**Exhibit 99.1**

 

**Factors Affecting Future Financial Results**

**Statement Regarding Forward-Looking Disclosure and Risk Factors**

 

Thisannual report on Form 10-K contains statements about future events andexpectations that are “forward-looking statements.”  These statements relate to future events orour future financial performance, and involve known and unknown risks,uncertainties and other factors that may cause our actual results, levels ofactivity, performance or achievements to be materially different from anyfuture results, levels of activity, performance or achievements expressed orimplied by these forward-looking statements. In some cases, you can identify forward-looking statements byterminology such as “may,” “will,” “should,” “could,” “expects,” “intends,” “plans,”“anticipates,” “believes,” “estimates,” “predicts,” or the negative use ofthese terms or other comparable terminology. Any statement in this annual report on Form 10-K that is not astatement of historical fact may be deemed to be a forward-lookingstatement.  All statements other thanstatements of historical fact included in this annual report on Form 10-K,including without limitation, the statements under “Item 1. Business” and “Item7. Management’s Discussion and Analysis of Financial Condition and Results ofOperations” and located elsewhere herein regarding our financial position andliquidity are forward-looking statements.

 

Althoughwe believe that the expectations reflected in such forward-looking statementsare based upon reasonable assumptions, we can give no assurance that suchexpectations will prove to be correct or that our goals will be achieved.  Given these uncertainties, you are cautionednot to place undue reliance on these forward-looking statements.  These forward-looking statements are made asof the date of this annual report on Form 10-K.  We assume no obligation to update or revisethem or provide reasons why actual results may differ.

 

Theseforward-looking statements involve known and unknown risks, uncertainties andother factors which may cause our actual results, performance or achievementsto be materially different from any future results, performance or achievementsexpressed or implied by such forward-looking statements.  All subsequent written and oral forward-lookingstatements attributable to us or persons acting on our behalf are expresslyqualified in their entirety by the Cautionary Statements.  See “Item 7. Management’s Discussion andAnalysis of Financial Condition and Results of Operations” for furtherinformation regarding several of the risks and uncertainties.

 

**RisksRelated to Our Business, Strategy and Operations**

 

*Oursubstantial leverage could adversely affect our ability to raise additionalcapital if needed and to service our debt.*

 

We are highlyleveraged.  As of December 31, 2004,our total outstanding long-term debt was approximately $125.0 million.  As of that date, such indebtednessrepresented approximately 49% of our total capitalization.  In addition, if the merger with iPCS is consummated,iPCS’ total outstanding long-term indebtedness as of December 31, 2004, ona pro forma basis, would have been $290.0 million.  If we incur additional indebtedness thatranks equally with the senior notes, the holders of that debt will be entitledto share ratably with the holders of the senior notes in any proceedsdistributed in connection with any insolvency, liquidation, reorganization,dissolution or other winding-up of our company.

 

Oursubstantial indebtedness could adversely affect our financial health by, amongother things:

 

•                                          increasing our vulnerability to adverse economic and industry conditions;

 

•                                          limiting our ability to obtain any additional financing we may need tooperate, develop and expand our business;

 

•                                          limiting our flexibility in planning for, or reacting to, changes in ourbusiness and the industry in which we operate;

 

•                                          requiring us to dedicate a substantial portion of any cash flow from ouroperating activities to service our debt, which reduces the funds available foroperations and future business opportunities; and

 

•                                          potentially making us more highly leveraged than our competitors, whichcould decrease our ability to compete in our industry.

 

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Theability to make payments on our debt will depend upon our future operatingperformance and ability to generate cash, which are subject to general economicand competitive conditions and to financial, business and other factors, manyof which we cannot control.  If the cashflow from our operating activities is insufficient, we may take actions, suchas delaying or reducing capital expenditures, attempting to restructure orrefinance our debt, selling assets or operations or seeking additional equitycapital.  Any or all of these actions maynot be sufficient to allow us to service our debt obligations.  Further, we may be unable to take any ofthese actions on satisfactory terms in a timely manner or at all.  We may need to refinance all or a portion ofour indebtedness, including the senior notes, on or before maturity.  We may not be able to refinance any of ourindebtedness on commercially reasonable terms, or at all.  The indenture that governs the senior noteslimits our ability to take several of these actions.  Our failure to generate sufficient funds topay our debts or to successfully undertake any of these actions could, amongother things, materially adversely affect the market value of the senior notesand our ability to repay our obligations under the senior notes.  The indenture that governs the senior notespermits us and our subsidiaries to incur additional indebtedness subject tocertain limitations, which could further exacerbate the risks associated withour leverage.

 

*Werecently emerged from bankruptcy and we have a history of net losses.  We may incur additional losses in the futureand our operating results could fluctuate significantly on a quarterly andannual basis.  As a result, we may beunable to pay amounts due under the senior notes and you could lose all or partof your investment.*

 

Weemerged from bankruptcy on October 1, 2004.  We sustained net losses attributed to commonstockholders of $24.0 million for the three months ended December 31,2004.  Our earnings were insufficient tocover fixed charges by $24.1 million for the three months ended December 31,2004.  Our future operating profitabilityand cash flow from operating activities will depend upon many factors,including, among others, our ability to market Sprint PCS products andservices, achieve projected market penetration and manage subscriber turnoverrates.  If we do not achieve and maintainoperating profitability and positive cash flow from operating activities, wemay be unable to make interest or principal payments on the senior notes andyou could lose all or part of your investment.

