<PAGE>

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

                                   FORM 10-K

                 FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO
               SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934
(Mark One)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For The Fiscal Year Ended September 30, 2000.

     OR

[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934.

                        Commission File Number: 027455

                               AirGate PCS, Inc.
                    ---------------------------------------
                         (Exact name of registrant as
                           specified in its charter)

<TABLE>
     <S>                                                              <C>
                         Delaware                                                   58-2422929
   ----------------------------------------------------             ------------------------------------------
     (State or other jurisdiction of incorporation or                 (I.R.S. Employer Identification Number)
                      organization)

     Harris Tower, 233 Peachtree St. NE, Suite 1700,
                  Atlanta, Georgia                                                   30303
   ----------------------------------------------------             ------------------------------------------
         (Address of principal executive offices)                                   (Zip code)

</TABLE>

Registrant's telephone number, including area code    (404) 525-7272
                                                   -----------------------------

       Securities registered pursuant to Section 12(b) of the Act: None.

          Securities registered pursuant to Section 12(g) of the Act:

                    Common Stock, par value $.01 per share

                              Title of Each Class

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 and 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 ___
                                       ---

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

The aggregate market value of the voting stock held by non-affiliates of the
registrant (based upon the closing sale price on the Nasdaq Stock Market on
December 11, 2000) is approximately $383,936,000. (For purposes of determination
of the foregoing amount, only our directors and executive officers have been
deemed affiliates). As of December 11, 2000, there were 12,846,526 shares of
common stock, $0.01 par value per share, outstanding.
<PAGE>

                      DOCUMENTS INCORPORATED BY REFERENCE

1.  Portions of the AirGate PCS, Inc. Notice of Annual Meeting and Proxy
    Statement, dated December 20, 2000 (Part III of Form 10-K).
<PAGE>

                               AIRGATE PCS, INC.
                          ANNUAL REPORT ON FORM 10-K
                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
ITEM NO.                                                                                                    PAGE NO.
--------                                                                                                    --------
<S>                                                                                                         <C>
PART I..................................................................................................           3

   ITEM 1.   Business...................................................................................           3
   ITEM 2.   Properties.................................................................................          19
   ITEM 3.   Legal proceedings..........................................................................          19
   ITEM 4.   Submission of Matters to a Vote of Security Holders........................................          19

PART II.................................................................................................          19

   ITEM 5.   Market For Registrant's Common Equity And Related Stockholder Matters......................          19
   ITEM 6.   Selected Financial Data....................................................................          20
   ITEM 7.   Management's Discussion And Analysis Of Financial Condition And Results Of Operations......          22
   ITEM 7A.  Quantitative And Qualitative Disclosures About Market Risk.................................          27
   ITEM 8.   Financial Statements.......................................................................          27
   ITEM 9.   Changes In And Disagreements With Accountants On Accounting And Financial Disclosure.......          27

PART III................................................................................................          28

   ITEM 10.  Directors And Executive Officers Of The Registrant.........................................          28
   ITEM 11.  Executive Compensation.....................................................................          28
   ITEM 12.  Security Ownership Of Certain Beneficial Owners And Management.............................          28
   ITEM 13.  Certain Relationships And Related Transactions.............................................          28

PART IV.................................................................................................          28

   ITEM 14.  Exhibits, Financial Statements, Schedules, And Reports On Form 8-K.........................          28
</TABLE>
<PAGE>

                                    PART I

ITEM 1.   Business

Special Caution Regarding Forward-Looking Statements

     We believe that it is important to communicate our future expectations to
our stockholders and to the public. This report, therefore, contains forward-
looking statements within the meaning of Section 27A of the Securities Act of
1933 and 21E of the Securities and Exchange Act of 1934, including the
statements about our plans, objectives, expectations and prospects under the
headings "Item 1. Business" and "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations." In addition, the "Letter to
Stockholders" in our 2000 Annual Report contains forward-looking statements. You
can identify these statements by forward-looking words such as "anticipate,"
"believe," "estimate," "expect," intend," "plan," "seek," and similar
expressions. Although we believe that the plans, objectives, expectations and
prospects reflected in or suggested by our forward-looking statements are
reasonable, those statements involve uncertainties and risks, and we can give no
assurance that our plans, objectives, expectations and prospects will be
achieved.

     Important factors that could cause our actual results to differ materially
from the results contemplated by the forward-looking statements are contained in
the "Investment Considerations" section in this Item 1, in "Item 7 Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
elsewhere in this report. All written or oral forward-looking statements
attributable to us are expressly qualified in their entirety by these cautionary
statements.

                               BUSINESS OVERVIEW

     We market and provide digital personal communication services, or PCS.  We
are a network affiliate of Sprint PCS, the personal communications services
group of Sprint Corporation. Sprint PCS, directly and indirectly

                                       3
<PAGE>

through affiliates such as us, provides wireless services in more than 4,000
cities and communities across the country. Through our management agreement with
Sprint PCS, we have the right to provide Sprint PCS products and services under
the Sprint and Sprint PCS brand names in a territory that covers almost the
entire state of South Carolina, parts of North Carolina and the eastern Georgia
cities of Augusta and Savannah. Our Sprint PCS territory encompasses 21
contiguous markets and approximately 7.1 million residents. Our Sprint PCS
territory is one of the fastest growing regions in the United States. Based upon
population of our Sprint PCS territory, we are one of the largest Sprint PCS
affiliates in the United States.

     In January 2000, we launched Sprint PCS service in the Greenville-
Spartanburg and Anderson, South Carolina markets and the Asheville and Hickory,
North Carolina markets. Since then, we have commenced service in all 17 of our
remaining Sprint PCS markets (for more information on our existing markets and
launch dates see "Markets"). Our Sprint PCS network currently covers
approximately 5.4 million, or 76%, of the 7.1 million residents in our Sprint
PCS territory. The number of residents covered by our Sprint PCS network does
not represent an actual number of our subscribers that we expect to have in our
territory, but instead represents the maximum number of potential subscribers in
that territory.

     As of September 30, 2000, we were providing PCS service to 56,689
subscribers within our Sprint PCS territory.

Our History

     AirGate PCS, Inc. (formerly AirGate Holdings, Inc.) and its subsidiaries
and predecessors were formed for the purpose of becoming a leading provider of
wireless PCS. In July 1998, our predecessor entered into a series of agreements
with Sprint and Sprint PCS under which it agreed to construct and manage a PCS
network using Sprint PCS' licensed spectrum and supporting Sprint PCS' services
within a specified territory in the southeastern United States.

     Our predecessors formed our corporation, AirGate PCS, Inc., a Delaware
corporation, in August 1998 to assume its responsibilities under the Sprint PCS
agreements. In the course of our operations, we have formed two wholly-owned
subsidiaries, AGW Leasing Co., Inc. and AirGate Network Services, LLC.

Relationship with Sprint PCS

     Sprint PCS is a wholly-owned subsidiary of Sprint, a diversified
telecommunications service provider, that operates a 100% digital PCS wireless
network in the United States and holds the licenses to provide PCS nationwide
using a single frequency and a single technology. Sprint PCS directly operates
its PCS network in major metropolitan markets throughout the United States and
has entered into independent agreements with various affiliates, such as us,
under which the affiliate has agreed to construct and manage PCS networks in
smaller metropolitan areas and along major highways.

Markets

     We are one of the largest affiliates of Sprint PCS based on the resident
population of our Sprint PCS territory. Our Sprint PCS markets consist of
almost the entire state of South Carolina including Charleston, Columbia and
Greenville-Spartanburg; portions of North Carolina including Asheville,
Wilmington and Hickory; and the eastern Georgia cities of Augusta and Savannah.
We believe that connecting Sprint PCS' existing markets with our markets is an
important part of Sprint PCS' on-going strategy to provide seamless, nationwide
PCS service to its subscribers.

                                       4
<PAGE>

     The following table sets forth the location, population and date on which
we began providing commercial Sprint PCS service in each of the markets that
comprise our Sprint PCS territory:

<TABLE>
<CAPTION>
           Territory (BTAs)*               State            Population(1)             Market Launch Date
     ------------------------------   --------------        ---------------          ------------------------
     <S>                              <C>                   <C>                       <C>
     Greenville-Spartanburg           South Carolina                874,000              January 2000
     Savannah                         Georgia                       725,000                  May 2000
     Charleston                       South Carolina                682,000                April 2000
     Columbia                         South Carolina                656,000                 June 2000
     Asheville-Hendersonville         North Carolina                589,000              January 2000
     Augusta                          Georgia                       579,000                 June 2000
     Anderson                         South Carolina                362,000              January 2000
     Hickory-Lenoir-Morganton         North Carolina                331,000              January 2000
     Wilmington                       North Carolina                328,000             February 2000
     Florence                         South Carolina                259,000                 June 2000
     Greenville-Washington            North Carolina                244,000                 July 2000
     Goldsboro-Kinston                North Carolina                238,000                March 2000
     Rocky Mount-Wilson               North Carolina                218,000                March 2000
     Myrtle Beach                     South Carolina                186,000             February 2000
     New Bern                         North Carolina                173,000                 June 2000
     Sumter                           South Carolina                159,000                 July 2000
     Jacksonville                     North Carolina                141,000                  May 2000
     Orangeburg                       South Carolina                119,000                 June 2000
     The Outer Banks(2)               North Carolina                 92,000                 July 2000
     Roanoke Rapids                   North Carolina                 77,000                  May 2000
     Greenwood                        South Carolina                 74,000               August 2000
                                                                  ---------               -----------
            Total                                                 7,106,000
                                                                  =========
</TABLE>

     ________________________
/*/ Basic Trading Areas
(1)  Based on 2000 U.S. Census Department data.
(2)  The Outer Banks territory covered by our Sprint PCS agreement does not
     comprise a complete BTA.

     Our Sprint PCS agreements require us to provide PCS coverage to certain
percentages of the residents in each of the markets granted to us by those
agreements. We are fully compliant with these build-out requirements.

     We believe our Sprint PCS territory, with 7.1 million residents, has
attractive demographic characteristics. Our Sprint PCS territory has many
vacation destinations, covers substantial highway mileage and includes a large
student population, with at least 27 colleges and universities.

Products and Services

     We offer Sprint PCS' products and services throughout our Sprint PCS
territory. These products and services are designed to mirror the services
offered by Sprint PCS and to provide seamless integration with the Sprint PCS
nationwide network.

     Our primary service is wireless mobility coverage. As a Sprint PCS
affiliate, our existing PCS network is part of the largest 100% digital PCS
network in the United States. Sprint PCS customers in our territory may use
Sprint PCS services throughout our contiguous markets and seamlessly throughout
the Sprint PCS network.

     We support and market the Sprint Wireless Web throughout our territory. The
Sprint Wireless Web allows subscribers with data-capable handsets to connect
their portable computers or personal digital assistants to the internet.

     We offer Code Division Multiple Access (CDMA) handsets weighing
approximately five to seven ounces and offering up to three to five days of
standby time and approximately two to four hours of talk time. We also offer

                                       5
<PAGE>

dual-band/dual-mode handsets that allow customers to make and receive calls on
both PCS and cellular frequency bands and both digital or analog technology. All
handsets are equipped with preprogrammed features, and are sold under the Sprint
and Sprint PCS brand names.

     We provide roaming services to Sprint PCS subscribers that use a portion of
our Sprint PCS network, and to non-Sprint subscribers when they use a portion of
our Sprint PCS network pursuant to roaming agreements between Sprint PCS and
other wireless service providers. Sprint PCS and other wireless service
providers supply similar services to our subscribers when our subscribers use a
portion of their networks.

Marketing Strategy

     Our marketing and sales strategy uses the advertising and marketing
programs that have been developed by Sprint PCS. We enhance Sprint PCS'
marketing with strategies we have tailored to our specific markets.

     Sprint PCS uses national as well as regional television, radio, print,
outdoor and other advertising campaigns to promote its products. We benefit from
this national advertising in our territory at no additional cost to us. Sprint
PCS also runs numerous promotional campaigns that provide customers with
benefits such as additional features at the same rate. We are able to purchase
promotional materials related to these programs from Sprint PCS at their cost.

     We supplement Sprint PCS' marketing strategies with local radio,
television, outdoors and newspaper advertising that promote the use of our
products and services in each of our markets. We have established a large local
sales force to execute our marketing strategy through 20 company-owned Sprint
PCS stores, and we employ a direct sales force targeted to business sales. We
feature the nationally recognized Sprint and Sprint PCS brand names in our
marketing efforts. In addition, Sprint PCS' existing agreements with national
retailers provide us with access to over 300 retail locations in our territory.

     Finally, we offer Sprint PCS' pricing strategies to our customers. Sprint
PCS' consumer pricing plans are typically structured with competitive monthly
recurring charges, large local calling areas, service features such as
voicemail, enhanced caller ID, call waiting and three-way calling, and
competitive per-minute rates.

Sales and Distribution

     Sprint has an arrangement with RadioShack under which Sprint PCS installs a
"store within a store." Under the arrangement, Sprint PCS is the only brand of
PCS that is sold through RadioShack stores. RadioShack has approximately 113
stores in our Sprint PCS territory. In addition to RadioShack, Sprint PCS has
agreements with other national retailers, which provide an additional 125 retail
stores in our Sprint PCS territory and local independent agents, which provide
an additional 62 retail stores in our Sprint PCS territory.

     We also own and operate 19 Sprint PCS stores, which are located in major
metropolitan markets within our Sprint PCS territory. Our stores provide us with
a strong local presence and a high degree of visibility. Following the Sprint
PCS model, these stores are designed to facilitate retail sales, bill collection
and customer service.

Seasonality

     Our business is subject to seasonality because the wireless industry is
heavily dependent on fourth calendar quarter results. Among other things, the
industry relies on significantly higher customer additions and handset sales in
the fourth calendar quarter as compared to the other three calendar quarters. A
number of factors contribute to this trend, including: the increasing use of
retail distribution, which is heavily dependent upon the year-end holiday
shopping season; the timing of new product and service announcements and
introductions; competitive pricing pressures; and aggressive marketing and
promotions. The increased level of activity requires a greater use of our
available financial resources during this period.

                                       6
<PAGE>

Suppliers and Equipment Vendors

     We do not manufacture any of the handsets or network equipment we use in
our operations. We purchase our network equipment, handsets and accessories
pursuant to various Sprint PCS' vendor arrangements that provide us with volume
discounts. These discounts significantly reduce the overall capital required to
build our network and the costs of handsets and accessories to us.

     Under such arrangements, we currently purchase our network equipment from
Lucent Technologies, our handsets directly from Sprint PCS and our accessories
from certain other third party vendors.

                            OUR NETWORK OPERATIONS

General

     The effective operation of our portion of the Sprint PCS network requires:

     .  public switched and long distance interconnection;

     .  the implementation of roaming arrangements; and

     .  the development of network monitoring systems.


     We monitor our portion of the Sprint PCS network during normal business
hours.  We currently use Sprint PCS's Network Operations Control Center for
continuous network monitoring.

     Sprint PCS developed the initial plan for the build out of our Sprint PCS
network. We have further enhanced this plan to provide better coverage for our
Sprint PCS territory. Pursuant to our network operations strategy, we have
provided PCS to the largest communities in our markets and have covered
interstates and primary roads connecting these communities to each other and to
the adjacent major markets owned and operated by Sprint PCS.

     Our network currently consists of three switches at two switch centers and
approximately 585 operating cell sites. A switching center serves several
purposes, including routing calls, managing call handoff, managing access to the
public telephone network and providing access to voice mail. We are currently
installing a fourth switch in anticipation of growth in call volume in our
Sprint PCS territory. Ninety-nine percent of our operating cell sites are co-
located. Co-location describes the strategy of leasing available space on a
tower or cell site owned by another company rather than building and owning the
tower or cell site directly.

     Our network connects to the public telephone network through local exchange
carriers, which facilitate the origination and termination of traffic between
our network and both local exchange and long distance carriers. Through our
Sprint PCS agreements, we have the benefit of Sprint PCS-negotiated
interconnection agreements with local exchange carriers.

     We use Sprint and other third party providers for long distance services
and for back haul services. Sprint provides us with preferred rates for long
distance services. Back haul services are the telecommunications services which
other carriers provide to carry our voice traffic from our cell sites to our
switching facilities. When we use Sprint, we receive the same preferred rates
made available to Sprint PCS.


                                  TECHNOLOGY

General

                                       7
<PAGE>

     In 1993, the Federal Communications Commission (FCC) allocated the 1900 MHz
frequency block of the radio spectrum for wireless personal communications
services, (PCS).  Wireless PCS operates at a higher frequency and employs more
advanced digital technology than traditional analog cellular telephone service.
The enhanced capacity of digital systems, along with enhancements in digital
protocols, allows digital-based wireless technologies, whether using wireless
PCS or cellular frequencies, to offer new and enhanced services, including
greater call privacy and more robust data transmission, such as facsimile,
electronic mail and connecting notebook computers with computer/data networks.

       Presently, wireless PCS systems operate under one of three principal air
interface protocols, code division multiple access (CDMA), time division
multiple access (TDMA) or global system for mobile communications (GSM).
Wireless PCS operators in the United States now have dual-mode or tri-mode
handsets available so that their customers can operate on different networks
that employ different protocols.

CDMA Technology

     CDMA technology is fundamental to accomplishing our business objective of
providing high volume, high quality airtime at a low cost. We believe that CDMA
provides important system performance benefits. CDMA systems offer more powerful
error correction, less susceptibility to fading and reduced interference than
analog systems. Using enhanced voice coding techniques, CDMA systems achieve
voice quality that is comparable to that of the typical wireline telephone. This
CDMA vocoder technology also employs adaptive equalization which filters out
annoying background noise more effectively than existing wireline, analog
cellular or other digital PCS phones. CDMA technology allows a greater number of
calls within one allocated frequency and reuses the entire frequency spectrum in
each cell. CDMA technology also combines a constantly changing coding scheme
with a low power signal to enhance security and privacy. Vendors are currently
developing additional encryption capabilities which will further enhance overall
network security. CDMA technology is designed to provide flexible or "soft"
capacity that permits a system operator to temporarily increase the number of
telephone calls that can be handled within a cell. As a subscriber travels from
one cell site to another cell site, the call must be "handed off" to the second
cell site. CDMA systems transfer calls throughout the network using a technique
referred to as a soft hand-off, which connects a mobile customer's call with a
new cell site while maintaining a connection with the cell site currently in
use.

Research and Development

     We currently do not carry on our own research and development. Instead we
benefit from Sprint PCS' extensive research and development effort, which
provides us with access to new technological products and enhanced service
features without significant research and development expenditures of our own.
We have been provided prompt access to any developments produced by Sprint PCS
for use in our network.

Intellectual Property

     Other than our corporate name, we do not own any intellectual property that
is material to our business. "Sprint," the Sprint diamond design logo, "Sprint
PCS," "Sprint Personal Communication Services," "The Clear Alternative to
Cellular" and "Experience the Clear Alternative to Cellular Today" are service
marks registered with the United States Patent and Trademark Office and owned by
Sprint. Pursuant to our Sprint PCS agreements, we have the right to use,
royalty-free, the Sprint and Sprint PCS brand names and the Sprint diamond
design logo and certain other service marks of Sprint in connection with
marketing, offering and providing licensed services to end-users and resellers,
solely within our Sprint PCS territory.

     Except in certain instances, Sprint PCS has agreed not to grant to any
other person a right or license to provide or resell, or act as agent for any
person offering, licensed services under the licensed marks in our Sprint PCS
territory except as to Sprint PCS' marketing to national accounts and the
limited right of resellers of Sprint PCS to inform their customers of handset
operation on the Sprint PCS network. In all other instances, Sprint PCS has
reserved for itself and its affiliates the right to use the licensed marks in
providing its services, subject to its exclusivity obligations described above,
whether within or without our Sprint PCS territory.

                                       8
<PAGE>

     Our Sprint PCS agreements contain numerous restrictions with respect to the
use and modification of any of the licensed marks.

