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

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549

FORM 10-Q

[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2001 OR [ ] TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 1-4996

ALLTEL CORPORATION (Exact name of registrant as specified in its
charter)

Delaware       
                     
                     
                     
                     
                     
             34-0868285
     (State or other jurisdiction of           
                     
                     
                     
                     
(I.R.S. Employer
     incorporation or organization)           
                     
                     
                     
                    Identification No.)

One Allied Drive, Little Rock, Arkansas    
                     
                     
                     
                   72202      (Address of principal
executive offices)           
                     
                     
                     
            (Zip Code)

Registrant's telephone number, including area code(501) 905-8000

(Former name, former address and former fiscal year, if changed since
last report)

| | 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 X  NO
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Number
of common shares outstanding as of June 30, 2001:
| | --------------------------------------------------------

310,238,935

| | The
Exhibit Index is located at sequential page 36.
| | ---------------------------------------------------

ALLTEL CORPORATION FORM 10-Q TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

Page No.

|       |  |                                                            
|------ |  | -----------------------------------------------------------
|Item 1 |  | Financial Statements                                       
|Item 2 |  | Management's Discussion and Analysis of Financial Condition
|       |  | and Results of Operations                                  
|Item 3 |  | Quantitative and Qualitative Disclosures About Market Risk 

PART II - OTHER INFORMATION

|       |  |                                                  
|------ |  | -------------------------------------------------
|Item 1 |  | Legal Proceedings                                
|Item 2 |  | Changes in Securities                            
|Item 3 |  | Defaults Upon Senior Securities                  
|Item 4 |  | Submission of Matters to Vote of Security Holders
|Item 5 |  | Other Information                                
|Item 6 |  | Exhibits and Reports on Form 8-K                 
|      
|*      |  | No reportable information under this item.       

Forward-Looking Statements
     This Report on Form 10-Q includes, and future filings by ALLTEL on Form 10-K and Form 8-K and
future oral and written statements by ALLTEL and its management may include, certain
forward-looking statements, including (without limitation) statements with respect to
anticipated future operating and financial performance, growth opportunities and growth
rates, acquisition and divestitive opportunities and other similar forecasts and
statements of expectation. Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," and
"should," and variations of these words and similar expressions, are intended to identify
these forward-looking statements. Forward-looking statements by ALLTEL and its management
are based on estimates, projections, beliefs and assumptions of management and are not
guarantees of future performance. ALLTEL disclaims any obligation to update or revise any
forward-looking statement based on the occurrence of future events, the receipt of new
information, or otherwise.

Actual future performance, outcomes, and
results may differ materially from those expressed in forward-looking statements made by
ALLTEL and its management as a result of a number of important factors. Representative
examples of these factors include (without limitation) rapid technological developments
and changes in the telecommunications and information services industries; ongoing
deregulation (and the resulting likelihood of significantly increased price and
product/service competition) in the telecommunications industry as a result of the
Telecommunications Act of 1996 and other similar federal and state legislation and the
federal and state rules and regulations enacted pursuant to that legislation; regulatory
limitations on ALLTEL's ability to change its pricing for communications services; and
the possible future unavailability of Statement of Financial Accounting Standards No. 71
to ALLTEL's wireline subsidiaries.

In addition to these factors, actual future
performance, outcomes and results may differ materially because of other, more general,
factors including (without limitation) general industry and market conditions and growth
rates, economic conditions, governmental and public policy changes, and the continued
availability of financing in the amounts, at the terms, and on the conditions necessary
to support ALLTEL's business.

1

ALLTEL CORPORATION FORM 10-Q TABLE OF CONTENTS

Item 1. Financial Statements

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

|                                                            |  |            |    
|----------------------------------------------------------- |  | ---------- | ---
|                                                           
|(Dollars in millions, except per share amounts)             |  |            |    
|                                                           
|                                                            |  | June 30,   |    
|ASSETS                                                      |  | 2001       |    
|CURRENT ASSETS:                                             | 
|Cash and short-term investments                             |  | $       33 | .7 
|Accounts receivable (less allowance for doubtful            | 
|accounts of $53.4, $52.7 and $42.5, respectively)           |  | 1,252      | .5 
|Inventories                                                 |  | 138        | .5 
|Prepaid expenses and other                                  |  | 151        | .7 
|Total current assets                                        |  | 1,576      | .4 
|Investments                                                 |  | 259        | .8 
|Goodwill and other intangibles                              |  | 3,435      | .6 
|PROPERTY, PLANT AND EQUIPMENT:                              | 
|Land                                                        |  | 235        | .6 
|Buildings and improvements                                  |  | 1,017      | .8 
|Wireline                                                    |  | 5,311      | .6 
|Wireless                                                    |  | 3,898      | .7 
|Information services                                        |  | 1,096      | .1 
|Other                                                       |  | 576        | .0 
|Under construction                                          |  | 508        | .1 
|Total property, plant and equipment                         |  | 12,643     | .9 
|Less accumulated depreciation                               |  | 5,966      | .6 
|Net property, plant and equipment                           |  | 6,677      | .3 
|Other assets                                                |  | 335        | .8 
|TOTAL ASSETS                                                |  | $12,284    | .9 
|LIABILITIES AND SHAREHOLDERS' EQUITY                        | 
|CURRENT LIABILITIES:                                        | 
|Current maturities of long-term debt                        |  | $       55 | .3 
|Accounts payable                                            |  | 503        | .3 
|Advance payments and customer deposits                      |  | 218        | .1 
|Accrued taxes                                               |  | 385        | .7 
|Accrued dividends                                           |  | 103        | .4 
|Other current liabilities                                   |  | 247        | .7 
|Total current liabilities                                   |  | 1,513      | .5 
|Long-term debt                                              |  | 4,029      | .7 
|Deferred income taxes                                       |  | 536        | .3 
|Other liabilities                                           |  | 892        | .3 
|SHAREHOLDERS' EQUITY:                                       | 
|Preferred stock, Series C, $2.06, no par value, issued and  | 
|outstanding: 17,160, 19,471 and 20,499 shares, respectively |  | 0          | .4 
|Common stock, par value $1 per share, 1.0 billion shares    | 
|authorized and outstanding: 310,238,935, 312,983,882        | 
|and 315,518,471 shares, respectively                        |  | 310        | .2 
|Additional paid-in capital                                  |  | 755        | .3 
|Unrealized holding gain on investments                      |  | 0          | .9 
|Foreign currency translation adjustment                     |  | (8         | .8)
|Retained earnings                                           |  | 4,255      | .1 
|Total shareholders' equity                                  |  | 5,313      | .1 
|TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                  |  | $12,284    | .9 

2

CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)

|                                     |      |          |     
|------------------------------------ | ---- | -------- | ----
|(Millions, except per share amounts) | 2001 | 2000     | 2001
|REVENUES AND SALES:                  |      |          |     
|Service revenues                     |      | $1,709   | .0  
|Product sales                        |      | 211      | .4  
|Total revenues and sales             |      | 1,920    | .4  
|COSTS AND EXPENSES:                  |     
|Operations                           |      | 985      | .4  
|Cost of products sold                |      | 206      | .9  
|Depreciation and amortization        |      | 291      | .2  
|Merger and integration               |     
|expenses and other charges           |      | 2        | .1  
|Total costs and expenses             |      | 1,485    | .6  
|OPERATING INCOME                     |      | 434      | .8  
|                                    
|Equity earnings in unconsolidated    |     
|partnerships                         |      | 17       | .1  
|Minority interest in consolidated    |     
|partnerships                         |      | (18      | .6) 
|Other income, net                    |      | 9        | .2  
|Interest expense                     |      | (72      | .5) 
|Gain (loss) on disposal of assets    |     
|and other                            |      | (4       | .9) 
|                                    
|Income before income taxes           |      | 365      | .1  
|Income taxes                         |      | 146      | .6  
|                                    
|Income before cumulative             |     
|effect of accounting change          |      | 218      | .5  
|Cumulative effect of accounting      |     
|change (net of income taxes          |     
|of $13.0 and tax benefit of          |     
|$23.3, respectively)                 |      |          | --  
|                                    
|Net income                           |      | 218      | .5  
|Preferred dividends                  |      | 0        | .1  
|Net income applicable to             |     
|common shares                        |      | $    218 | .4  
|EARNINGS PER SHARE:                  |     
|Basic:                               |     
|Income before cumulative effect      |     
|of accounting change                 |      | $0       | .70 
|Cumulative effect of                 |     
|accounting change                    |      |          | --  
|Net income                           |      | $0       | .70 
|Diluted:                             |     
|Income before cumulative effect      |     
|of accounting change                 |      | $0       | .70 
|Cumulative effect of                 |     
|accounting change                    |      |          | --  
|Net income                           |      | $0       | .70 

3

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

|                                                       | Six MonthsEnded June 30, | Twelve MonthsEnded June 30,
|------------------------------------------------------ | ------------------------ | ---------------------------
|
|NET CASH PROVIDED FROM OPERATIONS                      |                          | $     994                  
|CASH FLOWS FROM INVESTING ACTIVITIES:                  |                         
|Additions to property, plant and equipment             |                          | (616                       
|Additions to capitalized software development costs    |                          | (52                        
|Additions to investments                               |                          | (1                         
|Purchase of property, net of cash acquired             |                          | (19                        
|Proceeds from the lease of cell site towers            |                          | 260                        
|Proceeds from the sale of investments                  |                          | 2                          
|Proceeds from the return on investments                |                          | 26                         
|Proceeds from the sale of assets                       |                          | 411                        
|Other, net                                             |                          | 3                          
|Net cash provided by (used in) investing activities    |                          | 15                         
|CASH FLOWS FROM FINANCING ACTIVITIES:                  |                         
|Dividends on preferred and common stock                |                          | (206                       
|Reductions in long-term debt                           |                          | (598                       
|Purchase of common stock                               |                          | (192                       
|Preferred stock redemptions and purchases              |                          |                            
|Distributions to minority investors                    |                          | (63                        
|Long-term debt issued                                  |                          |                            
|Common stock issued                                    |                          | 16                         
|Net cash provided by (used in) financing activities    |                          | (1,043                     
|Increase (decrease) in cash and short-term investments |                          | (33                        
|CASH AND SHORT-TERM INVESTMENTS:                       |                         
|Beginning of the period                                |                          | 67                         
|End of the period                                      |                          | $      33                  

4

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
_________________

|1. |  | General:Basis of Presentation - The consolidated financial statements at June 30, 2001 and 2000
and for the three, six and twelve month periods then ended for ALLTEL Corporation ("ALLTEL" or
the "Company") are unaudited. The consolidated financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial reporting
and Securities and Exchange Commission rules and regulations. Certain information and
footnote disclosures have been condensed or omitted pursuant to such rules and
regulations. Certain prior year amounts have been reclassified to conform to the 2001
financial statement presentation. The consolidated financial statements reflect all
adjustments (consisting only of normal recurring adjustments) which are, in the opinion
of management, necessary for a fair presentation of the financial position and operating
results for the interim periods presented.
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Change
in Business Segment Reporting - During the first quarter of 2001, ALLTEL changed its
business segment reporting presentation. As a result of this change, the Company's
wireless segment now consists of both its cellular and Personal Communications Services ("PCS")
operations. Previously, the PCS operations were included in the Company's emerging
businesses segment. Following this change, the Company's emerging businesses segment
consists of its long-distance and network management services, competitive local access
and Internet access operations. All prior period segment information has been restated to
conform to this new financial reporting presentation.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Change
in Reporting Wireless Equipment Sales -In the second quarter of 2001, the Company changed
the reporting presentation for wireless equipment sales revenues to a gross basis.
Previously, the Company netted equipment sales against charges incurred to acquire new
customers or retain existing ones and included the net amount in cost of products sold or
operations expense. Prior period revenue and expense information has been reclassified to
conform to the new reporting presentation. This change does not affect previously
reported operating income or net income of the Company.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|2. |  | Cumulative
Effect of Change in Accounting: In the second quarter of 2001, the Company changed the
accounting for the defined benefit pension plan of a subsidiary acquired in 1999 to
conform with the accounting principles followed by the ALLTEL Pension Plan (the "ALLTEL
Plan"), a defined benefit plan covering substantially all employees working in the Company's
communications and corporate operations. The change in accounting was completed in
conjunction with the Company's decision to conform future benefits earned under the
subsidiary's plan with the ALLTEL Plan effective June 1, 2001. The change in accounting,
retroactive to January 1, 2001, affects both the computation and amortization of
unrecognized actuarial gains and losses for purposes of calculating annual pension cost
related to the subsidiary's pension plan. The change included modifying the method by
which the market-related value of plan assets is determined from a calculated five-year
average to actual fair value. In addition, unrecognized actuarial gains or losses that
exceed 17.5% of the greater of the projected benefit obligation or market-related value
of plan assets are amortized on a straight-line basis over 5 years. Unrecognized
actuarial gains and losses below the 17.5% corridor are amortized over the average
remaining service life of active plan participants (approximately 13 years). Under the
method previously followed by the subsidiary's plan, only unrecognized actuarial gains
and losses in excess of 10% of the greater of the projected benefit obligation or
market-related value of plan assets were amortized over the average remaining service
life of active plan participants. The Company believes the changes in computing the
market-related value of plan assets and accelerating the amortization periods are
preferable as these changes will result in more timely recognition of actuarial gains and
losses in computing annual pension cost related to the subsidiary's pension plan, and
will achieve consistency in the application of accounting principles with the ALLTEL
Plan. The effect of these changes in 2001 will be to increase pension income by $1.7
million and income before cumulative effect of accounting change by $1.0 million. The
cumulative effect of retroactively applying these changes to periods prior to 2001
resulted in a one-time non-cash credit of $19.5 million, net of income tax expense of
$13.0 million, and is included in net income for the six and twelve month periods ended
June 30, 2001.
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