 

Inaddition, our future operating results and cash flow will be subject toquarterly and annual fluctuations due to many factors, some of which areoutside our control.  These factorsinclude increased costs we may incur in connection with the further development,expansion and upgrade of our wireless network and fluctuations in the demandsfor our services.  We may not be able toachieve or sustain profitability.  To theextent our quarterly or annual results of operations fluctuate significantly,we will be unable to pay amounts due under the senior notes and you could loseall or part of your investment.

 

*It isour strategy to resume building our subscriber base, which may negativelyaffect our near-term profitability.*

 

Duringour bankruptcy proceedings, we experienced overall reduced net subscribergrowth as compared to prior periods.  Welimited new subscriber activation volume to ensure adequate liquidity to meetour financial obligations.  As a means toconserve cash in 2003, we closed 20 company-owned retail stores and cancellednine agreements with local third-party distributors, one of which accounted for52 stores throughout our markets, thereby reducing our retail presence in anumber of our markets.  After October 1,2004, the effective date of our Plan of Reorganization, we further reduced ourstores to nine full service retail stores and two customer service stores.  As we seek to resume building our subscriberbase consistent with our new strategy, we will incur significant up-frontsubscriber acquisition expenses, which initially will result in reduced levelsof net income and cash flow from operating activities as compared to our mostrecent prior periods.

 

*Ourfinancial condition or results of operations will not be comparable to thefinancial condition or results of operations reflected in our historicalfinancial statements.*

 

As aresult of the Reorganization, we are operating our existing business under anew capital structure.  In addition, weare subject to fresh-start accounting principles, and we no longer operate inthe NTELOS markets.  As required byfresh-start accounting, our assets have been recorded at fair value, with theenterprise value determined in connection with the Reorganization.  Accordingly, our financial condition and resultsof operations from and after the effective date of the Plan of Reorganizationare not comparable to the financial condition or results of operationsreflected in our historical financial statements for periods prior to that dateincluded elsewhere in this annual report on Form 10-K.

 

*Thebankruptcy proceeding may adversely affect our ability to engage intransactions.*

 

Our pastinability to meet our obligations that resulted in our bankruptcy filing, orthe perception that we may not be able to meet our obligations since ouremergence from bankruptcy, could adversely affect our relationships with thirdparties, as well as our ability to retain or attract high-qualityemployees.  For example, we may havedifficulty entering into leases and other agreements related to our operationsbecause of our bankruptcy filing.

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*Theterms of our debt place restrictions on us and our subsidiaries, which maylimit our operating flexibility.*

 

Theindenture that governs the senior notes imposes material operating andfinancial restrictions on us and our subsidiaries. These restrictions may limitour ability and the ability of our subsidiaries to, among other things:

 

•                  incur additional debt or, in the case of our restricted subsidiaries,issue capital stock to a third party;

 

•                  pay dividends, redeem capital stock or make other restricted payments orinvestments;

 

•                  create liens on assets;

 

•                  merge, consolidate or dispose of assets;

 

•                  enter into transactions with affiliates;

 

•                  place restrictions on the ability of our restricted subsidiaries to paydividends or make other payments to us; and

 

•                  change our lines of business.

 

Theserestrictions could limit our ability to obtain debt financing, repurchasestock, refinance or pay principal or interest on our outstanding debt, completeacquisitions for cash or debt or react to changes in our operating environment.Any future debt that we incur may contain similar or more restrictivecovenants.

 

*If we receive less revenues orincur more fees than we anticipate for PCS roaming from Sprint PCS, our resultsof operations may be negatively affected.*

 

We arepaid a fee from Sprint PCS or PCS Affiliates of Sprint for every voice minuteand data kilobit that Sprint PCS’ or PCS Affiliates’ subscribers use on ournetwork.  Similarly, we pay a fee toSprint PCS or another PCS Affiliate of Sprint for every voice minute and datakilobit that our subscribers use on the Sprint PCS network outside ourterritory.  The per minute and perkilobit rates that we receive from and pay to Sprint PCS or another PCSAffiliate of Sprint are the same.  Underthe recent addendum to our affiliation agreements with Sprint PCS, we agreedwith Sprint PCS that the voice rate would be $0.058 per minute until December 31,2006, except with respect to several of our markets which, under ouraffiliation agreements with Sprint PCS, are subject to an exception that fixesthe reciprocal voice rate at $0.10 per voice minute.  Sprint PCS subscribers based in our territorymay spend more time outside our territory than we anticipate, and wirelesssubscribers from outside our territory may spend less time in our territory ormay use our services less than we anticipate. As a result, we may receive less Sprint PCS roaming revenue and/or haveto pay more in Sprint PCS roaming fees than we collect in Sprint PCS roamingrevenue.

 

*Roaming revenue from subscribersof wireless communications providers other than Sprint PCS and its PCSAffiliates may decline in the future.*

 

Wederive a significant amount of roaming revenue from wireless communicationsproviders other than Sprint PCS and PCS Affiliates of Sprint for permittingtheir subscribers to roam on our network when they are in our territory.  For the period from January 1, 2004through September 30, 2004, and the period from October 1, 2004through December 31, 2004, approximately 14% and 19%, respectively, of ourroaming revenue was attributable to revenue derived from these other wirelesscommunications providers.  We do not haveagreements directly with these providers. Instead, we rely on roaming arrangements that Sprint PCS hasnegotiated.  Sprint PCS may negotiateroaming arrangements with other wireless communications providers at rates thatare lower than current rates, resulting in a decrease in our roaming revenue.  If the rates offered by Sprint PCS are notattractive, these other wireless communications providers may decide tobuild-out their own networks in our territory and compete with us directly orenter into roaming arrangements with our competitors who also have networks inour territory.  The loss of all or asignificant portion of this roaming revenue would have a material adverseeffect on our financial condition and operating results.  Roaming revenue from subscribers of wirelesscommunications providers other than Sprint PCS and PCS Affiliates of Sprint mayalso decline as a result of decreased roaming traffic in our territory if ourquality of service does not continue to meet designated technical and qualitystandards or if we are unable to control fraudulent use.