Competition

     Competition in the wireless communications services industry is intense. We
operate in highly competitive markets. In our Sprint PCS territory, we compete
with both cellular and PCS providers. The cellular providers include Alltel and
Verizon. The PCS providers include Cingular Wireless and Triton PCS. These
wireless service providers offer services that are generally comparable to our
PCS service.

     Our ability to compete effectively with these other providers depends on a
number of factors, including the continued success of CDMA technology in
providing better call quality and clarity as compared to analog and digital
cellular systems, our competitive pricing with various options suiting
individual customer's calling needs, and the continued expansion and improvement
of the Sprint PCS nationwide network, customer care system, and handset options.

     Most of our competitors are cellular providers and joint ventures of
wireless communications service providers, many of which have financial
resources and customer bases greater than ours. Many of our competitors have
access to more licensed spectrum than the 10 MHz licensed to Sprint PCS in our
Sprint PCS territory. Cellular service providers have licenses covering 25 MHz
of spectrum, and two competing PCS providers have licenses to use 30 MHz in our
territory. Some of our competitors also have established infrastructures,
marketing programs, and brand names. In addition, certain of our competitors may
be able to offer coverage in areas not served by our Sprint PCS network, or,
because of their calling volumes or their affiliations with, or ownership of,
wireless providers, may be able to offer roaming rates that are lower than those
we offer. PCS providers will likely compete with us in providing some or all of
the services available through the Sprint PCS network and may provide services
that we do not. Additionally, we expect that existing cellular providers, some
of whom have been operational for a number of years and have significantly
greater financial and technical resources and customer bases than us, will
continue to upgrade their systems to provide digital wireless communication
services competitive with Sprint PCS.

     In the future, we expect to face increased competition from entities
providing similar services using other communications technologies, including
satellite-based telecommunications and wireless cable systems. While some of
these technologies and services are currently operational, others are being
developed or may be developed in the future.

     Over the past several years the FCC has auctioned and will continue to
auction large amounts of wireless spectrum that could be used to compete with
Sprint PCS service. Based upon increased competition, we anticipate that market
prices for two-way wireless services generally will decline in the future. Our
ability to attract and retain customers will depend principally on the strength
of the Sprint and Sprint PCS brand name, services and features; pricing; the
location of our Sprint PCS markets; the size of our Sprint PCS territory;
national network coverage and reliability; and our customer care.

Employees and Labor Relations

     As of September 30, 2000, we employed 341 full-time employees. None of our
employees are represented by a labor union. We believe that we have good
relations with our employees.


            REGULATION OF THE WIRELESS TELECOMMUNICATIONS INDUSTRY

Federal Regulation

     The FCC closely regulates the licensing, construction, operation,
acquisition and interconnection arrangements of wireless telecommunications
systems, including PCS, in the United States. Although we do not currently hold
FCC licenses, we are obligated under the Sprint PCS agreements to conduct our
management and

                                       9
<PAGE>

resale of Sprint PCS' licensed spectrum in compliance with the FCC's rules.
Consequently, we have summarized some of the major FCC regulations that govern
the operation of PCS systems.

Conditions of PCS Licenses

     All PCS licenses are granted for 10-year terms conditioned upon timely
compliance with the FCC's build-out requirements. Pursuant to the FCC's build-
out requirements, all 30 MHz broadband PCS licensees must construct facilities
that offer coverage to one-third of the population within 5 years and to two-
thirds of the population within 10 years, and all 10 MHz broadband PCS licensees
must construct facilities that offer coverage to at least one-quarter of the
population within 5 years or make a showing of "substantial service" within
that 5 year period. However, under our Sprint PCS agreements, we have exceeded
all build out requirements associated with the Sprint PCS licenses in our Sprint
PCS territory. Rule violations could result in license revocations. Because
Sprint PCS is the licensee of the frequencies on which our network operates, the
revocation or non-renewal of Sprint PCS' licenses could adversely affect our
business.

     The FCC also requires licensees to maintain a certain degree of control
over their licenses. The Sprint PCS agreements reflect an alliance that the
parties believe meets the FCC requirements for licensee control of licensed
spectrum. If the FCC were to determine that our Sprint PCS agreements need to be
modified to increase the level of licensee control, the Sprint PCS agreements
may be modified to cure any purported deficiency regarding licensee control of
the licensed spectrum.

     The FCC currently prohibits a single entity from having a combined
attributable interest of 20% or greater in any license in broadband PCS,
cellular and SMR licenses totaling more than 45 MHz in most geographic areas;
within Rural Service Areas a single entity may hold up to 55 MHz.

Communications Assistance for Law Enforcement Act

     The Communications Assistance for Law Enforcement Act was enacted in 1994
to preserve electronic surveillance capabilities by law enforcement officials in
the face of rapidly changing telecommunications technology. This act requires
telecommunications carriers, including us, to modify their equipment, facilities
and services to allow for authorized electronic surveillance based on either
industry or FCC standards. In 1997, industry-setting organizations developed
interim standard for wireline, cellular and broadband PCS carriers to comply
with the Communications Assistance for Law Enforcement Act. In August 1999, the
FCC supplemented the interim industry standards with additional standards. For
interim industry standards, the deadline for compliance was June 30, 2000, and
for the additional standards established by the FCC, the deadline is September
30, 2001. We are or will be able to offer traditional electronic surveillance
capabilities to law enforcement agencies on the date of these deadlines. Like
many other wireless telecommunications providers, due to difficulty in obtaining
compliant switching equipment, we have not met the compliance deadline of June
30, 2000, and Sprint PCS, on behalf of AirGate PCS and others, has filed a
petition for an extension of that deadline. That petition was granted by the FCC
and our compliance deadline was extended to March 31, 2001. Like many other
wireless telecommunications providers, we also may not meet the compliance
deadline for September 30, 2001. Our failure to meet these deadlines is due to
required hardware changes that have not yet been developed and implemented by
switch manufacturers. We may be granted extensions for compliance or we may be
subject to penalties if we fail to comply, including being assessed fines or
having conditions put on our licenses.

Other Federal Regulations

     Wireless system licensees, such as Sprint PCS, must comply with certain FCC
and FAA regulations regarding the siting, lighting and construction of
transmitter towers and antennas. In addition, certain FCC environmental
regulations may cause certain antenna site locations to become subject to
regulation under the National Environmental Policy Act. The FCC is required to
implement the National Environmental Policy Act by requiring licensees to meet
certain land use and radio frequency standards.

Review of Universal Service Requirements

     The FCC and each of the states are required to establish a "universal
service" program to ensure that affordable, quality telecommunications services
are available to all Americans. Sprint PCS is required to contribute to the
federal universal service program as well as existing state programs. The FCC
has determined that Sprint

                                       10
<PAGE>

PCS' "contribution" to the federal universal service program is a variable
percentage of "end-user telecommunications revenues." Although many states have
adopted similar assessment methodologies, the states are free to calculate
telecommunications service provider contributions in any manner they choose as
long as the process is not inconsistent with the FCC's rules. To the extent that
we resell Sprint PCS' services directly to end-users, we may be responsible for
contributing to the universal service fund; however, we may also pass these
costs through to our end-users.

Wireless Facilities Siting

     States and localities are not permitted to regulate the placement of
wireless facilities so as to "prohibit" the provision of wireless services or
to "discriminate" among providers of such services. In addition, so long as a
wireless system complies with the FCC's rules, states and localities are
prohibited from using radio frequency health effects as a basis to regulate the
placement, construction or operation of wireless facilities. The FCC is
considering numerous requests for preemption of local actions affecting wireless
facilities siting.

State Regulation

     Section 332 of the Communications Act of 1934, as amended preempts states
from regulating the rates and entry of commercial mobile radio service
providers, such as PCS licensees. However, states may petition the FCC, and be
granted authority to regulate the rates of such providers if the state
demonstrates that (1) market conditions fail to protect subscribers from unjust
and unreasonable rates or rates that are unjustly or unreasonably
discriminatory, or (2) when commercial mobile radio service is a replacement for
landline telephone service within the state. To date, the FCC has granted no
such petition. To the extent we provide fixed wireless service, we may be
subject to additional state regulation.

     The forgoing summary is not a comprehensive description of every federal,
state and local regulation or law that could apply to PCS licensees or our
company.

                           INVESTMENT CONSIDERATIONS

Risks Particular to AirGate PCS

The termination of our affiliation with Sprint PCS or Sprint PCS' failure to
perform its obligations under our agreements would severely restrict our ability
to conduct our business

     Our ability to offer Sprint PCS products and services and our PCS network's
operation are dependent on our Sprint PCS agreements being renewed and not
terminated. Each of these agreements can be terminated for breach of any
material terms. We are dependent on Sprint PCS' ability to perform its
obligations under the Sprint PCS agreements. The non-renewal or termination of
any of the Sprint PCS agreements or the failure of Sprint PCS to perform its
obligations under the Sprint PCS agreements would severely restrict our ability
to conduct our business.

We may not receive as much Sprint PCS roaming revenue in the future because
Sprint PCS can change the rate we receive or fewer people may travel in our
network area

     We are paid a fee from Sprint PCS for every minute that a Sprint PCS
subscriber based outside of our territory uses our network; we refer to such
fees as roaming revenue. Similarly, we pay a fee to Sprint PCS for every minute
that our customers use the Sprint PCS network outside of our markets; we refer
to such fees as roaming fees. Roaming revenue will continue to represent a
substantial portion of our revenue in the near future. Under our agreements with
Sprint PCS, Sprint PCS can change the fee we receive for each Sprint PCS roaming
minute or pay for each roaming minute. The change by Sprint PCS in the roaming
revenue we are paid could substantially decrease our revenues and net income. In
addition, our customers may spend more time in other Sprint PCS coverage areas
than Sprint PCS customers from outside our Sprint PCS territory spend in our
Sprint PCS territory or may not use our services, which will reduce our roaming
revenue. As a result, we may not receive a

                                       11
<PAGE>

substantial amount of Sprint PCS roaming revenue or we may have to pay more
Sprint PCS roaming fees than the roaming revenue we collect.

If Sprint PCS does not complete the construction of its nationwide PCS network,
we may not be able to attract and retain customers

     Sprint PCS' network may not provide nationwide coverage to the same extent
as its competitors, which could adversely affect our ability to attract and
retain customers. Sprint PCS is creating a nationwide PCS network through its
own construction efforts and those of its affiliates. Today, Sprint PCS is still
constructing its nationwide network and does not offer PCS services, either on
its own network or through its roaming agreements, in every city in the United
States. Sprint PCS has entered into affiliation agreements similar to ours with
companies in other territories pursuant to its nationwide PCS build-out
strategy. Our results of operations are dependent on Sprint PCS' national
network and, to a lesser extent, on the networks of its other affiliates. Sprint
PCS and its affiliate program are subject, to varying degrees, to the economic,
administrative, logistical, regulatory and other risks described in other risk
factors contained below. Sprint PCS' and its other affiliates' PCS operations
may not be successful.

We have a limited operating history and if we do not successfully manage our
anticipated rapid growth, our operating performance may be adversely impacted

     We launched commercial operations in January 2000 and have grown our
employee base to 341 employees as of September 30, 2000. Our performance as a
PCS provider depends on our ability to implement operational and administrative
systems, including the training and management of our engineering, marketing and
sales personnel. These activities are expected to place demands on our
managerial, operational and financial resources.

The inability to use Sprint PCS' back office services and third party vendors'
back office systems could disrupt our business

     Our operations could be disrupted if Sprint PCS is unable to maintain and
expand its back office services such as customer activation, billing and
customer care, or to efficiently outsource those services and systems through
third party vendors. The rapid expansion of Sprint PCS' business is expected to
continue to pose a significant challenge to its internal support systems.
Additionally, Sprint PCS has relied on third-party vendors for a significant
number of important functions and components of its internal support systems and
may continue to rely on these vendors in the future. We depend on Sprint PCS'
willingness to continue to offer such services to us and to provide these
services at competitive costs. Our Sprint PCS agreements provide that, upon nine
months' prior written notice, Sprint PCS may elect to terminate any such service
beginning January 1, 2002. If Sprint PCS terminates a service for which we have
not developed a cost-effective alternative, our operating costs may increase and
may restrict our ability to operate successfully.

We have substantial debt that we may not be able to service and a failure to
service our debt may result in our lenders controlling our assets.

     Our substantial debt will have a number of important consequences for our
operations and our investors, including the following:

     .  we will have to dedicate a substantial portion of any cash flow from
        operations to the payment of interest on, and principal of, our debt,
        which will reduce funds available for other purposes;

     .  we have a fully-financed business plan, but we may not be able to obtain
        additional financing for currently unanticipated capital requirements,
        capital expenditures, working capital requirements and other corporate
        purposes;

     .  some of our debt, including our financing from Lucent, will be at
        variable rates of interest, which could result in higher interest
        expense in the event of increases in market interest rates; and

                                       12
<PAGE>

     .  due to the liens on substantially all of our assets and the pledges of
        stock of our existing and future subsidiaries that secure our senior
        debt and our senior subordinated discount notes, lenders or holders of
        our senior subordinated discount notes may control our assets or our
        subsidiaries' assets in the event of a default.

     As of September 30, 2000, our outstanding long-term debt totaled $180.7
million. Under our current business plan, we expect to incur substantial
additional debt before achieving break-even operating cash flow. Accordingly, we
will utilize some portion, if not all, of the $98.0 million of additional
available borrowings under our financing from Lucent.

If we do not meet all of the conditions required under our Lucent financing
documents, we may not be able to draw down all of the funds we anticipate
receiving from Lucent and may not be able to fund operating losses and working
capital needs

     As of September 30, 2000, we had borrowed $13.5 million from Lucent. On
October 2, 2000, we borrowed an additional $42.0 million from Lucent. The
remaining $98.0 million, which we expect to borrow in the future, is subject to
our meeting all of the conditions specified in the financing documents and, in
addition, is subject at each funding date to the following conditions:

 .  that the representations and warranties in the loan documents are true and
   correct; and

 .  the absence of a default under our loan documents.

     If we do not meet these conditions at each funding date, Lucent may not
lend any or all of the remaining amounts, and if other sources of funds are not
available, we may not be in a position to meet the operating cash needs of our
business.

We may have difficulty in obtaining subscriber equipment required in order to
attract customers

     We depend on equipment vendors for an adequate supply of subscriber
equipment, including handsets. If the supply of subscriber equipment is
inadequate or delayed, we may have difficulty in attracting customers.

Conflicts with Sprint PCS may not be resolved in our favor which could restrict
our ability to manage our business and provide Sprint PCS products and services

     Conflicts between us and Sprint PCS may arise and these conflicts may not
be resolved in our favor. The conflicts and their resolution may harm our
business. For example, Sprint PCS prices its national plans based on its own
objectives and could set price levels that may not be economically sufficient
for our business. In addition, upon expiration, Sprint PCS could decide to not
renew the Sprint PCS agreements which would not be in our best interest or the
interest of our stockholders. There may be other conflicts such as the setting
of the price we pay for back office services and the focus of Sprint PCS'
management and resources.

If we fail to pay our debt, our lenders have the option of may selling our loans
to Sprint PCS, giving Sprint PCS certain rights of a creditor to foreclose on
our assets

     Sprint PCS has contractual rights, triggered by an acceleration of the
maturity of our financing from Lucent, pursuant to which Sprint PCS may purchase
our obligations to Lucent under the financing and obtain the rights of a senior
lender. To the extent Sprint PCS purchases these obligations, Sprint PCS'
interests as a creditor could conflict with ours. Sprint PCS' rights as a senior
lender would enable it to exercise rights with respect to our assets and
continuing relationship with Sprint PCS in a manner not otherwise permitted
under our Sprint PCS agreements.

                                       13
<PAGE>

Certain provisions of our agreements with Sprint PCS may diminish the valuation
of our company

     Provisions of our Sprint PCS agreements could affect the valuation of our
company, thereby, among other things, reducing the market prices of our
securities and decreasing our ability to raise additional capital necessary to
complete our network build-out. Under our agreements with Sprint PCS, subject to
the requirements of applicable law, there are circumstances under which Sprint
PCS may purchase our operating assets or capital stock for 72% of the "entire
business value" of our company, as defined in our management agreement with
Sprint PCS. In addition, Sprint PCS must approve any change of control of our
ownership and consent to any assignment of our agreements with Sprint PCS.
Sprint PCS also has been granted a right of first refusal if we decide to sell
our operating assets. We are also subject to a number of restrictions on the
transfer of our business including the prohibition on selling our company or our
operating assets to a number of identified and as yet to be identified
competitors of Sprint PCS or Sprint. These and other restrictions in our Sprint
PCS agreements may limit the saleability and/or reduce the value a buyer may be
willing to pay for our business and may operate to reduce the "entire business
value" of our company.

We may not be able to compete with larger, more established businesses offering
similar products and services

     Our ability to compete depends, in part, on our ability to anticipate and
respond to various competitive factors affecting the telecommunications
industry, including new services that may be introduced, changes in consumer
preferences, demographic trends, economic conditions and discount pricing
strategies by competitors. We compete in our territory with at least four other
wireless service providers, each of which have an infrastructure in place and
have been operational for a number of years. They have significantly greater
financial and technical resources than we do, could offer attractive pricing
options and may have a wider variety of handset options. We expect that existing
cellular providers will upgrade their systems and provide expanded, digital
services to compete with the Sprint PCS products and services that we intend to
offer. These wireless providers require their customers to enter into long-term
contracts, which may make it more difficult for us to attract customers away
from them. Sprint PCS generally does not require its customers to enter into
long-term contracts, which may make it easier for other wireless providers to
attract Sprint PCS customers away from Sprint PCS. We also compete with several
PCS providers and other existing communications companies in our Sprint PCS
territory. A number of our cellular and PCS competitors have access to more
licensed spectrum than the 10 MHz licensed to Sprint PCS in our Sprint PCS
territory. In addition, any competitive difficulties that Sprint PCS may
experience could also harm our competitive position and success.

The technology we use has limitations and could become obsolete

     We employ digital wireless communications technology selected by Sprint PCS
for its network. Code division multiple access, CDMA, technology is a relatively
new technology. CDMA may not provide the advantages expected by Sprint PCS. If
another technology becomes the preferred industry standard, we may be at a
competitive disadvantage and competitive pressures may require Sprint PCS to
change its digital technology which, in turn, may require us to make changes at
substantially increased costs. We may not be able to respond to such pressures
and implement new technology on a timely basis, or at an acceptable cost.

If Sprint PCS customers are not able to roam instantaneously or efficiently onto
other wireless networks, prospective customers could be deterred from
subscribing for our Sprint PCS services

     The Sprint PCS network operates at a different frequency and uses or may
use a different technology than many analog cellular and other digital systems.
To access another provider's analog cellular or digital system outside of the
Sprint PCS network, a Sprint PCS customer is required to utilize a dual-
band/dual-mode handset compatible with that provider's system. Generally,
because dual-band/dual-mode handsets incorporate two radios rather than one,
they are more expensive and are larger and heavier than single-band/single-mode
handsets. The Sprint PCS network does not allow for call hand-off between the
Sprint PCS network and another wireless network, thus requiring a customer to
end a call in progress and initiate a new call when leaving the Sprint PCS
network and entering another wireless network. In addition, the quality of the
service provided by a network provider during a roaming call may not approximate
the quality of the service provided by Sprint PCS. The price of a roaming call
may not be competitive with prices of other wireless companies for roaming
calls, and Sprint PCS customers may not be able to use Sprint PCS advanced
features, such as voicemail notification, while roaming.

                                       14
<PAGE>

Our territory has limited licensed spectrum, and this may affect the quality of
our service, which could impair our ability to attract or retain customers

     Sprint PCS has licenses covering only 10 MHz in our territory. In the
future, as our customers in those areas increase in number, this limited
licensed spectrum may not be able to accommodate increases in call volume and
may lead to increased dropped calls and may limit our ability to offer enhanced
services.