5

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
_________________

| | In
December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin
No. 101, "Revenue Recognition in Financial Statements", ("SAB No. 101"), which provided
additional guidance in applying generally accepted accounting principles for revenue
recognition. As a result, effective January 1, 2000, the Company changed its method of
recognizing wireless access revenues and certain customer activation fees to conform its
revenue recognition policies to the requirements of SAB No. 101. Prior to January 1,
2000, the Company recognized monthly non-refundable wireless access revenues when billed
in accordance with contractual arrangements with customers. Following the change, the
Company recognizes wireless access revenues over the period in which the corresponding
services are provided. Because the Company bills its customers on a cycle basis
throughout the month, this change in accounting resulted in the deferral of approximately
15 days of wireless access revenue. In addition, certain fees assessed to communications
customers to activate service were previously recognized when billed. With the change in
accounting, the Company recognizes these fees over the expected life of the customer. The
cumulative effect of retroactively applying this change in accounting principle to
periods prior to January 1, 2000 resulted in a one-time non-cash charge of $36.6 million,
net of income tax benefit of $23.3 million. The cumulative effect of the accounting
change is included in net income for the six and twelve months ended June 30, 2000.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3. |  | Purchase
Price Allocation Adjustments: In 2000, ALLTEL, Bell Atlantic Corporation ("Bell Atlantic"),
GTE Corporation ("GTE") and Vodafone Airtouch exchanged wireless properties in 13 states.
On April 3, 2000, ALLTEL completed the exchange of wireless properties with Bell Atlantic
in five states, acquiring operations in Arizona, New Mexico and Texas and divesting
operations in Nevada and Iowa. In addition to the transfer of wireless assets, ALLTEL
also paid Bell Atlantic $624.3 million in cash to complete this transaction. On June 30,
2000, ALLTEL completed the remaining wireless property exchanges with Bell Atlantic and
GTE, acquiring operations in Florida, Ohio, South Carolina and Alabama, while divesting
operations in Illinois, Indiana, New York and Pennsylvania. ALLTEL also transferred to
Bell Atlantic or GTE certain of its minority investments in unconsolidated wireless
properties, representing approximately 2.6 million potential customers. In connection
with the transfer of the remaining wireless assets, ALLTEL received $216.9 million in
cash and prepaid vendor credits of $199.6 million and assumed long-term debt of $425.0
million. ALLTEL accounted for these exchange transactions as purchases, and accordingly,
the accompanying consolidated financial statements include the accounts and results of
operations of the acquired wireless properties from the applicable dates of acquisition.
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | During
the second quarter of 2001, the Company recorded the final purchase price allocation
related to these acquisitions based on a study completed by a third party
appraisal firm. The following table summarizes the assets acquired, long-term debt
assumed and assets exchanged:
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                     
|-------------------------------------
|Acquired fromBell Atlantic           
|Fair value of assets acquired        
|Customer lists                       
|Cellular licenses                    
|Goodwill                             
|Net deferred tax assets (liabilities)
|established on acquired assets       
|Long-term debt assumed               
|Fair value of assets exchanged       
|Net cash paid (received)             

| | Amortization
of the customer lists, cellular licenses and goodwill is being recorded on a
straight-line basis over 6, 40 and 25 years, respectively.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------

6

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
_________________

|4. |  | Merger
and Integration Expenses and Other Charges: During 2001, the Company restructured its
regional communications, product distribution and corporate operations. In connection
with these restructuring efforts, the Company recorded a restructuring charge during the
first and second quarters of 2001. The total charge recorded by the Company in the second
quarter was $2.1 million and consisted of $1.6 million in severance and employee-related
expenses and $0.5 million in lease termination costs. In the first quarter, the Company
recorded a restructuring charge of $69.0 million, which consisted of $54.9 million in
severance and employee benefit costs related to a planned workforce reduction, $5.2
million in lease termination costs associated with the closing of certain retail and
other operating locations and a $8.9 million write-down in the carrying value of certain
software development costs. Included in the severance and employee benefit component of
the restructuring charge are non-cash charges of $22.6 million. These non-cash charges
consist of $21.5 million in additional pension and postretirement benefit costs related
to a special early retirement program offered by the Company to employees meeting certain
age and service requirements and $1.1 million in compensation expense related to the
accelerated vesting of certain stock options. Eligible employees who elected the early
retirement incentive received five years of additional vested service for purposes of
calculating their retirement benefits available under the Company's pension and
postretirement benefit plans. During the first quarter of 2001, 230 employees accepted
the retirement incentive offer. The restructuring plan was completed in June 2001 and
resulted in the elimination of 1,417 employees, including the employees who accepted the
early retirement incentive. The work force reductions primarily occurred in operations
management, engineering, sales and the corporate support functions. As of June 30, 2001,
the Company had paid $32.1 million in severance and employee-related expenses, and all of
the employee reductions had been completed.
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
lease termination costs recorded in the first and second quarters consist of $4.6 million
representing the estimated minimum contractual commitments over the next one to five
years for 58 operating locations that the Company has abandoned, net of anticipated
sublease income. The lease termination costs also include $1.1 million of unamortized
leasehold improvement costs related to the abandoned locations. The write-down in the
carrying value of certain software development costs resulted from the Company's
formation of a joint venture with IBM announced in March 2001. The joint venture, which
operates as ALLTEL Corebanking Solutions, markets IBM's Corebank software, a real time
banking system, to financial service organizations in Europe. Prior to forming the joint
venture, ALLTEL had been developing its own real-time processing software. Following the
signing of the joint venture agreement, the Company ceased further development of its
software product and wrote-off the portion of the capitalized software development costs
that had no alternative future use or functionality.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | During
the fourth quarter of 2000, in connection with the purchase of wireless assets in
Louisiana from SBC Communications, Inc., the Company recorded integration expenses and
other charges of $1.9 million, consisting of branding and signage costs. The Company also
recorded a $1.1 million reduction in the liabilities associated with the September 1999
restructuring of its wireline operations. This adjustment primarily reflects differences
between estimated and actual severance costs paid and a slight reduction in the number of
employees to be terminated under the plan from 248 to 242.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
connection with the exchange of wireless assets with Bell Atlantic and GTE completed
during the second and third quarters of 2000, the Company recorded integration expenses
and other charges consisting of severance and employee benefit costs related to a planned
workforce reduction and branding and signage costs. The integration plan, completed in
September 2000, provided for the elimination of 22 employees in the Company's wireless
operations management, engineering and sales support functions. In connection with this
integration plan, the Company recorded a charge of $9.2 million in the third quarter of
2000, consisting of $8.9 million in branding and signage costs and $0.3 million in
severance and employee-related expenses. In the second quarter, the Company recorded a
charge of $8.8 million, which consisted of $5.0 million in severance and employee benefit
costs and $3.8 million in branding and signage costs. As of June 30, 2001, the Company
had paid $5.3 million in severance and employee-related expenses and all of the employee
reductions had been completed. During the third quarter of 2000, the Company also
recorded a $1.5 million reduction in the liabilities
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

7

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
_________________

|4. |  | Merger
and Integration Expenses and Other Charges, Continued: associated with its merger and
integration activities initiated during 1999. The reduction consisted of a $1.0 million
decrease in estimated severance costs to complete the September 1999 restructuring of the
Company's wireline operations and decreases in estimated severance costs of $0.3 million
and $0.2 million, respectively, related to the acquisitions of Aliant Communications Inc.
("Aliant") and Liberty Cellular, Inc. ("Liberty"). The adjustment to the wireline
restructuring plan reflects a reduction in the expected number of employees to be
terminated from 308 to 248, while the adjustments to the Aliant and Liberty merger and
integration plans reflect differences between estimated and actual severance costs paid.
During the second quarter of 2000, the Company also recorded a $2.0 million reduction in
the merger and integration liability related to its acquisition of Aliant. This
adjustment primarily reflects a decrease in severance and employee benefit costs to be
paid as a result of reducing the expected number of Aliant employees to be terminated
from 160 to 132.
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
an effort to realign the cost structure of its information services business, the Company
recorded a restructuring charge of $10.1 million during the first quarter of 2000. This
charge consisted of $5.9 million in severance and employee benefit costs related to a
planned workforce reduction and $4.2 million in lease termination costs related to the
consolidation of certain operating locations. The restructuring plan, which resulted in
the elimination of 199 employees, was completed in July 2000. As of June 30, 2001, the
Company had paid $5.9 million in severance and employee-related expenses and all of the
employee reductions had been completed. The lease termination costs represent the
estimated minimum contractual commitments over the next one to four years for facilities
that the Company has abandoned, net of anticipated sublease income.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | During
the third quarter of 1999, the Company recorded a pretax charge of $90.5 million in
connection with its mergers with Aliant, Liberty, Advanced Information Resources, Ltd.
and Southern Data Systems and with certain loss contingencies and other restructuring
activities. The merger and integration expenses, which totaled $73.4 million, included
professional and financial advisors'fees of $24.4 million, severance and employee-related
expenses of $15.4 million and other integration costs of $33.6 million. The other
integration costs included $12.5 million of lease termination costs, $10.2 million of
costs associated with the early termination of certain service obligations, and a $4.6
million write-down in the carrying value of certain in-process and other software
development assets that have no future alternative use or functionality. Also included
are other integration costs incurred in the third quarter consisting of branding and
signage costs of $4.1 million and other expenses of $2.2 million. The Company's merger
and integration plan, as approved by ALLTEL's Board of Directors, provided for a
reduction of 160 employees of Aliant and 40 employees of Liberty, primarily in the
corporate support functions, to be substantially completed by the third quarter of 2000.
As previously discussed, in the second quarter of 2000, the Company reduced the expected
number of Aliant employees to be terminated to 132 and decreased the related accrued
liability by $2.0 million. In the third quarter of 2000, the Company further reduced the
accrued liabilities related to the Aliant and Liberty mergers by $0.5 million. As of June
30, 2001, the Company had paid $11.8 million in severance and employee-related expenses
and all of the 172 employee reductions had been completed.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
lease termination costs included a cancellation fee of $7.3 million representing the
negotiated settlement to terminate the Company's contractual commitment to lease building
space previously occupied by the former 360 Communications Company ("360") operations
acquired in 1998. The lease termination costs also included a $4.1 million write-off of
capitalized leasehold improvements and $1.1 million in other disposal costs. The contract
termination fees included $5.2 million related to long-term contracts with an outside
vendor for customer billing services to be provided to the Aliant and Liberty operations
until conversion of these operations to the Company's own internal billing system
occurred. Conversion of the Liberty operations was completed in November 1999, and
conversion of the Aliant operations began in the first quarter of 2001. The $5.2 million
amount represented the termination fee specified in the contracts. Of the total
termination fee, $0.7 million has been paid with the remainder due in installments upon
completion of the conversion of the Aliant operations to ALLTEL's billing system. The
Company also recorded an additional $5.0 million charge to reflect the actual cost of
terminating its contract with Convergys Corporation("Convergys") for customer
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

8

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
_________________

|4. |  | Merger
and Integration Expenses and Other Charges, Continued: billing services to be provided to
the former 360 operations. In September 1999, the Company and Convergys agreed to a final
contract termination fee of $55.0 million, of which $50.0 million of termination costs
were recorded in 1998. Through June 30, 2001, the Company had paid $50.0 million of the
termination fee.
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
connection with management's plan to reduce costs and improve operating efficiencies, the
Company recorded a restructuring charge of $17.1 million during the third quarter of
1999. This charge consisted of $10.8 million in severance and employee benefit costs
related to a planned workforce reduction and $6.3 million in lease termination costs
related to the consolidation of certain operating locations. The restructuring plan
provided for the elimination of approximately 308 employees in the Company's wireline
operations support functions to be completed by September 2000. As previously discussed,
during 2000, the Company reduced the expected number of employees to be terminated to 242
and decreased the related accrued liability by $2.1 million. As of June 30, 2001, the
Company had paid $8.7 million in severance and employee-related expenses and all of the
employee reductions had been completed. The lease termination costs represent the
estimated minimum contractual commitments over the next one to four years for leased
facilities that the Company has abandoned.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
following is a summary of activity related to the liabilities associated with the Company's
merger and integration expenses and other charges for the twelve months ended June 30:
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                  |     
|------------------------------------------------- | ----
|                                                  | 2001
|Balance, beginning of period                      |     
|Merger and integration expenses and other charges |     
|Reversal of accrued liabilities                   |     
|Non-cash charges for employee benefits            |     
|Non-cash write-down of assets                     |     
|Cash outlays                                      |     
|Balance, end of period                            |     

| | At
June 30, 2001, the remaining unpaid liability related to the Company's merger and
integration and restructuring activities consists of contract termination fees of $9.5
million, severance and employee-related expenses of $4.6 million and lease cancellation
and termination costs of $6.5 million.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|5. |  | Gain
(Loss) on Disposal of Assets and Other: In the second quarter of 2001, the Company
recorded a pretax adjustment of $4.4 million to reduce the gain recognized from the
dissolution of a wireless partnership with Bell South Mobility, Inc. ("Bell South")
initially recorded in the first quarter of 2001, as discussed below. The Company also
recorded a pretax adjustment of $2.4 million to increase the gain recognized from the
sale of PCS licenses to Verizon Wireless also completed during the first quarter of 2001.
These adjustments primarily reflected differences between the actual and estimated book
values of the properties transferred. In addition, during the second quarter of 2001, the
Company prepaid $73.5 million of long-term debt prior to its stated maturity date and
incurred pretax termination fees of $2.9 million in connection with the early retirement
of that debt.
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
the first quarter of 2001, the Company recorded a pretax gain of $345.4 million from the
sale of 20 PCS licenses to Verizon Wireless completed in February 2001. In addition, the
Company recorded a pretax gain of $13.9 million upon the dissolution of a wireless
partnership with Bell South involving properties in four states. Upon dissolution, the
partnership assets were distributed to the partners at fair value resulting in a gain for
financial reporting purposes. Also in the first quarter of 2001, the Company recorded
pretax gains of $3.2 million from the sale of investments.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