 

*Ourroaming arrangements may not be competitive with other wireless communicationsproviders, which may restrict our ability to attract and retain subscribers andthus may adversely affect our operations.*

 

We donot have agreements directly with other wireless service providers for roamingcoverage outside our territory. Instead, we rely on roaming arrangements that Sprint PCS has negotiatedwith other wireless communications providers for coverage in these areas.  Some of the risks related to thesearrangements include:

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•                                          the arrangements may not benefit us in the same manner that they benefitSprint PCS;

 

•                                          the quality of the service provided by another provider during a roamingcall may not approximate the quality of the service provided by Sprint PCS;

 

•                                          the price of a roaming call may not be competitive with prices charged byother wireless companies for roaming calls;

 

•                                          subscribers must end a call in progress and initiate a new call whenleaving the Sprint PCS network and entering another wireless network;

 

•                                          Sprint PCS subscribers may not be able to use advanced PCS features fromSprint PCS, such as PCS Vision, while roaming;

 

•                                          Sprint PCS or the carriers providing the service may not be able toprovide us with accurate billing information on a timely basis; and

 

•                                          if Sprint PCS subscribers do not have a similar wireless experience aswhen they are on the PCS network of Sprint PCS, we may lose current subscribersand Sprint PCS products and services may be less attractive to potential newsubscribers.

 

*Unauthorizeduse of, or interference with, the Sprint PCS network in our territory coulddisrupt our service and increase our costs.*

 

We mayincur costs associated with the unauthorized use of the Sprint PCS network inour territory, including administrative and capital costs associated withdetecting, monitoring and reducing the incidence of fraud.  Fraudulent use of our network may impactinterconnection costs, capacity costs, administrative costs, fraud preventioncosts and payments to other carriers for fraudulent roaming.

 

*If welose the right to install our equipment on wireless towers or are unable torenew expiring leases for wireless towers on favorable terms, or at all, ourbusiness and results of operations could be adversely impacted.*

 

All ofour base stations are installed on leased or licensed tower facilities.  A large portion of these leased or licensedtower sites are owned or leased by a few tower companies.  If a master agreement with one of these towercompanies were to terminate, or if one of these tower companies were unable tosupport the use of its tower sites by us, we would have to find new sites ormay be required to rebuild the affected portion of our network.  In addition, the concentration of our towerleases with a limited number of tower companies could adversely affect ourresults of operations and financial condition if any of our operatingsubsidiaries are unable to renew their expiring leases with these towercompanies either on favorable terms, or at all.  If any of the tower leasing companies that wedo business with should experience severe financial difficulties, or file forbankruptcy protection, our ability to use our towers could be adverselyaffected.  That, in turn, would adverselyaffect our revenues and financial condition if a material number of towers wereinvolved.

 

*Wedepend on other telecommunications companies for some services that, if delayedor interrupted, could delay our expected increases in subscribers and revenues.*

 

Wedepend on other telecommunications companies to provide facilities andtransport to interconnect portions of our network and to connect our networkwith the landline telephone system. Without these services, we could not offer Sprint PCS services to oursubscribers in some areas.  From time totime, we have experienced delays in obtaining facilities and transport fromsome of these companies, and in obtaining local telephone numbers for use byour subscribers, which are sometimes in short supply, and we may continue to experiencedelays and interruptions in our network operations and our business maysuffer.  Delays or interruptions couldalso result in a breach of our affiliation agreements with Sprint PCS,subjecting these agreements to potential termination by Sprint PCS.

 

*Thetechnology that we use may become obsolete, which would limit our ability tocompete effectively within the wireless telecommunications industry which wouldnegatively affect our operating results.*

 

Thewireless telecommunications industry is experiencing significant technologicalchange.  We employ CDMA (code divisionmultiple access), a digital spread-spectrum wireless technology that allows alarge number of users to access a single

 

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frequency band by assigning a code to all transmission bits,sending a scrambled transmission of the encoded information over the air andreassembling the speech and data into its original format, which is the digitalwireless communications technology selected by Sprint PCS and certain othercarriers for their nationwide networks. Other carriers employ other technologies, such as TDMA (time divisionmultiple access), a technology used in digital cellular telephone communicationthat divides each cellular channel into three time slots in order to increasethe amount of data that can be carried, GSM (global system for mobilecommunication), a technology that digitizes and compresses data, then sends itdown a channel with other streams of user data, each in its own time slot andiDEN (integrated digital enhanced network), a technology which includes thecapabilities of a digital cellular telephone, two-way radio, alphanumericpager, and data/fax modem in a single network, for their nationwidenetworks.  If another technology becomesthe preferred industry standard, we would be at a competitive disadvantage andcompetitive pressures may require Sprint PCS to change its digital technology,which in turn could require us to make changes to our network at substantialcost.  We may be unable to respond tothese pressures and implement new technology on a timely basis or at anacceptable cost.  Additionally, oursubstantial indebtedness, coupled with our recent emergence from bankruptcy,could limit our ability to obtain any additional financing that we may need inorder to make changes to our network. This, in turn, may require us to dedicate a substantial portion of anycash flow from our operating activities to make such changes, thereby reducingfunds available for future marketing activities and debt repayment.  We may also lose subscribers if we fail toimplement significant technological changes evidenced by the development andcommercial acceptance of advanced wireless data services, shorter developmentcycles for new products and enhancements and changes in end-user requirementsand preferences.  If we lose subscribers,our ability to maintain and increase revenues will be impaired and ouroperating margin will deteriorate.