Non-renewal or revocation by the FCC of the Sprint PCS licenses would
significantly harm our business

     PCS licenses are subject to renewal and revocation. Sprint PCS' licenses in
our territory will expire in 2007 but may be renewed for additional ten year
terms. There may be opposition to renewal of Sprint PCS' licenses upon their
expiration and the Sprint PCS licenses may not be renewed. The FCC has adopted
specific standards to apply to PCS license renewals. Failure by Sprint PCS to
comply with these standards in our territory could cause revocation or
forfeiture of the Sprint PCS licenses for our territory or the imposition of
fines on Sprint PCS by the FCC.

If we lose the right to install our equipment on wireless towers owned by other
carriers or fail to obtain zoning approval for our cell sites, we may have to
rebuild our network

     More than 99% of our cell sites are co-located on facilities shared with
one or more wireless providers. We co-locate a large portion of our sites on
facilities that are owned by only a few tower companies. If our master
collocation agreements with one of those tower companies were to terminate, or
if one of those tower companies were otherwise not able to support our use of
its tower sites, we would have to find new sites, and if the equipment had
already been installed, we might have to rebuild that portion of our network.
Some of the cell sites are likely to require us to obtain zoning variances or
other local governmental or third party approvals or permits. We may also have
to make changes to our radio frequency design as a result of difficulties in the
site acquisition process.

The loss of our officers and skilled employees that we depend upon to operate
our business could reduce our ability to offer Sprint PCS products and services

     The loss of one or more key officers could impair our ability to offer
Sprint PCS products and services. Our business is managed by a small number of
executive officers. We believe that our future success will also depend in large
part on our continued ability to attract and retain highly qualified technical
and management personnel. We believe that there is and will continue to be
intense competition for qualified personnel in the PCS equipment and services
industry as the PCS market continues to develop. We may not be successful in
retaining our key personnel or in attracting and retaining other highly
qualified technical and management personnel. We currently have "key man" life
insurance for our chief executive officer.

We may not achieve or sustain operating profitability or positive cash flow from
operating activities

     We expect to incur significant operating losses and to generate significant
negative cash flow from operating activities until the third quarter of fiscal
year 2002 while we develop and construct our PCS network and build our customer
base. Our operating profitability will depend upon many factors, including,
among others, our ability to market our services, achieve our projected market
penetration and manage customer turnover rates. If we do not achieve and
maintain operating profitability and positive cash flow from operating
activities on a timely basis, we may not be able to meet our debt service
requirements.

Unauthorized use of our Sprint PCS network could disrupt our business

     We will likely incur costs associated with the unauthorized use of our PCS
network, including administrative and capital costs associated with detecting,
monitoring and reducing the incidence of fraud. Fraud impacts interconnection
costs, capacity costs, administrative costs, fraud prevention costs and payments
to other carriers for unbillable fraudulent roaming.

                                       15
<PAGE>

Our agreements with Sprint PCS, our certificate of incorporation and our bylaws
include provisions that may discourage, delay and/or restrict any sale of our
operating assets or common stock to the possible detriment of our stockholders

     Our agreements with Sprint PCS restrict our ability to sell our operating
assets and common stock. Generally, Sprint PCS must approve a change of control
of our ownership and consent to any assignment of our agreements with Sprint
PCS. The agreements also give Sprint PCS a right of first refusal if we decide
to sell our operating assets to a third party. These restrictions, among other
things, could discourage, delay or make more difficult any sale of our operating
assets or common stock. This could have a material adverse effect on the value
of our common stock and could reduce the price of our company in the event of a
sale. Provisions of our certificate of incorporation and bylaws could also
operate to discourage, delay or make more difficult a change in control of our
company. Our certificate of incorporation, which contains a provision
acknowledging the terms under the management agreement and a consent and
agreement pursuant to which Sprint PCS may buy our operating assets, has been
duly authorized and approved by our board of directors and our stockholders.
This provision is intended to permit the sale of our operating assets pursuant
to the terms of the management agreement or a consent and agreement with our
lenders without further stockholder approval.

Industry Risks

Wireless service providers generally experience a high rate of customer turnover
which would increase our costs of operations and reduce our revenue

     Our strategy to reduce customer turnover, commonly known as churn, may not
be successful. Our average monthly churn (net of 14 day returns) for the three
months ended September 30, 2000 was 2.9%. As a result of customer turnover, we
lose the revenue attributable to these customers and increase the costs of
establishing and growing our customer base. The rate of customer turnover may be
the result of several factors, including network coverage; reliability issues
such as blocked calls, dropped calls and handset problems; customer care
concerns; non-use of phones; non-use of customer contracts, pricing; and other
competitive factors.

Wireless providers offering services based on lower cost structures may reduce
demand for PCS

     Other wireless providers enjoy economies of scale that can result in a
lower cost structure for providing wireless services. Rapid technological
changes and improvements in the telecommunications market could lower other
wireless providers' cost structures in the future. These factors could reduce
demand for PCS because of competitors' ability to provide other wireless
services at a lower price. There is also uncertainty as to the extent of
customer demand as well as the extent to which airtime and monthly recurring
charges may continue to decline. As a result, our future prospects, those of our
industry, and the success of PCS and other competitive services, remain
uncertain.

Alternative technologies and current uncertainties in the wireless market may
reduce demand for PCS

     Technological advances and industry changes could cause the technology used
on our network to become obsolete. We may not be able to respond to such changes
and implement new technology on a timely basis, or at an acceptable cost.

     The wireless telecommunications industry is experiencing significant
technological change, as evidenced by the increasing pace of digital upgrades in
existing analog wireless systems, evolving industry standards, ongoing
improvements in the capacity and quality of digital technology, shorter
development cycles for new products and enhancements and changes in end-user
requirements and preferences.

     If we were unable to keep pace with these technological changes or changes
in the telecommunications market based on the effects of consolidation from the
Telecommunications Act of 1996 or from the uncertainty of future government
regulation, the technology used on our network or our current business strategy
may become obsolete. In addition, wireless carriers are seeking to implement a
new "third generation," or "3G," technology

                                       16
<PAGE>

throughout the industry. There can be no assurance that we can implement the new
3G technology successfully on a cost-effective basis.

Regulation by government agencies may increase our costs of providing service or
require us to change our services, either of which could impair our financial
performance

     The licensing, construction, use, operation, sale and interconnection
arrangements of wireless telecommunications systems are regulated to varying
degrees by the FCC, the Federal Aviation Administration and, depending on the
jurisdiction, state and local regulatory agencies and legislative bodies.
Adverse decisions regarding these regulatory requirements could negatively
impact our operations and our cost of doing business. Our Sprint PCS agreements
reflect an affiliation that the parties believe meets the FCC requirements for
licensee control of licensed spectrum. If the FCC were to determine that our
Sprint PCS agreements need to be modified to increase the level of licensee
control, we have agreed with Sprint PCS to use our best efforts to modify the
agreements as necessary to cause the agreements to comply with applicable law
and to preserve to the extent possible the economic arrangements set forth in
the Sprint PCS agreements. If the Sprint PCS agreements cannot be modified, the
Sprint PCS agreements may be terminated pursuant to their terms.

Use of hand-held phones may pose health risks, which could result in the reduced
use of our services or liability for personal injury claims

     Media reports have suggested that certain radio frequency emissions from
wireless handsets may be linked to various health problems, including cancer,
and may interfere with various electronic medical devices, including hearing
aids and pacemakers. Concerns over radio frequency emissions may discourage use
of wireless handsets or expose us to potential litigation. Any resulting
decrease in demand for our services, or costs of litigation and damage awards,
could impair our ability to profitably operate our business.

                            OUR EXECUTIVE OFFICERS

The following table presents information with respect to our executive officers.

<TABLE>
<CAPTION>
Name                                             Age     Position
----                                             ---     --------
<S>                                              <C>     <C>
Thomas M. Dougherty...........................    56     President and Chief Executive Officer
J. Mark Allen.................................    41     Vice President of Marketing
Barbara L. Blackford..........................    43     Vice President, General Counsel and Secretary
W. Chris Blane................................    47     Vice President of New Business Development
Thomas D. Body III............................    62     Vice President of Strategic Planning
Alan B. Catherall.............................    47     Chief Financial Officer
Charles S. Goldfarb...........................    36     Vice President of Sales, Coastal Region
Robert E. Gourlay.............................    46     Vice President of Sprint PCS Relationship
Dennis K. Rabon...............................    31     Vice President of Sales, Interior Region
David C. Roberts..............................    38     Vice President of Engineering and Network Operations
</TABLE>


Thomas M. Dougherty has been our president and chief executive officer since
April 1999. From March 1997 to April 1999, Mr. Dougherty was a senior executive
of Sprint PCS. From June 1996 to March 1997, Mr. Dougherty served as executive
vice president and chief operating officer of Chase Telecommunications, a
personal communications services company. Mr. Dougherty served as president and
chief operating officer of Cook Inlet BellSouth PCS, L.P., a start-up wireless
communications company, from November 1995 to June 1996. Prior to October 1995,
Mr. Dougherty was vice president and chief operating officer of BellSouth
Mobility DCS Corporation, a PCS company.

J. Mark Allen has been our vice president of marketing since June 2000. From
January 2000 to June 2000, Mr. Allen served as vice president of marketing with
RetailExchange.com in Boston. From July 1999 to January 2000, Mr. Allen served
as a management consultant to several internet start-up companies. During the
previous five years, Mr.

                                       17
<PAGE>

Allen was vice president of marketing for Conxus Communications a wireless email
and voice mail start-up supported by Motorola and was responsible for a number
of marketing leadership roles in the launch of the first PCS service in the
nation under the Sprint Spectrum brand with Sprint PCS (American Personal
Communications). Prior to that, Mr. Allen held several management positions at
SkyTel in marketing, international operations and customer management. Mr. Allen
has over 15 years of marketing and operations management experience.

Barbara L. Blackford has been our vice president, general counsel and secretary
since September 2000. From October 1997 to September 2000, Ms. Blackford was
with Monsanto Company where she served as associate general counsel and
assistant secretary responsible for the office of the corporate secretary and
co-head of mergers and acquisitions from September 1997 to September 1999 and
chief counsel for mergers and acquisitions and general counsel of Cereon
Genomics from September 1999 until she left the company. Prior to joining
Monsanto Company, Ms. Blackford was a partner with the private law firm Long,
Aldridge & Norman in Atlanta, Georgia.

W. Chris Blane has been our vice president of new business development since
August 1998. In June 1995, Mr. Blane joined AirLink II LLC, an affiliate of our
predecessor company, as a vice president for business development as it prepared
for the C block PCS auction. Prior to 1995, Mr. Blane was the president of
Metrex Corporation, which constructed the first fiber optic competitive access
network in Atlanta, Georgia and which ultimately merged with MFS of Atlanta, now
MCI WorldCom, Inc.

Thomas D. Body III has been our vice president of strategic planning since
November 1998. From January 1998 to October 1998, Mr. Body served as our chief
executive officer. In 1994, Mr. Body joined AirLink II LLC, an affiliate of our
predecessor company, as a vice president for business development as it prepared
for the C block PCS auction. From March 1988 to March 1992, Mr. Body was the
chairman and chief executive officer of Metrex Corporation, which constructed
the first fiber optic competitive access network in Atlanta, Georgia. In 1992,
Metrex merged with MFS of Atlanta, now WorldCom, Inc. Mr. Body served as
chairman and chief executive officer of MFS of Atlanta until September of 1993.
From September 1993 to March 1995, Mr. Body served as a consultant to MFS of
Atlanta and as president of Metrex of Alabama, which was involved in
constructing a fiber-optic access network in Birmingham, Alabama.

Alan B. Catherall has been our chief financial officer since March 1998. From
April 1996 to present, Mr. Catherall has served as a partner in Tatum CFO
Partners, a financial consulting firm. From August 1994 to April 1996, Mr.
Catherall was chief financial officer of Syncordia Services, a joint venture of
MCI and British Telecom that provides telecom outsourcing services.

Charles S. Goldfarb has been our vice president of sales, coastal region, since
January 2000. From September 1991 to January 2000, Mr. Goldfarb worked at Paging
Network Inc., most recently as its area vice president and general manager for
the Virginia, North Carolina and South Carolina region. Mr. Goldfarb has over 10
years of wireless experience and has been successful in numerous start-up
markets. Prior to his wireless experience, Mr. Goldfarb worked at ITT Financial
Services as its assistant vice president of operations in the Washington DC
area.

Robert E. Gourlay has been our vice president of Sprint PCS relationship since
February 2000. Prior to his current position, he was vice president of marketing
and a founder of AirLink II, LLC, an affiliate of our predecessor company. Mr.
Gourlay was one of the founders of Encompass, Inc., a company formed in 1993 to
focus on the acquisition of licenses in the C and F block spectrum auctions. At
Encompass Mr. Gourlay served as vice president of sales and marketing.

Dennis K. Rabon has been our vice president of sales, interior region, since
September 2000. Mr. Rabon joined AirGate PCS in October 1999 as market manager
for the Columbia, South Carolina market. From July 1999 to September 1999, Mr.
Rabon was a general sales manager for PageNet in Atlanta, Georgia. From December
1996 to July1999, Mr. Rabon worked for Bandag Inc. initially as a sales
development manager and most recently as a fleet sales manager . From August
1995 to December 1996 Mr. Rabon was a territory manager at Michelin Tire
Corporation in Greenville South, Carolina. Mr. Rabon has ten years of management
experience.

David C. Roberts has been our vice president of engineering and network
operations since July 1998. From July 1995 to July 1998, Mr. Roberts served as
director of engineering for AirLink II LLC, an affiliate of our predecessor
company.

                                       18
<PAGE>

ITEM 2.   Properties

As of September 30, 2000, our properties were as follows:

     Corporate offices. Our principal executive offices consist of a 14,000
     -----------------
square foot leased office space located at Harris Tower, 233 Peachtree Street,
N.E., Suite 1700, Atlanta, Georgia 30303. We also lease a 40,000 square foot
office space located at Pelham 85 Business Center in Greenville, South Carolina
and a 24,000 square foot office space located at 411 Huger Street in Columbia,
South Carolina.

     Sprint PCS stores. We currently lease space for 19 Sprint PCS retail stores
     -----------------
in our territory.

     Switching Centers. We lease two switching centers: a switching center
     -----------------
located at Pelham 85 Business Center in Greenville, South Carolina, and a
switching center located at 411 Huger Street in Columbia, South Carolina.

     Cell Sites. We lease space on 610 cell site towers, and we own one tower
     ----------
site. We co-locate on approximately 99% of our cell sites.

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


ITEM 3.   Legal proceedings

     We are not aware of any pending legal proceedings against us which,
individually or in the aggregate, if adversely determined, would have a material
adverse effect on our financial condition or results of operations.

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

     None.

                                    PART II

ITEM 5.   Market For Registrant's Common Equity And Related Stockholder Matters

     Our common stock has been traded on the Nasdaq National Market under the
symbol "PCSA" since September 28, 1999. Prior to that date, there was no public
market for our common stock. The following table sets forth, for the periods
indicated, the range of high and low sales prices for our common stock as
reported on the Nasdaq National Market.

                                                            Price Range of
                                                             Common Stock
                                                           High         Low
                                                       -------------------------
     Fiscal Year Ended September 30, 2000:
           Fourth Quarter                                $ 80.56      $31.00
           Third Quarter                                 $114.50      $29.00
           Second Quarter                                $108.50      $50.13
           First Quarter                                 $ 54.75      $23.00

     Fiscal Year Ended September 30, 1999:
           Third Quarter (From September 28, 1999)       $ 28.00      $23.00

                                       19
<PAGE>

     On December 11, 2000, the last reported sales price of our common stock as
reported on the Nasdaq National Market was $34.50 per share. On December 11,
2000, there were 119 holders of record of our common stock.

     We have never declared or paid any cash dividends on our common stock or
any other of our securities. We do not expect to pay cash dividends on our
capital stock in the foreseeable future. We currently intend to retain our
future earnings, if any, to fund the development and growth of our business. Our
future decisions concerning the payment of dividends on our common stock will
depend upon our results of operations, financial condition and capital
expenditure plans, as well as such other factors as the board of directors, in
its sole discretion, may consider relevant. In addition, our existing
indebtedness restricts, and we anticipate our future indebtedness may restrict,
our ability to pay dividends.

Use of Proceeds from Sales of Registered Securities

     On September 30, 1999, we completed the concurrent offerings of our equity
and debt with total net proceeds to us of approximately $269.7 million. In the
year ended September 30, 2000, we spent $152.4 million of those proceeds to fund
capital expenditures relating to the build-out of our PCS network and $7.7
million of those proceeds to repay our indebtedness.

     On July 11, 2000, Weiss, Peck and Greer Venture Partners Affiliated Funds
exercised their warrants to acquire 214,413 shares of our common stock, at a
price of $12.75 per share. The exercise was a cashless exercise, with 40,956 of
the 214,413 shares being surrendered to us as payment of the exercise price. Net
of shares surrendered in payment of the exercise price, we issued 173,457 shares
of common stock to the warrant holder. The exemption claimed for this issuance
is Section 4(2) of the Securities Act of 1933.

     On September 14, 2000, Lucent Technologies exercised its warrants to
acquire 128,860 shares of our common stock at a price of $20.40 per share. The
exercise was a cashless exercise, with 48,457 of the 128,860 shares being
surrendered to us as payment of the exercise price. Net of shares surrendered in
payment of the exercise price, we issued 80,403 shares of common stock to the
warrant holder. The exemption claimed for this issuance is Section 4(2) of the
Securities Act of 1933.

ITEM 6.   Selected Financial Data

     The selected financial data presented below under the captions "Statement
of Operations Data," "Other Data," and "Balance Sheet Data" for, and as of the
end of, the year ended September 30, 2000, the nine months ended September 30,
1999 and each of the years in the three-year period ended December 31, 1998, are
derived from the consolidated financial statements of AirGate PCS, Inc. and
subsidiaries, which consolidated financial statements have been audited by KPMG
LLP, independent certified public accountants. The selected financial data
should be read in conjunction with the consolidated financial statements
included herein.

<TABLE>
<CAPTION>
                                                                For the Nine
                                                                   Months
                                               For the Year         Ended
                                                   Ended          September                   For the Year Ended
                                               September 30,         30,                          December 31,
                                               -------------    ------------      ------------------------------------------
                                                    2000            1999             1998             1997              1996
                                               -------------    ------------      ---------        ---------        --------
                                                          (In thousands except per share and subscriber data)
<S>                                            <C>              <C>               <C>              <C>              <C>
Statement of Operations Data:
Revenues:
  Service revenue.....................            $  9,183       $      --        $      --         $     --         $      --
  Roaming revenue.....................              12,338              --               --               --                --
  Equipment revenue...................               2,981              --               --               --                --
                                                  --------       ---------        ---------         --------         ---------
      Total revenues.................               24,502              --               --               --                --
</TABLE>

                                       20
<PAGE>

<TABLE>
<S>                                              <C>                    <C>     <C>                    <C>              <C>
Operating expenses:
 Cost of service and roaming.........             (27,207)                 --              --               --               --
 Cost of equipment...................              (5,685)                 --              --               --               --
 Selling and marketing...............             (28,357)                 --              --               --               --
 General and administrative..........             (14,078)             (5,294)         (2,597)          (1,101)          (1,252)
 Noncash stock option
  compensation.......................              (1,665)               (325)             --               --               --
 Depreciation and amortization.......             (12,034)               (622)         (1,204)            (998)             (19)
                                                 --------            --------         -------          -------          -------
 Operating loss......................             (64,524)             (6,241)         (3,801)          (2,099)          (1,271)
 Interest expense, net...............             (16,799)             (9,358)         (1,392)            (817)            (582)
                                                 --------            --------         -------          -------          -------
 Net loss............................            $(81,323)           $(15,599)        $(5,193)         $(2,916)         $(1,853)
                                                 ========            ========         =======          =======          =======
Other Data:

 Basic and diluted net loss per                  $  (6.60)           $  (4.57)        $ (1.54)         $ (0.86)         $ (0.55)
       share of common stock (1).....            ========            ========         =======          =======          =======

 Number of subscribers at end of
       period........................              56,689                  --              --               --               --
</TABLE>
___________________________

<TABLE>
<CAPTION>
                                          As of September 30,             As of December 31,
                                       ------------------------   ---------------------------------
                                           2000         1999         1998        1997        1996
                                       -----------  -----------   ----------  ----------  ---------
                                                                (In thousands)
<S>                                      <C>          <C>          <C>         <C>         <C>
Balance Sheet Data:

 Cash and cash equivalents...........    $ 58,384     $258,900     $ 2,296     $    147    $      6
 Property and equipment, net.........     183,581       44,206      12,545           17          11
 Total assets........................     268,948      317,320      15,450       13,871       2,196
 Long-term debt(2)...................     180,727      165,667       7,700       11,745          --
 Stockholders' equity (deficit)......      49,873      127,846      (5,350)      (1,750)     (3,025)
</TABLE>

___________________________
(1)  Basic and diluted net loss per share of common stock is computed by
     dividing net loss by the weighted average number of common shares
     outstanding.