9

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
_________________

|5. |  | Gain
(Loss) on Disposal of Assets and Other, Continued: During the fourth quarter of 2000, the
Company recorded pretax gains totaling $85.7 million from the sale of investments,
including ALLTEL's remaining investment in WorldCom, Inc. ("WorldCom") common stock.
Proceeds from the investment sales amounted to $102.2 million. The Company also recorded
pretax gains of $35.5 million from the sale of its PCS operations in Birmingham, Ala. and
eight other PCS licenses. In addition, the Company recorded a pretax adjustment of $5.7
million to decrease the gain recognized from the exchange of wireless properties with
Bell Atlantic and GTE initially recorded in the second quarter of 2000.
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
the third quarter of 2000, the Company recorded pretax gains totaling $476.3 million from
the sale of a portion of its investment in WorldCom common stock. In addition, the
Company recorded a pretax adjustment of $1.4 million to reduce the gain recognized from
the exchange of wireless properties with Bell Atlantic and GTE and the sale of certain
PCS assets recorded in the second quarter of 2000, as discussed below. This adjustment,
along with the $5.7 million fourth quarter adjustment previously discussed, primarily
reflected differences between the actual and estimated book values of the properties
transferred.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
the second quarter of 2000, the Company recorded pretax gains totaling $1,353.1 million
from the exchange of wireless properties with Bell Atlantic and GTE and the sale of its
PCS operations in Mobile, Ala. and the PCS license covering the Pensacola, Fla. market.
In addition, the Company recorded a pretax write-down of $15.0 million on its investment
in APEX Global Information Services, Inc. ("APEX"), a provider of Internet access
services. The write-off was recorded due to adverse market conditions facing APEX and the
company's bankruptcy filing.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | During
the fourth quarter of 1999, the Company recorded a pretax gain of $43.1 million from the
sale of a portion of its investment in WorldCom common stock. Proceeds from this sale
amounted to $45.0 million.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|6. |  | Comprehensive
Income: Comprehensive income was as follows for the three, six and twelve month periods
ended June 30:
|-- |  | --------------------------------------------------------------------------------------------------------------------

|                                    | Three Months Ended | Six Months Ended | Twelve Months Ended |        |     |       
|----------------------------------- | ------------------ | ---------------- | ------------------- | ------ | --- | ------
|
|Net income                          |                    | $  218           | .5                  | $1,003 | .5  | $  614
|Other comprehensive income (loss):  |                   
|Unrealized holding gains (losses)   |                   
|on investments in the period        |                    | (4               | .1)                 | 42     | .9  | (10   
|Income tax expense (benefit)        |                    | (1               | .2)                 | 14     | .4  | (3    
|                                    |                    | (2               | .9)                 | 28     | .5  | (7    
|Less:  reclassification adjustments |                   
|for gains included in net income    |                    | --               |                     | --     |     | (2    
|Income tax expense                  |                    | --               |                     | --     |     | 1     
|                                    |                    | --               |                     | --     |     | (1    
|Net unrealized gains (losses)       |                    | (4               | .1)                 | 42     | .9  | (13   
|Income tax expense (benefit)        |                    | (1               | .2)                 | 14     | .4  | (4    
|                                    |                    | (2               | .9)                 | 28     | .5  | (8    
|Foreign currency translation        |                   
|adjustment                          |                    | 1                | .9                  | (0     | .3) | (4    
|                                   
|Other comprehensive income          |                   
|(loss) before tax                   |                    | (2               | .2)                 | 42     | .6  | (17   
|Income tax expense (benefit)        |                    | (1               | .2)                 | 14     | .4  | (4    
|Other comprehensive income (loss)   |                    | (1               | .0)                 | 28     | .2  | (13   
|Comprehensive income                |                    | $  217           | .5                  | $1,031 | .7  | $  601

10

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
_________________

|7. |  | Earnings
per Share: A reconciliation of the net income and number of shares used in computing
basic and diluted earnings per share was as follows for the three, six and twelve month
periods ended June 30:
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                       | Three Months Ended | Six Months Ended | Twelve Months Ended |        |     |     
|-------------------------------------- | ------------------ | ---------------- | ------------------- | ------ | --- | ----
|
|                                      
|Basic earnings per share:              |                   
|Income before cumulative effect        |                   
|of accounting change                   |                    | $218             | .5                  | $1,003 | .5  | $594
|Preferred dividends                    |                    | 0                | .1                  | 0      | .1  | 0   
|Net income applicable to common        |                   
|shares before cumulative effect        |                   
|of accounting change                   |                    | $218             | .4                  | $1,003 | .4  | $594
|                                      
|Weighted average common shares         |                   
|outstanding for the period             |                    | 311              | .6                  | 315    | .4  | 312 
|                                      
|Basic earnings per share               |                    | $                | .70                 | $3     | .18 | $1  
|                                      
|Diluted earnings per share:            |                   
|Net income applicable to common shares |                   
|before cumulative effect of            |                   
|accounting change                      |                    | $218             | .4                  | $1,003 | .4  | $594
|Adjustment for convertible preferred   |                   
|stock dividends                        |                    | --               |                     | --     |     | 0   
|Net income applicable to common shares |                   
|before cumulative effect of            |                   
|accounting change and assuming         |                   
|conversion of preferred stock          |                    | $218             | .4                  | $1,003 | .4  | $594
|                                      
|Weighted average common shares         |                   
|outstanding for the period             |                    | 311              | .6                  | 315    | .4  | 312 
|Increase in shares resulting from:     |                   
|Exercise of stock options              |                    | 1                | .6                  | 2      | .4  | 1   
|Conversion of preferred stock          |                    | 0                | .4                  | 0      | .4  | 0   
|Weighted average common shares         |                   
|assuming conversion                    |                    | 313              | .6                  | 318    | .2  | 314 
|                                      
|Diluted earnings per share             |                    | $                | .70                 | $3     | .15 | $1  

11

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
_________________

|8. |  | Business
Segment Information: ALLTEL manages its business operations based on differences in
products and services. The Company evaluates performance based on segment revenue and
operating income, excluding non-recurring and unusual items. Segment operating results
were as follows for the three, six and twelve month periods ended June 30:
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                           | Three Months Ended | Six Months Ended | Twelve Months Ended
|-------------------------- | ------------------ | ---------------- | -------------------
|
|Revenues and Sales from    |                    |                  |                    
|External Customers:        |                   
|Wireless                   |                    | $   965          | .2                 
|Wireline                   |                    | 423              | .9                 
|Emerging businesses        |                    | 85               | .7                 
|Total communications       |                    | 1,474            | .8                 
|Information services       |                    | 261              | .9                 
|Other operations           |                    | 94               | .7                 
|Total business segments    |                    | $1,831           | .4                 
|Intersegment Revenues      |                   
|and Sales:                 |                   
|Wireless                   |                    | $                | --                 
|Wireline                   |                    | 27               | .1                 
|Emerging businesses        |                    | 29               | .1                 
|Total communications       |                    | 56               | .2                 
|Information services       |                    | 75               | .7                 
|Other operations           |                    | 45               | .7                 
|Total business segments    |                    | $   177          | .6                 
|                          
|Total Revenues and Sales:  |                   
|Wireless                   |                    | $   965          | .2                 
|Wireline                   |                    | 451              | .0                 
|Emerging businesses        |                    | 114              | .8                 
|Total communications       |                    | 1,531            | .0                 
|Information services       |                    | 337              | .6                 
|Other operations           |                    | 140              | .4                 
|Total business segments    |                    | 2,009            | .0                 
|Less:  intercompany        |                   
|eliminations               |                    | 88               | .6                 
|Total revenues and sales   |                    | $1,920           | .4                 
|                          
|Operating Income (Loss):   |                   
|Wireless                   |                    | $   201          | .2                 
|Wireline                   |                    | 183              | .0                 
|Emerging businesses        |                    | 8                | .5                 
|Total communications       |                    | 392              | .7                 
|Information services       |                    | 46               | .4                 
|Other operations           |                    | 6                | .2                 
|Total business segments    |                    | 445              | .3                 
|Corporate operations       |                    | (8               | .4)                
|Merger and integration     |                   
|expenses and other charges |                    | (2               | .1)                
|Total corporate expenses   |                    | (10              | .5)                
|Total operating income     |                    | $   434          | .8                 

12

NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
_________________

|9. |  | Agreement
to Lease Cell Site Towers: In December 2000, the Company announced the signing of a
definitive agreement with American Tower Corporation ("American Tower") to lease
approximately 2,200 of ALLTEL's cell site towers. Under terms of the 15-year lease
agreement, American Tower will pay ALLTEL approximately $660.0 million in cash at the
commencement of the lease term. American Tower will have the option to purchase the
towers for additional consideration at the end of the lease term. With this transaction,
American Tower will manage, maintain and remarket the remaining space on the towers,
while ALLTEL will continue to own the cell site facilities. ALLTEL will pay American
Tower a monthly fee for management and maintenance services. The transaction is
structured to close in several phases. In the second quarter of 2001, the first three
phases of this transaction, covering a total of 869 towers, were closed. ALLTEL received
$260.7 million in cash and recorded the proceeds as deferred rental income that will be
recognized on a straight-line basis over the lease term. On July 2, 2001 and August 1,
2001, the next two phases of the transaction, covering a total of 435 towers, were
closed. The remaining phases of the transaction are subject to necessary consents and
approvals and should be completed by year-end.
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

13

ALLTEL CORPORATION FORM 10-Q PART I - FINANCIAL INFORMATION

Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations

GENERAL

The following is a discussion and analysis
of the historical results of operations and financial condition of ALLTEL Corporation ("ALLTEL"or
the "Company"). This discussion should be read in conjunction with the unaudited
consolidated financial statements, including the notes thereto, for the interim periods
ended June 30, 2001 and 2000, and the Company's Annual Report on Form 10-K, as amended,
for the year ended December 31, 2000.

ACQUISITIONS

On October 3, 2000, ALLTEL purchased
wireless properties in New Orleans, Baton Rouge and three rural service areas ("RSAs") in
Louisiana from SBC Communications, Inc. ("SBC"). In connection with this transaction,
ALLTEL paid SBC $387.6 million in cash and acquired approximately 150,000 wireless
customers and 300,000 paging customers. The accompanying consolidated financial
statements include the accounts and results of operations of the acquired wireless
properties from the date of acquisition. Under the purchase method of accounting,
tangible and identifiable intangible assets acquired are recorded at fair value. The
excess of the aggregate purchase price over the fair market value of the net assets
acquired of $210.2 million has been initially allocated to goodwill and is being
amortized on a straight-line basis over 25 years. The fair values and useful lives of
assets acquired have been estimated based on a preliminary valuation and are subject to
final valuation adjustments. ALLTEL has engaged a third-party appraisal firm to perform a
study to determine the allocation of the total purchase price to the various assets
acquired from SBC. Accordingly, a portion of the excess cost currently allocated to
goodwill may be classified as other intangibles and may be amortized over periods
different from the goodwill amortization period of 25 years. The Company expects to
record the final purchase price adjustments related to this acquisition during the fourth
quarter of 2001.

During 2000, ALLTEL, Bell Atlantic
Corporation ("Bell Atlantic"), GTE Corporation ("GTE") and Vodafone Airtouch exchanged
wireless properties in 13 states. On April 3, 2000, ALLTEL completed the exchange of
wireless properties with Bell Atlantic in five states, acquiring operations in Arizona,
New Mexico and Texas and divesting operations in Nevada and Iowa. In addition to the
transfer of wireless assets, ALLTEL also paid Bell Atlantic $624.3 million in cash to
complete this transaction. On June 30, 2000, ALLTEL completed the remaining wireless
property exchanges with Bell Atlantic and GTE, acquiring operations in Florida, Ohio,
South Carolina and Alabama, while divesting operations in Illinois, Indiana, New York and
Pennsylvania. ALLTEL also transferred to Bell Atlantic or GTE certain minority
investments in unconsolidated wireless properties, representing approximately 2.6 million
potential customers ("POPs"). In connection with the transfer of the remaining wireless
assets, ALLTEL received $216.9 million in cash and prepaid vendor credits of $199.6
million and assumed long-term debt of $425.0 million. Through the completion of the above
transactions, ALLTEL acquired interests in 27 wireless markets representing about 14.6
million POPs and approximately 1.5 million wireless customers, while divesting interests
in 42 wireless markets representing 6.9 million POPs and approximately 778,000 customers.
ALLTEL accounted for these exchange transactions as purchases, and accordingly, the
accompanying consolidated financial statements include the accounts and results of
operations of the acquired wireless properties from the applicable dates of acquisition.
During the second quarter of 2001, the Company completed the final purchase price
allocation related to these acquisitions. The excess of the aggregate purchase price over
the fair market value of the tangible net assets acquired was allocated to customer lists
($185.0 million), cellular licenses ($448.0 million) and goodwill ($1,088.9 million)
based on a study completed by a third party appraisal firm. Amortization of the customer
lists, cellular licenses and goodwill is being recorded on a straight-line basis over 6,
40 and 25 years, respectively. As a result of recording the final purchase price
adjustments, the Company expects amortization expense to increase approximately $5.0
million in the third quarter of 2001.

14

OVERVIEW-CONSOLIDATED RESULTS OF OPERATIONSRESULTS OF OPERATIONS

|                   | Three Months EndedJune 30, | Six Months EndedJune 30, | Twelve Months EndedJune 30, |         |     |        
|------------------ | -------------------------- | ------------------------ | --------------------------- | ------- | --- | -------
|
|Revenues and sales |                            | $1,920                   | .4                          | $1,816  | .2  | $3,773 
|Operating income   |                            | $   434                  | .8                          | $   445 | .7  | $   780
|Net income         |                            | $   218                  | .5                          | $1,003  | .5  | $   614
|Basic              |                            | $                        | .70                         | $3      | .18 | $1     
|Diluted            |                            | $                        | .70                         | $3      | .15 | $1     

Revenues and sales increased $104.2 million
or 6 percent, $276.0 million or 8 percent and $650.0 million or 9 percent in the three,
six and twelve month periods ended June 30, 2001, respectively. Revenue growth in each
period reflects strong market demand for the Company's communications services as further
discussed below.