 

*Theloss of the officers and skilled employees upon whom we depend to operate ourbusiness could adversely affect our operating results.*

 

Ourbusiness is managed by a small number of executive officers on whom we dependto operate our business.  We believe thatour future success will depend in part on our continued ability to retain theseexecutive officers and to attract and retain other highly qualified technicaland management personnel.  We may not besuccessful in retaining key personnel or in attracting and retaining otherhighly qualified technical and management personnel.  Moreover, our past inability to meet ourobligations that resulted in our bankruptcy filing, or the perception that wemay not be able to meet our obligations since the reorganization, couldadversely affect our ability to retain or attract high quality personnel.  The loss of the officers and skilledemployees upon whom we depend to operate our business could adversely affectour operating results.

 

*Failure to achieve and maintaineffective internal controls could have a material adverse effect on ourbusiness and operating results.*

 

We arein the process of documenting our internal control procedures in order tosatisfy the requirements of Section 404 of the Sarbanes-Oxley Act, whichrequires annual management assessments of the effectiveness of our internalcontrols over financial reporting and a report by our independent registeredpublic accounting firm addressing these assessments. During the course of ourtesting we may identify deficiencies which we may not be able to remediate intime to meet the deadline imposed by the Sarbanes-Oxley Act for compliance withthe requirements of Section 404, which will apply to us for our year endedDecember 31, 2006 in the event we do not consummate our merger with iPCS priorto that date. In addition, if we fail to achieve and maintain the adequacy ofour internal controls, as such standards are modified, supplemented or amendedfrom time to time, we may not be able to ensure that we can conclude on anongoing basis that we have effective internal controls over financial reportingin accordance with Section 404 of the Sarbanes-Oxley Act. Moreover,effective internal controls, particularly those related to revenue recognition,are necessary for us to produce reliable financial reports and are important tohelping prevent financial fraud. If we cannot provide reliable financialreports or prevent fraud, our business and operating results could be harmedand investors could lose confidence in our reported financial information.

 

**RisksRelated to our Relationship with Sprint PCS**

 

*Theproposed merger between Sprint and Nextel may have an adverse effect on us inways that would be beyond our co**ntrol.*

 

On December 15,2004, Sprint Corporation and Nextel Communications, Inc. announced thatthey had signed a merger agreement, pursuant to which Sprint Corporation andNextel Communications, Inc. would merge and combine their operations.  Nextel Communications, Inc. and anaffiliated company, Nextel Partners, Inc., operate wirelesstelecommunications networks in portions of our service areas.  Pursuant to our affiliation agreements withSprint PCS, Sprint PCS has granted us certain exclusivity rights within ourservice areas.  We believe that,depending upon the actions of Sprint following the closing of the merger,Sprint would be in violation of the exclusivity provisions of our affiliationagreements with Sprint PCS.  Sprint hasannounced that it will pursue discussions with the PCS Affiliates toward amodification of our affiliation agreements as a result of the Sprint/Nextelmerger.  We do not know the terms ofSprint’s proposal, or whether we will ultimately reach agreement with Sprint onmutually satisfactory terms for a revised affiliation agreement.  It is likely that such a revised affiliationagreement

 

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would materially change our business and operations andmay result in us making significant payments to acquire network assets andsubscribers or to otherwise modify our network and marketing plans.  The announcement and closing of theSprint/Nextel merger may give rise to a negative reaction by our existing andpotential customers and a diminution in brand recognition or loyalty, which mayhave an adverse effect on our revenues. If necessary, we intend to enforce our rights, whether through seekinginjunctive relief or otherwise, to the extent that Sprint violates or threatensto violate the terms of our affiliation agreements with Sprint PCS.

 

*IfSprint PCS does not succeed, our business may not succeed.*

 

IfSprint has a significant disruption to its business plan or network, fails to operateits business in an efficient manner or suffers a weakening of its brand name,our operations and profitability would likely be negatively impacted.  If Sprint should have significant financialproblems, including bankruptcy, our business would suffer material adverseconsequences, which could include termination or revision of our affiliationagreements with Sprint PCS.

 

*Our ability to conduct ourbusiness would be severely restricted if Sprint PCS were to terminate ouraffiliation agreements.*

 

Our relationshipwith Sprint PCS is governed by our affiliation agreements with it.  As we do not own the licenses that are usedin our portion of the Sprint PCS network, our business depends on the continuedeffectiveness of these affiliation agreements. Sprint PCS may be able to terminate our affiliation agreements if wematerially breach the terms of these agreements.  These terms include operational and networkrequirements that are extremely technical and detailed and apply to each retailstore, cell site and switch site.  Undercertain circumstances, many of these operational and network requirements, aswell as the pricing of the services Sprint PCS renders to us, can be changed bySprint PCS, in certain cases, with little notice.  As a result, we may not always be incompliance with all requirements of our affiliation agreements with SprintPCS.  Sprint PCS conducts periodic auditsof compliance with various aspects of its program guidelines and identifiesissues it believes need to be addressed. We may need to incur substantial costs to remedy any noncompliance.  The extent to which we are not in compliancewith our affiliation agreements could limit our ability to obtain anyadditional financing that we may need in order to remedy suchnoncompliance.  Additionally, oursubstantial indebtedness and our recent emergence from bankruptcy could furtherlimit our ability to obtain additional financing.  If we cannot obtain additional financing, wemay be unable to remedy such noncompliance, thereby resulting in a materialbreach of our affiliation agreements, which could lead to their termination bySprint.  If Sprint PCS were to terminateor fail to renew our affiliation agreements or fail to perform its obligationsunder those agreements, our ability to conduct business would be severelyrestricted.