(2)  Includes current maturities.

                                       21
<PAGE>

ITEM 7.   Management's Discussion And Analysis Of Financial Condition And
          Results Of Operations

     The following discussion and analysis should be read in conjunction with
the consolidated financial statements and the related notes included elsewhere
in this Report.  The discussion contains forward-looking statements that involve
risks and uncertainties.  Our actual results could differ materially from the
results contemplated in these forward-looking statements as a result of factors
including, but not limited to, those under "Item 1. Business Investment
Considerations."

Overview

     On July 22, 1998, we entered into a management agreement with Sprint PCS
whereby we became the Sprint PCS affiliate with the exclusive right to provide
100% digital PCS services under the Sprint and Sprint PCS brand names in our
Sprint PCS territory in the southeastern United States.  We completed our radio
frequency design, network design and substantial site acquisition and cell site
engineering, and commenced construction of our PCS network in November 1998.  In
January 2000 we began commercial operations with the launch of four markets
covering 2.2 million residents in our Sprint PCS territory.  By September 30,
2000, we had launched commercial PCS service in all of the 21 markets that
comprise our Sprint PCS territory.  At September 30, 2000, we provided Sprint
PCS services to 56,689 subscribers.

     Sprint PCS has invested $44.6 million to purchase the PCS licenses in our
territory and incurred additional expenses for microwave clearing. Under our
long-term agreements with Sprint PCS, we manage the network on Sprint PCS'
licensed spectrum as well as use the Sprint and Sprint PCS brand names royalty-
free during our affiliation with Sprint PCS. We also have access to Sprint PCS'
national marketing support and distribution programs and are entitled to buy
network and subscriber equipment and handsets at the same discounted rates
offered by vendors to Sprint PCS based on its large volume purchases. In
exchange for these and other benefits, we are entitled to receive 92%, and
Sprint PCS is entitled to retain 8%, of collected service revenues from
customers in our Sprint PCS territory.  We are entitled to 100% of revenues
collected from the sale of handsets and accessories and on roaming revenues
received when Sprint PCS customers from a different territory make a wireless
call on our PCS network.

     Through September 30, 2000, we have incurred $186.7 million of capital
expenditures related to the build-out of our PCS network.  We were able to open
the network for a portion of our territory for roaming coverage along Interstate
85 between Atlanta, Georgia and Charlotte, North Carolina in November 1999.  In
the three months ended March 31, 2000, we launched commercial PCS operations in
the Greenville-Spartanburg, Anderson and Myrtle Beach, South Carolina markets
and the Hickory, Asheville, Wilmington and Rocky Mount, North Carolina markets.
In the three months ended June 30, 2000, we launched commercial PCS operations
in the Charleston, Columbia and Florence, South Carolina markets, the Augusta
and Savannah, Georgia markets and the Goldsboro, Jacksonville, New Bern,
Orangeburg, Roanoke Rapids and Greenville-Washington, North Carolina markets.
In the three months ended September 30, 2000, we launched commercial PCS
operations in the Greenwood and Sumter, South Carolina markets and the
Outer Banks, North Carolina market. At September 30, 2000, our Sprint PCS
network covered 5.4 million of the 7.1 million residents in our Sprint PCS
territory based on 2000 U.S. Census Department data.

Results of Operations

     For the year ended September 30, 2000:

     We did not launch commercial operations until January 2000.  For the nine
months ended September 30, 1999, we had no customers and thus no service,
roaming and equipment revenues or the related costs of revenues and sales and
marketing costs.

     Customer Additions

     For the year ended September 30, 2000, we added a net 56,689 customers
since the launch of our commercial operations in January 2000.  We launched all
21 of the markets that comprise our Sprint PCS territory during 2000.

                                       22
<PAGE>

     Average Revenue Per User (ARPU)

     Average Revenue Per User (ARPU), which summarizes the average monthly
service revenue per customer net of an allowance for doubtful accounts, was $56
since commercial operations were launched in January 2000.

     Revenues

     Service revenue and equipment revenue were $9.2 million and $3.0 million,
respectively, for the year ended September 30, 2000.  These revenues were the
result of launching commercial operations in 21 markets during the year.
Service revenue consists of monthly recurring access and feature charges and
monthly non-recurring charges for local, long distance and roaming airtime usage
in excess of the pre-subscribed usage plan.  Equipment revenue is derived from
the sale of handsets and accessories, net of an allowance for returns.  Our
handset return policy allows customers to return their handsets for a full
refund within 14 days of purchase.  When handsets are returned to us, we may be
able to reissue the handsets to customers at little additional cost to us.
However, when handsets are returned to Sprint PCS for refurbishing, we receive a
credit from Sprint PCS, which is less than the amount we originally paid for the
handset.

     Roaming revenue of $12.3 million was recorded during the year ended
September 30, 2000.  We receive Sprint PCS roaming revenue at a per-minute rate
from Sprint PCS or another Sprint PCS affiliate when Sprint PCS subscribers or
other Sprint PCS affiliate subscribers from outside of our Sprint PCS territory
use our network.  We also receive non-Sprint PCS roaming revenue when
subscribers of other wireless service providers roam on our network.

     Cost of Service and Roaming and Cost of Equipment

     The cost of service and roaming and the cost of equipment was $27.2 million
and $5.7 million, respectively, for the twelve months ended September 30, 2000.
Cost of service represents network operating costs (including cell site lease
payments, salaries, fees related to data transfer via T-1 and other transport
lines, inter-connect fees and other expenses related to network operations),
roaming expense when AirGate PCS customers place calls on Sprint PCS's network
or other third party networks, back-office services provided by Sprint PCS such
as customer care and billing, long distance expense relating to inbound roaming
revenue and the 8% of collected service revenue representing the Sprint PCS
affiliation fee.  The Sprint PCS affiliation fee totaled $0.8 million in the
year ended September 30, 2000.  There were approximately 59 employees performing
network operations functions at September 30, 2000.

     Cost of equipment includes the cost of handsets and accessories sold to
customers during the year ended September 30, 2000.  The cost of handsets
exceeds the retail price because we subsidize the price of handsets to remain
competitive in the marketplace.

     Selling and Marketing

     We incurred expenses of $28.4 million during the year ended September 30,
2000 for selling and marketing costs associated with launch of our 21 markets in
2000.  These amounts include retail store costs such as salaries and rent, in
addition to promotion, advertising, commission costs, and handset subsidies on
units sold by third parties for which we do not record revenue.  These handset
subsidies totaled $3.7 million for the year ended September 30, 2000. At
September 30, 2000, there were approximately 246 employees performing sales and
marketing functions compared to four employees performing those functions at
September 30, 1999.

     General and Administrative

     For the year ended September 30, 2000, we incurred expenses of $14.1
million compared to $5.3 million for the nine months ended September 30, 1999,
an increase of $8.8 million.  The increase is primarily comprised of additional
rent, professional fees, consulting fees for outsourced labor and salaries and
compensation, recruiting and relocation costs relating to growth in the number
of employees.  Of the total 341 employees at September 30, 2000, approximately
36 employees were performing corporate support functions compared to 15
employees performing

                                       23
<PAGE>

those functions at September 30, 1999. We incurred $2.1 million of legal and
professional fees related to business development activities in 2000. On May 4,
2000, we entered into a retention bonus agreement with our chief executive
officer that provides for the payment of periodic retention bonuses. Included in
compensation expense in the year ended September 30, 2000 was $1.2 million
related to the retention bonus agreement with our chief executive officer.

     Noncash Stock Option Compensation

     Noncash stock option compensation expense was $1.7 million for the year
ended September 30, 2000 compared to $0.3 million in the nine months ended
September 30, 1999.  The increase in noncash stock option compensation resulted
from a full twelve months expense in 2000 compared to only two months of expense
in 1999 related to the July 1999 stock option grants.  We apply the provisions
of APB Opinion No. 25 and related interpretations in accounting for our stock
option plan.  Unearned stock option compensation is recorded for the difference
between the exercise price and the fair market value of our common stock at the
date of grant and is recognized as noncash stock option compensation expense in
the period in which the related services are rendered.

     Depreciation and Amortization

     For the year ended September 30, 2000, depreciation and amortization
expense increased $11.4 million to $12.0 million compared to $0.6 million for
the nine months ended September 30, 1999. The increase in depreciation and
amortization expense relates primarily to network assets placed in service to
support our commercial launch. Depreciation and amortization will continue to
increase as additional portions of our network are placed into service. We
incurred capital expenditures of $151.4 million in the year ended September 30,
2000 related to the continued build-out of our PCS network which included
approximately $5.9 million of capitalized interest.

     Interest Income

     For the year ended September 30, 2000, interest income was $9.3 million.
Interest income is generated from cash proceeds originating from our initial
public equity and units offering completed on September 30, 1999.  Decreasing
cash balances as a result of capital expenditures to complete the build-out of
our PCS network and the funding of operating losses will result in lower
interest income for fiscal 2001.  No significant interest income was recorded in
the nine months ended September 30, 1999.

     Interest Expense

     For the year ended September 30, 2000, interest expense was $26.1 million,
an increase of $16.8 million compared to the nine months ended September 30,
1999. The increase is primarily attributable to the $23.0 million associated
with the senior subordinated discount notes and $7.3 million associated with our
financing from Lucent partially offset by $5.9 million of capitalized interest.
We had borrowings of $180.7 million at  September 30, 2000 compared to $165.7
million at September 30, 1999.

     Net Loss

     For the year ended September 30, 2000, the net loss was $81.3 million, an
increase of $65.7 million over a net loss of $15.6 million for the nine months
ended September 30, 1999.

For the nine months ended September 30, 1999:

     On October 21, 1999, we changed our fiscal year from a calendar year ending
on December 31 to a fiscal year ending on September 30, effective September 30,
1999.  From January 1, 1999 through September 30, 1999, we were focused on
raising capital to continue our PCS network build-out.

     Revenues

     We had no commercial operations in the nine months ended September 30,
1999, resulting in no revenues or costs of service being recorded.

                                       24
<PAGE>

     General and Administrative Expenses

     From January 1, 1999 through September 30, 1999, we were focused on raising
capital to continue our PCS network build-out.  We incurred general and
administrative expenses of $5.3 million during the nine months ended September
30, 1999, compared to $2.6 million for the year ended December 31, 1998, an
increase of $2.7 million.  The increase was primarily comprised of cell site
lease payments related to our PCS network build-out, additional salaries,
employee bonus accruals and relocation liabilities.

     Noncash Stock Option Compensation

     Noncash stock option compensation expense was $0.3 million for the nine
months ended September 30, 1999 related to the granting of options in July 1999.

     Depreciation and Amortization

     For the nine months ended September 30, 1999, depreciation and amortization
expense was $0.6 million, compared to $1.2 million for the year ended December
31, 1998.  Through August 1998, we were amortizing the purchase price of FCC
licenses held by our predecessor.  We made capital expenditures of $32.8 million
in the nine months ended September 30, 1999 related to the continued build-out
of our PCS network, which included approximately $1.1 million of capitalized
interest.

     Interest Expense

     For the nine months ended September 30, 1999, interest expense was $9.4
million, net of capitalized interest of $1.1 million, an increase of $8.0
million over the $1.4 million in interest expense for the year ended December
31, 1998. Interest expense for the 1999 period included an $8.7 million charge
to record the fair value of warrants and the beneficial conversion feature
related to the convertible promissory notes issued to the affiliates of Weiss,
Peck & Greer Venture Partners and the affiliates of JAFCO America Ventures Inc.
Capitalized interest of $1.1 million for the nine months ended September 30,
1999 was higher due to increased capital expenditures, compared to no
capitalized interest for the year ended December 31, 1998.

     Net Loss

     For the nine months ended September 30, 1999, our net loss was $15.6
million, compared to $5.2 million for the year ended December 31, 1998.  The net
loss increased $10.4 million, resulting primarily from the items discussed
above.

For the year ended December 31, 1998:

     In July 1998, we signed a series of agreements with Sprint PCS to operate
as the exclusive affiliate of Sprint PCS in certain markets in the southeastern
United States.  In October 1998, AirGate PCS, Inc. was formed and all operations
related to the affiliation with Sprint PCS were transferred to it and its
subsidiaries.  The FCC PCS licenses would not be used in our continuing
operations as a Sprint PCS affiliate and, therefore, were excluded from the
consolidated financial statements of AirGate PCS, Inc. and its subsidiaries and
predecessors.  During 1998, we focused on consummating our affiliation with
Sprint PCS.  Expenses incurred for these purposes totaled $5.2 million for
salaries and benefits, professional fees, interest expense and depreciation and
amortization.  Capital outlays in 1998 amounted to $12.9 million.  Included in
this amount were $7.7 million of network assets which we purchased from Sprint
PCS, which include radio frequency and engineering design data, site acquisition
materials and construction equipment.  We also made $5.2 million of capital
expenditures related to the build-out of our PCS network.

                                       25
<PAGE>

     Liquidity and Capital Resources

     As of September 30, 2000, we had $58.4 million in cash and cash
equivalents, compared to $258.9 million in cash and cash equivalents at
September 30, 1999.  Our net working capital was $36.6 million at September 30,
2000, compared to $231.0 million at September 30, 1999.

     Net Cash Used in Operating Activities

     The $41.6 million of cash used in operating activities in the year ended
September 30, 2000 was the result of the company's $81.3 million net loss being
partially offset by a net $1.8 million in cash provided by changes in working
capital and $37.9 million of depreciation, amortization of note discounts,
amortization of financing costs and noncash stock option compensation.

     Net Cash Used in Investing Activities

     The $152.4 million of cash used in investing activities represents cash
outlays for capital expenditures during the year ended September 30, 2000.  We
incurred a total of $151.4 million of capital expenditures in the year ended
September 30, 2000. Further, cash payments of $16.2 million were made for
equipment purchases made through accrued expenses at September 30, 1999
partially offset by equipment purchases of $15.2 million made through accounts
payable and accrued expenses at September 30, 2000.

     Net Cash Provided by Financing Activities

     The $6.5 million of cash used in financing activities in the year ended
September 30, 2000 consisted of the repayment of the $7.7 million unsecured
promissory note partially offset by $1.2 million received from the exercise of
common stock options by employees during 2000.

     Liquidity

     We closed our offerings of equity and debt funding on September 30, 1999.
The total equity amount raised was $131.0 million, or $120.5 million in net
proceeds.  Concurrently, we closed our units offering consisting of $300 million
principal amount at maturity 13.5% senior subordinated discount notes due 2009
and warrants to purchase 644,400 shares of our common stock at $0.01 per share.
The gross proceeds from the units offering were $156.1 million, or $149.4
million in net proceeds.  The senior subordinated discount notes will require
cash payments of interest beginning on April 1, 2005.

     Our $153.5 million credit agreement with Lucent provides for a $13.5
million senior secured term loan which matures on June 6, 2007, which is the
first installment of the loan, or tranche I.  The second installment, or tranche
II, under the credit agreement with Lucent is for a $140.0 million senior
secured term loan which becomes available for borrowing on October 1, 2000 and
which matures on September 30, 2008. The credit agreement requires us to make
quarterly payments of principal beginning December 31, 2002 for tranche I and
March 31, 2004 for tranche II initially in the amount of 3.75% of the loan
balance then outstanding and increasing thereafter. For the year ended September
30, 2000, commitment fees totaled $6.0 million. After October 1, 2000, if we
borrow at least 30% of the tranche II term loan, or $42 million, the commitment
fee on unused borrowings decreases to 1.50%, payable quarterly. As of September
30, 2000, $140 million remained undrawn on our financing from Lucent. On October
2, 2000, we borrowed $42 million, resulting in $98 million being available to us
under the Lucent financing. Our obligations under the credit agreement are
secured by all of our assets. We expect that cash and cash equivalents together
with future advances under the financing from Lucent will fund our capital
expenditures and our working capital requirements through 2002 at which time we
anticipate we will be operational cash flow positive. If any corporate
development event such as an acquisition is effected, additional debt and/or
equity capital may be needed. The financing with Lucent is subject to certain
restrictive covenants including maintaining certain financial ratios, reaching
defined subscriber growth and network covered population goals, and limiting
annual capital expenditures. Further, the credit facility restricts the payment
of dividends on the our common stock. As of September 30, 2000, management
believes that we are in compliance with all covenants governing our financing
from Lucent.

                                       26
<PAGE>

Inflation

     Management believes that inflation has not had, and does not expect
inflation to have, a material adverse effect on our results of operations.

     ITEM 7A.  Quantitative And Qualitative Disclosure About Market Risk

     In the normal course of business, our operations are exposed to interest
rate risk on our financing from Lucent and any future financing requirements.
Our fixed rate debt consists primarily of the accreted carrying value of the
senior subordinated discount notes ($177.9 million at September 30, 2000).  Our
variable rate debt consists of borrowings made under our financing from Lucent
($13.5 million at September 30, 2000).  Our primary interest rate risk exposures
relate to (i) the interest rate on our Lucent financing; (ii) our ability to
refinance our senior subordinated discount notes at maturity at market rates;
and (iii) the impact of interest rate movements on our ability to meet our
interest expense requirements and financial covenants under our debt
instruments.

     We manage the interest rate risk on our outstanding long-term debt through
the use of fixed and variable rate debt and expect in the future to use interest
rate swaps. While we cannot predict our ability to refinance existing debt or
the impact interest rate movements will have on our existing debt, we continue
to evaluate our interest rate risk on an ongoing basis.

     The following table presents the estimated future balances of outstanding
long-term debt at the end of each period and future required annual principal
payments for each period then ended associated with the senior subordinated
discount notes and our financing from Lucent based on our projected level of
long-term indebtedness:

<TABLE>
<CAPTION>
                                                              Years Ending September 30,
                                         ---------------------------------------------------------------------
                                         2001        2002        2003        2004        2005       Thereafter
                                         ---------------------------------------------------------------------
                                                            (Dollars in thousands)
<S>                                      <C>         <C>         <C>         <C>         <C>        <C>
Senior subordinated discount notes....   $202,689    $230,993    $263,246    $300,000    $300,000         --
Fixed interest rate...................       13.5%       13.5%       13.5%       13.5%       13.5%      13.5%
Principal payments....................         --          --          --          --          --   $300,000

Lucent financing......................   $ 55,500    $ 63,500    $100,475    $ 98,450    $ 96,425         --
Variable interest rate (1)............      10.44%      10.44%      10.44%      10.44%      10.44%     10.44%
Principal payments....................         --          --    $  2,025    $  2,025    $  2,025   $ 96,425
</TABLE>

___________________
(1)  The interests rate on the Lucent financing equals the London Interbank
     Offered Rate ("LIBOR") +3.75%.  LIBOR is assumed to equal 6.69% for all
     periods presented.

ITEM 8.    Financial Statements

     Our financial statements are listed under Item 14(a) of this annual report
and are filed as part of this report on the pages indicated.


ITEM 9.   Changes In And Disagreements With Accountants On Accounting And
          Financial Disclosure

     None.