Reported operating income, net income and
earnings per share for the three, six and twelve month periods ended June 30, 2001 and
2000 include the effects of various non-recurring and unusual items. As further discussed
below, the non-recurring and unusual items include merger and integration expenses and
other charges and gains realized from the exchange or sale of assets. Adjusted to exclude
the effects of the non-recurring and unusual items in each period, operating income would
have decreased $15.6 million or 3 percent, decreased $16.2 million or 2 percent and
increased $0.7 million or less than 1 percent in the three, six and twelve month periods
ended June 30, 2001, respectively. For the same periods of 2001, net income would have
decreased $9.9 million or 4 percent, $30.3 million or 7 percent and $44.3 million or 5
percent, respectively. When excluding the effects of the non-recurring and unusual items
in each period, basic earnings per share would have decreased 4 percent, 6 percent and 5
percent in the three, six and twelve month periods ended June 30, 2001, respectively. For
the same periods of 2001, diluted earnings per share would have decreased 3 percent, 6
percent and 4 percent, respectively. Operating results for the three, six and twelve
month periods of 2001 were adversely affected by additional goodwill amortization of
approximately $10.4 million, $23.1 million and $50.1 million, respectively, primarily
related to the acquisitions of wireless assets previously discussed. Increased interest
expense resulting from additional borrowings to fund the wireless asset acquisitions also
adversely affected net income and earnings per share growth in the six and twelve month
periods of 2001. As further discussed below, the Company restructured its communications,
product distribution and corporate operations during the first and second quarters of
2001.

Operating income, net income and earnings
per share adjusted for the non-extraordinary, non-recurring and unusual items are
summarized in the following tables:

|                                 | Three Months EndedJune 30, | Six Months EndedJune 30, | Twelve Months EndedJune 30, |      |    |     
|-------------------------------- | -------------------------- | ------------------------ | --------------------------- | ---- | -- | ----
|
|Operating income, as reported    |                            | $434                     | .8                          | $445 | .7 | $780
|Non-recurring and unusual items: |                           
|Litigation settlement            |                            | --                       |                             | --   |    | --  
|Merger and integration           |                           
|expenses and other charges       |                            | 2                        | .1                          | 6    | .8 | 71  
|Operating income, as adjusted    |                            | $436                     | .9                          | $452 | .5 | $851

15

|                                 | Three Months EndedJune 30, | Six Months EndedJune 30, | Twelve Months EndedJune 30, |        |      |     
|-------------------------------- | -------------------------- | ------------------------ | --------------------------- | ------ | ---- | ----
|
|Net income, as reported          |                            | $218                     | .5                          | $1,003 | .5   | $614
|Non-recurring and unusual items: |                           
|Cumulative effect of             |                           
|accounting change                |                            |                          | --                          |        | --   | (19 
|Litigation settlement            |                            |                          | --                          |        | --   |     
|Merger and integration           |                           
|expenses and other charges       |                            | 1                        | .2                          | 4      | .1   | 42  
|Gain (loss) on disposal of       |                           
|assets and other                 |                            | 2                        | .9                          | (775   | .1)  | (212
|Net income, as adjusted          |                            | $222                     | .6                          | $  232 | .5   | $424
|Basic earnings per share,        |                           
|as reported                      |                            | $                        | .70                         | $3     | .18  | $1  
|Non-recurring and unusual        |                           
|items, net of tax:               |                           
|Cumulative effect of             |                           
|accounting change                |                            |                          | --                          |        | --   | (   
|Litigation settlement            |                            |                          | --                          |        | --   |     
|Merger and integration           |                           
|expenses and other charges       |                            |                          | --                          |        | .02  |     
|Gain (loss) on disposal of       |                           
|assets and other                 |                            |                          | .01                         | (2     | .46) | (   
|Basic earnings per share,        |                           
|as adjusted                      |                            | $                        | .71                         | $      | .74  | $1  
|Diluted earnings per share,      |                           
|as reported                      |                            | $                        | .70                         | $3     | .15  | $1  
|Non-recurring and unusual        |                           
|items, net of tax:               |                           
|Cumulative effect of             |                           
|accounting change                |                            |                          | --                          |        | --   | (   
|Litigation settlement            |                            |                          | --                          |        | --   |     
|Merger and integration           |                           
|expenses and other charges       |                            |                          | --                          |        | .01  |     
|Gain (loss) on disposal of       |                           
|assets and other                 |                            |                          | .01                         | (2     | .43) | (   
|Diluted earnings per share,      |                           
|as adjusted                      |                            | $                        | .71                         | $      | .73  | $1  

The operating income, net income and
earnings per share impact of the non-recurring and unusual items have been presented as
supplemental information only. The non-recurring items reflected in the above tables are
discussed in reference to the caption in the consolidated statements of income in which
they are reported.

Cumulative Effect of Accounting Change

During the second quarter of 2001, ALLTEL
changed the accounting for the defined benefit pension plan of a subsidiary acquired in
1999 to conform with the accounting principles followed by the ALLTEL Pension Plan (the "ALLTEL
Plan"), a defined benefit plan covering substantially all employees working in the Company's
communications and corporate operations. The change in accounting was completed in
conjunction with the Company's decision to conform future benefits earned under the
subsidiary's plan with the ALLTEL Plan effective June 1, 2001. The change in accounting,
retroactive to January 1, 2001, affects

16

both the computation and amortization of unrecognized actuarial gains and
losses for purposes of computing annual pension cost related to the subsidiary's pension
plan. The change included modifying the method by which the market-related value of plan
assets is determined from a calculated five-year average to actual fair value. In
addition, unrecognized actuarial gains or losses that exceed 17.5% of the greater of the
projected benefit obligation or market-related value of plan assets will be amortized on
a straight-line basis over 5 years. Unrecognized actuarial gains and losses below the
17.5% corridor will be amortized over the average remaining service life of active plan
participants (approximately 13 years). Under the method previously followed by the
subsidiary's plan, only unrecognized actuarial gains and losses in excess of 10% of the
greater of the projected benefit obligation or market-related value of plan assets were
amortized over the average remaining service life of active plan participants. The
Company believes the changes in computing the market-related value of plan assets and
accelerating the amortization periods are preferable as these changes will result in more
timely recognition of actuarial gains and losses in computing annual pension cost related
to the subsidiary's pension plan, and will achieve consistency in the application of accounting
principles with the ALLTEL Plan. The effect of these changes in 2001 will be to increase
pension income by $1.7 million and income before cumulative effect of accounting change
by $1.0 million.

Effective January 1, 2000, the Company
changed its method of recognizing wireless access revenues and certain customer
activation fees. These changes conform ALLTEL's revenue recognition policies to the
requirements of the Securities and Exchange Commission's Staff Accounting Bulletin No.
101, "Revenue Recognition in Financial Statements". Prior to January 1, 2000, the Company
recognized monthly non-refundable wireless access revenues when billed in accordance with
contractual arrangements with customers. With the change in accounting, the Company
recognizes wireless access revenues over the period in which the corresponding services
are provided. As ALLTEL bills its customers on a cycle basis throughout the month, this
accounting change resulted in the deferral of approximately 15 days of wireless access
revenue. In addition, certain fees assessed to communications customers to activate
service were previously recognized when billed. With the change in accounting, the
Company now recognizes these fees over the expected life of the customer. (See Note 2 to
the unaudited interim consolidated financial statements for additional information
regarding these changes in accounting principles).

Litigation Settlement

On September 19, 2000, ALLTEL and the
Georgia Public Service Commission ("Georgia PSC") reached a final settlement agreement to
resolve all pending litigation involving the two parties. Under terms of the final
agreement, ALLTEL agreed to issue a one-time credit of about $25 to approximately 450,000
wireline customers in Georgia. The credits were issued to business and residential
customers during the fourth quarter of 2000 and totaled $11.5 million. The Company
recorded the credits as a reduction in wireline operating revenues. The one-time customer
credits were in addition to other commitments agreed to by ALLTEL under an earlier
version of the settlement agreement signed on April 11, 2000. As part of the earlier
agreement, ALLTEL agreed to accelerate deployment of digital subscriber lines and
Internet service to its customers in Georgia and to reduce certain optional local calling
plan rates. In addition, ALLTEL agreed to future reductions in funds received from the
Georgia Universal Service Fund. These revenue reductions will total approximately $26.0
million in 2001.

Merger and Integration Expenses and Other Charges

During 2001, the Company restructured its
regional communications, product distribution and corporate operations. In connection
with these restructuring efforts, the Company recorded a restructuring charge during the
first and second quarters of 2001. The total charge recorded by the Company in the second
quarter was $2.1 million and consisted of $1.6 million in severance and employee-related
expenses and $0.5 million in lease termination costs. In the first quarter, the Company
recorded a restructuring charge of $69.0 million, which consisted of $54.9 million in
severance and employee benefit costs related to a planned workforce reduction, $5.2
million in lease termination costs associated with the closing of several retail and
other operating locations and a $8.9 million write-down in the carrying value of certain

17

software development costs. Included in the severance and employee
benefit component of the first quarter restructuring charge were non-cash charges of
$22.6 million. These non-cash charges consisted of $21.5 million in additional pension
and postretirement benefit costs related to a special early retirement program offered by
the Company to employees meeting certain age and service requirements and $1.1 million in
compensation expense related to the accelerated vesting of certain stock options.
Eligible employees who elected the early retirement incentive received five years of
additional vested service for purposes of calculating their retirement benefits available
under the Company's pension and postretirement benefit plans. During the first quarter of
2001, 230 employees accepted the retirement incentive offer. The restructuring plan was
completed in June 2001 and resulted in the elimination of 1,417 employees, including the
employees who accepted the early retirement incentive. As of June 30, 2001, the Company
had paid $32.1 million in severance and employee-related expenses, and all of the
employee reductions had been completed.

The lease termination costs recorded in the
first and second quarters of 2001 include $4.6 million representing the estimated minimum
contractual commitments over the next one to five years for 58 operating locations that
the Company has abandoned, net of anticipated sublease income. The lease termination
costs also include $1.1 million of unamortized leasehold improvement costs related to the
abandoned locations. The write-down in the carrying value of certain software development
costs resulted from the Company's formation of a joint venture with IBM announced in
March 2001. The joint venture, which operates as ALLTEL Corebanking Solutions, markets IBM's
Corebank software, a real time, continuous banking system, to financial service
organizations in Europe. Prior to forming the joint venture, ALLTEL had been developing
its own real-time processing software. Following the signing of the joint venture
agreement, ALLTEL ceased further development of its software product and wrote-off the
portion of the capitalized software development costs that had no alternative future use
or functionality.

During the fourth quarter of 2000, in
connection with the purchase of wireless assets in Louisiana from SBC, the Company
recorded integration expenses and other charges of $1.9 million, consisting of branding
and signage costs. The Company also recorded a $1.1 million reduction in the liabilities
associated with the September 1999 restructuring of its wireline operations. This
adjustment primarily reflects differences between estimated and actual severance costs
paid and a slight reduction in the number of employees to be terminated under the plan to
242.

In connection with the exchange of wireless
assets with Bell Atlantic and GTE, the Company recorded integration expenses and other
charges during the second and third quarters of 2000, consisting of severance and
employee benefit costs related to a planned workforce reduction and branding and signage
costs. The total charge recorded by the Company in the third quarter was $9.2 million and
consisted of $8.9 million in branding and signage costs and $0.3 million in severance and
employee-related expenses. In the second quarter, the Company recorded a charge of $8.8
million, consisting of $5.0 million in severance and employee benefit costs and $3.8
million in branding and signage costs. As of June 30, 2001, all of the planned employee
reductions had been completed and all severance-related expenses had been paid.

During the third quarter of 2000, the
Company also recorded a $1.5 million reduction in the liabilities associated with its
merger and integration activities initiated during 1999. The reduction consisted of a
$1.0 million decrease in estimated severance costs to complete the September 1999
restructuring of the wireline operations and decreases in estimated severance costs of
$0.3 million and $0.2 million, respectively, related to the acquisitions of Aliant and
Liberty. The adjustment to the wireline restructuring plan reflects a reduction in the
expected number of employees to be terminated from 308 to 248, while the adjustments to
the Aliant and Liberty merger and integration plans reflect differences between actual
and estimated severance costs paid. During the second quarter of 2000, the Company also
recorded a $2.0 million reduction in the merger and integration liability related to its
acquisition of Aliant. This adjustment primarily reflects a decrease in severance and
employee benefit costs to be paid as a result of reducing the expected number of Aliant
employees to be terminated from 160 to 132.

18

In an effort to realign the cost structure
in its information services business, the Company recorded a restructuring charge of
$10.1 million during the first quarter of 2000. This charge consisted of $5.9 million in
severance and employee benefit costs related to a planned workforce reduction and $4.2
million in lease termination costs related to the consolidation of certain operating
locations. The lease termination costs represented the estimated minimum contractual
commitments over the next one to four years for leased facilities that the Company has
abandoned, net of anticipated sublease income. As of June 30, 2001, the Company had paid
all severance-related expenses and completed all of the scheduled employee reductions.

During the third quarter of 1999, the
Company recorded a pretax charge of $90.5 million in connection with its mergers with
Aliant, Liberty, Advanced Information Resources, Ltd. and Southern Data Systems and with
certain loss contingencies and other restructuring activities. The merger and integration
expenses totaled $73.4 million and consisted of professional and financial advisors'fees
of $24.4 million, severance and employee-related expenses of $15.4 million and other
integration costs of $33.6 million. The other integration costs included $12.5 million of
lease termination costs, $10.2 million of costs associated with the early termination of
certain service obligations, and a $4.6 million write-down in the carrying value of
certain in-process and other software development assets that had no future alternative
use or functionality. The other integration costs also included branding and signage
costs of $4.1 million and other expenses of $2.2 million incurred in the third quarter of
1999. The lease termination costs consisted of a cancellation fee of $7.3 million to
terminate the Company's contractual commitment to lease building space previously
occupied by the former 360 Communications Company ("360") operations acquired in 1998, a
$4.1 million write-off of capitalized leasehold improvements and $1.1 million in other
disposal costs. The contract termination fees included $5.2 million related to long-term
contracts with an outside vendor for customer billing services to be provided to the
Aliant and Liberty operations until conversion of these operations to the Company's own
internal billing system occurred. Conversion of the Liberty operations was completed in
November 1999, with conversion of the Aliant operations began in the first quarter of
2001. The Company also recorded an additional $5.0 million charge to reflect the actual
cost of terminating its contract with Convergys Corporation ("Convergys") for customer
billing services to be provided to the former 360 operations. In September 1999, ALLTEL
and Convergys agreed to a final contract termination fee of $55.0 million, of which $50.0
million was recorded in 1998. Through June 30, 2001, the Company has paid Convergys $50.0
million of the termination fee. As previously discussed, the Company subsequently reduced
the accrued liabilities related to the Aliant and Liberty mergers by $2.5 million. As of
June 30, 2001, the Company had paid $11.8 million in severance and employee-related
expenses and all of the employee reductions had been completed.

