |  |                                  |       |            |  |      |       |   |  |   |       |  
|------------------------------------------------------------------- |  | -------------------------------- | ----- | ---------- |  | ---- | ----- | - |  | - | ----- | -
|                                                                    |  |                                  |       |           
|                                                                    |  | Year Ended                       |       | Period    
|                                                                    |  | December 31,                     |       | Ended     
|                                                                    |  |                                  |       | October 2,
|                                                                    |  | 1998                             |       | 1999       |  | 2000
|                                                                    |  |                                  |       |            |  |     
|                                                                    |  |                                 
|                                                                    |  | (Dollars in millions, except for
|                                                                    |  | operating data)                 
|Other Operating Data                                                |  |                                  |       |            |  |      |       |   |  |   |       |  
|Total cellular/PCS subscribers (in millions) (end
    of period)(5) |  |                                  | 10.4  |            |  |      | 11.2  |   |  |   | 13.2  |  
|Cellular/PCS subscriber churn(6)                                    |  |                                  | 2.1   | %          |  |      | 2.4   | % |  |   | 2.6   | %
|Average cellular/PCS revenue per subscriber unit
    (ARPU)(7)      |  | $                                | 51.11 |            |  | $    | 50.37 |   |  | $ | 51.23 |  
|EBITDA (in millions)(8)                                             |  | $                                | 1,895 |            |  | $    | 2,292 |   |  | $ | 2,123 |  
|EBITDA margin(9)                                                    |  |                                  | 31.8  | %          |  |      | 33.8  | % |  |   | 38.0  | %



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | In October 1999, SBC completed the required
    disposition, as a condition of the Ameritech merger, of 20
    Midwestern cellular properties, including the competing cellular
    licenses in Chicago, Illinois, and St. Louis, Missouri and other
    markets. The SBC Domestic Wireless Group recorded an
    extraordinary gain of $1,379 on this sale, net of taxes of $960.                                                                                                                                                                                                                                                                                                                                                                         
|   
|(2) | In September 2000, adjustments related to
    calculations of the 1999 gain on the required disposition of the
    20 Midwestern cellular properties following the Ameritech merger
    referred to in note (1) above resulted in an additional
    extraordinary gain of $36, net of taxes of $24.                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   
|(3) | The SBC Domestic Wireless Groups results in
    1999 include the effect of conforming the adoption date for
    postretirement accounting between SBC and Ameritech. This change
    was recorded in the third quarter of 1999, retroactive to
    January 1, 1999, as a cumulative effect of accounting
    change of $14, net of taxes of $9.                                                                                                                                                                                                                                                                                                                                                                                                           
|   
|(4) | Net cash provided by operating activities for the
    period ended October 2, 2000 reflects a tax payment of
    $1,102 associated with the sale of the 20 Midwestern cellular
    properties referenced in note (1).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   
|(5) | Subscribers include customers served through
    reseller agreements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   
|(6) | Cellular/PCS subscriber churn is calculated by
    dividing the aggregate number of cellular/PCS subscribers who
    cancel service during each month in a period by the total number
    of cellular/PCS subscribers at the beginning of each month in
    that period.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   
|(7) | Average revenue per subscriber unit
    (ARPU) is defined as cellular/PCS service revenues during
    the period divided by average cellular/PCS subscribers during
    the period.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   
|(8) | EBITDA is defined as operating income plus
    depreciation and amortization. EBITDA is not presented as an
    alternative measure of operating results or cash flows from
    operations, as determined in accordance with generally accepted
    accounting principles, but because we believe it is a widely
    accepted indicator of our ability to incur and service debt and
    make capital expenditures. EBITDA does not give effect to cash
    used for debt service requirements and distributions and thus
    does not reflect funds available for dividends, reinvestment or
    other discretionary uses. In addition, EBITDA as presented
    herein may not be comparable to similarly titled measures
    reported by other companies.
|   
|(9) | EBITDA margin is defined as EBITDA divided by
    service revenues. When adjusted for a $220 million charge
    recorded in 1999 by SBC in connection with the sale/leaseback of
    certain network assets, the EBITDA margin for 1999 would have
    been 37.0%.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

Selected Historical Financial
Information  BellSouth Domestic Wireless
Group

The following table presents summary historical
consolidated financial and operating data of the BellSouth
Domestic Wireless Group. The statement of operations and cash
flow data for the years ended December 31, 1998 and 1999
and the period ended October 2, 2000 is derived from the
audited financial statements of the BellSouth Domestic Wireless
Group. We derived the remaining financial data from the
BellSouth Domestic Wireless Groups unaudited financial
statements. You should read those statements

32



---



##### Table of Contents



for a further explanation of the selected
financial data set forth below. You should also read our
Managements Discussion and Analysis of Financial
Condition and Results of Operations.


The historical financial information for the
BellSouth Domestic Wireless Group includes the results of
operations and cash flows for various significant acquisitions
from their date of acquisition and includes the results of
operations and cash flows from various disposed assets until
their date of disposition. You should also read our
Managements Discussion and Analysis of Financial
Condition and Results of Operations  Presentation of
Financial Information.

|                                                                                                                        |  |                                  |       |            |  |      |       |   |  |   |        |  
|----------------------------------------------------------------------------------------------------------------------- |  | -------------------------------- | ----- | ---------- |  | ---- | ----- | - |  | - | ------ | -
|                                                                                                                        |  |                                  |       |           
|                                                                                                                        |  | Year Ended                       |       | Period    
|                                                                                                                        |  | December 31,                     |       | Ended     
|                                                                                                                        |  |                                  |       | October 2,
|                                                                                                                        |  | 1998                             |       | 1999       |  | 2000
|                                                                                                                        |  |                                  |       |            |  |     
|                                                                                                                        |  |                                 
|                                                                                                                        |  | (Dollars in millions, except for
|                                                                                                                        |  | operating data)                 
|Statement of Operations Data                                                                                            |  |                                  |       |            |  |      |       |   |  |   |        |  
|Total operating revenue                                                                                                 |  | $                                | 3,053 |            |  | $    | 3,573 |   |  | $ | 3,102  |  
|Total operating expenses(1)                                                                                             |  |                                  | 2,808 |            |  |      | 3,680 |   |  |   | 2,723  |  
|                                                                                                                        |  |                                  |       |            |  |      |       |   |  |   |        |  
|Operating income (loss)                                                                                                 |  |                                  | 245   |            |  |      | (107  | ) |  |   | 379    |  
|Income (loss) before provision for income
    taxes, extraordinary gain and cumulative effect of accounting
    changes |  |                                  | 110   |            |  |      | (132  | ) |  |   | 194    |  
|Net income (loss)                                                                                                       |  |                                  | 46    |            |  |      | (87   | ) |  |   | 114    |  
|Cash Flow Data                                                                                                          |  |                                  |       |            |  |      |       |   |  |   |        |  
|Net cash provided by operating activities                                                                               |  | $                                | 691   |            |  | $    | 545   |   |  | $ | 826    |  
|Net cash used in investing activities                                                                                   |  |                                  | (750  | )          |  |      | (322  | ) |  |   | (1,347 | )
|Net cash provided by (used in) financing
    activities                                                                 |  |                                  | 125   |            |  |      | (295  | ) |  |   | 553    |  
|Capital expenditures                                                                                                    |  |                                  | 705   |            |  |      | 590   |   |  |   | 461    |  
|Other Operating Data                                                                                                    |  |                                  |       |            |  |      |       |   |  |   |        |  
|Total cellular/PCS subscribers (in millions) (end
    of period)(2)                                                     |  |                                  | 4.5   |            |  |      | 4.9   |   |  |   | 5.7    |  
|Cellular/PCS subscriber churn(3)                                                                                        |  |                                  | 2.3   | %          |  |      | 2.9   | % |  |   | 2.5    | %
|Average cellular/PCS revenue per subscriber unit
    (ARPU)(4)                                                          |  | $                                | 58.42 |            |  | $    | 58.08 |   |  | $ | 58.47  |  
|EBITDA (in millions)(5)                                                                                                 |  | $                                | 805   |            |  | $    | 570   |   |  | $ | 870    |  
|EBITDA margin(6)                                                                                                        |  |                                  | 28.4  | %          |  |      | 17.4  | % |  |   | 30.3   | %



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Total operating expenses include a provision for
    asset impairment in 1999. This provision represents non-cash
    charges associated with disposals of infrastructure equipment in
    14 wireless markets in the southeastern United States. This
    charge of $320 was recorded to write down these assets to their
    fair market value, as required under SFAS 121, and was
    estimated by discounting the expected future cash flows of these
    assets through the date of disposal. This equipment was replaced
    with new equipment.
|   
|(2) | Subscribers include customers served through
    reseller agreements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   
|(3) | Cellular/PCS subscriber churn is calculated by
    dividing the aggregate number of cellular/PCS subscribers who
    cancel service during each month in a period by the total number
    of cellular/PCS subscribers at the beginning of each month in
    that period.                                                                                                                                                                                                                                                                               
|   
|(4) | Average revenue per subscriber unit
    (ARPU) is defined as cellular/PCS service revenues during
    the period divided by average cellular/PCS subscribers during
    the period.                                                                                                                                                                                                                                                                                                                                                                    

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|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(5) | EBITDA is defined as operating income plus
    depreciation and amortization. EBITDA is not presented as an
    alternative measure of operating results or cash flows from
    operations, as determined in accordance with generally accepted
    accounting principles, but because we believe it is a widely
    accepted indicator of our ability to incur and service debt and
    make capital expenditures. EBITDA does not give effect to cash
    used for debt service requirements and distributions and thus
    does not reflect funds available for dividends, reinvestment or
    other discretionary uses. In addition, EBITDA as presented
    herein may not be comparable to similarly titled measures
    reported by other companies.
|   
|(6) | EBITDA margin is defined as EBITDA divided by
    service revenues. When adjusted for the provision for asset
    impairment described in note (1), the EBITDA margin for
    1999 would have been 27.1%.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  






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

Introduction

We serve approximately 22.7 million voice
and data customers, including customers served over our Mobitex
network, and are the second-largest provider of wireless voice
and data communications services in the United States, based on
the number of wireless subscribers. We have access to licenses
to provide cellular or PCS wireless communications services
covering an aggregate population of 231 million, or
approximately 81% of the U.S. population, including in 45 of the
50 largest U.S. metropolitan areas. We provide cellular or PCS
services in 43 of the 50 largest U.S. metropolitan areas.

Competition

We compete for customers based principally on
price, service offerings, call quality, coverage area and
customer service. We face substantial and increasing competition
in all aspects of our business. This condition has had an
adverse impact on our customer and revenue growth, and we expect
this trend to continue. Our competitors are principally five
national (Verizon Wireless, AT&T Wireless, Sprint PCS,
Nextel Communications and T-Mobile) and a large number of
regional providers of cellular, PCS and other wireless
communications services, resellers and wireline service
providers. In addition, we may experience significant
competition from companies that provide similar services using
other current or future communications technologies and services.

Operating Revenues

Service Revenues.Service revenues consist of revenues from the provision of
wireless voice and data services. Service revenues, which we
record when services are provided, include revenues from:



| |   |                                                                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | recurring monthly access charges;                                                                                                                           
|
| |  | airtime usage, including prepaid service;                                                                                                                   
|
| |  | long distance charges;                                                                                                                                      
|
| |  | charges for optional features and services such
    as voice mail, unlimited mobile-to-mobile calling, roadside
    assistance, caller ID and data services;
|
| |  | roaming charges we bill to our customers for
    their use of our and other carriers networks, which we
    refer to as incollect roaming revenues; and  
|
| |  | roaming charges we bill to other wireless service
    providers whose subscribers use our network, which we refer to
    as outcollect roaming revenues.  

Revenues from data services have not been
material in any of the periods presented. We expect that trend
to continue, although revenues from wireless data services will
increase as a result of the availability of GPRS and EDGE across
our network and the introduction of new data applications for
business and consumer use, including access to e-mail, Internet
content, mobile commerce and location-based services.

34



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##### Table of Contents



Equipment Sales.Equipment sales include revenues from the sale of handsets and
accessories to new and existing customers and to agents and
other third-party distributors. The trend in equipment sales is
generally comparable to the trend in gross customer additions.

Operating Expenses

Our operating expenses include:



| |   |                                                  
| | - | -------------------------------------------------
| |  | cost of services;                                
|
| |  | cost of equipment sales;                         
|
| |  | selling, general and administrative expenses; and
|
| |  | depreciation and amortization.                   

The integration of our predecessor operations
provided opportunities for cost savings. Prior to our formation
as a joint venture, the SBC and BellSouth Domestic Wireless
Groups had their own management teams, wireless networks,
operational and technical groups, marketing and distribution
channels and information, customer care, billing and other
systems. We believe that our formation and the resulting
combination of these businesses has generated significant
synergies, which will lower our overall cost structure on a
recurring basis.

We must increasingly seek to reduce expense
growth in order to protect profit margins. As a combined entity,
we eliminated roaming costs between our two predecessor entities
and by spreading our fixed costs over a larger subscriber base,
we generate higher operating income. We also believe that our
industry position enables us to negotiate roaming, long distance
and local network connection fees and handset and network
infrastructure purchase arrangements on favorable terms.

Cost of Services.Cost of services includes the cost of
carrying calls and maintaining our network including internal
and contract engineering labor, expenses to monitor, maintain
and service our network and landline facilities expense. Cost of
service also includes roaming charges and long distance expense
for services provided by other telecommunications carriers,
which are increasing as a result of increased usage stimulated
by national rate plans inclusion of free roaming and long
distance services.

Cost of Equipment
Sales.Cost of equipment sales
includes the cost of handsets and accessories. Some of our third
party distributors purchase handsets and accessories from us,
usually above cost. However, we generally sell handsets below
cost to customers who purchase through direct sales channels,
such as our company stores, as an inducement to customers who
agree to one-year and two-year subscription contracts or in
connection with other promotions. As a result, revenues from
equipment sales are more than offset by the related cost of
equipment sales, resulting in a net subsidy to customers. In
addition, we have actively focused on selling services to new
customers and upgrading existing customers to digital handsets
and service, which increase network capacity and lower our
operating cost per minute. When first introduced, digital
handsets were more expensive than analog phones, contributing to
an increase in cost of equipment. The trend in costs from
equipment sales follows the trend in gross customer additions
and, to a lesser degree, changes in the cost of handsets. The
cost of handsets has declined, and, as one of the largest
purchasers of handsets in the United States, we believe we will
be able to purchase handsets at attractive volume-discounted
rates.

Selling, General and
Administrative.Selling, general and
administrative expenses include all operating costs and expenses
not included in the other operating cost and expense categories,
such as:



| |   |                                                                                                                                                                                              
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | sales and marketing costs, including the costs of
    advertising and promotions;                                                                                                            
|
| |  | distribution expenses, including the costs to
    maintain retail locations and the commissions paid to our own
    sales force as well as agents and other third party
    distributors; and
|
| |  | other administrative cost such as accounting and
    billing operations, customer service, and other overhead costs.                                                                         

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Pre-paid and reseller customers, together,
comprise less than 10% of our customer base. Because the cost to
acquire these customers is less than for direct, post-paid
customers, our customer acquisition costs have increased as
pre-paid and reseller customers have decreased as a percentage
of total subscribers.

Depreciation and Amortization.Depreciation and amortization expense
includes non-cash expenses relating to the depreciation of
property, plant and equipment and the amortization of
intangibles, such as customer lists and, prior to 2002, FCC
licenses and goodwill. Depreciation expense pertaining to assets
used in our business (excluding assets transferred to joint
ventures) has been generally increasing as a result of our
capital expenditures and we expect this expense to continue to
increase in the foreseeable future as we make capital
expenditures to build out and upgrade our network, adjust asset
lives, as appropriate, and make other investments. See
 Liquidity and Capital Resources below
for a discussion of our capital expenditures and other
investments.

Other Income (Expenses)

Interest Expense.Interest expense includes interest
costs related primarily to our indebtedness and capital leases.

Minority Interest.Minority interest reflects the share
of operating income (loss) belonging to members or partners
in consolidated entities.

Equity in Net Income (Loss) of
Affiliates, Net.In addition to the
subsidiaries that we control and include in our consolidated
financial statements, we have non-controlling equity investments
in various entities. The largest of these are as follows:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | In November 2000, we made an equity investment,
    and as of December 31, 2002 had a non-controlling equity
    interest, in Salmon. Because we do not control Salmon, we
    account for this investment using the equity method and record
    profits or losses in our income statement as equity in net
    income (loss) of affiliates. Crowley Digital LLC, the other
    member of Salmon, is not committed to provide equity funding in
    excess of its initial capital contribution of $50. As a result,
    we will recognize 100% of Salmons losses at such time as
    Crowleys capital contribution has been eliminated due to
    it being charged with its proportionate share of Salmons
    losses. Until Salmons networks are built out and it has
    acquired a significant number of subscribers, it is expected to
    generate significant operating losses. None of Salmons
    networks are constructed or operational as of December 31,
    2002.
|
| |  | In November 2001, we formed a jointly-controlled
    infrastructure venture with T-Mobile. In July 2002, we commenced
    commercial operations in New York City and T-Mobile commenced
    operations in California and Nevada. Because we do not
    independently control this venture, we also account for this
    investment using the equity method. This venture is structured
    to generate operating losses approximating the amount of the
    depreciation on the assets that have been contributed to it and
    unreimbursed interest expense.                                                                                                                                                                                                                                                                                                                                                                                                                      

We expect to record a significant equity in loss
of affiliates over the next several years relating to our
investments in these ventures.

Income Taxes

We are a limited liability company treated as a
partnership for income tax purposes and therefore generally do
not pay taxes on our income. Instead, income taxes are generally
the responsibility of our members. However, we have corporate
and LLC subsidiaries that are taxpayers in some jurisdictions
and will record income tax expense. We do not expect that our
income tax expense will be material in the near future.

36



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##### Table of Contents



Consolidated Results of Operations

Presentation of Financial
Information

We were formed in 2000 and have limited
historical results of operation prior to the contribution of the
SBC and BellSouth Domestic Wireless Groups assets on
October 2, 2000. Therefore, for periods prior to October
2000, we present the historical results of operations of the SBC
Domestic Wireless Group and the BellSouth Domestic Wireless
Group and discuss the results of operations of those businesses
on a historical basis.

We present and discuss:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | our financial results for the twelve months ended
    December 31, 2002 compared to the twelve months ended
    December 31, 2001; and                                                                                                                                                                                                                                                                                                                             
|
| |  | certain components of our historical financial
    results for the year ended December 31, 2001 compared to
    the comparative components of unaudited combined historical
    results of the SBC Domestic Wireless Group and the BellSouth
    Domestic Wireless Group for the nine months ended
    September 30, 2000, combined with our historical
    consolidated financial results for the period April 24,
    2000 (inception) through December 31, 2000.

The combined financial data was prepared by
aggregating for the periods indicated the historical financial
statements of Cingular, the SBC Domestic Wireless Group and the
BellSouth Domestic Wireless Group, as applicable, and
eliminating any inter-company transactions. The combined
operating data for 2000 does not purport to be indicative of
what our results of operations would actually have been if we
had been formed at the beginning of that year. The SBC and
BellSouth Domestic Wireless Groups were managed separately prior
to their contribution to us on October 2, 2000; and the
combined financial data for 2000 is not intended to show what
the combined financial results would have been had the companies
actually been managed together. We present the combined
operating data because management evaluates our business by
comparing our results from one period against results from prior
periods and believes that these comparisons provide a reasonable
basis for measuring changes in our operating results.

The combined operating data should be read in
conjunction with our audited financial statements and the
audited financial statements of the SBC Domestic Wireless Group
and the BellSouth Domestic Wireless Group and other financial
and operating information appearing under Item 8.



| |                                                                                 
| | --------------------------------------------------------------------------------
| | Year Ended December 31, 2002, Compared
    with the Year Ended December 31, 2001

The historical consolidated data below is for the
years ended December 31, 2001 and 2002.

|                   |                             |                             |   |        |        |  |   |        |        | 
|------------------ | --------------------------- | --------------------------- | - | ------ | ------ |  | - | ------ | ------ | 
|                   |                             |                            
|                   |                             | Year Ended                 
|                   |                             | December 31,               
|                   |                             |                            
|                   |                             | 2001                        |   | 2002  
|                   |                             |                             |   |       
|Operating revenues |                             |                             |   |        |        |  |   |       
|                   | Local Service Revenue-Voice |                             | $ | 10,620 |        |  | $ | 11,638 |       
|                   | Data Revenue                |                             |   | 193    |        |  |   | 286    |       
|                   |                             |                             |   |        |        |  |   |       
|                   |                             | Total Local Service Revenue |   |        | 10,813 |  |   |        | 11,924 | 
|                   | Incollect Roamer Revenue    |                             |   | 884    |        |  |   | 776    |       
|                   | Long Distance               |                             |   | 223    |        |  |   | 209    |       
|                   |                             |                             |   |        |        |  |   |       
|                   |                             | Subscriber Revenue          |   |        | 11,920 |  |   |        | 12,909 | 

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##### Table of Contents



|                                                       |                                                                         |                       |        |        |       |  |        |        |     | 
|------------------------------------------------------ | ----------------------------------------------------------------------- | --------------------- | ------ | ------ | ----- |  | ------ | ------ | --- | 
|                                                       |                                                                         |                      
|                                                       |                                                                         | Year Ended           
|                                                       |                                                                         | December 31,         
|                                                       |                                                                         |                      
|                                                       |                                                                         | 2001                  |        | 2002  
|                                                       |                                                                         |                       |        |       
|                                                       | Outcollect Revenue                                                      |                       |        | 940    |       |  |        | 701    |    
|                                                       | Other Revenue                                                           |                       |        | 209    |       |  |        | 136    |    
|                                                       |                                                                         |                       |        |        |       |  |        |       
|                                                       |                                                                         | Other Service Revenue |        |        | 1,149 |  |        |        | 837 | 
|                                                       |                                                                         |                       |        |        |       |  |        |       
|                                                       | Wireless Service Revenue                                                |                       |        | 13,069 |       |  |        | 13,746 |    
|                                                       | Equipment sales                                                         |                       |        | 1,039  |       |  |        | 981    |    
|                                                       |                                                                         |                       |        |        |       |  |        |       
|Total operating revenues                               |                                                                         |                       | 14,108 |        |       |  | 14,727 |       
|                                                       |                                                                         |                       |        |        |       |  |        |       
|Operating expenses                                     |                                                                         |                       |        |        |       |  |        |       
|                                                       | Cost of services (excluding depreciation)                               |                       |        | 2,752  |       |  |        | 3,395  |    
|                                                       | Cost of equipment sales                                                 |                       |        | 1,652  |       |  |        | 1,535  |    
|                                                       | Selling, general and administrative                                     |                       |        | 5,235  |       |  |        | 5,426  |    
|                                                       | Depreciation and amortization                                           |                       |        | 1,921  |       |  |        | 1,850  |    
|                                                       |                                                                         |                       |        |        |       |  |        |       
|Total operating expenses                               |                                                                         |                       | 11,560 |        |       |  | 12,206 |       
|                                                       |                                                                         |                       |        |        |       |  |        |       
|Other income (expenses)                                |                                                                         |                       |        |        |       |  |        |       
|                                                       | Interest expense                                                        |                       |        | (822   | )     |  |        | (911   | )  
|                                                       | Minority interest in net income (loss) of
    consolidated partnerships |                       |        | (122   | )     |  |        | (123   | )  
|                                                       | Equity in net loss of affiliates, net                                   |                       |        | (68    | )     |  |        | (265   | )  
|                                                       | Other, net                                                              |                       |        | 164    |       |  |        | 29     |    
|                                                       |                                                                         |                       |        |        |       |  |        |       
|Total other income (expense)                           |                                                                         |                       | (848   | )      |       |  | (1,270 | )     
|                                                       |                                                                         |                       |        |        |       |  |        |       
|Cumulative effect of accounting change, net of
    tax |                                                                         |                       |       |        |       |  | (32    | )     
|                                                       |                                                                         |                       |        |        |       |  |        |       

Customer
Base

We have recently experienced lower subscriber
growth due in part to a slowing economy and increased wireless
penetration and competition in the United States. As these
factors may reduce the pool of prospective wireless subscribers,
our customer growth is increasingly dependent on reducing our
churn and attracting customers who churn from other carriers.

Cellular/PCS customers were 21.9 million at
December 31, 2002, an increase of 1.4% from the
21.6 million customers at December 31, 2001. Net
cellular/PCS customer additions in 2002 were 360,000, a decrease
of 1,561,000, or 81.3%, from the 1,921,000 net customer
additions in 2001. The decrease in net customer additions was
primarily a function of a 1.1 million, or 12.3%, reduction
in gross customer additions from 2001. The decrease in 2002 was
a result of intense industry competition, impacts of the
economic slowdown, and the continued decline in our analog,
prepaid and reseller customer bases. We lost approximately
266,000 reseller customers after WorldCom, Inc. (WorldCom)
exited the reseller business during the year, and an additional
approximately 130,000 WorldCom customers became our direct
customers. We believe that a number of internal business
initiatives also contributed to our negative growth trends in
2002, including;



| |   |                                                                                                                                                                        
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | centralization of the marketing and sales
    organizations, which reduced our effectiveness in responding to
    regional and local product and service opportunities;
|
| |  | other merger-related changes, such as billing
    system integration and inventory and customer care
    consolidation, that may have impacted customers; and          
|
| |  | a shift to sales plan initiatives designed to
    improve cash flow rather than overall market share.                                                                  

38



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During the year ended December 31, 2002, our
postpaid subscriber base increased 928,000, or 4.9%, including
the approximately 130,000 former WorldCom reseller subscribers
who transferred to us after WorldCom exited the reseller
business. The prepaid and reseller subscriber bases decreased by
23,000, or 1.6%, and 577,000, or 45.1% respectively, during the
year.

For the year ended December 31, 2002, the
cellular/PCS churn rate was 2.8% compared with a 2.9% churn rate
for 2001. The lower churn in 2002 is reflective of our efforts
to acquire and maintain quality non-reseller postpaid customers.
This lower churn was partially offset by the continued
deterioration of our prepaid and reseller customer base,
primarily as a result of WorldComs exiting the reseller
business, which had a negative impact on churn in 2002.

We had over 5 million customers using our
data services at December 31, 2002. In addition to our
cellular and PCS licenses, we own FCC licenses to provide data
services over a separate frequency band. Our network at this
band utilizes a different technology called Mobitex.
The number of our Mobitex data network customers increased to
approximately 817,000 at December 31, 2002, an 11.5% increase
from 733,000 customers at year-end 2001. Net customer additions
for the year ended December 31, 2002 were 84,000, a
decrease of 47.5% from the 160,000 net customer additions in the
prior year. Most of these customers are business customers, and
the decline in net additions is primarily due to the economic
slowdown.

Operating
Revenue

Total operating revenues, consisting of service
revenues and equipment revenues, increased $619, or 4.4%, to
$14,727 for the year ended December 31, 2002, compared with
$14,108 for the prior year. An increase in 2002 service
revenues, as a result of a higher average number of subscribers,
was partially offset by reduced equipment revenues, primarily
attributable to reduced gross customer additions. Although total
operating revenues increased, the rate of increase declined
during 2002, reflecting slower customer growth and lower prices
for our services driven by increasing competition. The
components of the change in operating revenues are described
below.

Service Revenues.Service revenues are comprised of local service, roaming, long
distance and other revenues. For the year ended
December 31, 2002, service revenues were $13,746 an
increase of $677, or 5.2%, compared with $13,069 for the prior
year. Of the $677 increase, $203 can be attributed to the
contribution of a Puerto Rico wireless business from SBC in
September 2001.

The local service component of total service
revenues includes recurring monthly access charges, airtime
usage, including prepaid service when earned, and charges for
optional features and services, such as voice mail,
mobile-to-mobile calling, roadside assistance, caller ID,
handset insurance and data services.

Local service revenues for the year ended
December 31, 2002 were $11,924, an increase of $1,111, or
10.3%, compared with $10,813 for the prior year. The increase
was primarily driven by a 6.8% increase in the average number of
cellular/PCS subscribers versus 2001 and the continued migration
of our customers to all-inclusive rate plans that include
roaming and long distance at no additional charge. The increase
was also driven by a 26.2% increase in local minutes of use per
customer, driven by plans offering increasing numbers of minutes
of service for a flat, monthly fee. Additionally, $156 from the
provision of handset insurance through a new subsidiary and $181
due to the September 2001 contribution by SBC of the Puerto Rico
wireless business also contributed to the increase from the
prior year. Data service revenues, a component of local service
revenues, increased 48.2% in 2002, from $193 in 2001 to $286 in
2002.

The roaming component of total service revenues
includes revenues that we collect from our customers who roam
outside their selected home coverage area, referred to as
incollect roaming revenues, and revenues from other
wireless carriers for roaming by their customers on our network,
referred to as outcollect roaming revenues.

Incollect revenues for the year ended
December 31, 2002 were $776, a decrease of $108, or 12.2%,
compared with $884 for the prior year. Incollect revenues
declined as more of our customers adopted regional and national
rate plans, which include free roaming in bundled minute plans.

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Outcollect revenues for the year ended
December 31, 2002 were $701, a decrease of $239, or 25.4%,
compared with $940 for the prior year. This decline is primarily
a function of reductions in roaming rates with major roaming
partners and the building out of other carriers networks,
which reduces the need of their customers to roam on our
network. The impact of our infrastructure venture with T-Mobile
also contributed $26 to the decrease from 2001.

Long distance revenues for the year ended
December 31, 2002 comprised only approximately 1.5% of
total service revenues. These revenues continue to decline as
our customers migrate to all-inclusive rate plans that include
long distance service in the monthly access charge.

Other revenues for the year ended
December 31, 2002 were $136, a decrease of $73, or 34.9%
compared with $209 for the prior year. The decrease in 2002
includes a reduction of $23 in administrative and programming
revenues related to the formation of a captive handset insurance
company in 2002. Other decreases from 2001 include a $17
reduction in management fees as a result of the contribution of
the Puerto Rico wireless business in September 2001 and a $13
decrease in local exchange carrier (LEC) reciprocal
compensation revenues as a result of our infrastructure joint
venture with T-Mobile.

ARPU for cellular/PCS service declined by $0.79
to $51.47, or 1.5%, from $52.26 for the year ended
December 31, 2001. Our strategy of targeting, acquiring and
retaining non-reseller postpaid customers has resulted in an
increase in subscriber revenues. This increase, however, has
been offset by reductions in revenues from bundled services and
outcollect and other revenues, thereby reducing overall service
ARPU. The consolidation of Puerto Rico operating results in our
financial statements, beginning September 2001, also adversely
affected ARPU as a result of the heavy concentration of prepaid
subscribers in Puerto Rico. Of the $0.79 decline in ARPU, $0.18
of the decline can be attributed to the dilutive ARPU impact of
the Puerto Rico consolidation.

Equipment Sales.Equipment sales for the year ended
December 31, 2002 were $981, a decrease of $58, or 5.6%,
compared with $1,039 for the prior year. This decrease is
primarily the result of a 5.0% decline in non-reseller gross
additions from 2001.

Operating
Expenses

Cost of Services (Exclusive of Depreciation).Cost of services primarily includes
expenses to monitor, maintain and service our network, landline
facilities expense, incollect roaming charges from other
carriers and long distance expense. Cost of services for the
year ended December 31, 2002 was $3,395, an increase of
$643, or 23.4%, compared with $2,752 for the prior year. Cost
increases in 2002 were driven by a 36% increase in system
minutes of use and higher roaming and long distance costs. These
increases are a result of customer migration to digital rate
plans that include more minutes, free long distance calling and
free roaming. Increases in 2002 over the prior year also include
$151 in impairment losses related to our long-lived assets
utilized in our Mobitex data network and certain TDMA network
assets and $93 related to the provision of handset insurance
through the new captive insurance subsidiary. See Critical
Accounting Policies and Estimates for further discussion
of impairment losses recognized in 2002. Although systems costs
are increasing due to increased minutes of use, efficiencies
attributable to digital networks contribute to decreasing
per-minute costs.

Cost of Equipment Sales.Cost of equipment sales for the year
ended December 31, 2002 was $1,535, a decrease of $117, or 7.1%,
compared with $1,652 for the prior year. Consistent with the
trend in equipment revenues, this decrease is primarily the
result of a 5.0% decline in non-reseller gross additions
compared with 2001. This year over year cost decrease was also
driven by more favorable per-unit pricing in 2002 resulting from
our combined purchasing power as well as industry trends. These
decreases were offset to a limited degree by increased upgrade
equipment costs in 2002.

Selling, General and Administrative Expenses.Selling, general and administrative
expenses for the year ended December 31, 2002 were $5,426,
an increase of $191, or 3.6%, compared with $5,235 for prior
year. The higher cost in 2002 was driven by increases of $135 in
costs related to maintaining and supporting our customer base,
$41 in administrative costs and $15 in selling expenses.

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The $135 in cost increases for maintaining and
supporting our customer base included higher residuals and
upgrade commissions, customer retention costs and bad debt
expense. Bad debt expense increased by $70, with over half of
the increase attributable to WorldCom write-offs occurring in
2002. Within this same area of customer maintenance and support
expenses, the overall $135 cost increase included lower billing
and customer service expenses, reflecting cost reductions as a
result of billing system and call center consolidations.

The increase of $41 in other administrative costs
is primarily due to higher information technology (IT) and
development costs.

Selling expenses, which include sales, marketing,
advertising and commissions expenses, increased $15 from 2001.
Increases in 2002 include $41 in advertising and agent build-out
costs associated with the launch of Cingular Wireless service in
New York City and $28 related to the reorganization of the sales
operation and related workforce reductions. Costs in 2001
included $70 related to the Cingular brand launch.

Depreciation and Amortization.Depreciation and amortization for the
year ended December 31, 2002 were $1,850, a decrease of
$71, or 3.7%, compared with $1,921 for the prior year.
Depreciation expense increased $148 and was comprised primarily
of increased depreciation associated with new capital assets,
partially offset by a reduction in depreciation as a result of
the transfer of assets to our network infrastructure venture
with T-Mobile. Beginning in November 2001, the operating losses
of Factory, which include depreciation, are reflected as a
component of equity in net loss of affiliates. For the year
ended December 31, 2002, amortization expense decreased by
$219 compared with the prior year. This was primarily
attributable to the cessation of amortizing goodwill and
wireless licenses as a result of our January 1, 2002
adoption of SFAS No. 142.

Interest
Expense

Interest expense for the year ended
December 31, 2002 was $911, an increase of $89, or 10.8%,
compared with $822 for the prior year. The increase in interest
expense primarily resulted from the issuance in December 2001 of
$2,000 in fixed-rate senior notes to refinance lower
interest-bearing commercial paper and fund capital expenditures
and working capital. The increased interest expense of $124
related to these fixed-rate senior notes was offset by a
reduction of $39 related to minimal use of commercial paper in
2002, compared to 2001.



| |                                          
| | -----------------------------------------
| | Equity in Net Loss of Affiliates,
    Net

Equity in net loss of affiliates for the year
ended December 31, 2002 was $265, an increase of $197,
compared with $68 for the prior year. The increase primarily
reflects additional equity losses of $209 associated with the
investment in our network infrastructure venture with T-Mobile,
which was formed in the fourth quarter of 2001. This increase
was partially offset by a $14 reduction in losses related to our
Salmon joint venture.



| |           
| | ----------
| | Other, Net

Other, net for the year ended December 31,
2002 was $29, a decrease of $135, compared with $164 for the
prior year. The decrease is primarily due to a $76 gain
associated with the distribution of assets to us at fair value
following a partnership dissolution in 2001, a reduction of $27
in interest income and gains from partitioning transactions and
a $19 decrease in interest income on advances to Salmon.



| |                                           
| | ------------------------------------------
| | Cumulative Effect of Accounting
    Change

Cumulative effect of change in accounting
principle, net of tax, was a loss of $32 during the year ended
December 31, 2002 and resulted from an impairment of
goodwill related to the Mobitex data business upon the adoption
of Statement of Financial Accounting Standards No. 142,
Goodwill and Other Intangible Assets, effective
January 1, 2002.

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| |                                                                                                                                                 
| | ------------------------------------------------------------------------------------------------------------------------------------------------
| | Consolidated Year Ended December 31,
    2001 Operating Data, Compared with Combined Year Ended
    December 31, 2000 Operating Data (Unaudited)

The historical consolidated operating revenues,
cost of service and equipment sales and gross margin for
Cingular Wireless LLC are shown for the year ended
December 31, 2001. For the year ended December 31,
2000, the combined historical consolidated operating revenues,
cost of service and equipment sales and gross margin for the
period April 24, 2000 (inception) to December 31,
2000, combined with the operating revenues, cost of service and
equipment sales and gross margin for the SBC Domestic Wireless
group and the BellSouth Domestic Wireless Group for the period
ended October 2, 2000, are included below. In combining the
historical results of the SBC Domestic Wireless Group and the
BellSouth Domestic Wireless Group, inter-group transactions have
been eliminated. For 2001, the first full year of operations for
Cingular Wireless LLC, we have also included below a discussion
of 2001s selling, general and administrative expenses,
depreciation and amortization, interest expense, minority
interest in net income of consolidated partnerships, equity in
net income (loss) of affiliates, net and other, net.

|                             |                                                                |                                           |       |          |        |   |       |        |        | 
|---------------------------- | -------------------------------------------------------------- | ----------------------------------------- | ----- | -------- | ------ | - | ----- | ------ | ------ | 
|                             |                                                                |                                          
|                             |                                                                | Year Ended                               
|                             |                                                                | December 31,                             
|                             |                                                                |                                          
|                             |                                                                | 2000                                      |       | 2001    
|                             |                                                                | (Combined)                                |       | (Actual)
|                             |                                                                |                                           |       |         
|Statement of Operations Data |                                                                |                                           |       |          |        |   |       |       
|Operating revenues:          |                                                                |                                           |       |          |        |   |       |       
|                             | Service revenues                                               |                                           | $     | 11,221   |        |   | $     | 13,069 |       
|                             | Equipment sales                                                |                                           |       | 988      |        |   |       | 1,039  |       
|                             |                                                                |                                           |       |          |        |   |       |       
|                             |                                                                | Total operating revenues                  |       |          | 12,209 |   |       |        | 14,108 | 
|Operating expenses:          |                                                                |                                           |       |          |        |   |       |       
|                             | Cost of service                                                |                                           |       | 2,191    |        |   |       | 2,752  |       
|                             | Cost of equipment sales                                        |                                           |       | 1,573    |        |   |       | 1,652  |       
|                             |                                                                |                                           |       |          |        |   |       |       
|                             |                                                                | Total cost of service and equipment sales |       |          | 3,764  |   |       |        | 4,404  | 
|Gross margin (1)             |                                                                | $                                         | 8,445 |          |        | $ | 9,704 |       
|                             |                                                                |                                           |       |          |        |   |       |       
|Operating Data               |                                                                |                                           |       |          |        |   |       |       
|                             | Cellular/PCS subscribers (in millions) (end of
    period)(2)  |                                           |       | 18.6     |        |   |       | 21.6   |       
|                             | Average cellular/PCS revenue per subscriber unit
    (ARPU)(3) |                                           | $     | 53.47    |        |   | $     | 52.26  |       



---



|    |                                                                                                                                                                                    
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Gross margin excludes depreciation expense.                                                                                                                                        
|   
|(2) | Cellular/PCS subscribers include customers served
    through reseller agreements.                                                                                                 
|   
|(3) | Average revenue per subscriber unit
    (ARPU) is defined as cellular/PCS service revenues during
    the period divided by average cellular/PCS subscribers during
    the period.



| |              
| | -------------
| | Customer Base

Cellular and PCS customers grew to
21.6 million for the year ended December 31, 2001, an
increase of 16.1% from the 18.6 million customers at
December 31, 2000. In comparison, the increase in the
customer base for the year ended December 31, 2000 was
20.0%. The slower rate of growth for the 2001 period reflects
the economic slowdown, higher penetration levels and increasing
competition in all of our markets. In addition, the rate of
customer growth reflects a cellular/PCS customer churn rate of
2.9% for the year ended December 31, 2001, compared to 2.6% in
2000. Our net cellular/PCS customer additions, excluding net
additions that occurred prior to the contribution date of those
businesses contributed to us in 2001, declined 36.7% from
3.0 million for the year ended December 31, 2000 to
1.9 million in 2001. This decrease was mainly attributable
to third and fourth quarter 2001 net customer additions of
417,000, a

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71.6% decline from 1,470,000 in the third and
fourth quarters of 2000. Additional factors contributing to
these results include the following:




| |   |                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------
| |  | increasing pricing for postpaid analog customers;                                                           
|
| |  | reducing the subsidy for handsets sold to prepaid
    customers;                                            
|
| |  | shortening the expiration date of new prepaid
    cards to 90 days from 180 days from the date of issue; and
|
| |  | removing from our count of resale customers those
    customers who were inactive for 60 days or longer.    

We implemented these practices to migrate analog
customers to digital service and improve the profitability of
prepaid services.

In addition to our cellular and PCS licenses, we
own licenses to provide data services over a separate frequency
band. Our network at this band utilizes a different technology
called Mobitex. Our Mobitex data network customers
increased to approximately 733,000 at December 31, 2001, a
27.9% increase from approximately 573,000 customers at
December 31, 2000. The rate of growth slowed during 2001 as
net customer additions of approximately 160,000 for the year
ended December 31, 2001 declined from just over 350,000 for
the comparable 2000 period. Most of these customers are business
customers, and the decline in net additions reflects primarily
the economic slowdown, as well as removal of inactive customers
from our customer base. This had a significant impact in the
third and fourth quarters of 2001 with nearly 45,000 net
additions, compared to approximately 191,000 in the third and
fourth quarters of 2000. We had approximately 1.7 million
active users of our cellular and PCS data services as of
December 31, 2001. Most of these customers began
subscribing to these services during 2001.

Revenue from data services has not been material
in any of the periods presented. We believe that growth in our
data services revenue and customers demonstrates customer
acceptance of these services, which we expect over time will
increasingly contribute to operating revenue.



| |                   
| | ------------------
| | Operating Revenues

Total operating revenues for the year ended
December 31, 2001 were $14,108, an increase of $1,899, or
15.6%, from $12,209 for the year ended December 31, 2000.
The components of the change in operating revenues are described
below.

Service Revenues.Service revenues for the year ended December 31, 2001 were
$13,069, an increase of $1,848, or 16.5%, compared to $11,221
for the year ended December 31, 2000. The increase was
primarily driven by the 21.2% increase in average cellular/PCS
subscribers versus the same period one year earlier, offset by a
decline in revenues we received from other wireless carriers for
roaming by their subscribers on our network. Roaming revenues
are trending downward as other carriers build out their networks
and as roaming rates decline. Long distance revenue and the
revenue we collect from our customers to cover the costs we
incur when our customers roam on the networks of other wireless
carriers also decreased slightly as a result of our introduction
of more competitive regional and national calling plans, which
have the effect of converting minutes of use from long distance
and roaming revenues to local service revenues. Local service
revenues for the year ended December 31, 2001 increased
24.6% over the year ended December 31, 2000. ARPU decreased
by $1.21 to $52.26, or 2.3%, from $53.47 in the year ended
December 31, 2000 largely due to a lower per minute pricing,
offset by a 37.3% increase in local minutes of use per customer.

Equipment Sales.Equipment sales for the year ended December 31, 2001 were
$1,039, an increase of $51, or 5.2%, from $988 for the year
ended December 31, 2000. The growth was primarily
attributable to an increase in gross customer additions, offset
by declining retail prices for digital handsets.

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| |                                    
| | -----------------------------------
| | Cost of Service and Equipment Sales

Total cost of service and equipment sales for the
year ended December 31, 2001 was $4,404, an increase of
$640, or 17.0%, from $3,764 for the year ended December 31,
2000. The components of the change in cost of service and
equipment sales are described below.

Cost of Services (Exclusive of
Depreciation).Cost of services for
the year ended December 31, 2001 was $2,752, an increase of
$561, or 25.6%, compared to $2,191 for the year ended
December 31, 2000. This increase was largely attributable
to a 61.0% increase in system minutes of use, fueled by a 18.7%
increase in average cellular/PCS subscribers and higher usage
from digital rate plans with larger numbers of included minutes.
The cost associated with the increase in network traffic volume
was partly offset by lower interconnection costs and
efficiencies attributable to digital networks.

Cost of Equipment
Sales.Cost of equipment sales for the
year ended December 31, 2001 was $1,652, an increase of
$79, or 5.0%, compared to $1,573 for the year ended
December 31, 2000. The increase was primarily due to an
increase in handset sales in order to accommodate subscriber
growth and upgrades, coupled with a shift toward higher priced
handsets.



| |                                                 
| | ------------------------------------------------
| | Selling, General and Administrative
    Expenses

Selling, general and administrative expenses for
the year ended December 31, 2001 were $5,235, or
approximately 37% of total revenues. Our integration efforts are
expected to yield some savings in distribution and customer care
costs, with additional savings realized from the consolidation
of call centers, billing systems and other functions.



| |                              
| | -----------------------------
| | Depreciation and Amortization

Depreciation and amortization for the year ended
December 31, 2001 was $1,921. We expect depreciation costs
to increase as larger capital expenditures will be required for
new technologies and services, network enhancements and product
offerings.



| |                 
| | ----------------
| | Interest Expense

Interest expense for the year ended
December 31, 2001 was $822. The issuance of $2,000 in
senior notes in December 2001 will lead to higher interest
expense in subsequent periods.



| |                                                                 
| | ----------------------------------------------------------------
| | Minority Interest in Net Income of
    Consolidated Partnerships

Minority interest in net income of consolidated
partnerships for the year ended December 31, 2001 was
($122). Partnership operating results and changes in ownership
drive the change in minority interest in net income of
consolidated partnerships.



| |                                              
| | ---------------------------------------------
| | Equity in Net Income (Loss) of
    Affiliates

Equity in net income (loss) of affiliates,
net, for the year ended December 31, 2001 was a
$68 million loss. The loss primarily reflects $32 in equity
losses associated with our investment in our jointly controlled
venture with T-Mobile and $43 in equity losses associated with
Salmon PCS.



| |           
| | ----------
| | Other, Net

Other, net, for the year ended December 31,
2001 was $164, which primarily reflects a $76 gain associated
with the distribution of assets to us at fair value following a
partnership dissolution, $24 in gains from the sale of
partitioned properties and $43 in interest income on advances to
Salmon PCS.