                                       27
<PAGE>

                                   PART III

Item 10. Directors And Executive Officers Of The Registrant

     The sections under the headings "Proposal 1: Election of Directors -
Nominees for Director" and "-Directors Continuing in Office" of the proxy
statement for the annual meeting of stockholders to be held January 30, 2001 are
incorporated herein by reference. See "Item 1. Business - Our Executive
Officers" for information regarding our executive officers. The section under
the heading "Compliance With Section 16(a) Beneficial Ownership Reporting
Requirements" of the proxy statement is also incorporated herein by reference.

Item 11. Executive Compensation

     The sections "Executive Compensation-Summary Compensation Table"
"-Employment Agreements," "-Option/SAR Grants During the Last Fiscal Year" and
"-Aggregated Option Exercises and Year End Option Value Table"; "Meetings and
Committees of the Board-Directors' Compensation"; and "Other Information-
Compensation Committee Interlocks and Insider Participation" of the proxy
statement are incorporated herein by reference.

Item 12. Security Ownership Of Certain Beneficial Owners And Management

     The section "Security Ownership of Certain Beneficial Owners, Directors
and Officers" of the proxy statement is incorporated herein by reference.

Item 13. Certain Relationships And Related Transactions

     The section "Certain Related Transactions" of the proxy statement is
incorporated herein by reference.

                                    PART IV

Item 14. Exhibits, Financial Statements, Schedules, And Reports On Form 8-K

         (a) Financial Statements

         1.  The following financial statements are filed with this report on
the pages indicated:

<TABLE>
<CAPTION>
                                                                                                   Page
                                                                                                   ----
<S>                                                                                                <C>
         Independent Auditors' Report...........................................................    F-1
         Consolidated Balance Sheets as of September 30, 2000 and September 30, 1999............    F-2
         Consolidated Statements of Operations for the year ended September 30, 2000,
                  the nine months ended September 30, 1999, and the year ended
                  December 31, 1998 ............................................................    F-3
         Consolidated Statements of Stockholders' Equity (Deficit) for the year ended
                  September 30, 2000, the nine months ended September 30, 1999, and
                  the year ended December 31, 1998..............................................    F-4
         Consolidated Statements of Cash Flows for the year ended September 30, 2000,
                  the nine months ended September 30, 1999, and the year ended
                  December 31, 1998.............................................................    F-5
         Notes to the Consolidated Financial Statements.........................................    F-7

         (b) Financial Statement Schedule

         Financial Statement Schedule
                  Report of Independent Auditors' on Financial Statement Schedule...............    F-24
                  Schedule II - Valuation and Qualifying Accounts...............................    F-25
</TABLE>

                                       28
<PAGE>

         2.       Exhibits

         See Item 14(c) below

         (c) Reports on Form 8-K

         None.

         (d) Exhibits

Exhibit
Number   Number description
------   ------------------

3.1      Amended and Restated Certificate of Incorporation of AirGate PCS, Inc.
         (Incorporated by reference to Exhibit 3.1 to the quarterly report on
         Form 10-Q filed by the company with the Commission on August 14, 2000
         for the quarter ended June 30, 2000 (SEC File No.000-27455))

3.2      Amended and Restated Bylaws of AirGate PCS, Inc. (Incorporated by
         reference to Exhibit 3.2 to the Registration Statement on Form S-1/A
         filed by the company with the Commission on June 15, 1999 (SEC File
         Nos. 333-79189-02 and 333-79189-01))

4.1      Specimen of common stock certificate of AirGate PCS, Inc. (Incorporated
         by reference to Exhibit 4.1 to the Registration Statement on Form S-1/A
         filed by the company with the Commission on June 15, 1999 (SEC File
         Nos. 333-79189-02 and 333-79189-01))

4.2      Form of warrant issued in units offering (included in Exhibit 10.15)

4.3.1    Form of Weiss, Peck and Greer warrants (Incorporated by reference to
         Exhibit 4.3 to the Registration Statement on Form S-1/A filed by the
         company with the Commission on August 9, 1999 (SEC File Nos. 333-79189-
         02 and 333-79189-01))

4.3.2    Form of Lucent Warrants (Incorporated by reference to Exhibit 4.4 to
         the Registration Statement on Form S-1/A filed by the company with the
         Commission on September 17, 1999 (SEC File Nos. 333-79189-02 and
         333-79189-01))

4.3.3    Form of Indenture for senior subordinated discount notes (including
         form of pledge agreement) (Incorporated by reference to Exhibit 4.5 to
         the Registration Statement on Form S-1/A filed by the company with the
         Commission on September 23, 1999 (SEC File Nos. 333-79189-02 and
         333-79189-01))

4.4      Form of unit (included in Exhibit 10.15)

10.1.1   Sprint PCS Management Agreement and Addenda I-III thereto between
         SprintCom, Inc. and AirGate Wireless, L.L.C. (Incorporated by reference
         to Exhibit 10.1 to the Registration Statement on Form S-1/A filed by
         the company with the Commission on June 15, 1999 (SEC File Nos. 333-
         79189-02 and 333-79189-01))

10.1.2   Addendum IV to Sprint PCS Management Agreement dated August 26, 1999
         by and among SprintCom, Inc., Sprint Communications Company, L.P.,
         Sprint Spectrum L.P. and AirGate PCS, Inc.

10.1.3   Addendum V to Sprint PCS Management Agreement dated May 12, 2000 by and
         among SprintCom, Inc., Sprint Communications Company, L.P. and AirGate
         PCS, Inc.



                                       29
<PAGE>

10.2     Sprint PCS Services Agreement between Sprint Spectrum L.P. and AirGate
         Wireless, L.L.C. (Incorporated by reference to Exhibit 10.2 to the
         Registration Statement on Form S-1/A filed by the company with the
         Commission on June 15, 1999 (SEC File Nos. 333-79189-02 and 333-79189-
         01))

10.3     Sprint Spectrum Trademark and Service Mark License Agreement
         (Incorporated by reference to Exhibit 10.3 to the Registration
         Statement on Form S-1/A filed by the company with the Commission on
         June 15, 1999 (SEC File Nos. 333-79189-02 and 333-79189-01))

10.4     Sprint Trademark and Service Mark License Agreement (Incorporated by
         reference to Exhibit 10.4 to the Registration Statement on Form S-1/A
         filed by the company with the Commission on June 15, 1999 (SEC File
         Nos. 333-79189-02 and 333-79189-01))

10.5     Master Site Agreement dated August 6, 1998 between AirGate and
         BellSouth Carolinas PCS, L.P., BellSouth Personal Communications, Inc.
         and BellSouth Mobility DCS (Incorporated by reference to Exhibit 10.5
         to the Registration Statement on Form S-1/A filed by the company with
         the Commission on June 15, 1999 (SEC File Nos. 333-79189-02 and 333-
         79189-01))

10.5.1   Notice to AirGate of an assignment of sublease, dated September 20,
         1999 between BellSouth Cellular Corp. and Crown Castle South, Inc.,
         given pursuant to Section 16(b) of the Master Site Agreement.

10.5.2   Master Tower Space Reservation and License Agreement dated February 19,
         1999 between AGW Leasing Company, Inc. and American Tower, L.P.

10.5.3   Master Antenna Site Lease No. J50 dated July 20, 1999 between Pinnacle
         Towers Inc. and AGW Leasing Company, Inc.

10.6.1   Compass Telecom, L.L.C. Construction Management Agreement (Incorporated
         by reference to Exhibit 10.6 to the Registration Statement on Form S-
         1/A filed by the company with the Commission on June 15, 1999 (SEC File
         Nos. 333-79189-02 and 333-79189-01))

10.6.2   First Amendment to Services Agreement between AirGate PCS, Inc. and
         COMPASS Telecom Services, L.L.C. dated May 30, 2000 (Incorporated by
         reference to Exhibit 6.2 to the quarterly report on Form 10-Q filed by
         the company with the Commission on August 14, 2000 for the quarter
         ended June 30, 2000 (SEC File No.000-27455))

10.7     Commercial Real Estate Lease dated August 7, 1998 between AirGate and
         Perry Company of Columbia, Inc. to lease a warehouse facility
         (Incorporated by reference to Exhibit 10.7 to the Registration
         Statement on Form S-1/A filed by the company with the Commission on
         July 12, 1999 (SEC File Nos. 333-79189-02 and 333-79189-01))

10.7.1   Lease Agreement dated August 25, 1999 between Robert W. Bruce,
         Camperdown Company, Inc. and AGW Leasing Company, Inc. to lease
         office/warehouse space in Greenville, South Carolina.

10.8.1   Form of Indemnification Agreement (Incorporated by reference to Exhibit
         10.8 to the Registration Statement on Form S-1/A filed by the company
         with the Commission on June 15, 1999 (SEC File Nos. 333-79189-02 and
         333-79189-01))

10.9     Employment Agreement dated April 9, 1999 by and between AirGate PCS,
         Inc. and Thomas M. Dougherty (Incorporated by reference to Exhibit 10.9
         to the Registration Statement on Form S-1/A filed by the company with
         the Commission on June 15, 1999 (SEC File Nos. 333-79189-02 and 333-
         79189-01))

10.10.1  Form of Executive Employment Agreement (Incorporated by reference to
         Exhibit 10.10 to the Registration Statement on Form S-1/A filed by the
         company with the Commission on July 12, 1999 (SEC File Nos. 333-79189-
         02 and 333-79189-01))

10.11    AirGate PCS, Inc. 1999 Stock Option Plan (Incorporated by reference to
         Exhibit 99.1 to the Registration Statement on Form S-8 filed by the
         company with the Commission on April 10, 2000 (SEC File No. 333-34416))

                                       30
<PAGE>

10.11.1  Form of AirGate PCS, Inc. Option Agreement (Incorporated by reference
         to Exhibit 10.11.1 to the quarterly report on Form 10-Q filed by the
         company with the Commission on August 14 15, 2000 for the quarter ended
         June 30, 2000 (SEC File No. 000-27455))

10.12    Credit Agreement with Lucent (including form of pledge agreement and
         form of intercreditor agreement) (Incorporated by reference to Exhibit
         10.12 to the Registration Statement on Form S-1/A filed by the company
         with the Commission on September 17, 1999 (SEC File Nos. 333-79189-02
         and 333-79189-01))

10.13    Consent and Agreement (Incorporated by reference to Exhibit 10.13 to
         the Registration Statement on Form S-1/A filed by the company with the
         Commission on September 17, 1999 (SEC File Nos. 333-79189-02 and 333-
         79189-01))

10.14    Assignment of Sprint PCS Management Agreement, Sprint Spectrum Services
         Agreement and Trademark and Service Mark Agreement from AirGate
         Wireless, L.L.C. to AirGate Wireless, Inc. dated November 20, 1998
         (Incorporated by reference to Exhibit 10.14 to the Registration
         Statement on Form S-1/A filed by the company with the Commission on
         August 9, 1999 (SEC File Nos. 333-79189-02 and 333-79189-01))

10.15    Form of Warrant for units offering (including from of warrant in units
         offering and form of unit) (Incorporated by reference to Exhibit 10.15
         to the Registration Statement on Form S-1/A filed by the company with
         the Commission on September 23, 1999 (SEC File Nos. 333-79189-02 and
         333-79189-01))

10.16    First Amendment to Employment Agreement dated December 20, 1999 between
         AirGate PCS, Inc. and Thomas M. Dougherty (Incorporated by reference to
         Exhibit 10.16 to the quarterly report on Form 10-Q filed by the company
         with the Commission on May 15, 2000 for the quarter ended March 31,
         2000 (SEC File No.000-27455))

10.17    Retention Bonus Agreement dated May 4, 2000 between AirGate PCS, Inc.
         and Thomas M. Dougherty (Incorporated by reference to Exhibit 10.17 to
         the quarterly report on Form 10-Q filed by the company with the
         Commission on May 15, 2000 for the quarter ended March 31, 2000 (SEC
         File No.000-27455))

21       Subsidiaries of AirGate PCS, Inc.

23       Consent of KPMG

24       Power of Attorney

27       Financial Data Schedule

                                       31
<PAGE>

                                  SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, as amended, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, on December 18,
2000.

                                        AirGate PCS, Inc.

                                        By: /s/ Alan B. Catherall
                                            ------------------------
                                            Name: Alan B. Catherall
                                            Title: Chief Financial Officer
                                            (Principal Financial and
                                            Accounting Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons in the capacities and on the dates
indicated.

<TABLE>
<CAPTION>
               Name                                   Title                                   Date
               ----                                   -----                                   ----
<S>                                        <C>                                          <C>
/s/              *                         Chief Executive Officer and                  December 14, 2000
-----------------------------------        Director (Principal Executive
Thomas M. Dougherty                        Officer)

/s/              *                         Chief Financial Officer                      December 14, 2000
-----------------------------------        (Principal Financial and
Alan B. Catherall                          Accounting Officer)

/s/              *                         Vice President and Director                  December 14, 2000
-----------------------------------
W. Chris Blane

/s/              *                         Vice President and Director                  December 14, 2000
-----------------------------------
Thomas D. Body III

/s/              *                         Chairman of the Board of                     December 15, 2000
-----------------------------------        Directors
Barry Schiffman

/s/              *                         Director                                     December 14, 2000
-----------------------------------
Gill Cogan

/s/              *                         Director                                     December 12, 2000
-----------------------------------
Robert Ferchat

/s/              *                         Director                                     December 14, 2000
-----------------------------------
John R. Dillon

By:  /s/ BARBARA L. BLACKFORD
     -------------------------------
     Barbara L. Blackford
     Attorney-in-fact
</TABLE>

     *  Barbara Blackford, by signing her name hereto, does sign this document
on behalf of the above noted individuals pursuant to powers of attorney duly
executed by such individuals which have been filed as an exhibit to this
Report.

                                       32
<PAGE>

                         INDEPENDENT AUDITORS' REPORT

The Board of Directors
AirGate PCS, Inc.:

     We have audited the accompanying consolidated balance sheets of AirGate
PCS, Inc. and subsidiaries as of September 30, 2000 and 1999, and the related
consolidated statements of operations, stockholders' equity (deficit), and cash
flows for the year ended September 30, 2000, the nine months ended September 30,
1999, and the year ended December 31, 1998. These consolidated financial
statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

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

     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of AirGate PCS,
Inc. and subsidiaries as of September 30, 2000 and 1999 and the results of their
operations and their cash flows for the year ended September 30, 2000, the nine
months ended September 30, 1999, and the year ended December 31, 1998, in
conformity with accounting principles generally accepted in the United States of
America.

                                                       KPMG LLP



Atlanta, Georgia
November 10, 2000

                                      F-1
<PAGE>

                      AIRGATE PCS, INC. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS
          (dollars in thousands, except share and per share amounts)

<TABLE>
<CAPTION>
                                                                   September 30,        September 30,
                                                                       2000                 1999
                                                                -----------------     -----------------
<S>                                                             <C>                   <C>
         Assets
Current assets:
    Cash and cash equivalents                                   $          58,384     $         258,900
    Accounts receivable, net (note 3)                                       8,696                    --
    Inventories                                                             2,902                    --
    Prepaid expenses                                                        2,106                 1,596
    Other current assets (note 4)                                           2,227                 1,974
                                                                -----------------     -----------------
      Total current assets                                                 74,315               262,470

Property and equipment, net (note 5)                                      183,581                44,206
Financing costs                                                             9,098                10,399
Other assets                                                                1,954                   245
                                                                -----------------     -----------------
                                                                $         268,948     $         317,320
                                                                =================     =================
         Liabilities and Stockholders' Equity
Current liabilities:

   Accounts payable                                             $          21,009     $           2,216
   Accrued expenses                                                         9,320                20,178
   Payable to Sprint PCS                                                    5,292                    --
   Deferred revenue                                                         1,828                    --
   Accrued interest                                                           228                 1,413
   Current maturities of long-term debt (note 6)                               --                 7,700
                                                                -----------------     -----------------
      Total current liabilities                                            37,677                31,507
Deferred revenue                                                              671                    --
Long-term debt, excluding current maturities (note 6)                     180,727               157,967
                                                                -----------------     -----------------
      Total liabilities                                                   219,075               189,474
                                                                -----------------     -----------------
Stockholders' equity (note 8):
   Preferred stock, par value, $.01 per share;
      5,000,000 shares authorized; no shares issued and
      outstanding                                                              --                    --
   Common stock, par value, $.01 per share;
      150,000,000 shares authorized;
      12,816,783 and 11,957,201 shares issued
      and outstanding at September 30, 2000
      and September 30, 1999, respectively                                    128                   120
   Additional paid-in-capital                                             161,575               157,880
   Accumulated deficit                                                   (108,577)              (27,254)
   Unearned stock option compensation                                      (3,253)               (2,900)
                                                                -----------------     -----------------
      Total stockholders' equity                                           49,873               127,846
   Commitments and contingencies (notes 2, 6, 10 and 11)
                                                                -----------------     -----------------
                                                                $         268,948     $         317,320
                                                                =================     =================
</TABLE>

         See accompanying notes to consolidated financial statements.

                                      F-2
<PAGE>

                      AIRGATE PCS, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS
          (dollars in thousands, except share and per share amounts)

<TABLE>
<CAPTION>
                                                            Year           Nine Months           Year
                                                           Ended              Ended              Ended
                                                       September 30,      September 30,      December 31,
                                                            2000              1999               1998
                                                      ----------------    --------------   ----------------
<S>                                                   <C>                 <C>              <C>
Revenues:
    Service revenue                                         $    9,183      $         --     $           --
    Roaming revenue                                             12,338                --                 --
    Equipment revenue                                            2,981                --                 --
                                                      ----------------      ------------     --------------
        Total revenues                                     $    24,502      $         --     $           --

Operating expenses:
    Cost of service and roaming                                (27,207)               --                 --
    Cost of equipment                                           (5,685)               --                 --
    Selling and marketing                                      (28,357)               --                 --
    General and administrative                                 (14,078)           (5,294)            (2,597)

    Noncash stock option compensation
       (In 2000, $1,260 related to general and
         administrative, $210 related to cost of
         service and roaming, and $195 related
         to selling and marketing. In 1999,
         $325 related to general and administrative)            (1,665)             (325)                --
         Depreciation and amortization                         (12,034)             (622)            (1,204)
                                                            ----------      ------------     --------------
        Operating loss                                         (64,524)           (6,241)            (3,801)

 Interest income                                                 9,321                --                 --

 Interest expense                                              (26,120)           (9,358)            (1,392)
                                                           -----------      ------------     --------------
         Net loss                                          $   (81,323)     $    (15,599)    $       (5,193)
                                                           ===========      ============     ==============
 Basic and diluted net loss per
     share of common stock                                 $     (6.60)     $      (4.57)    $        (1.54)
                                                           ===========      ============     ==============

 Weighted-average outstanding common shares                 12,329,149         3,414,276          3,382,518
                                                           ===========      ============     ==============

 Weighted-average potentially dilutive
   common stock equivalents:

      Common stock options                                     777,758            42,157                 --
      Stock purchase warrants                                  142,492            29,187                 --
      Convertible promissory notes                                  --           433,249                 --
                                                           -----------      ------------      -------------
Weighted-average outstanding common shares including
  potentially dilutive common stock equivalents             13,249,399         3,918,869          3,382,518
                                                           ===========      ============      =============
</TABLE>

         See accompanying notes to consolidated financial statements.