During the third quarter of 1999, the
Company also recorded a restructuring charge of $17.1 million consisting of $10.8 million
in severance and employee benefit costs related to a planned workforce reduction and $6.3
million in lease termination costs related to the consolidation of certain operating
locations. The original restructuring plan provided for the elimination of 308 employees
in the Company's wireline operations support functions. As previously discussed, in the
third and fourth quarters of 2000, the Company reduced the number of employees to be
terminated to 242 and decreased the related liability by $2.1 million. The lease
termination costs represented the minimum estimated contractual commitments over the next
one to four years for leased facilities that the Company has abandoned. As of June 30,
2001, the Company had completed the employee reductions and paid $8.7 million in
severance-related expenses.

At June 30, 2001, the remaining unpaid
liability related to the Company's merger and integration and restructuring activities
was $20.6 million, consisting of contract termination fees of $9.5 million, severance and
employee-related expenses of $4.6 million and lease cancellation and termination costs of
$6.5 million. Of the remaining contract termination fees, $7.1 million will be paid in
2001 and $2.4 million will be paid in 2002. Cash outlays for the remaining
employee-related expenses and lease termination costs will be disbursed over the next 12
to 60 months. Funding for the unpaid merger and integration and restructuring liability
will be internally financed from operating cash flows. As a result of its first and
second quarter 2001 restructuring efforts, ALLTEL expects to realize cost savings through
a reduction in employee salaries and other benefit costs of approximately $55.0 million
in 2001. (See Note 4 to the unaudited interim consolidated financial statements for
additional information regarding the merger and integration expenses and other charges).

19

Gain (Loss) on Disposal of Assets and Other

In the second quarter, the Company recorded
a pretax adjustment of $4.4 million to reduce the gain recognized from the dissolution of
a wireless partnership with Bell South Mobility, Inc. ("Bell South") initially recorded
in the first quarter of 2001, as discussed below. The Company also recorded a pretax
adjustment of $2.4 million to increase the gain recognized from the sale of PCS licenses
to Verizon Wireless also completed during the first quarter of 2001. These adjustments
primarily reflected differences between the actual and estimated book values of the
properties transferred. In addition, during the second quarter, the Company prepaid $73.5
million of long-term debt prior to its stated maturity date and incurred pretax
termination fees of $2.9 million in connection with the early retirement of that debt.

In the first quarter of 2001, the Company
recorded a pretax gain of $345.4 million from the sale of 20 Personal Communications
Services ("PCS") licenses to Verizon Wireless completed in February 2001. In addition,
the Company recorded a pretax gain of $13.9 million upon the dissolution of a partnership
with Bell South, involving wireless properties in four states. Upon dissolution, the
partnership's assets were distributed to the partners at fair value resulting in a gain
for financial reporting purposes. Also in the first quarter of 2001, the Company recorded
pretax gains of $3.2 million from the sale of investments.

In addition to including the effects of the
transactions recorded in the first and second quarters of 2001 discussed above, the
twelve month period ended June 30, 2001 also includes pretax gains of $562.0 million from
the sale of investments, including ALLTEL's remaining investment in WorldCom, Inc. ("WorldCom")
common stock. In addition, the Company recorded pretax gains of $35.5 million from the
sale of certain PCS assets. The PCS assets sold include the operations in Birmingham,
Ala. and PCS licenses in eight other markets. The twelve month period of 2001 also
includes pretax adjustments totaling $7.1 million to reduce the gain recognized by the
Company in connection with the exchange of wireless properties with Bell Atlantic and GTE
recorded in the second quarter of 2000, as discussed below. These adjustments primarily
reflected differences between the actual and estimated book values of the properties
transferred.

In the second quarter of 2000, the Company
recorded pretax gains totaling $1,353.1 million from the exchange of wireless properties
with Bell Atlantic and GTE and the sale of its PCS operations in Mobile, Ala. and the PCS
license covering the Pensacola, Fla. market. The Company also recorded a pretax
write-down of $15.0 million on its investment in APEX Global Information Services, Inc. ("APEX"),
a provider of Internet access services. The write-off was recorded due to adverse market
conditions facing APEX and the company's bankruptcy filing. The twelve month period ended
June 30, 2000 includes a pretax gain of $43.1 million from the sale of a portion of the
Company's investment in WorldCom common stock.

RESULTS OF OPERATIONS BY BUSINESS SEGMENT

In the second quarter of 2001, the Company
changed the reporting presentation for wireless equipment sales revenues to a gross
basis. Previously, the Company netted equipment sales against charges incurred to acquire
new customers or retain existing ones and included the net amount in cost of products
sold or operations expense. Prior period revenue and expense information has been
reclassified to conform to the new reporting presentation. This change does not affect
previously reported operating income or net income of the Company.

During the first quarter of 2001, ALLTEL
changed its business segment reporting presentation. As a result of this change, the
Company's wireless segment now consists of both its cellular and PCS operations.
Previously, the PCS operations were included in the Company's emerging businesses
segment. Following this change, the Company's emerging businesses segment consists of its
long-distance and network management services, competitive local access ("CLEC") and
Internet access operations.

20

|Communcications-Wireless Operations |  |       |     |       |     |        
|----------------------------------- |  | ----- | --- | ----- | --- | -------
|
|
|Revenues and sales                  |  | $965  | .2  | $883  | .0  | $1,884 
|Operating income                    |  | $201  | .2  | $252  | .5  | $   389
|Customers                           |  | 6,463 | .6  | 5,835 | .0 
|Market penetration                  |  | 13    | .1% | 12    | .2%

During the past twelve month period,
customer growth continued as the number of wireless customers grew by more than 628,000
customers. As previously discussed, during the fourth quarter of 2000, ALLTEL purchased
wireless properties in Louisiana. This transaction accounted for approximately 148,000 of
the overall increase in wireless customers that occurred in the twelve month period ended
June 30, 2001. As a result of customer growth, the Company's market penetration rate
(number of customers as a percent of the total population in ALLTEL's service areas)
increased nearly 1 percent during the past twelve month period. Excluding the effect of
acquisitions, ALLTEL added more than 1,126,000 gross customers during the first six
months of 2001, compared to 945,000 for the same period of 2000.

Customer churn (average monthly rate of
customer disconnects) decreased slightly during the second quarter of 2001 and was 2.17
percent compared to 2.19 percent for the same period of 2000. For the six and twelve
months ended June 30, 2001, customer churn increased slightly and was 2.30 percent and
2.35 percent, respectively, compared to 2.27 percent and 2.28 percent for the same
periods in 2000. The Company continues to focus its efforts on lowering churn. Among the
initiatives implemented by the Company to improve customer retention are analyzing
customer usage patterns over a six-month period and notifying the customer if a better
rate plan is available and migrating customers from analog equipment to digital through
the use of equipment subsidies.

Wireless revenues and sales increased $82.2
million or 9 percent, $224.6 million or 14 percent and $527.5 million or 16 percent for
the three, six and twelve month periods ended June 30, 2001, respectively. Wireless
revenues and sales increased in all periods primarily due to the growth in wireless
customers and the acquisitions of wireless properties from Bell Atlantic, GTE and SBC.
These acquisitions accounted for approximately $101.6 million, $244.2 million and $476.8
million of the overall increases in revenues in the three, six and twelve month periods
ended June 30, 2001, respectively. Revenue growth attributable to customer growth and
acquisitions were offset by declines in roaming revenues reflecting the expansion of
local, regional and national calling plans and a decrease in roamer billing rates.
Average revenue per customer per month was $47.56, $46.74 and $47.78 for the three, six
and twelve months ended June 30, 2001, respectively, compared to $51.27, $49.85 and
$50.64 for the same periods of 2000. The decreases in average revenue per customer per
month in all three 2001 periods reflect the expansion of local, regional and national
calling plans, decreased roaming rates and continued penetration into competitive market
segments. The Company expects these industry-wide trends to continue. In addition, while
the expanded calling area plans provide the Company the ability to effectively compete
for high volume customers, retail roaming revenues will continue to decline as customers
migrate to these rate plans. Accordingly, future revenue growth will be dependent upon
ALLTEL's success in adding new customers in its existing markets, increasing customer
usage of its network and providing customers with enhanced products and services.

Operating income decreased $51.3 million or
20 percent, $77.5 million or 17 percent and $113.4 million or 13 percent for the three,
six and twelve month periods ended June 30, 2001, respectively. The decreases in
operating income in the all three periods of 2001 reflect additional goodwill
amortization of $10.2 million, $22.6 million and $49.6 million, respectively, associated
with the acquisitions of wireless assets previously discussed. Increased advertising and
other selling and marketing costs, consistent with the overall growth in revenues and
sales, the rollout of new rate plans and expanded competition from other wireless service
providers also affected operating income growth in all three periods of 2001. Operating
income also reflects increased customer retention expenses resulting from migrating
customers from analog to digital equipment, increased network-related expenses resulting
from increased network traffic due to customer growth and expansion of calling areas, and
increased depreciation expense, consistent with the growth in wireless plant in service.

21

The cost to acquire a new wireless customer
represents sales, marketing and advertising costs and the net equipment cost for each new
customer added. Cost to acquire a new wireless customer was $335, $299 and $306 for the
three, six and twelve months ended June 30, 2001, respectively, compared to $318, $301
and $300 for the same periods of 2000. The increases in cost to acquire a new customer in
the three and twelve month periods primarily reflect increased selling and marketing
costs attributable to a nationwide branding campaign and an increase in promotional
activities. In addition, margins earned from the sale of digital handsets and other
accessories declined driven by lower retail prices, reflecting highly competitive market
conditions. The increases in customer acquisition costs in the three and twelve month
periods of 2001 attributable to increased advertising costs and equipment subsidies were
partially offset by lower commissions expense, reflecting a shift in the Company's
distribution mix as proportionately higher sales volumes were generated from ALLTEL's
internal sales distribution channels. The Company has expanded its internal sales
distribution channels through Company retail stores and kiosks located in shopping malls
and other retail outlets. Incremental sales costs at a Company retail store or kiosk are
significantly lower than commissions paid to dealers. During the first six months of
2001, approximately 80 percent of the gross customer additions came through ALLTEL's
internal distribution channels. In addition, commissions paid to outside agents also
decreased in all periods of 2001, reflecting a shift in the mix of the Company's external
distribution channels from national to local dealers. While ALLTEL intends to manage the
costs of acquiring new customers by continuing to expand and enhance its internal
distribution channels, the Company will continue to utilize its large dealer network. The
decrease in cost to acquire a new wireless customer in the six month period of 2001
primarily reflects the lower commission costs noted above.

|Communcications-Wireline Operations |  |       |    |       |    |     
|----------------------------------- |  | ----- | -- | ----- | -- | ----
|
|
|Local service                       |  | $215  | .3 | $205  | .4 | $427
|Network access and                  | 
|long-distance                       |  | 207   | .3 | 204   | .6 | 416 
|Miscellaneous                       |  | 28    | .4 | 28    | .7 | 57  
|Total revenues and sales            |  | $451  | .0 | $438  | .7 | $901
|Operating income                    |  | $183  | .0 | $167  | .6 | $362
|Access lines in service             |  | 2,606 | .6 | 2,520 | .0

Wireline revenues and sales increased 3
percent in each of the three, six and twelve months ended June 30, 2001, or $12.3
million, $25.6 million and $43.0 million, respectively. Wireline operating income
increased $15.4 million or 9 percent, $24.0 million or 7 percent and $30.4 million or 5
percent for the three, six and twelve months ended June 30, 2001, respectively. Wireline
operating results for the twelve months ended June 30, 2001 includes the effect of the
$11.5 million Georgia PSC litigation settlement previously discussed. Excluding the
effect of this settlement, revenues and sales would have increased $54.5 million or 3
percent and operating income would have increased $41.9 million or 6 percent in the
twelve month period of 2001, respectively.

Local service revenues increased $9.9
million or 5 percent, $21.4 million or 5 percent and $32.2 million or 4 percent for the
three, six and twelve months ended June 30, 2001, respectively. Local service revenues
for the twelve month period of 2001 include the effect of the Georgia PSC litigation
settlement. Excluding the effect of the settlement, local service revenues would have
increased $43.7 million or 6 percent in the twelve month period ended June 30, 2001. Net
of the litigation settlement, the increases in local service revenues in all 2001 periods
reflect growth in customer access lines.

22

During the past twelve months, access line
growth, including the sales of residential and second access lines, continued as the
number of access lines grew more than 3 percent. Revenues from custom calling and other
enhanced services increased $6.4 million , $12.7 million and $23.8 million in the three,
six and twelve month periods ended June 30, 2001, respectively, also contributing to the
overall growth in local service revenues in all three 2001 periods.

Network access and long-distance revenues
increased $2.7 million or 1 percent, $6.6 million or 2 percent and $18.9 million or 2
percent in the three, six and twelve months ended June 30, 2001, respectively. The
increases in all periods primarily reflect growth in customer access lines and higher
volumes of access usage. The increases in network access and long-distance revenues in
both periods attributable to customer access line growth and increased access usage were
partially offset by reductions in intrastate toll revenues. Network access and long
distance revenues for the three, six and twelve month periods of 2001 also reflect
reductions in revenues received from the Georgia Universal Service Fund of $4.5 million,
$9.0 million and $18.0 million, respectively. These revenue reductions were the result of
the Georgia PSC litigation settlement previously discussed.

Miscellaneous revenues decreased $0.3
million or 1 percent, $2.4 million or 4 percent and $8.1 million or 7 percent for the
three, six and twelve month periods ended June 30, 2001, respectively. The decreases in
each period primarily reflect a reduction in billing and collection revenues, partially
offset by increases in directory advertising revenues.