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Liquidity and Capital Resources



| |                   
| | ------------------
| | Cash Flow Analysis

The following cash flow analysis compares cash
flows for the year ended December 31, 2002, with the year
ended December 31, 2001. Also presented are the year 2000
cash flows for our limited operations from October 2, 2000
through December 31, 2000. Because a year over year
comparison for such periods does not yield meaningful results,
the discussion regarding 2000 will be on the cash flow activity
occurring in that period.

Cash and cash equivalents for the year ended
December 31, 2002 was $908, an increase of $341, or 60.1%,
compared with $567 for the year ended December 31, 2001.

Net Cash Provided by Operating Activities.Net cash generated by operations for
the year ended December 31, 2002, was $3,592, a decrease of
$73, or 2.0%, compared with $3,665 for the year ended
December 31, 2001. Net cash generated by operations was
$1,062 for the period from October 2, 2000 through
December 31, 2000. Cash generated from operations was our
primary source of funds in 2002, 2001 and 2000.

Net Cash Used in Investing Activities.Net cash used in investing activities
for the year ended December 31, 2002, was $3,585, a
decrease of $360, or 9.1%, compared with $3,945 for the year
ended December 31, 2001. Net cash used in investing
activities was $1,218 for the period October 2, 2000
through December 31, 2000.

Capital expenditures, representing the largest
component of cash used in investing activities, totaled $3,085
in 2002, a decrease of $71 from $3,156 in 2001. Capital
expenditures were $959 for the period October 2, 2000
through December 31, 2000.

The primary contributors to the overall decrease
in 2002 of net cash used in investing activities were a $283
decrease in acquisition activity, a $135 reduction in advances
and investments in equity affiliates and the $71 decrease in
capital expenditures. These decreases were offset by a $79
decrease in cash inflows in 2002 related to dispositions and a
$50 cash payment in 2002 for a contractor engineering deposit.

Advances and investments in equity affiliates of
$450 in 2002 decreased $135 from $585 in 2001. In 2002, an
increase of $641 for cash and funding of capital expenditures
contributed to our infrastructure venture with T-Mobile was
offset by a $780 decrease related to our Salmon investment. In
2001 and 2000, we made advances and investments in Salmon of
$384 and $239, respectively. In 2002, Salmon made net advance
repayments of $396, consisting of two repayments totaling $421
partially offset by $25 in additional advances. The $421
repayment by Salmon was as a result of the return to Salmon, by
the FCC, of license deposits related to 34 challenged licenses.

Cash needs for acquisitions of businesses and
licenses decreased by $283 in 2002 when compared with 2001.
Acquisitions of $289 in 2001 consisted primarily of net cash
payments of $146 for the remaining 10% ownership stake in our
Washington/Baltimore property and $140 for the Salt Lake/Provo
license acquisition. In 2002 and 2000, there was limited
acquisition activity.

Net Cash Provided by Financing Activities.Net cash provided by financing
activities for the year ended December 31, 2002, was $334,
a decrease of $387, or 53.7%, compared with $721 for the year
ended December 31, 2001. Net cash provided by financing
activities was $282 for the period October 2, 2000 through
December 31, 2000.

The primary component of the $334 in cash
provided by financing activities in 2002 was a $499 capital
contribution by our members, SBC and BellSouth. This was
partially offset in 2002 by $79 in net distributions to minority
interests, $59 in external debt repayments and a $27 commercial
paper repayment. The 2002 external debt repayment consisted
primarily of capital lease payments of $42 and a $17 payment to
retire bonds issued by our Puerto Rico company.

The $721 in cash provided by financing activities
in 2001 consisted of net cash inflows of $1,973 related to the
issuance of $2,000 in senior notes in December 2001 and $1,370
associated with the

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contribution of the Houston and Puerto Rico
properties in January 2001 and September 2001, respectively.
These cash inflows were partially offset by cash outflows in
2001 for the payment of $1,148 in affiliate debt, a net $672
repayment of borrowings under our commercial paper program,
contractual distributions of $639 to SBC and BellSouth related
to income tax obligations, $126 in net distributions to minority
interests, and other external debt repayments of $37, primarily
for capital leases.


Cash provided by financing activities of $282 in
2000 consisted of net cash inflows of $699 from the issuance of
commercial paper and $117 related to cash contributed at the
inception of Cingular. These cash inflows were partially offset
by cash outflows in 2000 of $324 for external debt repayments,
primarily bank loans, payment of $140 in affiliate debt and $70
in net distributions to minority interests.

We expect to have significant cash needs over the
next several years, as described below.



| |                                               
| | ----------------------------------------------
| | Capital Expenditures and Other
    Investments

Network Upgrades and
Expansion.The operation, upgrade and
expansion of our networks will require substantial amounts of
capital over the next several years. During 2003, we expect to
spend $3,400 to $3,800 for our ongoing capital expenditures and
equity investments. These estimates include approximately $1,200
to $1,300 for costs of upgrading our TDMA systems with GSM voice
and GPRS/EDGE data technology, $1,600 to $1,700 for network and
other capital expenditures and $600 to $800 for equity
contributions and/or secured loans to Salmon and funding our
network sharing ventures with T-Mobile and AT&T Wireless.
Expenditures for additional investment in the TDMA network is
limited to markets where additional capacity is needed prior to
GSM upgrade. Including our network infrastructure venture with
T-Mobile and investment in Salmon, capital expenditures totaled
$3,944 for the year ended December 31, 2002.

The GSM/GPRS/EDGE network upgrade is currently on
schedule and we expect to have 90% of our POPs covered by
GSM/GPRS/EDGE by the end of 2003 and 100% by the end of 2004. We
estimate that the total capital cost of our network upgrade will
be approximately $2,600 to $2,800 through 2004 when the upgrade
project is expected to conclude. We have vendor contracts for
the acquisition and installation of infrastructure for our
GSM/GPRS/EDGE overlay. Under these agreements, we have made good
faith capital expenditure commitments through 2004. However,
there is no penalty for not achieving the contemplated levels of
expenditures under these vendor agreements, and we are not
contractually obligated to spend these amounts. Expansion of our
current network in future years will continue to require large
outlays of funds because network usage by wireless customers is
expected to continue to rise, wireless subscriber growth is
expected to continue, and additional capacity is necessary to
support wireless data services. We may also require substantial
additional capital for, among other uses, access to additional
spectrum, build-out of infrastructure in newly licensed areas,
additional system development and network technology changes, as
well as development and implementation of 3G technologies and
services. Unforeseen delays, cost overruns, regulatory changes,
engineering and technological factors may also increase our
funding requirements.

Investment in
Salmon.We and Crowley Digital
Wireless LLC (Crowley Digital) formed Salmon to bid for PCS
licenses in an FCC auction that ended in January 2001. Salmon
was successful in acquiring 45 licenses covering more than
11 million POPs. We have secured loans (including accrued
interest) to Salmon of $101 as of December 31, 2002. Salmon
has principally used advances to make full payment on the 45
licenses that the FCC granted to Salmon. In addition to funding
payment for licenses, we have agreed that, upon Salmons
request, we will provide, until November 2006, through
additional secured loans and equity contributions, substantially
all of the funding that Salmon will need to build out and
operate its systems and to fund operating losses. Advances and
loans made during the year 2002 were $25. Salmon has scheduled
the launch of two of its markets in 2003. The remaining 43
markets are scheduled to launch during 2005. We estimate the
costs to build out Salmons system is approximately $350 to
$500. Loans are repayable no later than May 2008, with interest
at a rate of 9% per annum, or 14% per annum if Salmon terminates
the management agreement or trademark license agreement.

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Investment in Venture with T-Mobile
(Factory).In November 2001, we and
T-Mobile formed a jointly-controlled infrastructure venture,
which we refer to as Factory, to allow the companies
to share network infrastructures in the California, Nevada and
New York City metropolitan area markets. We and T-Mobile buy
access to the ventures network infrastructure but each of
us has retained ownership and control of our own FCC licenses.
Although the networks we contributed to the venture are
constructed and operational, we will from time to time be
required to invest additional capital to modify and expand the
network and to fund cash operating expenses.

We and T-Mobile agreed to jointly fund capital
expenditures of Factory. Contributions to Factory are generally
determined by our proportionate share of the annual capital
expenditure requirements based on each partys incremental
growth in minutes of use, and such contributions are accounted
for as an increase to our investment. During the period from
November 1, 2001 to December 31, 2001, we made
additional contributions of $208 to Factory, principally related
to capital expenditures in the California and Nevada markets.
During 2002, we made net contributions of assets to Factory of
$707. In 2002, we also contributed $225 in cash pursuant to
contractual commitments. An additional $225 contractual
commitment is due on or after July 1, 2003. At
December 31, 2002, we had an approximate 75% economic
interest in Factory.

Formation of Joint Venture with AT&T
Wireless.In January 2002, we entered
into an agreement with AT&T Wireless to form a
jointly-controlled and equally-owned venture to build out a GSM
voice network with GPRS/EDGE data technologies along a number of
major highways in order to ensure availability of GSM/GPRS/EDGE
service to our customers, and reduce incollect roaming expenses
we pay to other carriers, when our customers travel on those
highways. We and AT&T Wireless will each buy services from
the venture and provide services under our own brand names. In
March 2003, we and AT&T Wireless contributed licenses and
assets of equal value. We do not expect capital contributions by
either party to exceed $85.

Purchase of California/Nevada Tower Leasehold
Interests.In February 2003, we
acquired leasehold interests in 545 communication towers in
California and Nevada from SpectraSite for $81. SpectraSite had
previously acquired these leasehold interests from an affiliate
of SBC in 2000 and a portion of the tower space was leased by us
indirectly from SpectraSite for use in our network
infrastructure venture with T-Mobile.



| |             
| | ------------
| | Debt Service

As of December 31, 2002, we had $12,591 of
consolidated indebtedness and capitalized lease obligations.
This debt includes an aggregate of $9,678 in unsecured,
subordinated member loans from SBC and BellSouth and $2,000 in
unsecured senior notes. In addition, at December 31, 2002,
we were obligated to pay capital leases assigned to the T-Mobile
venture of $222.

Member loans are subordinated to our senior debt,
including commercial paper notes, our other capital markets debt
and any debt outstanding under our bank credit facility.
Although the subordinated member loans are scheduled to mature
on March 31, 2005, we may prepay the subordinated loans or
refinance them with senior debt (other than with the proceeds
from our bank credit facility or senior loans from SBC or
BellSouth) at any time if we are not in default under our senior
debt.



| |                                   
| | ----------------------------------
| | Off-Balance Sheet
    Arrangements

At December 31, 2002, we were obligated to
pay capital leases assigned to the T-Mobile venture of $222. We
have several investments in unconsolidated affiliates, including
our investment in Salmon and our joint ventures with T-Mobile
and AT&T Wireless. As required by GAAP, we have accounted
for our joint venture activity using the equity method of
accounting, as we do not control these joint ventures. As a
result, the assets and liabilities of our joint ventures are not
included on our balance sheet and the results of operations of
the ventures are not included on our income statement, other
than as equity in earnings of unconsolidated affiliates.

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| |                  
| | -----------------
| | Capital Resources

We expect to rely on cash provided by operations
to fund most of our ongoing operations, business development,
debt service and distributions to our members. To the extent
that additional cash is required from time to time for these
purposes or for acquisitions or other business expansion
initiatives, we may utilize the following sources of external
funding: issuances of commercial paper and long-term debt,
equity investments and borrowings from SBC or BellSouth and bank
borrowings under our revolving credit facility, which we do not
expect to use as a normal source of funding. Neither SBC nor
BellSouth is obligated to provide additional financing to us,
and there is no assurance that any further loans would be on a
subordinated basis.

In order to provide a source of short-term
liquidity, our managers board has authorized us to issue
commercial paper through selected dealers. Our commercial paper
program is supported by a $1,500 revolving credit facility,
which expires on November 17, 2003. As of December 31,
2002, we had no commercial paper or revolving credit facility
debt outstanding.

Depending upon the corporate credit ratings
assigned to us from time to time by the various rating agencies,
any amounts outstanding under our revolving credit facility
would bear variable rate interest at a spread above LIBOR
ranging from 0.24% to 1.30%. As a result of our current credit
ratings, which are discussed below, interest would currently
accrue on any borrowings under our revolving credit facility at
an average rate of LIBOR plus 28 basis points, assuming
borrowings under the facility are less than 33% of the
$1.5 billion credit facility, or 38 basis points, assuming
higher borrowings. The credit facility contains customary events
of defaults and covenants, including a covenant to maintain a
specified debt (excluding subordinated member loans) to trailing
four quarters EBITDA ratio, a limitation on mergers and sale of
all or substantially all of our assets and a negative pledge. We
are in compliance with all such ratios and covenants under our
credit facility, and there are no other material covenants to
which we are subject under other agreements. Based on our
current business plans and projections, we believe we will have
sufficient operating cash flow to enable us to continue to
comply with the covenants in the credit facility.

Our credit ratings as of the date of this filing
with Standard & Poors, Moodys Investor Services
and Fitch Ratings are:

|                         |  |                       |                      |                        |  |  |    | 
|------------------------ |  | --------------------- | -------------------- | ---------------------- |  |  | -- | 
|Rating Agency            |  | Long-Term Debt Rating |                      | Short-Term Debt Rating
|                         |  |                       |                      |                       
|Standard & Poors         |  |                       | A+, stable outlook   |                        |  |  | A1 | 
|Moodys Investor Service |  |                       | A3, negative outlook |                        |  |  | P2 | 
|Fitch Ratings            |  |                       | A-, negative outlook |                        |  |  | F2 | 

To the extent the rating agencies downgrade our
ratings, it may be more difficult to access the commercial paper
market and our cost of borrowings from all sources may increase.



| |                       
| | ----------------------
| | Other Business Matters

In July 2002, WorldCom filed a petition for
reorganization under Chapter 11 of the U.S. Bankruptcy
Code. Subsequent to this filing, approximately 130,000 former
WorldCom reseller customers became our direct customers as of
December 31, 2002. We previously supplied airtime for
WorldCom to serve those customers and approximately 266,000
other WorldCom reseller subscribers who did not transition to
become our direct subscribers. Upon completion of the transition
of WorldCom customers in the fourth quarter, we paid WorldCom a
fee for each customer retained. We do not believe that the
amounts paid were material to our results of operations,
financial position or liquidity.

Critical Accounting Policies and
Estimates

The preparation of financial statements in
conformity with accounting principles generally accepted in the
United States requires management to make estimates and
assumptions that affect the amounts reflected in the
consolidated financial statements and accompanying notes. We
base our estimates on historical experience, where applicable,
and other assumptions that we believe are reasonable under the

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circumstances. Actual results could differ from
those estimates under different assumptions or conditions. The
various policies that are important to the portrayal of our
financial condition and results of operations include:




| |             
| | ------------
| | Depreciation

We depreciate our wireless communications
equipment using the straight-line method over estimated useful
lives. We periodically review changes in our technology and
industry conditions, asset retirement activity and salvage to
determine adjustments to estimated remaining useful lives and
depreciation rates.

Effective January 1, 2003, we implemented
the results of a review of the estimated service lives of our
remaining TDMA network assets. Useful lives will be shortened to
fully depreciate all such equipment within six years. While we
will continue to sell and market TDMA services for the
foreseeable future, the amount of future projected cash flows to
be derived from the TDMA network assets is highly dependent upon
the rate of transition of existing subscribers using TDMA
equipment to GSM/GPRS/EDGE-capable equipment, as well as other
competitive and technological factors. We determined that a
reduction in the useful lives of these assets is warranted based
on the projected transition of network traffic to GSM/GPRS/EDGE.
This change in estimate is expected to increase depreciation in
2003 by approximately $100. TDMA equipment acquired after
January 1, 2003 will have useful lives not to exceed six
years. We will continue to review the useful lives of the TDMA
assets throughout the period of transition of subscribers to
GSM/GPRS/EDGE-capable equipment to determine whether further
changes are warranted.



| |                                   
| | ----------------------------------
| | Valuation of Long Lived
    Assets

We review long-lived assets, consisting primarily
of property, plant and equipment and intangible assets with
finite lives, for impairment in accordance with Statement of
Financial Accounting Standards No. 144, Accounting for
the Impairment or Disposal of Long-Lived Assets(SFAS
No. 144). In analyzing potential impairment, we use
projections of future cash flows from the assets. These
projections are based on our views of growth rates for the
related business and anticipated future economic conditions and
the appropriate discount rates relative to risk and estimates of
residual values. We believe that our estimates are consistent
with assumptions that marketplace participants would use in
their estimates of fair value. If changes in growth rates,
future economic conditions or discount rates and estimates of
terminal values were to occur, long-lived assets may become
impaired. In 2002, we recognized impairment losses related to
our Mobitex data business long-lived assets and certain TDMA
network assets. These impairment losses are as follows:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | During the fourth quarter of 2002, we evaluated
    the recoverability of the long-lived assets, including property
    and equipment and FCC licenses, of our Mobitex data business.
    While the business continues to generate positive operating cash
    flows, the timing of our migration to data services over our
    cellular/PCS networks, as well as other competitive and
    technological factors, have decreased the cash flows that we
    expect to generate from continuing to operate the Mobitex data
    network. In the fourth quarter of 2002, we determined that the
    estimated future undiscounted cash flows were less than the
    carrying value of the Mobitex data business long- lived assets.
    Accordingly, we adjusted the carrying value of the Mobitex data
    business long-lived assets to their estimated fair value,
    resulting in a noncash impairment loss of $104. Fair value was
    determined using a discounted cash flow approach.
|
| |  | Our cellular/PCS networks are currently equipped
    with digital transmission technologies, TDMA and GSM.
    Additionally, the TDMA technologies are deployed over two
    different spectrum frequencies, 850 MHz (cellular) and 1900 MHz
    (PCS). As discussed in Capital Expenditures and Other
    Investments, we are currently in the process of adding GSM
    equipment throughout our TDMA markets to provide a common voice
    standard and to add technologies for high-speed data services.
    In the fourth quarter of 2002, we finalized market specific
    execution strategies concurrent with the development and
    approval of the 2003 capital budget. In general, we have adequate                                                                                                                                                                                                                                                                            

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| |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | spectrum depth in our 850 MHz markets to operate
    both technologies. In several smaller PCS markets, where we have
    only 10 MHz of available spectrum, we do not have adequate
    spectrum depth to concurrently provide wireless services using
    both TDMA and GSM technologies. In these markets we must retire
    the TDMA network assets in order to deploy GSM technology. The
    TDMA technology assets used in 1900 MHz markets are frequency
    specific and cannot be redeployed for use in our other 850 MHz
    markets. Due to the anticipated near-term removal of these
    assets from service during the period ranging from the third
    quarter of 2003 to the fourth quarter of 2004, we performed an
    impairment test as required by SFAS No. 144 to determine
    whether the future cash flows of these markets were sufficient
    to recover the carrying value of the related TDMA assets as of
    December 31, 2002. In the fourth quarter of 2002, we
    recognized a noncash impairment charge of $47 related to our
    1900 MHz TDMA assets in ten markets located in the southeastern
    and southwestern United States. The impairment loss was measured
    as the difference between the carrying value of these assets at
    December 31, 2002 and their fair value. Fair value was
    determined using the discounted cash flow approach.



| |                                                                 
| | ----------------------------------------------------------------
| | Valuation of Goodwill and Indefinite-Lived
    Intangible Assets

We review goodwill and indefinite-lived
intangible assets for impairment based on the requirements of
Statement of Financial Accounting Standards (SFAS) No. 142,
Goodwill and Other Intangible Assets. We adopted this new
accounting standard effective January 1, 2002. Under this
standard, a new impairment testing process for goodwill is
required to be performed on an annual basis or on an interim
basis if an event occurs or circumstances change that would
reduce the fair value of a reporting unit below its carrying
value. Additionally, impairment tests for other indefinite-lived
intangible assets, consisting of FCC licenses, are required to
be performed on an annual basis or on an interim basis if an
event occurs or circumstances change that would indicate the
asset might be impaired. These events or circumstances would
include a significant change in the business climate, legal
factors, operating performance indicators, competition, sale or
disposition of a significant portion of the business or other
factors.

We began applying the provisions of SFAS
No. 142 in the first quarter of 2002 in relation to testing
goodwill for impairment using a two-step process. The first step
screens for potential impairment, while the second step measures
the amount of the impairment, if any. In the first quarter of
2002, we completed the first step of the goodwill impairment
transition tests as of January 1, 2002 for our reporting
units. For goodwill related to our cellular/PCS business, the
first step indicated no impairment in value. For goodwill
related to the Mobitex data business, the first step indicated
an impairment in value. In the second quarter we completed the
second step of the goodwill impairment transition test for our
Mobitex data business using a discounted cash flow approach.
Based on the results of this test, we recognized an impairment
of the goodwill related to our Mobitex data business, with a
carrying value of $32, and have reflected the impairment as the
cumulative effect of a change in accounting principle in the
first quarter of 2002.

We completed the transition impairment test of
our FCC licenses as of January 1, 2002 and determined that no
impairment existed. In accordance with Emerging Issues Task
Force (EITF) 02-7, Unit of Accounting for Testing of
Impairment of Indefinite-Lived Intangible Assets, impairment
tests for FCC licenses are performed on an aggregate basis,
consistent with our management of the business on a national
scope. We utilize a fair value approach, incorporating
discounted cash flows, to complete the test. This approach
determines the fair value of the FCC licenses and accordingly
incorporates cash flow assumptions regarding the investment in a
network, the development of distribution channels, and other
inputs for making the business operational. As these inputs are
included in determining free cash flows of the business, the
present value of the free cash flows is attributable to the
licenses. We believe that our estimates are consistent with
assumptions that marketplace participants would use in their
estimates of fair value.

Annual impairment tests for goodwill and FCC
licenses were performed in the fourth quarter and indicated no
impairment. The determination of fair value is critical to
assessing impairments under SFAS No. 142 and includes
significant assumptions and estimates.

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| |                    
| | -------------------
| | Revenue Recognition

We earn service revenues by providing access to
our wireless network (access revenue) and for usage of our
wireless system (airtime revenue). Access revenue is billed in
advance and recognized ratably over the service period. Airtime
revenue, including roaming revenue and long-distance revenue,
for postpaid customers is billed in arrears based on minutes of
use and is recognized when the service is rendered. Prepaid
airtime sold to customers is recorded as deferred revenues prior
to the commencement of services, and revenue is recognized when
airtime is used or expires. Access and airtime services provided
are billed throughout the month according to the bill cycle in
which a particular subscriber is placed. As a result of bill
cycle cut-off times, we are required to make estimates for
service revenues earned but not yet billed at the end of each
quarter. These estimates are based primarily upon actual and
historical minutes of use. Certain rate plans include a rollover
feature whereby unused peak minutes do not expire each month but
rather are available, under certain conditions, for future use
for a period not to exceed one year from the date of purchase.
We defer revenue based on an estimate of the portion of minutes
expected to be utilized prior to expiration. Our estimate of
expected future services is primarily based on historical
minutes of use.

Roaming revenues include revenues from certain
customers who roam outside their selected home coverage area,
referred to as incollect roaming revenues, and
revenues from other wireless carriers for roaming by their
customers on our network, referred to as outcollect
roaming revenues.

We offer enhanced services including caller ID,
call waiting, call forwarding, three-way calling, no answer/busy
transfer, text messaging and voice mail. Generally, these
enhanced features generate additional revenues through monthly
subscription fees or increased wireless usage through
utilization of the features. Other optional services, such as
unlimited mobile-to-mobile calling, roadside assistance and
handset insurance, may also be provided for a monthly fee. These
enhanced features and optional services may be bundled with
package rate plans or sold separately. Revenues for enhanced
services and optional features are recognized as earned.

We defer non-refundable, up-front activation fees
and associated costs to the extent of the related revenues in
accordance with Staff Accounting Bulletin Number 101 (SAB 101),
Revenue Recognition in Financial Statements, issued by
the Securities and Exchange Commission (SEC). These deferred
fees and costs are amortized over the estimated customer
relationship period, which is currently estimated to be three
years. We have recorded deferred revenues and deferred expenses
of equal amount in the consolidated balance sheets. As of
December 31, 2002, SAB 101 deferred revenues and expenses
were $198.

Equipment sales consist principally of revenues
from the sale of wireless mobile telephone handsets and
accessories to new and existing customers and to agents and
other third-party distributors. The revenue and related expenses
associated with the sale of wireless handsets and accessories
are recognized when the products are delivered and accepted by
the customer, as this is considered to be a separate earnings
process from the sale of wireless services.



| |                                    
| | -----------------------------------
| | Allowance for Doubtful
    Accounts

We maintain allowances for doubtful accounts for
estimated losses resulting from the inability of our customers
to make required payments. We base our estimates primarily on
our historical write-off experience, net of recoveries, and the
aging of accounts receivable balances. Our collection policies
and procedures vary by credit class and prior payment history of
subscribers.



| |                       
| | ----------------------
| | Valuation of Inventory

We maintain inventory valuation reserves for
obsolescence and slow moving inventory. Reserves for
obsolescence are determined based on analysis of inventory
agings. Changes in technology may require us to provide
additional reserves.

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| |                         
| | ------------------------
| | Valuation of Investments

We hold non-controlling investments in several
entities for which we apply the equity or cost method of
accounting. We record impairments associated with these
investments when we determine that the decline in market value
of the investment below our carrying value is deemed to be other
than temporary. Volatility in market prices of these investments
or poor operating performance of these entities could result in
future values of these investments declining below our carrying
value.



| |                  
| | -----------------
| | Employee Benefits

We calculate the costs of providing retiree
benefits under the provisions of SFAS No. 87,
Employers Accounting for Pensions, and SFAS
No. 106, Employers Accounting for Postretirement
Benefits Other Than Pensions. The key assumptions used in
making these calculations are disclosed in the notes to our
consolidated financial statements. The most significant of these
assumptions are the discount rate used to value the future
obligation, expected return on plan assets and health care cost
trend rates. We select the discount rate commensurate with
current market interest rates on high-quality, fixed-rate debt
securities. The expected return on assets is based on our
current view of the long-term returns on assets held by the
plans, which is influenced by historical averages. The medical
cost trend rate is based on our actual medical claims and future
projections of medical cost trends. The changes in our discount
rate, long-term rate of return on plan assets and composite rate
of compensation increase for 2002, as described in Note 14
to the audited consolidated financial statements, did not have a
significant impact our results of operations or cash flows.

Contractual Obligations

The following table provides a summary of our
contractual commitments as of December 31, 2002.

|                               |  |                        |        |          |  |             |       |             |  |               |        |  |  |   |       |  |  |   |       | 
|------------------------------ |  | ---------------------- | ------ | -------- |  | ----------- | ----- | ----------- |  | ------------- | ------ |  |  | - | ----- |  |  | - | ----- | 
|                               |  |                       
|                               |  | Payments Due by Period
|                               |  |                       
|                               |  | Total                  |        | < 1 year |  | 1 - 3 years |       | 4 - 5 years |  | After 5 years
|                               |  |                        |        |          |  |             |       |             |  |              
|Long-term Debt(1)              |  | $                      | 15,472 |          |  | $           | 861   |             |  | $             | 10,898 |  |  | $ | 736   |  |  | $ | 2,977 | 
|Capital Lease Obligations(2)   |  |                        | 2,345  |          |  |             | 105   |             |  |               | 274    |  |  |   | 243   |  |  |   | 1,723 | 
|Operating Leases(3)            |  |                        | 2,131  |          |  |             | 409   |             |  |               | 661    |  |  |   | 403   |  |  |   | 658   | 
|Purchase Obligations(4)        |  |                        | 612    |          |  |             | 235   |             |  |               | 164    |  |  |   | 209   |  |  |   | 4     | 
|Other Long-term Obligations(5) |  |                        | 225    |          |  |             | 225   |             |  |               |       |  |  |   |      |  |  |   |      | 
|                               |  |                        |        |          |  |             |       |             |  |               |        |  |  |   |       |  |  |   |       | 
|Total                          |  | $                      | 20,785 |          |  | $           | 1,835 |             |  | $             | 11,997 |  |  | $ | 1,591 |  |  | $ | 5,362 | 
|                               |  |                        |        |          |  |             |       |             |  |               |        |  |  |   |       |  |  |   |       | 



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Long-term debt obligations include interest of
    $3,730. The 1-3 years amount also includes
    $9,678 of debt due to SBC and BellSouth with a maturity date of
    March 31, 2005. See Note 7 to the audited consolidated
    financial statements included in Item 8. We do not expect
    SBC and BellSouth to require any repayment if it would impair
    our debt ratings or impair our working capital or if we cannot
    advantageously raise debt or equity proceeds from external
    financing sources.
|   
|(2) | Capital lease obligations include interest and
    executory costs. See Note 7 to the audited consolidated
    financial statements included in Item 8.                                                                                                                                                                                                                                                                                                                                                                
|   
|(3) | Operating lease obligations do not include
    payments due under renewals to the original lease term. See Note
    15 to the audited consolidated financial statements included in
    Item 8.                                                                                                                                                                                                                                                                                                                        
|   
|(4) | Purchase obligations also include the expected
    payout of the Crowley put option of $186 in 2006. See discussion
    of the Crowley put option in Note 5 to the audited
    consolidated financial statements included in Item 8.                                                                                                                                                                                                                                                                                   
|   
|(5) | Other long-term obligations include our
    contractual cash commitment related to our Factory venture. See
    Note 5 to the audited consolidated financial statements
    included in Item 8.                                                                                                                                                                                                                                                                                                                        

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Related Party Transactions

We incurred the following related party charges:

|                                               |  |                |     |              |  |      |     |  |  |   |     | 
|---------------------------------------------- |  | -------------- | --- | ------------ |  | ---- | --- |  |  | - | --- | 
|                                               |  | Period From    |     |             
|                                               |  | April 24, 2000 |     | Year Ended  
|                                               |  | (Inception) to |     | December 31,
|                                               |  | December 31,   |     |             
|Type of Service                                |  | 2000           |     | 2001         |  | 2002
|                                               |  |                |     |              |  |     
|Interconnect and long distance(1)              |  | $              | 103 |              |  | $    | 385 |  |  | $ | 663 | 
|Information systems development and support(2) |  |                | 16  |              |  |      | 63  |  |  |   | 67  | 
|Agent commissions and compensation(1)          |  |                | 9   |              |  |      | 33  |  |  |   | 46  | 
|Transition services(1)                         |  |                | 153 |              |  |      | 267 |  |  |   | 17  | 
|Interest expense on debt due to affiliates(1)  |  |                | 219 |              |  |      | 735 |  |  |   | 726 | 



---



|    |                                                                                                                            
|--- | ---------------------------------------------------------------------------------------------------------------------------
|(1) | These are charges from SBC and BellSouth, and
    their affiliates                                                         
|   
|(2) | These are charges for services under contract
    with Amdocs Limited (Amdocs), a software company affiliated with
    SBC.

For the year ended December 31, 2002, SBC
and BellSouth made cash capital contributions to us of $499 for
general corporate purposes.

Recent Accounting Pronouncements

See the section, New Accounting Standards, in
Note 1 to our audited consolidated financial statements included
in Item 8.






|         |                                                              
|-------- | -------------------------------------------------------------
|Item 7a. | Quantitative and Qualitative Disclosure About
    Market Risk

The majority of our financial instruments are
medium- and long-term fixed rate notes and member loans.
Fluctuations in market interest rates can lead to significant
fluctuations in the fair value of these fixed rate instruments.
In addition,we are exposed to market risks, primarily from
changes in interest rates and to a lesser degree from foreign
currency exchange rates. To manage exposure to these
fluctuations, manage capital costs, control financial risks and
maintain financial flexibility over the long term, we engage
from time to time in hedging transactions that have been
authorized by the board of directors of our manager. We do not
use derivatives for trading purposes, to generate income or to
engage in speculative activity.

We currently have outstanding an aggregate of
$9,678 in unsecured, subordinated member loans from SBC and
BellSouth with a fixed interest rate of 7.5% and a stated
maturity of March 31, 2005. In addition, we currently have
outstanding $2,000 of unsecured senior notes with fixed interest
rates ranging from 5.625% to 7.125% and with maturity dates
between 2006 and 2031. We also have capital leases outstanding
of $778 primarily with a fixed interest rate of 8% and of $83
with fixed interest rates ranging from 4.55% to 7.08%. As of
December 31, 2002, we had not entered into any interest
rate swaps pertaining to any of our fixed rate debt.

As of December 31, 2002, we had $64 of
floating rate borrowings. A change in interest rates of 100
basis points would change our interest expense on floating rate
debt balances as of December 31, 2002 by less than $1 per
annum.

We currently have no commercial paper outstanding
and we have not borrowed any amounts under our revolving credit
facility. However, we may have future interest rate risk
associated with the issuance of commercial paper or borrowings
under our $1,500 revolving credit facility, which was executed
in November 2002. Commercial paper is issued at a spread to
LIBOR, depending on our credit ratings. Borrowings under the
credit facility would generally bear interest at pre-determined
spreads above LIBOR. See Item 7. Managements
Discussion and Analysis of Financial Condition and Results of
Operations  Liquidity and Capital Resources.

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The fair values of our foreign currency
derivatives are subject to fluctuations in foreign exchange
rates. We use forward foreign currency exchange contracts to
offset foreign exchange gains and losses on Japanese
Yen-denominated capital lease obligations. As of
December 31, 2002, the approximate fair value of these
foreign currency hedging instruments was a loss of $35. The
potential gain or loss in the fair value of such financial
instruments from a hypothetical 10% decrease or increase in the
Japanese Yen relative to the U.S. Dollar would be less than $10
as of December 31, 2002, although this would be primarily
offset by the decrease or increase in the fair value of the
capital lease obligations. The fair value is based on dealer
quotes, considering current exchange rates. There is not a cash
flow impact or earnings risk associated with changes in the fair
value of the these foreign currency hedging instruments and the
underlying capital lease obligations.

The risk management discussion above, related to
our market risks, contains forward-looking statements and
represents, among other things, an estimate of possible changes
in fair value that would occur assuming hypothetical future
foreign currency fluctuations. Future impacts of market risk
would be based on actual developments in the financial markets.
See Cautionary Language Concerning Forward-Looking
Statements immediately prior to Part I of this Annual
Report.

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Item 8.     Financial
Statements and Supplemental Data

|                                                                                                                                                              |  |  |     | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  | --- | 
|Historical Financial Statements                                                                                                                               |  |  |     | 
|Cingular Wireless LLC                                                                                                                                         |  |  |     | 
|Report of Independent Auditors                                                                                                                                |  |  | 56  | 
|Consolidated Statements of Income for the period
    from April 24, 2000 through December 31, 2000 and for
    the years ended December 31, 2001 and 2002     |  |  | 57  | 
|Consolidated Balance Sheets as of
    December 31, 2001 and 2002                                                                                              |  |  | 58  | 
|Consolidated Statements of Cash Flows for the
    period from April 24, 2000 through December 31, 2000
    and for the years ended December 31, 2001 and 2002 |  |  | 59  | 
|Consolidated Statements of Changes in
    Members Capital for the period ended December 31,
    2000 and for the years ended December 31, 2001 and 2002      |  |  | 60  | 
|Notes to Consolidated Financial Statements                                                                                                                    |  |  | 61  | 
|SBC Domestic Wireless Group                                                                                                                                   |  |  |     | 
|Report of Independent Auditors                                                                                                                                |  |  | 90  | 
|Combined Statement of Operations for the period
    from January 1, 2000 to October 2, 2000                                                                   |  |  | 91  | 
|Combined Statement of Cash Flows for the period
    January 1, 2000 to October 2, 2000                                                                        |  |  | 92  | 
|Combined Statement of Shareowners Equity
    for the period ended October 2, 2000                                                                            |  |  | 93  | 
|Notes to Combined Financial Statements                                                                                                                        |  |  | 94  | 
|BellSouth Domestic Wireless Group                                                                                                                             |  |  |     | 
|Report of Independent Auditors                                                                                                                                |  |  | 103 | 
|Combined Statement of Operations for the period
    from January 1, 2000 to October 2, 2000                                                                   |  |  | 104 | 
|Combined Statement of Cash Flows for the period
    January 1, 2000 to October 2, 2000                                                                        |  |  | 105 | 
|Combined Statement of Shareowners Equity
    for the period ended October 2, 2000                                                                            |  |  | 106 | 
|Notes to Combined Financial Statements                                                                                                                        |  |  | 107 | 
|Financial Statement Schedule                                                                                                                                  |  |  |     | 
|Cingular Wireless LLC                                                                                                                                         |  |  |     | 
|Schedule II  Valuation and
    Qualifying Accounts                                                                                                           |  |  | 117 | 

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REPORT OF INDEPENDENT AUDITORS

Board of Directors and Shareowners

Cingular Wireless Corporation, Manager of


Cingular Wireless
LLC


We have audited the accompanying consolidated
balance sheets of Cingular Wireless LLC as of December 31,
2001 and 2002 and the related consolidated statements of income,
changes in members capital, and cash flows for the period
from April 24, 2000 (inception) through
December 31, 2000 and the years ended December 31,
2001 and 2002. Our audits also included the financial statement
schedule listed in the Index at Item 15(a). These financial
statements and schedule are the responsibility of the
Companys management. Our responsibility is to express an
opinion on these financial statements and schedule based on our
audits.

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

In our opinion, the consolidated financial
statements referred to above present fairly, in all material
respects, the consolidated financial position of Cingular
Wireless LLC at December 31, 2001 and 2002, and the
consolidated results of its operations and its cash flows for
the period from April 24, 2000 (inception) through
December 31, 2000 and for the years ended December 31,
2001 and 2002, in conformity with accounting principles
generally accepted in the United States. Also, in our opinion,
the related financial statement schedule, when considered in
relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set
forth therein.

As discussed in Note 4 to the financial
statements, in 2002 the Company adopted Statement of Financial
Accounting Standards No. 142, Goodwill and Other
Intangible Assets.



| |                              
| | -----------------------------
| | /s/     ERNST &
    YOUNG LLP

February 7, 2003

Atlanta, Georgia


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CINGULAR WIRELESS LLC

CONSOLIDATED STATEMENTS OF INCOME

|                                                                                        |                                                                                                   |                               |       |              |      |      |        |        |      |   |        |        |        |  
|--------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------- | ----------------------------- | ----- | ------------ | ---- | ---- | ------ | ------ | ---- | - | ------ | ------ | ------ | -
|                                                                                        |                                                                                                   | Period from                   |       |             
|                                                                                        |                                                                                                   | April 24, 2000                |       | Year Ended  
|                                                                                        |                                                                                                   | through                       |       | December 31,
|                                                                                        |                                                                                                   | December 31,                  |       |             
|                                                                                        |                                                                                                   | 2000                          |       | 2001         |      | 2002
|                                                                                        |                                                                                                   |                               |       |              |      |     
|                                                                                        |                                                                                                   |                              
|                                                                                        |                                                                                                   | (Dollars in millions)        
|Operating revenues:                                                                     |                                                                                                   |                               |       |              |      |      |        |        |      |   |        |       
|                                                                                        | Service revenues                                                                                  |                               | $     | 2,814        |      |      | $      | 13,069 |      |   | $      | 13,746 |       
|                                                                                        | Equipment sales                                                                                   |                               |       | 241          |      |      |        | 1,039  |      |   |        | 981    |       
|                                                                                        |                                                                                                   |                               |       |              |      |      |        |        |      |   |        |       
|Total operating revenues                                                                |                                                                                                   |                               | 3,055 |              |      |      | 14,108 |        |      |   | 14,727 |       
|Operating expenses:                                                                     |                                                                                                   |                               |       |              |      |      |        |        |      |   |        |       
|                                                                                        | Cost of services (excluding depreciation of $293,
    $1,291 and $1,396, which is included below) |                               |       | 581          |      |      |        | 2,752  |      |   |        | 3,395  |       
|                                                                                        | Cost of equipment sales                                                                           |                               |       | 393          |      |      |        | 1,652  |      |   |        | 1,535  |       
|                                                                                        | Selling, general and administrative                                                               |                               |       | 1,279        |      |      |        | 5,235  |      |   |        | 5,426  |       
|                                                                                        | Depreciation and amortization                                                                     |                               |       | 421          |      |      |        | 1,921  |      |   |        | 1,850  |       
|                                                                                        |                                                                                                   |                               |       |              |      |      |        |        |      |   |        |       
|Total operating expenses                                                                |                                                                                                   |                               | 2,674 |              |      |      | 11,560 |        |      |   | 12,206 |       
|                                                                                        |                                                                                                   |                               |       |              |      |      |        |        |      |   |        |       
|Operating income                                                                        |                                                                                                   |                               | 381   |              |      |      | 2,548  |        |      |   | 2,521  |       
|Other income (expenses):                                                                |                                                                                                   |                               |       |              |      |      |        |        |      |   |        |       
|                                                                                        | Interest expense                                                                                  |                               |       | (231         | )    |      |        | (822   | )    |   |        | (911   | )     
|                                                                                        | Minority interest in net income (loss) of
    consolidated partnerships                           |                               |       | (32          | )    |      |        | (122   | )    |   |        | (123   | )     
|                                                                                        | Equity in net income (loss) of affiliates, net                                                    |                               |       | 3            |      |      |        | (68    | )    |   |        | (265   | )     
|                                                                                        | Other, net                                                                                        |                               |       | 7            |      |      |        | 164    |      |   |        | 29     |       
|                                                                                        |                                                                                                   |                               |       |              |      |      |        |        |      |   |        |       
|                                                                                        |                                                                                                   | Total other income (expenses) |       |              | (253 | )    |        |        | (848 | ) |        |        | (1,270 | )
|                                                                                        |                                                                                                   |                               |       |              |      |      |        |        |      |   |        |       
|Income before provision for income taxes and
    cumulative effect of accounting change |                                                                                                   |                               | 128   |              |      |      | 1,700  |        |      |   | 1,251  |       
|Provision for income taxes                                                              |                                                                                                   |                               | 1     |              |      |      | 8      |        |      |   | 12     |       
|                                                                                        |                                                                                                   |                               |       |              |      |      |        |        |      |   |        |       
|Income before cumulative effect of accounting
    change                                |                                                                                                   |                               | 127   |              |      |      | 1,692  |        |      |   | 1,239  |       
|Cumulative effect of accounting change, net of tax                                      |                                                                                                   |                               |      |              |      |      |       |        |      |   | (32    | )     
|                                                                                        |                                                                                                   |                               |       |              |      |      |        |        |      |   |        |       
|Net income                                                                              |                                                                                                   | $                             | 127   |              |      | $    | 1,692  |        |      | $ | 1,207  |       
|                                                                                        |                                                                                                   |                               |       |              |      |      |        |        |      |   |        |       

See accompanying notes.

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CINGULAR WIRELESS LLC

CONSOLIDATED BALANCE SHEETS

|                                                 |                                                                                   |                       |        |       |   |   |        |       |  
|------------------------------------------------ | --------------------------------------------------------------------------------- | --------------------- | ------ | ----- | - | - | ------ | ----- | -
|                                                 |                                                                                   |                      
|                                                 |                                                                                   | December 31,         
|                                                 |                                                                                   |                      
|                                                 |                                                                                   | 2001                  |        | 2002 
|                                                 |                                                                                   |                       |        |      
|                                                 |                                                                                   |                      
|                                                 |                                                                                   | (Dollars in millions)
|ASSETS                                          
|Current assets:                                  |                                                                                   |                       |        |       |   |   |        |      
|                                                 | Cash and cash equivalents                                                         |                       | $      | 567   |   |   | $      | 908   |  
|                                                 | Accounts receivable  net of allowance
    for doubtful accounts of $131 and $163 |                       |        | 1,644 |   |   |        | 1,520 |  
|                                                 | Inventories                                                                       |                       |        | 189   |   |   |        | 126   |  
|                                                 | Prepaid expenses and other current assets                                         |                       |        | 157   |   |   |        | 177   |  
|                                                 |                                                                                   |                       |        |       |   |   |        |      
|Total current assets                             |                                                                                   |                       | 2,557  |       |   |   | 2,731  |      
|Property, plant and equipment, net               |                                                                                   |                       | 8,864  |       |   |   | 10,146 |      
|FCC licenses, net                                |                                                                                   |                       | 7,403  |       |   |   | 7,387  |      
|Goodwill, net                                    |                                                                                   |                       | 859    |       |   |   | 844    |      
|Other intangible assets, net                     |                                                                                   |                       | 493    |       |   |   | 307    |      
|Investments in and advances to equity affiliates |                                                                                   |                       | 2,023  |       |   |   | 2,316  |      
|Other assets                                     |                                                                                   |                       | 331    |       |   |   | 391    |      
|                                                 |                                                                                   |                       |        |       |   |   |        |      
|Total assets                                     |                                                                                   | $                     | 22,530 |       |   | $ | 24,122 |      
|                                                 |                                                                                   |                       |        |       |   |   |        |      
|                                                
|LIABILITIES AND MEMBERS
    CAPITAL            
|Current liabilities:                             |                                                                                   |                       |        |       |   |   |        |      
|                                                 | Debt maturing within one year                                                     |                       | $      | 65    |   |   | $      | 45    |  
|                                                 | Accounts payable                                                                  |                       |        | 1,137 |   |   |        | 1,043 |  
|                                                 | Due to affiliates, net                                                            |                       |        | 54    |   |   |        | 45    |  
|                                                 | Advanced billing and customer deposits                                            |                       |        | 415   |   |   |        | 446   |  
|                                                 | Accrued liabilities                                                               |                       |        | 1,553 |   |   |        | 1,208 |  
|                                                 |                                                                                   |                       |        |       |   |   |        |      
|Total current liabilities                        |                                                                                   |                       | 3,224  |       |   |   | 2,787  |      
|Long-term debt:                                  |                                                                                   |                       |        |       |   |   |        |      
|                                                 | Debt due to affiliates                                                            |                       |        | 9,678 |   |   |        | 9,678 |  
|                                                 | Other long-term debt, net of discount                                             |                       |        | 2,788 |   |   |        | 2,868 |  
|                                                 |                                                                                   |                       |        |       |   |   |        |      
|Total long-term debt                             |                                                                                   |                       | 12,466 |       |   |   | 12,546 |      
|Other noncurrent liabilities                     |                                                                                   |                       | 505    |       |   |   | 681    |      
|                                                 |                                                                                   |                       |        |       |   |   |        |      
|Total liabilities                                |                                                                                   |                       | 16,195 |       |   |   | 16,014 |      
|Minority interests in consolidated partnerships  |                                                                                   |                       | 485    |       |   |   | 567    |      
|Members capital:                                |                                                                                   |                       |        |       |   |   |        |      
|                                                 | Members capital                                                                  |                       |        | 6,030 |   |   |        | 7,721 |  
|                                                 | Receivable for properties to be contributed                                       |                       |        | (178  | ) |   |        | (178  | )
|                                                 | Accumulated other comprehensive loss                                              |                       |        | (2    | ) |   |        | (2    | )
|                                                 |                                                                                   |                       |        |       |   |   |        |      
|Total members capital                           |                                                                                   |                       | 5,850  |       |   |   | 7,541  |      
|                                                 |                                                                                   |                       |        |       |   |   |        |      
|Total liabilities and members capital           |                                                                                   | $                     | 22,530 |       |   | $ | 24,122 |      
|                                                 |                                                                                   |                       |        |       |   |   |        |      

See accompanying notes.