                                      F-3
<PAGE>

                                                               DRAFT OF 12/13/00


                      AIRGATE PCS, INC. AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
                 (dollars in thousands, except share amounts)

     Year ended September 30, 2000, nine months ended September 30, 1999,
                     and the year ended December 31, 1998

<TABLE>
<CAPTION>
                                              Common Stock
                                         ------------------------     Additional                   Unearned stock       Total
                                                                       paid-in      Accumulated       option        stockholders'
                                           Shares        Amount        capital         deficit     compensation   equity (deficit)
                                         ---------     ----------     ---------     ------------   -------------  ----------------
<S>                                      <C>           <C>            <C>           <C>            <C>            <C>
Balance at December 31, 1997                    --     $       --     $    4,712    $   (6,462)    $       --     $   (1,750)
Formation of AirGate PCS, Inc. (note
1(a))                                    3,382,518             34            (34)           --             --             --
Distribution of AirGate Wireless, LLC           --             --          1,593            --             --          1,593
Net loss                                        --             --             --        (5,193)            --         (5,193)
                                         ---------     ----------      ---------     ---------    -----------    -----------
Balance at December 31, 1998             3,382,518             34          6,271       (11,655)            --         (5,350)
Issuance of stock purchase warrants
  in connection with issuance of
  convertible notes payable to
  stockholders and Lucent Financing
  (notes 8(b)(i) and 8(b)(ii))                  --             --          2,369            --             --          2,369
Beneficial conversion feature of
  convertible notes payable
  to stockholders (note 8(a)(iii))              --             --          6,979            --             --          6,979
Unearned compensation related to
  grant of compensatory stock
  options (note 8(c))                           --             --          3,225            --         (3,225)            --
Stock option compensation (note 8(c))           --                            --            --            325            325
Issuance of common stock, net of
  offering costs (note 8(a)(ii))         7,705,000             77        120,391            --             --        120,468
Issuance of warrants in connection
  with units offering (note 8(b)(iii))          --             --         10,948            --             --         10,948
Conversion of notes payable to
  stockholders to common stock
  (note 8(a)(iii))                         869,683              9          7,697            --             --          7,706
Net loss                                        --             --             --       (15,599)            --        (15,599)
                                        ----------     ----------      ---------     ---------    -----------    -----------
Balance at September 30, 1999           11,957,201            120        157,880       (27,254)        (2,900)       127,846

Conversion of notes payable to
  stockholders to common stock
  (note 8(a)(iii))                          12,533             --            213            --             --            213
Exercise of common stock purchase
  warrants in connection with issuance
  of convertible notes payable to
  stockholders, the Lucent Financing
  and the units offering (notes
  8(b)(i), 8(b)(ii) and 8(b)(iii))         762,444              8             (3)           --             --              5
Unearned compensation related to
  grant of compensatory stock options
  (note 8(c))                                   --             --          2,231            --         (2,231)            --
Issuance of stock purchase warrants
  in connection with Lucent Financing
  (note 8(b)(ii))                               --             --            282            --             --            282
Exercise of stock options (note 8(c))       84,605             --          1,185            --             --          1,185
Forfeiture of compensatory stock
  options (note 8(c))                           --             --           (213)           --            213             --
Stock option compensation (note 8(c))           --                            --            --          1,665          1,665
Net loss                                        --             --             --       (81,323)            --        (81,323)
                                        ----------     ----------      ---------     ---------    -----------    -----------
Balance at September 30, 2000           12,816,783    $       128      $ 161,575    $ (108,577)    $   (3,253)      $ 49,873
                                        ==========     ==========      =========     =========    ===========    ===========
</TABLE>

         See accompanying notes to consolidated financial statements.

                                      F-4

<PAGE>

                      AIRGATE PCS, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                            (dollars in thousands)

<TABLE>
<CAPTION>
                                                                    Year        Nine Months         Year
                                                                   Ended          Ended            Ended
                                                                 September 30,  September 30,    December 31,
                                                                     2000            1999           1998
                                                                 ------------   -------------   ---------------
<S>                                                              <C>            <C>             <C>
Cash flows from operating activities:
     Net loss                                                    $  (81,323)    $  (15,599)     $       (5,193)
     Adjustments to reconcile net loss to net cash
     used in operating activities:
          Depreciation and amortization                              12,034            622               1,204
          Amortization of financing costs                             1,192             --                  --
          Provision for doubtful accounts                               563             --                  --
          Loss on sale of fixed assets                                   --             19                  --
          Interest expense associated with accretion
           of discount and beneficial conversion feature             23,043          8,707                  --
          Stock option compensation                                   1,665            325                  --
          (Increase) decrease in:
            Trade receivables                                        (9,259)            --                  --
            Inventories                                              (2,902)            --                  --
            Prepaid expenses                                           (511)        (1,496)                (95)
            Other current assets                                       (253)          (373)               (378)
            Other assets                                             (1,709)          (114)               (131)
          Increase (decrease) in:
            Accounts payable                                          5,016            767               1,411
            Accrued expenses                                          4,126          3,942                  --
            Sprint payable                                            5,292             --                  --
            Deferred revenue                                          2,499             --                  --
            Accrued interest                                         (1,082)           727               1,007
                                                                 ----------     ----------      --------------
                Net cash used in operating activities               (41,609)        (2,473)             (2,175)
                                                                 ----------     ----------      --------------
Cash flows from investing activities:
     Capital expenditures                                          (152,397)       (15,706)             (5,176)
                                                                 ----------     ----------      --------------
                Net cash used in investing activities              (152,397)       (15,706)             (5,176)
                                                                 ----------     ----------      --------------
Cash flows from financing activities:
     Proceeds from issuance of notes payable and related
           warrants to Lucent                                            --         18,500               5,000
     Payment on notes payable to Lucent                                  --        (10,000)                 --
     Proceeds from issuance of warrants and
           senior subordinated discount notes in units offering          --        156,057                  --
     Financing cost on Lucent Financing and units offering               --        (11,622)                 --
     Proceeds from issuance of common stock                              --        130,985                  --
     Offering costs                                                      --        (10,517)                 --
     Payment of note payable                                             --         (1,000)                 --
     Payment of note payable to Sprint PCS                           (7,700)            --                  --
     Proceeds from issuance of convertible notes payable
           to stockholders and related warrants                          --          2,530               5,200
     Payments on notes payable to stockholders                           --           (150)               (700)
     Proceeds from exercise of stock purchase warrants                    5             --                  --
     Proceeds from exercise of employee stock options                 1,185             --                  --
                                                                 ----------     ----------      --------------
                Net cash (used in) provided by financing
                activities                                           (6,510)       274,783               9,500
                                                                 ----------     ----------      --------------
                Net (decrease) increase in cash and cash
                equivalents                                        (200,516)       256,604               2,149
Cash and cash equivalents at beginning of period                    258,900          2,296                 147
                                                                 ----------     ----------      --------------
Cash and cash equivalents at end of period                       $   58,384     $  258,900      $        2,296
                                                                 ==========     ==========      ==============
Supplemental disclosure of cash flow information -
     cash paid for interest                                      $    2,609     $      503      $        1,279
                                                                 ==========     ==========      ==============
</TABLE>

                                  (continued)

                                      F-5
<PAGE>

                      AIRGATE PCS, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                            (dollars in thousands)

<TABLE>
<CAPTION>


                                                                  Year          Nine Months        Year
                                                                  Ended            Ended           Ended
                                                               September 30,    September 30,   December 31,
                                                                  2000             1999            1998
                                                              --------------   --------------  --------------
<S>                                                           <C>              <C>           <C>
Supplemental disclosure of non-cash investing and
   financing activities:
     Capitalized interest                                        $ 5,938          $ 1,109       $    --
     Grant of common stock purchase warrants related to
       Lucent Financing                                              282              658            --
     Convertible notes payable to stockholders and accrued
       interest converted to equity                                  102            7,706            --
     Beneficial conversion feature of convertible notes
       payable to stockholders                                       111            6,979            --
     Grant of compensatory stock options                           2,231            3,225            --
     Forfeiture of compensatory stock options                       (213)              --            --
     Network assets acquired and not yet paid for                 15,248           16,236            --
     Assets acquired through debt financing                           --               --         7,700
     Distribution of FCC licenses:
         Accrued interest                                             --               --          (894)
         Long-term debt                                               --               --       (11,745)
         FCC licenses                                                 --               --        12,846
         Line of credit                                               --               --        (1,800)
</TABLE>

         See accompanying notes to consolidated financial statements.

                                      F-6
<PAGE>

                      AIRGATE PCS, INC. AND SUBSIDIARIES

                NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                          September 30, 2000 and 1999


(1)  Business, Basis of Presentation and Summary of Significant Accounting
     Policies

     (a)  Business and Basis of Presentation

AirGate PCS, Inc. and subsidiaries (collectively, the "Company") were created
for the purpose of becoming a leading provider of wireless Personal
Communication Services ("PCS"). AirGate PCS, Inc., formed in October 1998, is
the exclusive affiliate of Sprint PCS in its territory and is licensed to use
the Sprint PCS brand name in 21 markets located in the southeastern United
States. The consolidated financial statements included herein include the
accounts of AirGate PCS, Inc. and its wholly-owned subsidiaries, AGW Leasing
Company, Inc., and AirGate Network Services, LLC for all periods presented. All
significant intercompany accounts and transactions have been eliminated in
consolidation.

Prior to October 1998, the predecessor entities' operating activities focused on
developing a PCS business in the southeastern United States. These activities
included the purchase of four Federal Communications Commission ("FCC") PCS
licenses. In July 1998, the Company decided to pursue a different PCS business
opportunity and signed a series of agreements with Sprint and Sprint PCS (the
"Sprint Agreements") to build, construct and manage a PCS network that will
support the offering of Sprint PCS products and services in the Company's
territory. As a result of this change in business strategy, AirGate Wireless,
LLC, which consisted solely of the FCC licenses and related liabilities, was not
transferred to its successor entity, AirGate PCS, Inc. because its assets and
liabilities were not included in the continuing operations of AirGate PCS, Inc.

The PCS market is characterized by significant risks as a result of rapid
changes in technology, increasing competition and the cost associated with the
build-out of a PCS network. The Company's continuing operations are dependent
upon Sprint's ability to perform its obligations under the Sprint Agreements.
Additionally, the Company's ability to attract and maintain a sufficient
customer base is critical to achieving breakeven cash flow. Changes in
technology, increased competition, economic conditions or inability to achieve
breakeven cash flow, among other factors, could have an adverse effect on the
Company's financial position and results of operations.

     (b)  Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, demand deposits, money market
accounts, and investments in commercial paper rated A-1/P-1 or better with
original maturities of three months or less.

     (c)  Inventories

Inventories consist of handsets and related accessories. Inventories are carried
at the lower of cost (determined using the weighted average method) or market
(replacement cost).

     (d)  Property and Equipment

Property and equipment are stated at cost, less accumulated depreciation and
amortization. Depreciation is provided using the straight-line method over the
estimated useful lives of the assets. Asset lives used by the Company are as
follows:

                                                                USEFUL LIFE
                                                                -----------
          Network assets....................................       7 years
          Computer equipment................................       3 years
          Furniture, fixtures, and office equipment.........       5 years


Construction in progress includes expenditures for the purchase of capital
equipment, design services, construction services, and testing of the Company's
network. The Company capitalizes interest on its construction in progress
activities. Interest capitalized for the year ended September 30, 2000 totaled
$5.9 million and $1.1 million for the

                                      F-7
<PAGE>

                       AIRGATE PCS, INC. AND SUBSIDIARY

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                          September 30, 2000 and 1999


nine months ended September 30, 1999. Capitalized interest on construction
activities in prior periods was not material. When the network assets are placed
in service, the Company transfers the assets from construction in progress to
network assets and depreciates those assets over their estimated useful life.

     (e)  Financing Costs

Costs incurred in connection with the Lucent Financing and the Company's
issuance of senior subordinated discount notes were deferred and are amortized
into interest expense over the term of the respective financing using the
effective interest method.

     (f)  Income Taxes

Prior to the formation of AirGate PCS, Inc. in October 1998, the predecessors of
AirGate PCS, Inc. were operated as limited liability companies. As a result,
income taxes were passed through to and were the responsibility of the
stockholders of the predecessors.

The Company has not provided any pro forma income tax information for periods
prior to October 1998 because such information would not be significant to the
accompanying consolidated financial statements.

The Company uses the asset and liability method of accounting for income taxes.
Deferred income tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amount of existing assets and liabilities and their respective tax
basis and net operating loss and tax credit carryforwards. Deferred income tax
assets and liabilities are measured using enacted tax rate expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. The effect on deferred income tax assets and
liabilities of a change in tax rates is recognized in the statement of
operations in the period that includes the enactment date.

     (g)  Net Loss Per Share

The Company computes net loss per common share in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share" and SEC
Staff Accounting Bulletin No. 98. Basic and diluted net loss per share of common
stock is computed by dividing net loss for each period by the weighted-average
outstanding common shares. No conversion of common stock equivalents has been
assumed in the calculations since the effect would be antidilutive. As a result,
the number of weighted-average outstanding common shares as well as the amount
of net loss per share are the same for basic and diluted net loss per share
calculations for all periods presented.

     (h)  Revenue Recognition

The Company sells handsets and accessories which are recorded at the time of the
sale as equipment revenue. After the handset has been purchased, the subscriber
purchases a service package which is recognized monthly as service is provided
and is included as service revenue. Roaming revenue is recorded when Sprint PCS
subscribers, other Sprint PCS affiliate subscribers and non-Sprint PCS
subscribers roam onto the Company's network.

The accounting policy for the recognition of activation fee revenue is to record
the revenue over the periods such revenue is earned in accordance with the
current interpretations of SEC Staff Accounting Bulletin No. 101 (SAB 101),
"Revenue Recognition in Financial Statements." Accordingly, activation fee
revenue and direct customer activation expense has been deferred and will be
recorded over the average life for those customers (30 months) that are assessed
an activation fee. Those customers for which the Company waives the activation
fee must enter into an Advantage Agreement and the direct customer activation
expense is deferred and recorded over the contractual term of the Advantage
Agreement period (12 months). As of September 30, 2000, the Company has
recognized approximately $0.1 million of activation fee revenue and direct
customer activation expense and has deferred $1.2 million of activation fee
revenue and $1.0 million of direct customer activation expense to future
periods.

                                      F-8
<PAGE>


                       AIRGATE PCS, INC. AND SUBSIDIARY

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                          September 30, 2000 and 1999


     (i)  Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed
Of

The Company accounts for long-lived assets in accordance with the provisions of
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived
Assets to be Disposed Of." SFAS No. 121 requires that long-lived assets and
certain identifiable intangibles be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows expected
to be generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets. Assets to be disposed
of are reported at the lower of the carrying amount or fair value less costs to
sell. At September 30, 2000 and 1999, the Company had no impaired assets.

     (j)  Advertising Costs

The company expenses advertising costs when the advertisement occurs. Total
advertising expense was approximately $7.5 million and $0.1 million for the year
ended September 30, 2000 and the nine months ended September 30, 1999,
respectively. No advertising expense was recorded in 1998.

     (k)  New Accounting Pronouncements

On July 8, 1999, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 137, "Deferral of the Effective Date of SFAS 133." SFAS No. 137 defers the
effective date of SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities," to all fiscal quarters of all fiscal years beginning after
June 15, 2000. The adoption is not expected to have a material effect on the
Company's consolidated results of operations, financial position, or cash flows.

In March 2000, the FASB issued FASB Interpretation No. 44, Accounting for
Certain Transactions involving Stock Compensation ("FIN No. 44"). FIN No. 44
clarifies the application of APB No. 25, Accounting for Stock Issued to
Employees, to certain areas of stock based compensation. Among other issues,
FIN No. 44 clarifies the accounting consequences of a modification to the terms
of a fixed stock option award. FIN No. 44 is effective July 1, 2000 but covers
specific events, such as option repricing, which occurred after either December
15, 1998 or January 12, 2000.

     (l)  Development Stage Enterprise

AirGate LLC, the first predecessor of the Company, was established on June 15,
1995 (inception). The Company and its predecessor devoted most of their efforts
through December 31, 1999, to activities such as preparing business plans,
raising capital and planning and executing the build-out of its PCS network.
With the launch of commercial service in several markets during the second
fiscal quarter of 2000, the Company has completed its development stage
activities.

     (m)  Use of Estimates

Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent liabilities at the dates of the consolidated balance sheets and
revenues and expenses during the reporting periods to prepare these consolidated
financial statements in conformity with generally accepted accounting
principles. Actual results could differ from those estimates.

     (n)  Change of Fiscal Year

On October 21, 1999, the Company changed its fiscal year from a calendar year
ending on December 31 to a fiscal year ending on September 30 effective
September 30, 1999.

     (o)  Concentration of risk

The Company maintains cash and cash equivalents in an account with a financial
institution in excess of the amount insured by the Federal Deposit Insurance
Corporation. The financial institution is one of the five largest banks in the
United States and management does not believe there is significant credit risk
associated with deposits in excess of federally insured amounts.

                                      F-9
<PAGE>

                       AIRGATE PCS, INC. AND SUBSIDIARY

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                          September 30, 2000 and 1999


Further, the Company maintains accounts with nationally recognized investment
managers. Such deposits are not insured by the Federal Deposit Insurance
Corporation. Management does not believe there is significant credit risk
associated with these uninsured deposits.

     (p)  Comprehensive Income

No statements of comprehensive income have been included in the accompanying
consolidated financial statements since the Company does not have any "Other
Comprehensive Income" to report.

     (q)  Reclassification

Certain reclassifications have been made to prior year balances to conform to
the current year presentation.

(2)  Sprint Agreements

In July 1998, the Company signed four major agreements with Sprint and Sprint
PCS. They are the management agreement, the services agreement, the trademark
and service license agreement with Sprint and the trademark and service license
agreement with Sprint PCS. These agreements allow the Company to exclusively
offer Sprint PCS services in the Company's territory.

The management agreement has an initial term of 20 years with three 10-year
renewals, the first renewal being automatic. The key clauses within the
management agreement refer to exclusivity, network build-out, products and
services offered for sale, service pricing, roaming, advertising and promotion,
program requirements including technical and customer care standards,
non-competition, inability to use non-Sprint PCS brands and rights of first
refusal and are summarized as follows:

     (a)  Exclusivity. The Company is designated as the only person or entity
          that can manage or operate a PCS network for Sprint PCS in the
          Company's territory. Sprint PCS is prohibited from owning, operating,
          building or managing another wireless mobility communications network
          in the Company's territory while the management agreement is in place.

     (b)  Network build-out. In the management agreement, the Company has agreed
          to cover a specified percentage of the population at coverage levels
          ranging from 39% to 86% within each of the 21 markets that comprise
          the Company's territory by specified dates beginning on March 31, 2000
          and ending on December 31, 2000. The required aggregate coverage of
          all markets is approximately 65% of the 7.1 million in population
          within the Company's territory by December 31, 2000. As of October 16,
          2000, the Company had exceeded its build-out requirements in all 21 of
          its markets.

     (c)  Products and services offered for sale. The management agreement
          identifies the products and services that can be offered for sale in
          the Company's territory. The Company cannot offer wireless local loop
          services specifically designed for the competitive local market in
          areas where Sprint owns the local exchange carrier unless the Sprint
          owned local exchange carrier is named as the exclusive distributor or
          Sprint PCS approves the terms and conditions.

     (d)  Service pricing. The Company must offer Sprint PCS subscriber pricing
          plans designated for national offerings. The Company is permitted to
          establish local price plans for Sprint PCS products and services only
          offered in the Company's market. Sprint PCS will retain 8% of the
          Company's collected service revenues but will remit 100% of revenues
          derived from roaming by Sprint PCS and Sprint PCS affiliate
          subscribers and sales of handsets and accessories and proceeds from
          sales not in the ordinary course of business.

                                      F-10
<PAGE>

                       AIRGATE PCS, INC. AND SUBSIDIARY

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                          September 30, 2000 and 1999


     (e)  Roaming. The Company will earn roaming revenues when a Sprint PCS
          customer from outside of the Company's territory roams onto the
          Company's network. There are established rates for Sprint PCS' or
          affiliates' subscribers roaming and similarly, the Company will pay
          Sprint PCS when the Company's own subscribers use the Sprint PCS
          nationwide network outside the Company's territory. Sprint PCS
          reserves the right to change the established per minute rate for
          roaming.

     (f)  Advertising and Promotion. Sprint PCS is responsible for all national
          advertising and promotion of Sprint PCS products and services. The
          Company is responsible for local advertising and promotion in the
          Company's territory.