Growth in operating income for all three
periods of 2001 reflects the increases in wireline revenues and reductions in customer
service and other general and administrative expenses, primarily resulting from the
Company's restructuring efforts, as previously discussed. The increases in operating
income attributable to revenue growth and cost savings were partially offset by increases
in network-related expenses, data processing charges, depreciation and amortization, and
selling and marketing expenses. Network-related expenses and data processing charges
increased in all periods primarily due to the growth in customer access lines and network
usage, while depreciation and amortization expense increased in all three periods of 2001
primarily due to growth in wireline plant in service. Selling and marketing expenses
increased in all periods primarily due to additional advertising as a result of the
Company's nationwide branding campaign.

Regulatory Matters - Communications Operations

ALLTEL's wireline subsidiaries, except for
the Nebraska operations, currently follow the accounting for regulated enterprises
prescribed by Statement of Financial Accounting Standards ("SFAS") No. 71, "Accounting
for the Effects of Certain Types of Regulation". Criteria that would give rise to the
discontinuance of SFAS 71 include (1) increasing competition that restricts the wireline
subsidiaries'ability to establish prices to recover specific costs and (2) significant
changes in the manner in which rates are set by regulators from cost-based regulation to
another form of regulation. The Company periodically reviews these criteria to ensure the
continuing application of SFAS 71 is appropriate. As a result of the passage of the
Telecommunications Act of 1996 (the "96 Act") and state telecommunications reform
legislation, ALLTEL's wireline subsidiaries could begin to experience increased
competition in their local service areas. To date, competition has not had a significant
adverse effect on the operations of ALLTEL's wireline subsidiaries.

While the Company believes that the
application of SFAS 71 continues to be appropriate, it is possible that changes in
regulation, legislation or competition could result in the Company's wireline operations
no longer being subject to SFAS 71 in the near future. If ALLTEL's wireline subsidiaries
no longer qualified for the provisions of SFAS 71, the accounting impact to the Company
would be an extraordinary non-cash charge to operations of an amount that would be
material to the Company's consolidated financial statements. The non-cash charge would
include the write-off of previously established regulatory assets and liabilities and an
adjustment of accumulated depreciation to reflect the difference between recorded
depreciation and the amount of depreciation that would have been recorded had ALLTEL's
wireline subsidiaries not been subject to SFAS 71.

23

The Nebraska wireline properties, which
were acquired in 1999, have been operating under price cap regulation pursuant to waivers
granted by the Federal Communications Commission ("FCC"). On June 12, 2001, the FCC
granted ALLTEL's request to extend the waiver to July 1, 2002.

In 1996, the FCC issued regulations
implementing the local competition provisions of the 96 Act. These regulations
established pricing rules for state regulatory commissions to follow with respect to
entry by competing carriers into the local, intrastate markets of Incumbent Local
Exchange Carriers ("ILECs") and addressed interconnection, unbundled network elements and
resale rates. The FCC's authority to adopt such pricing rules, including permitting new
entrants to "pick and choose"among the terms and conditions of approved interconnection
agreements, was considered first by the U.S. Eighth Circuit Court of Appeals (the "Eighth
Circuit Court") and then by the U.S. Supreme Court (the "Supreme Court"). In January
1999, the Supreme Court ruled that the FCC had the jurisdiction to implement certain
local competition provisions of the 96 Act. The Supreme Court remanded a portion of the
decision to the Eighth Circuit Court for it to rule on certain issues that it had not
previously decided, such as whether the FCC's pricing rules are consistent with the 96
Act. Other issues were remanded to the FCC.

In November 1999, the FCC issued a decision
outlining how it would interpret the "necessary"and "impair"standards set forth in the 96
Act, and which specific network elements it would require ILECs to unbundle as a result
of its interpretation of those standards. The FCC reaffirmed that ILECs must provide
unbundled access to the following network elements: loops, including loops used to
provide high-capacity and advanced telecommunications services, network interface
devices, local circuit switching, dedicated and shared transport, signaling and
call-related databases, and operations support systems. The FCC also imposed on ILECs the
obligation to unbundle other network elements including access to sub-loops or portions
of sub-loops, fiber optic loops and transport. At this time, the FCC declined to impose
any obligations on ILECs to provide unbundled access to packet switching or to digital
subscriber line access multiplexers. The FCC has adopted national rules for the
unbundling of the high frequency portion of the local loop. The FCC also began a
rulemaking proceeding regarding the ability of carriers to use certain unbundled network
elements as a substitute for the ILEC's special access services.

In July 2000, the Eighth Circuit Court
issued a decision on the earlier remand from the Supreme Court, and rejected, as contrary
to the 96 Act, the use of hypothetical network costs which the FCC had used in developing
certain of its pricing rules. The FCC's pricing rules related to unbundled network
elements, termination and transport were also vacated. The Eighth Circuit Court upheld
its prior decision that ILECs'universal service subsidies should not be included in the
costs of providing network elements. Finally, the Eighth Circuit Court also vacated the
FCC's rules requiring that (1) ILECs recombine unbundled network elements for competitors
in any technically feasible combination; (2) all preexisting interconnection agreements
be submitted to the states for review; and (3) the burden of proof for retention of a
rural exemption be shifted to the ILEC. Pending disposition by the Supreme Court of
petitions for certiorari, the Eighth Circuit Court has stayed its earlier decision, which
vacated the FCC's use of hypothetical network costs in the development of certain pricing
rules applicable to ILECs.

In October 1999, the FCC adopted two
orders, currently on appeal, involving universal service. In the first order, the FCC
completed development of the cost model that will be used to estimate non-rural ILECs'forward-looking
costs of providing telephone service. In the second order, the FCC adopted a methodology
that uses the costs generated by the cost model to calculate the appropriate level of
support for non-rural carriers serving rural areas. Under the new funding mechanism,
high-cost support will be targeted to the highest cost wire center within the state and
support will be portable. That is, when a non-rural ILEC loses a customer to a
competitor, the competitor may receive the universal service high-cost support for
service provided to that customer. The new high-cost support mechanism should ensure that
rates are reasonably comparable on average among states, while the states will continue
to ensure that rates are reasonably comparable within their borders. On May 23, 2001, the
FCC adopted an interim universal service mechanism that will govern compensation for
rural telephone companies for the next five years.

24

Among other provisions, the FCC's interim
plan adopts a modified embedded cost mechanism while retaining an indexed cap on the
fund. The high-cost loop support fund will be permitted to grow, based on annual changes
in the Gross Domestic Product - Chained Price Index and the total number of working loops
of rural carriers. This order also adopted three paths for the disaggregation and
targeting of high-cost universal service support. At this time, ALLTEL cannot estimate
the affect of the changes to its universal service support, if any, that may occur once
the FCC adopts a permanent plan for rural carriers.

Certain states in which the Company's
wireline subsidiaries operate have adopted alternatives to rate-of-return regulation,
either through legislative or regulatory commission actions. The Company has elected
alternative regulation for certain of its wireline subsidiaries in Alabama, Arkansas,
Florida, Georgia, Kentucky, North Carolina and Texas. The Company also has an alternative
regulation application pending in Pennsylvania. The Company continues to evaluate
alternative regulation options in other states where its wireline subsidiaries operate.

In June 1998, the FCC began a rulemaking
proceeding to consider access charge reform for rate-of-return ILECs. In October 1998,
the FCC began a proceeding to consider the represcription of the authorized
rate-of-return for the interstate access services of approximately 1,300 ILECs, including
the ALLTEL subsidiaries operating under rate-of-return regulation. The Multi-Association
Group, a coalition of ILEC trade associations, filed with the FCC a comprehensive access
charge reform and deregulation plan for rate-of-return ILECs. If adopted as proposed, the
plan would provide access service pricing flexibility to rate-of-return ILECs, resolve
certain universal service issues and moot the pending FCC proceedings on access charge
reform and rate-of-return represcription. In January 2001, the FCC began a rulemaking
proceeding on that plan.

On May 22, 2001, the FCC released an order
adopting the recommendation of the Federal-State Joint Board to impose an interim freeze
of the Part 36 category relationships and jurisdictional cost allocation factors for
price cap ILECs and a freeze of all allocation factors for rate-of-return ILECs.
Rate-of-return ILECs also were given a one-time option, which has been extended to
September 1, 2001, to freeze their Part 36 category relationships in addition to their
jurisdictional allocation factors. ALLTEL has not exercised that option to date. The
freeze will be in effect for five years, starting on July 1, 2001, or until the FCC has
completed comprehensive separations reform, whichever comes first. The frozen allocation
factors and category relationships will be based on carriers'separations studies for
calendar year 2000.

On June 14, 2001 the FCC, on its own
motion, waived certain elements of its Part 69 access charge rules to allow non-price cap
LECs to include in their tariff filings an end-user charge to recover their universal
service contributions. ALLTEL ILECs tariffed the surcharge in their annual interstate
access tariff filing and began assessing the surcharge August 1, 2001.

Because certain of the regulatory matters
discussed above are under FCC or judicial review, resolution of these matters continues
to be uncertain and ALLTEL cannot predict at this time the specific effects, if any, that
the 96 Act and future competition will ultimately have on its wireline operations.

|Communcications-Emerging Businesses |  |        |    |      |     |      
|----------------------------------- |  | ------ | -- | ---- | --- | -----
|
|
|
|Revenues and sales                  |  | $114   | .8 | $91  | .8  | $225 
|Operating income (loss)             |  | $    8 | .5 | $ (6 | .4) | $  15

The Company's long-distance and network
management services and Internet access services are currently marketed to residential
and business customers in the majority of states in which ALLTEL provides communications
services. Currently, the Company's CLEC services are focused on business customers.
During 2000, ALLTEL added CLEC services to markets in Alabama, Georgia, Ohio, Missouri
and South Carolina.

25

Emerging businesses revenues and sales
increased $23.0 million or 25 percent, $49.4 million or 28 percent and $107.2 million or
33 percent for the three, six and twelve month periods ended June 30, 2001. The increases
in revenues and sales in all periods primarily reflect growth in each of the emerging
businesses'product groups, primarily driven by growth in ALLTEL's customer base for these
services. Revenues from long-distance and network management services increased $12.4
million, $26.0 million and $62.5 million in the three, six and twelve months ended June
30, 2001, respectively, while CLEC revenues increased $8.2 million, $18.1 million and
$34.0 million for the same periods of 2001, respectively. Additionally, during the three,
six and twelve month periods of 2001, Internet access revenues increased $2.4 million,
$5.3 million and $10.7 million, respectively.

Operating income from emerging businesses
increased $14.9 million or 233 percent, $29.6 million or 211 percent and $49.9 million or
197 percent for the three, six and twelve months ended June 30, 2001, respectively. The
increases in all three periods were primarily due to growth in the long-distance and
network management services, which accounted for $11.7 million, $25.8 million and $56.3
million of the overall increases in emerging businesses operating income in the three,
six and twelve month periods of 2001, respectively. The increases in operating income in
the six and twelve month periods of 2001 attributable to the long-distance and network
operations were partially offset by increased losses sustained by the CLEC operations,
reflecting the expanded rollout of these operations during the fourth quarter of 2000.

|Information Services |  |       |    |       |    |      
|-------------------- |  | ----- | -- | ----- | -- | -----
|
|
|
|Revenues and sales   |  | $337  | .6 | $318  | .7 | $665 
|Operating income     |  | $  46 | .4 | $  44 | .1 | $  90

Information services revenues and sales
increased $18.9 million or 6 percent, $36.1 million or 6 percent and $60.2 million or 5
percent for the three, six and twelve month periods ended June 30, 2001, respectively.
Revenues and sales increased in all three periods of 2001, primarily due to growth in the
financial services operations. Financial services revenues, which includes the
residential lending and international operations, increased $23.9 million, $32.1 million
and $29.2 million in the three, six and twelve month periods, respectively. The increases
in financial services revenues in all 2001 periods reflects growth in mortgage processing
revenues, reflecting increased mortgage refinancing activity due to the recent declines
in consumer borrowing rates, additional revenues earned from new businesses and increases
in software licensing revenues. During the third quarter of 2000, ALLTEL acquired
Benchmark Consulting International and Datamatic Services, Inc, two privately held
companies serving the financial services industry and formed ALLTEL Mortgage Solutions, a
joint venture with Bradford &Bingley Group, a large United Kingdom mortgage lender. These
new businesses accounted for $10.7 million, $21.5 million and $38.8 million of the
overall increases in financial services revenues for the three, six and twelve month
periods of 2001, respectively.

Growth in financial services revenues in
the twelve month period of 2001 attributable to new business was partially offset by
reduced revenues from several large customers and lost operations due to contract
terminations. Telecommunications revenues decreased $3.1 million in the three month
period and increased $6.4 million and $35.7 million in the six and twelve month periods
of 2001, respectively. The decrease in telecommunications revenues in the three month
period primarily reflects lost operations due to contract terminations. The increases in
telecommunications revenues in both the six and twelve month periods primarily reflect
growth in existing contracts and the affect of two new outsourcing agreements.