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CINGULAR WIRELESS LLC

CONSOLIDATED STATEMENTS OF CASH
FLOWS

|                                                                                      |                                                                         |                                                |        |              |     |      |        |       |      |   |        |       |      |  
|------------------------------------------------------------------------------------- | ----------------------------------------------------------------------- | ---------------------------------------------- | ------ | ------------ | --- | ---- | ------ | ----- | ---- | - | ------ | ----- | ---- | -
|                                                                                      |                                                                         | Period from                                    |        |             
|                                                                                      |                                                                         | April 24, 2000                                 |        | Year Ended  
|                                                                                      |                                                                         | through                                        |        | December 31,
|                                                                                      |                                                                         | December 31,                                   |        |             
|                                                                                      |                                                                         | 2000                                           |        | 2001         |     | 2002
|                                                                                      |                                                                         |                                                |        |              |     |     
|                                                                                      |                                                                         |                                               
|                                                                                      |                                                                         | (Dollars in millions)                         
|Operating activities                                                                  |                                                                         |                                                |        |              |     |      |        |       |      |   |        |      
|Net income                                                                            |                                                                         | $                                              | 127    |              |     | $    | 1,692  |       |      | $ | 1,207  |      
|Adjustments to reconcile net income to net cash
    provided by operating activities: |                                                                         |                                                |        |              |     |      |        |       |      |   |        |      
|                                                                                      | Depreciation and amortization                                           |                                                |        | 421          |     |      |        | 1,921 |      |   |        | 1,850 |     
|                                                                                      | Provision for doubtful accounts                                         |                                                |        | 57           |     |      |        | 333   |      |   |        | 404   |     
|                                                                                      | Asset impairments                                                       |                                                |        |             |     |      |        |      |      |   |        | 151   |     
|                                                                                      | Gain on disposition of businesses                                       |                                                |        |             |     |      |        | (97   | )    |   |        | (8    | )   
|                                                                                      | Minority interest in net (income) loss of
    consolidated partnerships |                                                |        | 32           |     |      |        | 122   |      |   |        | 123   |     
|                                                                                      | Equity in net (income) loss of affiliates,
    net                      |                                                |        | (3           | )   |      |        | 68    |      |   |        | 265   |     
|                                                                                      | Cumulative effect of accounting change, net of tax                      |                                                |        |             |     |      |        |      |      |   |        | 32    |     
|                                                                                      | Changes in operating assets and liabilities:                            |                                                |        |              |     |      |        |       |      |   |        |       |     
|                                                                                      |                                                                         | Accounts receivable                            |        |              | (52 | )    |        |       | (541 | ) |        |       | (280 | )
|                                                                                      |                                                                         | Other current assets                           |        |              | (13 | )    |        |       | 113  |   |        |       | 21   |  
|                                                                                      |                                                                         | Accounts payable and other current liabilities |        |              | 478 |      |        |       | 90   |   |        |       | (420 | )
|                                                                                      |                                                                         | Pensions and post-employment benefits          |        |              |    |      |        |       | 6    |   |        |       | 91   |  
|                                                                                      | Other, net                                                              |                                                |        | 15           |     |      |        | (42   | )    |   |        | 156   |     
|                                                                                      |                                                                         |                                                |        |              |     |      |        |       |      |   |        |      
|Net cash provided by operating activities                                             |                                                                         |                                                | 1,062  |              |     |      | 3,665  |       |      |   | 3,592  |      
|Investing activities                                                                  |                                                                         |                                                |        |              |     |      |        |       |      |   |        |      
|Construction and capital expenditures                                                 |                                                                         |                                                | (959   | )            |     |      | (3,156 | )     |      |   | (3,085 | )    
|Investments in and advances to equity affiliates,
    net                             |                                                                         |                                                | (239   | )            |     |      | (585   | )     |      |   | (450   | )    
|Dispositions of businesses and licenses                                               |                                                                         |                                                |       |              |     |      | 85     |       |      |   | 6      |      
|Acquisitions of businesses and licenses, net of
    cash received                     |                                                                         |                                                | (20    | )            |     |      | (289   | )     |      |   | (6     | )    
|Contractor engineering deposit                                                        |                                                                         |                                                |       |              |     |      |       |       |      |   | (50    | )    
|                                                                                      |                                                                         |                                                |        |              |     |      |        |       |      |   |        |      
|Net cash used in investing activities                                                 |                                                                         |                                                | (1,218 | )            |     |      | (3,945 | )     |      |   | (3,585 | )    
|Financing activities                                                                  |                                                                         |                                                |        |              |     |      |        |       |      |   |        |      
|Net repayment of debt due to affiliates                                               |                                                                         |                                                | (140   | )            |     |      | (1,148 | )     |      |   |       |      
|Proceeds from issuance of Senior Notes, net of
    issuance costs                     |                                                                         |                                                |       |              |     |      | 1,973  |       |      |   |       |      
|Net borrowings (repayment) of commercial
    paper                                    |                                                                         |                                                | 699    |              |     |      | (672   | )     |      |   | (27    | )    
|Net repayment of long-term debt                                                       |                                                                         |                                                | (324   | )            |     |      | (37    | )     |      |   | (59    | )    
|Distributions to members                                                              |                                                                         |                                                |       |              |     |      | (639   | )     |      |   |       |      
|Net distributions to minority interests                                               |                                                                         |                                                | (70    | )            |     |      | (126   | )     |      |   | (79    | )    
|Contributions from members                                                            |                                                                         |                                                | 117    |              |     |      | 1,370  |       |      |   | 499    |      
|                                                                                      |                                                                         |                                                |        |              |     |      |        |       |      |   |        |      
|Net cash provided by financing activities                                             |                                                                         |                                                | 282    |              |     |      | 721    |       |      |   | 334    |      
|                                                                                      |                                                                         |                                                |        |              |     |      |        |       |      |   |        |      
|Net increase in cash and cash equivalents                                             |                                                                         |                                                | 126    |              |     |      | 441    |       |      |   | 341    |      
|Cash and cash equivalents at beginning of period                                      |                                                                         |                                                |       |              |     |      | 126    |       |      |   | 567    |      
|                                                                                      |                                                                         |                                                |        |              |     |      |        |       |      |   |        |      
|Cash and cash equivalents at end of period                                            |                                                                         | $                                              | 126    |              |     | $    | 567    |       |      | $ | 908    |      
|                                                                                      |                                                                         |                                                |        |              |     |      |        |       |      |   |        |      

See accompanying notes.

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CINGULAR WIRELESS LLC

CONSOLIDATED STATEMENTS OF CHANGES IN
MEMBERS CAPITAL

|                             |                                      |                       |       |        |  
|---------------------------- | ------------------------------------ | --------------------- | ----- | ------ | -
|                             |                                      | (Dollars in millions)
|Balance at April 24, 2000    |                                      | $                     |      |       
|                             | Net income                           |                       |       | 127    |  
|                             | Contributions from members           |                       |       | 4,493  |  
|                             | Receivable for pending contributions |                       |       | (2,355 | )
|                             |                                      |                       |       |       
|Balance at December 31, 2000 |                                      |                       | 2,265 |       
|                             | Net income                           |                       |       | 1,692  |  
|                             | Contributions from members           |                       |       | 2,534  |  
|                             | Distributions to members             |                       |       | (639   | )
|                             | Other comprehensive loss             |                       |       | (2     | )
|                             |                                      |                       |       |       
|Balance at December 31, 2001 |                                      |                       | 5,850 |       
|                             | Net income                           |                       |       | 1,207  |  
|                             | Contributions from members           |                       |       | 484    |  
|                             |                                      |                       |       |       
|Balance at December 31, 2002 |                                      | $                     | 7,541 |       
|                             |                                      |                       |       |       

|                           |                                    |                                           |                                                                   |              |   |      |       |  |    |    |       |  |    |   | 
|-------------------------- | ---------------------------------- | ----------------------------------------- | ----------------------------------------------------------------- | ------------ | - | ---- | ----- |  | -- | -- | ----- |  | -- | - | 
|                           |                                    | Period from                               |                                                                   |             
|                           |                                    | April 24, 2000                            |                                                                   | Year Ended  
|                           |                                    | through                                   |                                                                   | December 31,
|                           |                                    | December 31,                              |                                                                   |             
|                           |                                    | 2000                                      |                                                                   | 2001         |   | 2002
|                           |                                    |                                           |                                                                   |              |   |     
|                           |                                    |                                          
|                           |                                    | (Dollars in millions)                    
|Comprehensive Income       |                                    |                                           |                                                                   |              |   |      |       |  |    |    |       | 
|Net income                 |                                    | $                                         | 127                                                               |              |   | $    | 1,692 |  |    | $  | 1,207 | 
|                           | Other comprehensive income (loss): |                                           |                                                                   |              |   |      |       |  |    |    |       |  |   
|                           |                                    | Minimum pension liability adjustment      |                                                                   |              |  |      |       |  | (1 | )  |       |  | (1 | )
|                           |                                    | Net unrealized gain (loss) on securities: |                                                                   |              |   |      |       |  |    |    |       |  |    |  
|                           |                                    |                                           | Unrealized losses on available for sale securities                |              |   |     |       |  |    | (1 | )     |  |    |  | 
|                           |                                    |                                           | Reclassification adjustment for losses included
    in net income |              |   |     |       |  |    |   |       |  |    | 1 | 
|                           |                                    |                                           |                                                                   |              |   |      |       |  |    |    |       | 
|Total comprehensive income |                                    | $                                         | 127                                                               |              |   | $    | 1,690 |  |    | $  | 1,207 | 
|                           |                                    |                                           |                                                                   |              |   |      |       |  |    |    |       | 

See accompanying notes.

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CINGULAR WIRELESS LLC

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

(Dollars in millions)


1.     Summary of
Significant Accounting Policies



| |                      
| | ---------------------
| | Basis of Presentation

Cingular Wireless LLC (the Company) is a Delaware
limited liability company formed by SBC Communications Inc.
(SBC) and BellSouth Corporation (BellSouth) as the
operating company for their U.S. wireless joint venture. The
parties entered into an agreement to form the Company in April
2000, subject to regulatory approvals. Cingular Wireless
Corporation acts as the Companys manager and controls the
Companys management and operations. The Company provides
domestic wireless communications services, including local,
long-distance, and roaming services using both cellular and
personal communications services (PCS). Wireless services and
products also include certain voice and data enhanced services,
interactive messaging services and wireless equipment. All of
the Companys operations, which consist of businesses in 37
states, the District of Columbia, Puerto Rico and the
U.S. Virgin Islands, are conducted through subsidiaries or
ventures.

On October 2, 2000, SBC and BellSouth (the
members) and certain of their subsidiaries contributed
substantially all of their U.S. wireless assets in exchange for
approximately 60% and 40% economic interests, respectively, in
the Company, and the Company began doing business under the
Cingular brand name in January 2001. SBC and
BellSouth share joint voting control of the Companys
operations by virtue of their 50/50 ownership of, and the terms
of the stockholders agreement pertaining to, Cingular
Wireless Corporation. All assets and liabilities contributed to
the venture have been recorded at their historical basis of
accounting. At the contribution date, assets and liabilities of
$12,381 and $9,958, respectively, were contributed by SBC;
assets and liabilities of $7,099 and $5,029, respectively, were
contributed by BellSouth. Included in these amounts were
estimated receivables for wireless operations to be contributed
to the Company after the formation date.

As provided for in the Contribution and Formation
Agreement between the Company, SBC and BellSouth, additional
contributions of wireless operations and assets in certain
markets were made during 2001 (see Note 2). The contribution by
SBC of wireless operations and assets in the Arkansas markets,
or an equivalent amount in cash if such assets are not
contributed, was still pending as of December 31, 2002. The
Company has recorded amounts to be contributed as
Receivable for properties to be contributed in the
consolidated balance sheets. Until such time as the contribution
is made, the Company continues to manage the properties for a
fee. Fees received for managing the Arkansas markets for the
periods ended December 31, 2000, 2001 and 2002 were $9, $28
and $22, respectively. For the wireless businesses contributed
in 2001, the Company received management fees in 2000 and 2001,
respectively, of $5 and $22 for services provided prior to the
actual dates of contribution.

These consolidated financial statements include
charges from SBC and BellSouth for certain expenses pursuant to
various agreements (see Notes 10 and 14). These
expenses are considered to be a reasonable reflection of the
value of services provided or the benefits received by the
Company.

The Companys operations presented for the
period from April 24, 2000 (inception) through
December 31, 2000 reflect principally the operations from
October 2, 2000 (date of contribution) through
December 31, 2000.



| |                 
| | ----------------
| | Use of Estimates

The preparation of financial statements in
conformity with accounting principles generally accepted in the
United States (GAAP) requires management to make estimates
and assumptions that affect the amounts reported in the
consolidated financial statements and accompanying notes. Actual
results could differ from those estimates. Estimates are used
when accounting for certain items such as revenue

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CINGULAR WIRELESS LLC


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(Dollars in millions)


recognition, allowance for doubtful accounts,
depreciation and amortization, valuation of inventory, pensions
and other benefits, investments and asset impairment.



| |                            
| | ---------------------------
| | Principles of Consolidation

The consolidated financial statements include the
accounts of the Company and entities in which the Company
exercises control. Other parties interests in consolidated
entities are reported as minority interests. The equity method
is used to account for investments for which the Company
exercises significant influence but does not control. All
significant intercompany transactions are eliminated in the
consolidation process.



| |         
| | --------
| | Segments

The Company manages the business as one
reportable business segment, wireless communications services.
The Company operates only domestically.



| |             
| | ------------
| | FCC Licenses

The Federal Communications Commission
(FCC) issues licenses that authorize wireless carriers to
provide service in specific geographic service areas. The FCC
grants licenses for terms of up to ten years. In 1993, the FCC
adopted specific standards to apply to wireless renewals,
concluding it will award a license renewal to a licensee that
meets certain standards of past performance. Historically, the
FCC has granted license renewals routinely. The licenses held by
the Company expire at various dates. The Company believes that
it will be able to meet all requirements necessary to secure
renewal of its wireless licenses.



| |                    
| | -------------------
| | Revenue Recognition

The Company earns service revenues by providing
access to its wireless network (access revenue) and for usage of
its wireless system (airtime revenue). Access revenue is billed
in advance and recognized ratably over the service period.
Airtime revenue, including roaming revenue and long-distance
revenue, for postpaid customers is billed in arrears based on
minutes of use and is recognized when the service is rendered.
Prepaid airtime sold to customers is recorded as deferred
revenues prior to the commencement of services, and revenue is
recognized when airtime is used or expires. Access and airtime
services provided are billed throughout the month according to
the bill cycle in which a particular subscriber is placed. As a
result of bill cycle cut-off times, the Company is required to
make estimates for service revenues earned but not yet billed at
the end of each quarter. These estimates are based primarily
upon actual and historical minutes of use. Certain rate plans
include a rollover feature whereby unused peak minutes do not
expire each month but rather are available, under certain
conditions, for future use for a period not to exceed one year
from the date of purchase. The Company defers revenue based on
an estimate of the portion of minutes expected to be utilized
prior to expiration. The Companys estimate of expected
future revenue is primarily based on historical minutes of use.

Roaming revenues include revenues from certain
customers who roam outside their selected home coverage area,
referred to as incollect roaming revenues, and
revenues from other wireless carriers for roaming by their
customers on the Companys network, referred to as
outcollect roaming revenues.

The Company offers enhanced services including
caller ID, call waiting, call forwarding, three-way calling, no
answer/busy transfer, text messaging and voice mail. Generally,
these enhanced features generate additional revenues through
monthly subscription fees or increased wireless usage through
utilization of these features. Other optional services, such as
unlimited mobile-to-mobile calling, roadside

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CINGULAR WIRELESS LLC


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(Dollars in millions)


assistance and handset insurance, may also be
provided for a monthly fee. These enhanced features and optional
services may be bundled with package rate plans or sold
separately. Revenues for enhanced services and optional features
are recognized as earned.

The Company defers non-refundable, up-front
activation fees and associated costs to the extent of the
related revenues in accordance with Staff Accounting Bulletin
Number 101 (SAB 101), Revenue Recognition in Financial
Statements, issued by the Securities and Exchange Commission
(SEC). These deferred fees and costs are amortized over the
estimated customer relationship period, which is currently
estimated to be three years. The Company has recorded deferred
revenues and deferred expenses of equal amount in the
consolidated balance sheets. As of December 31, 2002, SAB
101 deferred revenues and expenses were $198.

Equipment sales consist principally of revenues
from the sale of wireless mobile telephone handsets and
accessories to new and existing customers and to agents and
other third-party distributors. The revenue and related expenses
associated with the sale of wireless handsets and accessories
are recognized when the products are delivered and accepted by
the customer, as this is considered to be a separate earnings
process from the sale of wireless services.



| |             
| | ------------
| | Income Taxes

Substantially all of the operating units
controlled and consolidated by the Company are either limited
liability companies or partnerships. Accordingly, in most tax
jurisdictions, tax items flow through to the members or partners
who are taxed at their level pursuant to federal and state
income tax laws. The members or partners are responsible for
their tax liabilities resulting from income earned at the member
or partner level. The Company is not subject to income taxes at
the limited liability company or partnership level in most tax
jurisdictions. There are a few tax-paying subsidiaries for which
the Company has provided an income tax provision.



| |                       
| | ----------------------
| | Required Distributions

The Company is required to make periodic
distributions to its members on a pro rata basis in accordance
with each members ownership interest in amounts sufficient
to permit members to pay the tax liabilities resulting from
allocations of income tax items from the Company. During 2001,
the Company made distributions to members of $47 related to 2000
tax liabilities and $592 related to 2001 tax liabilities. Since
the Company did not generate taxable income to the members in
2002, the Company made no distributions in 2002.

Additionally, the Company is required to
distribute to its members 50% of its excess cash, as
defined in the operating agreement, at the end of each fiscal
year. Excess cash consists of funds generated from the
Companys operations less forecasted cash needs for the
upcoming fiscal year and distributions made to the members for
their tax payments. In 2000, 2001 and 2002 the Company was not
required to make any distributions of excess cash to the members
and does not anticipate being required to make any such
distributions in 2003.



| |                          
| | -------------------------
| | Cash and Cash Equivalents

Cash and cash equivalents include all highly
liquid investments with original maturities of three months or
less. Outstanding checks and drafts of $455 and $202 have been
included in Accounts payable in the consolidated
balance sheets as of December 31, 2001 and 2002,
respectively.

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CINGULAR WIRELESS LLC


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(Dollars in millions)




| |                    
| | -------------------
| | Accounts Receivable

Accounts receivable consist principally of trade
accounts receivable from customers and are generally unsecured
and due within 30 days. Credit losses relating to these
receivables consistently have been within managements
expectations. Expected credit losses are recorded as an
allowance for doubtful accounts in the consolidated balance
sheets. Estimates of expected credit losses are based primarily
on historical write-off experience, net of recoveries, and on
the aging of the accounts receivable balances. The collection
policies and procedures of the Company vary by credit class and
prior payment history of subscribers.



| |            
| | -----------
| | Inventories

Inventories consist principally of wireless
mobile telephone handsets and accessories and are valued at the
lower of weighted-average cost or market value.



| |                              
| | -----------------------------
| | Property, Plant and Equipment

Property, plant and equipment is stated at cost
less accumulated depreciation and amortization. The cost of
additions and substantial improvements is capitalized. The cost
of maintenance and repairs is charged to operating expenses.
Property, plant and equipment are depreciated using the
straight-line method over their estimated useful lives.
Effective January 1, 2001, the Company conformed the
estimated useful lives with those used by its predecessor
entities. These useful lives are applied to all assets purchased
after January 1, 2001. This change did not have a material
effect on the Companys results of operations. Upon sale or
retirement of an asset, the related costs and accumulated
depreciation are removed from the accounts and any gain or loss
is recognized and included in operating results.

Interest expense and network engineering costs
incurred during the construction phase of the Companys
wireless network are capitalized as part of property, plant and
equipment until the projects are completed and placed into
service.



| |                        
| | -----------------------
| | Software Capitalization

The Company capitalizes certain costs incurred in
connection with developing or obtaining internal use software in
accordance with American Institute of Certified Public
Accountants Statement of Position 98-1, Accounting for the
Costs of Computer Software Developed or Obtained for Internal
Use. These capitalized software costs are included in
Property, plant and equipment, net in the
consolidated balance sheets and are being amortized ratably over
a period not to exceed five years.



| |                  
| | -----------------
| | Intangible Assets

Intangible assets consist primarily of FCC
licenses, the excess of consideration paid over the fair value
of net assets acquired in purchase business combinations
(goodwill) and customer lists. In 2000 and 2001, goodwill
and licenses were amortized using the straight-line method over
20 to 40 years and 40 years, respectively. With the
adoption of Statement of Financial Accounting Standards
(SFAS) No. 142, Goodwill and Other Intangible
Assets,as of January 1, 2002, FCC licenses are
classified as indefinite-lived intangible assets. No
amortization was taken on goodwill and FCC licenses in 2002,
with the exception of licenses used in the Mobitex data
business. Customer lists represent values placed on customers of
acquired businesses and have a finite life. The Companys
customer lists are amortized over a five-year period primarily
using the straight-line method.

The Company will test goodwill and other
indefinite-lived intangible assets for impairment on an annual
basis. Additionally, goodwill will be tested for impairment
between annual tests if an event occurs or circumstances change
that would more likely than not reduce the fair value of an
entity below its

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CINGULAR WIRELESS LLC


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(Dollars in millions)


carrying value. Other indefinite-lived intangible
assets will be tested between annual tests if events or changes
in circumstances indicate that the asset might be impaired.
These events or circumstances would include a significant change
in the business climate, legal factors, operating performance
indicators, competition, sale or disposition of a significant
portion of the business or other factors. See Note 4 for
discussion of the goodwill and indefinite-lived intangible asset
impairment tests.



| |                                   
| | ----------------------------------
| | Valuation of Long-lived
    Assets

Long-lived assets, including property, plant and
equipment and intangible assets with finite lives, are reviewed
for impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable. It is
reasonably possible that these assets could become impaired as a
result of technological or other industry changes. For assets
the Company intends to hold for use, if the total of the
expected future undiscounted cash flows is less than the
carrying amount of the asset, a loss is recognized for the
difference between the fair value and carrying amount of the
asset. For assets the Company intends to dispose of, a loss is
recognized if the carrying amount of the asset is more than fair
value, net of the costs of disposal. The Company principally
uses the discounted cash flow method to estimate the fair value
of its long-lived assets. The discount rate applied to the
undiscounted cash flows is consistent with the Companys
weighted-average cost of capital. See Note 11 for discussion of
impairment losses recognized in 2002.

The Company holds equity interests principally in
two ventures (see Note 5). These investments are accounted for
under the equity method of accounting. In accordance with
Accounting Principles Board (APB) Opinion No. 18,
The Equity Method of Accounting for Investments in Common
Stock, the Company periodically reviews its equity method
investments for impairment. These reviews are performed to
determine whether a decline in the fair value of an investment
below its carrying value is deemed to be other than temporary.

The Company periodically evaluates the useful
lives of its wireless network equipment and other equipment and
finite-lived intangible assets based on technological and other
industry changes to determine whether events or changes in
circumstances warrant revisions to the useful lives (see
Notes 3 and 11).



| |                         
| | ------------------------
| | Deferred Financing Costs

In connection with the issuance of Senior Notes
in December 2001 described in Note 7, the Company recorded
$20 of deferred costs for underwriting fees and other related
debt issuance costs. The net deferred financing costs were $20
and $19 at December 31, 2001 and 2002, respectively. These
deferred financing costs are included in Other
assets in the consolidated balance sheets and are
amortized over the related terms of the notes using the
effective interest method.



| |                  
| | -----------------
| | Advertising Costs

Costs for advertising are expensed as incurred.
Total advertising expenses were $152, $509 and $549 for the
periods ended December 31, 2000, 2001 and 2002,
respectively.



| |                                     
| | ------------------------------------
| | Derivative Financial
    Instruments

The Company recognizes all derivatives as either
assets or liabilities in the consolidated balance sheets and
measures those instruments at fair value. Gains and losses
resulting from changes in the fair values of those derivative
instruments will be recorded to earnings or other comprehensive
income depending on the use of the derivative instrument and
whether it qualifies for hedge accounting.

65



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##### Table of Contents



CINGULAR WIRELESS LLC


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(Dollars in millions)


The Company formally documents all relationships
between hedging instruments and hedged items, as well as its
risk management objectives and strategies for undertaking
various hedge transactions. The Company links hedges to specific
assets or liabilities on the consolidated balance sheets, as
appropriate.

The Company also assesses, both at the inception
of the hedge and on an on-going basis, whether the derivatives
that are used in hedging transactions are effective. Should it
be determined that a derivative is not effective as a hedge, the
Company would discontinue the hedge accounting prospectively.



| |                         
| | ------------------------
| | New Accounting Standards

In January 2003, the Financial Accounting
Standards Board (FASB) issued FASB Interpretation No. 46,
Consolidation of Variable Interest Entities
(FIN 46). FIN 46 clarifies the application of
Accounting Research Bulletin No. 51, Consolidated
Financial Statements, to certain entities in which equity
investors do not have the characteristics of a controlling
financial interest or do not have sufficient equity at risk for
the entity to finance its activities without additional
subordinated support from other parties. FIN 46 requires
existing unconsolidated variable interest entities to be
consolidated by their primary beneficiaries if the entities do
not effectively disperse risks among parties involved. All
companies with variable interests in variable interest entities
created after January 31, 2003, shall apply the provisions
of this Interpretation to those entities immediately. A public
company with a variable interest in a variable interest entity
created before February 1, 2003, shall apply the provisions
of this Interpretation to that entity no later than the
beginning of the first interim or annual reporting period after
June 15, 2003. For variable interest entities for which an
enterprise holds a variable interest that it acquired before
February 1, 2003, FIN 46 may be applied by restating
previously issued financial statements or prospectively from the
date of adoption. The Company will begin applying the provisions
of this new pronouncement effective January 1, 2003. The
Company will not restate any previously issued financial
statements.

The Company has determined that Salmon PCS LLC
(Salmon) meets the definition of a variable interest entity and
the Company is the primary beneficiary of the Salmon variable
interests (See Note 5). Accordingly, the Company will begin
consolidating the financial position, results of operations and
cash flows of Salmon effective January 1, 2003. The Company
will initially measure the assets, liabilities and
non-controlling interests of Salmon at their carrying amounts.
The Company has determined that the principal impact on its
financial position, effective January 1, 2003, will be the
elimination of its Investments in and advances to equity
affiliates of $337 and an increase to FCC licenses,
net of $358. The impact to results of operations and cash
flows will not be material.

In November 2002, the Emerging Issues Task Force
(EITF) of the FASB reached a consensus on EITF
No. 00-21, Accounting for Revenue Arrangements with
Multiple Element Deliverables. The Issue addresses how to
account for arrangements that may involve the delivery or
performance of multiple products, services and/or rights to use
assets. Revenue arrangements with multiple deliverables should
be divided into separate units of accounting if the deliverables
in the arrangement meet certain criteria. Arrangement
consideration should be allocated among the separate units of
accounting based on their relative fair values. The Issue also
supersedes certain guidance set forth in SAB 101. The final
consensus is applicable to agreements entered into in quarters
beginning after June 15, 2003, with early adoption
permitted. Additionally, companies are permitted to apply the
consensus guidance to all existing arrangements as a cumulative
effect of a change in accounting principle. The Company will
adopt this new pronouncement no later than July 1, 2003.
The Company is currently evaluating its impact on results of
operations, financial position and cash flows.

In July 2002, the FASB issued SFAS No. 146,
Accounting for Costs Associated with Exit or Disposal
Activities, which addresses financial accounting and
reporting for costs associated with exit or disposal activities
and nullifies EITF No. 94-3, Liability Recognition for
Certain Employee Termination Benefits

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CINGULAR WIRELESS LLC


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(Dollars in millions)


and Other Costs to Exit an Activity Including
Certain Costs Incurred in a Restructuring(EITF 94-3). The principal
difference between SFAS No. 146 and EITF 94-3 relates
to SFAS No. 146s requirements for recognition of a
liability for a cost associated with an exit or disposal
activity. SFAS No. 146 requires that a liability for a cost
associated with an exit or disposal activity be recognized when
the liability is incurred. Under EITF 94-3, a liability for
an exit cost was recognized at the date of an entitys
commitment to an exit plan. A fundamental conclusion reached by
the FASB in this statement is that an entitys commitment
to a plan, by itself, does not create an obligation that meets
the definition of a liability. Therefore, this statement
eliminates the definition and requirements for recognition of
exit costs in EITF 94-3. This statement also establishes
that fair value is the objective for initial measurement of the
liability. The effective date of the new statement is
January 1, 2003, with earlier adoption encouraged. In
connection with the reorganization discussed in Note 12,
the Company early adopted SFAS No. 146 in 2002.

In August 2001, the FASB issued SFAS
No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets. The statement supersedes SFAS
No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of; however,
it retains the fundamental provisions of that statement related
to the recognition and measurement of the impairment of
long-lived assets to be held and used. The statement
provides more guidance on estimating cash flows when performing
a recoverability test, requires that a long-lived asset or asset
group, principally consisting of property, plant and equipment,
to be disposed of other than by sale (e.g., abandoned) be
classified as held and used until it is disposed of,
requires revision of the depreciable life of a long-lived asset
to be abandoned, and establishes more restrictive criteria to
classify an asset or asset group as held for sale.
The Company adopted SFAS No. 144 effective January 1,
2002. See Note 11 for discussion of impairment losses recognized
in 2002.

In June 2001, the FASB issued SFAS No. 143,
Accounting for Asset Retirement Obligations. This
statement requires entities to record the fair value of a
liability for an asset retirement obligation in the period in
which it is incurred and capitalize that amount as part of the
book value of the long-lived asset. Over time, the liability is
accreted to its present value each period, and the capitalized
cost is depreciated over the useful life of the related asset.
Upon settlement of the liability, an entity either settles the
obligation for its recorded amount or incurs a gain or loss upon
settlement. This statement is effective for financial statements
for fiscal years beginning after June 15, 2002.

The Company has certain legal obligations,
principally related to its tower assets, which fall within the
scope of SFAS No. 143. These legal obligations include
obligations to remediate leased land on which the Companys
tower assets are located. In conjunction with the adoption of
SFAS No. 143 effective January 1, 2003, the Company
did not record asset retirement obligations for network
infrastructure assets subject to the provisions of this
statement as the fair value of the obligations could not
reasonably be estimated. The Company believes that uncertainty
as to the eventual settlement of legal obligations exists due to
trends in the wireless communications industry such as the rapid
growth in minutes of use on wireless networks, increasing
subscriber penetration and deployment of next generation
technologies. Therefore, these factors increase the probability
that third parties would not contractually enforce their
remediation rights related to the sites. Based on the
combination of these industry trends and the Companys
limited experience in removing sites, it is not probable that
any sites will be removed in the foreseeable future and require
remediation. Therefore, sufficient information to estimate a
range of potential settlement dates is not available. In
accordance with SFAS No. 143, the Company will not
recognize a liability until such information becomes known.

In June 2001, the FASB also issued SFAS
No. 142 which prohibits the amortization of goodwill and
intangible assets with indefinite useful lives. SFAS
No. 142 requires that these assets be reviewed for

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CINGULAR WIRELESS LLC


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(Dollars in millions)


impairment at least annually. Intangible assets
with finite lives will continue to be amortized over their
estimated useful lives. Additionally, SFAS No. 142 requires
that goodwill included in the carrying value of equity method
investments no longer be amortized. See Note 4 for discussion of
this statements impact on the Companys results of
operations, financial position and cash flows.

In June 2001, the FASB issued SFAS No. 141,
Business Combinations. SFAS No. 141 requires the use of
the purchase method of accounting for all business combinations
initiated after June 30, 2001, thereby eliminating the use
of the pooling-of-interests method of accounting for business
combinations. In addition, SFAS No. 141 requires intangible
assets be recorded apart from goodwill if they meet certain
criteria. This new standard did not have an impact on the
Companys results of operations, financial position or cash
flows.



| |                  
| | -----------------
| | Reclassifications

Certain amounts have been reclassified in the
2000 and 2001 consolidated financial statements to conform to
the current year presentation.

2.     Contributions,
Acquisitions, Disposition and License Exchange



| |              
| | -------------
| | Contributions

In September and December of 2002, SBC and
BellSouth made cash capital contributions to the Company
totaling $499 for general corporate purposes.

In September 2001, SBC contributed its
controlling 50% equity interest in Cellular Communications of
Puerto Rico. In May 2001, an SBC affiliate contributed a
minority interest in a Washington/ Baltimore cellular operation.
In March 2001, SBC contributed its interest in the operations
and assets of a Michigan wireless business and certain assets of
an SBC affiliate. The aggregate net book value of these
contributions totaled $831.

In December 2000, BellSouth exercised its option
to redeem the 55.6% limited partnership interest of AT&T
Wireless Services, Inc. (AT&T Wireless) in AB Cellular by
distributing to AT&T Wireless the Los Angeles area cellular
business. Following this transaction, BellSouth held the
remaining assets of the AB Cellular partnership, which included
100% of the Houston area cellular market, 87.35% of the
Galveston area cellular market and $1,163 in cash. In January
2001, BellSouth contributed the operations and assets of the AB
Cellular partnership to the Company; the aggregate net book
value of the contribution was $1,727. The majority of the cash
contributed was used to pay the Companys debt due to
affiliates in accordance with terms of the Contribution and
Formation Agreement.

The results of operations of these contributed
entities are included in the consolidated statements of income
as of their respective contribution dates.

As stipulated by the Contribution and Formation
Agreement, amounts may be due to (from) SBC or BellSouth to
the extent that the carrying amounts of the net assets as of the
contribution date are more (less) than the agreed upon
amount at formation. In 2001, the Company paid a net amount of
$186, plus accrued interest from the date of contribution, to
the members under these provisions.



| |             
| | ------------
| | Acquisitions

In April 2002, the Company and an affiliate of
SBC completed a transaction with T-Mobile USA, Inc. (T-Mobile,
formerly known as VoiceStream Wireless Corporation) in which
T-Mobile contributed assets for a 6% equity interest in the
Companys Puerto Rico wireless communications operations.
No gain or loss was recognized on this transaction. This
transaction resulted in a decrease in the Companys

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CINGULAR WIRELESS LLC


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(Dollars in millions)


ownership interest in the Puerto Rico business
from 50% to 47%. Due to the fact that all existing control
provisions have been retained by the Company, consolidation of
the financial statements of the Puerto Rico business will
continue. On each of the fifth, seventh and tenth anniversaries
of this transaction, T-Mobile and the Company have fair market
value put and call options, respectively, related to
T-Mobiles 6% equity interest.

In May 2001, the Company purchased from SBC for
$151 a 10% minority interest in the Washington/ Baltimore
wireless business that SBC acquired from affiliates of Vivendi
Universal. Concurrent with this purchase, SBC also contributed a
minority interest in the Washington/ Baltimore operations held
by an SBC affiliate. As a result of the purchase and
contribution of minority interests from SBC, the Company holds a
100% interest in the Washington/ Baltimore wireless business.

The minority interest acquisition was accounted
for under the purchase method of accounting. Prior to the
adoption of SFAS No. 142 on January 1, 2002, the
purchase price in excess of the proportionate interest in the
underlying fair value of identifiable net assets acquired was
amortized using the straight-line method over a 20-year period.
The acquisition of the minority interest did not have a
significant impact on the consolidated results of operations for
2001, nor would it had it occurred on October 2, 2000, the
original contribution date.

In November 2001, the Company acquired two 15-MHz
licenses in the Salt Lake City and Provo Basic Trading Areas
(BTAs) in Utah for $140 in cash.



| |            
| | -----------
| | Disposition

In March 2001, the Company and ALLTEL Corporation
agreed to dissolve a wireless partnership and distributed the
related partnership assets. The Company recognized the
partnership assets received at fair value and a related gain of
$76, which is included in Other, net in the
consolidated statement of income.



| |                 
| | ----------------
| | License Exchange

In May 2001, the Company and T-Mobile exchanged
licenses covering approximately 36 million people, referred
to as POPs, each. The Company received licenses
covering 10-MHz of spectrum for the New York major trading
area (MTA) and for each of the St. Louis and Detroit
BTAs. In exchange, the Company transferred to T-Mobile licenses
covering 10-MHz out of the 30-MHz of spectrum that it had in the
Los Angeles and San Francisco MTAs, which include most
of California and Nevada. This transaction was accounted for as
a like-kind exchange at historical cost.

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CINGULAR WIRELESS LLC


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(Dollars in millions)


3.     Property,
Plant and Equipment

Property, plant and equipment is summarized as
follows:

|                                                |  |              |       |              |  |      |        |   |  |   |        |  
|----------------------------------------------- |  | ------------ | ----- | ------------ |  | ---- | ------ | - |  | - | ------ | -
|                                                |  |              |       |             
|                                                |  |              |       | December 31,
|                                                |  | Estimated    |       |             
|                                                |  | Useful Lives |       | 2001         |  | 2002
|                                                |  |              |       |              |  |     
|                                                |  | (In years)   |       |              |  |     
|Land                                            |  |              |      |              |  | $    | 56     |   |  | $ | 60     |  
|Buildings and building improvements             |  |              | 10-25 |              |  |      | 2,812  |   |  |   | 3,118  |  
|Operating and other equipment                   |  |              | 5-10  |              |  |      | 10,322 |   |  |   | 12,097 |  
|Furniture and fixtures                          |  |              | 3-10  |              |  |      | 1,486  |   |  |   | 1,595  |  
|Construction in progress                        |  |              |      |              |  |      | 644    |   |  |   | 1,175  |  
|                                                |  |              |       |              |  |      |        |   |  |   |        |  
|                                                |  |              |       |              |  |      | 15,320 |   |  |   | 18,045 |  
|Less: accumulated depreciation and amortization |  |              |       |              |  |      | (6,456 | ) |  |   | (7,899 | )
|                                                |  |              |       |              |  |      |        |   |  |   |        |  
|Property, plant and equipment, net              |  |              |       |              |  | $    | 8,864  |   |  | $ | 10,146 |  
|                                                |  |              |       |              |  |      |        |   |  |   |        |  

Depreciation expense and capitalized interest and
network engineering costs incurred during the construction phase
of the Companys wireless network are summarized as follows:

|                                      |  |                      |     |      |  |      |       |  |  |   |       | 
|------------------------------------- |  | -------------------- | --- | ---- |  | ---- | ----- |  |  | - | ----- | 
|                                      |  |                     
|                                      |  | For the Period Ended
|                                      |  | December 31,        
|                                      |  |                     
|                                      |  | 2000                 |     | 2001 |  | 2002
|                                      |  |                      |     |      |  |     
|Depreciation expense                  |  | $                    | 324 |      |  | $    | 1,514 |  |  | $ | 1,662 | 
|Capitalized interest costs            |  |                      | 2   |      |  |      | 13    |  |  |   | 19    | 
|Capitalized network engineering costs |  |                      | 21  |      |  |      | 87    |  |  |   | 127   | 

The net book value of assets recorded under
capital leases was $771 and $637 at December 31, 2001 and
2002, respectively. These capital leases principally relate to
communications towers and other operating equipment.
Amortization of assets recorded under capital leases is included
in depreciation expense. Capital lease additions for the periods
ended December 31, 2000, 2001 and 2002 were $6, $389 and
$121, respectively.

The Companys cellular/ PCS networks are
currently equipped with digital transmission technologies known
as Time Division Multiple Access technology (TDMA) and Global
System for Mobile Communication technology (GSM). The Company is
currently in the process of adding GSM equipment throughout its
TDMA markets to provide a common voice standard. At the same
time, the Company is adding high-speed technologies for data
services. The GSM network upgrade is expected to be
substantially complete by the end of 2003 when approximately 90%
of the Companys POPs will be covered by GSM. While the
Company will continue to sell and market TDMA services for the
foreseeable future, the amount of the future cash flows to be
derived from the TDMA network assets is highly dependent upon
the rate of transition of existing subscribers using TDMA
equipment to GSM-capable equipment, as well as other competitive
and technological factors. Currently, the TDMA network assets
are generally depreciated over an eight-year period. Effective
January 1, 2003, the Company implemented the results of a
review of the estimated service lives of its remaining TDMA
network assets. The Company determined that a reduction in the
useful lives of TDMA assets is warranted based on the projected
transition of network traffic to GSM technology. Useful lives
will be shortened to fully depreciate all TDMA equipment by
2008. TDMA equipment acquired after January 1, 2003 will
have useful lives not to exceed six years.

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CINGULAR WIRELESS LLC


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(Dollars in millions)


During 2002, the Company provided a $50 security
deposit to a contract engineering vendor. The security deposit
bears interest at LIBOR plus 10 basis points and is
collateralized by a bank letter of credit.

4.     Intangible
Assets

Effective January 1, 2002, the Company
adopted SFAS No. 142. In conjunction with this adoption,
the Company reassessed the useful lives of previously recognized
intangible assets. A significant portion of its intangible
assets are FCC licenses that provide the Company with the
exclusive right to utilize certain radio frequency spectrum to
provide wireless communications services. While FCC licenses are
issued for only a fixed time, generally ten years, such licenses
are subject to renewal by the FCC. Renewals of FCC licenses have
occurred routinely and at nominal cost. Moreover, the Company
has determined that there are currently no legal, regulatory,
contractual, competitive, economic or other factors that limit
the useful lives of its FCC licenses. As a result, the FCC
licenses will be treated as an indefinite-lived intangible asset
under the provisions of SFAS No. 142 and will not be
amortized but rather will be tested for impairment annually or
when events and circumstances warrant. The Company will
reevaluate the useful life determination for wireless licenses
each reporting period to determine whether events and
circumstances continue to support an indefinite useful life.

The Company completed the transition impairment
test of its indefinite-lived intangible assets as of
January 1, 2002 and determined that no impairment existed.
In accordance with EITF 02-7, Unit of Accounting for
Testing Impairment of Indefinite-Lived Intangible Assets,
this impairment test was performed on an aggregate basis,
consistent with the Companys management of the business on
a national scope. The Company utilized a fair value approach,
incorporating discounted cash flows, to complete the test. This
approach determines the fair value of the FCC licenses and
accordingly incorporates cash flow assumptions regarding the
investment in a network, the development of distribution
channels and other inputs for making the business operational.
As these inputs are included in determining free cash flows of
the business, the present value of the free cash flows is
attributable to the licenses. The discount rate applied to the
cash flows is consistent with the Companys
weighted-average cost of capital.

The Company completed the transition impairment
test of goodwill as of January 1, 2002 using a two-step
process. The first step screens for potential impairment, while
the second step measures the amount of the impairment, if any.
In the first quarter of 2002, the Company completed the first
step of the goodwill impairment transition tests as of
January 1, 2002 for its reporting units. For goodwill
related to the Companys cellular/ PCS business, the first
step indicated no impairment in value. For goodwill related to
the Mobitex data business, the first step indicated an
impairment in value. To measure any impairment, in the second
quarter the Company completed the second step of the goodwill
impairment transition test for the Mobitex data business using a
discounted cash flow approach. Based on the results of this
test, the Company recognized an impairment of the goodwill
related to its Mobitex data business, with a carrying value of
$32, and has reflected the impairment as the cumulative effect
of a change in accounting principle in the first quarter of
2002. The Company believes that the decline in the fair value of
its Mobitex business is due to the development of new wireless
data technologies.

Using methodologies consistent with those applied
for its transitional impairment tests performed as of
January 1, 2002, the Company completed its annual
impairment tests for goodwill and indefinite-lived intangible
assets during the fourth quarter. These annual impairment tests,
prepared as of October 1, 2002, resulted in no impairment
of the Companys goodwill or indefinite-lived intangible
assets.

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CINGULAR WIRELESS LLC


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(Dollars in millions)


Summarized below are the carrying values for the
major classes of intangible assets that will continue to be
amortized under SFAS No. 142, as well as the carrying
values of those intangible assets which will no longer be
amortized:

|                                               |                                       |              |  |                   |  |                   |   |          |       |              |   |        |      |   |   |       |       |  |   |      |      |  
|---------------------------------------------- | ------------------------------------- | ------------ |  | ----------------- |  | ----------------- | - | -------- | ----- | ------------ | - | ------ | ---- | - | - | ----- | ----- |  | - | ---- | ---- | -
|                                               |                                       |              |  |                   |  |                  
|                                               |                                       |              |  | December 31, 2001 |  | December 31, 2002
|                                               |                                       |              |  |                   |  |                  
|                                               |                                       |              |  | Gross             |  |                   |   | Gross    |       |             
|                                               |                                       |              |  | Carrying          |  | Accumulated       |   | Carrying |       | Accumulated 
|                                               |                                       | Useful Lives |  | Amount            |  | Amortization      |   | Amount   |       | Amortization
|                                               |                                       |              |  |                   |  |                   |   |          |       |             
|Intangible assets subject to amortization:     |                                       |              |  |                   |  |                   |   |          |       |              |   |        |      |   |   |       |       |  |   |     
|                                               | FCC licenses used in Mobitex business |              |  | 4 years           |  |                   | $ | 89       |       |              | $ | (13    | )    |   | $ | 28    |       |  | $ |     |     
|                                               | Customer lists                        |              |  | 5 years           |  |                   |   | 1,070    |       |              |   | (621   | )    |   |   | 1,070 |       |  |   | (771 | )   
|                                               | Other                                 |              |  | 3-5 years         |  |                   |   | 167      |       |              |   | (123   | )    |   |   | 145   |       |  |   | (137 | )   
|                                               |                                       |              |  |                   |  |                   |   |          |       |              |   |        |      |   |   |       |       |  |   |     
|                                               |                                       | Total        |  |                   |  |                   |   | $        | 1,326 |              |   | $      | (757 | ) |   | $     | 1,243 |  |   | $    | (908 | )
|                                               |                                       |              |  |                   |  |                   |   |          |       |              |   |        |      |   |   |       |       |  |   |     
|Intangible assets not subject to amortization: |                                       |              |  |                   |  |                   |   |          |       |              |   |        |      |   |   |       |       |  |   |     
|                                               | FCC licenses                          |              |  |                   |  |                   | $ | 8,481    |       |              | $ | (1,154 | )    |   | $ | 7,359 |       |  | $ |     |     
|                                               |                                       |              |  |                   |  |                   |   |          |       |              |   |        |      |   |   |       |       |  |   |     
|                                               | Goodwill                              |              |  |                   |  |                   | $ | 1,005    |       |              | $ | (146   | )    |   | $ | 844   |       |  | $ |     |     
|                                               |                                       |              |  |                   |  |                   |   |          |       |              |   |        |      |   |   |       |       |  |   |     

The weighted average estimated useful lives of
intangible assets subject to amortization was 4.8 years for
the year ended December 31, 2002, with remaining useful
lives of 1.6 years.

The changes in the carrying amount of goodwill
for the year ended December 31, 2002 are as follows:

|                             |                         |   |     |     |  
|---------------------------- | ----------------------- | - | --- | --- | -
|Balance at December 31, 2001 |                         | $ | 859 |    
|                             | SFAS No. 142 impairment |   |     | (32 | )
|                             | Other                   |   |     | 17  |  
|                             |                         |   |     |    
|Balance at December 31, 2002 |                         | $ | 844 |    
|                             |                         |   |     |    

The following table presents current and
estimated amortization expense for each of the following periods:

|                                                         |      |  |   |     | 
|-------------------------------------------------------- | ---- |  | - | --- | 
|Aggregate amortization expense for the year ended:       |      |  |   |    
|                                                         | 2002 |  | $ | 188 | 
|Estimated amortization expense for the years
    ending: |      |  |   |    
|                                                         | 2003 |  |   | 162 | 
|                                                         | 2004 |  |   | 114 | 
|                                                         | 2005 |  |   | 48  | 
|                                                         | 2006 |  |   | 11  | 
|                                                         | 2007 |  |   | 0   | 

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CINGULAR WIRELESS LLC


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(Dollars in millions)


The following table presents the Companys
2000 and 2001 results, which are presented on a basis comparable
to the 2002 results, adjusted to exclude amortization expense
related to goodwill and indefinite-lived FCC licenses.

|                         |                                 |                      |     |      |  |      |       |     |  |   |       |   | 
|------------------------ | ------------------------------- | -------------------- | --- | ---- |  | ---- | ----- | --- |  | - | ----- | - | 
|                         |                                 |                     
|                         |                                 | For the Period Ended
|                         |                                 | December 31,        
|                         |                                 |                     
|                         |                                 | 2000                 |     | 2001 |  | 2002
|                         |                                 |                      |     |      |  |     
|Net income  as reported |                                 | $                    | 127 |      |  | $    | 1,692 |     |  | $ | 1,207 |  
|                         | Add back: Goodwill amortization |                      |     | 7    |  |      |       | 28  |  |   |       |  | 
|                         | Add back: License amortization  |                      |     | 47   |  |      |       | 202 |  |   |       |  | 
|                         |                                 |                      |     |      |  |      |       |     |  |   |       |  
|Net income  as adjusted |                                 | $                    | 181 |      |  | $    | 1,922 |     |  | $ | 1,207 |  
|                         |                                 |                      |     |      |  |      |       |     |  |   |       |  

5.     Investments in
and Advances to Equity Affiliates

The Company has investments in affiliates for
which it does not have a controlling interest that are accounted
for under the equity method. The more significant of these
investments are GSM Facilities, LLC (Factory), a
jointly-controlled infrastructure venture with T-Mobile for
networks in the New York City metropolitan area, California and
Nevada, and Salmon, formed to bid as a very small
business on FCC licenses and build out and operate
wireless voice and data communications systems using those
licenses.

Investments in and advances to equity affiliates
consist of the following:

|                                               |  |              |       |      |  |   |       | 
|---------------------------------------------- |  | ------------ | ----- | ---- |  | - | ----- | 
|                                               |  |             
|                                               |  | December 31,
|                                               |  |             
|                                               |  | 2001         |       | 2002
|                                               |  |              |       |     
|Investment in Factory                          |  | $            | 1,275 |      |  | $ | 1,966 | 
|Investment in Salmon                           |  |              | 262   |      |  |   | 236   | 
|Advances to Salmon, including accrued interest |  |              | 475   |      |  |   | 101   | 
|Other                                          |  |              | 11    |      |  |   | 13    | 
|                                               |  |              |       |      |  |   |       | 
|                                               |  | $            | 2,023 |      |  | $ | 2,316 | 
|                                               |  |              |       |      |  |   |       | 



| |        
| | -------
| | Factory

In November 2001, the Company and T-Mobile formed
Factory and contributed portions of their existing network
infrastructures in the California, Nevada and New York City
metropolitan area markets. Management control of Factory is
vested in a four-member management committee, to which each
company has the right to appoint two members. The Company does
not have the unilateral ability to control any actions of
Factory. As a result, the Companys interest in Factory is
accounted for as an equity investment. At formation, the Company
contributed network assets to Factory with a carrying value of
$1,271. Both companies buy network services from Factory but
retain ownership and control of their own licenses in those
markets. In the event the Factory venture is terminated, under
certain circumstances, the parties may have the right to
exchange certain licenses. The Company and T-Mobile
independently market their services to customers using their
respective brand names and utilizing their own sales, marketing,
billing and customer care operations. In July 2002, the Company
began marketing its commercial service in the New York City
market and T-Mobile began service in California and Nevada.

The Company and T-Mobile agreed to jointly fund
capital expenditures of Factory. Contributions to Factory are
generally determined by the Companys proportionate share
of the annual capital expenditure requirements based on each
partys incremental growth in minutes of use, and such
contributions are

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CINGULAR WIRELESS LLC


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(Dollars in millions)


accounted for as an increase to the
Companys investment. During the period from
November 1, 2001 to December 31, 2001, the Company
made additional contributions of $208 to Factory, principally
related to capital expenditures in the California and Nevada
markets. During 2002, the Company made net contributions of
assets to Factory of $707. In 2002, the Company also contributed
$225 in cash pursuant to contractual commitments. An additional
$225 contractual commitment is due in 2003.

At December 31, 2002, the Company recorded a
$28 receivable due from Factory related to settlement of the
Companys capital obligations for 2002, which is included
in Due to affiliates, net in the consolidated
balance sheet. During 2001 and 2002, Factory made monthly
payments on approximately $166 and $222, respectively, of the
Companys tower capital lease obligations and other assumed
liabilities, which are reflected in the Companys
investment in Factory.

The Company performs certain technical and
management services for Factory and charges these costs to
Factory. For the period from November 1, 2001 to
December 31, 2001 and for 2002, the Company incurred costs
of $33 and $225, respectively. In turn, the monthly operating
expenses of Factory are charged back to the Company and T-Mobile
based upon their share of the total minutes of use on the
respective networks. Charges for network services provided by
Factory were $36 and $216 for the period from November 1,
2001 to December 31, 2001 and for 2002, respectively. These
charges for network services are included in Cost of
services in the consolidated statements of income. At
December 31, 2001 and 2002, the Company had $19 due from
Factory and $13 due to Factory, respectively, which is included
in Due to affiliates, net in the consolidated
balance sheets.

Factory is expected to incur net losses due to
depreciation and interest expense, which are not reimbursed by
the Company or T-Mobile. For the period from November 1,
2001 to December 31, 2001 and for 2002, the Company
recorded equity in the net loss of Factory of $32 and $241,
respectively. At December 31, 2002, the Companys
economic interest in Factory approximated 75%.



| |       
| | ------
| | Salmon

In November 2000, the Company and Crowley Digital
Wireless, LLC (Crowley Digital) entered into an agreement,
pursuant to which Salmon was formed to bid as a very small
business for certain 1900 MHz band PCS licenses
auctioned by the FCC. The auction ended in January 2001. Salmon
was the successful bidder for, and at the conclusion of the
auction proceedings was granted, 45 licenses, for which Salmon
paid $241. Salmon was also the successful bidder for 34 other
licenses reclaimed from carriers in bankruptcy and auctioned by
the FCC. In December 2002, the FCC released Salmon from its
purchase obligation and returned Salmons remaining
downpayment on the 34 licenses. In January 2003, after a
protracted legal challenge by one of the wireless carriers in
bankruptcy, the U.S. Supreme Court invalidated the auction
results as to the challenged licenses. The FCCs grant of
the 45 unchallenged licenses was not affected by this decision.

Management control of Salmon is vested in Crowley
Digital under the terms of Salmons limited liability
company agreement. Crowley Digital is controlled by George D.
Crowley, Jr. Mr. Crowley is not an employee or director of
the Company, Cingular Wireless Corporation, SBC or BellSouth,
nor has he been previously. Crowley Digital appoints three of
the five members of Salmons management committee. The
Company does not have the unilateral ability to control any
actions by Salmon. As a result, the Companys
non-controlling interest in Salmon is accounted for as an equity
investment. As of December 31, 2002 the Company had an
approximate 80% non-controlling equity interest in Salmon.

In November 2000, Salmon and the Company entered
into a management agreement for a term of eight years, which
became effective in October 2001 when the 45 licenses were
granted. Under this agreement, Salmon hired the Company to act
as the manager of its PCS systems, subject to its oversight

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CINGULAR WIRELESS LLC


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(Dollars in millions)


and control. In addition, pursuant to a trademark
license agreement, Salmon will use Company trademarks in its
business to offer Cingular-branded services. The Company
received a management fee of $10 for the twelve-month period
beginning October 2001. The Company will receive 5% of
Salmons gross revenues thereafter until Salmons
earnings before interest, taxes, depreciation and amortization
is positive for two consecutive quarters and 7% of Salmons
gross revenue thereafter. After September 2002 and until such
time as Salmon has gross revenues, the Company will not receive
a fee for its management services. Salmon can terminate the
management agreement at any time with one years notice.
During 2001 and 2002, the Company earned $3 and $7 in management
fees from Salmon, respectively. Salmon had no gross revenues in
2002.

Crowley Digital has the right to put its interest
in Salmon to the Company at a cash price equal to Crowley
Digitals initial investment plus a specified rate of
return. The put right can be exercised at certain times, and the
Company estimates that the earliest exercise period will begin
in September 2005 and the latest exercise period will end in
April 2008. The present value of this put obligation, estimated
at approximately $110 and $126 as of December 31, 2001 and
2002, respectively, is included in Other noncurrent
liabilities in the consolidated balance sheets. The put
obligation results in a basis difference in the Companys
investment in Salmon.

The Company entered into a credit agreement with
Salmon under which the Company will, upon Salmons request,
provide substantially all of the capital Salmon will require to
pay for licenses, build out its system and fund working capital
requirements. The agreement extends until November 2006, and
funding will be provided through secured loans. Salmon has
scheduled the launch of two of its markets in 2003. The
remaining 43 markets are scheduled to launch during 2005. The
Companys estimate of the costs to build out Salmons
system is approximately $350 to $500. Loans are repayable no
later than May 2008, with interest at a rate of 9% per annum, or
14% per annum if Salmon terminates the management agreement or
trademark license agreement. Interest is not payable in cash
until two years after the substantial completion of the
build-out of the Salmon system in a manner that satisfies FCC
rules (or beginning on the date the management or trademark
license agreement has been terminated). For the three years
thereafter, only portions of the interest are payable in cash.
There is no scheduled amortization for the loans prior to the
maturity date.

For the periods ended December 31, 2000,
2001 and 2002, the Company made advances and loans to Salmon of
$239, $240 and $25, respectively, and recognized interest income
on the loan balances of $2, $41 and $22, respectively. Salmon
used funds received from the Company to make full payment on the
45 licenses that the FCC granted to Salmon and for the
downpayment on the 34 challenged licenses. In April and December
2002, the FCC refunded to Salmon the auction deposits pertaining
to the challenged licenses of $358 and $63, respectively, and
Salmon used these proceeds to repay $421 in principal and
interest to the Company.

In October 2001, the Company contributed $191 in
equity to Salmon. Until Salmons networks are built out and
it has acquired a significant number of subscribers, it is
expected to generate significant operating losses. Crowley
Digital is not committed to provide equity funding in excess of
its initial capital contribution of $50. As a result, the
Company will recognize 100% of Salmons losses at such time
as Crowley Digitals capital contribution has been
eliminated due to its proportionate share of Salmons
losses. For the years ended December 31, 2001 and 2002, the
Company recorded equity in the net losses on Salmon of $43 and
$29, respectively. Additionally, the Company recorded
capitalized interest on its investment in and advances to Salmon
of $3 in both 2001 and 2002.

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CINGULAR WIRELESS LLC


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(Dollars in millions)


Summarized unaudited financial information with
respect to Factory and Salmon is as follows:

|                          |                        |              |   |       |  |  |   |       | 
|------------------------- | ---------------------- | ------------ | - | ----- |  |  | - | ----- | 
|                          |                        |             
|                          |                        | December 31,
|                          |                        |             
|                          |                        | 2001         |   | 2002 
|                          |                        |              |   |      
|Balance Sheet Information |                        |              |   |       |  |  |   |      
|                          | Current assets         |              | $ | 25    |  |  | $ | 23    | 
|                          | Noncurrent assets      |              |   | 2,594 |  |  |   | 3,216 | 
|                          | Current liabilities    |              |   | 31    |  |  |   | 46    | 
|                          | Noncurrent liabilities |              |   | 643   |  |  |   | 300   | 
|                          | Net equity             |              |   | 1,945 |  |  |   | 2,893 | 

|                             |                                             |                      |   |      |   |      |   |     |   |  |   |      |  
|---------------------------- | ------------------------------------------- | -------------------- | - | ---- | - | ---- | - | --- | - |  | - | ---- | -
|                             |                                             |                     
|                             |                                             | For the Period Ended
|                             |                                             | December 31,        
|                             |                                             |                     
|                             |                                             | 2000                 |   | 2001 |   | 2002
|                             |                                             |                      |   |      |   |     
|Income Statement Information |                                             |                      |   |      |   |      |   |     |   |  |   |     
|                             | Revenues                                    |                      | $ |     |   |      | $ | 50  |   |  | $ | 325  |  
|                             | Costs and expenses (excluding depreciation) |                      |   | 1    |   |      |   | 57  |   |  |   | 327  |  
|                             | Depreciation expense                        |                      |   |     |   |      |   | 41  |   |  |   | 324  |  
|                             | Operating loss                              |                      |   | (1   | ) |      |   | (48 | ) |  |   | (326 | )
|                             | Interest expense                            |                      |   | 2    |   |      |   | 40  |   |  |   | 38   |  
|                             | Net loss                                    |                      |   | (3   | ) |      |   | (88 | ) |  |   | (364 | )

6.     Accrued
Liabilities

Accrued liabilities are summarized as follows:

|                                      |  |              |       |      |  |   |       | 
|------------------------------------- |  | ------------ | ----- | ---- |  | - | ----- | 
|                                      |  |             
|                                      |  | December 31,
|                                      |  |             
|                                      |  | 2001         |       | 2002
|                                      |  |              |       |     
|Accrued fixed asset purchases         |  | $            | 705   |      |  | $ | 443   | 
|Taxes other than income               |  |              | 217   |      |  |   | 231   | 
|Payroll and other related liabilities |  |              | 187   |      |  |   | 169   | 
|Agent commissions                     |  |              | 104   |      |  |   | 158   | 
|Advertising                           |  |              | 25    |      |  |   | 38    | 
|Other                                 |  |              | 315   |      |  |   | 169   | 
|                                      |  |              |       |      |  |   |       | 
|Total accrued liabilities             |  | $            | 1,553 |      |  | $ | 1,208 | 
|                                      |  |              |       |      |  |   |       | 

7.     Debt

Debt Maturing
Within One Year

Debt maturing within one year is summarized as
follows:

|                                     |  |              |    |      |  |   |    | 
|------------------------------------ |  | ------------ | -- | ---- |  | - | -- | 
|                                     |  |             
|                                     |  | December 31,
|                                     |  |             
|                                     |  | 2001         |    | 2002
|                                     |  |              |    |     
|Commercial paper                     |  | $            | 27 |      |  | $ |   | 
|Current maturities of long-term debt |  |              | 38 |      |  |   | 45 | 
|                                     |  |              |    |      |  |   |    | 
|Debt maturing within one year        |  | $            | 65 |      |  | $ | 45 | 
|                                     |  |              |    |      |  |   |    | 

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CINGULAR WIRELESS LLC


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(Dollars in millions)


At December 31, 2001 and 2002, the Company
had a commercial paper program and a $3,000 and $1,500 unsecured
364-day revolving bank credit facility, respectively, to support
the commercial paper program. JPMorgan Chase Bank serves as
administrative agent for the facility. The bank credit facility
contains customary events of default and covenants, including a
covenant to maintain a specified debt (excluding subordinated
shareholder loans) to trailing four quarters EBITDA ratio, a
limitation on mergers and sale of all or substantially all of
the Companys assets and a negative pledge. The Company is
in compliance with all such ratios and covenants under the bank
credit facility, and there are no other material covenants that
the Company is subject to under other agreements. The credit
agreement provides that each lender will have the option to
terminate its commitment to make additional loans and declare
all outstanding amounts to be due and payable upon a change in
control of the Company. The credit facility also gives the
Company the option to convert any revolving loans outstanding on
the maturity date to one-year term loans. This credit facility
expires November 17, 2003. The weighted-average interest
rate on commercial paper borrowings at December 31, 2001
was 2.5%. At December 31, 2001, the Company had no
outstanding borrowings under the credit facility. At
December 31, 2002, the Company had no outstanding
borrowings under the commercial paper program or the credit
facility.



| |               
| | --------------
| | Long-Term Debt

Long-term debt is summarized as follows:

|                                                                    |                                                                                                                   |              |        |      |  |   |        |     | 
|------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------- | ------------ | ------ | ---- |  | - | ------ | --- | 
|                                                                    |                                                                                                                   |             
|                                                                    |                                                                                                                   | December 31,
|                                                                    |                                                                                                                   |             
|                                                                    |                                                                                                                   | 2001         |        | 2002
|                                                                    |                                                                                                                   |              |        |     
|Due to affiliates, 7.5%                                             |                                                                                                                   | $            | 9,678  |      |  | $ | 9,678  |    
|Due to external parties:                                            |                                                                                                                   |              |        |      |  |   |        |    
|                                                                    | 5.625% Senior Notes, due December 2006                                                                            |              |        | 500  |  |   |        | 500 | 
|                                                                    | 6.5% Senior Notes, due December 2011                                                                              |              |        | 750  |  |   |        | 750 | 
|                                                                    | 7.125% Senior Notes, due December 2031                                                                            |              |        | 750  |  |   |        | 750 | 
|                                                                    | Capital leases, 8.0% and 9.6%                                                                                     |              |        | 648  |  |   |        | 778 | 
|                                                                    | Capital leases, Japanese Yen and U.S. Dollar
    denominated, 4.55%  7.13% in 2001 and
    4.55%  7.08% in 2002 |              |        | 110  |  |   |        | 83  | 
|                                                                    | Other                                                                                                             |              |        | 80   |  |   |        | 64  | 
|                                                                    |                                                                                                                   |              |        |      |  |   |        |    
|Total long-term debt, including discount and
    current maturities |                                                                                                                   |              | 12,516 |      |  |   | 12,603 |    
|Unamortized discount on Senior Notes                                |                                                                                                                   |              | (12    | )    |  |   | (12    | )  
|Current maturities of long-term debt                                |                                                                                                                   |              | (38    | )    |  |   | (45    | )  
|                                                                    |                                                                                                                   |              |        |      |  |   |        |    
|Total long-term debt                                                |                                                                                                                   | $            | 12,466 |      |  | $ | 12,546 |    
|                                                                    |                                                                                                                   |              |        |      |  |   |        |    



| |                       
| | ----------------------
| | Debt due to Affiliates

The debt due to affiliates represents the net
amount of debt due to SBC and BellSouth, as provided for in the
Contribution and Formation Agreement. Such amounts have a fixed
interest rate of 7.5%. Interest accrues and is payable monthly.
Interest expense on the affiliate loans for the periods ended
December 31, 2000, 2001 and 2002 was $219, $735 and $726,
respectively. In conjunction with the execution of the
Companys credit facility in November 2002, SBC and
BellSouth extended the maturity of their affiliate loans from
March 31, 2004 to March 31, 2005. The Company may,
however, prepay the affiliate loans at any time, subject to the
provisions described below, or further extend their maturity to
the extent required in connection with the credit facility, if
approved by SBC and BellSouth.

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CINGULAR WIRELESS LLC


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(Dollars in millions)


SBC and BellSouth have agreed to subordinate
their repayment rights applicable to the affiliate loans to the
repayment rights of the senior debt. Senior debt includes the
Companys Senior Notes, commercial paper, any debt
outstanding under its bank credit facility, as well as bank
notes and other borrowings from external parties designated as
such and to which SBC and BellSouth have specifically agreed to
be subordinate. The payment of principal and interest on the
subordinated affiliate loans by the Company is prohibited in the
event of bankruptcy or an event of default in the payment or
prepayment of any principal of or interest on any senior debt,
or in the event of an acceleration of the subordinated debt upon
its default, until the senior debt has been repaid in full. The
payment of principal and interest on the subordinated affiliate
loans is also prohibited, with limited exceptions, during a
covenant or other non-payment default under the credit facility
(unless waived by the banks), but may continue during a
non-payment default on the Senior Notes or other senior debt.



| |             
| | ------------
| | Senior Notes

In December 2001, the Company completed the
private placement of $2,000 of Senior Notes under Rule 144A
of the Securities Act of 1933. The Senior Notes are unsecured
obligations and rank equally with all other unsecured and
unsubordinated indebtedness. In 2002, the Company filed with the
SEC a registration statement on Form S-4 pertaining to the
exchange of the private placement Senior Notes for Senior Notes
that are registered under the securities laws in identical
principal amounts and with substantially identical terms.
Interest on the Senior Notes is payable in arrears semi-annually
on June 15 and December 15, beginning June 15,
2002.

The Senior Notes are governed by an indenture
with Bank One Trust Company, N.A., which acts as trustee. The
indenture provides that the Company will not subject its
property or assets to any mortgage or other encumbrance unless
the Senior Notes are secured equally and ratably with other
indebtedness that is secured by that property or assets. There
is no sinking fund or mandatory redemption applicable to the
Senior Notes. The Senior Notes are redeemable, in whole or in
part, at any time at a price equal to their principal amount
plus any accrued interest and any make-whole
premium, which is designed to compensate the investors for early
payment of their investment. The premium is the excess of
(i) the present value of all future scheduled principal and
interest payments of the Senior Notes to be redeemed, calculated
by discounting the aggregate amount of such payments by a
percentage factor related to the yield to maturity on U.S.
Treasury securities equal to the then remaining maturity of the
Senior Notes being prepaid, over (ii) the principal amount
of the Notes to be redeemed.



| |                         
| | ------------------------
| | Capital Leases and Other

The Company has entered into capital leases
primarily for the use of communications towers. See Note 16 for
further discussions regarding these towers.

In December 2000, the Company repaid a note
payable to Bank of America in the amount of $310.

Cash paid for interest on debt for the periods
ended December 31, 2000, 2001 and 2002 was $339, $883 and
$905, respectively. These amounts include cash paid for interest
on debt due to affiliates of $324, $805 and $726 for the periods
ended December 31, 2000, 2001 and 2002, respectively.

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CINGULAR WIRELESS LLC


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(Dollars in millions)


Maturities of long-term debt outstanding,
including capital lease obligations, at December 31, 2002
are summarized below:

|                            |                                     |      |        |                |  |       |       |       |  |   |        |       | 
|--------------------------- | ----------------------------------- | ---- | ------ | -------------- |  | ----- | ----- | ----- |  | - | ------ | ----- | 
|                            |                                     | Debt |        | Capital Leases |  | Total
|                            |                                     |      |        |                |  |      
|Maturities                  |                                     |      |        |                |  |       |       |       |  |   |        |      
|                            | 2003                                |      | $      | 3              |  |       | $     | 105   |  |   | $      | 108   | 
|                            | 2004                                |      |        | 51             |  |       |       | 155   |  |   |        | 206   | 
|                            | 2005                                |      |        | 9,680          |  |       |       | 119   |  |   |        | 9,799 | 
|                            | 2006                                |      |        | 502            |  |       |       | 120   |  |   |        | 622   | 
|                            | 2007                                |      |        | 2              |  |       |       | 123   |  |   |        | 125   | 
|                            | Thereafter                          |      |        | 1,504          |  |       |       | 1,723 |  |   |        | 3,227 | 
|                            |                                     |      |        |                |  |       |       |       |  |   |        |      
|Total minimum payments      |                                     |      | 11,742 |                |  |       | 2,345 |       |  |   | 14,087 |      
|                            | Less capital lease imputed interest |      |        |               |  |       |       | 925   |  |   |        | 925   | 
|                            | Less capital lease executory costs  |      |        |               |  |       |       | 559   |  |   |        | 559   | 
|                            |                                     |      |        |                |  |       |       |       |  |   |        |      
|Total obligations           |                                     | $    | 11,742 |                |  | $     | 861   |       |  | $ | 12,603 |      
|                            | Less current portion                |      |        | 3              |  |       |       | 42    |  |   |        | 45    | 
|                            |                                     |      |        |                |  |       |       |       |  |   |        |      
|Total long-term obligations |                                     | $    | 11,739 |                |  | $     | 819   |       |  | $ | 12,558 |      
|                            |                                     |      |        |                |  |       |       |       |  |   |        |      

8.     Financial
Instruments

The carrying amounts of cash and cash
equivalents, accounts receivable, accounts payable, advanced
billing and customer deposits and other current liabilities are
reasonable estimates of their fair value due to the short-term
nature of these instruments. At December 31, 2001, the
carrying value of the Senior Notes issued in December 2001
approximated fair value. At December 31, 2002, the fair
value of the Senior Notes was $2,121 based on their quoted
market prices. The carrying value of the long-term debt due to
affiliates approximates fair value since the Company may prepay
the debt at any time, without penalty.

The Company maintains foreign exchange-forward
contracts to hedge exposures to foreign exchange risk associated
with Japanese Yen-denominated capital lease obligations. The
contracts generally require the Company to exchange U.S. dollars
for Japanese Yen at maturity at rates agreed to at the inception
of the contracts. The contracts, which have an aggregate
notional amount of $138 and $110, respectively, at
December 31, 2001 and 2002, expire at various dates from
2003 to 2005. The notional amount of the foreign
exchange-forward contracts equals the future minimum lease
payments required to be paid in Japanese Yen. The contracts are
designed as cash flow hedges in accordance with SFAS
No. 138, Accounting for Certain Derivative Instruments
and Certain Hedging Instruments. The fair values of the
foreign exchange-forward contracts were losses of $42 and $35 at
December 31, 2001 and 2002, respectively, and are included
in Accrued liabilities and Other noncurrent
liabilities depending on the timing of the future contract
payments. The impact to other comprehensive income for the
periods ended December 31, 2000, 2001 and 2002 was not
material.

The Company could be at risk if the
counterparties do not contractually comply. Should the
counterparties not comply, the ultimate impacts will be a
function of the difference, if any, in the cost of acquiring
Japanese Yen at maturity versus the contractually agreed upon
price.

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CINGULAR WIRELESS LLC


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(Dollars in millions)


9.     Concentrations
of Risk

The Company relies on local and long-distance
telephone companies and other companies to provide certain
communications services. Although management believes
alternative telecommunications facilities could be found in a
timely manner, any disruption of these services could
potentially have an adverse impact on operating results.

The Company relies on roaming agreements with
other wireless carriers to permit the Companys subscribers
to use their GSM and TDMA networks in areas not covered by the
Companys networks. If these providers decide not to
continue those agreements due to a change in ownership or other
circumstance, this would cause a loss of service in certain
areas and possible loss of customers.

As discussed in Note 5, the Company has entered
into a network infrastructure venture with T-Mobile to share
infrastructure and save on the cost of building and maintaining
its own network. If the Company experiences disagreements with
T-Mobile, it could adversely affect the Companys ability
to serve customers in certain geographic markets.

Although the Company attempts to maintain
multiple vendors to the extent practicable, its handset
inventory and network infrastructure equipment, which are
important components of its operations, are currently acquired
from only a few sources. If the suppliers are unable to meet the
Companys needs as it builds out and upgrades its network
infrastructure and sells service and equipment, delays and
increased costs in the expansion of the Companys network
infrastructure or losses of potential customers could result,
which would adversely affect operating results.

Financial instruments that potentially subject
the Company to credit risks consist principally of trade
accounts receivable. Concentrations of credit risk with respect
to these receivables are limited due to the composition of the
customer base, which includes a large number of individuals and
businesses. No customer accounted for more than 10% of
consolidated revenues in all periods presented.

Approximately 17,300, or 51%, of the
Companys employees are represented by the Communications
Workers of America, with contracts expiring on various dates
between February 2004 and January 2007. Most of the contracts
contain no-strike clauses. The Company is contractually required
to maintain a position of neutrality and to allow card-check
balloting with respect to unionization and will support the
determination of its employees.

10.     Related Party
Transactions

In addition to the affiliate transactions
described elsewhere in these financial statements, other
significant transactions with related parties are summarized in
the succeeding paragraphs.

On October 2, 2000, the Company entered into
a transition services agreement with BellSouth and SBC, pursuant
to which BellSouth and SBC each provided transition services and
products for a limited period of time. The services provided by
both BellSouth and SBC included government and regulatory
affairs, finance, compensation and benefit accounting, human
resources, internal audit, risk management, technical support,
marketing, research and development, procurement, real estate,
legal, security and tax. The fees were determined based upon the
costs of providing the expected level of services. As of
December 31, 2001, the Company had terminated most of these
services and assumed them internally.

For the periods ended December 31, 2000,
2001 and 2002, the Company incurred charges from SBC and
BellSouth affiliates for transition services of $153, $267 and
$17, respectively. These charges are primarily included in
Selling, general and administrative in the
consolidated statements of income.

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CINGULAR WIRELESS LLC


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(Dollars in millions)


Included in affiliate charges are services under
contract with Amdocs Limited (Amdocs), a software company
affiliated with SBC, to provide ongoing information systems
development and support services. Charges for Amdocs development
and support services for the periods ended December 31,
2000, 2001 and 2002 were $16, $63 and $67, of which $11, $37 and
$31 were capitalized, respectively. Certain select officers of
the Company own shares in Amdocs that were issued under
compensation plans when these officers were employed by SBC.

The Company also entered into wireless agency
agreements with subsidiaries of SBC and BellSouth. Such
subsidiaries and any of their affiliates that make an election
to do so will act as authorized agents exclusively on the
Companys behalf for the sale of its wireless services to
subscribers in SBCs and BellSouths respective
incumbent service territories. The Company is free to contract
with other agents, including retailers and other distributors,
for the sale of its wireless services in both of the
members incumbent service territories and elsewhere
throughout the United States. In addition to the unilateral
rights of SBC and BellSouth and their affiliates to terminate
after October 2, 2003 and to the Companys right to
terminate in certain events, each wireless agency agreement
terminates upon breach, mutual agreement of the parties or on
December 31, 2050. For the periods ended December 31,
2000, 2001 and 2002, the Company incurred charges of $9, $33 and
$46, respectively, from SBC and BellSouth and their affiliates
for agent commissions and compensation paid to affiliates and
agents. These charges are included in Selling, general and
administrative in the consolidated statements of income.

The Company incurred local interconnect and long
distance charges from SBC and BellSouth and their affiliates for
the periods ended December 31, 2000, 2001 and 2002 of $103,
$385 and $663, respectively, which are included in Cost of
services in the consolidated statements of income. These
charges also include amounts paid to SBC related to the
infrastructure venture with T-Mobile.

The Company had receivables from affiliates of
$85 and $97 and payables to affiliates of $139 and $142 at
December 31, 2001 and 2002, respectively.

11.     Impairment of
Long-lived Assets

During the fourth quarter of 2002, the Company
evaluated the recoverability of the long-lived assets, including
property and equipment and FCC licenses, of its Mobitex data
business. While the business continues to generate positive
operating cash flows, the timing of the Companys migration
to data services over its cellular/ PCS networks, as well as
other competitive and technological factors, have decreased the
cash flows that the Company expected to generate from continuing
to operate the Mobitex data network. In the fourth quarter of
2002, the Company determined that the estimated future
undiscounted cash flows were less than the carrying value of the
Mobitex data business long-lived assets. Accordingly, the
Company adjusted the carrying value of the Mobitex data business
long-lived assets to their estimated fair value, resulting in a
noncash impairment loss of $104. Fair value was determined using
a discounted cash flow approach. The impairment loss is included
in Cost of services in the consolidated statement of
income. The impairment loss was comprised of $71 of property,
plant and equipment and $33 of FCC licenses. In conjunction with
the impairment test, the Company reviewed the remaining useful
lives of the Mobitex data business long-lived assets and
determined the lives to be appropriate.

The Companys cellular/ PCS networks are
currently equipped with digital transmission technologies, TDMA
and GSM. Additionally, the TDMA technologies are deployed over
two different spectrum frequencies, 850 MHz (cellular) and
1900 MHz (PCS). As discussed in Note 3, the Company is currently
in the process of adding GSM equipment throughout its TDMA
markets to provide a common voice standard and to add
technologies for high-speed data services. In the fourth quarter
of 2002, the Company finalized market specific execution
strategies concurrent with the development and approval of the
2003 capital budget. In general, the Company has adequate
spectrum depth in its 850 MHz markets to

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CINGULAR WIRELESS LLC


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(Dollars in millions)


operate both technologies. In several smaller PCS
markets, where the Company has only 10 MHz of available
spectrum, it does not have adequate spectrum depth to
concurrently provide wireless services using both technologies.
In these markets the Company must retire the TDMA network assets
in order to deploy GSM technology. The TDMA technology assets
used in 1900 MHz markets are frequency specific and cannot be
redeployed for use in the Companys other 850 MHz markets.
Due to the anticipated near-term removal of these assets from
service during the period ranging from the third quarter of 2003
to the fourth quarter of 2004, the Company performed an
impairment test as required by SFAS No. 144 to determine
whether the future cash flows of these markets were sufficient
to recover the carrying value of the related TDMA assets as of
December 31, 2002. In the fourth quarter of 2002, the
Company recognized a noncash impairment charge of $47 related to
its 1900 MHz TDMA assets in ten markets located in the
southeastern and southwestern United States. The impairment loss
was measured as the difference between the carrying value of
these assets at December 31, 2002 and their fair value.
Fair value was determined using a discounted cash flow approach.
The impairment loss is included in Cost of services
in the consolidated statement of income. Additionally, the
Company plans to shorten the remaining useful lives of the
assets in these markets effective January 1, 2003.

12.     Reorganization
Costs

In August 2002, the Company announced plans to
reorganize its sales operations and to reduce its workforce in
these and other functional areas of the business. It was
expected that approximately 2,500 to 3,000 positions would be
eliminated, with more than one-third occurring through the
elimination of temporary positions and normal attrition.
Substantially all employees affected received notification in
mid-September 2002. At December 31, 2002 approximately
1,600 employees had been terminated. Employee severance costs
were accounted for in accordance with SFAS No. 112,
Employers Accounting for Postemployment Benefits.
For other costs of the reorganization, the Company has adopted
SFAS No. 146 (see Note 1) and will account for the
costs of this reorganization when the liability is incurred. The
costs associated with the reorganization are not expected to
exceed $70. A summary of total expected costs to be incurred and
the amounts incurred through December 31, 2002 is presented
in the table below.

|                            |                                      |                |    |                   |   |   |    |    |  
|--------------------------- | ------------------------------------ | -------------- | -- | ----------------- | - | - | -- | -- | -
|                            |                                      |                |    | Costs Incurred   
|                            |                                      | Costs Expected |    | through          
|                            |                                      | to be Incurred |    | December 31, 2002
|                            |                                      |                |    |                  
|Termination Benefits:       |                                      |                |    |                   |   |   |    |   
|                            | Severance and related costs          |                | $  | 31                |   |   | $  | 29 |  
|                            | Outplacement                         |                |    | 1                 |   |   |    |   |  
|                            | OPEB curtailment gain                |                |    | (1                | ) |   |    | (1 | )
|Contract Termination Costs: |                                      |                |    |                   |   |   |    |   
|                            | Lease terminations                   |                |    | 14                |   |   |    | 4  |  
|                            | Write-offs of leasehold improvements |                |    | 11                |   |   |    | 4  |  
|Other Associated Costs:     |                                      |                |    |                   |   |   |    |   
|                            | Relocation and other                 |                |    | 14                |   |   |    | 5  |  
|                            |                                      |                |    |                   |   |   |    |   
|Total                       |                                      | $              | 70 |                   |   | $ | 41 |   
|                            |                                      |                |    |                   |   |   |    |   

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CINGULAR WIRELESS LLC


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(Dollars in millions)


The remaining costs to be incurred are expected
to be recognized in the first half of 2003. Costs incurred
through December 31, 2002 in connection with this
reorganization plan are principally reflected in Selling,
general and administrative expenses in the consolidated
statement of income.

Reorganization costs accrued and paid at
December 31, 2002 are summarized as follows:

|                              |  |   |     |  
|----------------------------- |  | - | --- | -
|Balance at September 30, 2002 |  | $ | 31  |  
|Liability incurred            |  |   | 2   |  
|Amounts paid                  |  |   | (17 | )
|                              |  |   |     |  
|Balance at December 31, 2002  |  | $ | 16  |  
|                              |  |   |     |  

13.     Income
Taxes

Substantially all of the operating units
controlled and consolidated by the Company are either
partnerships or limited liability entities that are disregarded
entities or taxed as partnerships under federal and state income
tax laws. Therefore, income tax items flow through to the
members or partners. However, the Company has corporate
subsidiaries and LLC subsidiaries that are taxpayers in some
jurisdictions and will record income tax expense. We do not
expect that the Companys income tax expense will be
material in the future.

The Company is required to make periodic
distributions to its members on a pro rata basis in accordance
with each members ownership interests in amounts
sufficient to permit members to pay the tax liabilities
resulting from allocations of income tax items from the Company.

At December 31, 2001 and 2002, the reported
amounts of the Companys net assets exceeded their tax
bases by approximately $7,900 and $10,000, respectively. This
basis differential is principally attributable to property,
plant and equipment and intangible assets.

At December 31, 2001 and 2002, deferred tax
liabilities of $183 and $180 are included in Other
noncurrent liabilities in the consolidated balance sheets.
Of these amounts, $173 and $169 are attributable to the Puerto
Rico wireless operations contributed in September 2001 as
discussed in Note 2. These Puerto Rico deferred tax liabilities
principally relate to book and tax basis differences on
intangible assets.

14.     Employee
Benefits

In conjunction with the contribution of their
U.S. wireless assets and operations to the Company, SBC and
BellSouth transferred their respective wireless employees and
related obligations and liabilities to one or more of their
wholly-owned subsidiaries, which were leasing companies. Under
employee leasing agreements, the leasing companies agreed to
lease all of their employees and any employees hired after
October 2, 2000 to the Company until the leasing companies
were contributed to the Company. During this period, the
employees were solely employed by the leasing companies and
participated in their respective member company employee benefit
plans. The leasing companies assumed from each of BellSouth and
SBC and their respective affiliates certain employment-related
obligations and liabilities relating to the member
companies compensation and benefit plans prior to their
contribution. For the periods ended December 31, 2000 and
2001, prior to their contribution to the Company, the leasing
companies billed the Company $366 and $1,452, respectively, for
payroll costs including payroll taxes, benefits and relocation
costs. In October and December 2001, the leasing companies were
contributed to the Company.

83



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CINGULAR WIRELESS LLC


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(Dollars in millions)




| |                                          
| | -----------------------------------------
| | Pensions and Post-Retirement
    Benefits

Substantially all of the Companys employees
are covered by one of two noncontributory qualified pension
plans. Participation in the Companys plans commenced
November 1, 2001, following the initial contribution of
leasing companies to the Company. Management and some
non-management employees participate in a cash balance plan,
under which they can elect to receive their pensions in a lump
sum. The pension benefit formula for most non-management
employees is based on a flat dollar amount per year of service
according to job classification. These benefits are typically
paid as an annuity, although some non-management employees can
elect a lump sum payment.

The projected benefit obligation of the
Companys pension plans is the actuarial present value of
all benefits attributed by the pension benefit formula to
previously rendered employee service. It is measured based on
assumptions concerning future interest rates, employee
compensation levels, retirement date and mortality. Actual
experience may differ from the actuarial assumptions, and the
benefit obligation will be affected.

Nonbargained employees and their covered
dependents who meet certain eligibility requirements will be
provided access to certain post-retirement medical and dental
benefits at no cost to the Company. For bargained employees and
a closed group of non-bargained transitional employees, the
Company provides certain retiree medical, dental and life
insurance benefits under various plans and accrues actuarially
determined post-retirement benefit costs as active employees
earn these benefits. These post-retirement plans are not funded.

The pension plan and post-retirement benefit plan
funded status and amounts recognized in the consolidated balance
sheets at December 31, 2001 and 2002 are as follows:

|                                        |  |              |     |              |  |      |     |      |  |   |    |  |  |   |    |  
|--------------------------------------- |  | ------------ | --- | ------------ |  | ---- | --- | ---- |  | - | -- |  |  | - | -- | -
|                                        |  |              |     |              |  |     
|                                        |  |              |     | Post-       
|                                        |  | Pension      |     | Retirement  
|                                        |  | December 31, |     | December 31,
|                                        |  |              |     |             
|                                        |  | 2001         |     | 2002         |  | 2001 |     | 2002
|                                        |  |              |     |              |  |      |     |     
|Change in Benefit Obligation            |  |              |     |              |  |      |     |      |  |   |    |  |  |   |    |  
|Benefit obligation at beginning of year |  | $            |    |              |  | $    | 345 |      |  | $ |   |  |  | $ | 65 |  
|Obligations transferred by members      |  |              | 330 |              |  |      |    |      |  |   | 46 |  |  |   |   |  
|Service cost                            |  |              | 3   |              |  |      | 62  |      |  |   | 1  |  |  |   | 6  |  
|Interest cost                           |  |              | 2   |              |  |      | 24  |      |  |   |   |  |  |   | 4  |  
|Amendments                              |  |              |    |              |  |      | 1   |      |  |   | 8  |  |  |   |   |  
|Actuarial loss                          |  |              | 10  |              |  |      | 1   |      |  |   | 10 |  |  |   | 10 |  
|Curtailments                            |  |              |    |              |  |      |    |      |  |   |   |  |  |   | (1 | )
|Benefits paid                           |  |              |    |              |  |      | (20 | )    |  |   |   |  |  |   |   |  
|                                        |  |              |     |              |  |      |     |      |  |   |    |  |  |   |    |  
|Benefit obligation at end of year       |  | $            | 345 |              |  | $    | 413 |      |  | $ | 65 |  |  | $ | 84 |  
|                                        |  |              |     |              |  |      |     |      |  |   |    |  |  |   |    |  

84



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CINGULAR WIRELESS LLC


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(Dollars in millions)


|                                               |  |              |     |              |  |      |     |      |  |   |   |  |  |   |   | 
|---------------------------------------------- |  | ------------ | --- | ------------ |  | ---- | --- | ---- |  | - | - |  |  | - | - | 
|                                               |  |              |     |              |  |     
|                                               |  |              |     | Post-       
|                                               |  | Pension      |     | Retirement  
|                                               |  | December 31, |     | December 31,
|                                               |  |              |     |             
|                                               |  | 2001         |     | 2002         |  | 2001 |     | 2002
|                                               |  |              |     |              |  |      |     |     
|Change in Plan Assets                          |  |              |     |              |  |      |     |      |  |   |   |  |  |   |   | 
|Fair value of plan assets at beginning of year |  | $            |    |              |  | $    | 508 |      |  | $ |  |  |  | $ |  | 
|Plan assets due from members                   |  |              | 508 |              |  |      | 6   |      |  |   |  |  |  |   |  | 
|Actual return on plan assets                   |  |              |    |              |  |      | (44 | )    |  |   |  |  |  |   |  | 
|Benefits paid                                  |  |              |    |              |  |      | (20 | )    |  |   |  |  |  |   |  | 
|                                               |  |              |     |              |  |      |     |      |  |   |   |  |  |   |   | 
|Fair value of plan assets at end of year       |  | $            | 508 |              |  | $    | 450 |      |  | $ |  |  |  | $ |  | 
|                                               |  |              |     |              |  |      |     |      |  |   |   |  |  |   |   | 

|                                                                        |  |              |     |              |  |      |     |      |  |   |     |   |  |   |     |  
|----------------------------------------------------------------------- |  | ------------ | --- | ------------ |  | ---- | --- | ---- |  | - | --- | - |  | - | --- | -
|                                                                        |  |              |     |              |  |     
|                                                                        |  |              |     | Post-       
|                                                                        |  | Pension      |     | Retirement  
|                                                                        |  | December 31, |     | December 31,
|                                                                        |  |              |     |             
|                                                                        |  | 2001         |     | 2002         |  | 2001 |     | 2002
|                                                                        |  |              |     |              |  |      |     |     
|Funded status                                                           |  | $            | 163 |              |  | $    | 37  |      |  | $ | (65 | ) |  | $ | (84 | )
|Unrecognized transition asset                                           |  |              |    |              |  |      |    |      |  |   | 1   |   |  |   | 1   |  
|Unrecognized prior service cost                                         |  |              | 22  |              |  |      | 20  |      |  |   | 11  |   |  |   | 9   |  
|Unrecognized net actuarial (gain) loss                                  |  |              | (15 | )            |  |      | 51  |      |  |   | 4   |   |  |   | 14  |  
|                                                                        |  |              |     |              |  |      |     |      |  |   |     |   |  |   |     |  
|Prepaid pension cost and accrued post-retirement
    benefit obligation |  | $            | 170 |              |  | $    | 108 |      |  | $ | (49 | ) |  | $ | (60 | )
|                                                                        |  |              |     |              |  |      |     |      |  |   |     |   |  |   |     |  

In connection with the contribution of various
leasing companies to the Company, SBC and BellSouth agreed to
transfer pension assets from the qualified trusts to the trusts
established for the Companys pension plans. Plan assets
primarily consist of equity and fixed income securities. The
Company did not make any contributions to the pension plans
during 2001 or 2002.

Net pension expense and post-retirement benefit
expense recognized subsequent to the contribution of the leasing
companies is composed of the following:

|                                             |  |         |   |            |  |      |     |      |  |   |   |  |  |   |    |  
|-------------------------------------------- |  | ------- | - | ---------- |  | ---- | --- | ---- |  | - | - |  |  | - | -- | -
|                                             |  |         |   |            |  |     
|                                             |  |         |   | Post-     
|                                             |  | Pension |   | Retirement
|                                             |  |         |   |           
|                                             |  | 2001    |   | 2002       |  | 2001 |     | 2002
|                                             |  |         |   |            |  |      |     |     
|Service cost                                 |  | $       | 3 |            |  | $    | 62  |      |  | $ | 1 |  |  | $ | 6  |  
|Interest cost                                |  |         | 2 |            |  |      | 24  |      |  |   |  |  |  |   | 4  |  
|Expected return on plan assets               |  |         |  |            |  |      | (27 | )    |  |   |  |  |  |   |   |  
|Amortization of prior service cost           |  |         |  |            |  |      | 3   |      |  |   |  |  |  |   | 2  |  
|Recognized actuarial gain                    |  |         |  |            |  |      |    |      |  |   |  |  |  |   |   |  
|                                             |  |         |   |            |  |      |     |      |  |   |   |  |  |   |    |  
|Net expense                                  |  | $       | 5 |            |  | $    | 62  |      |  | $ | 1 |  |  | $ | 12 |  
|                                             |  |         |   |            |  |      |     |      |  |   |   |  |  |   |    |  
|Curtailment and termination benefits         |  |         |   |            |  |      |     |      |  |   |   |  |  |   | (1 | )
|                                             |  |         |   |            |  |      |     |      |  |   |   |  |  |   |    |  
|Adjusted net post-retirement benefit expense |  |         |   |            |  |      |     |      |  |   |   |  |  | $ | 11 |  
|                                             |  |         |   |            |  |      |     |      |  |   |   |  |  |   |    |  

85



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CINGULAR WIRELESS LLC


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(Dollars in millions)


Significant weighted-average assumptions used in
developing pension and post-retirement benefit information
include:

|                                        |  |         |       |                 |  |      |       |      |  |  |       |  |  |  |       | 
|--------------------------------------- |  | ------- | ----- | --------------- |  | ---- | ----- | ---- |  |  | ----- |  |  |  | ----- | 
|                                        |  |         |       |                
|                                        |  | Pension |       | Post-Retirement
|                                        |  |         |       |                
|                                        |  | 2001    |       | 2002            |  | 2001 |       | 2002
|                                        |  |         |       |                 |  |      |       |     
|Discount rate                           |  |         | 7.25% |                 |  |      | 6.75% |      |  |  | 7.25% |  |  |  | 6.75% | 
|Long-term rate of return on plan assets |  |         | 8.50% |                 |  |      | 8.50% |      |  |  |      |  |  |  |      | 
|Composite rate of compensation increase |  |         | 7.00% |                 |  |      | 7.00% |      |  |  | 7.00% |  |  |  | 7.00% | 

The assumed medical cost trend rate in 2003,
prior to adjustment for cost-sharing provisions of the medical
and dental plans for active and certain recently retired
employees, is 10.0% for retirees 64 and under, decreasing by
0.75% for six years and then by 0.50% to reach an ultimate rate
of 5.00% in 2010; for retirees 65 and over, the assumed medical
cost trend rate in 2003 is 11.0%, decreasing by 1% for three
years and then by 0.75% for the next four years to reach an
ultimate rate of 5.00% in 2010. The assumed dental cost trend
rate is 5.0% in 2003. A one percentage-point change in the
assumed health care cost trend rate would have the following
effects:

|                                                            |  |                 |    |                 |  |   |     |  
|----------------------------------------------------------- |  | --------------- | -- | --------------- |  | - | --- | -
|                                                            |  | One Percentage- |    | One Percentage-
|                                                            |  | Point Increase  |    | Point Decrease 
|                                                            |  |                 |    |                
|Effect on total of service and interest cost
    components |  | $               | 2  |                 |  | $ | (2  | )
|Effect on post-retirement benefit obligation                |  |                 | 14 |                 |  |   | (11 | )



| |                           
| | --------------------------
| | Defined Contribution Plans

The Company maintains several contributory
savings plans that cover substantially all employees. Effective
December 31, 2002, the plan covering bargained employees
was merged into the plan covering non-bargained employees.
Participation in the plans commenced November 1, 2001,
following the contribution of leasing companies to the Company.
Contributions made by the Company and the related costs are
determined as a percentage of covered employees eligible
contributions to the plans and totaled $3 in 2001 and $56 in
2002.



| |                              
| | -----------------------------
| | Supplemental Retirement Plans

The Company has also assumed the liabilities
related to nonqualified, unfunded supplemental retirement plans
for senior executives previously employed by SBC affiliates.
Expenses related to these plans were less than $1 in both 2001
and 2002. Liabilities of $5 and $7 related to these plans, which
include an additional minimum pension liability of $1 and $2,
have been included in Other noncurrent liabilities
in the consolidated balance sheets at December 31, 2001 and
2002, respectively.



| |                           
| | --------------------------
| | Deferred Compensation Plan

The Company also provides senior and middle
management employees with a nonqualified, unfunded deferred
compensation plan. The plan allows eligible participants to
defer some of their compensation on a pre-tax basis into a
market-based interest bearing account. In addition, the plan
provides for a stated matching contribution by the Company based
on a percentage of the compensation deferred. Deferred
compensation expenses in 2001 and 2002 were not significant. The
long-term portion of liabilities related to this plan of $2 and
$18 have been included in Other noncurrent
liabilities in the consolidated balance sheets at
December 31, 2001 and 2002, respectively.

86



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CINGULAR WIRELESS LLC


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(Dollars in millions)




| |                         
| | ------------------------
| | Long-term Incentive Plan

Pursuant to the Cingular Wireless Long-term
Incentive Plan (the Plan) approved by the board of directors,
the Company granted performance units valued at $50 (whole
dollars) each as of January 1, 2002 to eligible
participants. The value of the performance units will be
determined based upon the achievement of certain Company
objectives regarding revenue growth and return on capital during
the three-year performance period 2002  2004 and will
be payable during the first quarter of 2005. The value of the
award payable at the end of the performance period will range
from 0% to 200% of the original granted performance units based
upon the achievement of the performance targets. The Company has
determined that the Plan is compensatory and will accrue
compensation expense over the term of the Plan. For the year
ended December 31, 2002, the Company accrued compensation
expense of $20 associated with the Plan.

15.     Commitments
and Contingencies



| |       
| | ------
| | Leases

The Company has entered into significant capital
leases primarily for the use of communications towers (see
Note 16). Capital lease obligations are included in
Note 7.

The Company has also entered into operating
leases for facilities and equipment used in operations. These
leases typically include renewal options and escalation clauses.
Rental expense under operating leases for the periods ended
December 31, 2000, 2001 and 2002 was $87, $370 and $430,
respectively.

The following table summarizes the approximate
future minimum rentals under noncancelable operating leases in
effect at December 31, 2002:

|           |  |   |       | 
|---------- |  | - | ----- | 
|2003       |  | $ | 409   | 
|2004       |  |   | 355   | 
|2005       |  |   | 306   | 
|2006       |  |   | 239   | 
|2007       |  |   | 164   | 
|Thereafter |  |   | 658   | 
|           |  |   |       | 
|Total      |  | $ | 2,131 | 
|           |  |   |       | 



| |            
| | -----------
| | Commitments

The Company has unconditional purchase
commitments for advertising and marketing, computer equipment
and services, roaming, network equipment and related
maintenance, and software development and related maintenance.
These commitments totaled approximately $426 at
December 31, 2002.



| |       
| | ------
| | Claims

The Company is subject to claims arising in the
ordinary course of business involving allegations of personal
injury, breach of contract, anti-competitive conduct, employment
law issues, regulatory matters and other actions. While complete
assurance cannot be given as to the outcome of any legal claims,
the Company believes that any financial impact would not be
material to its results of operations, financial position or
cash flows.

87



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CINGULAR WIRELESS LLC


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(Dollars in millions)


16.     Communications
Towers

In June 1999, BellSouth leased to Crown Castle
International (Crown) all unused space on 2,623 of
BellSouths communications towers in exchange for $927 to
be paid in a combination of cash and Crown common stock. All
cash proceeds and the majority of stock proceeds resulting from
this agreement were retained by BellSouth.

Under these transactions, Crown manages and
maintains the towers. The Company (as lessor) has the right to
withdraw from any lease on the tenth anniversary of the lease
date and on each five-year anniversary thereafter. The Company
has retained, outside of the leases, a portion of the towers for
use in operating its wireless network and continues to own the
towers and related communications components including switching
equipment, shelters and communications facilities. During 2000,
2001 and 2002, the Company paid $9, $37 and $51, respectively,
to Crown for its monitoring and maintenance services. Monitoring
and maintenance fees are escalated by 5% on the anniversary of
each site commencement date.

In August 2000, Southwestern Bell Mobile Systems,
Inc., which was transferred to the Company on October 2,
2000, agreed to transfer approximately 3,900 of its
communications towers (later reduced to 3,306), including those
owned by consolidated partnerships, to another SBC affiliate, in
connection with an agreement whereby the SBC affiliate would
lease its rights pertaining to these towers to SpectraSite Inc.
(SpectraSite, formerly SpectraSite Holdings, Inc.) to operate
and lease space on the towers. Under the arrangement,
SpectraSite then subleases back to the SBC affiliate space on
the towers the Company uses and the SBC affiliate further
subleases that space to the Company. The annual rent is
escalated by 5% and executory costs are escalated by 4% as of
December 14 of every year. The term of the sublease is
unique to each tower and ranges from 13 to 32 years. The
Company (as lessee) has the right to withdraw from any lease on
the tenth anniversary of the lease date and on each five-year
anniversary thereafter. The Company accounts for its subleases
of the tower space from the SBC affiliate as capital leases.

In 2000, 2001 and 2002, the Company transferred
to the SBC affiliate 1,490, 1,461 and 33 towers, respectively.
Excluding certain closed towers to be contributed by SBC, 322
towers remain to be transferred to the SBC affiliate as of
December 31, 2002. These transfers will occur during 2003
and 2004 upon the completion of legal requirements, including
receiving consents from certain limited partners. For towers not
yet transferred to the SBC affiliate, the Company pays monthly
monitoring and maintenance fees to the affiliate. During 2000,
2001 and 2002, the Company paid $2, $9 and $8, respectively,
related to these fees.

As part of the Crown and SpectraSite agreements,
the Company had entered into build-to-suit (BTS) agreements
that provided for the development and construction of towers on
BTS sites and the performance of other services. In May and
September 2002, the Company terminated its BTS agreements with
SpectraSite and Crown, respectively. Under the BTS agreement,
thirty-four towers were completed and became capital leases with
SpectraSite. Certain other towers under construction and other
work-in-progress were transferred to the Company during the
transition period.

17.     Subsequent
Events



| |                      
| | ---------------------
| | Communications Towers

In February 2003, the Company acquired leasehold
interests in 545 communications towers in California and Nevada
from SpectraSite for $81. SpectraSite had previously acquired
these leasehold interests from an affiliate of SBC in connection
with the August 2000 transaction described in Note 16 above. The
portion of the space on these communications towers previously
subleased by the Company is accounted for as capital leases and
is used in its network infrastructure venture with T-Mobile.

88



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CINGULAR WIRELESS LLC


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

(Dollars in millions)




| |                      
| | ---------------------
| | AT&T Wireless Venture

In January 2002, the Company entered into an
agreement with AT&T Wireless to form a jointly-controlled
and equally-owned venture to build out a GSM voice network with
General Packet Radio Service/Enhanced Data Rate for Global
Evolution (GPRS/EDGE) data technologies along a number of major
highways in order to ensure availability of GSM/GPRS/EDGE
service to its customers. The Company expects that the venture
will reduce incollect roaming expenses it pays to other carriers
when its customers travel on those highways. The Company and
AT&T Wireless will each buy services from the venture and
provide services under their own brand names. In
March 2003, the Company and AT&T Wireless contributed
licenses and assets of equal value. The Company does not expect
capital contributions by either party to exceed $85.

18.     Selected
Quarterly Financial Data (Unaudited)

The table below sets forth summarized quarterly
financial data for the years ended December 31, 2001 and
2002.

|                                                                                        |  |         |       |         |  |         |       |         |  |   |       |  |  |   |       | 
|--------------------------------------------------------------------------------------- |  | ------- | ----- | ------- |  | ------- | ----- | ------- |  | - | ----- |  |  | - | ----- | 
|                                                                                        |  | First   |       | Second  |  | Third   |       | Fourth 
|2001                                                                                    |  | Quarter |       | Quarter |  | Quarter |       | Quarter
|                                                                                        |  |         |       |         |  |         |       |        
|Total operating revenues                                                                |  | $       | 3,274 |         |  | $       | 3,536 |         |  | $ | 3,663 |  |  | $ | 3,635 | 
|Operating income                                                                        |  |         | 511   |         |  |         | 758   |         |  |   | 730   |  |  |   | 549   | 
|Income before provision for income taxes and
    cumulative effect of accounting change |  |         | 361   |         |  |         | 524   |         |  |   | 537   |  |  |   | 278   | 
|Net income                                                                              |  |         | 359   |         |  |         | 522   |         |  |   | 535   |  |  |   | 276   | 

|                                                                                        |  |         |       |         |  |         |       |         |  |   |       |     |  |   |       |       
|--------------------------------------------------------------------------------------- |  | ------- | ----- | ------- |  | ------- | ----- | ------- |  | - | ----- | --- |  | - | ----- | ------
|                                                                                        |  | First   |       | Second  |  | Third   |       | Fourth 
|2002                                                                                    |  | Quarter |       | Quarter |  | Quarter |       | Quarter
|                                                                                        |  |         |       |         |  |         |       |        
|Total operating revenues                                                                |  | $       | 3,543 |         |  | $       | 3,748 |         |  | $ | 3,779 |     |  | $ | 3,657 |       
|Operating income                                                                        |  |         | 667   |         |  |         | 722   |         |  |   | 616   | (b) |  |   | 516   | (c)(d)
|Income before provision for income taxes and
    cumulative effect of accounting change |  |         | 372   |         |  |         | 399   |         |  |   | 296   |     |  |   | 184   |       
|Net income                                                                              |  |         | 338   | (a)     |  |         | 395   |         |  |   | 293   |     |  |   | 181   |       



---



|    |                                                                                                                                                                                                                                                                                                                                                                                    
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | Net income of $370 as previously reported in the
    unaudited consolidated statement of operations, included in the
    Companys Registration Statement on Form S-4 (No.
    333-81342) that became effective July 26, 2002 has been
    restated to include a cumulative effect of change in accounting
    principle of $32 upon the adoption of SFAS No. 142 (see
    Note 4).
|   
|(b) | Includes a reduction of $32 due to reorganization
    costs (see Note 12).                                                                                                                                                                                                                                                                                                         
|   
|(c) | Includes a reduction of $151 due to impairment
    losses (see Note 11).                                                                                                                                                                                                                                                                                                           
|   
|(d) | Includes a reduction of $9 due to reorganization
    costs (see Note 12).                                                                                                                                                                                                                                                                                                          

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REPORT OF INDEPENDENT AUDITORS

Board of Directors and Shareowner

SBC Domestic Wireless Group


We have audited the accompanying combined
statement of operations, shareowners equity, and cash flow
of the SBC Domestic Wireless Group (a business of SBC
Communications Inc., see Note 1) for the period from
January 1, 2000 to October 2, 2000. These financial
statements are the responsibility of the Groups
management. Our responsibility is to express an opinion on these
financial statements based on our audit.

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

In our opinion, based on our audit, the combined
financial statements referred to above present fairly, in all
material respects, the combined results of operations and cash
flow of the SBC Domestic Wireless Group for the period from
January 1, 2000 to October 2, 2000, in conformity with
accounting principles generally accepted in the United States.



| |                              
| | -----------------------------
| | /s/     ERNST &
    YOUNG LLP

December 15, 2000

Atlanta, Georgia


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SBC DOMESTIC WIRELESS GROUP

COMBINED STATEMENT OF OPERATIONS

|                                                                                                             |                                         |                       |       |       |  
|------------------------------------------------------------------------------------------------------------ | --------------------------------------- | --------------------- | ----- | ----- | -
|                                                                                                             |                                         | From                 
|                                                                                                             |                                         | January 1, 2000 to   
|                                                                                                             |                                         | October 2, 2000      
|                                                                                                             |                                         |                      
|                                                                                                             |                                         | (Dollars in millions)
|Operating revenues:                                                                                          |                                         |                       |       |      
|                                                                                                             | Service revenues                        |                       | $     | 5,582 |  
|                                                                                                             | Equipment sales                         |                       |       | 518   |  
|                                                                                                             |                                         |                       |       |      
|Total operating revenues                                                                                     |                                         |                       | 6,100 |      
|Operating expenses:                                                                                          |                                         |                       |       |      
|                                                                                                             | Cost of service                         |                       |       | 1,037 |  
|                                                                                                             | Cost of equipment sales                 |                       |       | 702   |  
|                                                                                                             | Selling, general and administrative     |                       |       | 2,238 |  
|                                                                                                             | Depreciation and amortization           |                       |       | 835   |  
|                                                                                                             |                                         |                       |       |      
|Total operating expenses                                                                                     |                                         |                       | 4,812 |      
|                                                                                                             |                                         |                       |       |      
|Operating income                                                                                             |                                         |                       | 1,288 |      
|Other income (expenses):                                                                                     |                                         |                       |       |      
|                                                                                                             | Interest expense                        |                       |       | (267  | )
|                                                                                                             | Minority interest                       |                       |       | (133  | )
|                                                                                                             | Equity in net income of affiliates, net |                       |       | 7     |  
|                                                                                                             | Other, net                              |                       |       | 22    |  
|                                                                                                             |                                         |                       |       |      
|Total other expenses                                                                                         |                                         |                       | (371  | )    
|                                                                                                             |                                         |                       |       |      
|Income before provision for income taxes,
    extraordinary gain and cumulative effect of accounting changes |                                         |                       | 917   |      
|Provision for income taxes                                                                                   |                                         |                       | 367   |      
|                                                                                                             |                                         |                       |       |      
|Income before extraordinary gain and cumulative
    effect of accounting changes                             |                                         |                       | 550   |      
|Extraordinary gain on disposal, net of tax                                                                   |                                         |                       | 36    |      
|Cumulative effect of accounting change, net of tax                                                           |                                         |                       |      |      
|                                                                                                             |                                         |                       |       |      
|Net Income                                                                                                   |                                         | $                     | 586   |      
|                                                                                                             |                                         |                       |       |      

See accompanying notes.

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SBC DOMESTIC WIRELESS GROUP

COMBINED STATEMENT OF CASH FLOWS

|                                                                                      |                                                         |                                                           |        |     |      |  
|------------------------------------------------------------------------------------- | ------------------------------------------------------- | --------------------------------------------------------- | ------ | --- | ---- | -
|                                                                                      |                                                         | From                                                     
|                                                                                      |                                                         | January 1, 2000 to                                       
|                                                                                      |                                                         | October 2, 2000                                          
|                                                                                      |                                                         |                                                          
|                                                                                      |                                                         | (Dollars in millions)                                    
|Operating activities                                                                  |                                                         |                                                           |        |    
|Net income                                                                            |                                                         | $                                                         | 586    |    
|Adjustments to reconcile net income to net cash
    provided by operating activities: |                                                         |                                                           |        |    
|                                                                                      | Depreciation                                            |                                                           |        | 571 |     
|                                                                                      | Amortization                                            |                                                           |        | 264 |     
|                                                                                      | Minority interest in net income                         |                                                           |        | 133 |     
|                                                                                      | Provision for doubtful accounts                         |                                                           |        | 57  |     
|                                                                                      | Deferred income taxes                                   |                                                           |        | 119 |     
|                                                                                      | Gains on disposition of businesses                      |                                                           |        | (21 | )   
|                                                                                      | Extraordinary gain, net of tax                          |                                                           |        | (36 | )   
|                                                                                      | Cumulative effect of accounting changes, net of
    tax |                                                           |        |    |     
|                                                                                      | Changes in operating assets and liabilities:            |                                                           |        |     |     
|                                                                                      |                                                         | Accounts receivable                                       |        |     | (89  | )
|                                                                                      |                                                         | Inventory, prepaid expenses, and other current
    assets |        |     | (98  | )
|                                                                                      |                                                         | Accounts payable and accrued liabilities                  |        |     | (836 | )
|Other  net                                                                           |                                                         |                                                           | (30    | )  
|                                                                                      |                                                         |                                                           |        |    
|Net cash provided by operating activities                                             |                                                         |                                                           | 620    |    
|Investing activities                                                                  |                                                         |                                                           |        |    
|Construction and capital expenditures                                                 |                                                         |                                                           | (704   | )  
|Acquisitions of businesses                                                            |                                                         |                                                           | (1,824 | )  
|Dispositions of businesses                                                            |                                                         |                                                           |       |    
|                                                                                      |                                                         |                                                           |        |    
|Net cash used in investing activities                                                 |                                                         |                                                           | (2,528 | )  
|Financing activities                                                                  |                                                         |                                                           |        |    
|Net increase in amounts due to affiliates                                             |                                                         |                                                           | 6,375  |    
|Repayment of long-term debt                                                           |                                                         |                                                           | (31    | )  
|Return of capital to shareowner                                                       |                                                         |                                                           | (2,321 | )  
|Dividends paid to shareowner                                                          |                                                         |                                                           | (1,934 | )  
|Net distributions to minority interests                                               |                                                         |                                                           | (124   | )  
|                                                                                      |                                                         |                                                           |        |    
|Net cash provided by financing activities                                             |                                                         |                                                           | 1,965  |    
|                                                                                      |                                                         |                                                           |        |    
|Net increase in cash and cash equivalents                                             |                                                         |                                                           | 57     |    
|Cash and cash equivalents beginning of period                                         |                                                         |                                                           | 59     |    
|                                                                                      |                                                         |                                                           |        |    
|Cash and cash equivalents end of period                                               |                                                         | $                                                         | 116    |    
|                                                                                      |                                                         |                                                           |        |    

See accompanying notes.

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SBC DOMESTIC WIRELESS GROUP

COMBINED STATEMENT OF SHAREOWNERS
EQUITY

|                             |                                 |                       |   |            |  |             |       |        |   |   |       |        |   |   |       |        |  
|---------------------------- | ------------------------------- | --------------------- | - | ---------- |  | ----------- | ----- | ------ | - | - | ----- | ------ | - | - | ----- | ------ | -
|                             |                                 |                       |   | Additional |  | Accumulated |       |       
|                             |                                 | Common                |   | Paid-In    |  | Earnings    |       |       
|                             |                                 | Stock                 |   | Capital    |  | (Deficit)   |       | Total 
|                             |                                 |                       |   |            |  |             |       |       
|                             |                                 |                      
|                             |                                 | (Dollars in millions)
|Balance at December 31, 1999 |                                 | $                     |  |            |  | $           | 3,898 |        |   | $ | 1,136 |        |   | $ | 5,034 |       
|                             | Net income                      |                       |   |           |  |             |       |       |   |   |       | 586    |   |   |       | 586    |  
|                             | Dividends to shareowner         |                       |   |           |  |             |       |       |   |   |       | (1,934 | ) |   |       | (1,934 | )
|                             | Return of capital to shareowner |                       |   |           |  |             |       | (2,410 | ) |   |       |       |   |   |       | (2,410 | )
|                             |                                 |                       |   |            |  |             |       |        |   |   |       |        |   |   |       |       
|Balance at October 2, 2000   |                                 | $                     |  |            |  | $           | 1,488 |        |   | $ | (212  | )      |   | $ | 1,276 |       
|                             |                                 |                       |   |            |  |             |       |        |   |   |       |        |   |   |       |       

See accompanying notes.

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SBC DOMESTIC WIRELESS GROUP

NOTES TO COMBINED FINANCIAL
STATEMENTS

(Dollars in millions)


1.     Summary of
Significant Accounting Policies



| |                      
| | ---------------------
| | Basis of Presentation

The SBC Domestic Wireless Group (the Group)
consists of substantially all of the domestic wireless
businesses of SBC Communications Inc. (SBC). In April 2000, SBC
and BellSouth Corporation (BellSouth) formed a joint venture to
combine their respective domestic wireless properties. In
October 2000, SBC and BellSouth began contributions of their
wireless properties and formally began operations of Cingular
Wireless LLC (Cingular). Economic ownership in
Cingular is held 60% by SBC and 40% by BellSouth, with control
shared equally. These combined financial statements have been
prepared using SBCs historical basis in the assets and
liabilities and the historical results of the operations of the
Group, which was substantially contributed to Cingular.

These combined financial statements include
allocations of certain SBC corporate expenses, including legal,
accounting, employee benefits, real estate, insurance services,
information technology services and other SBC corporate
infrastructure costs. The expense allocations have been
determined on bases that SBC and the Group considered to be a
reasonable reflection of the utilization of services provided or
the benefit received by the Group. However, the financial
information included herein may not reflect the combined
operating results, changes in shareowner equity and cash flows
of the Group in the future or what they would have been had the
Group been a separate, stand-alone entity.

The Group provides domestic wireless
telecommunications services, including local, long-distance and
roaming services using both cellular and personal communication
services (PCS) networks. Wireless services and products
offered also include certain enhanced services, paging services
and wireless equipment. The services and products of the Group
are marketed under several established brands including
Ameritech, Cellular One, Pacific Bell, SNET and Southwestern
Bell.

The preparation of financial statements in
conformity with accounting principles generally accepted in the
United States (GAAP) requires management to make estimates
and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual results
could differ from those estimates. Comprehensive income for the
Group is the same as net income for all periods presented.



| |                          
| | -------------------------
| | Principles of Combination

The combined financial statements include the
accounts of the Group and partnerships in which the Group
exercises control. Other parties interests in controlled
partnerships are reported as minority interests. The equity
method is used to account for investments in partnerships for
which it has significant influence. All significant intragroup
transactions are eliminated in the combination process.



| |                   
| | ------------------
| | Operating Segments

The Group operates in only one segment, wireless
telecommunications services; therefore, separate segment
reporting is not applicable.



| |             
| | ------------
| | FCC Licenses

The Federal Communications Commission
(FCC) issues licenses that authorize wireless carriers to
provide service in specific geographic areas. The FCC grants
licenses for terms of up to ten years. In 1993, the FCC adopted
specific standards to apply to wireless renewals, concluding it
will award a license renewal to a licensee that meets certain
standards of past performance. Historically, the FCC has granted
license renewals routinely. The licenses held by the Group
expire at various dates. The Group believes that it will be able
to meet all requirements necessary to secure renewal of its
wireless licenses.

94



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SBC DOMESTIC WIRELESS GROUP


NOTES TO COMBINED FINANCIAL
STATEMENTS  (Continued)

(Dollars in millions)




| |                    
| | -------------------
| | Revenue Recognition

The Group earns service revenues by providing
access to its wireless network (access revenue) and for usage of
its wireless system (airtime revenue). Access revenue is
recognized when earned throughout the normal billing cycle.
Airtime revenue, including roaming revenue and long-distance
revenue, is recognized when the service is rendered. The revenue
and related expenses associated with the sale of wireless
handsets and accessories are recognized when the products are
delivered and accepted by the customer, as this is considered to
be a separate earnings process from the sale of wireless
services.



| |             
| | ------------
| | Income Taxes

The entities that are included in the Group are
included in SBCs consolidated federal income tax return.
Federal income taxes are provided for in accordance with the
provisions of the Tax Allocation Agreement (Agreement) between
the Group and SBC. In general, the Groups income tax
provision under the Agreement reflects the financial
consequences of income, deductions and credits which can be
utilized on a separate return basis or in consolidation with SBC
and which are assured of realization.



| |                 
| | ----------------
| | Cash Equivalents

Cash equivalents include all highly liquid
investments with original maturities of three months or less.



| |                    
| | -------------------
| | Accounts Receivable

Accounts receivable from customers are generally
unsecured and are due within 30 days. Expected credit
losses are recorded as an allowance for doubtful accounts in the
Combined Balance Sheet.



| |          
| | ---------
| | Inventory

Inventory consists primarily of wireless
telephone handsets and is valued at the lower of weighted
average cost or market value.



| |                              
| | -----------------------------
| | Property, Plant and Equipment

Property, plant and equipment is stated at cost.
The cost of additions and substantial improvements to property,
plant and equipment is capitalized. The cost of maintenance and
repairs of property, plant and equipment is charged to operating
expenses. Property, plant and equipment is depreciated using
straight-line methods over its estimated economic life,
generally ranging from 3 to 40 years. Leasehold
improvements are depreciated over the shorter of the remaining
term of the lease or the estimated useful life of the
improvement.

Interest expense and network engineering costs
incurred during the construction phase of the Groups
wireless network and real estate properties under development
are capitalized as part of property, plant and equipment and
recorded as plant under construction until the projects are
completed and placed into service.

Interest costs capitalized were $2 for the period
ended October 2, 2000.

Amortization of assets recorded under capital
leases is included in depreciation expense.



| |                  
| | -----------------
| | Intangible Assets

Intangible assets consist primarily of FCC
licenses, the excess of consideration paid over the fair value
of net assets acquired in purchase business combinations
(goodwill) and customer lists. These assets are

95



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SBC DOMESTIC WIRELESS GROUP


NOTES TO COMBINED FINANCIAL
STATEMENTS  (Continued)

(Dollars in millions)


being amortized using the straight-line method
over their estimated economic lives of up to 40 years. The
carrying value of these assets is periodically reviewed to
determine whether such intangibles are fully recoverable from
projected net cash flows of the related business.



| |                                   
| | ----------------------------------
| | Valuation of Long-Lived
    Assets

Long-lived assets, including intangibles, are
reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be
recoverable. It is reasonably possible that these assets could
become impaired as a result of technological or other industry
changes. For assets the Group intends to hold for use, if the
total of the expected future undiscounted cash flows is less
than the carrying amount of the asset, a loss is recognized for
the difference between the fair value and carrying value of the
asset. For assets the Group intends to dispose of, depreciation
is adjusted over the remaining service period to arrive at fair
value at the estimated date of disposal.



| |                  
| | -----------------
| | Advertising Costs

Costs for advertising products and services or
corporate image are expensed as incurred. Total advertising
expense was $223 for the period ended October 2, 2000.



| |                                     
| | ------------------------------------
| | Derivative Financial
    Instruments

The Group does not hold derivatives for trading
purposes. From time to time, as part of its risk management
strategy, the Group uses derivative financial instruments,
including foreign currency forward exchange contracts to hedge
exposures to changes in foreign currency rates related to
foreign denominated obligations. Gains and losses on such
foreign exchange contracts are recognized currently and serve to
offset foreign exchange transaction losses and gains recognized
on the foreign denominated liability. The Group is subject to
credit risk in the event of nonperformance by the counterparty
to the contracts. However, the Group does not anticipate
nonperformance by any counterparty.



| |               
| | --------------
| | Software Costs

The American Institute of Certified Public
Accountants issued a Statement of Position (SOP) that
requires capitalization of certain computer software
expenditures beginning in 1999. The SOP, which prescribed
prospective application, requires the capitalization of certain
costs incurred in connection with developing or obtaining
internal use software. When placed in service, capitalized
software costs are being amortized over three years. Prior to
the adoption of the SOP, the costs of computer software
purchased or developed for internal use were generally expensed
as incurred. However, initial operating system software costs
were, and continue to be, capitalized.

Capitalized software, net of related amortization
of $186 as of October 2, 2000 has been included in
property, plant and equipment.



| |                         
| | ------------------------
| | New Accounting Standards

In June 1998, the Financial Accounting Standards
Board (FASB) issued Statement of Financial Accounting
Standards (SFAS) No. 133, Accounting for Derivative
Instruments and Hedging Activities. Among other provisions,
it requires that entities recognize all derivatives as either
assets or liabilities in the statement of financial position and
measure those instruments at fair value. Gains and losses
resulting from changes in the fair values of those derivatives
would be accounted for depending on the use of the derivative
and whether it qualifies for hedge accounting. The effective
date of this standard was delayed with the issuance of SFAS
No. 137, Accounting for Derivative Instruments and
Hedging Activities 

96



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SBC DOMESTIC WIRELESS GROUP


NOTES TO COMBINED FINANCIAL
STATEMENTS  (Continued)

(Dollars in millions)


Deferral of the Effective Date of FASB
Statement No. 133  an amendment of FASB
Statement 133.The effective date for
SFAS No. 133 is now for fiscal years beginning after
June 15, 2000, though earlier adoption is encouraged and
retroactive application is prohibited. This means that the
standard, as amended by SFAS No. 138, Accounting for
Certain Derivative Instruments and Certain Hedging
Activities  an amendment of FASB Statement
No. 133, must be adopted by the Group no later than
January 1, 2001. The Group does not expect the adoption of
this standard to have a material impact on net income.

In December 1999, the SEC issued Staff Accounting
Bulletin Number 101, Revenue Recognition in Financial
Statements(SAB 101) which must be adopted by the fourth
quarter of 2000. SAB 101 addresses, among other items, when
revenue relating to non-refundable, up-front fees, and
associated costs should be recognized. The Group does not expect
that the adoption of SAB 101 will have an effect on net
income.

2.     Acquisitions
and Dispositions



| |             
| | ------------
| | Acquisitions

In March 2000, SBC completed the acquisition of
Radiofone, Inc. (Radiofone) for $400 in SBC common stock.

In August 2000, SBC purchased wireless properties
in Austin, Texas, Seattle and Spokane, Washington, and other
properties in Texas and Washington from GTE Corporation for
approximately $1,348.

The acquisitions were accounted for under the
purchase method of accounting. The purchase prices in excess of
the underlying fair value of identifiable net assets acquired
are being amortized over periods not exceeding 40 years.
Results of operations of the acquisitions have been included in
the combined financial statements from their respective dates of
acquisition.

The above acquisitions did not have a significant
impact on combined results of operations for 2000, nor would
they, had they occurred on January 1 of the year preceding the
year of acquisition.



| |             
| | ------------
| | Dispositions

In July 2000, SBC entered into agreements to sell
overlapping properties in Indianapolis, Indiana, and selected
Radiofone properties in New Orleans and Baton Rouge, Louisiana
as a regulatory condition of the formation of Cingular. These
properties were not contributed to Cingular.

In August 2000, Southwestern Bell Mobile Systems,
Inc. (SBMS) agreed to transfer approximately 3,900 of its
existing network of towers, including those owned by
partnerships, to SBC, former owner of SBMS, in connection with
an agreement between SBC and SpectraSite Holdings, Inc.
(SpectraSite) to operate and lease space on the towers. The
Group will sublease space on the existing towers from
SpectraSite for $1,400 (actual dollars, not in millions) a month
per tower, inclusive of executory costs, and will account for
the transactions as capital leases. Each tower lease has an
initial term of 10 years followed by 5-year renewal periods
at the option of the Group. As of October 2, 2000, the net
book value of towers to be transferred to SBC was $117. On
December 14, 2000, SBC closed on 739 towers, with future
closings expected to occur monthly until mid-2002. The Group
will transfer its remaining towers to SBC upon the completion of
legal requirements, including receiving consents from its
partners.

97



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SBC DOMESTIC WIRELESS GROUP


NOTES TO COMBINED FINANCIAL
STATEMENTS  (Continued)

(Dollars in millions)


3.     Debt

Long-term debt is summarized as follows:

|                                                            |  |            |       |  
|----------------------------------------------------------- |  | ---------- | ----- | -
|                                                            |  | October 2,
|                                                            |  | 2000      
|                                                            |  |           
|Due to affiliates                                           |  | $          | 7,389 |  
|Capital leases, Japanese Yen-denominated,
    5.71%  7.13% |  |            | 213   |  
|Notes 9.5%  10% 2007                                       |  |            | 55    |  
|                                                            |  |            |       |  
|Total long-term debt, including current maturities          |  |            | 7,657 |  
|Current maturities                                          |  |            | (38   | )
|                                                            |  |            |       |  
|Total long-term debt                                        |  | $          | 7,619 |  
|                                                            |  |            |       |  

As of October 2, 2000, the Group was in
compliance with all covenants and conditions of instruments
governing its debt. Substantially all of the Groups
outstanding long-term debt is unsecured.

Amounts due to affiliates of the Group are
financed through a revolving credit facility with SBC for credit
lines up to $8,900 and are payable on March 31, 2003. The
interest rate on amounts due to affiliates at October 2,
2000 was 9.50%. (See Note 11 for discussion of subsequent
events related to amounts due to affiliates.) Accrued interest
is payable monthly. Interest expense on amounts due to
affiliates for the period ended October 2, 2000 was $254.

Cash paid for interest was $269 for the period
ended October 2, 2000.

4.     Financial
Instruments

The carrying amounts of cash and cash
equivalents, customer deposits and long-term debt approximate
fair values.



| |                           
| | --------------------------
| | Foreign Exchange Contracts

The Group does not hold or issue any financial
instruments for trading purposes. The Group entered into a
foreign currency contract to hedge exposure to adverse foreign
exchange risk. The notional amount of the foreign currency
forward exchange contracts, $142 at October 2, 2000, equals
the future minimum lease payments required to be paid in
Japanese Yen. Valuations of derivative transactions are provided
from proprietary models based upon well recognized financial
principles and reasonable estimates about relevant future market
conditions. The fair value of these foreign currency contracts
was $10 at October 2, 2000 and is recorded in Other Assets.

5.     Related-Party
Transactions

SBC and its subsidiaries provide the Group with
financial, marketing, network, and administrative services, for
which the Group is charged. In addition, indirect SBC costs are
allocated to SBCs subsidiaries based on several factors,
including relative equity, number of employees, marketing costs,
and a composite based on the Groups proportionate share of
certain direct and allocated charges. Total direct and indirect
costs charged to the Group were $550 for the period ended
October 2, 2000.

The Group has contracted with AMDOCS, a software
company affiliated with SBC, to provide ongoing information
systems development and support services. Charges for
AMDOCS development and support services for the period
ended October 2, 2000 were $36. Beginning in 1999, the
development

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SBC DOMESTIC WIRELESS GROUP


NOTES TO COMBINED FINANCIAL
STATEMENTS  (Continued)

(Dollars in millions)


portion of these services was capitalized in
accordance with SOP 98-1. Capitalized development services
included in the above total were $19 for the period ended
October 2, 2000.

6.     Income
Taxes

The provision for income taxes is summarized as
follows:

|         |         |              |     |     | 
|-------- | ------- | ------------ | --- | --- | 
|         |         | Period Ended
|         |         | October 2,  
|         |         | 2000        
|         |         |             
|Current  |         |              |     |    
|         | Federal |              | $   | 241 | 
|         | State   |              |     | 7   | 
|         |         |              |     |    
|         |         |              | 248 |    
|         |         |              |     |    
|Deferred |         |              |     |    
|         | Federal |              |     | 91  | 
|         | State   |              |     | 28  | 
|         |         |              |     |    
|         |         |              | 119 |    
|         |         |              |     |    
|Total    |         | $            | 367 |    
|         |         |              |     |    

A reconciliation of income tax expense and the
amount computed by applying the statutory federal income tax
rate to income before provision for income taxes, extraordinary
gain and cumulative effect of accounting changes is as follows:

|                                                          |  |              |     | 
|--------------------------------------------------------- |  | ------------ | --- | 
|                                                          |  | Period Ended
|                                                          |  | October 2,  
|                                                          |  | 2000        
|                                                          |  |             
|Taxes computed at federal statutory rate                  |  | $            | 321 | 
|State and local income taxes  net of
    federal benefit |  |              | 22  | 
|Amortization of intangibles                               |  |              | 11  | 
|Other, net                                                |  |              | 13  | 
|                                                          |  |              |     | 
|Provision for income taxes                                |  | $            | 367 | 
|                                                          |  |              |     | 

Cash paid for income taxes was $1,214 for the
period ended October 2, 2000.

7.     Employee
Benefits



| |         
| | --------
| | Pensions

Substantially all employees of the Group are
covered by one of the various noncontributory pension and death
benefit plans sponsored by SBC. Management employees participate
in either cash balance or defined lump-sum pension plans. The
pension benefit formula for most nonmanagement employees is
based on a flat dollar amount per year according to job
classification. Most employees can elect to receive their
pension benefits in either lump-sum or annuity.

SBCs objective in funding the plans, in
combination with the standards of the Employee Retirement Income
Security Act of 1974 (as amended), is to accumulate funds
sufficient to meet its benefit obligations to employees upon
their retirement. Contributions to the plans are made to a trust
for the

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SBC DOMESTIC WIRELESS GROUP


NOTES TO COMBINED FINANCIAL
STATEMENTS  (Continued)

(Dollars in millions)


benefit of plan participants. Plan assets consist
primarily of stocks, U.S. government and domestic corporate
bonds, index funds, and real estate.

Significant weighted-average assumptions used by
SBC in developing pension information include:

|                                                               |  |            |       | 
|-------------------------------------------------------------- |  | ---------- | ----- | 
|                                                               |  | October 2,
|                                                               |  | 2000      
|                                                               |  |           
|Discount rate for determining projected benefit
    obligation |  |            | 7.75% | 
|Long-term rate of return on plan assets                        |  |            | 8.50% | 
|Composite rate of compensation increase                        |  |            | 4.25% | 

GAAP requires certain disclosures to be made of
components of net periodic pension cost for the period and a
reconciliation of the funded status of the plans with amounts
reported in the balance sheets. Since the funded status of plan
assets and obligations relates to the plans as a whole, which
are sponsored by SBC, this information is not presented for the
Group. For the period ended October 2, 2000, pension
activity did not have a material effect on the Groups
results of operations. In addition, the Group recognized a
settlement gain for the period ended October 2, 2000 of
$10. The gain resulted from a significant amount of lump-sum
pension payments that caused a partial settlement of
Ameritechs pension plans.



| |                        
| | -----------------------
| | Postretirement Benefits

Under SBCs benefit plans in which the Group
participates, SBC provides certain medical, dental, and life
insurance benefits to substantially all retired employees and
their dependents under various plans and accrues actuarially
determined postretirement benefit costs as active employees earn
these benefits.

GAAP requires certain disclosures to be made of
components of net periodic postretirement benefit cost and a
reconciliation of the funded status of the plans to amounts
reported in the balance sheets. Since the funded status of
assets and obligations relates to the plans as a whole, this
information is not presented for the Group. The Group recognized
postretirement benefit costs of $15 for the period ended
October 2, 2000. Significant assumptions for the discount
rate, long-term rate of return on plan assets, and composite
rate of compensation increase used by SBC in developing the
accumulated postretirement benefit were the same as those used
in developing the pension information.



| |              
| | -------------
| | Savings Plans

Substantially all employees are eligible to
participate in contributory savings plans sponsored by SBC.
Under the savings plans, the Group matches a stated percentage
of eligible employee contributions, subject to a specified
ceiling.

The Groups match of employee contributions
to the savings plans is fulfilled with SBC shares of stocks
allocated from the Employee Stock Ownership Plans and with
purchases of SBCs shares of stock in the open market. The
Groups costs related to these savings plans was $5 for the
period ended October 2, 2000.

8.     Stock Option
Plans

Management employees of the Group participate in
various stock option plans sponsored by SBC. Options issued
through October 2, 2000, carry exercise prices equal to the
market price of the stock at the date of grant and have maximum
terms of ten years. Depending upon the plan, vesting of options
occurs up to four years from the date of grant.

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SBC DOMESTIC WIRELESS GROUP


NOTES TO COMBINED FINANCIAL
STATEMENTS  (Continued)

(Dollars in millions)


The Group measures compensation cost for these
plans using the intrinsic value-based method of accounting as
allowed in Statement of Financial Accounting Standards
No. 123, Accounting for Stock Based Compensation(FAS 123). Accordingly, no compensation cost has been
recognized for the stock option plans. Had compensation cost for
stock option plans been recognized using the fair value-based
method of accounting at the date of grant for awards as defined
by FAS 123, the Groups net income would have been $577 for
the period ended October 2, 2000.

For purposes of these pro forma disclosures, the
estimated fair value of the options granted is amortized to
expense over the options vesting period. The fair value
for these stock options was estimated at the date of grant,
using a Black-Scholes option pricing model with the following
weighted-average assumptions for grants in the period ended
October 2, 2000: risk-free interest rate of 6.69%, dividend
yield of 2.21%, expected volatility factor of 16%, and expected
option life of 4.6.

FAS 123 requires certain disclosures to be made
about the outstanding and exercisable options, option activity,
weighted-average exercise price per option, and option exercise
price range for each income statement period. Since the stock
option activity relates only to SBCs shareowners
equity, this information is not presented for the Group.

9.     Commitments
and Contingencies



| |      
| | -----
| | Lease

The Group has entered into operating leases for
facilities and equipment used in operations. Rental expense
under operating leases was $142 for the period ended
October 2, 2000.



| |       
| | ------
| | Claims

The Group is subject to claims arising in the
ordinary course of business involving allegations of personal
injury, breach of contract, anti-competitive conduct, employment
law issues, regulatory matters, and other actions. While
complete assurance cannot be given as to the outcome of any
legal claims, the Group believes that any financial impact would
not be material to its financial statements.

10.     Concentrations
of Risk

The Group relies on local and long-distance
telephone companies and other companies to provide certain
telecommunication services. Although management believes
alternative telecommunications facilities could be found in a
timely manner, any disruption of these services could
potentially have an adverse impact on operating results.

Although the Group attempts to maintain multiple
vendors for each required product, its inventory and equipment,
which are important components of its operations, are currently
acquired from only a few sources. If the suppliers are unable to
meet the Groups needs as it builds its network
infrastructure and sells services and equipment, delays and
increased costs in the expansion of the Groups network
infrastructure or losses of potential customers could result,
which would adversely affect operating results.

Financial instruments that potentially subject
the Group to credit risks consist principally of trade accounts
receivable. Concentrations of credit risk with respect to these
receivables are limited due to the composition of the customer
base, which includes a large number of individuals and
businesses. No customer accounted for more than 10% of combined
revenues in 2000.

Approximately 30% of the Groups employees
are represented by collective bargaining agreements with varying
dates expiring beginning in 2001 through 2004. Of those
employees covered by bargaining agreements, 6% are covered by
agreements that expire within one year.

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SBC DOMESTIC WIRELESS GROUP


NOTES TO COMBINED FINANCIAL
STATEMENTS  (Continued)

(Dollars in millions)


11.     Subsequent
Events



| |                              
| | -----------------------------
| | Transition Services Agreement

In October 2000, SBC and BellSouth began
contributing their wireless properties to Cingular. Cingular
entered into transition services agreements with SBC and
BellSouth under which SBC and BellSouth will provide certain
services and products to Cingular until 90 days notice is
given or until the agreements expire on December 31, 2002.
Services to be provided by SBC and BellSouth include but are not
limited to legal, human resources, internal audit, risk
management, and treasury. Fees for such services are fixed and
paid on a monthly basis.



| |                           
| | --------------------------
| | Employee Leasing Agreement

In October 2000, the Group transferred its
approximately 14,000 employees and related liabilities to
leasing companies which are wholly-owned by SBC. The leasing
companies incur costs for the employees salaries and
related benefits. Cingular has entered into a services contract
with SBC under which these employees provide services to
Cingular and SBC bills Cingular for the costs, including
payroll, payroll taxes, benefit costs and relocation costs.



| |                                                
| | -----------------------------------------------
| | Due to Affiliates Revolving Credit
    Facility

In October 2000, Cingular and SBC amended the
revolving credit facility to increase its borrowing capacity to
$10,000 and to set the annual interest rate at 7.5%. In November
2000, Cingular and SBC amended the revolving credit facility to
extend the maturity to March 31, 2003.

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REPORT OF INDEPENDENT AUDITORS

Board of Directors and Shareowner

BellSouth Domestic Wireless Group


We have audited the accompanying combined
statement of operations, shareowners equity (deficit), and
cash flow of the BellSouth Domestic Wireless Group (a business
of BellSouth Corporation, see Note 1) for the period from
January 1, 2000 to October 2, 2000. These financial
statements are the responsibility of the Companys
management. Our responsibility is to express an opinion on these
financial statements based on our audit.

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

In our opinion, based on our audit, the combined
financial statements referred to above present fairly, in all
material respects, the combined results of operations and cash
flow of the BellSouth Domestic Wireless Group for the period
from January 1, 2000 to October 2, 2000, in conformity
with accounting principles generally accepted in the United
States.



| |                              
| | -----------------------------
| | /s/     ERNST &
    YOUNG LLP

March 9, 2001

Atlanta, Georgia


103



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BELLSOUTH DOMESTIC WIRELESS GROUP

COMBINED STATEMENT OF OPERATIONS

|                                         |                                         |                       |       |       |  
|---------------------------------------- | --------------------------------------- | --------------------- | ----- | ----- | -
|                                         |                                         | From                 
|                                         |                                         | January 1, 2000 to   
|                                         |                                         | October 2, 2000      
|                                         |                                         |                      
|                                         |                                         | (Dollars in millions)
|Operating revenues:                      |                                         |                       |       |      
|                                         | Service revenues                        |                       | $     | 2,873 |  
|                                         | Equipment sales                         |                       |       | 229   |  
|                                         |                                         |                       |       |      
|Total operating revenues                 |                                         |                       | 3,102 |      
|Operating expenses:                      |                                         |                       |       |      
|                                         | Cost of service                         |                       |       | 656   |  
|                                         | Cost of equipment sales                 |                       |       | 438   |  
|                                         | Selling, general and administrative     |                       |       | 1,138 |  
|                                         | Depreciation and amortization           |                       |       | 491   |  
|                                         |                                         |                       |       |      
|Total operating expenses                 |                                         |                       | 2,723 |      
|                                         |                                         |                       |       |      
|Operating income                         |                                         |                       | 379   |      
|Other income (expenses):                 |                                         |                       |       |      
|                                         | Interest expense                        |                       |       | (291  | )
|                                         | Minority interest                       |                       |       | (8    | )
|                                         | Equity in net income of affiliates, net |                       |       | 123   |  
|                                         | Other, net                              |                       |       | (9    | )
|                                         |                                         |                       |       |      
|Total other income (expenses)            |                                         |                       | (185  | )    
|                                         |                                         |                       |       |      
|Income before provision for income taxes |                                         |                       | 194   |      
|Provision for income taxes               |                                         |                       | 80    |      
|                                         |                                         |                       |       |      
|Net income                               |                                         | $                     | 114   |      
|                                         |                                         |                       |       |      

See accompanying notes.

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BELLSOUTH DOMESTIC WIRELESS GROUP

COMBINED STATEMENT OF CASH FLOWS

|                                                                                      |                                              |                                                   |        |      |     |  
|------------------------------------------------------------------------------------- | -------------------------------------------- | ------------------------------------------------- | ------ | ---- | --- | -
|                                                                                      |                                              | From                                             
|                                                                                      |                                              | January 1, 2000 to                               
|                                                                                      |                                              | October 2, 2000                                  
|                                                                                      |                                              |                                                  
|                                                                                      |                                              | (Dollars in millions)                            
|Operating Activities                                                                  |                                              |                                                   |        |     
|Net income                                                                            |                                              | $                                                 | 114    |     
|Adjustments to reconcile net income to net cash
    provided by operating activities: |                                              |                                                   |        |     
|                                                                                      | Depreciation                                 |                                                   |        | 426  |    
|                                                                                      | Amortization                                 |                                                   |        | 65   |    
|                                                                                      | Minority interest in net income              |                                                   |        | 8    |    
|                                                                                      | Provision for doubtful accounts              |                                                   |        | 45   |    
|                                                                                      | Deferred income taxes                        |                                                   |        | (19  | )  
|                                                                                      | Gains on dispositions                        |                                                   |        | (2   | )  
|                                                                                      | Equity in net income of affiliates           |                                                   |        | (123 | )  
|                                                                                      | Dividends received from equity affiliates    |                                                   |        | 85   |    
|                                                                                      | Changes in operating assets and liabilities: |                                                   |        |      |    
|                                                                                      |                                              | Accounts receivable and other current assets      |        |      | (93 | )
|                                                                                      |                                              | Accounts payable and other current liabilities    |        |      | 266 |  
|                                                                                      |                                              | Other assets                                      |        |      | 7   |  
|                                                                                      |                                              | Other noncurrent liabilities and deferred credits |        |      | 34  |  
|                                                                                      | Other, net                                   |                                                   |        | 13   |    
|                                                                                      |                                              |                                                   |        |     
|Net cash provided by operating activities                                             |                                              |                                                   | 826    |     
|Investing activities                                                                  |                                              |                                                   |        |     
|Construction and capital expenditures                                                 |                                              |                                                   | (461   | )   
|Acquisition of minority interests                                                     |                                              |                                                   | (892   | )   
|Other, net                                                                            |                                              |                                                   | 6      |     
|                                                                                      |                                              |                                                   |        |     
|Net cash used in investing activities                                                 |                                              |                                                   | (1,347 | )   
|Financing activities                                                                  |                                              |                                                   |        |     
|Net increase in amounts due to affiliates                                             |                                              |                                                   | 887    |     
|Proceeds from long-term debt                                                          |                                              |                                                   | 14     |     
|Repayment of long-term debt                                                           |                                              |                                                   | (24    | )   
|Funds received from shareowner                                                        |                                              |                                                   | 115    |     
|Dividends paid to shareowner                                                          |                                              |                                                   | (397   | )   
|Net distributions to minority interests                                               |                                              |                                                   | (40    | )   
|Other, net                                                                            |                                              |                                                   | (2     | )   
|                                                                                      |                                              |                                                   |        |     
|Net cash provided by financing activities                                             |                                              |                                                   | 553    |     
|                                                                                      |                                              |                                                   |        |     
|Net increase in cash and cash equivalents                                             |                                              |                                                   | 32     |     
|Cash and cash equivalents at beginning of period                                      |                                              |                                                   | 11     |     
|                                                                                      |                                              |                                                   |        |     
|Cash and cash equivalents at end of period                                            |                                              | $                                                 | 43     |     
|                                                                                      |                                              |                                                   |        |     

See accompanying notes.

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BELLSOUTH DOMESTIC WIRELESS GROUP

COMBINED STATEMENT OF SHAREOWNERS EQUITY
(DEFICIT)

|                             |                                         |                                        |   |            |   |             |       |               |   |       |        |      |   |   |   |   |    |   |      |      |    |  
|---------------------------- | --------------------------------------- | -------------------------------------- | - | ---------- | - | ----------- | ----- | ------------- | - | ----- | ------ | ---- | - | - | - | - | -- | - | ---- | ---- | -- | -
|                             |                                         |                                        |   |            |   |             |       | Accumulated   |   |      
|                             |                                         |                                        |   | Additional |   |             |       | Other         |   |      
|                             |                                         | Common                                 |   | Paid-in    |   | Accumulated |       | Comprehensive |   |      
|                             |                                         | Stock                                  |   | Capital    |   | Deficit     |       | Income        |   | Total
|                             |                                         |                                        |   |            |   |             |       |               |   |      
|                             |                                         |                                       
|                             |                                         | (Dollars in millions)                 
|Balance at December 31, 1999 |                                         | $                                      |  |            |   | $           | 1,187 |               |   | $     | (1,167 | )    |   | $ | 6 |   |    | $ | 26   |     
|                             | Net income                              |                                        |   |           |   |             |       |              |   |       |        | 114  |   |   |   |  |    |   |      | 114  |   
|                             | Other comprehensive income, net of tax: |                                        |   |            |   |             |       |               |   |       |        |      |   |   |   |   |    |   |      |      |   
|                             |                                         | Supplemental executive retirement plan |   |            |  |             |       |               |  |       |        |      |  |   |   |   | (1 | ) |      |      | (1 | )
|                             | Dividends to shareowner                 |                                        |   |           |   |             |       | (127          | ) |       |        | (270 | ) |   |   |  |    |   |      | (397 | ) 
|                             | Funds received from shareowner          |                                        |   |           |   |             |       | 143           |   |       |        |     |   |   |   |  |    |   |      | 143  |   
|                             |                                         |                                        |   |            |   |             |       |               |   |       |        |      |   |   |   |   |    |   |      |     
|Balance at October 2, 2000   |                                         | $                                      |  |            |   | $           | 1,203 |               |   | $     | (1,323 | )    |   | $ | 5 |   |    | $ | (115 | )   
|                             |                                         |                                        |   |            |   |             |       |               |   |       |        |      |   |   |   |   |    |   |      |     

See accompanying notes.

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BELLSOUTH DOMESTIC WIRELESS GROUP

NOTES TO COMBINED FINANCIAL
STATEMENTS

(Dollars in millions)


1.     Summary of
Significant Accounting Policies



| |                      
| | ---------------------
| | Basis of Presentation

The BellSouth Domestic Wireless Group (the Group)
consists of substantially all of the domestic wireless
businesses of BellSouth Corporation (BellSouth). In April 2000,
BellSouth and SBC Communications Inc. (SBC) formed a joint
venture to combine their respective domestic wireless
properties. In October 2000, SBC and BellSouth began
contributions of their wireless properties and formally began
operations of Cingular Wireless LLC (Cingular). Economic
ownership in Cingular is held 60% by SBC and 40% by BellSouth,
with control shared equally. These combined financial statements
have been prepared using BellSouths historical basis in
the assets and liabilities and the historical results of the
operations of the Group, which will be substantially contributed
to Cingular.

These combined financial statements include
allocations of certain BellSouth corporate expenses, including
legal, accounting, employee benefits, real estate, insurance
services, information technology services and other BellSouth
corporate infrastructure costs. BellSouth directly charges
specifically identified costs for shared corporate services to
the Group based upon use of those services and, where not
practically determinable, by other allocation methods. While we
believe these allocations are reasonable, they are not
necessarily indicative of, and it is not practical for us to
estimate, the levels of expenses that would have resulted had
the Group been operating as an independent company. However, we
believe that the level of expenses would not have been
materially different if these services had been provided by
third parties.

The Group provides domestic wireless
telecommunications services, including local, long-distance and
roaming services using both cellular and personal communications
services (PCS) networks. Wireless services and products
offered also include certain enhanced services, paging services
and wireless equipment. The Groups customer market
principally covers the southeastern region of the United States.

The preparation of financial statements in
conformity with accounting principles generally accepted in the
United States (GAAP) requires management to make estimates
and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual results
could differ from those estimates.



| |                          
| | -------------------------
| | Principles of Combination

The combined financial statements include the
accounts of the Group and partnerships in which the Group
exercises control. Other parties interests in controlled
partnerships are reported as minority interests. The equity
method is used to account for its investments in partnerships
for which it has significant influence. All significant
intragroup transactions are eliminated in the combination
process.



| |                   
| | ------------------
| | Operating Segments

The Group operates in only one segment, wireless
telecommunications services; therefore, separate segment
reporting is not applicable.



| |             
| | ------------
| | FCC Licenses

The Federal Communications Commission
(FCC) issues licenses that authorize wireless carriers to
provide service in specific geographic areas. The FCC grants
licenses for terms of up to ten years. In 1993, the FCC adopted
specific standards to apply to wireless renewals, concluding it
will award a license renewal to a licensee that meets certain
standards of past performance. Historically, the FCC has granted
license renewals routinely. The licenses held by the Group
expire at various dates. The Group believes that it will be able
to meet all requirements necessary to secure renewal of its
wireless licenses.

107



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BELLSOUTH DOMESTIC WIRELESS GROUP


NOTES TO COMBINED FINANCIAL
STATEMENTS  (Continued)

(Dollars in millions)




| |                    
| | -------------------
| | Revenue Recognition

The Group earns service revenues by providing
access to its wireless network (access revenue) and for usage of
its wireless system (airtime revenue). Access revenue is
recognized when earned throughout the normal billing cycle.
Airtime revenue, including roaming revenue and long distance
revenue, is recognized when the service is rendered. The revenue
and related expenses associated with the sale of wireless
handsets and accessories are recognized when the products are
delivered and accepted by the customer, as this is considered to
be a separate earnings process from the sale of wireless
services.



| |             
| | ------------
| | Income Taxes

The entities that are included in the Group are
included in BellSouths consolidated federal income tax
return. Federal income taxes are provided for in accordance with
the provisions of the Tax Allocation Agreement (Agreement)
between the Group and BellSouth. In general, the Groups
income tax provision reflects the financial consequences of
income, deductions and credits which can be utilized on a
separate return basis or in consolidation with BellSouth and
which are assured of realization.



| |                          
| | -------------------------
| | Cash and Cash Equivalents

Cash and cash equivalents include all highly
liquid investments with original maturities of three months or
less.



| |                    
| | -------------------
| | Accounts Receivable

Accounts receivable from customers are generally
unsecured and are due within 30 days. Expected credit
losses are recorded as an allowance for doubtful accounts in the
Combined Balance Sheet.



| |          
| | ---------
| | Inventory

Inventory consists primarily of wireless
telephone handsets and is valued at the lower of weighted
average cost or market value.



| |                              
| | -----------------------------
| | Property, Plant and Equipment

Property, plant and equipment is stated at cost.
The cost of additions and substantial improvements to property,
plant and equipment is capitalized. The cost of maintenance and
repairs of property, plant and equipment is charged to operating
expenses. Property, plant and equipment is depreciated using
straight-line methods over its estimated economic lives,
generally ranging from 5 to 40 years. Leasehold
improvements are depreciated over the shorter of the remaining
term of the lease or the estimated useful life of the
improvement.

Interest expense and network engineering costs
incurred during the construction phase of the Groups
wireless network and real estate properties under development
are capitalized as part of property, plant and equipment and
recorded as plant under construction until the projects are
completed and placed into service.

Interest costs capitalized were $2 for the period
ended October 2, 2000.

In June 1999, the Group executed a contract to
replace infrastructure equipment in the southeastern United
States. The planned disposals of the existing infrastructure
equipment required an evaluation of asset impairment in
accordance with SFAS 121. As a result, a non-cash charge of
$320, or $187 after tax, was recorded in the second quarter of
1999 to write these assets down to their fair market value,
which was estimated by discounting the expected future cash
flows of these assets through the date of disposal.

108



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BELLSOUTH DOMESTIC WIRELESS GROUP


NOTES TO COMBINED FINANCIAL
STATEMENTS  (Continued)

(Dollars in millions)


Management will continue to use the assets until
the conversion process has been completed, which is estimated to
be December 31, 2000, and depreciate the remaining new
carrying value over this period.



| |                  
| | -----------------
| | Intangible Assets

Intangible assets consist primarily of FCC
licenses, the excess of consideration paid over the fair value
of net assets acquired in purchase business combinations
(goodwill), and customer lists. Goodwill and licenses are being
amortized using the straight-line method over their estimated
economic lives up to 40 years. Customer lists represent
values placed on acquired customer bases. These lists are being
amortized over a 4 to 6 year period using the sum of the
years digits method. The carrying value of these assets is
periodically reviewed to determine whether such intangibles are
fully recoverable from projected net cash flows of the related
business.



| |                                   
| | ----------------------------------
| | Valuation of Long-Lived
    Assets

Long-lived assets are reviewed for impairment
whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. It is reasonably
possible that these assets could become impaired as a result of
technological or other industry changes. For assets the Group
intends to hold for use, if the total of the expected future
undiscounted cash flows is less than the carrying amount of the
asset, a loss is recognized for the difference between the fair
value and carrying value of the asset. For assets the Group
intends to dispose of, depreciation is adjusted over the
remaining service period to arrive at fair value less cost to
sell at the estimated date of disposal.



| |                  
| | -----------------
| | Advertising Costs

Costs for advertising products and services or
corporate image are expensed as incurred. Total advertising
expense was $121 for the period ended October 2, 2000.



| |                                     
| | ------------------------------------
| | Derivative Financial
    Instruments

The Group does not hold derivatives for trading
purposes. From time to time, as part of its risk management
strategy, the Group uses derivative financial instruments,
including interest rate swap contracts to hedge exposures to
changes in interest rates on its variable rate debt obligations.
The interest rate swap settlement and differential is reflected
as an adjustment to interest expense.



| |               
| | --------------
| | Software Costs

The American Institute of Certified Public
Accountants issued a Statement of Position (SOP) that
requires capitalization of certain computer software
expenditures beginning in 1999. The SOP, which prescribed
prospective application, requires the capitalization of certain
costs incurred in connection with developing or obtaining
internal use software. When placed in service, capitalized
software costs are being amortized over three years. Prior to
the adoption of the SOP, the costs of computer software
purchased or developed for internal use were generally expensed
as incurred. However, initial operating system software costs
were, and continue to be, capitalized.

Capitalized software, net of related amortization
of $157 as of October 2, 2000 has been included in
property, plant and equipment.

109



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BELLSOUTH DOMESTIC WIRELESS GROUP


NOTES TO COMBINED FINANCIAL
STATEMENTS  (Continued)

(Dollars in millions)




| |                         
| | ------------------------
| | New Accounting Standards

In June 1998, the Financial Accounting Standards
Board (FASB) issued Statement of Financial Accounting
Standards (SFAS) No. 133, Accounting for Derivative
Instruments and Hedging Activities. Among other provisions,
it requires that entities recognize all derivatives as either
assets or liabilities in the statement of financial position and
measure those instruments at fair value. Gains and losses
resulting from changes in the fair values of those derivatives
would be accounted for depending on the use of the derivative
and whether it qualifies for hedge accounting. The effective
date of this standard was delayed with the issuance of SFAS
No. 137, Accounting for Derivative Instruments and
Hedging Activities  Deferral of the Effective Date of
FASB Statement No. 133  an amendment of FASB
Statement 133. The effective date for SFAS No. 133 is
now for fiscal years beginning after June 15, 2000, though
earlier adoption is encouraged and retroactive application is
prohibited. This means that the standard, as amended by SFAS
No. 138, Accounting for Certain Derivative Instruments
and Certain Hedging Activities  an amendment of FASB
Statement No. 133, must be adopted by the Group no
later than January 1, 2001. The group does not expect the
adoption of this standard to have a material impact on net
income.

In December 1999, the SEC issued Staff Accounting
Bulletin Number 101, Revenue Recognition in Financial
Statements (SAB 101), which must be adopted by the fourth
quarter of 2000. SAB 101 addresses, among other items, when
revenue relating to non-refundable, up-front fees, and
associated costs should be recognized. The Group does not expect
that the adoption of SAB 101 will have an effect on net income.

2.     Acquisitions

On September 27, 2000, the Group acquired
the 44.2% outstanding minority interest of its partners in the
BellSouth Carolinas PCS Limited Partnership (the Partnership).
The total purchase consideration was $916 and consisted of $887
in cash paid to minority members, $24 for liabilities assumed,
and $5 for acquisition costs. The Group borrowed $887 from
BellSouth to pay for the acquisition. As the Partnership was
previously consolidated by the Group, its results of operations
have been included in the combined financial statements for all
periods presented.

The 2000 acquisitions was accounted for under the
purchase method of accounting. The excess purchase price over
the fair value of net assets acquired for 2000 acquisitions was
approximately $127 and was allocated to goodwill which is being
amortized over 20 years.

The above acquisition did not have a significant
impact on the combined results of operations for the period
ended October 2, 2000, nor would it, had it occurred on
January 1 of the year preceding the year of acquisition.

3.     Investments
and Advances

The Group holds investments in various domestic
partnerships and ventures, which are accounted for under the
equity method and investments in equity securities accounted for
under the cost method. The Groups investment in AB
Cellular is a 44.4% interest in a joint venture which serves the
Los Angeles, Houston and Galveston metropolitan areas. The joint
venture was formed by a 1998 reorganization in which BellSouth
and AT&T contributed to the joint venture their ownership
interests in separate partnerships serving the three areas. In
addition, AT&T also contributed approximately $1,000 of cash
to the joint venture. As a result of the reorganization, the
Groups proportionate share of the net assets of the joint
venture exceeded the Groups book investment balance. The
related excess totaled $650 at October 2, 2000, and is
being amortized into income using the straight-line method over
a period of 30 years. See Note 13 for discussion of
subsequent event related to the AB Cellular joint venture.

110



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BELLSOUTH DOMESTIC WIRELESS GROUP


NOTES TO COMBINED FINANCIAL
STATEMENTS  (Continued)

(Dollars in millions)




| |                                                      
| | -----------------------------------------------------
| | Summary Financial Information of Equity
    Investees

A summary of combined results of operations as
reported by our equity investees is set forth below:

|                              |                  |            |   |       | 
|----------------------------- | ---------------- | ---------- | - | ----- | 
|                              |                  | October 2,
|                              |                  | 2000      
|                              |                  |           
|Income statement information: |                  |            |   |      
|                              | Net Revenues     |            | $ | 1,048 | 
|                              | Operating income |            |   | 404   | 
|                              | Net income       |            |   | 226   | 



| |                        
| | -----------------------
| | Cost Method Investments

The Group has an investment in a marketable
security, which is accounted for under the cost method. This
investment is comprised of Crown Castle International (Crown)
common stock and is classified as available-for-sale securities
under SFAS 115. Under SFAS 115, available-for-sale securities
are required to be carried at their fair value, with unrealized
gains and losses (net of income taxes) recorded in accumulated
other comprehensive income (loss). The fair value of the
Groups investment in Crown is determined based on market
quotations. The original cost of this investment was $21. The
gross unrealized gain was $12 at October 2, 2000. The after
tax unrealized gain was $5 at October 2, 2000, with a fair
value of $33 at October 2, 2000. (See Note 12 for more
information on the agreement with Crown).

4.     Debt

Long-term debt is summarized as follows:

|                                   |                 |            |       |     | 
|---------------------------------- | --------------- | ---------- | ----- | --- | 
|                                   |                 | October 2,
|                                   |                 | 2000      
|                                   |                 |           
|Due to affiliates                  |                 | $          | 4,840 |    
|Notes payable to external parties: |                 |            |       |    
|                                   | Bank of America |            |       | 310 | 
|                                   | Bank notes      |            |       | 62  | 
|                                   | Capital leases  |            |       | 22  | 
|                                   |                 |            |       |    
|                                   |                 |            | 5,234 |    
|Current maturities                 |                 |            | (3    | )  
|                                   |                 |            |       |    
|Total long-term debt               |                 | $          | 5,231 |    
|                                   |                 |            |       |    

Amounts due to affiliates of the Group are
comprised of various notes with interest rates of 5.8% to 8.5%
in 2000 and which have maturities from 2002 through 2006.
Accrued interest is payable monthly. Interest expense on amounts
due to affiliates for the period ended October 2, 2000 was
$244. See Note 13 for discussion of subsequent events
related to amount due to affiliates.

The note payable to Bank of America represents a
$550 revolving credit agreement with a syndicated group of
lenders entered into in April 1998. Borrowings under the credit
agreement bear interest at LIBOR plus 1%, or the base rate as
defined. The weighted average interest rate on the balance
outstanding was 7.04% at October 2, 2000. In December 2000,
the balance of this note was paid in full.

Cash paid for interest was $199 for the period
ended October 2, 2000.

111



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##### Table of Contents



BELLSOUTH DOMESTIC WIRELESS GROUP


NOTES TO COMBINED FINANCIAL
STATEMENTS  (Continued)

(Dollars in millions)


5.     Financial
Instruments

The recorded amounts of cash and cash equivalents
and long-term debt approximate fair values.



| |                    
| | -------------------
| | Interest Rate Swaps

The Group enters into interest rate swap
agreements to exchange fixed and variable rate interest payment
obligations without the exchange of the underlying principal
amounts. At October 2, 2000, the Group was party to various
interest rate swaps with an aggregate notional amount of $300
related to the Bank of America note payable. Under these swap
agreements, the Group paid fixed rates of 6.70% at
October 2, 2000 and received variable rates of 6.66% at
October 2, 2000. The fair market value of these swaps was
$3 at October 2, 2000. In December 2000, the Group settled
the swap agreements due to the retirement of the Bank of America
note payable. As a result of settling the swap agreements, the
Group recorded a gain of $2 in December 2000.

6.     Related Party
Transactions

The Group recorded revenues for interconnect
services provided to subsidiaries of BellSouth of $11 for the
period ended October 2, 2000. The Group also recorded
revenues for pager services to subsidiaries of BellSouth of $13
for the period ended October 2, 2000.

The Group incurred local interconnect and long
distance charges of $78 for the period ended October 2,
2000, for services provided by subsidiaries of BellSouth. In
addition, BellSouth subsidiaries charged the Group for joint
marketing efforts of $17 for the period ended October 2,
2000.

Included in selling, general and administrative
expenses are allocations to the Group for its share of
BellSouths shared corporate services. These amounts were
$61 for the period ended October 2, 2000. See Note 1 for
details describing the nature of corporate services and
allocations.

7.     Income
Taxes

The provision for income taxes is summarized as
follows:

|          |         |            |     |     |  
|--------- | ------- | ---------- | --- | --- | -
|          |         | October 2,
|          |         | 2000      
|          |         |           
|Current:  |         |            |     |    
|          | Federal |            | $   | 67  |  
|          | State   |            |     | 32  |  
|          |         |            |     |    
|          |         |            | 99  |    
|Deferred: |         |            |     |    
|          | Federal |            |     | (7  | )
|          | State   |            |     | (12 | )
|          |         |            |     |    
|          |         |            | (19 | )  
|          |         |            |     |    
|Total     |         | $          | 80  |    
|          |         |            |     |    

112



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##### Table of Contents



BELLSOUTH DOMESTIC WIRELESS GROUP


NOTES TO COMBINED FINANCIAL
STATEMENTS  (Continued)

(Dollars in millions)


A reconciliation of income tax expense and the
amount computed by applying the statutory federal income tax
rate to income before income taxes is as follows:

|                                                         |  |            |    | 
|-------------------------------------------------------- |  | ---------- | -- | 
|                                                         |  | October 2,
|                                                         |  | 2000      
|                                                         |  |           
|Taxes computed at federal statutory rate                 |  | $          | 68 | 
|State and local income taxes, net of federal
    benefit |  |            | 12 | 
|Valuation allowances established                         |  |            |   | 
|Other  net                                              |  |            |   | 
|                                                         |  |            |    | 
|Provision (benefit) for income taxes                     |  | $          | 80 | 
|                                                         |  |            |    | 

Cash paid for income taxes to BellSouth was $66
for the period ended October 2, 2000.

8.     Employee
Benefits



| |         
| | --------
| | Pensions

Substantially all employees of the Group are
covered by a noncontributory pension plan sponsored by
BellSouth. Employees participate in a cash balance pension plan
and can elect to receive their pension benefits in either lump
sum or annuity. Plan assets consist primarily of stocks, U.S.
government and domestic corporate bonds, index funds and real
estate. The BellSouth pension plan is fully funded, so
contributions to the plan are not currently required.

Significant weighted-average assumptions used by
BellSouth in developing pension information are set forth below.

|                                                               |  |            |       | 
|-------------------------------------------------------------- |  | ---------- | ----- | 
|                                                               |  | October 2,
|                                                               |  | 2000      
|                                                               |  |           
|Discount rate for determining projected benefit
    obligation |  |            | 7.75% | 
|Expected rate of return on plan assets                         |  |            | 9.00% | 
|Composite rate of compensation increase                        |  |            | 5.10% | 

SFAS 87, as amended by SFAS 132, requires certain
disclosures to be made of components of net periodic pension
cost for the period and a reconciliation of the funded status of
the plans with amounts reported in the balance sheets. Since the
funded status of plan assets and obligations relates to the
plans as a whole, which are sponsored by BellSouth, this
information is not presented for the Group. The Group recognized
pension expense of $1 for the period ended October 2, 2000.



| |                        
| | -----------------------
| | Postretirement Benefits

The Group also participates in the
BellSouth-sponsored postretirement health and life insurance
welfare plans covering certain employees.

SFAS 132 requires certain disclosures to be made
of components of net periodic postretirement benefit cost and a
reconciliation of the funded status of the plans to amounts
reported in the balance sheets. Since the funded status of
assets and obligations relates to the plans as a whole, this
information is not presented for the Group. The Group recognized
postretirement benefit cost of $2 for the period ended
October 2, 2000.

Significant assumptions for the discount rate,
long-term rate of return on plan assets and composite rate of
compensation increase used by BellSouth in developing the
accumulated postretirement benefit were the same as those used
in developing the pension information, with the exception of
return on plan

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BELLSOUTH DOMESTIC WIRELESS GROUP


NOTES TO COMBINED FINANCIAL
STATEMENTS  (Continued)

(Dollars in millions)


assets which was 7.00% for 2000. Since the
actuarial review takes place as of December 31 of every
year, the assumption as of October 2, 2000 for return on
plan assets was the same as the rate used at December 31,
1999. In addition, the health care cost trend rate was 9.00% for
the period ended October 2, 2000.



| |                           
| | --------------------------
| | Defined Contribution Plans

Substantially all employees are eligible to
participate in contributory savings plans sponsored by
BellSouth. Under the savings plans, the Group matches a stated
percentage of eligible employee contributions, subject to a
specified ceiling.

The Groups match of employee contributions
to the savings plans is fulfilled with BellSouths shares
of stock allocated from the Employee Stock Ownership Plans and
with purchases of BellSouths stock in the open market. The
Groups cost related to these savings plans was $7 for the
period ended October 2, 2000.

9.     Stock Option
Plans

Certain employees of the Group participate in
stock option plans sponsored by BellSouth. The BellSouth
Corporation Stock Plan (the Stock Plan) provides for grants to
key employees of stock options and various other stock-based
awards. One share of BellSouth common stock is the underlying
security for any award. The aggregate number of shares of
BellSouth common stock that may be granted in any calendar year
cannot exceed one percent of the shares outstanding at the time
of grant. Prior to the adoption of the Stock Plan, stock options
were granted under the BellSouth Corporation Stock Option Plan.
Stock options under both plans entitle an optionee to purchase
shares of BellSouth common stock within prescribed periods at a
price either equal to, or in excess of, the fair market value on
the date of grant. Options granted under these plans generally
become exercisable at the end of three to five years and have a
term of 10 years.

The Group applies APB Opinion 25 and related
Interpretations in accounting for stock-based compensation
plans. Accordingly, no compensation cost has been recognized by
the Group for stock options granted to its employees. Had
compensation cost for BellSouths stock-based compensation
plans been determined in accordance with SFAS No. 123,
Accounting for Stock-Based Compensation, the
Groups net income would have been reduced by $6 for the
period ended October 2, 2000. For purposes of these pro
forma disclosures, the estimated fair value of the options
granted is amortized to expense over the options vesting
period.

The fair value for these stock options was
estimated at the date of grant, using a Black-Scholes option
pricing model with the following weighted-average assumptions:

|                        |  |            |      |  
|----------------------- |  | ---------- | ---- | -
|                        |  | October 2,
|                        |  | 2000      
|                        |  |           
|Expected life (years)   |  |            | 5    |  
|Dividend yield          |  |            | 1.66 | %
|Expected volatility     |  |            | 27.0 | %
|Risk-free interest rate |  |            | 6.65 | %

As options are exercisable in BellSouth common
stock, separate assumptions are not developed for subsidiaries
of BellSouth.

SFAS 123 requires certain disclosures to be made
about the outstanding and exercisable options, option activity,
weighted average exercise price per option and option exercise
price range for each income

114



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BELLSOUTH DOMESTIC WIRELESS GROUP


NOTES TO COMBINED FINANCIAL
STATEMENTS  (Continued)

(Dollars in millions)


statement period. Since the stock option activity
relates only to BellSouths shareholders equity, this
information is not presented for the Group.

10.     Commitments
and Contingencies



| |       
| | ------
| | Leases

The Group has entered into operating leases for
facilities and equipment used in operations. Rental expense
under operating leases was $82 for the period ended
October 2, 2000. Capital leases currently in effect are not
significant.



| |       
| | ------
| | Claims

The Group is subject to claims arising in the
ordinary course of business involving allegations of personal
injury, breach of contract, anti-competitive conduct, employment
law issues, regulatory matters and other actions. While complete
assurance cannot be given as to the outcome of any legal claims,
the Group believes that any financial impact would not be
material to its financial statements.



| |                     
| | --------------------
| | Purchase Commitments

As of October 2, 2000, the Group had
outstanding purchase commitments of $192 million through 2004 to
various vendors for the purchase of network equipment, services
and software.

11.     Concentrations
of Risk

The Group relies on local and long-distance
telephone companies and other companies to provide certain
telecommunication services. Although management believes
alternative telecommunications facilities could be found in a
timely manner, any disruption of these services could
potentially have an adverse impact on operating results.

Although the Group attempts to maintain multiple
vendors for each required product, its inventory and equipment,
which are important components of its operations, are currently
acquired from only a few sources. If the suppliers are unable to
meet the Groups needs as it builds out its network
infrastructure and sells service and equipment, delays and
increased costs in the expansion of the Groups network
infrastructure or losses of potential customers could result,
which would adversely affect operating results.

Financial instruments that potentially subject us
to credit risks consist principally of trade accounts
receivable. Concentrations of credit risk with respect to these
receivables are limited due to the composition of the customer
base, which includes a large number of individuals and
businesses.

No customer accounted for more than 10% of
combined revenues in the period ended October 2, 2000.

12.     Sublease of
Communications Towers

In June 1999, BellSouth signed a definitive
agreement with Crown for the sublease of all unused space on
2,623 of the Companys communications towers in exchange
for $927 to be paid in a combination of cash and Crown common
stock. The term of the agreement is 20 years for each tower
leased to Crown. All cash proceeds and the majority of stock
proceeds resulting from this agreement were paid directly to
BellSouth; however, the Group holds Crown stock resulting from
this agreement. The stock held by the Group represents stock
held by partnerships and corporations with minority partners.
The fair value of this stock was $33 as of October 2, 2000.

115



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BELLSOUTH DOMESTIC WIRELESS GROUP


NOTES TO COMBINED FINANCIAL
STATEMENTS  (Continued)

(Dollars in millions)


With these transactions, Crown will manage,
maintain and remarket the remaining space on the towers. The
Group has retained a portion of the space on each for use in
operating its wireless network and will continue to fully own
the communications components including switching equipment,
shelters and cell site facilities. The Group will pay $1,200
(actual dollars, not in millions) a month per tower to Crown for
its monitoring and maintenance services.

13.     Subsequent
Events



| |                              
| | -----------------------------
| | Transition Services Agreement

In October 2000, SBC and BellSouth began
contributing their wireless properties to Cingular. Cingular
entered into transition services agreements with BellSouth and
SBC under which BellSouth and SBC will provide certain services
and products to Cingular until 90 days notice is given or
until the agreements expire on December 31, 2002. Services
to be provided by BellSouth and SBC include but are not limited
to legal, human resources, internal audit, risk management, and
treasury. Fees for such services are fixed and paid on a monthly
basis.



| |                           
| | --------------------------
| | Employee Leasing Agreement

In October 2000, the Group transferred
approximately 12,000 employees and related employee liabilities
to leasing companies which are wholly-owned by BellSouth. The
leasing companies incur costs for the employees salaries
and related benefits. Cingular has entered into a services
contract with BellSouth under which these employees provide
services to Cingular and BellSouth bills Cingular for the costs,
including payroll, payroll taxes, benefit costs and relocation
costs.



| |                                                
| | -----------------------------------------------
| | Due to Affiliates Revolving Credit
    Facility

In October 2000, Cingular, BellSouth and SBC
signed an agreement to establish an interest rate of 7.5% on
affiliate debt. In November 2000, Cingular, BellSouth, and SBC
amended existing credit agreements to extend the repayment of
the principle of the amounts due to affiliates to March 31,
2003.



| |                                                      
| | -----------------------------------------------------
| | Redemption of Partnership Interest in AB
    Cellular

In December 2000, BellSouth exercised its option
to redeem the 55.6% minority partnership interest in AB Cellular
by distributing to the minority partner the Los Angeles area
cellular business. The transaction closed on December 29,
2000. As a result, BellSouth received the remaining assets of
the AB Cellular partnership, which included, 100% of the Houston
area cellular market, 87.35% of the Galveston, Texas area market
and approximately $1,000 in cash already held by the
partnership. BellSouth contributed the Houston and Galveston
cellular markets and cash to Cingular on January 4, 2001.

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SCHEDULE II  VALUATION AND
QUALIFYING ACCOUNTS

ALLOWANCE FOR DOUBTFUL ACCOUNTS

|                                                                        |  |               |     |            |  |            |     |            |  |           |       |  |  |  |          |  |  |   |     | 
|----------------------------------------------------------------------- |  | ------------- | --- | ---------- |  | ---------- | --- | ---------- |  | --------- | ----- |  |  |  | -------- |  |  | - | --- | 
|Col. A                                                                  |  | Col. B        |     | Col. C     |  | Col. C     |     | Col. D     |  | Col. E   
|                                                                        |  |               |     |            |  |            |     |            |  |          
|                                                                        |  | Balance at    |     | Charged to |  | Charged to |     |            |  | Balance  
|                                                                        |  | Beginning     |     | Costs and  |  | Other      |     |            |  | at End   
|Description                                                             |  | of Period     |     | Expenses   |  | Accounts   |     | Deductions |  | of Period
|                                                                        |  |               |     |            |  |            |     |            |  |          
|                                                                        |  |              
|                                                                        |  | (In millions)
|Year 2002                                                               |  | $             | 131 |            |  |            | 404 |            |  |           |      |  |  |  | (372)(c) |  |  | $ | 163 | 
|Year 2001                                                               |  | $             | 67  |            |  |            | 333 |            |  |           | 6(a)  |  |  |  | (275)(c) |  |  | $ | 131 | 
|For the period from April 24, 2000
    (Inception) to December 31, 2000 |  | $             |    |            |  |            | 57  |            |  |           | 67(b) |  |  |  | (57)(c)  |  |  | $ | 67  | 



---



|    |                                                                                                                                                      
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | Includes allowance balances received from
    contributions made by SBC and BellSouth of their Puerto Rico and
    Houston wireless operations.      
|   
|(b) | Includes allowance balances received from
    contributions made by SBC and BellSouth of certain of their
    wireless operations upon our formation.
|   
|(c) | Includes amounts written off as uncollectible,
    net of recoveries.                                                                                

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|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|Item 9. | Changes in and Disagreements With Accountants
    on Accounting and Financial Disclosure

None




PART III




Item 10.     Directors
and Executive Officers of the Registrant

Directors and Executive Officers

The following table presents information
regarding persons who serve as directors of our manager and
executive officers of us and our manager as of March 1,
2003.

|                          |  |     |    |          |  |                                                                                                   
|------------------------- |  | --- | -- | -------- |  | --------------------------------------------------------------------------------------------------
|Name                      |  | Age |    | Position
|                          |  |     |    |         
|Ronald M. Dykes           |  |     | 56 |          |  | Class B Director                                                                                  
|Richard A. Anderson       |  |     | 45 |          |  | Class B Director                                                                                  
|Randall L. Stephenson     |  |     | 42 |          |  | Chairman of the Board and Class B Director                                                        
|Rayford Wilkins, Jr.      |  |     | 51 |          |  | Class B Director                                                                                  
|Stanley T. Sigman         |  |     | 55 |          |  | President and Chief Executive Officer                                                             
|Mark L. Feidler           |  |     | 46 |          |  | Chief Operating Officer                                                                           
|Richard G. Lindner        |  |     | 48 |          |  | Chief Financial Officer                                                                           
|F. Thaddeus Arroyo        |  |     | 39 |          |  | Chief Information Officer                                                                         
|Rickford D. Bradley       |  |     | 51 |          |  | Executive Vice President  Human
    Resources                                                    
|Joaquin R. Carbonell, III |  |     | 50 |          |  | Executive Vice President and General
    Counsel  Legal and Regulatory                           
|Gregory T. Hall           |  |     | 47 |          |  | Controller                                                                                        
|Carol L. Tacker           |  |     | 54 |          |  | Vice President and Assistant General Counsel,
    Corporate Secretary and Chief Compliance Officer



| |          
| | ---------
| | Directors

Richard A. Anderson, Class B Director,
Cingular Wireless Corporation. Richard Anderson is
president  customer markets of BellSouth and has
served in various positions with BellSouth since 1981. He was
elected to the board of directors of Cingular Wireless
Corporation in February 2003. Mr. Anderson is also a
director of Adtran, Inc.

Ronald M. Dykes, Class B Director,
Cingular Wireless Corporation. Ronald Dykes is chief
financial officer of BellSouth and has served in various
positions with BellSouth since 1971. He was elected to the board
of directors of Cingular Wireless Corporation in
October 2000. Mr. Dykes is also a director of
St. Josephs Hospital Atlanta.

Randall L. Stephenson, Chairman of the Board
and Class B Director, Cingular Wireless Corporation.
Randall Stephenson is senior executive vice president and chief
financial officer of SBC and has served SBC in high level
managerial positions for more than the past five years, most
recently as senior vice president of finance since
May 2001. He was elected to the board of directors of
Cingular Wireless Corporation in July 2001 and Chairman of
the Board in February 2003.

Rayford Wilkins, Jr., Class B Director,
Cingular Wireless Corporation. Rayford Wilkins is group
president  SBC marketing and sales and has served SBC
and its predecessors in various capacities since 1974. He was
selected to the board of directors of Cingular Wireless
Corporation in November 2002. He also serves on the board of
directors of H & R Block, Inc.

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| |                   
| | ------------------
| | Executive Officers

Executive officers are elected by the board of
directors of our manager and serve until their successors have
been duly elected and qualified or until their resignation or
removal. Our executive officers also constitute the executive
officers of our manager, each holding the same office with both
entities.

Stanley T. Sigman, President and Chief
Executive Officer. Stanley Sigman was elected to the board
of directors of Cingular Wireless Corporation in
October 2000 and resigned that position and became
President and Chief Executive Officer in November 2002. He
has held high level managerial positions with SBC or its
subsidiaries for more than the past five years. Previously, he
had served as group president and chief operating officer of SBC
from April 2001 until November 2002. Prior to that, he
was president and chief executive officer of Southwestern Bell
Telephone Company and served as group president of SBC National
Operations since 1999.

Mark L. Feidler, Chief Operating Officer.
Mark Feidler came to Cingular from BellSouth Cellular Corp.
where, as president, he was responsible for all of
BellSouths domestic wireless operations, including
wireless data and cellular in 11 states. Prior to that he served
as president of BellSouth Mobility in 1998. He also served as
president of BellSouths interconnection services from 1996
to 1997 and as vice president of corporate development from 1993
to 1996. He joined BellSouth in 1991.

Richard G. Lindner, Chief Financial
Officer. Richard Lindner came to Cingular from SBC Wireless,
where he served as senior vice president and chief operating
officer, responsible for the headquarter operations of
SBCs domestic wireless business until August 2000.
Prior to that he served as president and chief executive officer
of Southwestern Bell Wireless, where he was in charge of all
wireless operations in five states. Mr. Lindner held a
variety of senior management positions since joining SBC in
1986, including vice president and chief financial officer for
Southwestern Bell Telephone Company in 1996. Mr. Lindner is also
a director of Sabre Holdings Corporation.

F. Thaddeus Arroyo, Chief Information
Officer. Thaddeus Arroyo came to Cingular from Sabre
Corporation, where he served as senior vice president of product
marketing and development since June 2000. He also served
as senior vice president of information technology services in
1999, vice president of global outsourcing from 1997 to 1999,
vice president of strategic infrastructure and in a number of
other positions for Sabre from 1992 to 1997. Prior to joining
Sabre, Mr. Arroyo worked in Southwestern Bells
information technology organization.

Rickford D. Bradley, Executive Vice
President  Human Resources. Rickford Bradley came
to Cingular from SBC Telecommunications, Inc., where he most
recently served as president of interconnection services. He has
held a variety of senior and executive positions in sales,
network services and corporate development. He also served as
president of public communications in 1999 for SBC. Prior to
SBCs merger with Pacific Telesis in 1997, Mr. Bradley
served as vice president and general manager of operator
services at Pacific Bell.

Joaquin R. Carbonell III, Executive Vice
President and General Counsel  Legal and
Regulatory. Joaquin Carbonell came to Cingular from
BellSouth Enterprises, Inc., where he served as vice president
and group counsel and was responsible for the legal operations
of wireless services since 1997. Prior to that, he held
positions as president of BellSouth International for Latin
America from 1992 to 1994 and then as president of BellSouth
Europe from 1994 to 1997, overseeing operations in those
regions. He joined BellSouth in 1980 as an attorney with the
Southern Bell Telephone & Telegraph Company.

Gregory T. Hall, Controller. Gregory Hall
came to Cingular from SBC Wireless, Inc., where he served as
vice president and chief financial officer from October 1999
until the formation of Cingular. He joined SBC in 1984 and has
served in numerous financial and corporate development positions
with it and its subsidiaries.

Carol L. Tacker, Vice President and Assistant
General Counsel, Corporate Secretary and Chief Compliance
Officer. Carol Tacker came to Cingular from SBC Wireless
where she served as vice president  general counsel
since 1996. Prior to that, Ms. Tacker served in several
positions of increasing

119



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##### Table of Contents



responsibility, including general attorney of
Southwestern Bell Yellow Pages, and general attorney of
Southwestern Bell Mobile Systems. Ms. Tacker joined SBC in
1984 as an attorney with Southwestern Bell Telephone Company.


There are no family relationships among any of
the above-named directors of our manager or executive officers
of our manager and us, or any arrangement or understanding
between any of these directors and executive officers and any
other person pursuant to which such director or officer was
selected. See Certain Relationships and Related
Transactions  Stockholders Agreement for
more information regarding the agreement between the
stockholders of our manager with respect to the election of the
directors of our manager.






|         |                       
|-------- | ----------------------
|Item 11. | Executive Compensation

Executive Compensation

We were formed on April 4, 2000 but
conducted no independent business operations until
October 2, 2000, when SBC and BellSouth contributed
substantially all of their U.S. wireless assets to us in
exchange for approximate 60% and 40% economic interests in us,
respectively. We refer to the two individuals who served in 2002
as our president and chief executive officer and our four most
highly compensated executive officers in 2002 other than our
president and chief executive officer as our named
executive officers.

Prior to October 28, 2001, in the case of
Stephen Carter, Richard Lindner and Robert Shaner, our named
executive officers who were previously employed by SBCs
Domestic Wireless Group, and prior to December 23, 2001, in
the case of Mark Feidler and F. Thaddeus Arroyo, our named
executive officers who were previously employed by
BellSouths Domestic Wireless Group, our named executive
officers (other than Mr. Sigman) were paid for the services
they provided to us by employee leasing company subsidiaries of
SBC or BellSouth. In October and December of 2001, SBC and
BellSouth contributed their respective employee leasing
companies to us. In November 2002, Stephen Carter resigned as
President and Chief Executive Officer and Mr. Sigman was
elected to that office. As a result, all of our named executive
officers are now our employees and receive their salary from us.
We reimbursed SBC and BellSouth for the payments made to
employees, including our officers, by the employee leasing
companies from October 2, 2000 to the date of the
respective contributions of these companies for services
rendered to us during that time.

Since the respective contribution dates of the
employee leasing companies by SBC and BellSouth, or the election
of Mr. Sigman as the case may be, all of our named
executive officers have participated in our benefit plans. In
addition, certain of the named executive officers have and will
continue to have interests in selected compensation and benefit
plans of SBC or BellSouth in which they participated prior to
the time they became our employees.

Summary of Cash and Other
Compensation



| |         
| | --------
| | Overview

As further described in the summary compensation
table below, the compensation structure for the named executive
officers consists of:



| |   |                                                                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | salary;                                                                                                                                                
|
| |  | short-term performance-based incentives paid in
    cash; and                                                                                          
|
| |  | long-term incentives in the form of stock options
    to purchase common stock of SBC or BellSouth and
    performance-based incentives, as applicable.

SBC and BellSouth have stated that they do not
intend to grant stock options or awards to our officers or
employees in the future and that our officers and employees will
no longer participate in their long-term incentive plans, except
to the extent of future payments for past performance periods
and grants. We have developed long-term incentive arrangements
in which our named executive officers participate, beginning in
2002. See Long-Term Incentive Plans.

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Annual Compensation.Salaries and bonuses listed in the table below are the total
annual salaries and bonuses for 2001 and 2002, including:



| |   |                                                                                                                                 
| | - | --------------------------------------------------------------------------------------------------------------------------------
| |  | the salary and bonus paid to each named executive
    officer by the applicable predecessor company and leasing
    company; and
|
| |  | the salary and bonus paid to each named executive
    officer by us.                                                            

Award values under short-term incentive plans are
based on the achievement of company financial goals and quality
and strategic objectives.

Long-Term
Incentives.Long-term compensation
awards in the table below consist primarily of the annual target
grant of stock options for each named executive officer pursuant
to the applicable SBC or BellSouth long-term incentive plan.
Payout amounts reflected below were paid from the respective
predecessor company long-term incentive plan.

Summary
Compensation Table

|                            |                            |                     |      |              |  |            |         |              |  |              |           |         |  |              |         |        |  |  |         |         |  |   |         |         |  |   |           |         | 
|--------------------------- | -------------------------- | ------------------- | ---- | ------------ |  | ---------- | ------- | ------------ |  | ------------ | --------- | ------- |  | ------------ | ------- | ------ |  |  | ------- | ------- |  | - | ------- | ------- |  | - | --------- | ------- | 
|                            |                            |                     |      |              |  |            |         |              |  |              |           |        
|                            |                            |                     |      |              |  |            |         |              |  | Long-term    |           |        
|                            |                            |                     |      |              |  |            |         |              |  | Compensation |           |        
|                            |                            |                     |      |              |  |            |         |              |  |              |           |        
|                            |                            |                     |      | Awards       |  | Payouts    |         |             
|                            |                            | Annual Compensation |      |              |  |            |         |             
|                            |                            |                     |      | Securities   |  |            |         |             
|                            |                            |                     |      | Other Annual |  | Underlying |         | LTIP         |  | All Other   
|                            |                            |                     |      | Salary       |  | Bonus      |         | Compensation |  | Options      |           | Payouts |  | Compensation
|Name and Principal Position |                            | Year                |      | ($)          |  | ($)(G)     |         | ($)(H)       |  | (#)          |           | ($)     |  | ($)         
|                            |                            |                     |      |              |  |            |         |              |  |              |           |         |  |             
|Stanley T. Sigman(A)        |                            |                     | 2002 |              |  | $          | 900,000 |              |  | $            | 921,000   |         |  | $            | 179,483 |        |  |  | 301,743 |         |  | $ | 239,076 |         |  | $ | 340,968   |        
|                            | President/CEO              |                     |      | 2001         |  |            |         |             |  |              |           |        |  |              |         |       |  |  |         |        |  |   |         |        |  |   |           |        | 
|Mark L. Feidler(B)          |                            |                     | 2002 |              |  |            | 536,442 |              |  |              | 1,071,750 |         |  |              | 6,221   |        |  |  | 0       |         |  |   | 0       |         |  |   | 99,255    |        
|                            | Chief Operating Officer    |                     |      | 2001         |  |            |         | 524,000      |  |              |           | 391,300 |  |              |         | 15,074 |  |  |         | 160,700 |  |   |         | 215,040 |  |   |           | 80,800  | 
|Richard G. Lindner(C)       |                            |                     | 2002 |              |  |            | 370,327 |              |  |              | 152,500   |         |  |              | 22,754  |        |  |  | 3,051   |         |  |   | 53,116  |         |  |   | 56,808    |        
|                            | Chief Financial Officer    |                     |      | 2001         |  |            |         | 366,267      |  |              |           | 222,705 |  |              |         | 25,629 |  |  |         | 62,305  |  |   |         | 89,804  |  |   |           | 573,872 | 
|Robert W. Shaner(D)         |                            |                     | 2002 |              |  |            | 338,500 |              |  |              | 105,500   |         |  |              | 15,799  |        |  |  | 2,772   |         |  |   | 57,100  |         |  |   | 37,291    |        
|                            | President  Wireless Oper. |                     |      | 2001         |  |            |         | 336,433      |  |              |           | 147,735 |  |              |         | 18,929 |  |  |         | 36,621  |  |   |         | 73,967  |  |   |           | 56,724  | 
|F. Thaddeus Arroyo(E)       |                            |                     | 2002 |              |  |            | 333,769 |              |  |              | 303,800   |         |  |              | 109,051 |        |  |  | 0       |         |  |   | 0       |         |  |   | 12,701    |        
|                            | Chief Information Officer  |                     |      | 2001         |  |            |         | 267,798      |  |              |           | 398,500 |  |              |         | 74,302 |  |  |         | 65,000  |  |   |         | 0       |  |   |           | 62,771  | 
|Stephen M. Carter(F)        |                            |                     | 2002 |              |  |            | 701,923 |              |  |              | 365,000   |         |  |              | 54,471  |        |  |  | 2,140   |         |  |   | 66,422  |         |  |   | 2,422,875 |        
|                            | President/CEO              |                     |      | 2001         |  |            |         | 684,600      |  |              |           | 521,250 |  |              |         | 89,008 |  |  |         | 143,132 |  |   |         | 126,787 |  |   |           | 864,927 | 



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(A) | For 2002, Mr. Sigmans Long-Term
    Incentive Plan payout was made by SBC under SBCs 1996
    Stock and Incentive Plan and is for the 1999-2001 performance
    period. Mr. Sigmans All Other
    Compensation for 2002 includes (a) benefits imputed
    with respect to premiums on SBC-owned life insurance as
    determined in accordance with IRS guidelines of $1,926; (b) pay
    in lieu of vacation of $110,765 paid by SBC;
    (c) above-market interest on deferred compensation of
    $27,777; (d) an incentive payment of $160,000 paid by
    Cingular in connection with his employment agreement; and
    (e) employer matching contributions made to SBC employee
    benefit plans of $40,500. Mr. Sigman became President and
    CEO in November 2002.
|   
|(B) | For 2002, Mr. Feidlers All Other
    Compensation includes (a) above-market interest on
    deferred compensation plans of $29,231; (b) the value of
    company-paid life insurance premiums of $7,271; (c) the
    value of benefits from company-paid premiums for split-dollar
    life insurance of $4,688; and (d) employer matching
    contributions made to certain employee benefit plans of $58,065.                                                                                                                                                                                                                                                                                                                                                                
|   
|(C) | For 2002, Mr. Lindners Long-Term
    Incentive Plan payout was made by SBC under SBCs 1996
    Stock and Incentive Plan and is for the 1999-2001 performance
    period. Mr. Lindners All Other
    Compensation for 2002 includes (a) above-market
    interest on deferred compensation plans of $10,614; (b) the
    value of company-paid life insurance premiums of $1,072;
    (c) employer matching contributions made to employee
    benefit plans of $32,695; and (d) a one-time payment of
    $12,427 by SBC for pay in lieu of vacation.                                                                                                                                                                                                                        

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|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(D) | For 2002, Mr. Shaners Long-Term
    Incentive Plan payout was made by SBC under SBCs 1996
    Stock and Incentive Plan and is for the 1999-2001 performance
    period. Mr. Shaners All Other
    Compensation for 2002 includes (a) above-market
    interest on deferred compensation plans of $10,126;
    (b) employer matching contributions made to employee
    benefit plans of $26,257; and (c) the value of company-paid
    life insurance premiums of $908. Mr. Shaner retired from
    the company effective January 31, 2003.                                                                                                                                                                                      
|   
|(E) | For 2002, Mr. Arroyos All Other
    Compensation includes (a) the value of company-paid
    life insurance premiums of $701 and (b) employer matching
    contributions made to certain employee benefit plans of $12,000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   
|(F) | For 2002, Mr. Carters Long-Term
    Incentive Plan payout was made by SBC under SBCs 1996
    Stock and Incentive Plan and is for the 1999-2001 performance
    period. Mr. Carters All Other
    Compensation for 2002 includes (a) above-market
    interest on deferred compensation of $797; (b) employer
    matching contributions made to employee benefit plans of
    $67,887; (c) the value of company-paid life insurance
    premiums of $3,613; and (d) a one-time payment of $34,000
    by SBC for pay in lieu of vacation. The amount reported also
    includes separation payments totaling $2,316,578 in connection
    with Mr. Carters resignation, in November 2002. See
    Agreements with Management.
|   
|(G) | These amounts were earned under the Cingular
    Executive Short-Term Incentive Plan. The amount reported for
    Mr. Sigman includes $825,000 paid by SBC under their
    applicable short-term incentive plan. The amount reported in
    2002 for Mr. Feidler includes $800,000 paid by BellSouth in
    connection with his transition agreement. The amounts reported
    for Mr. Arroyo include special bonuses of $200,000 for 2002 and
    $250,000 for 2001 as part of his employment offer.                                                                                                                                                                                                                                 
|   
|(H) | Includes, if applicable, (a) any tax
    gross-ups for the named executive officer and
    (b) payment of dividend equivalents on long-term
    performance shares. Excludes perquisites and other personal
    benefits that, in the aggregate, do not exceed $50,000 or 10% of
    the executives salary and bonus with respect to the
    applicable year.                                                                                                                                                                                                                                                                                                                                                                      



| |                        
| | -----------------------
| | Grants of Stock Options

In 2002, SBC granted non-qualified stock options
to purchase SBC common stock to Messrs. Sigman, Lindner,
Shaner and Carter. None of our other named executive officers
received stock option grants in 2002. The table below contains
the estimated present value of SBC stock options granted in
2002, as of their issue date. Each option provides for the
purchase of SBC common stock at a price equal to the fair market
value of the stock on the date of the grant. Option grant A
was granted by SBC to Mr. Sigman prior to his election as
our president and chief executive officer. Option grants B
and C were issued under a stock purchase plan where middle level
and above managers received options based on the number of SBC
shares they purchased. Grants to Messrs. Lindner, Shaner
and Carter relate to SBC stock purchase plan participation prior
to becoming our employees.

|                   |  |                   |   |            |  |                |         |             |  |            |      |               |  |   |       |  |  |  |           |  |  |   |           | 
|------------------ |  | ----------------- | - | ---------- |  | -------------- | ------- | ----------- |  | ---------- | ---- | ------------- |  | - | ----- |  |  |  | --------- |  |  | - | --------- | 
|                   |  |                   |   | Grant Date
|                   |  | Individual Grants |   | Value     
|                   |  |                   |   |           
|                   |  |                   |   | Number of  |  | % of Total     |         |             |  |           
|                   |  |                   |   | Securities |  | Options        |         |             |  |           
|                   |  |                   |   | Underlying |  | Granted to     |         | Exercise or |  |            |      | Grant Date   
|                   |  |                   |   | Options    |  | Employees in   |         | Base Price  |  | Expiration |      | Present Value
|Name               |  | Grants            |   | Granted(#) |  | Fiscal Year(1) |         | ($/Sh)      |  | Date       |      | ($)          
|                   |  |                   |   |            |  |                |         |             |  |            |      |              
|Stanley T. Sigman  |  |                   | A |            |  |                | 250,000 | (2)         |  |            | 0.69 | %             |  | $ | 35.52 |  |  |  | 1/25/2012 |  |  | $ | 1,869,500 | 
|                   |  |                   | B |            |  |                | 9,455   |             |  |            | 0.03 |               |  |   | 36.96 |  |  |  | 2/1/2012  |  |  |   | 72,132    | 
|                   |  |                   | C |            |  |                | 42,288  |             |  |            | 0.12 |               |  |   | 33.15 |  |  |  | 6/1/2012  |  |  |   | 280,750   | 
|Richard G. Lindner |  |                   | B |            |  |                | 3,051   |             |  |            | 0.01 |               |  |   | 36.96 |  |  |  | 2/1/2012  |  |  |   | 23,276    | 
|Robert W. Shaner   |  |                   | B |            |  |                | 2,772   |             |  |            | 0.01 |               |  |   | 36.96 |  |  |  | 2/1/2012  |  |  |   | 21,148    | 
|Stephen M. Carter  |  |                   | B |            |  |                | 2,140   |             |  |            | 0.01 |               |  |   | 36.96 |  |  |  | 2/1/2012  |  |  |   | 16,326    | 

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---



|    |                                                                                                                                                                            
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Percentages are based on 36,070,879 options
    granted to SBC employees in 2002.                                                                                          
|   
|(2) | One-third of these options vest on each
    anniversary of the grant. These options also vest at retirement.
    As of December 31, 2002, none of these options had vested.

The option values in the table represent the
estimated present value of the options as of their grant date.
These values were determined in accordance with a Black-Scholes
option valuation model. The significant assumptions incorporated
into the Black-Scholes model in estimating the value of the
options include the following:



| |   |                                                                                                                                                                                                                                                                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Each option was issued with an exercise price
    equal to the fair market value of SBC common stock on the date
    of grant. The term of each option is 10 years (unless
    otherwise shortened or forfeited due to termination of
    employment). The expected life of the option grants are
    6.5 years for each grant of A and C and 6 years for
    grant B.
|
| |  | In calculating the value of the options, the
    model assumed an interest rate of 4.99% for grant A, 4.78%
    for grant B and 4.81% for grant C. These interest
    rates represent the interest rates on U.S. Treasury
    securities on the date of grant with a maturity date
    corresponding to that of the expected option lives.                            
|
| |  | Expected volatility was calculated using daily
    SBC common stock prices for the period prior to the grant date,
    corresponding with the expected option life, resulting in
    volatility of 20.38% for grant A, 20.73% for grant B and
    21.33% for grant C.                                                                                                 
|
| |  | The model reflected an expected annual dividend
    yield on SBC common stock of 3.04% for grant A, 2.92% for
    grant B and 3.26% for grant C.                                                                                                                                                                                                                      

The ultimate value of each option will depend on
the future market price of SBCs common stock, which cannot
be forecast with reasonable accuracy. The actual value, if any,
an optionee will realize upon exercise of an option, before
taxes, will depend on the excess of the market value of
SBCs common stock over the exercise price on the date the
option is exercised.



| |                              
| | -----------------------------
| | Option Exercises and Holdings

The following table provides information for the
named executive officers regarding exercises of SBC and
BellSouth options during 2002. Additionally, the table provides
the values of unexercised options held on December 31, 2002
that are based on the fair market value of the shares of common
stock of SBC and BellSouth.

Aggregated Option Exercises in 2002

and Fiscal Year-End Option Values


|                      |  |             |   |          |  |                       |   |                      |  |             |         |               |  |  |         |  |  |   |         |  |  |   |   | 
|--------------------- |  | ----------- | - | -------- |  | --------------------- | - | -------------------- |  | ----------- | ------- | ------------- |  |  | ------- |  |  | - | ------- |  |  | - | - | 
|                      |  |             |   |          |  |                       |   |                      |  |            
|                      |  |             |   |          |  |                       |   | Value of Unexercised
|                      |  |             |   |          |  | Number of Unexercised |   | In-the-Money        
|                      |  |             |   |          |  | Options at FY-End     |   | Options at FY-End   
|                      |  | Shares      |   | Value    |  |                       |   |                     
|                      |  | Acquired on |   | Realized |  | Exercisable           |   | Unexercisable        |  | Exercisable |         | Unexercisable
|Name                  |  | Exercise(#) |   | ($)      |  | (#)                   |   | (#)                  |  | ($)         |         | ($)          
|                      |  |             |   |          |  |                       |   |                      |  |             |         |              
|Stanley T. Sigman(A)  |  |             | 0 |          |  | $                     | 0 |                      |  |             | 435,264 |               |  |  | 517,776 |  |  | $ | 0       |  |  | $ | 0 | 
|Mark L. Feidler(B)    |  |             | 0 |          |  |                       | 0 |                      |  |             | 657,755 |               |  |  | 0       |  |  |   | 852,536 |  |  |   | 0 | 
|Richard G. Lindner(A) |  |             | 0 |          |  |                       | 0 |                      |  |             | 241,965 |               |  |  | 0       |  |  |   | 114,975 |  |  |   | 0 | 
|Robert W. Shaner(A)   |  |             | 0 |          |  |                       | 0 |                      |  |             | 170,690 |               |  |  | 0       |  |  |   | 71,899  |  |  |   | 0 | 
|F. Thaddeus Arroyo(B) |  |             | 0 |          |  |                       | 0 |                      |  |             | 65,000  |               |  |  | 0       |  |  |   | 0       |  |  |   | 0 | 
|Stephen M. Carter(A)  |  |             | 0 |          |  |                       | 0 |                      |  |             | 307,231 |               |  |  | 0       |  |  |   | 105,396 |  |  |   | 0 | 



---



|    |                                                                                                                                                                       
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(A) | Represents SBC options. Value of
    Unexercised In-the-Money Options figures are based on the
    December 31, 2002 SBC common stock price per share of
    $27.11.

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|    |                                                                                                                                                                                   
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(B) | Represents BellSouth options. Value of
    Unexercised In-the-Money Options figures are based on the
    December 31, 2002 BellSouth common stock price per share of
    $25.97.



| |                          
| | -------------------------
| | Long-Term Incentive Plans

The following table lists the performance shares
granted in 2002 to the named executive officers under the 2002
Cingular Long-Term Incentive Plan (The LTIP Plan).
The LTIP Plan provides for incentive compensation based upon the
achievement of certain performance objectives over performance
periods that are two years or longer. For 2002, a targeted
number of performance units, valued at $50 each, were granted to
certain employees, including the named executive officers, other
than Mr. Sigman (see Footnotes A and B below). The
determination of the actual award earned is based on the
achievement of certain company objectives regarding revenue
growth and return on capital during the three-year performance
period from 2002-2004. The actual number of performance units
that can be earned at the end of the performance period ranges
from 0 to 200% of a participants performance unit award.

|                   |  |                  |         |                |  |                                |           |        |  |         |   |  |  |  |         |  |  |  |         | 
|------------------ |  | ---------------- | ------- | -------------- |  | ------------------------------ | --------- | ------ |  | ------- | - |  |  |  | ------- |  |  |  | ------- | 
|                   |  |                  |         |                |  |                               
|                   |  |                  |         | Performance or |  | Estimated Future Payouts under
|                   |  |                  |         | Other Period   |  | Non-Stock Price-Based Plans   
|                   |  | Number of        |         | Until          |  |                               
|                   |  | Shares, Units or |         | Maturation     |  | Threshold                      |           | Target |  | Maximum
|Name               |  | Other Rights     |         | or Payout      |  | (#)                            |           | (#)    |  | (#)    
|                   |  |                  |         |                |  |                                |           |        |  |        
|Stanley T. Sigman  |  |                  | 50,063  | (A)            |  |                                | 2002-2004 |        |  |         | 0 |  |  |  | 50,063  |  |  |  | 100,126 | 
|                   |  |                  | 186,580 | (B)            |  |                                | 2002-2005 |        |  |         | 0 |  |  |  | 186,580 |  |  |  | 186,580 | 
|Mark L. Feidler    |  |                  | 59,800  |                |  |                                | 2002-2004 |        |  |         | 0 |  |  |  | 59,800  |  |  |  | 119,600 | 
|Richard G. Lindner |  |                  | 26,100  |                |  |                                | 2002-2004 |        |  |         | 0 |  |  |  | 26,100  |  |  |  | 52,200  | 
|Robert W. Shaner   |  |                  | 17,442  |                |  |                                | 2002-2004 |        |  |         | 0 |  |  |  | 17,442  |  |  |  | 34,884  | 
|F. Thaddeus Arroyo |  |                  | 14,828  |                |  |                                | 2002-2004 |        |  |         | 0 |  |  |  | 14,828  |  |  |  | 29,656  | 
|Stephen M. Carter  |  |                  | 76,680  |                |  |                                | 2002-2004 |        |  |         | 0 |  |  |  | 76,680  |  |  |  | 153,360 | 



---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(A) | During 2002, Mr. Sigman was granted
    performance shares by SBC. Each performance share is equivalent
    in value to one share of SBC common stock. At the end of a
    performance period, a percentage of the performance shares is
    converted into cash and/or SBC common stock, based upon the
    achievement of certain SBC objectives. The performance levels
    are set on a yearly basis, and the extent to which a performance
    level is met or exceeded is expressed as a percentage. The
    annual percentages are then averaged over the term of each
    performance period to determine the percentage of performance
    shares that may be converted and paid out. The maximum number of
    performance shares that may be converted at the end of a
    performance cycle may not exceed 200% of the target number of
    performance shares.
|   
|(B) | This is a retention benefit granted in connection
    with Mr. Sigmans Cingular Wireless employment
    agreement, which will vest on the 3rd anniversary of the grant.
    The benefit, valued at $5,000,000 on the date of the grant, is
    converted to equivalent units of SBC and BellSouth stock that
    could be purchased at the closing prices of such stocks on the
    grant date, based on a ratio of 60% SBC stock and 40% BellSouth
    stock. The units payout in cash based on the relative values of
    the underlying stock at vesting. Dividend equivalents are paid
    at the same rate as paid to all respective SBC and BellSouth
    shareholders. See Agreements with Management 
    Agreement with Stanley T. Sigman below.                                                                                                              



| |                                          
| | -----------------------------------------
| | Pension and Other Retirement
    Benefits

We adopted a non-contributory pension plan that
covers all employees not covered by a collective bargaining
agreement and a limited group of employees covered by such an
agreement, known as the Cingular Wireless Pension Plan.
Beginning November 1, 2001, participants, including the
named executive officers, are entitled to receive monthly
service credits of 5% of base pay and interest credits,
compounded monthly, determined by reference to 30-year
U.S. Treasury rates. The Cingular Wireless Pension Plan
provides for certain transition benefits which are intended to
transition current employees from the SBC or BellSouth benefit
levels to our ongoing benefit level over a period of five years
or less.

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In addition to the Cingular Wireless Pension
Plan, each of the named executive officers participates in
certain non-qualified supplemental pension plans that provide
benefits in excess of amounts permitted in qualified benefit
plans by certain Internal Revenue Code provisions. For
Messrs. Lindner, Shaner and Carter, we adopted a
supplemental retirement income plan (Cingular Mirror
SRIP) that mirrors the substantive terms of the SBC
Supplemental Retirement Income Plan (SBC SRIP). The
Cingular Mirror SRIP establishes a target annual retirement
benefit for certain officers, stated as a percentage of their
annual salaries and annual incentive bonuses averaged over a
specified period, offset by our pension plan and any other
Cingular nonqualified plan, if adopted. The Cingular Mirror SRIP
will provide benefits identical to those of the SBC SRIP but
with the accrual of benefits freezing on and as of
December 31, 2006. Mr. Sigman will not accrue benefits
under the Cingular Mirror SRIP so long as he is accruing
benefits under the SBC SRIP. Mr. Sigmans SBC SRIP
benefit will be reduced by the amount of any vested benefit that
he receives from our qualified pension plan. See
Agreements with Management  Agreement with
Stanley Sigman below. For Mr. Feidler, BellSouth will
maintain existing accounts and remain liable for accrued
benefits under the BellSouth Supplemental Executive Retirement
Plan (SERP), along with certain other senior
managers transferred to Cingular. BellSouth will continue to
accrue benefits under the SERP to eligible participants through
December 31, 2006. The net SERP benefit payable from
BellSouth will equal the gross benefit amount determined by the
SERP formula, offset by Cingulars qualified pension plan
and social security, and further offset by any Cingular
nonqualified plan, if adopted. Mr. Arroyo was not a covered
participant under the BellSouth SERP.

The total estimated annual combined pension
amounts based on pay and completed years of service as of
December 31, 2002 payable beginning at the assumed
commencement age from qualified and non-qualified plans to
Messrs. Sigman, Feidler, Lindner and Arroyo would be
$1,478,687, $175,617, $208,167 and $7,519, respectively. The
assumed commencement age is 65 for Messrs. Sigman, Feidler
and Arroyo and 60 for Mr. Lindner. The estimated annual
retirement amounts payable to Mr. Carter, commencing in
2003, in connection with his resignation, would be $19,800 and
$149,000 from qualified and non-qualified plans, respectively.
The estimated annual retirement amounts payable to
Mr. Shaner, commencing in 2003, in connection with his
retirement, would be $82,000 and $199,600 from qualified and
non-qualified plans, respectively.



| |                           
| | --------------------------
| | Agreements with Management

Stanley Sigman.In
connection with his election as President and Chief Executive
Officer of the Company, Mr. Sigman and Cingular agreed to
the compensation arrangement summarized below:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | base pay of not less than $900,000 per year
    (established as $900,000 for 2003);                                                                                                                                                                                                                                                                                                                                                                                                       
|
| |  | short-term award target of not less than
    $1,144,000 per year (established as $1,144,000 for 2003), which
    shall be paid subject to achievement of performance criteria;                                                                                                                                                                                                                                                                                                            
|
| |  | long-term award target of not less than
    $5,000,000 per year (established as $5,000,000 for 2003), which
    shall be paid subject to achievement of performance criteria of
    the LTIP Plan;                                                                                                                                                                                                                                                                                        
|
| |  | a retention benefit valued on date of grant at
    $5,000,000 and payable in cash, unless terminated for cause or
    by retirement or resignation, at the end of three years (subject
    to accelerated vesting in the case of death, permanent
    disability or termination by Cingular other than for cause), in
    an amount giving effect to the weighted (at 60/40) stock price
    performance of, and dividends on, SBC and BellSouth common stock
    over the vesting period;
|
| |  | annual incentive cash payments on
    November 24, 2002, 2003 and 2004 of $160,000 if then
    employed by the Company;                                                                                                                                                                                                                                                                                                                                                                   
|
| |  | enhanced pension benefits to be accrued under the
    SBC SRIP; and                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| |  | Georgia and federal income tax gross-ups on
    designated compensation payments.                                                                                                                                                                                                                                                                                                                                                                                                         

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Mark Feidler.In
connection with his joining our company, Mr. Feidler and
BellSouth entered into an agreement providing certain retention
incentives and making modifications to certain benefits to which
he was entitled as a BellSouth executive officer. The agreement
provides for:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the payment by BellSouth to him of a special
    bonus in the amount of $800,000 in respect of his performance
    for the transition period during which BellSouths wireless
    interests were being transferred to Cingular;                                                                                                                                                                                                                                                                                           
|
| |  | the payment by BellSouth to him of $2,000,000 in
    the event of voluntary or involuntary termination of employment
    with Cingular on or prior to December 31, 2003 if BellSouth
    does not offer him a comparable position at BellSouth to which
    to return;                                                                                                                                                                                                                                                     
|
| |  | vesting of executive benefits in the event of
    voluntary or involuntary termination of employment with Cingular
    or change of control of BellSouth or a substantial diminution of
    BellSouths interest in Cingular;                                                                                                                                                                                                                                                                                              
|
| |  | the payment by BellSouth to him of an amount
    representing the approximate value he would have received if he
    exercised BellSouth options granted prior to June 9, 2000
    at a market price of $60 per share, less what value he actually
    received from exercising those options, in the event of a
    voluntary or involuntary termination of employment with
    Cingular, death or disability, change of control of BellSouth or
    a substantial diminution of BellSouths interest in
    Cingular; and
|
| |  | the payment by BellSouth to him of an amount
    representing the prorated short-term bonus award, as applicable
    to him under a comparable Cingular short-term bonus plan, in the
    event of a voluntary or involuntary termination of employment
    with Cingular (we would not be required to pay him any amount
    under our plan).                                                                                                                                                                             

Stephen Carter.In
connection with his resignation from our company, Stephen Carter
and Cingular agreed to the arrangement summarized below:



| |   |                                                                                                                                                                                                                                                                              
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a lump sum payment of $2,256,500;                                                                                                                                                                                                                                            
|
| |  | for 18 months following his resignation,
    reimbursement, including applicable tax gross-ups, for any
    amounts paid to continue coverage in the health plans in which
    he participated immediately prior to his resignation, including
    the Executive Health Plan;
|
| |  | relocation benefits of up to $350,000;                                                                                                                                                                                                                                       
|
| |  | SBC agrees to extend the period allowed to
    exercise certain vested SBC stock options until
    December 30, 2005, which right to exercise such options
    would otherwise expire as a result of his termination of
    employment with Cingular;                        
|
| |  | benefits under the Officer Communications Plan
    for one year;                                                                                                                                                                                                             
|
| |  | a payment of $60,078 for unused vacation and
    personal days not utilized prior to resignation; and                                                                                                                                                                        
|
| |  | a prorated 2002 short-term incentive award
    payment.                                                                                                                                                                                                                      

Thaddeus Arroyo.In
connection with his joining our company, Mr. Arroyo and
Cingular agreed to the compensation arrangement summarized below:



| |   |                                                                                                                                                                                                                        
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | short-term award target of $200,000 in 2001,
    which shall be paid subject to achievement of performance
    criteria;                                                                                               
|
| |  | a grant of 65,000 BellSouth stock options
    effective March 1, 2001, granted at the fair market value
    on the date of grant;                                                                                      
|
| |  | four special bonus payments payable as follows:
    $250,000 at the time of hire, $200,000 on the first anniversary
    with the company, $150,000 on the second anniversary and
    $100,000 on the third anniversary;

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| |   |                                                                                                                                                                                                                                                                                
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | a special bonus payment of $74,000, offset by any
    bonus payment earned in 2000 and paid in 2001 by his previous
    employer; and                                                                                                                                          
|
| |  | a separation payment of 1 times salary plus
    standard bonus payable if involuntarily terminated within
    36 months of date of hire, other than for cause, contingent
    upon executing a transition agreement containing non-compete and
    non-solicitation provisions.






|         |                                                                   
|-------- | ------------------------------------------------------------------
|Item 12. | Security Ownership of Certain Beneficial
    Owners and Management

SBC and BellSouth own approximately 60% and 40%
ownership interests in us, and Cingular Wireless Corporation,
our manager, owns a 0.0000001% ownership interest in us. Our
directors and officers do not own any interest in us.






|         |                                                   
|-------- | --------------------------------------------------
|Item 13. | Certain Relationships and Related
    Transactions

We have provided below a summary of the
significant agreements that we have executed with SBC or
BellSouth, or one of their respective subsidiaries, or that
relate to our formation. These descriptions are not complete and
only summarize the material terms of the agreements.

Our Limited Liability Company
Agreement

Our limited liability company agreement governs
our management and operations. Its parties are certain SBC and
BellSouth entities and Cingular Wireless Corporation 
our manager. Their economic interests in us are represented by
units.

Our manager has two classes of common stock:



| |   |                                                                                                                                                                                                                                                                                                                          
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Class A common stock, par value $0.01 per
    share, which entitles the holder to one vote per share and
    generally has voting rights identical to those of holders of
    Class B common stock, except for the low-vote structure and
    the differences in the right to vote for directors described
    below; and
|
| |  | Class B common stock, par value $0.01 per
    share, which entitles its holder to ten votes for each
    underlying unit in us.                                                                                                                                                                                          

Of the two outstanding shares of Class B
common stock, one share is held by SBC and the other share is
held by BellSouth. Our manager also has six billion shares of
Class A common stock authorized, none of which are
currently outstanding. In addition, our manager has one billion
authorized shares of preferred stock, issuable in one or more
series. However, no series has been designated and no shares are
currently outstanding.

Our structure gives SBC and BellSouth equal
control of our management and ownership interests of
approximately 60% and 40%, respectively. It also gives us the
flexibility to raise equity in the capital markets. If we wish
to raise new equity, our manager would need to obtain the
consent of its strategic review committee, then sell shares of
its Class A common stock and contribute the net proceeds to
us in return for units. Our parents may only sell their equity
interests as described in  Transfers of LLC
Units and Common Stock below.

Our Management.Our
management is vested in Cingular Wireless Corporation, whose
powers are established by the terms of its amended and restated
certificate of incorporation, which we refer to as the
managers charter. As our manager, that
corporation has control over all of our affairs and
decision-making. The same persons are officers of both us and
our manager, but our manager has no employees of its own.
Operational and administrative decisions and the day-to-day
management of our affairs are accomplished at our Company and at
the various operating entities that we own. Substantially all
important decisions must be approved by the managers
strategic review committee, which is currently comprised of all
of its Class B directors. At all times, as long as any
shares of Class B common stock remain outstanding, the
Class B common stockholders will be entitled to control the
managers board of directors, even if only one of SBC or
BellSouth holds Class B common stock. Substantially all
important decisions made by our manager are subject to the
affirmative vote of at least two-thirds of the strategic

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review committee of its board of directors. These
decisions include approval of a business plan, appointment of
executive officers, capital calls, declaration of dividends,
purchases of new technology, public stock offerings, changes to
the managers certificate of incorporation and by-laws and
many others. SBC and BellSouth each may elect two members to the
board of directors so long as each remains a holder of
Class B common stock of the manager and holds 10% or more
of the sum of




| |                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------
| | (1) the total number of our units
    outstanding (excluding units owned by our manager); and                    
|
| | (2) shares of our managers
    Class A and Class B common stock outstanding
    (excluding any treasury shares).

At present, the committee is composed of the
individuals who constitute our managers board of
directors. Deadlocks between the Class B directors of SBC
and those of BellSouth will be resolved by the chief executive
officers of SBC and BellSouth. Upon an underwritten public
offering of shares of Class A common stock, our
managers board will appoint one Class A director as
an additional member of the strategic review committee. SBC and
BellSouth have agreed in a stockholders agreement to vote
their Class B common stock in favor of any matter approved
by the strategic review committee.

Scope of our
Business.The limited liability
company agreement and our managers charter generally limit
our business to the domestic provision of mobile wireless voice
and data services that use radio frequencies licensed by the FCC
for the provision of cellular service, PCS service, wireless
data service, satellite services and related services.
Domestic means the 50 states of the United States,
the District of Columbia, the U.S. Virgin Islands and Puerto
Rico, but excludes other U.S. territories and possessions. In
Puerto Rico and the U.S. Virgin Islands, we may also conduct
paging services.

Exclusivity.When we
or our subsidiaries require network services of wireline
carriers to provide service in the incumbent service territories
of SBC and BellSouth, we and our subsidiaries must use
exclusively their network services, except where we and our
subsidiaries would be materially disadvantaged to do so. For
purposes of the limited liability company agreement, the
incumbent service territory of SBC consists of the states of
California, Nevada, Connecticut, Texas, Missouri, Arkansas,
Oklahoma, Kansas, Illinois, Indiana, Ohio, Michigan and
Wisconsin, and the incumbent service territory of BellSouth
consists of the states of Georgia, Florida, South Carolina,
North Carolina, Alabama, Mississippi, Kentucky, Louisiana and
Tennessee, together with any additional service territories that
may be acquired by either party, as described below.

In addition, SBC and BellSouth may not market or
sell mobile wireless products and/or services other than ours.
However, this does not prevent them from:



| |   |                                                                                                                                                                                                                      
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | continuing to market and sell wireless services
    other than ours to customers who were joint billing customers as
    of October 2, 2000;                                                                         
|
| |  | allowing our competitors to bundle and sell
    SBCs and BellSouths products and services together
    with such competitors wireless services;                                                                   
|
| |  | marketing and selling fixed wireless voice and
    data products other than ours; and                                                                                                                                
|
| |  | marketing and selling wireless services other
    than ours in geographic areas designated by the FCC, which
    include the entire United States, except for PCS service offered
    in the Gulf of Mexico, in which



| |   |                                                                                           
| | - | ------------------------------------------------------------------------------------------
| |  | neither we nor our subsidiaries provide wireless
    services pursuant to FCC licenses; or
|
| |  | Salmon PCS does not provide wireless services
    pursuant to FCC licenses.               

Competition.SBC and
BellSouth are generally not permitted to compete with us
regarding mobile wireless products and/or services, as described
under the exclusivity provisions above. However, SBC
and BellSouth may compete with each other and us to the extent
described above and with respect to resale and packaging of
wireless services. SBC and BellSouth may also act as our agents,
and may resell our services, as described below under
 Wireless Agency Agreements and
 Resale Agreements.

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Volume Discounts.We
must use reasonable best efforts to offer to SBC and BellSouth
any vendor volume discounts available to us, and SBC and
BellSouth must use reasonable best efforts to offer to us or to
our subsidiaries or Salmon, any vendor or volume discounts
available to them.

Change of Control.If a company with a mobile wireless business acquires control of
SBC or BellSouth and a regulatory conflict results, that company
must dispose of any resulting overlapping properties, which may
include its interest in us, and we would have no obligation to
make a disposition of any of our properties or to take any other
action to eliminate any resulting overlaps or regulatory
conflicts. A change of control, as defined, of SBC or BellSouth
would occur if any person becomes the beneficial owner of voting
securities of that company resulting in the acquiring person
having the power to cast at least 50% of the votes for the
election of directors of that company.

Divestiture of Wireless
Business.In general, SBC, BellSouth
and their subsidiaries must divest any domestic mobile wireless
businesses they own, other than wireless interests that, because
of insubstantial economic or passive management interests, are
considered de minimis.

Divestitures would be carried out as follows:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | if SBC or BellSouth owns and controls a mobile
    wireless business and has the power to control its disposition,
    it would be required to offer the wireless business to us before
    selling to a third party.                                                                                                                                                                                                                                                                                            
|
| |  | if SBC or BellSouth owns a mobile wireless
    business but cannot offer it to us because it cannot control its
    disposition, it would be required to dispose of the wireless
    business or reduce its ownership and/or management interest
    therein, such that the wireless business becomes a de minimis
    interest.                                                                                                                                                                                 
|
| |  | if the ownership of the mobile wireless business
    requires a disposition of licenses under applicable law that
    would be material to SBC or BellSouth, then that company may,
    but is not required to, sell the wireless business to us but may
    instead transfer all of its units and our managers
    Class A common stock through a spin-off or split-off or
    sale to third parties in accordance with the procedures
    described under Transfers of LLC Units and Common
    Stock below.

Distributions.Except as described below, distributions by us require the
consent of all of our members and no member is entitled to
withdraw any portion of its capital account without the consent
of the other members. We will make periodic distributions to our
members on a pro rata basis in an amount equal to the greatest
of each members taxes (calculated using the highest
corporate marginal tax rate as if we were a corporation for U.S.
federal, state and local income tax purposes) as a result of our
operations due for the fiscal quarter for which estimated income
tax payments are due, divided by the members percentage
interests in us. In addition, we will distribute to our members
at the end of a fiscal year, on a pro rata basis in accordance
with each members percentage interest in us, an amount
equal to the excess of the greater of:



| |   |                                                                                                                                                                                                                                                                                                                                      
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 50% of our excess cash, and                                                                                                                                                                                                                                                                                                        
|
| |  | the greatest of each members taxes
    (calculated using the highest corporate marginal tax rate as if
    we were a corporation for U.S. federal, state and local income
    tax purposes) resulting from allocations of tax items from us
    for the preceding fiscal year, divided by the members
    percentage interest in us

over the amount of tax distributions made with
respect to that fiscal year. Excess cash means, with
respect to any fiscal year, the excess, if any, of:

(A) the sum of (x) the amount of all
cash received by us (including any amounts allocated to our
subsidiaries) during such fiscal year and (y) any cash and
cash equivalents held by us at the start of such fiscal year,
over

(B) the sum of (x) all cash amounts
paid or payable (without duplication) in such fiscal year
incurred by us (including any amounts allocated to our
subsidiaries) and (y) the net amount of cash needs for us
set forth in our budget for the following fiscal year.

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The amount of the tax distributions to be made
regarding the federal estimated income tax payment on
September 15 of a year will be adjusted for the amount by
which the total of the quarterly tax distributions for the prior
fiscal year was less than or exceeded the amount that would have
been distributed had our members taxes been calculated
using our final results for the prior fiscal year, as opposed to
using estimates.

Our manager intends to reinvest any funds
distributed in excess of those it needs to pay taxes. The
limited liability company agreement does not provide a mechanism
for additional capital contributions by our manager, other than
capital calls for pro rata contributions by all of our members.
Accordingly, a reinvestment of distributions that our manager
receives from us in exchange for an increased interest in us
will require the approval of all of our members, in addition to
the approval of our managers strategic review committee.

Exchange of LLC Units and Transfer and
Conversion of Shares of Class B Common
Stock.Each of our members may
exchange any or all of its units for our managers
Class A common stock on a one-for-one basis. Our manager is
required to acquire a number of our units corresponding to any
shares of Class A common stock it issues.

If either SBC or BellSouth wishes to transfer its
shares of our managers Class B common stock, except
for permitted transfers described under
 Transfers of LLC Units and Common Stock
below, it is required to convert those shares of Class B
common stock into shares of our managers Class A
common stock. Shares of Class B common stock may be
converted into shares of Class A common stock at any time.
If either SBC or BellSouth reduces its total ownership to less
than 10% of the total outstanding shares, that party
must convert its remaining shares of Class B common stock
into Class A common stock, and it loses its Class B
directors on our managers board and strategic review
committee. Because of the economic equivalence with units, the
limited liability company agreement bases several of its
provisions on the concept of total outstanding
shares, which means the sum of the total number of shares
of our managers Class A and Class B common stock
issued and outstanding and the total number of our units
outstanding, excluding units owned by our manager.

Transfers of LLC Units and Common
Stock.The limited liability company
agreement generally prohibits transfers of units or common stock
of our manager (collectively referred to as
securities), except transfers with the consent of
each member owning more than 10% of the total outstanding
shares. However, there are several exceptions to this general
rule for transfers by SBC and BellSouth, including:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | transfers of our managers Class A
    common stock in a broad public offering of Class A common
    stock underwritten on a firm commitment basis, including
    transfers in any offering;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| |  | each member may transfer our managers
    Class A common stock or the stock of a company that owns
    units or the stock of a company that owns Class A common
    stock in our manager in up to two spin-offs or split- offs. A
    spin-off would be a wide, SEC-registered
    distribution of units or Class A common stock of our
    manager or of all of the equity securities of a subsidiary of a
    member that owns units or Class A common stock of our
    manager to all of the common stockholders of a series or class
    of the member or its ultimate parent. In a
    split-off, each such common stockholder would be
    offered the right to exchange common stock of our members or
    their ultimate parent entities for our managers
    Class A common stock or the stock of a subsidiary of the
    member that owns units or our managers Class A common
    stock, which exchange offer would also be widely distributed and
    registered with the SEC. Spin-offs and split-offs can involve
    the sale of all or a portion of a members interest; and
|
| |  | a sale of all, but not less than all, of a
    members units and any of our managers common stock
    to third parties, subject to, among other things, a right of
    first refusal and a requirement that the third-party or its
    ultimate parent become a party to the limited liability company
    agreement and the stockholders agreement in the place of
    the selling party. Upon any transfer of all of SBCs or
    BellSouths units, the transferring member will have no
    continuing rights or obligations under the                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

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| |  |                                                                                                                                                                                        
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | limited liability company agreement, but will
    remain bound by the terms of any ancillary operating agreements
    it entered into in accordance with the terms of those agreements.

Withdrawal of a
Member.A member automatically ceases
to be a member of us when it no longer owns any units.

Preemptive Rights.If our manager issues shares of its Class A common stock
solely for cash, except for issuances in a public offering
underwritten on a firm commitment basis or pursuant to the
exercise of options granted under employee benefit plans, each
member has the right to purchase from us a number of units such
that its percentage ownership in us will not be reduced.

Incentive Plans.If
our manager issues any Class A common stock pursuant to any
employee benefit plan of our manager, we will issue one unit to
our manager for each share issued by it and we will receive the
net proceeds for the shares that were received by our manager.

Tower Transactions.We lease or pay a monthly fee for the maintenance of the tower
or the use of the tower space on which many of our antennas are
located, including the antennas, microwave dishes and other
wireless equipment, together with the land surrounding the
tower, instead of owning or controlling the tower. Before
contributing their wireless properties to us, SBC and BellSouth
each entered into separate transactions with different tower
management companies to lease on a long-term basis many of their
communications towers and related assets to SpectraSite Inc.
(formerly SpectraSite Holdings, Inc.) in the case of SBC, and
Crown Castle International, in the case of BellSouth. In
connection with these transactions, SBC and BellSouth entered
into master leases to sublease portions of their towers in
exchange for a monthly rental or site maintenance payment and/or
reserved antenna space on the towers. Crown Castle is generally
required to build, manage, maintain and remarket, including to
competitors, the remaining space on future towers on which our
antennas will be located. With respect to the towers to be built
in the markets where SpectraSite is managing sites, we plan to
hire different tower companies to perform these functions. See
Notes 16 and 17 to our consolidated financial
statements for more information on communications tower
transactions with SBC and BellSouth.

Stockholders Agreement

There are four Class B directors. Under a
stockholders agreement, each of SBC and BellSouth has
agreed to vote shares beneficially owned by it for:



| |   |                                                                                                                                                                                                                                                                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the election of the Class B directors
    nominated by each of SBC and BellSouth, for so long as each such
    party is then entitled to have its nominees elected as
    Class B directors;                                                                                                                                                               
|
| |  | following any such issuance of Class A
    common stock of our manager, the election of one independent
    director to our managers board of directors selected by
    SBC and the election of one independent director selected by
    BellSouth, for so long as each such party is then entitled to
    have its nominees elected as Class B directors;
|
| |  | the removal of any Class B director as
    determined by the stockholder who nominated that director;                                                                                                                                                                                                                                                      
|
| |  | the appointment of a new Class B director
    upon any vacancy of a Class B directorship on the board or
    any committee of our managers board, as determined by the
    stockholder who nominated the Class B director whose
    departure caused the vacancy; and                                                                                     
|
| |  | approval of any matter submitted to the
    stockholders of our manager that has been previously approved by
    the strategic review committee of our manager.                                                                                                                                                                                            

Following the issuance of Class A common
stock of our manager, each of SBC and BellSouth shall be
entitled to nominate one person to serve as an independent
director. If there is an initial public offering of Class A
common stock, Class A stockholders will be entitled to
elect three independent directors. SBC, BellSouth and our
manager have agreed that one of the independent directors shall
be nominated by SBC and one by BellSouth. Within 12 months
following the closing of such offering, a third independent
director will be nominated by our managers board of
directors. Our manager, which is also a party to the

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agreement, has agreed that it will use its best
efforts to cause the holders of Class A common stock to
vote in favor of the nomination as independent directors on the
board of the nominees of SBC and BellSouth. In addition, SBC and
BellSouth have agreed that the chairman of our managers
board shall, for so long as SBC and BellSouth together hold at
least 50% of the total voting power, other than for the election
of directors, be elected from among the Class B directors
nominated by SBC and BellSouth.


The agreement contains transfer restrictions with
respect to the transfer of a stockholders Class A and
Class B common stock substantially similar to those set
forth above under  Our Limited Liability
Company Agreement  Transfers of LLC Units and Common
Stock. Conversions of Class B common stock into
Class A common stock are not considered transfers. In the
event of a transfer, the stockholders have agreed that the party
to whom the shares are transferred will become a party to the
stockholders agreement. In addition, no stockholder may
transfer any of its Class B common stock unless it
transfers all of the shares it holds to the same person.

Marketing, New Products and Services, Marks
and Intellectual Property

As specified in more detail under separate
agreements that are described below, our limited liability
company agreement sets out the following principles:



| |   |                                                                                                                                                                                                                                                                                         
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | we have primary responsibility for marketing our
    products and services;                                                                                                                                                                                                             
|
| |  | SBC and BellSouth may market our products and
    services as agents and resellers, as further specified in the
    agency and resale agreements that are described below;                                                                                                              
|
| |  | with respect to intellectual property other than
    the SBC and BellSouth marks, consisting of patents, trade
    secrets, copyrights, technology and know-how, we have entered
    into intellectual property agreements with SBC and BellSouth and
    certain of their subsidiaries;
|
| |  | we may create new products and services and
    associated intellectual property rights; and                                                                                                                                                                                            
|
| |  | we have agreed that we may in our sole discretion
    grant each of SBC and BellSouth licenses in the intellectual
    property that we are developing or that we acquire after
    October 2, 2000.                                                                                    

Transition Services Agreements

SBC and BellSouth Transition Services
Agreements.On October 2, 2000,
we entered into a transition services agreement with each of SBC
and BellSouth, pursuant to which SBC and BellSouth each provided
prior to December 31, 2002 transition services and
products. The services provided by both SBC and BellSouth
included government and regulatory affairs, finance,
compensation and benefit accounting, human resources, internal
audit, risk management, technical support, marketing, research
and development, procurement, real estate, legal, security and
tax. The fees were determined based upon the costs of providing
the level of services expected to be provided at the time we
entered into the agreements. For services rendered under these
agreements we paid $17 million for the year ended
December 31, 2002.

Ameritech Paging Transition Services
Agreement.We also entered into a
transition services agreement to continue for up to eighteen
months from October 2, 2000 to provide services to
Ameritech Wireless Holdings, Inc., which operates a paging
business that was not contributed to us but that has been
managed by a subsidiary that was contributed to us. This
agreement expired on April 1, 2002 except with respect to
real estate and information technology services, which were
extended for 90 days.

Intellectual Property
Agreements.We have granted SBC and
BellSouth perpetual, royalty-free, non-exclusive licenses to use
certain technology, the ownership of which was transferred by
BellSouth and SBC to us at the contribution closing, and to sell
any products that are covered by that technology and certain
other rights necessary for our parents to utilize the technology
they transferred to us in order to continue their business
without interruption. Similarly, SBC and BellSouth have each
granted us a perpetual, royalty-free, non-exclusive license to
certain copyrights, technology and know-how, which were not
transferred to us at the contribution closing but are used in
the operation of our business, as well as patents and patent
applications.

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Wireless Agency Agreements

Under our wireless agency agreements with
subsidiaries of SBC and BellSouth, such subsidiaries and any of
their affiliates that make an election to do so act as
authorized agents exclusively on our behalf for the sale of
wireless services to subscribers in SBCs and
BellSouths respective incumbent service territories. We
are free to contract with other agents for wireless services in
both of our parents incumbent service territories,
including retailers and other distributors. All subscribers
contracted through SBC and BellSouth agents are our own
customers, except where the agents sell packages, in which case
a subscriber is a customer of one of the agents for all portions
of the package other than our wireless services. All affiliates
of SBC and BellSouth may act as agents for us and, when electing
to act as agents, will be bound by one of the wireless agency
agreements. Each agent has agreed that it will not, directly or
indirectly, offer or promote wireless services of our
competitors in the agents service territory; however,
services typically referred to as reflex paging,
which is a two-way messaging service that adds a response
channel to traditional pager devices, is not considered a
competing service for these purposes. See Factors Relating
to Our Arrangements with SBC and BellSouth for further
information on wireless data services.

Each agent may elect to cease acting solely as
our agent and begin to act as a reseller under a resale
agreement, as described below. The election has to be made for
all package subscribers, but does not affect an agents
right to act as our agent in selling wireless services that are
not included in a package. Package subscribers are those
subscribers that buy combinations of wireless services and other
communications services offered by our parents. In addition, the
agent has a corresponding right to choose to cease acting as
agent with respect to national accounts.

Each agent has a unilateral right of termination
after October 2, 2003. We may terminate the agreement with
respect to any type of wireless service in the event of a change
in the law relating to that type of wireless service that
materially and adversely impacts our ability to conduct our
business in an agents service territory. We may also
terminate with respect to a specific wireless service if we do
not get regulatory approval to sell that service in an
agents service territory. Each wireless agency agreement
also terminates upon breach, mutual agreement of the parties or
on December 31, 2050. Once the agreement terminates, a
former agent still has the rights under the resale agreement
described below and may sell within its service territory
wireless services that are not part of a package. In addition,
in the event an agent terminates the agreement because we are in
breach, the former agent would have the right to offer competing
service purchased from third parties as an agent or reseller for
those third parties. Upon termination, we may offer any
communications services of the types that were previously
exclusively offered through our parents, network services or
other services bought from one of the agents or from third
parties.

The wireless agency agreements provide that the
agents receive a commission from us for each new subscriber
enrolled by the agent in its service territory, which varies
depending on the average three-month churn rate. Where we,
instead of the agents, provide handsets and other equipment, we
only pay a partial commission. In addition, the fees may be
different where we participate in the sales process.
Furthermore, we pay residual compensation supplementing the
commissions equal to a percentage rate multiplied by monthly
charges to the customer from accessing and using our network,
but only where a customer has completed a minimum of
180 days of service. Pursuant to the agency agreements, we
paid $46 million for the year ended December 31, 2002.

Resale Agreements

We agreed to sell to SBC and BellSouth and their
affiliates, as resellers, both existing and future wireless
services and features providing access to our wireless systems
or any wireless services to which we have access under roaming
agreements. The resellers will resell those services to their
customers, both separately and packaged with other
communications services. The reseller may sell any new service
offerings that we develop both in its own service territories
and outside of that service territory. We are not required to
provide any customer service or billing services to the
resellers users.

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Generally, the resellers may only sell our
wireless services outside their own service territory. However,
if the reseller terminates its wireless agency agreement on or
after October 2, 2003, as described above under
Wireless Agency Agreements, it may resell our
wireless services in its respective service territories. Each
agreement terminates on October 2, 2050 or upon mutual
agreement of the parties.

Under the resale agreements, we charge the
resellers a fixed monthly charge per wireless customer. In
addition, the resellers also pay charges based on usage of our
network and separate charges for roaming and a number of other
services. We had no revenues from these agreements in 2002.

Contribution and Formation Agreement

We entered into an amended and restated
contribution and formation agreement with SBC and BellSouth
dated as of April 4, 2000, governing the contributions that
were made to us on October 2, 2000 and some other
contributions that were scheduled to be made later.

We, our subsidiaries and other affiliates and our
and their directors, officers, employees, shareholders and
agents may seek indemnification for breaches of representations
and warranties made by SBC or BellSouth in the contribution
agreement, subject to certain thresholds and deductibles. The
indemnification is subject to the following limitations:



| |   |                                                                                                                                                                                                                                                                                                                                                                                             
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | any indemnifiable losses are subject to a minimum
    threshold of $2 million for individual losses, and only the
    amount in excess of that amount will be deemed a loss;                                                                                                                                                                                                                
|
| |  | any breaches that relate to matters set forth on
    the respective partys disclosure schedule shall not be
    deemed a loss until the amount of loss exceeds $4 million;                                                                                                                                                                                                                 
|
| |  | a party will not be liable for an indemnifiable
    loss until the total amount of the losses exceeds
    $250 million. For the purpose of calculating this
    deductible, our losses and those of SBC and BellSouth may not be
    counted twice for the same breach. A party is only liable for
    the amount of an indemnifiable loss in excess of the
    $250 million deductible; and
|
| |  | the maximum that SBC or BellSouth must pay for
    indemnifiable losses is $3 billion. Breaches of the
    representations on capitalization, subsidiaries, financial
    statements, taxes, brokers and finders and after-acquired
    properties are not subject to this limitation.                                                                                                      

Each partys representations generally
expired on April 2, 2002, except those representations
relating to:



| |   |                                                                                                                                                                                                                                                                                                                             
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | tax matters, which survive until the expiration
    of the applicable statute of limitations;                                                                                                                                                                                                                               
|
| |  | environmental matters, which survive until
    October 2, 2003; and                                                                                                                                                                                                                                                         
|
| |  | organization, good standing and qualification;
    capitalization; subsidiaries; corporate authority and approval;
    brokers and finders; after acquired properties; and
    BellSouths representations relating to the value of
    certain credits granted to BellSouth by Ericsson, which have no
    expiration date.

Registration Rights Agreements

Our manager has granted registration rights to
SBC and BellSouth through which they may require our manager to
register under the Securities Act shares of its Class A
common stock issued or issuable to them. These registration
rights expire one year after a holder ceases to hold at least
10% of the total outstanding shares.

Under the registration rights agreement, our
manager is required to use its best reasonable efforts to
register any of the shares of its common stock for sale in
accordance with the intended method of disposition, subject to
customary deferral rights. Each of SBC and BellSouth will have
the right to demand two registrations in any calendar year, but
no demand may be made unless the shares to be registered
(1) constitute at least 1% of our managers
Class A common stock outstanding, or (2) have a market
value on the demand date of at least $250 million. In
addition, SBC and BellSouth have the right to

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include their shares in other registrations of
our managers equity securities other than an initial
public offering and offerings on Form S-4 or S-8 and other
than in connection with rights offerings or dividend
reinvestment plans, subject to customary cutback provisions.
However, SBC and BellSouth are cut back only after all other
holders, including holders exercising their own demand rights,
are cut back. SBC and BellSouth may also piggyback on the demand
registration of another holder, but will be subject to the
cutback provisions applicable to demand registrations, pursuant
to which the securities to be registered by the demand holders
will be considered first, then the securities to be registered
by our manager and last, the securities of the holder
piggybacking on the demand registration.


Once our manager is eligible to file a shelf
registration statement on Form S-3, it is required to file a
shelf registration statement if so requested by SBC or BellSouth
and to use its reasonable best efforts to have it declared
effective and to keep it effective until the earlier of the date
on which the registering holder no longer holds any of our
common stock or the date on which its common stock may be sold
under Rule 144(k). As long as our manager has a shelf
registration statement outstanding, it is not required to file
additional demand registration statements, provided that the
number of securities to be registered can be sold under the
shelf.

In addition, the agreement provides that our
manager is required to pay all registration expenses, including
all filing fees and our fees and expenses, other than
underwriting discounts and commissions and any transfer taxes
incurred by the holders. Customary indemnification and
contribution provisions would be applicable to any registered
sale.

Information Systems Development and
Support

We receive ongoing information systems
development and support services pursuant to a contract between
a subsidiary of SBC and Amdocs Limited, a software company. SBC
owned approximately 10% of the outstanding share capital of
Amdocs Limited on December 31, 2002 Amdocs
development and support services for the year ended
December 31, 2002 resulted in charges of $67 million.

Interconnection and Long Distance
Agreements

We are also a party to local interconnect and
long distance agreements with subsidiaries of SBC and BellSouth.
Pursuant to these agreements, we incurred expenses of
$663 million for the year ended December 31, 2002.

SNET Diversified Group Name Delivery Service
Agreement

We and SNET Diversified Group (SNET DG), an
affiliate of SBC, entered into an agreement in October 2001 to
provide Calling Name Delivery (CNAM) service and to receive
a share of the fees generated by the provision of this service.
CNAM service allows Local Exchange Carrier
(LEC) subscribers with caller ID to view the name of a
Cingular subscriber calling an LEC subscriber. LECs pay a fee to
SNET DG each time a subscriber uses this service, which SNET DG
will share with us on a percentage basis, beginning at 50% of
revenues, and increasing to a maximum of 65%, with the addition
of subscribers and/or additional markets adding CNAM service.
For the year ended December 31, 2002, we recorded
approximately $8 million in revenue from SNET DG under this
agreement.

Service Level Agreement

We entered into a service level agreement with
BellSouth Affiliate Services Corporation (BASC), an affiliate of
BellSouth, pursuant to which BASC provides us with various
lockbox services including processing and depositing customer
payments, payment inquiry services, processing and distributing
customer correspondence and monthly performance monitoring
reports. The service level agreement provides for fixed fees
based on the type of payment processed. Pursuant to this
agreement, we paid BASC $7 million for the year ended
December 31, 2002. These cost are included in the amounts
reported for transition services.

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Although we believe that the operating agreements
described above are as advantageous to us as agreements that
could otherwise be obtained from unrelated third parties, we
have no independent verification that they are as advantageous
as similar agreements negotiated with unaffiliated third parties.






|         |                        
|-------- | -----------------------
|Item 14. | Controls and Procedures

(a) On March 11, 2003 (Evaluation
Date), management concluded its evaluation of the effectiveness
of the design and operation of the Companys disclosure
controls and procedures. As of the Evaluation Date, our
President and Chief Executive Officer and our Chief Financial
Officer concluded that we maintain disclosure controls and
procedures that are effective in providing reasonable assurance
that information required to be disclosed in our reports under
the Securities Exchange Act of 1934 (Exchange Act) is recorded,
processed, summarized and reported within the time periods
specified in the SECs rules and forms, and that such
information is accumulated and communicated to the
Companys management, including our President and Chief
Executive Officer and our Chief Financial Officer, as
appropriate, to allow timely decisions regarding required
disclosure. Management necessarily applied its judgment in
assessing the costs and benefits of such controls and
procedures, which, by their nature, can provide only reasonable
assurance regarding managements control objectives. We
also have investments in certain unconsolidated entities. As we
do not control or manage these entities, our disclosure controls
and procedures with respect to such entities are necessarily
more limited than those we maintain with respect to our
consolidated subsidiaries

(b) There have not been any significant
changes in our internal controls or in other factors that could
significantly affect these controls subsequent to the Evaluation
Date, including any corrective actions with regard to
significant deficiencies and material weaknesses.

136



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##### Table of Contents






Item 15.     Exhibits,
Financial Statement Schedules, and Reports on
Form 8-K

|                                                                                                                                                                                                |                                                                                                                                                                |                                                     |  |     |     | 
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------- |  | --- | --- | 
|                                                                                                                                                                                                |                                                                                                                                                                | Page(s)                                            
|                                                                                                                                                                                                |                                                                                                                                                                | in This                                            
|                                                                                                                                                                                                |                                                                                                                                                                | Form 10-K                                          
|                                                                                                                                                                                                |                                                                                                                                                                |                                                    
|a. Documents filed as part of the report                                                                                                                                                        |                                                                                                                                                                |                                                     |  |    
|(1) Financial Statements                                                                                                                                                                        |                                                                                                                                                                |                                                     |  |    
|                                                                                                                                                                                                | Cingular Wireless LLC                                                                                                                                          |                                                     |  |     |    
|                                                                                                                                                                                                | Report of Independent Auditors                                                                                                                                 |                                                     |  | 56  |    
|                                                                                                                                                                                                | Consolidated Statements of Income for the period
    from April 24, 2000 through December 31, 2000 and for
    the years ended December 31, 2001 and 2002.     |                                                     |  | 57  |    
|                                                                                                                                                                                                | Consolidated Balance Sheets as of
    December 31, 2001 and 2002                                                                                               |                                                     |  | 58  |    
|                                                                                                                                                                                                | Consolidated Statements of Cash Flows for the
    period from April 24, 2000 through December 31, 2000
    and for the years ended December 31, 2001 and 2002. |                                                     |  | 59  |    
|                                                                                                                                                                                                | Consolidated Statements of Changes in
    Members Capital for the period ended December 31,
    2000 and for the years ended December 31, 2001 and 2002.      |                                                     |  | 60  |    
|                                                                                                                                                                                                | Notes to Consolidated Financial Statements                                                                                                                     |                                                     |  | 61  |    
|                                                                                                                                                                                                | SBC Domestic Wireless Group                                                                                                                                    |                                                     |  |     |    
|                                                                                                                                                                                                | Report of Independent Auditors                                                                                                                                 |                                                     |  | 90  |    
|                                                                                                                                                                                                | Combined Statement of Operations for the period
    from January 1, 2000 to October 2, 2000                                                                    |                                                     |  | 91  |    
|                                                                                                                                                                                                | Combined Statement of Cash Flows for the period
    January 1, 2000 to October 2, 2000                                                                         |                                                     |  | 92  |    
|                                                                                                                                                                                                | Combined Statement of Shareowners Equity
    for the period ended October 2, 2000                                                                             |                                                     |  | 93  |    
|                                                                                                                                                                                                | Notes to Combined Financial Statements                                                                                                                         |                                                     |  | 94  |    
|                                                                                                                                                                                                | BellSouth Domestic Wireless Group                                                                                                                              |                                                     |  |     |    
|                                                                                                                                                                                                | Report of Independent Auditors                                                                                                                                 |                                                     |  | 103 |    
|                                                                                                                                                                                                | Combined Statement of Operations for the period
    from January 1, 2000 to October 2, 2000                                                                    |                                                     |  | 104 |    
|                                                                                                                                                                                                | Combined Statement of Cash Flows for the period
    January 1, 2000 to October 2, 2000                                                                         |                                                     |  | 105 |    
|                                                                                                                                                                                                | Combined Statement of Shareowners Equity
    for the period ended October 2, 2000                                                                             |                                                     |  | 106 |    
|                                                                                                                                                                                                | Notes to Combined Financial Statements                                                                                                                         |                                                     |  | 107 |    
|(2) Financial Statement Schedule as set
    forth under Item 8 of this Report                                                                                                                   |                                                                                                                                                                |                                                     |  |    
|                                                                                                                                                                                                | Cingular Wireless LLC                                                                                                                                          |                                                     |  |     |    
|                                                                                                                                                                                                |                                                                                                                                                                | Schedule II  Valuation and
    Qualifying Accounts |  |     | 117 | 
|All other financial statements and schedules not
    listed are omitted because they are not required, or the
    required information is included in the consolidated financial
    statements |                                                                                                                                                                |                                                     |  |    
|(3) Exhibits. The following exhibits are
    either provided with this Form 10-K or are incorporated by
    reference.                                                                          |                                                                                                                                                                |                                                     |  |    

|        |       |             |  |                                                                                                                                                                                                                                                                                
|------- | ----- | ----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |            
|Number  |       | Description
|        |       |            
|        | *     |             |  | Incorporated by reference                                                                                                                                                                                                                                                      
|        | #     |             |  | Management contract or compensatory plan or
    arrangement                                                                                                                                                                                                                    
|        | 2.1*  |             |  | Amended and Restated Contribution and Formation
    Agreement among SBC Communications, Inc., BellSouth Corporation
    and Alloy LLC, dated as of April 4, 2000 (Exhibit 2.1
    to Registration Statement on Form S-4 filed
    January 24, 2002, Registration No. 333-81342)
|        | 2.1.1 |             |  | Second Amendment to Amended and Restated
    Contribution and Formation Agreement among SBC Communications,
    Inc., BellSouth Corporation and Cingular Wireless                                                                                                              

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|        |        |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|------- | ------ | ----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |        |            
|Number  |        | Description
|        |        |            
|        | 3.1*   |             |  | Certificate of Formation of the Company, dated
    April 19, 2000, as amended by Certificate of Merger, dated
    November 1, 2000, Certificate of Merger, Dated
    February 21, 2001, and Certificate of Amendment, dated
    March 1, 2001 (Exhibit 3.1 to Registration Statement
    on Form S-4 filed January 24, 2002, Registration
    No. 333-81342)                                                                                                                                                                                                                                                             
|        | 3.2*   |             |  | Limited Liability Company Agreement of Alloy LLC
    by and among SBC Communications Inc., SBC Alloy Holdings, Inc.,
    BellSouth Corporation, BellSouth Mobile Data, Inc., BSCC of
    Houston, Inc., ACCC of Los Angeles, Inc., BellSouth Cellular
    Corp., RAM Broadcasting Corporation and Alloy Management Corp.,
    dated as of October 2, 2000, as amended by Amendment
    No. 1, dated January 1, 2001, Amendment No. 2,
    dated April 3, 2001 and Amendment No. 3, dated
    April 3, 2001 (Exhibit 3.2 to Registration Statement
    on Form S-4 filed January 24, 2002, Registration No.
    333-81342)
|        | 3.2.1* |             |  | Amendment No. 4 to Limited Liability Company
    Agreement dated December 31, 2001 (Exhibit 3.3 to
    Amendment No. 1 to the Registration Statement on
    Form S-4 filed May 31, 2002, Registration No.
    333-81342)                                                                                                                                                                                                                                                                                                                                                                                                 
|        | 4.1*   |             |  | Indenture between the Company and Bank One Trust
    Company, N.A., as Trustee, dated as of December 12, 2001
    (Exhibit 4.1 to Registration Statement on Form S-4
    filed January 24, 2002, Registration No. 333-81342)                                                                                                                                                                                                                                                                                                                                                                                             
|        | 4.1.1  |             |  | First Supplemental Indenture between the Company
    and Bank One Trust Company, N.A., as Trustee, dated
    December 31, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|        | 4.2    |             |  | $500,000,000 5.625% Senior Note Due
    December 15, 2006                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|        | 4.3    |             |  | $750,000,000 6.5% Senior Note Due
    December 15, 2011                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|        | 4.4    |             |  | $750,000,000 7.125% Senior Note Due
    December 15, 2031                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|        | 10.1*  |             |  | Wireless Agency Agreement between Alloy LLC and
    BellSouth Telecommunications Inc., dated October 2, 2000
    (Exhibit 10.1 to Registration Statement on Form S-4
    filed January 24, 2002, Registration No. 333-81342)                                                                                                                                                                                                                                                                                                                                                                                             
|        | 10.2*  |             |  | Wireless Agency Agreement between Alloy LLC and
    SBC Operations, Inc., dated October 2, 2000
    (Exhibit 10.2 to Registration Statement on Form S-4
    filed January 24, 2002, Registration No. 333-81342)                                                                                                                                                                                                                                                                                                                                                                                                          
|        | 10.3*  |             |  | Resale Agreement between Alloy LLC and BellSouth
    Telecommunications, Inc., dated October 2, 2000
    (Exhibit 10.3 to Registration Statement on Form S-4
    filed January 24, 2002, Registration No. 333-81342)                                                                                                                                                                                                                                                                                                                                                                                                     
|        | 10.4*  |             |  | Resale Agreement between Alloy LLC and SBC
    Communications Inc., dated October 2, 2000 (Exhibit 10.4 to
    Registration Statement on Form S-4 filed January 24,
    2002, Registration No. 333-81342)                                                                                                                                                                                                                                                                                                                                                                                                                
|        | 10.5*  |             |  | Intellectual Property License Agreement between
    Alloy LLC and BellSouth Corporation, dated October 2, 2000
    (Exhibit 10.5 to Registration Statement on Form S-4
    filed January 24, 2002, Registration No. 333-81342)                                                                                                                                                                                                                                                                                                                                                                                           
|        | 10.6*  |             |  | Intellectual Property Agreement between Cingular
    Wireless LLC and BellSouth Intellectual Property Marketing
    Corporation, dated October 17, 2001 (Exhibit 10.6 to
    Registration Statement on Form S-4 filed January 24,
    2002, Registration No. 333-81342)                                                                                                                                                                                                                                                                                                                                                  
|        | 10.7*  |             |  | Intellectual Property License Agreement between
    Alloy LLC and SBC Communications Inc., dated October 2,
    2000 (Exhibit 10.7 to Registration Statement on
    Form S-4 filed January 24, 2002, Registration
    No. 333-81342)                                                                                                                                                                                                                                                                                                                                                                                     
|        | 10.8*  |             |  | Intellectual Property License Agreement between
    BellSouth Corporation and Alloy LLC, dated October 2, 2000
    (Exhibit 10.8 to Registration Statement on Form S-4
    filed January 24, 2002, Registration No. 333-81342)                                                                                                                                                                                                                                                                                                                                                                                           
|        | 10.9*  |             |  | Intellectual Property License Agreement between
    SBC Communications Inc. and Alloy LLC, dated October 2,
    2000 (Exhibit 10.9 to Registration Statement on
    Form S-4 filed January 24, 2002, Registration
    No. 333-81342)                                                                                                                                                                                                                                                                                                                                                                                     

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|        |           |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|------- | --------- | ----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |           |            
|Number  |           | Description
|        |           |            
|        | 10.10*    |             |  | Authorized Sales Representative Agreement by and
    among SBC Communications Inc., Southwestern Bell Telephone
    Company, Pacific Bell Telephone Company, Ameritech Illinois,
    Ameritech Indiana, Ameritech Michigan, Ameritech Ohio, Ameritech
    Wisconsin, Nevada Bell Telephone, Southern New England Telephone
    Company and Alloy LLC, dated October 2, 2000, completed
    pursuant to the Wireline Agency Signature Agreement between SBC
    Communications Inc. and Alloy LLC, dated October 2, 2000
    (Exhibit 10.10 to Registration Statement on Form S-4
    filed January 24, 2002, Registration No. 333-81342)
|        | 10.11*    |             |  | Marketing Representative Agreement between
    BellSouth Telecommunications, Inc. and BellSouth Cellular Corp.,
    dated July 17, 1998 (Exhibit 10.11 to Registration
    Statement on Form S-4 filed January 24, 2002,
    Registration No. 333-81342)                                                                                                                                                                                                                                                                                                                                                                                
|        | 10.12*    |             |  | Assignment and Assumption Agreement between
    BellSouth Cellular Corp. and Alloy LLC (Exhibit 10.12 to
    Registration Statement on Form S-4 filed January 24,
    2002, Registration No. 333-81342)                                                                                                                                                                                                                                                                                                                                                                                                                                 
|        | 10.13     |             |  | Capital Markets Debt Subordination Agreement,
    dated as of November 21, 2000, among SBC Communications
    Inc., BellSouth Corporation and any Subsidiary Lender                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|        | 10.14*    |             |  | Subordinated Notes of SBC and BellSouth
    (Exhibit 10.14 to Amendment No. 1 to the Registration
    Statement on Form S-4 filed May 31, 2002, Registration
    No. 333-81342)                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|        | 10.15*    |             |  | Agreement to Sublease, dated August 25,
    2000, by and among SBC Wireless, Inc., for itself and on behalf
    of the Sublessor Entities, SpectraSite Holdings Inc. and
    Southern SpectraSite Towers, Inc. (Exhibit 10.1 of
    SpectraSite Holdings Inc. Current Report on Form 8-K, dated
    August 25, 2000)                                                                                                                                                                                                                                                                                                                    
|        | 10.16*#   |             |  | Cingular Wireless Cash Deferral Plan
    (Exhibit 10.16 to Registration Statement on Form S-4
    filed January 24, 2002, Registration No. 333-81342)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        | 10.17*#   |             |  | Cingular Wireless Pension Plan
    (Exhibit 10.17 to Amendment No. 1 to the Registration
    Statement on Form S-4 filed April 25, 2002,
    Registration No. 333-81342)                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|        | 10.18*#   |             |  | Cingular Wireless Savings Plan
    (Exhibit 10.18 to Amendment No. 1 to the Registration
    Statement on Form S-4 filed April 25, 2002,
    Registration No. 333-81342)                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|        | 10.19*#   |             |  | Agreement between Mark Feidler and BellSouth
    Corporation (Exhibit 10.19 to Registration Statement on
    Form S-4 filed January 24, 2002, Registration
    No. 333-81342)                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|        | 10.20*#   |             |  | The Amended and Restated BellSouth Corporation
    Stock Plan effective April 24, 1995, as amended
    (Exhibit 10v-1 of BellSouth Corporation Annual Report on
    Form 10-K for the year ended December 31, 2000)                                                                                                                                                                                                                                                                                                                                                                                                                     
|        | 10.21*#   |             |  | BellSouth Corporation Stock Plan, as amended on
    September 23, 1996 and November 24, 1996
    (Exhibit 10v of BellSouth Corporation Annual Report on
    Form 10-K for the year ended December 31, 1996)                                                                                                                                                                                                                                                                                                                                                                                                                             
|        | 10.22*#   |             |  | BellSouth Corporation Trust Under Executive
    Benefit Plan(s), as amended April 28, 1995 (Exhibit 10u-1
    of BellSouth Corporation Quarterly Report on Form 10-Q for
    the quarter ended June 30, 1995)                                                                                                                                                                                                                                                                                                                                                                                                                           
|        | 10.22.1*# |             |  | Amendment, dated May 23, 1996, to the
    BellSouth Corporation Trust Under Executive Benefit Plan(s)
    (Exhibit 10s-1 of BellSouth Corporation Quarterly Report on
    Form 10-Q for the quarter ended June 30, 1996)                                                                                                                                                                                                                                                                                                                                                                                                                
|        | 10.23*#   |             |  | BellSouth Retirement Savings Plan, as amended and
    restated effective July 1, 2001(Exhibit 10-w of
    BellSouth Corporation Annual Report on Form 10-K for the
    year ended December 31, 2001)                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        | 10.30*#   |             |  | BellSouth Corporation Executive Long-Term
    Incentive Plan (Exhibit 10e of BellSouth Corporation Annual
    Report on Form 10-K for the year ended December 31,
    1991)                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|        | 10.31*#   |             |  | BellSouth Corporation Executive Incentive Award
    Deferral Plan, as amended and restated effective
    September 23, 1996 (Exhibit 10g of BellSouth
    Corporation Annual Report on Form 10-K for the year ended
    December 31, 1996)                                                                                                                                                                                                                                                                                                                                                                                              

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|        |         |             |  |                                                                                                                                                                                                                                                                                     
|------- | ------- | ----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |         |            
|Number  |         | Description
|        |         |            
|        | 10.32*# |             |  | BellSouth Corporation Supplemental Executive
    Retirement Plan, as amended on March 23, 1998
    (Exhibit 10i of BellSouth Corporation Quarterly Report on
    Form 10-Q for the quarter ended March 31, 1998)                                                                    
|        | 10.33*# |             |  | BellSouth Corporation Nonqualified Deferred
    Compensation Plan, as amended and restated effective
    November 25, 1996 (Exhibit 10h of BellSouth
    Corporation Annual Report on Form 10-K for the year ended
    December 31, 1996)                                           
|        | 10.34*# |             |  | SBC Communications Inc. 1996 Stock and Incentive
    Plan (Exhibit 10-p of SBC Communications Inc. Annual Report
    on Form 10-K for the year ended December 31, 2001)                                                                                                             
|        | 10.35*# |             |  | SBC Communications Inc. 2001 Incentive Plan
    (Exhibit 10-w of SBC Communications Inc. Annual Report on
    Form 10-K for the year ended December 31, 2001)                                                                                                                       
|        | 10.36*# |             |  | SBC Communications Inc. Stock Savings Plan, as
    amended through September 28, 2001(Exhibit 10-m of SBC
    Communications Inc. Annual Report on Form 10-K for the year
    ended December 31, 2001)                                                                              
|        | 10.38*# |             |  | SBC Communications Inc. Short-Term Incentive Plan
    (Exhibit 10-a of SBC Communications Inc. Annual Report on
    Form 10-K for the year ended December 31, 2000)                                                                                                                 
|        | 10.39*  |             |  | SBC Communications Inc. Supplemental Retirement
    Income Plan (Exhibit 10-d of SBC Communications Inc. Annual
    Report on Form 10-K for the year ended December 31,
    2000)                                                                                                   
|        | 10.40*# |             |  | SBC Communications Inc. 1992 Stock Option Plan,
    as amended through June 19, 2001 (Exhibit 10-n of SBC
    Communications Inc. Annual Report on Form 10-K for the year
    ended December 31, 2001)                                                                              
|        | 10.41*# |             |  | Pacific Telesis Group 1994 Stock Incentive Plan
    (Attachment A of Pacific Telesis Groups Definitive Proxy
    Statement, dated March 11, 1994, and amended March 14
    and March 25, 1994)                                                                                     
|        | 10.42*# |             |  | Cingular Wireless SBC Transition Executive
    Benefit Plan (Exhibit 10.42 to Amendment No. 1 to the
    Registration Statement on Form S-4 filed May 31, 2002,
    Registration No. 333-81342)                                                                                     
|        | 10.43*# |             |  | Cingular Wireless Long-Term Incentive Plan
    (Exhibit 10.43 to Amendment No. 1 to the Registration
    Statement on Form S-4 filed May 31, 2002, Registration
    No. 333-81342)                                                                                                  
|        | 10.44*# |             |  | Service Level Agreement (Exhibit 10.44 to
    Amendment No. 1 to the Registration Statement on Form S-4
    filed April 25, 2002, Registration No. 333-81342)                                                                                                                       
|        | 10.45*# |             |  | Cingular Wireless Executive Short Term Incentive
    Award Plan (Exhibit 10.45 to Amendment No. 1 to the
    Registration Statement on Form S-4 filed May 31, 2002,
    Registration No. 333-81342)                                                                                 
|        | 10.46*# |             |  | Cingular Wireless BLS Transition Executive
    Benefit Plan (Exhibit 10.46 to Amendment No. 1 to the
    Registration Statement on Form S-4 filed May 31, 2002,
    Registration No. 333-81342)                                                                                     
|        | 10.47*# |             |  | Cingular Wireless Executive Financial Services
    Plan (Exhibit 10.47 to Amendment No. 1 to the
    Registration Statement on Form S-4 filed May 31, 2002,
    Registration No. 333-81342)                                                                                         
|        | 10.48#  |             |  | Officer Communication Plan                                                                                                                                                                                                                                                          
|        | 10.49   |             |  | Employment Agreement with Stanley T. Sigman                                                                                                                                                                                                                                         
|        | 10.50   |             |  | Employment Agreement with Stephen Carter                                                                                                                                                                                                                                            
|        | 10.51   |             |  | Employment Agreement with Thaddeus Arroyo                                                                                                                                                                                                                                           
|        | 12      |             |  | Statement of Computation of Ratios of Earnings to
    Fixed Charges                                                                                                                                                                                                                 
|        | 21      |             |  | Subsidiaries of the Registrant                                                                                                                                                                                                                                                      
|        | 24      |             |  | Powers of Attorney                                                                                                                                                                                                                                                                  
|        | 99.1*   |             |  | Amended and Restated Certificate of Incorporation
    of Cingular Wireless Corporation, dated October 2, 2000, as
    amended on October 23, 2000 and April 16, 2001
    (Exhibit 99.4 to Registration Statement on Form S-4
    filed January 24, 2002, Registration No. 333-81342)

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|        |         |             |  |                                                                                                                                                                                                                                                                  
|------- | ------- | ----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |         |            
|Number  |         | Description
|        |         |            
|        | 99.2*   |             |  | Amended and Restated Bylaws of Cingular Wireless
    Corporation, dated October 2, 2000, as amended on
    January 19, 2001 and November 28, 2001
    (Exhibit 99.5 to Registration Statement on Form S-4
    filed January 24, 2002, Registration No. 333-81342)
|        | 99.2.1* |             |  | Amendment to Bylaws dated April 30, 2002
    (Exhibit 99.6 to Amendment No. 1 to the Registration
    Statement on Form S-4 filed May 31, 2002, Registration
    No. 333-81342)                                                                                  
|        | 99.3    |             |  | Certification of President and Chief Executive
    Officer pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002, 18 U.S.C. Section 1350                                                                                                                 
|        | 99.4    |             |  | Certification of Chief Financial Officer pursuant
    to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C.
    Section 1350                                                                                                                               



| |    |                   
| | -- | ------------------
| | b. | Report on Form 8-K

We did not file any reports on Form 8-K
during the fiscal year ended December 31, 2002.

c. We hereby file as part of this
Form 10-K the Exhibits listed in Item 15(a)(3) above.



| |    |                                                                  
| | -- | -----------------------------------------------------------------
| | d. | The following financial statement schedule is
    filed herewith:

Schedule II  Valuation and
Qualifying Agreements

Schedules not listed above are omitted because
they are not required, or the required information is included
in our consolidated financial statements or notes thereto.

Supplemental Information to be Furnished With
Reports Filed Pursuant to Section 15(d) of the Act by
Registrants Which Have Not Registered Securities Pursuant to
Section 12 of the Act:

We have not prior to the filing of this annual
report on Form 10-K sent to our security holders any annual
report covering our last fiscal year or proxy materials with
respect to an annual or other meeting of our security holders.

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SIGNATURES

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



| |                      
| | ---------------------
| | CINGULAR WIRELESS LLC

| |     |                               
| | --- | ------------------------------
| | By: | CINGULAR WIRELESS CORPORATION,

| |           
| | ----------
| | as Manager



| |     |                       
| | --- | ----------------------
| | By: | /s/ RICHARD G. LINDNER

| |                        
| | -----------------------
| |                        
| | Richard G. Lindner     
| | Chief Financial Officer

Date: March 11, 2003

Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed below by the
following persons on behalf of Cingular Wireless Corporation, as
manager of the registrant, in the capacities and on the dates
indicated.

|                                                 |  |                                                                                                         |  |      
|------------------------------------------------ |  | ------------------------------------------------------------------------------------------------------- |  | -----
|                                                 |  | Signature                                                                                               |  | Title
|                                                 |  |                                                                                                         |  |      
|                                                
|/s/ STANLEY T. SIGMAN*Stanley T. Sigman*         |  | President and Chief Executive Officer (Principal
    Executive Officer)                                
|                                                
|/s/ RICHARD G. LINDNER*Richard G. Lindner*       |  | Chief Financial Officer
    (Principal Financial Officer)                                              
|                                                
|/s/ GREGORY T. HALL*Gregory T. Hall*             |  | Controller
    (Principal Accounting Officer)                                                          
|                                                
|/s/ RICHARD A. ANDERSON*Richard A. Anderson*     |  | Class B Director                                                                                       
|                                                
|/s/ RONALD M. DYKES*Ronald M. Dykes*             |  | Class B Director                                                                                       
|                                                
|/s/ RANDALL L. STEPHENSON*Randall L. Stephenson* |  | Chairman of the Board and
    Class B Director                                                         
|                                                
|/s/ RAYFORD WILKINS, JR.*Rayford Wilkins, Jr.*   |  | Class B Director                                                                                       
|                                                
|*By                                              |  | /s/  RICHARD G. LINDNERRichard G. Lindner
    (Individually and As Attorney-In-Fact)
    March 11, 2003 |  |      

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##### Table of Contents






302 CERTIFICATION

I, Stanley T. Sigman, President and Chief
Executive Officer of the Company, certify that:

1. I have reviewed this annual report on
Form 10-K of Cingular Wireless LLC;

2. Based on my knowledge, this annual report
does not contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements made,
in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this
annual report;

3. Based on my knowledge, the financial
statements, and other financial information included in this
annual report, fairly present in all material respects the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual
report;

4. The registrants other certifying
officers and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14 and 15d-14) for the registrant and we have:



| |                                                                                                                                                                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a. designed such disclosure controls and
    procedures to ensure that material information relating to the
    registrant, including its consolidated subsidiaries, is made
    known to us by others within those entities, particularly during
    the period in which this annual report is being prepared;
|
| | b. evaluated the effectiveness of the
    registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this annual
    report (the Evaluation Date); and                                                                                                      
|
| | c. presented in this annual report our
    conclusions about the effectiveness of the disclosure controls
    and procedures based on our evaluation as of the Evaluation Date;                                                                                                                                

5. The registrants other certifying
officers and I have disclosed, based on our most recent
evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons
performing the equivalent functions):



| |                                                                                                                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a. all significant deficiencies in the
    design or operation of internal controls which could adversely
    affect the registrants ability to record, process,
    summarize and report financial data and have identified for the
    registrants auditors any material weaknesses in internal
    controls; and
|
| | b. any fraud, whether or not material, that
    involves management or other employees who have a significant
    role in the registrants internal controls; and                                                                                                                                                    

6. The registrants other certifying
officers and I have indicated in this annual report whether or
not there were significant changes in internal controls or in
other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies
and material weaknesses.



| |     |                     
| | --- | --------------------
| | By: | /s/STANLEY T. SIGMAN

| |                                      
| | -------------------------------------
| |                                      
| | Stanley T. Sigman                    
| | President and Chief Executive Officer

Date: March 11, 2003

143



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##### Table of Contents



302 CERTIFICATION

I, Richard G. Lindner, Chief Financial Officer of
the Company, certify that:

1. I have reviewed this annual report on
Form 10-K of Cingular Wireless LLC;

2. Based on my knowledge, this annual report
does not contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements made,
in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this
annual report;

3. Based on my knowledge, the financial
statements, and other financial information included in this
annual report, fairly present in all material respects the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual
report;

4. The registrants other certifying
officers and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14 and 15d-14) for the registrant and we have:



| |                                                                                                                                                                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a. designed such disclosure controls and
    procedures to ensure that material information relating to the
    registrant, including its consolidated subsidiaries, is made
    known to us by others within those entities, particularly during
    the period in which this annual report is being prepared;
|
| | b. evaluated the effectiveness of the
    registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this annual
    report (the Evaluation Date); and                                                                                                      
|
| | c. presented in this annual report our
    conclusions about the effectiveness of the disclosure controls
    and procedures based on our evaluation as of the Evaluation Date;                                                                                                                                

5. The registrants other certifying
officers and I have disclosed, based on our most recent
evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons
performing the equivalent functions):



| |                                                                                                                                                                                                                                                                                                                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a. all significant deficiencies in the
    design or operation of internal controls which could adversely
    affect the registrants ability to record, process,
    summarize and report financial data and have identified for the
    registrants auditors any material weaknesses in internal
    controls; and                                                                                            
|
| | b. any fraud, whether or not material, that
    involves management or other employees who have a significant
    role in the registrants internal controls; and                                                                                                                                                                                                                                                
|
| | 6. The registrants other certifying
    officers and I have indicated in this annual report whether or
    not there were significant changes in internal controls or in
    other factors that could significantly affect internal controls
    subsequent to the date of our most recent evaluation, including
    any corrective actions with regard to significant deficiencies
    and material weaknesses.



| |     |                       
| | --- | ----------------------
| | By: | /s/ RICHARD G. LINDNER

| |                        
| | -----------------------
| |                        
| | Richard G. Lindner     
| | Chief Financial Officer

Date: March 11, 2003

144