     (g)  Program requirements including technical and customer care standards.
          The Company will comply with Sprint PCS' program requirements for
          technical standards, customer service standards, national and regional
          distribution and national accounts programs.

     (h)  Non-competition. The Company may not offer Sprint PCS products and
          services outside the Company's territory.

     (i)  Inability to use non-Sprint PCS brands. Without Sprint PCS' consent,
          the Company may not market, promote, advertise, distribute, lease or
          sell any of the Sprint PCS products on a non-branded, "private label"
          basis or under any brand, trademark or trade name other than the
          Sprint PCS brand, except for sales to resellers.

     (j)  Rights of first refusal. Sprint PCS has certain rights of first
          refusal to buy the Company's assets upon a proposed sale.

The management agreement can be terminated as a result of a number of events
including an uncured breach of the management agreement or bankruptcy of either
party to the agreement. In the event that the management agreement is not
renewed or terminated, certain formulas apply to the valuation and disposition
of the Company's assets.

The services agreement outlines various support services such as activation,
billing and customer care that are provided to the Company by Sprint PCS. These
services are available to the Company at established rates. Sprint PCS can
change any or all of the service rates one time in each twelve month period. The
Company may discontinue the use of any service upon three months written notice.
Sprint PCS has agreed that the services presently offered will be available
until at least December 31, 2001. After that date, Sprint PCS may discontinue a
service provided that it gives nine months written notice. The services
agreement automatically terminates upon termination of the management agreement.

The trademark and service mark license agreements with Sprint and Sprint PCS
provide the Company with non-transferable, royalty free licenses to use the
Sprint and Sprint PCS brand names, the "diamond" symbol and several other
trademarks and service marks. The Company's use of the licensed marks is subject
to adherence to quality standards determined by Sprint and Sprint PCS. Sprint
and Sprint PCS can terminate the trademark and service mark license agreements
if the Company files for bankruptcy, materially breaches the agreement or if the
management agreement is terminated.

(3)  Accounts receivable, net

Accounts receivable, net includes amounts due from Sprint PCS relating to
roaming revenues, amounts from customers with respect to airtime service charges
and amounts from local third party vendors relating to the sale of handsets and
accessories. For the year ended September 30, 2000, roaming revenues from Sprint
PCS totaled $12.3 million, or 50% of total revenues. Of this amount, $5.3
million was recorded as accounts receivable at September 30, 2000. There were no
revenues for the nine months ended September 30, 1999 or the year ended December
31, 1998.

                                      F-11
<PAGE>

                       AIRGATE PCS, INC. AND SUBSIDIARY

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                          September 30, 2000 and 1999


The Company records an allowance for doubtful accounts to reflect the expected
loss on the collection of receivables. Such allowance is recorded for accounts
receivables from customers and third party vendors and totaled $0.6 million at
September 30, 2000. There were no accounts receivable outstanding at September
30, 1999.

(4)       Other Current Assets

Other current assets consists of the following at September 30 (dollars in
thousands):
                                                             2000       1999
                                                             ----       ----


   Current portion of financing costs..............          $1,215     $1,223
   Prepaid activation expenses.....................             627         --
   Due from AirGate Wireless, LLC..................              --        751
   Interest receivable and other...................             385         --
                                                             ------     ------
          Other current assets.....................          $2,227     $1,974
                                                             ======     ======

The assets and liabilities of AirGate Wireless, LLC, a predecessor entity, which
consisted solely of the FCC licenses and related liabilities, were not
transferred to AirGate PCS, Inc., because its assets and liabilities would not
be used in the continuing operations of the Company. The Company made interest
payments totaling $0.4 million during the nine month period ended September 30,
1999 and $0.4 million during the year ended December 31, 1998 related to these
liabilities on behalf of AirGate Wireless, LLC. On January 28, 2000, AirGate
Wireless LLC repaid the Company $0.8 million representing amounts previously
paid by AirGate PCS plus accrued interest.

(5)       Property and Equipment

Property and equipment consists of the following at September 30 (dollars in
thousands):

                                                             2000       1999
                                                             ----       ----

   Network assets.......................................   $158,720    $ 7,700
   Computer equipment...................................      3,081         89
   Furniture, fixtures, and office equipment............      6,800         87
                                                           --------    -------
          Total network assets and equipment............    168,601      7,876
   Less accumulated depreciation and amortization.......    (13,005)      (971)
                                                           --------    -------
          Total network assets and equipment, net.......    155,596      6,905
   Construction in progress.............................     27,985     37,301
                                                           --------    -------
          Property and equipment, net...................   $183,581     44,206
                                                           ========    =======

(6)       Long-Term Debt

          Long-term debt consists of the following at September 30 (dollars in
thousands):

<TABLE>
<CAPTION>
                                                                           2000          1999
                                                                           ----          ----
   <S>                                                                  <C>            <C>
   Unsecured promissory note dated July 22, 1998; interest
        at 14%; due November 15, 1999;..........................        $    --        $    7,700
   Lucent Financing dated August 16, 1999; variable interest of
        LIBOR + 3.75% (10.44% and 9.25% at September 30,
</TABLE>


                                      F-12
<PAGE>

                         AIR PCS, INC. AND SUBSIDIARY

          NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                          September 30, 2000 and 1999

<TABLE>
   <S>                                                                                      <C>                <C>
        2000 and 1999,respectively); interest due quarterly; (net of
        unaccreted original issue discount of $772 and $642 at September
        30, 2000 and 1999, respectively, see note 8(b)(ii))........................             12,728             12,858
   Senior Subordinated Discount Notes due 2009; interest at 13.5%; interest
        accretes until October 1, 2004 after which semi-annual interest
        payments are required beginning April 1, 2005 (net of unaccreted
        original issue discount of $9,853 and $10,948 at September 30,
        2000 and 1999, respectively, see note 8(b)(iii))...........................            167,999            145,109
                                                                                            ----------         ----------
         Total long-term debt......................................................            180,727            165,667
   Less current maturities of long-term debt.......................................                 --             (7,700)
                                                                                            ----------         ----------
         Long-term debt, excluding current maturities..............................         $  180,727         $  157,967
                                                                                            ==========         ==========
</TABLE>

Unsecured Promissory Note

On August 31, 1999, the Company entered into a loan modification agreement with
the holder to defer the initial principal and interest payments due on the
Company's $7.7 million unsecured promissory note from March 1, 1999 to October
15, 1999. On November 15, 1999, the Company entered into an additional loan
modification to defer the maturity date to November 15, 1999. On November 15,
1999, the Company paid all outstanding principal and interest due under the
unsecured promissory note.

Lucent Financing

On August 16, 1999, the Company entered into a $153.5 million Credit Agreement
with Lucent (the "Lucent Financing" or "Credit Agreement"). The Credit Facility
provides for (i) a $13.5 million senior secured term loan (the "Tranche I Term
Loan") which matures on June 6, 2007, and (ii) a $140.0 million senior secured
term loan (the "Tranche II Term Loan") which matures on September 30, 2008.
Mandatory quarterly payments of principal are required beginning December 31,
2002 for the Tranche I Term Loan and March 31, 2004 for the Tranche II Term Loan
initially in the amount of 3.75% of the loan balance then outstanding and
increasing thereafter. A commitment fee of 3.75% on unused borrowings under the
Credit Facility is payable quarterly. For the year ended September 30, 2000,
commitment fees totaled $6.0 million. After October 1, 2000, if the Company
borrows at least 30% of the Tranche II Term Loan, or $42 million, the commitment
fee on unused borrowings decreases to 1.50%, payable quarterly. The Lucent
Facility is secured by all the assets of the Company. In connection with this
financing, the Company issued to Lucent warrants to purchase 139,035 shares of
common stock that were exercisable upon issuance (see note 8(b)(ii)).
Additionally, the Company incurred origination fees and expenses of $5.0 million
which have been recorded as financing cost and are amortized as interest expense
using the effective interest method.

The Lucent Financing is subject to certain restrictive covenants including
maintaining certain financial ratios, reaching defined subscriber growth and
network covered population goals, and limiting annual capital expenditures.
Further, the Credit Facility restricts the payment of dividends on the Company's
common stock. As of September 30, 2000, management believes that the Company is
in compliance with all covenants governing the Lucent Financing.

Senior Subordinated Discount Notes

On September 30, 1999, the Company received proceeds of $156.1 million from the
issuance of 300,000 units, each unit consisting of $1,000 principal amount at
maturity of 13.5% senior subordinated discount notes due 2009 and one warrant to
purchase 2.148 shares of common stock at a price of $0.01 per share (see note
8(b)(iii)) pursuant to a registration statement filed on Form S-1 declared
effective by the Securities and Exchange Commission on September 27, 1999. The
aggregate principal amount outstanding as of September 30, 2000 of the senior
subordinated discount notes was $168.0 million (net of original issue discount
of $9.9 million) which will accrete to the full aggregate principal amount

                                      F-13
<PAGE>

                       AIRGATE PCS, INC. AND SUBSIDIARY

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                          September 30, 2000 and 1999


of $300.0 million by October 1, 2004. The Company incurred expenses,
underwriting discounts and commissions of $6.6 million related to the units
offering which have been recorded as financing costs and are amortized as
interest expense using the effective interest method.

The senior subordinated discount notes contain certain covenants relating to
limitations on the Company's ability to, among other acts, sell assets, incur
additional indebtedness, and make certain payments. As of September 30, 2000,
management believes that the Company is in compliance with all covenants
governing the senior subordinated discount notes.

Aggregate minimum annual principal payments due on all issues of long-term debt
for the next five years at September 30, 2000 and thereafter are as follows
(dollars in thousands):

<TABLE>
<CAPTION>
               Years ending September 30,
               --------------------------
               <S>                                                              <C>
               2001......................................................       $       --
               2002......................................................               --
               2003......................................................            2,025
               2004......................................................            2,025
               2005......................................................            2,700
               Thereafter................................................          306,750
                                                                                ----------
                  Total..................................................          313,500
               Less: Unaccreted interest portion of long-term debt ......         (122,148)
                     Unaccreted original issue discounts.................          (10,625)
                                                                                ----------
                         Total long-term debt............................       $  180,727
                                                                                ==========
</TABLE>

(7)       Fair Value of Financial Instruments

Fair value estimates, assumptions, and methods used to estimate the fair value
of the Company's financial instruments are made in accordance with the
requirements of SFAS No. 107, "Disclosure about Fair Value of Financial
Instruments." The Company has used available information to derive its
estimates. However, because these estimates are made as of a specific point in
time, they are not necessarily indicative of amounts the Company could realize
currently. The use of different assumptions or estimating methods may have a
material effect on the estimated fair value amounts (dollars in thousands).

<TABLE>
<CAPTION>
                                                            September 30,                      September 30,
                                                                 2000                              1999
                                                      --------------------------        --------------------------
                                                      Carrying         Estimated        Carrying         Estimated
                                                       amount          fair value        amount         fair value
                                                       ------          ----------        ------         ----------
<S>                                                   <C>              <C>              <C>             <C>
Cash and cash equivalents.........................       $ 58,384         $ 58,384        $258,900          $258,900
Accounts receivable, net..........................          8,696            8,696              --                --
Accounts payable..................................         21,009           21,009           2,216             2,216
Accrued expenses..................................          9,320            9,320          20,178            20,178
Long-term debt....................................        180,727          181,500         165,667           165,667
</TABLE>

          (a)  Cash and cash equivalents, accounts receivable, accounts payable,
and accrued expenses

The carrying amounts of these items are a reasonable estimate of their fair
value due to the short-term nature of the instruments.

          (b)  Long-term debt

                                      F-14
<PAGE>

                       AIRGATE PCS, INC. AND SUBSIDIARY

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                          September 30, 2000 and 1999


Long-term debt is comprised of the senior subordinated discount notes and the
Lucent Financing. The fair value of the senior subordinated discount notes is
stated at quoted market value as of September 30, 2000 and September 30, 1999.
As there is no active market for the remaining items of long-term debt,
management believes that the carrying amount of the Lucent Financing is a
reasonable estimate of its fair value.

(8)       Stockholders' Equity

          (a)  Common stock

               (i)   Increase in authorized common shares

On May 26, 2000, at a Special Meeting of the stockholders of AirGate PCS, Inc.,
the stockholders voted to amend our Amended and Restated Certificate of
Incorporation to increase the number of authorized shares of our common stock,
par value $0.01 per share, from 25,000,000 to 150,000,000 shares.

               (ii)  Initial Public Offering

On September 30, 1999, the Company sold 7,705,000 shares of its common stock at
a price of $17.00 per share in its initial public offering pursuant to a
registration statement filed on Form S-1 declared effective by the Securities
and Exchange Commission on September 27, 1999. Proceeds from the initial public
offering were $131.0 million. The Company incurred expenses, underwriting
discounts and commissions related to the initial public offering of $10.5
million, which have been reflected as a reduction of the offering proceeds.

               (iii) Conversion of Notes Payable to Stockholders to Common Stock

On September 30, 1999, $4.8 million plus an additional $2.5 million of
convertible notes payable to stockholders and accrued interest were converted
into 869,683 shares of common stock at the applicable conversion price of $8.84
per share, a 48% discount from the initial public offering price. The amount
related to the fair value of the beneficial conversion feature of $7.0 million
as of the date of issuance (May 1999) has been recorded as additional
paid-in-capital and recognized as interest expense from the date of issuance to
the expected date of conversion (August 1999).

On October 21, 1999, the Company's Board of Directors authorized the issuance of
12,533 additional shares of common stock to the affiliates of Weiss, Peck &
Greer Venture Partners and the affiliates of JAFCO American Ventures, Inc.
pursuant to a previously authorized promissory note issued by the Company. The
shares were authorized for issuance in consideration of $0.1 million of interest
that accrued from the period June 30, 1999 to September 28, 1999 on promissory
notes issued to the affiliates of Weiss, Peck & Greer Venture Partners and the
affiliates of JAFCO American Ventures, Inc. The promissory notes and related
accrued interest were converted into shares of common stock at a price 48% less
than the price of a share of common stock sold in the Company's initial public
offering of common stock. The amount related to the fair value of the beneficial
conversion feature of $0.1 million has been recorded as additional
paid-in-capital and recognized as interest expense in the year ended September
30, 2000.

               (iv)  Stock splits

Shares of common stock outstanding reflect a 39,134-for-one stock split
effective July 9, 1999 and subsequent reverse stock splits of 0.996-for-one,
which was effective July 28, 1999, 0.900-for-one which was effective September
15, 1999, and 0.965-for-one which was effective September 27, 1999. All share
and stockholders' equity amounts have been restated for all periods presented
for these stock splits.

                                      F-15
<PAGE>

                       AIRGATE PCS, INC. AND SUBSIDIARY

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                          September 30, 2000 and 1999


          (b)  Common Stock Purchase Warrants

               (i)   Warrants Issued to Stockholders

In August 1998, the Company issued stock purchase warrants to stockholders in
consideration for: (1) loans made by the stockholders to the Company which have
been converted to additional paid-in capital, (2) guarantees of certain bank
loans provided by the stockholders, and (3) in connection with $4.8 million in
financing provided by the stockholders.

In connection with a refinancing of the convertible notes payable to
stockholders in May 1999, the Company cancelled the August 1998 warrants and
issued new warrants to Weiss, Peck & Greer Venture Partners Affiliated Funds to
purchase shares of common stock for an aggregate amount up to $2.7 million at an
exercise price 25% less than the price of a share of common stock sold in the
initial public offering, or $12.75 per share. The warrants for 214,413 shares
were exercisable upon issuance and may be exercised for two years from the date
of issuance. The Company allocated $1.7 million of the proceeds from this
refinancing to the fair value of the warrants and recorded a discount on the
related debt, which was recognized as interest expense from the date of issuance
(May 1999) to the expected date of conversion (August 1999).

On July 11, 2000, all of such warrants were exercised. Net of 40,956 shares
surrendered in payment of the exercise price, 173,457 shares of common stock
were issued.

               (ii)  Lucent Financing

On August 16, 1999, the Company issued stock purchase warrants to Lucent in
consideration of the Lucent Financing. The base price of the warrants equals
120% of the price of one share of common stock at the closing of the initial
public offering, or $20.40 per share, and the warrants are exercisable for an
aggregate of 128,860 shares of the Company's common stock. The warrants expire
on the earlier of August 15, 2004 or August 15, 2001, if, as of such date, the
Company has paid in full all outstanding amounts under the Lucent Financing and
has terminated the remaining unused portion of the commitments under the Lucent
Financing. The Company allocated $0.7 million of the proceeds from the Lucent
Financing to the fair value of the warrants and recorded a discount on the
associated credit facility, which is recognized as interest expense over the
period from the date of issuance to the maturity date using the effective
interest method.

On June 1, 2000, AirGate PCS issued stock purchase warrants for Lucent
Technologies to acquire 10,175 shares of common stock on terms identical to
those identified above. The Company recorded a discount on the associated credit
facility of $0.3 million, which represents the fair value of the warrants on the
date of grant using a Black-Scholes valuation. The discount is recognized as
interest expense over the period from the date of issuance to maturity using the
effective interest method. Interest expense relating to both grants of Lucent
Technologies warrants for the year ended September 30, 2000 and the nine months
ended September 30, 1999, was $0.2 million and $0.1 million, respectively.

On September 14, 2000, warrants to acquire 128,860 shares of common stock at a
price of $20.40 per share were exercised. Net of 48,457 shares surrendered in
payment of the exercise price, 80,403 shares of common stock were issued. As of
September 30, 2000, warrants to acquire 10,175 shares of common stock remain
outstanding.

               (iii) Senior Subordinated Discount Notes

On September 30, 1999, as part of the Company's senior subordinated discount
note offering, the Company issued warrants to purchase 2.148 shares of common
stock for each unit at a price of $0.01 per share. On January 3, 2000, the
Company's registration statement on Form S-1, relating to warrants to purchase
644,400 shares of common stock, was declared effective by the Securities and
Exchange Commission. The warrants expire October 1, 2009.

                                      F-16
<PAGE>

                       AIRGATE PCS, INC. AND SUBSIDIARY

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                          September 30, 2000 and 1999


The Company allocated $10.9 million of the proceeds from the units offering to
the fair value of the warrants and recorded a discount on the notes, which is
recognized as interest expense over the period from issuance to the maturity
date using the effective interest method. For the year ended September 30, 2000,
amortization of the fair value of the warrants totaling $1.1 million was
recorded as interest expense. As of September 30, 2000, warrants representing
508,584 shares of common stock had been exercised and warrants representing
135,816 shares of common stock remain outstanding.

          (c)  Stock Option Plan

On July 28,1999, the Board of Directors approved an incentive stock option plan,
whereby 2.0 million shares of common stock were reserved for issuance to current
and future employees. Options under the plan vest at various terms up to a 5
year period beginning at the grant date and expire ten years from the date of
grant. In the nine months ended September 30, 1999, unearned noncash stock
option compensation of $3.2 million was recorded, for the difference between the
initial public offering price of $17.00 per share and the exercise price at the
date of grant of $14.00 per share. During the year ended September 30, 2000,
unearned noncash stock option compensation for compensatory stock options
representing $2.2 million was recorded for the difference between the exercise
price at the date of grant and the fair value at the date of grant. Noncash
stock option compensation is recognized over the period in which the related
employee services are rendered and totaled $1.7 million and $0.3 million for the
year ended September 30, 2000 and nine months ended September 30, 1999,
respectively.