Operating income increased $2.3 million or
5 percent, $4.7 million or 5 percent and $12.0 million or 7 percent in the three, six and
twelve month periods ended June 30, 2001, respectively. The increases in operating income
in all three 2001 periods reflect the growth in revenues and sales noted above, partially
offset by losses sustained by the recently acquired operations and new joint venture
previously discussed. Additionally, financial services operating margins for the six and
twelve month periods reflect the loss of

26

higher margin operations from contract terminations, partially offset by
reduced operating costs as a result of the Company's first quarter 2000 restructuring
activities. Operating income growth for all periods of 2001 also reflects increases in
depreciation and amortization expense. Depreciation and amortization expense increased
$2.7 million, $5.2 million and $8.3 million in the three, six and twelve month periods of
2001, respectively, primarily due to the acquisition of additional data processing
equipment and an increase in amortization of internally developed software.

|Other Operations   |  |        |    |        |    |      
|------------------ |  | ------ | -- | ------ | -- | -----
|
|
|
|Revenues and sales |  | $140   | .4 | $168   | .3 | $262 
|Operating income   |  | $    6 | .2 | $    4 | .6 | $  10

Other operations consist of the Company's
product distribution and directory publishing operations. Revenues and sales decreased
$27.9 million or 17 percent, $43.8 million or 14 percent and $34.6 million or 6 percent
for the three, six and twelve months ended June 30, 2001, respectively. The decreases in
revenues and sales in all periods primarily reflect a reduction in sales of
telecommunications and data products, which decreased $36.8 million, $53.4 million and
$44.1 million in the three, six and twelve month periods of 2001, respectively. Sales to
affiliates accounted for $16.4 million, $36.2 million and $37.3 million of the overall
decreases in sales of telecommunications and data products in the three, six and twelve
month periods, respectively. The decreases in affiliate sales in all periods of 2001 were
primarily due to a reduction in purchases made by the Company's wireline subsidiaries,
reflecting timing differences in the purchases of materials and equipment related to
long-term construction projects. Sales to non-affiliates, which declined $20.3 million,
$17.2 million and $6.8 million in the three, six and twelve month periods of 2001,
respectively, primarily reflect a general reduction in capital spending by
telecommunications companies due to current economic conditions and the industry's
emphasis on controlling costs. Directory publishing revenues increased $8.9 million, $9.6
million and $9.5 million in the three, six and twelve month periods of 2001,
respectively, primarily reflecting increases in the number of directory contracts
published in each period.

Although sales of telecommunications and
data products declined in the each period, operating income increased $1.6 million or 35
percent, $1.6 million or 18 percent and $3.6 million or 18 percent in the three, six and
twelve month periods of 2001, respectively. The increases in operating income in all
periods primarily reflect improved profit margins realized by the product distribution
operations on its sales to both affiliates and non-affiliates, growth in directory
publishing revenues and a reduction in operating expenses, primarily due to the Company's
2001 restructuring efforts, as previously discussed.

|Corporate Expenses              |  |      |    |      |    |     
|------------------------------- |  | ---- | -- | ---- | -- | ----
|
|
|
|Corporate expenses              |  | $  8 | .4 | $  9 | .9 | $ 17
|Merger and integration expenses | 
|and other charges               |  | 2    | .1 | 6    | .8 | 71  
|Total corporate expenses        |  | $10  | .5 | $16  | .7 | $88 

As indicated in the table, corporate
expenses include the merger and integration expenses and other charges, as previously
discussed. Excluding the impact of the merger and integration expenses and other charges
in each period, corporate expenses would have decreased $1.5 million or 15 percent, $1.4
million or 7 percent and $6.7 million or 16 percent for the three, six and twelve month
periods ended June 30, 2001, respectively. Net of the merger and integration expenses and
other charges, the decreases in corporate expenses in all three 2001 periods primarily
reflect reductions in employee benefit costs and general and administrative expenses due
to the 2001 restructuring efforts and the Company's continued focus on controlling costs.

27

|Non-Operating Income, Net   |  |      |     |     |     |    
|--------------------------- |  | ---- | --- | --- | --- | ---
|
|
|
|Equity earnings in          |  |      |     |     |     |    
|unconsolidated partnerships |  | $17  | .1  | $39 | .1  | $28
|Minority interest in        | 
|consolidated partnerships   |  | (18  | .6) | (32 | .0) | (35
|Other income, net           |  | 9    | .2  | 11  | .6  | 19 
|Non-operating income, net   |  | $  7 | .7  | $18 | .7  | $12

As indicated in the table above,
non-operating income, net decreased $11.0 million or 59 percent, $31.7 million or 71
percent and $30.6 million or 48 percent in the three, six and twelve months ended June
30, 2001, respectively. The decreases in equity earnings in unconsolidated partnerships
in all three periods of 2001 primarily reflect the sale of certain minority investments
to Bell Atlantic and GTE completed during 2000, as previously discussed. The decreases in
minority interest expense in all three 2001 periods primarily reflect ALLTEL's
acquisitions of the remaining ownership interest in a Georgia RSA completed in January
2000 and in a Florida RSA completed in August 2000. Other income, net for all three 2000
periods include a one-time pre-tax gain of $4.7 million from the sale of a minority
interest in a wireless property. Other income, net for the twelve month period of 2001
also reflects a reduction in capitalized interest costs of $6.5 million attributable to
the sale of PCS licenses previously discussed and ALLTEL's deployment plans for PCS
service.

Interest Expense

Interest expense decreased $4.2 million or
5 percent, increased $8.4 million or 6 percent and increased $32.6 million or 11 percent
in the three, six and twelve month periods ended June 30, 2001, respectively. The
decrease in the three month period primarily reflects a reduction in both the weighted
average borrowing amount and interest rates applicable to ALLTEL's commercial paper
program. The increases in interest expense in the six and twelve month periods reflect a
net increase in the weighted average borrowing amounts outstanding under the Company's
commercial paper program. Additional borrowings under these credit facilities were used
principally to finance the Company's wireless property acquisitions with SBC, Bell
Atlantic and GTE and to fund the Company's stock repurchase plan, partially offset by the
proceeds received from the leasing of cell site towers, further discussed below. Interest
expense for the six and twelve month periods of 2001 also reflects additional interest
costs related to the $425.0 million of long-term debt assumed by ALLTEL in completing the
wireless property exchange with GTE.

Income Taxes

Income tax expense decreased $575.7 million
or 80 percent, $466.2 million or 54 percent and $216.6 million or 19 percent for the
three, six and twelve month periods ended June 30, 2001, respectively. The decreases in
income tax expense in each period primarily reflect the tax-related impact of the gains
recognized from the sale of PCS licenses, the exchange of wireless assets and the sale of
WorldCom stock, as well as the other non-recurring and unusual items previously
discussed. Excluding the impact on tax expense of the non-recurring and unusual items in
each period, income tax expense would have decreased $12.6 million or 8 percent, $26.0
million or 8 percent and $18.4 million or 3 percent in the three, six and twelve month
periods ended June 30, 2001, respectively, consistent with the Company's operating
results excluding non-recurring and unusual items.

28

Average Common Shares Outstanding

The average number of common shares
outstanding decreased one percent in each of the three and six month periods and
decreased less than 1 percent in the twelve month period ended June 30, 2001,
respectively. The decreases in all periods primarily reflect the Company's repurchase of
its common shares. The effect on the average number of common shares outstanding in the
twelve month period resulting from the stock repurchase plan was partially offset by
additional shares issued in connections with acquisitions and upon the exercise of
options granted under employee stock option plans.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

ALLTEL's total capital structure was $9.4
billion at June 30, 2001, reflecting 57 percent common and preferred equity and 43
percent debt, compared to a capital structure at December 31, 2000 of $9.8 billion
reflecting 52 percent common and preferred equity and 48 percent debt. The Company
believes it has adequate internal and external capital resources available to finance its
ongoing operating requirements including capital expenditures, business development and
the payment of dividends. ALLTEL has access to the capital markets, including the private
placement market, public issuance and the Rural Utilities Service financing programs for
wireline companies. The Company and its subsidiaries expect these sources to continue to
be available for future borrowings.

|(Millions)                                             | Six Months EndedJune 30, | Twelve Months EndedJune 30, |      |       
|------------------------------------------------------ | ------------------------ | --------------------------- | ---- | ------
|                                                       | 2001                     | 2000                        | 2001 | 2000  
|Cash flows from (used in):                             |                          |                             |      |       
|Operating activities                                   |                          | $    994                    | .7   | $  719
|Investing activities                                   |                          | 15                          | .5   | (762  
|Financing activities                                   |                          | (1,043                      | .7)  | 30    
|Increase (decrease) in cash and short-term investments |                          | $     (33                   | .5)  | $  (12

Operating Activities

Cash provided from operations continues to
be ALLTEL's primary source of liquidity. The increases in the six and twelve month
periods ended June 30, 2001 reflect growth in earnings of the Company before depreciation
and amortization, interest expense, income taxes and non-recurring and unusual charges.
Cash provided from operations in both periods of 2001 was also favorably impacted by the
timing of income tax payments associated with the gains realized from the sale of PCS
licenses, exchange of wireless assets with Bell Atlantic and GTE and the sale of WorldCom
stock. The increases in cash provided from operations resulting from earnings growth and
timing of income tax payments in both periods of 2001 were partially offset by changes in
working capital requirements, including timing differences in the receipt and payment of
trade receivables and payables.

Investing Activities

Capital expenditures for the six and twelve
month periods ended June 30, 2001 were $616.6 million and $1,373.8 million, respectively,
compared to $407.5 million and $979.4 million for the same periods in 2000. During the
past two-year period, the Company funded the majority of its capital expenditures through
internally generated funds. Capital expenditures were incurred primarily to construct
additional network facilities and to deploy digital wireless technology in select
markets. Capital expenditures were also incurred to upgrade ALLTEL's telecommunications
network in order to offer other communications services, including long-distance,
Internet and local competitive access services. Capital expenditures are forecast at
approximately $1.2 billion for 2001 and are expected to be funded primarily from
internally generated funds.

29

Cash flows used in investing activities for
the twelve month period of 2001 includes cash outlays for the acquisition of property of
$433.2 million, principally consisting of $387.6 million paid by ALLTEL in October 2000
to acquire wireless properties in Louisiana, as previously discussed. The twelve month
period of 2001 also includes cash outlays of $26.5 million incurred in connection with
the acquisition of an additional ownership interest in a wireless property in Florida and
the purchase of two privately held companies serving the financial services industry.
Cash flows used in investing activities for the six and twelve month periods ended June
30, 2000 includes cash outlays of $625.8 million and $630.3 million, respectively. These
amounts principally consist of $624.3 million paid by ALLTEL in connection with the
exchange of wireless assets with Bell Atlantic completed in April 2000, as previously
noted.

Cash flows from investing activities for
the six and twelve month periods ended June 30, 2001 include proceeds from the sale of
assets of $411.4 million and $515.8 million, respectively. These amounts primarily
consist of $410.1 million received by ALLTEL from the sale of 20 PCS licenses in February
2001, as previously discussed. Proceeds from asset sales for the twelve month period of
2001 also include $80.0 million received from the sale of the PCS operations in
Birmingham, Ala. and PCS licenses in eight other markets. Cash flows from investing
activities for the twelve month period ended June 30, 2001 also includes proceeds from
the sale of investments of $633.0 million, principally consisting of proceeds of $595.8
million received from the sale of a portion of the Company's investment in WorldCom
common stock. Cash flows used in investing activities for the six and twelve month
periods ended June 30, 2000 include proceeds from the sale of assets of $224.5 million.
These amounts consist of $192.5 million received by ALLTEL related to the exchange of
wireless assets with GTE in June 2000 and $32.0 million received from the sale of PCS
assets related to the Mobile, Ala. and Pensacola, Fla. markets.

Cash flows from investing activities for
the six and twelve month periods ended June 30, 2001 include proceeds from the leasing of
cell site towers of $260.7 million. As further discussed in Note 9 to the unaudited
interim consolidated financial statements, in December 2000, ALLTEL signed an agreement
with American Tower Corporation to lease approximately 2,200 of the Company's cell site
towers. Under terms of the agreement, ALLTEL will receive approximately $660.0 million in
cash. The transaction is structured to close in several phases, and through June 30,
2001, the first three phases of the transaction were completed involving 869 towers.

Cash flows from investing activities for
the six and twelve month periods ended June 30, 2001 also include proceeds from the
return on investments of $26.9 million and $42.3 million, respectively, compared to $89.3
million and $116.9 million for the same periods of 2000. These amounts primarily consist
of cash distributions received from ALLTEL's wireless minority investments. The decreases
in both 2001 periods primarily reflect the sale of certain minority investments to Bell
Atlantic and GTE, as previously discussed.

The proceeds received from the asset and
investment sales and the leasing of cell site towers were used primarily to reduce
borrowings under the Company's commercial paper program.

Financing Activities

Dividend payments remain a significant use
of capital resources for ALLTEL. Common and preferred dividend payments were $206.5
million and $407.7 million for the six and twelve month periods ended June 30, 2001,
respectively, compared to $201.8 million and $390.1 million for the same periods in 2000.
The increases in dividend payments in both periods primarily reflect growth in the annual
dividend rate on ALLTEL's common stock. In October 2000, the Company's Board of Directors
approved an increase in the quarterly common stock dividend rate from $.32 to $.33 per
share, raising the annual dividend rate to $1.32 per share.

The Company has a $1.0 billion line of
credit under a revolving credit agreement. During the second quarter of 2001, the
agreement was amended to provide that $50.0 million will expire in October 2003 and
$950.0 million will expire in October 2005. During 2000, the Company established a
commercial paper program with a maximum borrowing capacity of $1.25 billion. Under this

30

program, commercial paper borrowings are supported by the Company's
revolving credit agreement and are deducted from the amount available for borrowing under
the revolving credit agreement. Accordingly, the total amount outstanding under the
commercial paper program and the indebtedness incurred under the revolving credit
agreement may not exceed $1.25 billion. ALLTEL classifies commercial paper borrowings up
to $1.0 billion as long-term debt because the revolving credit agreement supports these
borrowings.

Commercial paper borrowings outstanding at
June 30, 2001 were $378.5 million, compared to $835.5 million and $632.0 million that
were outstanding at December 31, 2000 and June 30, 2000, respectively. Commercial paper
borrowings outstanding at June 30, 2001 had a weighted average interest rate of 4.0
percent. Additional borrowings under the commercial paper program were incurred to
finance the wireless property acquisitions, to fund stock repurchases and to retire
amounts outstanding under the revolving credit agreement. As a result, no borrowings were
outstanding under the revolving credit agreement at either June 30, 2001, December 31,
2000 or June 30, 2000, compared to $341.1 million and $405.7 million that were
outstanding at December 31, 1999 and June 30, 1999, respectively. The commercial paper
borrowings outstanding at June 30, 2000 represent all of the long-term debt issued in the
six and twelve month periods of 2000.