 

*If we materially breach ouraffiliation agreements with Sprint PCS, Sprint PCS may have the right topurchase our operating assets at a discount to market value.*

 

Ouraffiliation agreements with Sprint PCS require that we provide network coverageto a minimum network coverage area within specified time frames and that wemeet and maintain Sprint PCS’ technical and customer service requirements.  A failure by us to meet Sprint PCS’ technicalor customer service requirements contained in the affiliation agreements, amongother things, would constitute a material breach of the agreements, which couldlead to their termination by Sprint PCS. Our affiliation agreements with Sprint PCS provide that upon theoccurrence of an event of termination caused by our breach of such agreements,Sprint PCS has the right, among other things, to purchase our operating assetswithout stockholder approval and for a price equal to 72% of our “entirebusiness value,” which is our appraised value determined using certainprinciples set forth in our affiliation agreements with Sprint PCS and based onthe price a willing buyer would pay a willing seller for our entire business asa going concern.  See “Business — TheSprint PCS Agreements — Termination of management agreement” for a descriptionof how we calculate our entire business value.

 

*Sprint PCS may make decisions thatcould increase our expenses and/or our capital expenditure requirements, reduceour revenues or make our affiliate relationships with Sprint PCS lessadvantageous than expected.*

 

Underour affiliation agreements with Sprint PCS, Sprint PCS has a substantial amountof control over factors that significantly affect the conduct of ourbusiness.  Conflicts between us may ariseand these conflicts may not be resolved in our favor.  The conflicts and their resolution may harmour business.  Sprint PCS may makedecisions that adversely affect our business, such as the following:

 

•                                          Sprint PCS may price its national calling plans based on its ownobjectives and could set price levels and subscriber credit policies or changeother characteristics of its plans in a way that may not be economicallyadvantageous for our business; and

 

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•                                          Sprint PCS may alter its network and technical requirements or requestthat we build-out additional areas within our territory, which could result inincreased equipment and build-out costs or in Sprint PCS building out that areaitself or assigning it to another PCS Affiliate of Sprint.

 

*Certainprovisions of our affiliation agreements with Sprint PCS may diminish our valueand restrict the sale of our business.*

 

SprintPCS must consent to any transaction pursuant to which Horizon PCS, Inc. isno longer the “ultimate parent” of Horizon Personal Communications, Inc.and Bright Personal Communications Services, LLC, our operating subsidiariesthat are the parties to the affiliation agreements with Sprint PCS and mustconsent to any assignment by us of our affiliation agreements with it.  Sprint PCS also has a right of first refusalif we decide to sell the operating assets of Bright Personal CommunicationsServices, LLC to a third party.  We arealso subject to a number of restrictions on the transfer of our business,including a prohibition on the sale of our operating assets to competitors ofSprint PCS.  These restrictions and theother restrictions contained in our affiliation agreements with Sprint PCSrestrict our ability to sell our business, may reduce the value a buyer wouldbe willing to pay for our business, and may reduce our “entire business value,”which is our appraised value determined using principles set forth in ouraffiliation agreements with Sprint PCS and based on the price a willing buyerwould pay a willing seller for our entire business as a going concern.

 

*Problemsexperienced by Sprint PCS with its internal support systems could lead tosubscriber dissatisfaction or increase our costs.*

 

We relyon Sprint PCS’ internal support systems, including customer care, billing andback-office support.  As Sprint PCS hasexpanded its network and subscriber base, its internal support systems havebeen subject to increased demand and, in some cases, suffered degradation inservice.  Sprint PCS has entered intobusiness process outsourcing agreements with third parties to provide theseservices.  Sprint PCS may not be able tosuccessfully add system capacity, that its internal support systems will beadequate or that third parties contracted with by Sprint PCS can perform theirobligations.  Problems with Sprint PCS’internal support systems could cause:

 

•                                          delays or problems in our operations or services;

 

•                                          delays or difficulty in gaining access to subscriber and financialinformation;

 

•                                          a loss of subscribers; and

 

•                                          an increase in the costs of customer care, billing and back-officeservices.

 

•                                          Should Sprint PCS fail to deliver timely and accurate information, thismay lead to adverse short-term decisions and inaccurate assumptions in ourbusiness plan.  It could also adverselyaffect our cash flows, because Sprint PCS collects our receivables and remitsto us a net amount that is based on the financial information it produces forus.

 

*Ourcosts for internal support systems may increase if Sprint PCS terminates all orpart of our service agreements with it.*

 

Thecosts for the services provided by Sprint PCS under our service agreementsrelative to billing, customer care and other back-office functions for theperiod from January 1, 2004 through September 30, 2004 and the periodfrom October 1, 2004 through December 31, 2004 were approximately$58.0 million and $15.3 million, respectively. Because we incur the majority of these costs on a per subscriber basis,we expect the aggregate cost for such services to increase as our subscriberbase increases.  Sprint PCS may terminateany service provided under such agreements upon nine months’ prior writtennotice.  However, if that service was aservice that we were required to select under the services agreement and is aservice we need to continue to operate our business, Sprint PCS has agreed thatit will assist us in developing that function internally or locating athird-party vendor that will provide that service.  If Sprint PCS terminates a service for whichwe have not developed or are unable to develop a cost-effective alternative,our operating costs may increase beyond our expectations and our operations maybe interrupted or restricted.  We do notcurrently have a contingency plan if Sprint PCS terminates a service wecurrently receive from it.

 

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*IfSprint PCS does not maintain control over its licensed spectrum, ouraffiliation agreements with Sprint PCS may be terminated.*

 

SprintPCS, not us, owns the licenses necessary to provide wireless services in ourterritory.  The FCC requires thatlicensees like Sprint PCS maintain control of their licensed systems and notdelegate control to third-party operators or managers without the FCC’sconsent.  Our affiliation agreements withSprint PCS reflect an arrangement that the parties believe meets the FCCrequirements for licensee control of licensed spectrum.  However, if the FCC were to determine thatany of our affiliation agreements with Sprint PCS needed to be modified toincrease the level of licensee control, we have agreed with Sprint PCS to useour best efforts to modify the agreements to comply with applicable law.  If we cannot agree with Sprint PCS on themodification of the agreements, those agreements may be terminated.  If the agreements are terminated, we would nolonger be a part of the PCS network of Sprint PCS and we would not be able toconduct our business.

 

*TheFCC may fail to renew the Sprint PCS wireless licenses under certaincircumstances, which would prevent us from providing wireless services.*

 

SprintPCS’ wireless licenses are subject to renewal and revocation by the FCC.  The Sprint PCS wireless licenses in ourterritory will expire in 2007 but may be renewed for additional ten-yearterms.  The FCC has adopted specificstandards that apply to wireless personal communications services licenserenewals.  Any failure by Sprint PCS orus to comply with these standards could result in the non-renewal of the SprintPCS licenses for our territory.  Additionally,if Sprint PCS does not demonstrate to the FCC that Sprint PCS has met theconstruction requirements for each of its wireless personal communicationsservices licenses, it can lose those licenses. If Sprint PCS loses its licenses in our territory for any of thesereasons, or any other reasons, neither we, nor our subsidiaries, would be ableto provide wireless services without obtaining rights to other licenses.  If Sprint PCS loses its licenses in anotherterritory, Sprint PCS or the applicable PCS Affiliate of Sprint would not be ableto provide wireless services without obtaining rights to other licenses and ourability to offer nationwide calling plans would be diminished and potentiallymore costly.

 

*Partsof our territory have limited licensed spectrum, which may adversely affect thequality of our service.*

 

In themajority of our markets, Sprint PCS has licenses covering 20 MHz or 30 MHz ofspectrum.  However, Sprint PCS haslicenses covering only 10 MHz in parts of our territory which represent 2.3million in covered population out of a total population of over 2.6 millionresidents.  In the future, as oursubscriber base increases in those areas, this limited licensed spectrum maynot be able to accommodate increases in call volume and may lead to increaseddropped calls and may limit our ability to offer enhanced services.  We may also have to increase our capitalexpenditures in an attempt to compensate for this lack of licensed spectrum.

 

*Werely on Sprint PCS for a substantial amount of our financial information.  If that information is not accurate, ourability to report our financial data could be adversely affected and theinvestment community could lose confidence in us.*

 

Underour affiliation agreements with Sprint PCS, Sprint PCS performs our billing,manages our accounts receivable and provides a substantial amount of financialinformation that impacts our accounts. The data provided by Sprint related to these functions they perform forus is the primary source for our service revenue and for a significant portionof our cost of service and roaming, and selling and marketing expenses includedin our statement of operations.  We usethis data to record our financial results and prepare our financialstatements.  If Sprint PCS fails todeliver timely and accurate information, this may lead us to make adverse decisionsand inaccurate assumptions for future business plans and could also negativelyaffect our cash flows as Sprint PCS collects our receivables and remits a netamount to us that is based on the financial information it provides.  In addition, delays and material inaccuraciescould adversely affect the effectiveness of our disclosure controls andprocedures and if we later identify material errors in that data provided tous, we may be required to restate our financial statements.  The timing and nature of information wereceive from Sprint PCS may adversely affect our ability to accurately reportour financial data and to satisfy internal control requirements in thefuture.  If that occurs, with respect tous or any other PCS Affiliate of Sprint, investors and securities analysts maylose confidence in us.

 

*Ifother PCS Affiliates of Sprint have financial difficulties, the PCS network ofSprint PCS could be disrupted which may negatively affect our operatingresults.*

 

The PCSnetwork of Sprint PCS is a combination of networks.  The large metropolitan areas are operated bySprint, and the areas in between them are operated by PCS Affiliates of Sprint,all of which are independent companies like us. We believe that most, if not all, of these companies have incurredsubstantial debt to pay the large cost of building out their networks and haveexperienced financial difficulties in the past. If other PCS Affiliates of Sprint experience financial difficulties inthe future, the PCS network of Sprint PCS could be disrupted in the territoriesof those PCS Affiliates of Sprint. Material disruptions in the PCS network of Sprint PCS could have amaterial adverse effect on our ability to attract and retain subscribers.  If the affiliation agreements of those PCSAffiliates of Sprint were like ours, Sprint PCS would have the right to step inand operate the affected territory under certain circumstances.  However, Sprint’s right to step in could bedelayed or hindered by legal

 

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proceedings, including any bankruptcy proceeding relatedto the affected PCS Affiliate of Sprint. In addition to us, two other PCS Affiliates of Sprint have filed Chapter11 proceedings.

 

*We mayhave difficulty in obtaining an adequate supply of certain handsets from SprintPCS, which could adversely affect our results of operations.*

 

Wedepend on our relationship with Sprint PCS to obtain handsets and otherwireless devices.  Sprint PCS ordershandsets and other wireless devices from various manufacturers.  We could have difficulty obtaining specifictypes of handsets in a timely manner if:

 

•                                          Sprint PCS does not adequately project the need for handsets for itself,the PCS Affiliates of Sprint and its other third-party distribution channels,particularly in transition to new technologies, such as third-generation, or “3G,”technology;

 

•                                          Sprint PCS gives preference to other distribution channels;

 

•                                          we do not adequately project our need for handsets or other wirelessdevices;

 

•                                          Sprint PCS modifies its handset logistics and delivery plan in a mannerthat restricts or delays our access to handsets; or

 

•                                          there is an adverse development in the relationship between Sprint PCS andits suppliers or vendors.

 

Theoccurrence of any of the foregoing could disrupt our customer service and/orresult in a decrease in our subscribers, which could adversely affect ourresults of operations.

 

**RisksRelated to the Wireless Telecommunications Industry**

 

We maycontinue to experience a high rate of subscriber turnover, which wouldadversely affect our financial performance.

 

Thewireless telecommunications industry in general, and Sprint PCS and PCSAffiliates of Sprint in particular, have experienced a high rate of subscriberturnover, commonly known as churn.  Webelieve this higher churn rate has resulted from Sprint PCS’ programs formarketing its services to sub-prime credit subscribers and Sprint PCS’ focus onadding subscribers from the consumer segment of the industry, rather than thebusiness segment.

 

Significantcompetition in our industry and general economic conditions may cause ourfuture churn rate to be higher than our historical rate.  Factors that may contribute to higher churninclude:

 

•                                          inability or unwillingness of subscribers to pay, resulting in involuntarydeactivations, which accounted for over 35% and 32% of our subscriberdeactivations in the period from January 1, 2004 through September 30,2004 and the period from October 1, 2004 through December 31, 2004,respectively;

 

•                                          subscriber mix and credit class, particularly sub-prime credit subscribers,which accounted for approximately 23% and 25% of our gross subscriber additionsfor the period from January 1, 2004 through September 30, 2004 andthe period from October 1, 2004 through December 31, 2004,respectively, and account for approximately 18.0% of our subscriber base as of December 31,2004;

 

•                                          greater attractiveness of our competitors’ products, services and pricing;

 

•                                          our network performance and coverage relative to our competitors;

 

•                                          the level of customer service provided by Sprint PCS;

 

•                                          any increased prices for services in the future; and

 

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•                                          any future changes by us in the products and services we offer or in theterms under which we offer our products or services, especially to sub-primecredit subscribers.

 

Anadditional factor that may contribute to a higher churn rate is implementationof the FCC’s wireless local number portability (or “WLNP”) requirement.  The FCC’s WLNP requirement enables wirelesssubscribers to keep their telephone numbers when switching to anothercarrier.  As of May 24, 2004, allcovered Commercial Mobile Radio Service (“CMRS”) providers, including broadbandPCS, cellular and certain specialized mobile radio (“SMR”) licensees, mustallow subscribers to retain, subject to certain geographic limitations, theirexisting telephone number when switching from one telecommunications carrier toanother.  We anticipate that the WLNPmandate will impose increased operating costs on all CMRS providers, includingus, and may result in higher churn rates and subscriber acquisition andretention costs.  To date, WLNP hasincreased our total churn, and the ultimate impact is uncertain.

 

A highrate of subscriber turnover could adversely affect our competitive position,liquidity, financial position, results of operations and our costs of, orlosses incurred in, obtaining new subscribers, especially because we subsidizemost of the costs of the initial purchases of handsets by subscribers.

 

*Regulation by government agenciesand taxing authorities may increase our costs of providing service or requireus to change our services.*

 

Ouroperations and those of Sprint PCS may be subject to varying degrees ofregulation by the FCC, the Federal Trade Commission, the Federal AviationAdministration, the Environmental Protection Agency, the Occupational Safetyand Health Administration and state and local regulatory agencies andlegislative bodies.  Adverse decisions orregulations of these regulatory bodies could negatively impact our operationsand our costs of doing business.  Forexample, changes in tax laws or the interpretation of existing tax laws bystate and local authorities could subject us to increased taxes on income,sales, gross receipts or other tax costs or require us to alter the structureof our current relationship with Sprint PCS.

 

*Concerns over health risks and safety posed by the use of wirelesshandsets may reduce consumer demand for our ser****vices.***

 

Mediareports have suggested that radio frequency emissions from wireless handsetsmay:

 

•                                          be linked to various health problems resulting from continued or excessiveuse, including cancer;

 

•                                          interfere with various electronic medical devices, including hearing aidsand pacemakers; and

 

•                                          cause explosions if used while fueling an automobile.

 

Widespreadconcerns over radio frequency emissions may expose us to potential litigation,discourage the use of wireless handsets or result in additional regulationimposing restrictions or increasing requirements on the location and operationof cell sites or the use or design of wireless handsets.  Any resulting decrease in demand for theseservices or increase in the cost of complying with additional regulations couldimpair our ability to profitably operate our business.

 

Due tosafety concerns, some state and local legislatures have passed or areconsidering legislation restricting the use of wireless telephones whiledriving automobiles.  Concerns oversafety risks and the effect of future legislation, if adopted and enforced inthe areas we serve, could limit our ability to market and sell our wirelessservices.  In addition, it may discourageuse of our wireless devices and decrease our revenues from subscribers who nowuse their wireless telephones while driving. Further, litigation relating to accidents, deaths or serious bodilyinjuries allegedly incurred as a result of wireless telephone use while drivingcould result in damage awards, adverse publicity and further governmentalregulations.

 

*Significant competition in thewireless telecommunications industry may result in our competitors offering newservices or lower prices, which could prevent us from operating profitably andmay cause prices for our services to continue to decline in the future.*

 

Competitionin the wireless telecommunications industry is intense.  Competition has caused, and we anticipatethat competition will continue to cause, the market prices for two-way wirelessproducts and services to decline.  Ourability to compete will depend, in part, on our ability to anticipate andrespond to various competitive factors affecting the wirelesstelecommunications industry.  While wetry to maintain and increase our average revenue per user (“ARPU”), we cannotassure you that we will be able to do so in the future.  If prices for our services continue to decline,it could adversely affect our ability to increase revenue, which would have amaterial adverse effect on our financial condition, our results of operationsand our ability to repay the senior notes offered hereby.  In addition, the viability of our businessdepends upon, among other thing, our

 

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ability to compete with other wireless providers on thebasis of reliability, quality of service, availability of voice and datafeatures and customer care.  In addition,the pricing of our services may be affected by competition, including the entryof new service providers into our markets. Furthermore, there has been a recent trend in the wirelesstelecommunications industry towards consolidation of wireless serviceproviders, which could, over time, increase the size, depth and financialresources of competitors.

 

Ourdependence on Sprint PCS to develop competitive products and services and therequirement that we obtain Sprint PCS’ consent for our subsidiaries to sellnon-Sprint approved equipment may limit our ability to keep pace with ourcompetitors on the introduction of new products, services and equipment.  Some of our competitors are larger than us,possess greater resources, offer more extensive coverage areas and may marketother services, such as landline telephone service, cable television andInternet access, along with their wireless communications services.  A number of our cellular, PCS and otherwireless competitors have access to more licensed spectrum than the amountlicensed to Sprint in most of our territory and, therefore, will be able toprovide greater network call volume capacity than our network to the extentthat network usage begins to reach or exceed the capacity of our licensedspectrum.  In addition, we may be at acompetitive disadvantage since we may be more highly leveraged than some of ourcompetitors.

 

We alsoface competition from paging, dispatch and conventional mobile radiooperations, enhanced specialized mobile radio, called ESMR, and mobilesatellite services.  In addition, futureFCC regulation or federal legislation may create additional spectrumallocations that would have the effect of adding new entrants (and thusadditional competitors) into the mobile telecommunications market.

 

*Market saturation could limit ordecrease our rate of new subscriber additions and increase costs to keep ourcurrent subscribers.*

 

Intensecompetition in the wireless telecommunications industry could cause prices forwireless products and services to continue to decline.  If prices drop, our rate of net subscriberadditions will take on greater significance in improving our financialcondition and results of operations. However, as our and our competitors’ penetration rates in our marketsincrease over time, our rate of adding net subscribers could decreasefurther.  In addition, we may incuradditional costs through equipment upgrades and other retention costs to keepour current subscribers from switching to our competitors.  If price decreases were to occur, ourliquidity, financial condition and results of operation could be materiallyadversely affected.

 

*Alternative technologies andcurrent uncertainties in the wireless market may reduce demand for PCS productsand services.*

 

Thewireless telecommunications industry is experiencing significant and rapidtechnological change, as evidenced by the increasing pace of digital upgradesin existing analog wireless systems, evolving industry standards, ongoingimprovements in the capacity and quality of digital technology, shorter developmentcycles for new products and enhancements and changes in end-user requirementsand preferences.  Technological advancesand industry changes could cause the technology used in our network to becomeobsolete.  We rely on Sprint PCS forresearch and development efforts with respect to Sprint PCS products andservices and with respect to the technology used on our network.  Sprint PCS may not be able to respond to suchchanges and implement new technology on a timely basis, or at an acceptablecost.

 

If SprintPCS is unable to keep pace with these technological changes or other changes inthe wireless communications market, the technology used on our network maybecome obsolete.  In addition, othercarriers are in the process of completing, or have completed, upgrades to1xRTT, or other 3G technologies.  3Gtechnology provides high-speed, always-on Internet connectivity andhigh-quality video and audio.  Othercarriers may introduce these new technologies or other competing technologiesmore rapidly than we do, which could put us at a competitive disadvantage.  Additional steps beyond 1xRTT, which couldinclude enhancement to new EV-DO or EV-DV technology, may be taken as demandfor more robust data services or as the need for additional capacitydevelops.  These additional steps maysignificantly increase our capital expenditures.

 

*We are a consumer business and aneconomic downturn in the United States involving significantly reduced consumerspending could negatively affect our results of operation.*

 

Individualconsumers represent the majority of our subscriber base.  In the event that an economic downturnsimilar to the one recently experienced by the United States and othercountries occurs, and spending by individual consumers drops significantly, ourbusiness may be negatively affected.

 

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