The Company applies the provisions of APB Opinion No. 25 and related
interpretations in accounting for its stock option plan. Had compensation costs
for the Company's stock option plan been determined in accordance with SFAS No.
123, the Company's net loss and basic and diluted net loss per share of common
stock for the year ended September 30, 2000 and the nine months ended September
30, 1999 would have increased to the pro forma amounts indicated below (dollars
in thousands, except for per share amounts):

<TABLE>
<CAPTION>
                                               Year            Nine Months            Year
                                               Ended              Ended              Ended
                                           September 30,      September 30,       December 31,
                                               2000               1999                1998
                                               ----               ----                ----
<S>                                        <C>                <C>                 <C>
Net loss:
         As reported.....................    $(81,323)           $(15,599)         $(5,193)
         Pro forma.......................     (84,521)            (16,274)          (5,193)
Basic and diluted net loss per
 share of common stock:
         As reported.....................      $(6.60)             $(4.57)          $(1.54)
         Pro forma.......................      $(6.86)             $(4.77)          $(1.54)
</TABLE>

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

<TABLE>
<CAPTION>
                                               Year            Nine Months            Year
                                               Ended              Ended              Ended
                                           September 30,      September 30,       December 31,
                                               2000               1999                1998
                                               ----               ----                ----
<S>                                        <C>                <C>                 <C>
Risk from interest return                      6.5%               6.0%                 --
Volatility                                   120.0%              60.0%                 --
Dividend yield                                   0                  0                  --
Expected life in years                           5                  5                  --
</TABLE>

The following table summarizes activity under the 1999 stock option plan:

<TABLE>
<CAPTION>
                                                                                         Weighted-average
                                                               Number of                  exercise price
                                                                options                     per share
                                                                -------                     ---------
  <S>                                                          <C>                       <C>
  Options outstanding as of December 31, 1998                           --                        --
       Granted                                                   1,075,000                    $14.00
                                                                 ---------                    ------

  Options outstanding as of September 30, 1999                   1,075,000                    $14.00

       Granted                                                     600,500                    $51.63
       Exercised                                                   (84,605)                   $14.00
       Forfeited                                                   (86,250)                   $19.15
                                                                  --------                    ------
</TABLE>

                                      F-17
<PAGE>

                       AIRGATE PCS, INC. AND SUBSIDIARY

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                          September 30, 2000 and 1999


  Options outstanding as of September 30, 2000      1,504,645          $28.72

  Options exercisable as of September 30, 2000        285,395          $14.00
                                                      =======          ======

The following table summarizes information for stock options outstanding at
September 30, 2000:

<TABLE>
<CAPTION>
                                                          Weighted-
                                                           average                  Options
                        Number of    Weighted-average    remaining                Exercisable
    Exercise prices      options      exercise price    contractual life         at September 30,
                                                          (in years)                  2000
    <S>                 <C>          <C>                <C>                      <C>
         $ 2.00             20,000       $ 2.00              9.18                     ----
          14.00            959,145        14.00              8.83                   285,395
     35.875 - 47.50        270,500        44.50              9.45                     ----
     65.125 - 66.94        230,000        66.31              9.71                     ----
          98.50             25,000        98.50              9.44                     ----
                         ---------       ------             -----                   -------
                         1,504,645       $28.72              9.09                   285,395
                         =========       ======             =====                   =======
</TABLE>

         (d)      Preferred Stock

The Company's articles of incorporation authorize the Company's Board of
Directors to issue up to 5 million shares of preferred stock without stockholder
approval. The Company has not issued any preferred stock as of September 30,
2000.

(9)      Income Taxes

Prior to the formation of AirGate PCS, Inc. in October 1998, the predecessors of
the Company were operated as limited liability companies. As a result, income
taxes were passed through to and were the responsibility of the stockholders of
the predecessors.

The provision for income taxes includes income taxes currently payable and those
deferred because of temporary differences between the financial statement and
tax bases of assets and liabilities that will result in taxable or deductible
amounts in the future and any increase or decrease in the valuation allowance
for deferred income tax assets.

                                      F-18
<PAGE>

                       AIRGATE PCS, INC. AND SUBSIDIARY

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                          September 30, 2000 and 1999

Income tax expense (benefit) for the year ended September 30, 2000, the nine
months ended September 30, 1999 and the year ended December 31, 1998 differed
from the amounts computed by applying the statutory U.S. Federal income tax rate
of 34% to loss before income taxes as a result of the following (dollars in
thousands):

<TABLE>
<CAPTION>
                                                                          Year            Nine Months          Year
                                                                          Ended              Ended            Ended
                                                                      September 30,     September 30,       December 31,
                                                                          2000               1999              1998
                                                                          ----               ----              ----
       <S>                                                            <C>               <C>                <C>
       Computed "expected" tax benefit............................       $ (27,650)        $ (5,304)        $ (1,765)
       (Increase) decrease in income tax benefit resulting from:
       Expenses related to LLC predecessors.......................              --                7              569
       State income tax benefit, net of Federal effect............          (5,116)            (325)            (187)
       Increase in valuation allowance............................          31,000            3,869            1,893
       Benefit derived from contribution of tax assets............              --               --             (415)
       Nondeductible interest expense.............................           1,224            1,916               --
       Other, net.................................................             542             (163)             (95)
                                                                         ---------         --------         --------
              Total income tax expense (benefit)..................       $      --         $     --         $     --
                                                                         =========         ========         ========
</TABLE>

The income tax effect of temporary differences that give rise to significant
portions of the Company's deferred income tax assets and liabilities as of
September 30, 2000 and 1999 are presented below (dollars in thousands):

<TABLE>
<CAPTION>
                                                                                  2000                1999
                                                                                  ----                ----
          <S>                                                                 <C>                    <C>
          Deferred income tax assets:
          Net operating loss carryforwards..............................      $ 24,549               $ 1,784
          Capitalized start-up costs....................................         7,259                 3,669
          Accrued expenses..............................................           295                    10
          Deferred interest expense.....................................         7,321                    --
          Property and equipment, principally due to differences in
           depreciation and amortization................................            --                   299
                                                                              --------           -----------
          Gross deferred income tax assets..............................        39,424                 5,762
          Less valuation allowance......................................       (36,762)               (5,762)
                                                                              --------           -----------
          Net deferred income tax assets................................         2,662                    --
          Deferred income tax liabilities, principally due to
          differences in depreciation and amortization..................        (2,662)                   --
                                                                              --------           -----------
          Net deferred income tax assets................................      $     --           $        --
                                                                              ========           ===========
</TABLE>

Deferred income tax assets and liabilities are recognized for differences
between the financial statement carrying amounts and the tax basis of assets and
liabilities which result in future deductible or taxable amounts and for net
operating loss and tax credit carryforwards. In assessing the realizability of
deferred income tax assets, management considers whether it is more likely than
not that some portion of the deferred income tax assets will be realized. The
ultimate realization of deferred income tax assets is dependent upon the
generation of future taxable income during the periods in which those temporary
differences become deductible. Management has provided a valuation allowance
against all of its deferred income tax assets because the realization of those
deferred tax assets is uncertain.

                                      F-19
<PAGE>

                       AIRGATE PCS, INC. AND SUBSIDIARY

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                          September 30, 2000 and 1999

The valuation allowance for deferred income tax assets as of September 30, 2000
and 1999 was $36.8 million and $5.8 million, respectively. The net change in the
total valuation allowance for the year ended September 30, 2000 and the nine
months ended September 30, 1999 was an increase of $31.0 million and $3.9
million, respectively.

At September 30, 2000, the Company has net operating loss carryforwards for
Federal income tax purposes of approximately $60.0 million, which will expire in
various amounts beginning in the year 2019. Approximately $1.4 million of the
net operating loss carryforwards that the Company may use to offset taxable
income in future years is limited as a result of an ownership change, as defined
under Internal Revenue Code Section 382, which occurred effective with the
Company's initial public offering of stock on September 30, 1999. The amount of
this annual limitation is approximately $2.8 million per year. As a result, it
is anticipated that the net operating losses of the Company will be free of any
limitation, as a result of the September 30, 1999 change of ownership, in the
year ended September 30, 2001. At September 30, 2000, the Company also has a
South Carolina general business credit carryforward of approximately $0.5
million available to offset income tax expense from this state that will expire
in the year 2009.

(10)  Condensed Consolidating Financial Information

AGW Leasing Company, Inc. ("AGW") is a wholly-owned subsidiary of AirGate PCS,
Inc. AGW has fully and unconditionally guaranteed the Company's senior
subordinated discount notes and Lucent Financing. AGW was formed to hold the
real estate interests for the Company's PCS network. AGW also was a registrant
under the Company's registration statement declared effective by the Securities
and Exchange Commission on September 27, 1999. AGW jointly and severably
guarantees the Company's long-term debt.

During fiscal 2000, AirGate Network Services LLC ("ANS") was created as a
wholly-owned subsidiary of AirGate PCS, Inc. ANS has fully and unconditionally
guaranteed the Company's senior subordinated discount notes and Lucent
Financing. ANS was formed to provide construction management services for the
Company's PCS network. ANS jointly and severably guarantees the Company's long-
term debt.

The unaudited condensed consolidating financial information for AGW and ANS as
of September 30, 2000 and for the year then ended is as follows (dollars in
thousands):

<TABLE>
<CAPTION>
                                                                                            AirGate
                                                                           AGW Leasing      Network
                                                      AirGate PCS, Inc.   Company, Inc.   Services LLC  Eliminations  Consolidation
                                                      -----------------   -------------   ------------  ------------  -------------
<S>                                                   <C>                 <C>             <C>           <C>           <C>
Cash and cash equivalents .......................         $  58,636         $      --      $    (252)     $      --      $  58,384
Property and equipment, net .....................           138,924                --         44,657             --        183,581
Other assets ....................................            85,055                --            500        (58,572)        26,983
                                                          ---------         ---------      ---------      ---------      ---------
     Total assets ...............................         $ 282,615         $      --      $  44,905      $ (58,572)     $ 268,948
                                                          =========         =========      =========      =========      =========

Current liabilities .............................         $  36,760         $  11,133      $  48,356      $ (58,572)     $  37,677
Long-term deferred revenue ......................               671                --             --             --            671
Long-term debt ..................................           180,727                --             --             --        180,727
                                                          ---------         ---------      ---------      ---------      ---------
     Total liabilities ..........................           218,158            11,133         48,356        (58,572)       219,075
                                                          ---------         ---------      ---------      ---------      ---------

Common stock ....................................               128                --             --             --            128
Additional paid-in-capital ......................           161,575                --             --             --        161,575

Accumulated deficit .............................           (93,993)          (11,133)        (3,451)            --       (108,577)
Unearned stock option compensation ..............            (3,253)               --             --             --         (3,253)
                                                           --------          --------      ---------      ---------      ---------
     Total liabilities and stockholders' equity .          $282,615          $     --       $ 44,905      $ (58,572)     $ 268,948
                                                           ========          ========      =========      =========      =========


Total revenues ..................................            24,502                --             --             --         24,502
</TABLE>

                                      F-20
<PAGE>

<TABLE>
<S>                                                                  <C>          <C>          <C>          <C>          <C>
Cost of service and roaming ......................................     (18,350)      (8,857)          --           --      (27,207)
Selling and marketing ............................................     (27,832)        (525)          --           --      (28,357)
General and administrative .......................................     (13,706)        (372)          --           --      (14,078)
Other ............................................................     (24,149)          --           --           --      (24,149)
Depreciation and amortization ....................................      (8,583)          --       (3,451)          --      (12,034)
                                                                     ---------    ---------    ---------    ---------    ---------
Total expenses ...................................................     (92,620)      (9,754)      (3,451)          --     (105,825)
                                                                     ---------    ---------    ---------    ---------    ---------
Net loss .........................................................   $ (68,118)   $  (9,754)   $  (3,451)          --    $ (81,323)
                                                                     =========    =========    =========    =========    =========
Operating activities, net ........................................     (89,165)          --    $  47,556           --    $ (41,609)
Investing activities - capital expenditures ......................    (104,589)          --      (47,808)          --     (152,397)
Financing activities .............................................      (6,510)          --           --           --       (6,510)
                                                                     ---------    ---------    ---------    ---------    ---------
Decrease in cash and cash equivalents ............................    (200,264)          --         (252)          --     (200,516)
Cash and cash equivalents at end of period .......................   $  58,636    $      --    $    (252)   $      --    $  58,384
                                                                     =========    =========    =========    =========    =========
</TABLE>

The unaudited condensed consolidating financial information for AGW and ANS as
of September 30, 1999 and for the nine months then ended is as follows (dollars
in thousands):

<TABLE>
<CAPTION>
                                                                                           AirGate
                                                                        AGW Leasing        Network
                                                    AirGate PCS, Inc.   Company, Inc.   Services LLC   Eliminations   Consolidation
                                                    -----------------   -------------   ------------   ------------   -------------
<S>                                                 <C>                 <C>             <C>            <C>            <C>
Cash and cash equivalents ........................     $    258,900     $       --      $       --     $       --     $    258,900
Property and equipment, net ......................           44,206             --              --             --           44,206
Other assets .....................................           15,593             --              --         (1,379)          14,214
                                                       ------------     ----------      ----------     ----------     ------------
     Total assets ................................     $    318,699     $       --      $       --     $   (1,379)    $    317,320
                                                       ============     ==========      ==========     ==========     ============

Current liabilities ..............................     $     31,507     $    1,379      $       --     $   (1,379)    $     31,507

Long-term debt ...................................          157,967             --              --             --          157,967
                                                       ------------     ----------      ----------     ----------     ------------

     Total liabilities ...........................          189,474          1,379              --         (1,379)         189,474
                                                       ------------     ----------      ----------     ----------     ------------

Common stock .....................................              120             --              --             --              120
Additional paid-in-capital .......................          157,880             --              --             --          157,880

Accumulated deficit...............................          (25,875)        (1,379)             --             --          (27,254)
Unearned stock option compensation ...............           (2,900)            --              --             --           (2,900)
                                                       ------------     ----------      ----------     ----------     ------------
     Total liabilities and stockholders' equity...     $    318,699     $       --      $       --     $   (1,379)    $    317,320
                                                       ============     ==========      ==========     ==========     ============

Total expenses ...................................          (14,220)        (1,379)             --             --          (15,599)
                                                       ------------     ----------      ----------     ----------     ------------
Net loss .........................................     $    (14,220)    $   (1,379)     $       --     $       --     $    (15,599)
                                                       ============     ==========      ==========     ==========     ============
</TABLE>

(11)      Commitments

          (a)  Leases

The Company is obligated under noncancelable operating lease agreements for
office space, cell sites, vehicles and office equipment. Future minimum annual
lease payments under these noncancelable operating lease agreements for the next
five years and in the aggregate at September 30, 2000, are as follows (dollars
in thousands):

                    Years ending September 30,
                    --------------------------

                     2001........................................       $ 14,022
                     2002........................................         14,149
                     2003........................................         13,585

                                      F-21
<PAGE>

                       AIRGATE PCS, INC. AND SUBSIDIARY

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                          September 20, 2000 and 1999

<TABLE>
                <S>                                                        <C>
                2004....................................................        12,787
                2005....................................................         7,303
                Thereafter..............................................        18,463
                                                                           -----------
                       Total future minimum annual lease payments.......   $    80,309
                                                                           ===========
</TABLE>

Rental expense for all operating leases was $9.8 million, $1.4 million and $0.3
million for the year ended September 30, 2000, the nine months ended September
30, 1999, and the year ended December 31, 1998, respectively.

     (b)       Employment Agreements

The Company has entered into employment agreements with certain employees which
provide that the employee will not compete in the business of wireless
telecommunications in the Company's territory for a specified period after their
respective termination dates. The employment agreements also define employment
terms including salary, bonus and benefits to be provided to the respective
employees.

On May 4, 2000, the Company entered into a retention bonus agreement with Thomas
M. Dougherty, its Chief Executive Officer. So long as Mr. Dougherty is not
terminated for cause or does not voluntarily terminate employment, the Company
on specified payment dates, generally quarterly, extending to January 15, 2004,
periodic retention bonuses totaling $3.6 million will be earned and paid to Mr.
Dougherty by the Company. Compensation expense of $1.2 million was recorded in
the year ended September 30, 2000 related to amounts earned under the retention
bonus agreement. Under the terms of the agreement, partial acceleration of the
future payments would occur upon a change in control of the Company.

     (c)       Employee Benefit Plans

In February 2000, the Company established the AirGate PCS 401(k) Retirement
Plan, a defined contribution employee savings plan under Section 401(k) of the
Internal Revenue Code. For the year ended September 30, 2000, employer
contributions of $0.2 million were made to the plan.

(12) Related Party

For the year ended September 30, 2000, an affiliated company provided the
Company investment management services with fees totaling $44,000.

(13) Selected Quarterly Financial Data (Unaudited):

<TABLE>
<CAPTION>
                                                First         Second         Third        Fourth
                                               Quarter       Quarter        Quarter       Quarter       Total
                                               -------       -------        -------       -------       -----
<S>                                           <C>           <C>           <C>            <C>         <C>
Year Ended September 30, 2000:

   Total revenue...........................   $    130      $  1,580      $   6,542      $ 16,250    $  24,502
   Operating loss..........................     (6,331)      (13,987)       (20,300)      (23,906)     (64,524)
   Net loss................................     (9,828)      (17,104)       (25,196)      (29,195)     (81,323)

   Net loss per share:

       Basic and diluted (1)...............      (0.82)        (1.40)         (2.03)        (2.30)       (6.60)

Nine Months Ended September 30, 1999:
   Total revenue...........................   $      -      $      -      $       -      $     --            -
   Operating loss..........................       (836)       (1,372)        (4,033)           --       (6,241)

   Net loss................................     (1,580)       (6,185)        (7,834)           --      (15,599)

   Net loss per share:
</TABLE>

                                      F-22
<PAGE>

                       AIRGATE PCS, INC. AND SUBSIDIARY

         NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                          September 20, 2000 and 1999

<TABLE>
     <S>                                    <C>           <C>            <C>              <C>       <C>
     Basic and diluted (1) ...............  (0.47)        (1.83)         (2.25)           --        (4.57)
</TABLE>

(1)  The total net loss per share does not equal the sum of the quarterly net
     losses per share due to the change in fully diluted shares outstanding
     during the year and nine month period.

(14) Subsequent Events

(a)  On October 2, 2000, the Company borrowed an additional $42.0 million under
the Lucent Financing. As a result, the commitment fee for undrawn commitments
under the facility decreased to 1.50% per annum, payable quarterly.

                                     F-23
<PAGE>

                         Independent Auditors' Report
                         ----------------------------


The Board of Directors
AirGate PCS, Inc.:

Under date of November 10, 2000, we reported on the consolidated balance sheets
of AirGate PCS, Inc. and subsidiaries as of September 30, 2000 and 1999, and the
related consolidated statements of operations, stockholders' equity (deficit),
and cash flows for the year ended September 30, 2000, the nine months ended
September 30, 1999, and the year ended December 31, 1998. In connection with our
audits of the aforementioned consolidated financial statements, we also audited
the related financial statement schedule in the annual report on Form 10-K, as
listed in the index under Item 14. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this financial statement schedule based on our audits.

In our opinion, such financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, present fairly,
in all material respects, the information set forth therein.

/s/ KPMG LLP

Atlanta, Georgia
November 10, 2000


                                     F-24
<PAGE>

                      AIRGATE PCS, INC. AND SUBSIDIARIES

                CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS

                    FOR THE YEAR ENDED SEPTEMBER 30, 2000,
                  THE NINE MONTHS ENDED SEPTEMBER 30, 1999,
                     AND THE YEAR ENDED DECEMBER 31, 1998
                                (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                ADDITIONS
                                                            BALANCE AT          CHARGED TO                             BALANCE AT
                                                           BEGINNING OF         COSTS AND                                END OF
                                                              PERIOD             EXPENSES           DEDUCTIONS           PERIOD
                                                           ------------         ----------          ----------         ----------
<S>                                                        <C>                  <C>                 <C>                <C>
CLASSIFICATION
September 30, 2000
                     Allowance for Doubtful Accounts          $    -               $   563              $    -           $   563

                     Income Tax Valuation Allowance           $5,762               $31,000              $    -           $36,762


September 30, 1999
                     Allowance for Doubtful Accounts          $    -               $     -              $    -           $     -

                     Income Tax Valuation Allowance           $1,893               $ 3,869              $    -           $ 5,762

December 31, 1998
                     Allowance for Doubtful Accounts          $    -               $     -              $    -           $     -

                     Income Tax Valuation Allowance           $                    $ 1,893              $    -           $ 1,893



</TABLE>

                                     F-25