Retirements of long-term debt were $598.0
million and $423.7 million for the six and twelve months ended June 30, 2001,
respectively, compared to $376.7 million and $486.2 million for the same periods of 2000.
The net reductions from December 31, 2000 and June 30, 2000 in commercial paper
borrowings of $457.0 million and $253.5 million, respectively, represent the majority of
the long-term debt retired in the six and twelve month periods of 2001. Retirements of
long-term debt for both periods of 2001 also include the early retirement of $73.5
million of high-cost debt completed in the second quarter of 2001, as previously
discussed. The net reductions from December 31, 1999 and June 30, 1999 in revolving
credit borrowings of $341.1 million and $405.7 million, respectively, represent the
majority of the long-term debt retired in the six and twelve month periods ended June 30,
2000, respectively. Scheduled long-term debt retirements, net of commercial paper and
revolving credit agreement activity and the prepayment of long-term debt, amounted to
$67.5 million and $96.7 million for the six and twelve month periods of 2001,
respectively, compared to $35.6 million and $80.5 million for the same periods of 2000.

Distributions to minority investors were
$63.5 million and $101.4 million for the six and twelve months ended June 30, 2001,
respectively, compared to $39.0 million and $117.8 million for the same periods in 2000.
Included in distributions for the six and twelve month periods of 2001 are additional
payments of $22.5 million representing the minority investors'share of the proceeds
received from the leasing of cell site towers previously discussed. Distributions
decreased in the twelve month period of 2001 as the additional payments related to the
leasing transaction were more than offset by the acquisition of the remaining minority
interest in wireless properties in Florida and Georgia and the disposition of certain
non-wholly-owned subsidiaries in connection with the property exchanges with Bell
Atlantic and GTE.

On July 20, 2000, ALLTEL's Board of
Directors adopted a stock repurchase plan that allows the Company to repurchase up to 7.5
million shares of its outstanding common stock. During the six and twelve months ended
June 30, 2001, ALLTEL repurchased 1.4 million and 4.3 million of its common shares at a
total cost of $78.1 million and $242.4 million, respectively. The Company entered into
three forward purchase contracts with a financial institution in conjunction with the
stock repurchase program. Under terms of the contracts, the Company agreed to purchase
ALLTEL common shares from the financial institution at a specified price (the "forward
price"). The forward price was equal to the financial institution's cost to acquire the
shares plus a premium. Premiums were based on the net carrying cost of the shares to the
financial institution and accrued over the period that the contract was outstanding.
During the second quarter, the Company settled these contracts by acquiring nearly 2.0
million of its common share at a cost of $114.2 million. Through June 30, 2001, ALLTEL
has repurchased 6.3 million of the 7.5 million shares the Company was authorized to
repurchase under the stock repurchase plan.

31

Legal Proceedings

The Company is party to various legal
proceedings arising from the ordinary course of business. Although the ultimate
resolution of these various proceedings cannot be determined at this time, management of
the Company does not believe that such proceedings, individually or in the aggregate,
will have a material adverse effect on the future results of operations or financial
condition of the Company. In addition, management is currently not aware of any
environmental matters that in the aggregate, would have a material adverse effect on the
financial condition or results of operations of the Company.

Recently Issued Accounting Pronouncements

In July 2001, the Financial Accounting
Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No.
141 "Business Combinations"and SFAS No. 142 "Goodwill and Other Intangible Assets". SFAS
No. 141 requires that all business combinations initiated after June 30, 2001 be
accounted for using the purchase method of accounting. Accordingly, the use of the
pooling-of-interests method of accounting for future business combinations has been
eliminated. In addition, SFAS No. 141 requires that at the date of acquisition,
identifiable intangible assets should be recognized separate and apart from goodwill if
the intangible assets meet certain criteria. SFAS No. 142 will change the accounting for
goodwill and other indefinite lived intangible assets from an amortization method to an
impairment-only approach. Accordingly, amortization of goodwill, including goodwill
recorded in past business combinations, will cease January 1, 2002 for calendar year
companies such as ALLTEL. Under SFAS No. 142, goodwill will be assigned to a company's
reporting units and an initial impairment test by reporting unit must be completed by
June 30, 2002. Following the year of adoption, goodwill will be tested for impairment
annually using a consistent measurement date. Amortization of intangible assets with
indefinite lives other than goodwill will also cease, although such intangible assets
will be required to be tested for impairment at least annually, in a manner similar to
goodwill. Also, intangible assets with finite lives are required to be amortized over
their estimated useful lives. Accordingly, the current 40-year maximum estimated life
specified in APB Opinion No. 17 "Intangible Assets"will no longer apply.

At this time, the Company has not
determined its applicable reporting units or assigned goodwill to them. Additionally, the
Company has not yet completed a review of its identifiable intangible assets to determine
whether any of those assets would meet the indefinite life criteria outlined in SFAS No.
142, nor has the Company determined whether an impairment charge will be recognized upon
adoption of these standards. Accordingly, the Company cannot determine at this time the
full impact of adopting these standards will have on the Company's consolidated
financial statements other than the affects of no longer amortizing goodwill, which will
result in pretax annual expense savings of approximately $107.0 million.

In August, the FASB issued SFAS No. 143 "Accounting
for Asset Retirement Obligations". The Statement will apply to fiscal years beginning
after June 15, 2002, and will require that obligations related to asset retirements
should be recognized when incurred, recorded at fair value and classified as a liability
in the balance sheet. The Company has not determined whether it will be required to
change its method of accounting for asset retirement obligations or whether ALLTEL will
be required to record a material asset retirement obligation. Accordingly, at this time, the Company
cannot determine the impact, if any, that this standard will have on ALLTEL's
consolidated financial statements.

32

ALLTEL CORPORATION FORM 10-Q PART I - FINANCIAL INFORMATION

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company's market risks at June 30, 2001
are similar to the market risks discussed in the Company's Annual Report on Form 10-K, as
amended, for the year ended December 31, 2000. The Company is exposed to market risk from
changes in marketable equity security prices and from changes in interest rates
applicable to its commercial paper borrowings and other long-term debt obligations. The
Company has estimated its market risk using sensitivity analysis. Market risk has been
defined as the potential change in fair value of a financial instrument due to a
hypothetical adverse change in market prices or interest rates. Fair value for
investments was determined using quoted market prices, if available, or the carrying
amount of the investment if no quoted market price was available. Fair value of long-term
debt obligations was determined based on a discounted cash flow analysis, using the
overall weighted rates and maturities of these obligations compared to terms and rates
currently available in the long-term markets.

At June 30, 2001, investments of the
Company are recorded at estimated fair value of $259.8 million compared to $322.4 million
at December 31, 2000. The decrease in fair value primarily reflects the transfer to Bell
South of certain minority investments in unconsolidated wireless properties resulting
from the dissolution of a partnership completed in the first quarter of 2001, as
previously discussed. Marketable equity securities amounted to $1.0 million and $12.2
million and included unrealized holding gains of $0.9 million and $9.7 million at June
30, 2001 and December 31, 2000, respectively. A hypothetical 10 percent decrease in
quoted market prices would result in a $0.1 million decrease in the fair value of these
securities at June 30, 2001.

The Company has no material future earnings
or cash flow exposures from changes in interest rates on its long-term debt obligations,
as substantially all of the Company's long-term debt obligations are fixed rate
obligations. A hypothetical 10 percent adverse change in interest rates applicable to the
Company's variable rate debt obligations would not be material to the Company's results
of operations. In addition, changes in interest rates can result in fluctuations in the
fair value of the Company's long-term debt obligations. There have been no material
changes in the weighted average maturity or weighted average interest rates applicable to
the Company's outstanding long-term debt since December 31, 2000. At June 30, 2001, the
fair value of the Company's long-term debt was estimated to be $4,599.6 million compared
to a carrying value of $4,029.7 million. A hypothetical increase of 72 basis points (10
percent of the Company's overall weighted average borrowing rate) would result in an
approximate $138.1 million decrease in the fair value of the Company's long-term debt at
June 30, 2001. The Company had not entered into any derivative financial instruments to
manage its interest rate risks as of June 30, 2001.

The Company is not currently subject to
material foreign currency exchange rate risk from the effects that exchange rate
movements of foreign currency would have on the Company's future costs or on future cash
flows it would receive from its foreign subsidiaries. Although the Company conducts
business in foreign countries, the international operations are not material to the
Company's operations, financial condition and liquidity. Additionally, the majority of
the Company's international sales transactions are denominated in U.S. dollars, which
mitigates the effect of foreign currency fluctuations. To date, the Company has not
entered into any significant foreign currency forward exchange contracts or other
derivative financial instruments to hedge the effects of adverse fluctuations in foreign
currency exchange rates. Foreign currency translation gains and losses were not material
to the Company's results of operations for the three, six and twelve months ended June
30, 2001.

33

ALLTEL CORPORATION FORM 10-Q Part II - OTHER INFORMATION

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

| | The
Company's 2001 Annual Meeting of Stockholders was held on April 26, 2001. At the meeting,
the following items were submitted to a vote of stockholders:
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------

| | (1)
The election of four directors, constituting the class of the Board of Directors, who
will serve a three-year term expiring at the 2004 Annual Meeting of Stockholders:
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                             |  |            
|---------------------------- |  | -----------
|Nominee                      |  | Votes For  
|Scott T. Ford                |  | 268,529,655
|Lawrence L. Gellerstedt, III |  | 269,917,711
|Emon A. Mahony, Jr           |  | 270,042,328
|Ronald Townsend              |  | 269,900,558

| | (2)
The ALLTEL Corporation 2001 Equity Incentive Plan was adopted with 186,313,554 votes for,
82,260,158 votes against and 2,746,784 abstentions.
| | -------------------------------------------------------------------------------------------------------------------------------------------------

Item 6. Exhibits and Reports on Form 8-K

(a)      See the exhibits specified on the Index of
Exhibits located at Page 36.

(b)      Reports on Form 8-K:

| | No
reports on Form 8-K have been filed during the quarter for which this report is filed.
| | -----------------------------------------------------------------------------------------

34

SIGNATURE

Pursuant to the requirements 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.

ALLTEL CORPORATION (Registrant)

/s/ Jeffery R. Gardner Jeffery R. Gardner Senior
Vice President-Chief Financial Officer (Principal Financial Officer) August 13, 2001

35

ALLTEL CORPORATION FORM 10-Q INDEX OF EXHIBITS

|Form 10-Q      Exhibit No. | Description | SequentialPage No.                                   
|-------------------------- | ----------- | -----------------------------------------------------
|                          
|(10                        | )(k)(12)    | Amendment No. 17 to ALLTEL Corporation               
|                           |             | Pension (January 1, 1994 Restatement)                
|                          
|(18                        | )           | Preferability letter of Arthur Andersen LLP regarding
|                           |             | change in accounting principle                       

36

June 29, 2001

ALLTEL Corporation

Re: Form 10-Q Report for the quarter ended June
30, 2001.

Gentlemen/Ladies:

This letter is written to meet the requirements of Regulation S-K calling
for a letter from a registrant's independent accountants whenever there has been a change
in accounting principle or practice.

We have been informed that, as of January 1, 2001, the Company changed
its method of computing and amortizing unrecognized actuarial gains and losses for
purposes of calculating annual pension cost for a subsidiary's pension plan. According to
the management of the Company, this change was made to conform with the accounting
principles followed by the ALLTEL Plan. The change included modifying the method by which
the market-related value of plan assets is determined from a calculated five-year average
to actual fair value. In addition, this change resulted in any unrecognized actuarial
gains and losses that exceed 17.5% of the greater of a) the projected benefit obligation
or b) the market-related value of plan assets being amortized over 5 years using a
straight-line basis. Unrecognized actuarial gains and losses below the 17.5% corridor
will be amortized over the average remaining service life of active plan participants.
Under the previous method, only unrecognized actuarial gains and losses in excess of 10%
of the greater of the projected benefit obligation or the market-related value of plan
assets were amortized over the average remaining service life of active plan
participants. Company management believes the changes in computing the market-related
value of plan assets and accelerating the amortization periods are preferable as they
will result in more timely recognition of actuarial gains and losses in computing annual
pension cost related to the subsidiary's pension plan and will achieve consistency of the
application of accounting principles with the ALLTEL Plan.

A complete coordinated set of financial and reporting standards for
determining the preferability of accounting principles among acceptable alternative
principles has not been established by the accounting profession. Thus, we cannot make an
objective determination of whether the change in accounting described in the preceding
paragraph is to a preferable method. However, we have reviewed the pertinent factors,
including those related to financial reporting, in this particular case on a subjective
basis, and our opinion stated below is based on our determination made in this manner.

We are of the opinion that the Company's change in method of accounting
is to an acceptable alternative method of accounting, which, based upon the reasons
stated for the change and our discussions with you, is also preferable under the
circumstances in this particular case. In arriving at this opinion, we have relied on the
business judgment and business planning of your management.

We have not audited the application of this change to the financial
statements of any period subsequent to December 31, 2000. Further, we have not examined
and do not express any opinion with respect to the consolidated financial statements for
the six months ended June 30, 2001.

Very truly yours,

Arthur Andersen LLP

AMENDMENT NO. 18 TO ALLTEL CORPORATION PENSION PLAN (January 1, 1994
Restatement)

| | WHEREAS,
ALLTEL Corporation (the "Company") maintains the ALLTEL Corporation Pension Plan, as
amended and restated effective January1, 1994 and subsequently further amended (the
"Plan"); and
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | WHEREAS,
the Company desires further to amend the Plan; and
| | -----------------------------------------------------------

| | NOW
THEREFORE, BE IT RESOLVED, that the Company hereby amends subsection(a) of Section17.04
of the Plan, effective as of January29, 2001, by adding at the end thereof the following:
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | A
Participant who is not otherwise vested in his Accrued Pension shall be vested in his
Accrued Pension (including the increase in his Accrued Pension as provided under this
Section17.04) (without regard to his completion of any number of Vesting Years of
Service). A Participant who is not otherwise eligible to commence payment of his Accrued
Pension shall be eligible to commence payment of his Accrued Pension (including the
increase in his Accrued Pension as provided under this Section17.04), beginning as of
the first day of any month after April, 2001 (without regard to his age or his completion
of any number of Vesting Years of Service).
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | IN
WITNESS WHEREOF, the Company, by its duly authorized officer, has caused this Amendment
to be executed on this 23rd day of April, 2001.
| | ------------------------------------------------------------------------------------------------------------------------------------------

ALLTEL CORPORATION

By: /s/ Scott T. Ford

Title: