<PAGE>


--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

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

                               -----------------

                                   FORM 10-Q

(Mark One)
   [X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
         SECURITIES EXCHANGE ACT OF 1934, AS AMENDED

         For the quarterly period ended June 30, 2001

                                      OR

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

         For the transition period from ______________ to ______________

                     Commission file number ______________

                               -----------------

                              IWO HOLDINGS, INC.
            (Exact name of Registrant as specified in its charter)

                      Delaware                 14-1818487
                   (State or other          (I.R.S. Employer
                   jurisdiction of         Identification No.)
                  incorporation or                12203
                    organization)              (Zip Code)
              319 Great Oaks Boulevard
                  Albany, New York
                (Address of Principal
                      Executive
                      Offices)
      Registrant's telephone number, including area code: (518) 862-6000

                               -----------------

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

   As of July 31, 2001, there were 37,618,060.8568 shares of the Registrant's
common stock outstanding (consisting of 15,000,000.0000 shares of Class A
Common Stock, 13,458,775.8595 shares of Class B Common Stock, 3,555,630.4609
shares of Class C Common Stock, 60,000.0000 shares of Class D Common Stock and
5,543,654.5364 shares of Class E Common Stock).


--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

<PAGE>

                              IWO HOLDINGS, INC.

                         QUARTERLY REPORT ON FORM 10-Q
                                     INDEX

<TABLE>
<CAPTION>
                                                                                                   Page
                                                                                                  Number
                                                                                                  ------
<C>     <S>                                                                                       <C>
Part I  Financial Information

Item 1  Financial Statements.....................................................................    3
         Consolidated Balance Sheets as of December 31, 2000 and June 30, 2001 (unaudited).......    3
         Consolidated Statements of Operations for the three months and six months ended June 30,
           2000 (unaudited) and June 30, 2001 (unaudited)........................................    5
         Consolidated Statements of Cash Flows for the six months ended June 30, 2000 (unaudited)
           and June 30, 2001 (unaudited).........................................................    6
         Notes to Consolidated Financial Statements (unaudited)..................................    7

Item 2  Management's Discussion and Analysis of Financial Condition and Results of Operations....   23

Item 3  Quantitative and Qualitative Disclosures About Market Risk...............................   41

Part II Other Information

Item 1   Legal Proceedings.......................................................................   42

Item 2   Changes in Securities and Use of Proceeds...............................................   42

Item 3   Defaults Upon Senior Securities.........................................................   42

Item 4   Submission of Matters to a Vote of Security Holders.....................................   43

Item 5   Other Information.......................................................................   43

Item 6   Exhibits and Reports on Form 8-K........................................................   43
</TABLE>

                                      2

<PAGE>

                                    PART I

                             FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                      IWO HOLDINGS, INC. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS

             As of December 31, 2000 and (Unaudited) June 30, 2001
                       (In thousands except share data)

<TABLE>
<CAPTION>
                                                                                  December 31,  June 30,
                                                                                      2000        2001
                                                                                  ------------ -----------
                                                                                               (Unaudited)
                                     ASSETS
                                     ------
<S>                                                                               <C>          <C>
Current assets:
   Cash and cash equivalents.....................................................   $ 36,313    $ 13,267
   Accounts receivable, net of allowances of $312 and $364 at December 31, 2000
     and June 30, 2001, respectively.............................................      4,218       5,027
   Short-term investments at amortized cost--held to maturity....................         --      34,516
   Inventory.....................................................................      2,567         842
   Prepaid expenses..............................................................      1,072       1,881
   Other current assets..........................................................        199       1,901
   Prepaid management fee--related party.........................................      1,000       1,000
   Restricted cash and U.S. Treasury obligations at amortized cost--held to
     maturity....................................................................         --      31,674
                                                                                    --------    --------
       Total current assets......................................................     45,369      90,108
                                                                                    --------    --------
Restricted cash..................................................................      8,000       8,000
Restricted cash and U.S. Treasury obligations at amortized cost--held to maturity         --      30,898
Investment securities at amortized cost--held to maturity........................                 58,442
Prepaid management fee--related party............................................      2,970       2,470
Property and equipment, net......................................................     69,555      91,220
Construction in progress.........................................................     33,009      53,132
Deferred costs, net..............................................................     14,898      20,347
Intangible assets, net...........................................................     58,874      55,788
Other............................................................................         24          10
                                                                                    --------    --------
       Total assets..............................................................   $232,699    $410,415
                                                                                    ========    ========
</TABLE>

The accompanying notes are an integral part of the consolidated financial
                                  statements

                                      3

<PAGE>

                      IWO HOLDINGS, INC. AND SUBSIDIARIES

                   CONSOLIDATED BALANCE SHEETS--(Continued)

             As of December 31, 2000 and (Unaudited) June 30, 2001
                       (In thousands except share data)

<TABLE>
<CAPTION>
                                                                                     As of        As of
                                                                                  December 31,  June 30,
                                                                                      2000        2001
                                                                                  ------------ -----------
                                                                                               (Unaudited)
                      LIABILITIES AND STOCKHOLDERS' EQUITY
                      ------------------------------------
<S>                                                                               <C>          <C>
Current liabilities:
   Accounts payable..............................................................   $  6,388    $ 16,012
   Accounts payable--related parties.............................................        213          48
   Due to Sprint.................................................................      7,711       5,326
   Accrued expenses..............................................................     12,432      23,159
   Accrued expenses--related parties.............................................        463         152
   Unearned revenue..............................................................      1,652       2,211
                                                                                    --------    --------
       Total current liabilities.................................................     28,859      46,908
Term loan........................................................................     80,000     110,000
Senior notes.....................................................................         --     152,209
                                                                                    --------    --------
       Total liabilities.........................................................    108,859     309,117
                                                                                    --------    --------
Redeemable common stock..........................................................        346         173
                                                                                    --------    --------
Commitments and contingencies

Stockholders' equity:
   Preferred stock (nonvoting)--$.01 par value, 500,000 shares authorized, none
     issued and outstanding......................................................         --          --
   Common stock, Class A (nonvoting)--$.01 par value, 15,000,000 shares
     authorized, issued and outstanding..........................................        150         150
   Common stock, Class B (voting)--$.01 par value, 18,750,000 shares authorized,
     13,274,171 and 13,532,710 shares issued at
     December 31, 2000 and June 30, 2001, respectively...........................        133         136
   Common stock, Class C (nonvoting)--$.01 par value, 18,750,000 shares
     authorized, 3,555,630 shares issued and outstanding.........................         35          35
   Common stock, Class D (voting)--$.01 par value, 60,000 shares authorized,
     issued and outstanding......................................................          1           1
   Common stock, Class E (nonvoting)--$.01 par value, 5,545,000 shares
     authorized, 5,543,654 shares issued and outstanding.........................         55          55
   Common stock (voting)--$.01 par value, 58,105,000 shares authorized, none
     issued and outstanding......................................................         --          --
   Additional paid-in capital....................................................    175,271     184,103
   Deficit accumulated during development stage..................................     (1,076)     (1,076)
   Retained deficit..............................................................    (50,080)    (81,507)
                                                                                    --------    --------
                                                                                     124,489     101,897
Treasury stock at cost (43,856 and 73,935 Class B shares at December 31, 2000 and
  June 30, 2001), respectively...................................................       (252)       (425)
Promissory notes receivable......................................................       (743)       (347)
                                                                                    --------    --------
       Total stockholders' equity................................................    123,494     101,125
                                                                                    --------    --------
       Total liabilities and stockholders' equity................................   $232,699    $410,415
                                                                                    ========    ========
</TABLE>

The accompanying notes are an integral part of the consolidated financial
                                  statements

                                      4

<PAGE>

                      IWO HOLDINGS, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS

 For the (Unaudited) Three Months and Six Months Ended June 30, 2000 and 2001
                       (In thousands except share data)

<TABLE>
<CAPTION>
                                                        For the       For the       For the       For the
                                                     Three Months  Three Months   Six Months    Six Months
                                                         Ended         Ended         Ended         Ended
                                                     June 30, 2000 June 30, 2001 June 30, 2000 June 30, 2001
                                                     ------------- ------------- ------------- -------------
                                                      (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited)
<S>                                                  <C>           <C>           <C>           <C>
Net revenues........................................  $    12,405   $    24,613   $    22,416   $    44,706
                                                      -----------   -----------   -----------   -----------
Operating expenses:
   Costs of services and equipment..................        8,833        19,775        18,299        35,846
   Selling and marketing............................        3,695         6,209         6,986        11,239
   General and administrative:
       Noncash stock-based compensation.............          251            97           631           308
       Related parties..............................          321           198           761           525
       Other general and administrative.............        3,591         5,066         7,082         9,458
   Depreciation and amortization....................        3,626         4,422         4,772         8,568
                                                      -----------   -----------   -----------   -----------
       Total operating expenses.....................       20,317        35,767        38,531        65,944
                                                      -----------   -----------   -----------   -----------
Operating loss......................................       (7,912)      (11,154)      (16,115)      (21,238)
   Interest income..................................          346         2,339         1,298         4,168
   Interest expense.................................       (1,014)       (6,352)       (1,014)      (10,607)
   Interest expense--related parties................         (194)         (415)         (194)         (767)
   Amortization of debt issuance and offering costs.         (629)         (711)       (1,257)       (1,896)
   Other debt financing fees........................         (810)         (415)       (1,754)       (1,087)
                                                      -----------   -----------   -----------   -----------
       Net loss.....................................  $   (10,213)  $   (16,708)  $   (19,036)  $   (31,427)
                                                      ===========   ===========   ===========   ===========
Loss per share
   Basic............................................  $     (0.34)  $     (0.45)  $     (0.63)  $     (0.84)
   Diluted..........................................  $     (0.34)  $     (0.45)  $     (0.63)  $     (0.84)
Weighted average shares outstanding
   Basic............................................   30,261,000    37,589,000    30,260,000    37,500,000
   Diluted..........................................   30,261,000    37,589,000    30,260,000    37,500,000
</TABLE>


The accompanying notes are an integral part of the consolidated financial
                                  statements

                                      5

<PAGE>

                      IWO HOLDINGS, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

          For the (Unaudited) Six Months Ended June 30, 2000 and 2001
                                (In thousands)

<TABLE>
<CAPTION>
                                                                                          For the       For the
                                                                                        Six Months    Six Months
                                                                                           Ended         Ended
                                                                                       June 30, 2000 June 30, 2001
                                                                                       ------------- -------------
                                                                                        (Unaudited)   (Unaudited)
<S>                                                                                    <C>           <C>
Net cash used in operating activities.................................................      (8,616)      (21,867)
                                                                                         ---------     ---------
Cash flows from investing activities:
   Deferred acquisition costs.........................................................        (331)           --
   Purchase of Sprint assets..........................................................    (116,405)           --
   Purchase of investment securities--held to maturity................................          --      (105,328)
   Proceeds from maturities of investment securities..................................          --        12,371
   Restricted cash....................................................................      (8,000)           --
   Restricted cash and U.S. Treasury obligations at amortized cost--held to maturity..          --       (62,572)
   Purchase of property and equipment.................................................      (4,533)      (22,434)
   Construction in progress...........................................................      (7,943)       (6,493)
                                                                                         ---------     ---------
         Net cash used in investing activities........................................    (137,212)     (184,456)
                                                                                         ---------     ---------
Cash flows from financing activities:
   Gross proceeds received from equity investors for payment of promissory notes......          --           396
   Stock option exercises.............................................................         272           397
   Proceeds received from issuance of debt............................................      50,000        30,000
   Proceeds received from issuance of senior notes....................................          --       160,000
   Purchase of treasury stock.........................................................        (169)         (173)
   Payment for offering costs.........................................................        (510)       (7,343)
   Payment of debt issuance costs.....................................................      (2,012)           --
                                                                                         ---------     ---------
         Net cash provided by financing activities....................................      47,581       183,277
                                                                                         ---------     ---------
Net decrease in cash and cash equivalents.............................................     (98,247)      (23,046)
Cash and cash equivalents, beginning of period........................................     104,752        36,313
                                                                                         ---------     ---------
Cash and cash equivalents, end of period..............................................   $   6,505     $  13,267
                                                                                         =========     =========
Non-cash:
   Deferred costs included in accounts payable and accounts payable--related parties..   $     107     $      --
   Property and equipment included in accounts payable................................   $     259     $   1,676
   Property and equipment included in accrued expenses................................   $      --     $   1,630
   Construction in progress included in accounts payable..............................   $     229     $  13,430
   Construction in progress included in accrued expenses..............................   $      --     $   1,606
</TABLE>



The accompanying notes are an integral part of the consolidated financial
                                  statements

                                      6

<PAGE>

                              IWO HOLDINGS, INC.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                  (Unaudited)


1. Basis of Presentation

   The accompanying consolidated financial statements are unaudited and have
been prepared by management. The consolidated financial statements included
herein include the accounts of IWO Holdings, Inc. and its wholly-owned
subsidiaries, Independent Wireless One Corporation and Independent Wireless One
Leased Realty Corporation (collectively "IWO" or the "Company") for all periods
presented. In the opinion of management, all adjustments, consisting of normal
recurring adjustments, considered necessary for fair presentation have been
included. The results of operations for the three and six months ended June 30,
2001 are not indicative of the results that may be expected for the full fiscal
year of 2001. The financial information presented herein should be read in
conjunction with the Company's Form S-1 and Form S-4 registration statements
which include information and disclosures not included herein. All significant
intercompany accounts or balances have been eliminated in consolidation.
Certain amounts have been reclassified to conform to the current period
presentation.

2. Description of the Organization

   Independent Wireless One, LLC, (the "LLC") a limited liability company, was
formed on August 22, 1997 by a consortium of independent local telephone
companies (the "Founders") to become a provider of wireless telecommunications
and data services. On September 9, 1998 the LLC changed its status to a
C-corporation and changed its name to Independent Wireless One Corporation.

   On October 29, 1999, IWO Holdings, Inc. was formed to hold an investment in
Independent Wireless One Corporation ("Corp"). On December 20, 1999, the
Founders of Independent Wireless One Corporation exchanged their equity
ownership, representing in the aggregate 100% of the outstanding capital stock
of Corp for an aggregate of 6,300,000 shares of Class B common stock of IWO
Holdings, Inc. Further, certain investors and management invested approximately
$135,000,000 into IWO Holdings, Inc., for approximately 79% of the equity of
the Company. IWO Holdings, Inc. exchanged common stock, warrants and options to
purchase the non-monetary assets of Corp. As a result of the transaction,
Independent Wireless One Corporation became a wholly-owned subsidiary of IWO
Holdings, Inc. (collectively referred to as "IWO" or the "Company").

   The Company was a development stage enterprise until it commenced operations
effective January 2000.

   In February 2000, the Company formed Independent Wireless One Leased Realty
Corporation to hold all leasehold interests in the retail stores,
administrative offices and cell site leases.

3. Net Loss Per Share

   The Company computes net loss per common share in accordance with SFAS No.
128 "Earnings per Share". Basic and diluted loss available to common
stockholders per share of common stock is computed by dividing net loss
available to common stockholders for each period by the weighted-average
outstanding common shares. No conversion of common stock equivalents (options
or warrants) 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 loss per share calculations for all periods presented. There are two
items that could potentially dilute basic earnings per share in the future.
These items include the common stock options and warrants. These items will be
included in the diluted earnings per share calculation when dilutive.

4. Investments

   The Company's investments consist of debt securities (U.S. Treasury
obligations and corporate debt securities). In accordance with SFAS No. 115,
debt securities have been classified in the accompanying

                                      7

<PAGE>

                              IWO HOLDINGS, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

                                  (Unaudited)

consolidated balance sheets as held-to-maturity securities and are reported at
amortized cost because the Company has the positive intent and the ability to
hold these debt securities to maturity. Market value is determined by quoted
market prices.

   The amortized cost and approximate fair value of investment securities held
to maturity at June 30, 2001 by contractual maturity (which are restricted for
future interest payments on the Senior Notes) are summarized as follows (in
thousands):

<TABLE>
<CAPTION>
                                      Gross      Gross
                          Amortized Unrealized Unrealized Market
                            Cost      Gains      Losses   Value
                          --------- ---------- ---------- -------
<S>                       <C>       <C>        <C>        <C>
U.S. Treasury obligations  $61,192     $356       $--     $61,548
</TABLE>

<TABLE>
<CAPTION>
                             Amortized Market
                               Cost    Value
                             --------- -------
<S>                          <C>       <C>
Due in one year or less.....  $31,148  $31,281
Due in one year through five   30,044   30,267
                              -------  -------
                              $61,192  $61,548
                              =======  =======
</TABLE>

   The above table excludes $1,380,000 of cash and accrued interest receivable
restricted for future interest payments on the Senior Notes.

   The amortized cost and approximate fair value of investment securities held
to maturity at June 30, 2001 (excluding restricted securities) are summarized
as follows (in thousands):

<TABLE>
<CAPTION>
                                             Gross      Gross
                                 Amortized Unrealized Unrealized Market
                                   Cost      Gains      Losses   Value
                                 --------- ---------- ---------- -------
       <S>                       <C>       <C>        <C>        <C>
       U.S. Treasury obligations  $22,245     $ 66      $  --    $22,311
       Corporate debt securities   70,713      219       (175)    70,757
                                  -------     ----      -----    -------
                                  $92,958     $285      $(175)   $93,068
                                  =======     ====      =====    =======
</TABLE>

   The amortized cost and approximate fair value of debt securities held to
maturity at June 30, 2001, by contractual maturity, are shown below (in
thousands):

<TABLE>
<CAPTION>
                                              Amortized Market
                                                Cost    Value
                                              --------- -------
                 <S>                          <C>       <C>
                 Due in one year or less.....  $34,516  $34,378
                 Due in one year through five   58,442   58,690
                                               -------  -------
                                               $92,958  $93,068
                                               =======  =======
</TABLE>

   There were no sales of investment securities held to maturity during the six
months ended June 30, 2001.


                                      8

<PAGE>

                              IWO HOLDINGS, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

                                  (Unaudited)


5. Property and Equipment

   Property and equipment consist of the following at December 31, 2000 and
June 30, 2001 (in thousands):

<TABLE>
<CAPTION>
                                                     2000      2001
                                                    -------  --------
          <S>                                       <C>      <C>
          Land..................................... $   169  $    169
          Building and building improvements.......   5,943     5,943
          Network equipment........................  62,779    88,804
          Furniture and office equipment...........   3,871     4,346
          Computer software........................   1,261     1,526
          Vehicles.................................     926     1,149
          Leasehold improvements...................   1,419     1,579
                                                    -------  --------
                                                     76,368   103,516
          Accumulated depreciation and amortization  (6,813)  (12,296)
                                                    -------  --------
                                                    $69,555  $ 91,220
                                                    =======  ========
</TABLE>

6. Deferred Costs

   Deferred costs consist of the following at December 31, 2000 and June 30,
2001 (in thousands):

<TABLE>
<CAPTION>
                                                               2000     2001
                                                              -------  -------
 <S>                                                          <C>      <C>
 Debt issuance costs......................................... $15,591  $15,597
 Deferred offering costs.....................................   2,234    9,573
                                                              -------  -------
                                                               17,825   25,170
 Accumulated amortization of debt issuance and offering costs  (2,927)  (4,823)
                                                              -------  -------
                                                              $14,898  $20,347
                                                              =======  =======
</TABLE>

7. Sprint Payable

   The Sprint payable consists of amounts owed to Sprint PCS for services
provided directly by Sprint PCS such as customer care, customer billing and the
8% affiliation fee, or passed through items from various third party vendors
such as purchases of handsets and accessories, indirect equipment subsidies,
advertising and various network operation expenses. At December 31, 2000 and
June 30, 2001, the amount payable to Sprint PCS totaled $7,711,000 and
$5,326,000, respectively.

8. Long-Term Debt

   Long-term debt consists of the following at December 31, 2000 and June 30,
2001 (in thousands):

<TABLE>
<CAPTION>
                                              2000     2001
                                             ------- --------
                   <S>                       <C>     <C>
                   Senior Credit Facility... $80,000 $110,000
                   14% Senior Notes due 2011      --  152,209
                                             ------- --------
                                             $80,000 $262,209
                                             ======= ========
</TABLE>

                                      9

<PAGE>

                              IWO HOLDINGS, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

                                  (Unaudited)


  (a) Senior Credit Facility

   In December, 1999, the Company entered into a credit facility (the Senior
Credit Facility) which was amended on June 30, and December 8, 2000,
respectively, with a group of commercial lenders, under which the Company may
borrow up to $240,000,000 in the aggregate consisting of (i) up to $70,000,000
in revolving loans (the Senior Revolving Credit Facility) with a maturity date
eight years from the effective date of the loan, (ii) a $120,000,000 term loan
(the Tranche A Term Loan) with a maturity date of March 2008, and (iii) a
$50,000,000 term loan (the Tranche B Term Loan) with a maturity date of
September 2008. The Senior Credit Facility, as amended, provides that, subject
to certain conditions, the Company may request an additional tranche of loans
in the amount of $25,000,000 in the aggregate on or prior to March 31, 2002
from the lenders. No lender is obligated to subscribe to the new commitment
and, in the event that the total commitment from the lenders is less than
$25,000,000, the Company has the right to arrange the financing of the deficit
amount with other financial institutions (subject to the approval of the
administrative agent).

   Beginning in March 2004, principal repayments will be made in 17 quarterly
installments for the Tranche A Term Loan and 19 quarterly installments for the
Tranche B Term Loan. Quarterly principal repayments for the Tranche A Term Loan
will range from $2,000,000 on March 31, 2004 to $12,000,000 on March 31, 2008.
Quarterly principal payments for the Tranche B Term Loan will range from
$250,000 on March 31, 2004 to $31,000,000 on September 30, 2008. Interest
payments on the Senior Credit Facility are due quarterly.

   The Senior Credit Facility contains a prepayment provision whereby certain
amounts borrowed must be repaid upon the occurrence of certain specified events
and conditions, including issuance of capital stock, proceeds from certain
additional indebtedness, certain asset sales and excess cash flows as defined
in the agreement.

   The interest rate applicable to the Senior Credit Facility is based on, at
the Company's option, (i) LIBOR (Eurodollar Loans) plus the Applicable Margin,
as defined, or (ii) the higher of the administrative agent's prime rate or the
Federal Funds Effective Rate (ABR Loans), plus the Applicable Margin, as
defined. The Applicable Margin for Eurodollar Loans will range from 1.5% to
3.75% based on certain events involving the Company, as specified. The
Applicable Margin for ABR Loans will range from 0.50% to 2.75% based on certain
events by the Company, as specified.

   The loans from the Senior Credit Facility are subject to a quarterly
commitment fee on the unborrowed portion, which ranges from 0.75% to 1.25% of
the available portion of the Tranche A Term Loan, the Tranche B Term Loan, and
the Senior Revolving Credit Facility.

   The Company must comply with certain financial and operating covenants. The
most restrictive financial covenants include debt to equity, debt to EBITDA,
interest coverage and fixed charge coverage ratios, as defined in the Senior
Credit Facility.

  (b) Senior Notes

   In February 2001, IWO Holdings, Inc. issued 160,000 units, each consisting
of $1,000 principal amount of 14% Senior Notes due January 15, 2011 and one
warrant to purchase 12.50025 shares of class C common stock at an exercise
price of $7.00 per share. Interest is payable semi-annually on January 15 and
July 15 of each year. The gross proceeds from the offering were $160,000,000,
which have been allocated to the fair value of the Senior Notes ($152,042,000)
and warrants ($7,958,000). Significant terms of the Senior Notes are:

   Ranking--The Senior Notes are senior unsecured obligations of IWO Holdings,
Inc., rank equally with all its existing and future senior debt and rank senior
to all its future subordinated debt.

                                      10

<PAGE>

                              IWO HOLDINGS, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

                                  (Unaudited)


   Guarantee--Independent Wireless One Corporation is the sole guarantor of the
Senior Notes. All of the Company's restricted subsidiaries formed or acquired
after the issuance of the notes that guarantee the Company's senior credit
facility will also guarantee the notes.

   Interest Reserve--Concurrently with the closing of the Senior Notes, a
portion of the proceeds of the offering was used to purchase a portfolio of
U.S. government securities which will generate sufficient proceeds to make the
first six scheduled interest payments on the Senior Notes. The account holding
the investment securities and all of the securities and other items contained
in the account have been pledged to the trustee for the benefit of the holders
of the notes.

   Optional Redemption--During the first thirty six (36) months after the
Senior Notes offering, the Company may use net proceeds of an equity offering
to redeem up to 35% of the notes originally issued at a redemption price of
114% of the value of the notes as of the date of redemption.

   Change of Control--Upon a change of control as defined by the senior note
indenture, the Company will be required to make an offer to purchase the Senior
Notes at a price equal to 101% of the principal amount together with accrued
and unpaid interest.

   Restrictive Covenants--The indenture governing the Senior Notes contains
covenants that, among other things and subject to certain exceptions, limit the
ability of IWO Holdings, Inc. and the ability of its restricted subsidiaries to
incur additional debt, pay dividends, redeem capital stock or make other
restrictive payments or investments as defined by the Senior Notes offering,
create liens on assets, merge, consolidate, or dispose of assets, or enter into
transactions with affiliates or into sales and leaseback transactions.

   The Senior Notes have cross default provisions whereby an event of default
which results in acceleration of the maturity on other indebtedness of the
Company triggers a default of the Senior Notes.

   The warrants will become exercisable on February 2, 2002 and expire on
January 15, 2011.

9. Recent Accounting Pronouncements

   In June 2001, Statement of Financial Accounting Standards (SFAS) No. 141,
"Business Combinations," was approved by the Financial Accounting Standards
Board (FASB). SFAS No. 141 requires the purchase method of accounting to be
used for all business combinations initiated after June 30, 2001. The Company
does not expect the adoption of this standard to have a material effect on its
financial statements.

   In June 2001, SFAS No. 142, "Goodwill and Other Intangible Assets," was
approved by the FASB. SFAS No. 142 changes the accounting for goodwill from an
amortization method to an impairment-only approach. Amortization of goodwill,
including goodwill recorded in past business combinations, will cease upon
adoption of this statement. The Company plans to adopt SFAS No. 142 on its
effective date of January 1, 2002. The Company expects annual amortization
expense to decrease by approximately $2.5 million due to the effect of this
statement.

10. Condensed Consolidating Financial Information

   Independent Wireless One Leased Realty Corporation (the "Non-Guarantor"), a
100% wholly-owned subsidiary of Independent Wireless One Corporation, is
precluded from guaranteeing the debt of IWO Holdings, Inc. based on current
agreements in effect. Independent Wireless One Corporation is not restricted
from serving as a guarantor of the IWO Holdings, Inc. debt.

   Independent Wireless One Leased Realty Corporation holds all of the cell
site leases and certain leases related to the administrative office facilities
and retail stores. Operating expenses are comprised of rent expense

                                      11

<PAGE>

                              IWO HOLDINGS, INC.

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

                                  (Unaudited)

from these leases. Independent Wireless One Leased Realty Corporation has
charged Independent Wireless One Corporation a fee equal to its rent expense
for use of its leased cell sites, office and retail space.

   The information which follows presents the condensed consolidating financial
position as of December 31, 2000 and June 30, 2001 and the condensed
consolidating results of operations for the three months and six months ended
June 30, 2000 and June 30, 2001 and condensed consolidating cash flows for the
six months ended June 30, 2000 and June 30, 2001 of (a) the Parent Company, IWO
Holdings, Inc., (b) the "Guarantor", Independent Wireless One Corporation, and
(c) the "Non-Guarantor", Independent Wireless One Leased Realty Corporation;
and includes eliminating entries and the Company on a consolidated basis.

                                      12

<PAGE>

                      IWO HOLDINGS, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

                     CONDENSED CONSOLIDATING BALANCE SHEET

                            As of December 31, 2000
                       (In thousands except share data)

<TABLE>
<CAPTION>
                                                                       Independent
                                                                        Wireless
                                                                           One
                                                                         Leased
                                                          Independent    Realty
                                                IWO       Wireless One Corporation
                                           Holdings, Inc. Corporation     (Non-
                                              (Parent)    (Guarantor)  Guarantor)  Eliminations Consolidated
                                           -------------- ------------ ----------- ------------ ------------
                 ASSETS
                 ------
<S>                                        <C>            <C>          <C>         <C>          <C>
Current assets:
   Cash and cash equivalents..............    $     --      $ 36,313     $   --     $      --     $ 36,313
   Accounts receivable, net of allowances
     of $312..............................          --         4,218         --            --        4,218
   Intercompany receivable................         272           906        350        (1,528)          --
   Inventory..............................          --         2,567         --            --        2,567
   Prepaid expenses.......................          --           418        654            --        1,072
   Other current assets...................          --           199         --            --          199
   Prepaid management fee--related party..          --         1,000         --            --        1,000
                                              --------      --------     ------     ---------     --------
       Total current assets...............         272        45,621      1,004        (1,528)      45,369

Restricted cash...........................          --         8,000         --            --        8,000
Investment in subsidiaries................     136,594            --         --      (136,594)          --
Prepaid management fee--related party.....          --         2,970         --            --        2,970
Property and equipment, net...............          --        69,555         --            --       69,555
Construction in progress..................          --        33,009         --            --       33,009
Deferred costs, net.......................          --        14,898         --            --       14,898
Intangible assets, net....................          --        58,874         --            --       58,874
Other.....................................          --            24         --            --           24
                                              --------      --------     ------     ---------     --------
       Total assets.......................    $136,866      $232,951     $1,004     $(138,122)    $232,699
                                              ========      ========     ======     =========     ========
</TABLE>






                                      13

<PAGE>

                      IWO HOLDINGS, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

              CONDENSED CONSOLIDATING BALANCE SHEET--(Continued)

                            As of December 31, 2000
                       (In thousands except share data)

<TABLE>
<CAPTION>
                                                                                       Independent
                                                                        Independent   Wireless One
                                                              IWO       Wireless One  Leased Realty
                                                         Holdings, Inc. Corporation    Corporation
                                                            (Parent)    (Guarantor)  (Non-Guarantor) Eliminations Consolidated
                                                         -------------- ------------ --------------- ------------ ------------
         LIABILITIES AND STOCKHOLDERS' EQUITY
         ------------------------------------
<S>                                                      <C>            <C>          <C>             <C>          <C>
Current liabilities:
   Accounts payable.....................................    $     --      $  6,388       $   --       $      --     $  6,388
   Accounts payable--related parties....................          --           213           --              --          213
   Intercompany payable.................................         252           622          654          (1,528)          --
   Due to Sprint........................................          --         7,711           --              --        7,711
   Accrued expenses.....................................          --        12,082          350              --       12,432
   Accrued expenses--related parties....................          --           463           --              --          463
   Unearned revenue.....................................          --         1,652           --              --        1,652
                                                            --------      --------       ------       ---------     --------
       Total current liabilities........................         252        29,131        1,004          (1,528)      28,859
Term loan...............................................          --        80,000           --              --       80,000
                                                            --------      --------       ------       ---------     --------
Total liabilities.......................................         252       109,131        1,004          (1,528)     108,859
                                                            --------      --------       ------       ---------     --------
Redeemable common stock.................................         346            --           --              --          346
                                                            --------      --------       ------       ---------     --------
Commitments and contingencies
Stockholders' equity:
   Preferred stock (nonvoting)--$.01 par value, 500,000
     shares authorized, none issued and outstanding.....          --            --           --              --           --
   Common stock, Class A (nonvoting)--$.01 par value,
     15,000,000 shares authorized, issued and
     outstanding........................................         150            --           --              --          150
   Common stock, Class B (voting) $.01 par value,
     18,750,000 shares authorized, and 13,274,171
     shares issued......................................         133            --           --              --          133
   Common stock, Class C (nonvoting)--$.01 par value,
     18,750,000 shares authorized, 3,555,630 shares
     issued and outstanding.............................          35            --           --              --           35
   Common stock, Class D (voting)--$.01 par value,
     60,000 shares authorized, issued and outstanding...           1            --           --              --            1
   Common stock, Class E (nonvoting)--$.01 par value,
     5,545,000 shares authorized, 5,543,654 shares
     issued and outstanding.............................          55            --           --              --           55
   Common stock, (voting)--$.01 par value, 58,105,000
     shares authorized, none issued and outstanding.....          --            --           --              --           --
Capital stock...........................................          --         2,750           --          (2,750)          --
Additional paid-in capital..............................     187,302       172,969           --        (185,000)     175,271
Deficit accumulated during developmental stage..........      (1,076)       (1,076)          --           1,076       (1,076)
Retained deficit........................................     (50,080)      (50,080)          --          50,080      (50,080)
                                                            --------      --------       ------       ---------     --------
                                                             136,520       124,563           --        (136,594)     124,489
Treasury stock at cost (43,856 Class B shares)..........        (252)           --           --              --         (252)
Promissory notes receivable.............................          --          (743)          --              --         (743)
                                                            --------      --------       ------       ---------     --------
       Total stockholders' equity.......................     136,268       123,820           --        (136,594)     123,494
                                                            --------      --------       ------       ---------     --------
       Total liabilities and stockholders' equity.......    $136,866      $232,951       $1,004       $(138,122)    $232,699
                                                            ========      ========       ======       =========     ========
</TABLE>

                                      14

<PAGE>

                      IWO HOLDINGS, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

                UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET

                              As of June 30, 2001
                       (In thousands except share data)

<TABLE>
<CAPTION>
                                                                      Independent
                                                                     Wireless One
                                                        Independent  Leased Realty
                                                        Wireless One  Corporation
                                          IWO Holdings, Corporation      (Non-
                                          Inc. (Parent) (Guarantor)   Guarantor)   Eliminations Consolidated
                                          ------------- ------------ ------------- ------------ ------------
                 ASSETS
                 ------
<S>                                       <C>           <C>          <C>           <C>          <C>
Current assets:
   Cash and cash equivalents.............   $     --      $ 13,267      $   --      $      --     $ 13,267
   Accounts receivable net of
     allowances of $364..................         --         5,027          --             --        5,027
   Short-term investments at amortized
     cost--held to maturity..............         --        34,516          --             --       34,516
   Intercompany receivable...............    152,877         1,870         357       (155,104)          --
   Inventory.............................         --           842          --             --          842
   Prepaid expenses......................         --           436       1,445             --        1,881
   Other current assets..................         --         1,901          --             --        1,901
   Prepaid management fee--related
     party...............................         --         1,000          --             --        1,000
   Restricted cash and US Treasury
     obligation at amortized cost--
     held to maturity....................         --        31,674          --             --       31,674
                                            --------      --------      ------      ---------     --------
       Total current assets..............    152,877        90,533       1,802       (155,104)      90,108

Restricted cash..........................         --         8,000          --             --        8,000
Restricted cash and US Treasury
  obligations at amortized cost--held to
  maturity...............................         --        30,898          --             --       30,898
Investment securities at amortized cost--
  held to maturity.......................         --        58,442          --             --       58,442
Investment in subsidiaries...............    105,167            --          --       (105,167)          --
Prepaid management fee--related
  party..................................         --         2,470          --             --        2,470
Property and equipment, net..............         --        91,220          --             --       91,220
Construction in progress.................         --        53,132          --             --       53,132
Deferred costs, net......................         --        20,347          --             --       20,347
Intangible assets, net...................         --        55,788          --             --       55,788
Other....................................         --            10          --             --           10
                                            --------      --------      ------      ---------     --------
       Total assets......................   $258,044      $410,840      $1,802      $(260,271)    $410,415
                                            ========      ========      ======      =========     ========
</TABLE>

                                      15

<PAGE>

                      IWO HOLDINGS, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

         UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEET--(Continued)

                              As of June 30, 2001
                       (In thousands except share data)

<TABLE>
<CAPTION>
                                                                                          Independent
                                                                           Independent   Wireless One
                                                                 IWO       Wireless One  Leased Realty
                                                            Holdings, Inc. Corporation    Corporation
                                                               (Parent)    (Guarantor)  (Non-Guarantor) Eliminations Consolidated
                                                           --------------- ------------ --------------- ------------ ------------
          LIABILITIES AND STOCKHOLDERS' EQUITY
          ------------------------------------
<S>                                                        <C>             <C>          <C>             <C>          <C>
Current liabilities:
   Accounts payable.......................................    $     --       $ 16,012       $   --       $      --     $ 16,012
   Accounts payable--related parties......................          --             48           --              --           48
   Intercompany payable...................................         425        153,234        1,445        (155,104)          --
   Due to Sprint..........................................          --          5,326           --              --        5,326
   Accrued expenses.......................................          --         22,802          357              --       23,159
   Accrued expenses--related parties......................          --            152           --              --          152
   Unearned revenue.......................................          --          2,211           --              --        2,211
   Debt...................................................          --             --           --              --           --
                                                              --------       --------       ------       ---------     --------
       Total current liabilities..........................         425        199,785        1,802        (155,104)      46,908
Term loan.................................................          --        110,000           --              --      110,000
Senior notes..............................................     152,209             --           --              --      152,209
                                                              --------       --------       ------       ---------     --------
       Total liabilities..................................     152,634        309,785        1,802        (155,104)     309,117
                                                              --------       --------       ------       ---------     --------
Redeemable common stock...................................         173             --           --              --          173
                                                              --------       --------       ------       ---------     --------
Commitments and contingencies
Stockholders' Equity:
   Preferred stock (nonvoting)--$.01 par value,
     500,000 shares authorized, none issued and
     outstanding..........................................          --             --           --              --           --
   Common stock, Class A (nonvoting)--$.01 par value,
     15,000,000 shares authorized, issued and
     outstanding..........................................         150             --           --              --          150
   Common stock, Class B (voting)--$.01 par value
     18,750,000 shares authorized and 13,532,710 shares
     issued...............................................         136             --           --              --          136
   Common stock, Class C (nonvoting)--$.01 par value,
     18,750,000 shares authorized and 3,555,630 shares
     issued and outstanding...............................          35             --           --              --           35
   Common stock, Class D (voting)--$.01 par value,
     60,000 shares authorized, issued and outstanding.....           1             --           --              --            1
   Common stock, Class E (voting)--$.01 par value,
     5,545,000 shares authorized, 5,543,654 shares issued
     and outstanding......................................          55             --           --              --           55
   Common stock (voting)--$.01 par value,
     58,105,000 shares authorized, none issued and
     outstanding..........................................          --             --           --              --           --
Capital stock.............................................          --          2,750           --          (2,750)          --
Additional paid-in capital................................     187,868        181,235           --        (185,000)     184,103
Deficit accumulated during developmental stage............      (1,076)        (1,076)          --           1,076       (1,076)
Retained deficit..........................................     (81,507)       (81,507)          --          81,507      (81,507)
                                                              --------       --------       ------       ---------     --------
                                                               105,662        101,402           --        (105,167)     101,897
Treasury stock at cost (73,935 Class B Shares)............        (425)            --           --              --         (425)
Promissory notes receivable...............................          --           (347)          --              --         (347)
                                                              --------       --------       ------       ---------     --------
       Total stockholders' equity.........................     105,237        101,055           --        (105,167)     101,125
                                                              --------       --------       ------       ---------     --------
       Total liabilities and stockholders' equity.........    $258,044       $410,840       $1,802       $(260,271)    $410,415
                                                              ========       ========       ======       =========     ========
</TABLE>

                                      16

<PAGE>

                      IWO HOLDINGS, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

           UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

                   For the Three Months Ended June 30, 2000
                                (In thousands)

<TABLE>
<CAPTION>
                                                                      Independent
                                                IWO    Independent   Wireless One
                                             Holdings, Wireless One  Leased Realty
                                               Inc.    Corporation    Corporation
                                             (Parent)  (Guarantor)  (Non-Guarantor) Eliminations Consolidated
                                             --------- ------------ --------------- ------------ ------------
<S>                                          <C>       <C>          <C>             <C>          <C>
Net revenues................................ $     --    $ 12,405        $843         $  (843)     $ 12,405
                                             --------    --------        ----         -------      --------
Operating expenses:
   Costs of service and equipment...........       --       8,171         662              --         8,833
   Selling and marketing....................       --       3,621          74              --         3,695
   General and administrative:
       Noncash stock-based
         compensation.......................       --         251          --              --           251
       Related parties......................       --         321          --              --           321
       Other general and administrative
         expenses...........................       --       3,484         107              --         3,591
   Depreciation and amortization............       --       3,626          --              --         3,626
   Intercompany expenses....................       --         843          --            (843)           --
                                             --------    --------        ----         -------      --------
       Total operating expenses.............       --      20,317         843            (843)       20,317
                                             --------    --------        ----         -------      --------
Operating loss..............................       --      (7,912)         --              --        (7,912)
   Interest income..........................       --         346          --              --           346
   Interest expense.........................       --      (1,014)         --              --        (1,014)
   Interest expense--related parties........       --        (194)         --              --          (194)
   Amortization of debt issuance costs......       --        (629)         --              --          (629)
   Other debt financing fees................       --        (810)         --              --          (810)
   Equity in losses of wholly-owned
     subsidiaries...........................  (10,213)         --          --          10,213            --
                                             --------    --------        ----         -------      --------
       Net loss............................. $(10,213)   $(10,213)       $ --         $10,213      $(10,213)
                                             ========    ========        ====         =======      ========
</TABLE>

                                      17

<PAGE>

                      IWO HOLDINGS, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

    UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS--(Continued)

                   For the Three Months Ended June 30, 2001
                                (In thousands)

<TABLE>
<CAPTION>
                                                                          Independent
                                                                         Wireless One
                                                            Independent  Leased Realty
                                                  IWO       Wireless One  Corporation
                                             Holdings, Inc. Corporation      (Non-
                                                (Parent)    (Guarantor)   Guarantor)   Eliminations Consolidated
                                             -------------- ------------ ------------- ------------ ------------
<S>                                          <C>            <C>          <C>           <C>          <C>
Net revenues................................    $     --      $ 24,613      $1,967       $(1,967)     $ 24,613
                                                --------      --------      ------       -------      --------
Operating expenses:
   Costs of services and equipment..........          --        18,176       1,599            --        19,775
   Selling and marketing....................          --         5,958         251            --         6,209
   General and administrative:
       Noncash stock-based
         compensation.......................          --            97          --            --            97
       Related parties......................          --           198          --            --           198
       Other general and administrative
         expenses...........................          --         4,949         117            --         5,066
   Depreciation and amortization............          --         4,422          --            --         4,422
   Intercompany expenses....................          --         1,967          --        (1,967)           --
                                                --------      --------      ------       -------      --------
       Total operating expenses.............          --        35,767       1,967        (1,967)       35,767
                                                --------      --------      ------       -------      --------
Operating loss..............................          --       (11,154)         --            --       (11,154)
   Interest income..........................          --         2,339          --            --         2,339
   Interest expense.........................          --        (6,352)         --            --        (6,352)
   Interest expense--related parties........          --          (415)         --            --          (415)
   Amortization of debt issuance costs......          --          (711)         --            --          (711)
   Other debt financing fees................          --          (415)         --            --          (415)
   Equity in losses of wholly-owned
     subsidiaries...........................     (16,708)           --          --        16,708            --
                                                --------      --------      ------       -------      --------
       Net loss.............................    $(16,708)     $(16,708)     $   --       $16,708      $(16,708)
                                                ========      ========      ======       =======      ========
</TABLE>

                                      18

<PAGE>

                      IWO HOLDINGS, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

    UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS--(Continued)

                    For the Six Months Ended June 30, 2000
                                (In thousands)

<TABLE>
<CAPTION>
                                                                      Independent
                                                IWO    Independent   Wireless One
                                             Holdings, Wireless One  Leased Realty
                                               Inc.    Corporation    Corporation
                                             (Parent)  (Guarantor)  (Non-Guarantor) Eliminations Consolidated
                                             --------- ------------ --------------- ------------ ------------
<S>                                          <C>       <C>          <C>             <C>          <C>
Net revenues................................ $     --    $ 22,416        $981         $  (981)     $ 22,416
                                             --------    --------        ----         -------      --------
Operating expenses:
   Costs of service and equipment...........       --      17,636         663              --        18,299
   Selling and marketing....................       --       6,867         119              --         6,986
   General and administrative:
       Noncash stock-based
         compensation.......................       --         631          --              --           631
       Related parties......................       --         761          --              --           761
       Other general and administrative
         expenses...........................       --       6,883         199              --         7,082
   Depreciation and amortization............       --       4,772          --              --         4,772
   Intercompany expenses....................       --         981          --            (981)           --
                                             --------    --------        ----         -------      --------
       Total operating expenses.............       --      38,531         981            (981)       38,531
                                             --------    --------        ----         -------      --------
Operating loss..............................       --     (16,115)         --              --       (16,115)
   Interest income..........................       --       1,298          --              --         1,298
   Interest expense.........................       --      (1,014)         --              --        (1,014)
   Interest expense--related parties........       --        (194)         --              --          (194)
   Amortization of debt issuance costs......       --      (1,257)         --              --        (1,257)
   Other debt financing fees................       --      (1,754)         --              --        (1,754)
   Equity in losses of wholly-owned
     subsidiaries...........................  (19,036)         --          --          19,036            --
                                             --------    --------        ----         -------      --------
       Net loss............................. $(19,036)   $(19,036)       $ --         $19,036      $(19,036)
                                             ========    ========        ====         =======      ========
</TABLE>

                                      19

<PAGE>

                      IWO HOLDINGS, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

    UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS--(Continued)

                    For the Six Months Ended June 30, 2001
                                (In thousands)

<TABLE>
<CAPTION>
                                                                        Independent
                                                            Independent  Wireless
                                                             Wireless   One Realty
                                                  IWO           One     Corporation
                                             Holdings, Inc. Corporation    (Non-
                                                (Parent)    (Guarantor) Guarantor)  Eliminations Consolidated
                                             -------------- ----------- ----------- ------------ ------------
<S>                                          <C>            <C>         <C>         <C>          <C>
Net revenues................................    $     --     $ 44,706     $3,560      $(3,560)     $ 44,706
                                                --------     --------     ------      -------      --------
Operating expenses:
   Costs of services and equipment..........          --       32,971      2,875           --        35,846
   Selling and marketing....................          --       10,795        444           --        11,239
   General and administrative:
       Noncash stock-based
         compensation.......................          --          308         --           --           308
       Related parties......................          --          525         --           --           525
       Other general and administrative
         expenses...........................          --        9,217        241           --         9,458
   Depreciation and amortization............          --        8,568         --           --         8,568
   Intercompany expenses....................          --        3,560         --       (3,560)           --
                                                --------     --------     ------      -------      --------
       Total operating expenses.............          --       65,944      3,560       (3,560)       65,944
                                                --------     --------     ------      -------      --------
Operating loss..............................          --      (21,238)        --           --       (21,238)
   Interest income..........................          --        4,168         --           --         4,168
   Interest expense.........................          --      (10,607)        --           --       (10,607)
   Interest expense--related parties........          --         (767)        --           --          (767)
   Amortization of debt issuance costs......          --       (1,896)        --           --        (1,896)
   Other debt financing fees................          --       (1,087)        --           --        (1,087)
   Equity in losses of wholly-owned
     subsidiaries...........................     (31,427)          --         --       31,427            --
                                                --------     --------     ------      -------      --------
       Net loss.............................    $(31,427)    $(31,427)    $   --      $31,427      $(31,427)
                                                ========     ========     ======      =======      ========
</TABLE>

                                      20

<PAGE>

                      IWO HOLDINGS, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

           UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

                    For the Six Months Ended June 30, 2000
                                (In thousands)

<TABLE>
<CAPTION>
                                                                            Independent
                                                      IWO    Independent   Wireless One
                                                   Holdings, Wireless One  Leased Realty
                                                     Inc.    Corporation    Corporation
                                                   (Parent)  (Guarantor)  (Non-Guarantor) Eliminations Consolidated
                                                   --------- ------------ --------------- ------------ ------------
<S>                                                <C>       <C>          <C>             <C>          <C>
Net cash used in operating activities.............    (103)      (8,513)         --            --          (8,616)
                                                     -----    ---------         ---           ---       ---------
Cash flows from investing activities:
  Deferred acquisition costs......................      --         (331)         --            --            (331)
  Purchase of Sprint assets.......................      --     (116,405)         --            --        (116,405)
  Restricted cash.................................      --       (8,000)         --            --          (8,000)
  Purchase of property and equipment..............      --       (4,533)         --            --          (4,533)
  Construction in progress........................      --       (7,943)         --            --          (7,943)
                                                     -----    ---------         ---           ---       ---------
    Net cash used in investing activities.........      --     (137,212)         --            --        (137,212)
                                                     -----    ---------         ---           ---       ---------
Cash flows from financing activities:
   Stock option exercises.........................     272           --          --            --             272
   Proceeds received from issuance of debt........      --       50,000          --            --          50,000
   Purchase of treasury stock.....................    (169)          --          --            --            (169)
   Payment for registration costs.................      --         (510)         --            --            (510)
   Payment for debt issuance costs................      --       (2,012)         --            --          (2,012)
                                                     -----    ---------         ---           ---       ---------
    Net cash provided by financing activities.....     103       47,478          --            --          47,581
                                                     -----    ---------         ---           ---       ---------
Net decrease in cash and cash equivalents.........      --      (98,247)         --            --         (98,247)
Cash and cash equivalents, beginning of period....      --      104,752          --            --         104,752
                                                     -----    ---------         ---           ---       ---------
Cash and cash equivalents, end of period..........   $  --    $   6,505         $--           $--       $   6,505
                                                     =====    =========         ===           ===       =========
Non-cash:
  Deferred costs included in accounts payable and
   accounts payable--related parties..............   $  --    $     107         $--           $--       $     107
  Property and equipment included in accounts
   payable........................................   $  --    $     259         $--           $--       $     259
  Construction in progress included in accounts
   payable........................................   $  --    $     229         $--           $--       $     229
</TABLE>

                                      21

<PAGE>

                      IWO HOLDINGS, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

    UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS--(Continued)

                    For the Six Months Ended June 30, 2001
                                (In thousands)

<TABLE>
<CAPTION>
                                                                                       Independent   Independent
                                                                                        Wireless    Wireless One
                                                                             IWO           One      Leased Realty
                                                                        Holdings, Inc. Corporation   Corporation
                                                                           (Parent)    (Guarantor) (Non-Guarantor) Eliminations
                                                                        -------------- ----------- --------------- ------------
<S>                                                                     <C>            <C>         <C>             <C>
Net cash (used in) provided by operating activities....................    (160,620)      138,753         --            --
                                                                          ---------     ---------        ---           ---
Cash flows from investing activities:
   Purchase of investment securities at amortized cost--held to
    maturity...........................................................          --      (105,328)        --            --
   Proceeds from maturities of investment securities...................          --        12,371         --            --
   Restricted cash and U.S. Treasury obligations, at amortized cost--
    held to maturity...................................................          --       (62,572)        --            --
   Purchase of property and equipment..................................          --       (22,434)        --            --
   Construction in progress............................................          --        (6,493)        --            --
                                                                          ---------     ---------        ---           ---
         Net cash used in investing activities.........................          --      (184,456)        --            --
                                                                          ---------     ---------        ---           ---
Cash flows from financing activities:
   Gross proceeds received from equity investors for payment of
    promissory notes...................................................         396            --         --            --
   Stock option exercises..............................................         397            --         --            --
   Proceeds received from issuance of debt.............................          --        30,000         --            --
   Proceeds received from issuance of senior notes.....................     160,000            --         --            --
   Purchase of treasury stock..........................................        (173)           --         --            --
   Payment for offering costs..........................................          --        (7,343)        --            --
                                                                          ---------     ---------        ---           ---
         Net cash provided by financing activities.....................     160,620        22,657         --            --
                                                                          ---------     ---------        ---           ---
Net decrease in cash and cash equivalents..............................          --       (23,046)        --            --
Cash and cash equivalents, beginning of period.........................          --        36,313         --            --
                                                                          ---------     ---------        ---           ---
Cash and cash equivalents, end of period...............................   $      --     $  13,267        $--           $--
                                                                          =========     =========        ===           ===
Non-cash:
   Property and equipment included in accounts payable.................   $      --     $   1,676        $--           $--
   Property and equipment included in accrued expenses.................   $      --     $   1,630        $--           $--
   Construction in progress included in accounts payable...............   $      --     $  13,430        $--           $--
   Construction in progress included in accrued expenses...............   $      --     $   1,606        $--           $--
</TABLE>
<TABLE>
<CAPTION>




                                                                        Consolidated
                                                                        ------------
<S>                                                                     <C>
Net cash (used in) provided by operating activities....................    (21,867)
                                                                         ---------
Cash flows from investing activities:
   Purchase of investment securities at amortized cost--held to
    maturity...........................................................   (105,328)
   Proceeds from maturities of investment securities...................     12,371
   Restricted cash and U.S. Treasury obligations, at amortized cost--
    held to maturity...................................................    (62,572)
   Purchase of property and equipment..................................    (22,434)
   Construction in progress............................................     (6,493)
                                                                         ---------
         Net cash used in investing activities.........................   (184,456)
                                                                         ---------
Cash flows from financing activities:
   Gross proceeds received from equity investors for payment of
    promissory notes...................................................        396
   Stock option exercises..............................................        397
   Proceeds received from issuance of debt.............................     30,000
   Proceeds received from issuance of senior notes.....................    160,000
   Purchase of treasury stock..........................................       (173)
   Payment for offering costs..........................................     (7,343)
                                                                         ---------
         Net cash provided by financing activities.....................    183,277
                                                                         ---------
Net decrease in cash and cash equivalents..............................    (23,046)
Cash and cash equivalents, beginning of period.........................     36,313
                                                                         ---------
Cash and cash equivalents, end of period...............................  $  13,267
                                                                         =========
Non-cash:
   Property and equipment included in accounts payable.................  $   1,676
   Property and equipment included in accrued expenses.................  $   1,630
   Construction in progress included in accounts payable...............  $  13,430
   Construction in progress included in accrued expenses...............  $   1,606
</TABLE>

                                      22

<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

Forward-Looking Statements

   This quarterly report on Form 10-Q contains statements about future events
and expectations which are "forward-looking statements." Any statement in this
report that is not a statement of historical fact may be deemed to be a
forward-looking statement. These forward-looking statements include:

  .  forecasts of growth in the number of consumers using wireless personal
     communications services and in estimated number of residents;

  .  statements regarding our plans for, and costs of, the build-out of our
     portion of the Sprint PCS network;

  .  statements regarding our future revenues, expense levels, liquidity and
     capital resources, operating losses and projections of when we will launch
     commercial wireless personal communications services, products and
     distribution channels in particular markets;

  .  statements regarding expectations or projections about markets in our
     territory; and

  .  other statements, including statements containing words such as "may,"
     "might," "could," "would," "anticipate," "believe," "plan," "estimate,"
     "project," "expect," "seek," "intend" and other similar words that signify
     forward-looking statements.

   These forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause our actual results, performance
or achievements to be materially different from any future results, performance
or achievements expressed or implied by these forward-looking statements.
Specific factors that might cause such a difference include, but are not
limited to:

  .  our dependence on our affiliation with Sprint PCS;

  .  the need to successfully complete the build-out of our portion of the
     Sprint PCS network on our anticipated schedule;

  .  our dependence on Sprint PCS' back office services;

  .  our limited operating history and anticipation of future losses;

  .  our potential need for additional capital;

  .  the continued ability to borrow under our senior credit facility;

  .  our dependence on contractor and consultant services, network
     implementation and information technology support;

  .  our competition;

  .  our potential inability to expand our services and related products in the
     event of substantial increases in demand in excess of supply for network
     and handset equipment and related services and products; and

  .  changes or advance in technology.

   Readers are cautioned not to place undue reliance on these forward-looking
statements, which reflect management's analysis only as of the date hereof. We
do not undertake any obligation to publicly revise these forward-looking
statements to reflect events or circumstances that arise after the date hereof.
Readers should carefully review the risk factors described below.

Overview

   In February 1999, we entered into a management agreement with Sprint PCS
whereby we became the Sprint PCS affiliate with the exclusive right to provide
100% digital, 100% PCS services under the Sprint and Sprint

                                      23

<PAGE>

PCS brand names in our territory in the northeastern United States comprising
approximately 6.1 million residents. This territory extends from suburban New
York City (Orange and Sullivan Counties) north to the Canadian border and
reaches from the eastern suburbs of Rochester to Syracuse, Ithaca, Binghamton
and Elmira in central New York State (and extending into a small portion of
north central Pennsylvania), east to include all of Vermont and New Hampshire
(except Nashua, New Hampshire) and a portion of western Massachusetts. In March
2000, we completed the acquisition from Sprint PCS of certain assets, primarily
network assets, and obtained the right to manage approximately 45,000
subscribers in the aforementioned territory at a purchase price of
approximately $116.4 million. Sprint PCS had developed an operating network in
seven markets within our territory which will serve as the foundation of our
network. In 2000, we expanded coverage of the markets acquired from Sprint PCS.
As of June 30, 2001, we provided Sprint PCS services to 102,598 subscribers.

   Sprint PCS has invested approximately $90.0 million to purchase the PCS
licenses in our territory and incurred additional costs for microwave clearing.
Under our long-term agreements with Sprint PCS, we manage the network on Sprint
PCS' licensed spectrum and use the Sprint and Sprint PCS brand names
royalty-free during the term of 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 network.

   As of June 30, 2001, our network covered 3.3 million of the 6.1 million
residents in our territory.

Results of Operations

  The Three Months Ended June 30, 2001 Compared to the Three Months Ended June
  30, 2000:

  Customer Additions

   As of June 30, 2001, we provided personal communication services to 102,598
customers, a net increase of 11,006 during the three months then ended,
compared to a net increase of 6,706 new customers during the three months ended
June 30, 2000. The increased customers are attributable to the expansion of the
network within our existing markets as well as the expansion into new markets
within our territory.

  Average Revenue Per User (ARPU)

   An important operating metric in the wireless industry is Average Revenue
Per User (ARPU). ARPU summarizes the average monthly service revenue per
customer. ARPU is computed by dividing service revenues by the average
subscribers for the period. For the three months ended June 30, 2001, ARPU
(including roaming) was $80 compared to $73 for the three months ended June 30,
2000, an increase of $7. The increase in ARPU primarily resulted from higher
inbound roaming revenues as we expanded our network.

  Revenues

   Net revenues were $24.6 million for the three months ended June 30, 2001
compared to $12.4 million for the three months ended June 30, 2000, an increase
of $12.2 million. This is primarily attributable to the increase in our
customer base and the inbound roaming revenues associated with the expansion of
our network.

  Costs of Services and Equipment

   The costs of services and equipment were $19.8 million for the three months
ended June 30, 2001 compared to $8.8 million for the three months ended June
30, 2000, an increase of $11.0 million. The costs incurred related

                                      24

<PAGE>

to our agreement with Sprint PCS were $15.2 million, or 77% of total costs of
service and equipment, for the three months ended June 30, 2001 and $6.8
million, or 77% of total costs of service and equipment, for the three months
ended June 30, 2000. The comparative change was comprised of the following
elements:

   Operations expense was $8.3 million for the three months ended June 30, 2001
compared to $4.2 million for the three months ended June 30, 2000, an increase
of $4.1 million. This increase was a result of our network expansion, which led
to increases in site lease costs and costs related to utilities and
maintenance, engineering personnel and transport facilities, and the increase
in our customer base, which lead to more interconnect charges, long distance
charges and off network roaming expenses which are incurred when an IWO
customer roams on another carrier's network.

   Roaming expense on Sprint PCS networks was $7.1 million for the three months
ended June 30, 2001 compared to $2.6 million for the three months ended June
30, 2000, an increase of $4.5 million. The increased roaming minutes resulting
from the increase in our customer base.

   Cost of equipment was $2.1 million for the three months ended June 30, 2001
compared to $0.6 million for the three months ended June 30, 2000, an increase
of $1.5 million. This increase is largely attributable to the increase in the
number of customer additions over the same period in the prior year, as cost of
equipment includes the cost of handsets and accessories sold primarily to new
customers. The cost of handsets exceeds the retail price received from
customers because we subsidize the price of handsets to remain competitive in
the marketplace.

   Customer services and billing related expenses were $2.3 million for the
three months ended June 30, 2001 and $1.4 million for the three months ended
June 30, 2000, an increase of $0.9 million. This increase is attributable to
the increase in the number of customers over the same period. These expenses
include the cost of rendering customer bills and of customer care.

  Selling and Marketing

   We incurred selling and marketing expenses of $6.2 million during the three
months ended June 30, 2001 compared to $3.7 million during the three months
ended June 30, 2000, an increase of $2.5 million. The increase was a result of
an increase in new subscribers. These amounts include retail store costs such
as salaries and rent in addition to promotion, advertising and commission
costs, and handset subsidies on units sold by third parties for which we do not
take title. The costs incurred related to our agreement with Sprint PCS were
$2.5 million, or 40% of total selling and marketing expenses, for the three
months ended June 30, 2001 and $2.3 million, or 62% of total selling and
marketing expenses, for the three months ended June 30, 2000.

  General and Administrative

   For the three months ended June 30, 2001, we incurred expenses of $5.4
million compared to $4.2 million for the three months ended June 30, 2000, an
increase of $1.2 million. The increase is primarily comprised of compensation
and benefits relating to growth in the number of employees. Noncash stock
option compensation expense was $0.1 million for the three months ended June
30, 2001 compared to $0.3 million for the three months ended June 30, 2000, a
decrease of $0.2 million. The costs incurred related to our agreement with
Sprint PCS were $1.3 million, or 25% of total general and administrative
expenses, for the three months ended June 30, 2001 and $0.7 million, or 18% of
total general and administrative expenses, for the three months ended June 30,
2000.
  Depreciation and Amortization

   For the three months ended June 30, 2001, depreciation and amortization
expense increased to $4.4 million compared to $3.6 million for the three months
ended June 30, 2000, an increase of $0.8 million. The increase in

                                      25

<PAGE>

depreciation and amortization expense relates primarily to the expansion of our
network. Depreciation and amortization will continue to increase substantially
as additional portions of our network are placed into service. We incurred
capital expenditures of $33.1 million in the three months ended June 30, 2001,
which included approximately $1.3 million of capitalized interest. We incurred
capital expenditures of $6.4 million and capitalized interest of $0.1 million
in the three months ended June 30, 2000.

  Interest Income

   For the three months ended June 30, 2001, interest income was $2.3 million
compared to $0.3 million for the three months ended June 30, 2000, an increase
of $2.0 million. We had higher average invested balances for the three months
ended June 30, 2001 compared to the three months ended June 30, 2000, as a
result of the proceeds from our December 2000 equity offering and February 2001
debt offering. As capital expenditures are required to complete the build-out
of our PCS network, and as working capital and operating losses are funded,
decreasing average invested balances are expected to result in lower interest
income for the remainder of fiscal 2001.

  Interest Expense

   For the three months ended June 30, 2001, interest expense was $6.8 million
compared to $1.2 million for the three months ended June 30, 2000, an increase
of $5.6 million. The increase is primarily attributable to increased borrowings
under the senior credit facility and issuance of the senior notes. We had
borrowings of $262.2 million as of June 30, 2001, compared to $80.0 million as
of December 31, 2000 and $50.0 million as of June 30, 2000.

  Amortization of Debt Issuance and Offering Costs

   For the three months ended June 30, 2001, amortization of debt issuance and
offering costs was $0.7 million compared to $0.6 million for the three months
ended June 30, 2000, an increase of $0.1 million. The increase was primarily
attributable to amortization of the costs incurred to issue our $160.0 million
senior notes in February 2001.

  Other Debt Financing Fees

   For the three months ended June 30, 2001, other debt financing fees were
$0.4 million compared to $0.8 million for the three months ended June 30, 2000,
a decrease of $0.4 million. The decrease was primarily attributable to the
elimination of the commitment fee payable on the bridge loan that was replaced
with our recent high yield offering.

  The Six Months Ended June 30, 2001 Compared to the Six Months Ended June 30,
  2000:

  Customer Additions

   As of June 30, 2001, we provided personal communication services to 102,598
customers, a net increase of 20,971 during the six months then ended, compared
to a net increase of 13,119 new customers during the six months ended June 30,
2000. The increased customers are attributable to the expansion of the network
within our existing markets as well as the expansion into new markets within
our territory.

  Average Revenue Per User (ARPU)

   For the six months ended June 30, 2001, ARPU (including roaming) was $77
compared to $70 for the six months ended June 30, 2000, an increase of $7. The
increase in ARPU primarily resulted from higher inbound roaming revenues as we
expanded our network.

                                      26

<PAGE>

  Revenues

   Net revenues were $44.7 million for the six months ended June 30, 2001
compared to $22.4 million for the six months ended June 30, 2000, an increase
of $22.3 million. The increased revenue reflects the increase in customer base
and the growth in inbound roaming revenues as a result of the network
expansion.

  Costs of Services and Equipment

   The costs of services and equipment were $35.8 million for the six months
ended June 30, 2001 compared to $18.3 million for the six months ended June 30,
2000, an increase of $17.5 million. Operations expense was $14.8 million for
the six months ended June 30, 2001 and $10.0 million for the six months ended
June 30, 2000. Roaming expense on Sprint PCS networks was $13.1 million for the
six months ended June 30, 2001 and $4.7 million for the six months ended June
30, 2000. Cost of equipment was $3.7 million for the six months ended June 30,
2001 and $1.1 million for the six months ended June 30, 2000. Customer services
and billing related expenses were $4.2 million for the six months ended June
30, 2001 and $2.5 million for the six months ended June 30, 2000. These
increases correspond with the network expansion and increase in subscribers
since June 30, 2000. The costs incurred related to our agreement with Sprint
PCS were $27.3 million, or 76% of total costs of service and equipment, for the
six months ended June 30, 2001 and $15.6 million, or 85% of total costs of
service and equipment, for the six months ended June 30, 2000.

  Selling and Marketing

   We incurred selling and marketing expenses of $11.2 million during the six
months ended June 30, 2001 compared to $7.0 million during the six months ended
June 30, 2000, an increase of $4.2 million. The costs incurred related to our
agreement with Sprint PCS were $4.8 million, or 43% of total selling and
marketing expenses, and $4.6 million, or 66% of total selling and marketing
expenses, for the six months ended June 30, 2001 and 2000, respectively.

  General and Administrative

   For the six months ended June 30, 2001, we incurred expenses of $10.3
million compared to $8.5 million for the six months ended June 30, 2000, an
increase of $1.8 million. The increase is primarily comprised of compensation
and benefits relating to growth in the number of employees. Noncash stock
option compensation expense was $0.3 million for the six months ended June 30,
2001 compared to $0.6 million for the six months ended June 30, 2000, a
decrease of $0.3 million. The costs incurred related to our agreement with
Sprint PCS were $2.3 million, or 22% of total general and administrative
expenses, for the six months ended June 30, 2001 and $1.3 million, or 15% of
total general and administrative expenses, for the six months ended June 30,
2000.

  Depreciation and Amortization

   For the six months ended June 30, 2001, depreciation and amortization
expense increased to $8.6 million compared to $4.8 million for the six months
ended June 30, 2000, an increase of $3.8 million. The increase in depreciation
and amortization expense relates to the expansion of the operating network.
Depreciation and amortization will continue to increase substantially as
additional portions of our network are placed into service. We incurred capital
expenditures of $47.3 million in the six months ended June 30, 2001, which
included approximately $2.4 million of capitalized interest, as we continued
the build-out of our network. We incurred capital expenditures of $13.0 million
and capitalized interest of $0.1 million in the six months ended June 30, 2000.

  Interest Income

   For the six months ended June 30, 2001, interest income was $4.2 million
compared to $1.3 million for the six months ended June 30, 2000, an increase of
$2.9 million. We had higher average invested balances for the six

                                      27

<PAGE>

months ended June 30, 2001 as compared to the six months ended June 30, 2000,
as a result of the proceeds from our December 2000 equity offering and February
2001 debt offering. As capital expenditures are required to complete the
build-out of our PCS network, and as working capital and operating losses are
funded, decreasing average invested balances are expected to result in lower
interest income for the remainder of fiscal 2001.

  Interest Expense

   For the six months ended June 30, 2001, interest expense was $11.4 million
compared to $1.2 million for the six months ended June 30, 2000, an increase of
$10.2 million. The increase is primarily attributable to increased borrowings
under the senior credit facility and issuance of the senior notes.

  Amortization of Debt Issuance and Offering Costs

   For the six months ended June 30, 2001, amortization of debt issuance and
offering costs was $1.9 million compared to $1.3 million for the six months
ended June 30, 2000, an increase of $0.6 million. The increase was primarily
attributable to amortization of the costs incurred to issue our $160.0 million
senior notes in February 2001.

  Other Debt Financing Fees

   For the six months ended June 30, 2001, other debt financing fees were $1.1
million compared to $1.8 million for the six months ended June 30, 2000, a
decrease of $0.7 million. The decrease was primarily attributable to the
elimination of the commitment fee payable on the bridge loan that was replaced
with the issuance of our $160.0 million senior notes in February 2001.

Liquidity and Capital Resources

   During our developmental stage, our activities consisted principally of
raising capital, consummating and supporting our agreements with Sprint PCS,
developing the initial design of our network and adding to our management team.
We commenced operations on January 5, 2000. Since then, our activities have
consisted primarily of building our customer base and expanding our network
coverage. We have relied on the proceeds from equity and debt financing, rather
than revenues, as our primary sources of capital. Specifically, these
activities to date have been funded through equity investments of $187.8
million as well as borrowings of $110.0 million under our senior credit
facility and net proceeds from the issuance of $160.0 million of senior notes
and warrants.

   Our $240.0 million senior secured credit facilities include:

  .  a $70.0 million eight-year revolving credit facility;

  .  a $120.0 million delayed draw, eight-year term loan facility; and

  .  a $50.0 million eight and one-half year term loan facility.

   We borrowed the full amount available under the $50.0 million term loan
facility in March 2000 at the closing of our purchase from Sprint PCS of the
network assets in our territory and, as of June 30, 2001, had borrowed $60.0
million under the $120.0 million term loan facility. Quarterly principal
payments commence on both term loans in March 2004. The $120.0 million delayed
draw term loan requires 17 quarterly payments ranging from $2,000,000 on March
31, 2004 to $12,000,000 on March 31, 2008. The $50.0 million term loan requires
19 quarterly payments ranging from $250,000 on March 31, 2004 to $31,000,000 on
September 30, 2008.

   In February 2001, we issued 160,000 units, each consisting of $1,000
principal amount of 14% Senior Notes due January 15, 2011 and one warrant to
purchase 12.50025 shares of class C common stock at an exercise price of $7.00
per share. The gross proceeds from the offering were $160.0 million.
Concurrently with the closing of

                                      28

<PAGE>

the offering, a portion of the proceeds of the offering was used to purchase a
portfolio of U.S. government securities (the "Interest Reserve") that will
generate sufficient proceeds to make the first six scheduled interest payments
on the senior notes.

   As of June 30, 2001, we had $13.3 million in cash and cash equivalents,
compared to $36.3 million in cash and cash equivalents as of December 31, 2000.
Working capital was $43.2 million as of June 30, 2001 as compared to working
capital of $16.5 million as of December 31, 2000. As of June 30, 2001, we held
$93.0 million in investment securities, of which $34.5 million was included in
working capital, and $62.6 million in the Interest Reserve account for the
senior notes, of which $31.7 million was included in working capital.

   We used $21.9 million of cash in operating activities during the six months
ended June 30, 2001. This was the result of the our $31.4 million net loss and
a net $1.5 million in cash used from changes in working capital, partially
offset by depreciation and amortization and other non-cash items totaling $11.0
million.

   The $184.5 million of cash used in investing activities during the six
months ended June 30, 2001 includes cash outlays of $28.9 million for capital
expenditures, purchases of $105.3 million of investment securities, and the
establishment of the $62.6 million Interest Reserve related to the senior
notes, reduced by $12.4 million in proceeds from matured investments.

   The $183.3 million in cash provided by financing activities during the six
months ended June 30, 2001 consisted primarily of proceeds of $160.0 million on
the 14% senior notes less offering costs of approximately $7.3 million, $30.0
million drawn under the senior credit facility, $0.4 million from the exercise
of stock options, and $0.4 million from the repayment of promissory notes,
reduced by $0.2 million in treasury stock purchases.

   As of June 30, 2001, $130.0 million remained available under the senior
credit facility. Such borrowings are subject to meeting specified conditions
under the senior credit facility agreement. We expect that cash and cash
equivalents and our investments in securities, together with future advances
under the senior credit facility, will fund our capital expenditures and our
working capital requirements through 2003, at which time we anticipate we will
be cash flow positive. The senior credit facility and senior notes are subject
to certain restrictive covenants including maintaining certain financial
ratios, attaining defined subscriber growth and network coverage goals, and
limiting annual capital expenditures. Further, the senior credit facility and
senior note indenture restrict the payment of dividends on our common stock.

   As of June 30, 2001, management believes that we are in compliance with all
financial and operational covenants associated with our senior credit facility,
senior notes and agreements with Sprint PCS.

Recent Accounting Pronouncements

   In June 2001, Statement of Financial Accounting Standards (SFAS) No. 141,
"Business Combinations" was approved by the Financial Accounting Standards
Board (FASB). SFAS No. 141 requires the purchase method of accounting to be
used for all business combinations initiated after June 30, 2001. We do not
expect the adoption of this standard to have a material effect on our financial
statements.

   In June 2001, SFAS No. 142, "Goodwill and Other Intangible Assets" was
approved by the FASB. SFAS No. 142 changes the accounting for goodwill from an
amortization method to an impairment-only approach. Amortization of goodwill,
including goodwill recorded in past business combinations, will cease upon
adoption of this statement. We plan to adopt SFAS No. 142 on its effective date
of January 1, 2002. We expect annual amortization expense to decrease by
approximately $2.5 million due to the effect of this statement.

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

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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.

Factors That May Affect Our Business, Future Operating Results and Financial
Condition

Risks Particular to Our Relationship with Sprint PCS

  If Sprint PCS does not renew our management agreement, our ability to conduct
  our business would be severely restricted.

   Our management agreement with Sprint PCS is not perpetual. Sprint PCS can
choose not to renew the agreement at the expiration of the 20-year initial term
or any ten-year renewal term. Our agreement with Sprint PCS terminates in all
events in 50 years. If Sprint PCS decides not to renew the management agreement
or terminates it in accordance with its terms, we would no longer be a part of
the Sprint PCS network and it would severely restrict our ability to conduct
our business.

  If we materially breach our management agreement, Sprint PCS may terminate
  the agreement and purchase our operating assets at a discount to market value
  without further stockholder approval, and we would no longer be able to offer
  Sprint PCS services.

   Since we do not own any licenses to operate a wireless network, our ability
to offer Sprint PCS products and services and our network's operation are
dependent on our agreements with Sprint PCS not being terminated.

   We must comply with our obligations under the management agreement. For
example, we must meet stringent build-out criteria requiring us to provide
network coverage to a minimum network coverage area within specified time
frames. We must also meet strict technical program requirements such as:

  .  the percentage of time our network is up;

  .  the percentage of dropped calls;

  .  the ratio of blocked call attempts to total call attempts;

  .  the ratio of call origination to termination failures; and

  .  transport requirements for links between our cell sites and switches and
     between our switches and the public telephone system.

   Any material breach of our obligations under the management agreement could
lead to a termination. If the management agreement is terminated, we will no
longer be able to offer Sprint PCS products and services, and we may be
required to sell our operating assets to Sprint PCS. This sale may take place
without further stockholder approval and for a price equal to 72% of our entire
business value. Our entire business value includes the value of our right to
use the spectrum licenses in our markets, our business operations and other
assets. The provisions of our management agreement that allow Sprint PCS to
purchase our operating assets at a discount could adversely affect the value of
our common stock, may limit our ability to sell our business and may reduce the
price a buyer would be willing to pay for our business.

  We may encounter difficulties in completing the build-out of our network
  required under our management agreement, which could increase costs and delay
  completion of our build-out.

   We may experience difficulty in obtaining access to radio communications
sites, commonly referred to as cell sites, due to difficulty in obtaining local
regulatory approvals or other reasons. This may delay the build-out

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<PAGE>

of our portion of the Sprint PCS network. As part of our build-out, we must
successfully lease or otherwise retain rights to a sufficient number of cell
sites and switching facilities, build out the physical infrastructure and
complete the purchase and installation of equipment. We expect a majority of
our cell sites to be located on facilities shared with one or more wireless
providers. The termination of these cell site agreements would significantly
increase the costs of our build-out. Some of the cell sites are likely to
require us to obtain zoning variances or other local governmental or third
party approvals. The local governmental authorities in various locations in our
markets have, at times, placed moratoriums on the construction of additional
cell sites. Moreover, we may have to make changes to our network design as a
result of difficulties in the site acquisition process. We must also meet the
technical standards described in our management agreement in connection with
the build-out of our network. Additionally, the Federal Communications
Commission requires that our network must not interfere with the operations of
microwave radio systems, and we and Sprint PCS may be required to relocate
incumbent microwave operations to enable us to complete our build-out. Any
difficulty in constructing our portion of the Sprint PCS network may increase
our costs, affect our ability to provide services in our markets on a schedule
consistent with our current business plan, limit our network capacity or reduce
the number of new Sprint PCS subscribers. Any significant delays resulting from
this difficulty may constitute a breach of our management agreement with Sprint
PCS that could lead to a termination.

  We would suffer from any failure of Sprint PCS to perform its obligations
  under our management agreement. In addition, if we terminate the agreement
  because of this failure or because of any other event of termination caused
  by Sprint PCS, we have only limited rights upon a termination.

   We are dependent on Sprint PCS' ability to perform its obligations under our
agreements. The failure of Sprint PCS to perform its obligations under our
management agreement would substantially reduce our revenues, create difficulty
in obtaining important financial or subscriber information or severely restrict
our ability to conduct our business. In addition, if we terminate the agreement
because of this failure or because of any other event of termination caused by
Sprint PCS, we will no longer be able to offer Sprint PCS products and
services, and our only remedy would be to require Sprint PCS to purchase our
operating assets for a price equal to 80% of our entire business value or to
require Sprint PCS to assign to us up to 10 megahertz of its licensed spectrum
for a price equal to 10% of our entire business value or Sprint PCS' original
cost plus microwave relocation costs, whichever is greater.

  We may not receive as much Sprint PCS net travel revenue as we anticipate
  because more of our subscribers may travel on other networks, fewer of Sprint
  PCS' and its affiliates' subscribers may travel on our network or Sprint PCS
  may change the rate we receive.

   We are paid a fee from Sprint PCS for every minute that a Sprint PCS
subscriber based outside of our markets uses the Sprint PCS network in our
markets. Similarly, we pay a fee to Sprint PCS for every minute that a Sprint
PCS subscriber based in our markets uses the Sprint PCS network outside our
markets. Sprint PCS customers from our markets may spend more time in other
Sprint PCS coverage areas than we anticipate and Sprint PCS customers from
outside our markets may spend less time in our markets or may use our services
less than we anticipate. As a result, we may receive less Sprint PCS inbound
travel revenue than we anticipate or we may have to pay more Sprint PCS
outbound travel fees than the inbound travel revenue we collect. For the year
ended December 31, 2000, our inbound travel revenues represented 31% of our
total revenues, and for the six months ended June 30, 2001, our inbound travel
revenues represented 29% of our total revenues. We expect this percentage to
decrease significantly as we complete our network build and acquire more
subscribers. To the extent our outbound travel expenses exceed our inbound
travel revenues, Sprint PCS has agreed not to charge us for any excess until
January 1, 2003, after which we will incur losses to the extent of the excess.
In addition, under our agreements with Sprint PCS, Sprint PCS can change the
current fee we receive or pay for each Sprint PCS travel minute.

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  The inability to use Sprint PCS' support services could disrupt our business
  and increase our operating costs.

   We rely on Sprint PCS' internal support systems, including customer care,
customer activation, billing and other administrative support. Our operations
could be disrupted if Sprint PCS is unable to maintain and expand these back
office services or to efficiently outsource those services and systems through
third-party vendors. It is likely that problems with Sprint PCS' internal
support systems could cause:

  .  delays or problems in our own operations or service;

  .  delays or difficulty in gaining access to customer and financial
     information;

  .  a loss of Sprint PCS customers; and

  .  an increase in the costs of those services.

   Our services agreement with Sprint PCS provides that, upon nine months'
prior written notice, Sprint PCS may terminate any service that we purchase
from Sprint PCS. We do not have a contingency plan if Sprint PCS terminates any
service it provides. If Sprint PCS terminates a service for which we have not
developed a cost-effective alternative or increases the amount it charges us
for these services, our operating costs may increase beyond our expectations
and our operations may be interrupted or restricted.

  We rely on the use of the Sprint PCS brand name and logo to market our
  services, and a loss of use of this brand and logo or a decrease in the
  market value of this brand and logo would hinder our ability to market our
  products.

   The Sprint PCS brand and logo is highly recognizable. If we lose our rights
to use the Sprint PCS brand and logo under our trademark and service mark
license agreements, or if Sprint PCS makes business decisions which adversely
affect the Sprint PCS brand and logo, we would lose the advantages associated
with marketing efforts conducted by Sprint PCS. Potential customers may not
recognize our brand readily and we may have to spend significantly more money
on advertising to create brand recognition.

  Sprint PCS' roaming arrangements may not be competitive with other wireless
  service providers, which may restrict our ability to attract and retain
  customers.

   We rely on Sprint PCS' roaming arrangements with other wireless service
providers for coverage in some areas. Some risks related to these arrangements
are as follows:

  .  the quality of the service provided by another provider during a roaming
     call may not approximate the quality of the service provided by the Sprint
     PCS network;

  .  the price of a roaming call may not be competitive with prices of other
     wireless companies for roaming calls;

  .  customers may have to use a more expensive dual-frequency handset that is
     both digital and analog capable and has diminished standby and talk-time
     capacities;

  .  customers must end a call in progress and initiate a new call when leaving
     the Sprint PCS network and entering another wireless network; and

  .  Sprint PCS customers may not be able to use Sprint PCS' advanced features,
     such as voicemail notification, while roaming.

   If Sprint PCS customers are not able to roam instantaneously or efficiently
onto other wireless networks, we may lose current Sprint PCS subscribers and
our Sprint PCS services will be less attractive to new customers.

  Sprint PCS may make business decisions that would not be in our best
  interest.

   Under our management agreement, Sprint PCS has a substantial amount of
control over the conduct of our business. Conflicts between us and Sprint PCS
may arise, and because Sprint PCS owes us no duties except as set

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<PAGE>

forth in the management agreement, these conflicts may not be resolved in our
favor. Accordingly, Sprint PCS may make decisions that adversely affect our
business, such as the following:

  .  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;

  .  Sprint PCS could change the amount it charges us to perform support
     services;

  .  we must obtain Sprint PCS' consent to sell non-Sprint PCS approved
     equipment, which consent could be withheld;

  .  Sprint PCS may alter its network and technical requirements, which could
     result in increased equipment and build-out costs; and

  .  Sprint PCS may request that we build out additional areas within our
     markets, which if we undertake, could result in less return on investment,
     and which if we decline to undertake, could result in Sprint PCS
     terminating the management agreement and forcing us to sell our operating
     assets to Sprint PCS at a discount to market value without further
     stockholder approval.

  Provisions of our management agreement with Sprint PCS may diminish our value
  and restrict the sale of our business.

   Sprint PCS must approve any change of control of our ownership and consent
to any assignment of our management agreement with Sprint PCS. Sprint PCS has a
right of first refusal if we decide to sell our operating assets to a third
party. We are also subject to a number of restrictions on the transfer of our
business including a prohibition on the sale of us or our operating assets to
competitors of Sprint or Sprint PCS. These restrictions and other restrictions
in our management agreement with Sprint PCS could adversely affect the value of
our common stock, may limit our ability to sell the business, may reduce the
price a buyer would be willing to pay for our business and may reduce our
entire business value.

  If Sprint PCS does not maintain control over its licensed spectrum, our
  management agreement with Sprint PCS may be terminated.

   Sprint PCS, not us, owns the licenses necessary to provide wireless services
in our markets. The Federal Communications Commission requires that licensees
like Sprint PCS maintain control of their licensed systems and not delegate
control to third-party operators or managers like us. If the Federal
Communications Commission were to determine that our management agreement with
Sprint PCS needs to be modified to increase the level of licensee control, we
have agreed with Sprint PCS to use our best efforts to modify the agreement to
comply with applicable law. If we cannot agree with Sprint PCS to modify the
agreement, it may be terminated. If the agreement is terminated, we would no
longer be a part of the Sprint PCS network and we would be unable to conduct
our business.

  The Federal Communications Commission may not renew the Sprint PCS licenses,
  which would prevent us from providing wireless services.

   We do not own any licenses to operate wireless networks. We are dependent on
Sprint PCS' licenses, which are subject to renewal and revocation. Sprint PCS'
licenses in our markets will expire in June 2005, but may be renewed for
additional ten-year terms. The Federal Communications Commission has adopted
specific standards that apply to wireless personal communications services
license renewals which, in the event of a comparative proceeding with competing
applications, includes the award of a renewal expectancy to Sprint PCS upon its
showing of "substantial service" during the past license term. Any failure by
Sprint PCS or us to comply with these standards could cause nonrenewal of the
Sprint PCS licenses for our markets. Additionally, if Sprint PCS does not
demonstrate to the Federal Communications Commission that Sprint PCS has met
the five-year and ten-year construction requirements for each of its wireless
personal communications services licenses, it can lose the affected licenses
and be ineligible to regain them.

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<PAGE>

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

   Sprint PCS currently intends to cover a significant portion of the
population of the United States, Puerto Rico and the U.S. Virgin Islands by
creating a nationwide personal communications services network through its own
construction efforts and those of its affiliates. Sprint PCS is still
constructing its nationwide network and does not offer personal communications
services, either on its own network or through its roaming agreements, in every
city in the United States. Sprint PCS has entered into, and anticipates
entering into, management agreements similar to ours with companies in other
markets under its nationwide personal communications services build-out
strategy. Our results of operations are dependent on Sprint PCS' network and,
to a lesser extent, on the networks of its other affiliates. Sprint PCS' and
its affiliates' networks may not provide nationwide coverage to the same extent
as its competitors which could adversely affect our ability to attract and
retain customers.

Other Risks Particular to Us

  If we do not successfully manage our anticipated rapid growth, we may not be
  able to complete our entire network by our target date, if at all.

   Our performance as a personal communications services provider will depend
on our ability to manage successfully the network build-out process, implement
operational and administrative systems, expand our base of employees, and train
and manage our employees, including engineering, marketing and sales personnel.
We will require expenditures of significant funds for the development,
construction, testing and deployment of our personal communications services
network before expanding commercial operations. These activities are expected
to place significant demands on our managerial, operational and financial
resources.

   The management of our anticipated growth will require, among other things:

  .  continued development of our operational and administrative systems;

  .  control of costs of network build-out;

  .  integration of our network infrastructure with the rest of the Sprint PCS
     network;

  .  increased marketing activities;

  .  the ability to attract and retain qualified management, technical and
     sales personnel; and

  .  the training of new personnel.

   Failure to successfully manage our expected rapid growth and development
could impair our ability to achieve profitability and expand the coverage in
our markets.

  We will have substantial debt which may have a number of important
  consequences for our operations.

   We currently have a $240.0 million senior credit facility and as of June 30,
2001 borrowed $110.0 million under this facility. In December 2000 we amended
our $240.0 million senior credit facility to provide that, subject to specified
conditions, we may request an increase of $25.0 million in available borrowings
on or prior to March 31, 2002. No lender is obligated to subscribe to this new
commitment. We also have $160.0 million in outstanding 14% senior notes due
2011. As a result, we have a substantial amount of long-term debt.

   The substantial amount of our debt has a number of important consequences
for our operations, 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 may not be able to obtain additional financing for currently
     unanticipated capital expenditures, working capital requirements and other
     corporate purposes;

  .  our senior credit facility places restrictions on our ability to incur
     additional debt or issue additional equity without our lenders' consent;

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<PAGE>

  .  borrowings under our senior credit facility will be at variable rates of
     interest, which would result in higher interest expense in the event of
     increases in market interest rates; and

  .  we may be unable to refinance our senior credit facility on terms
     reasonably satisfactory to us.

  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 until at least 2003 while we develop and construct our
personal communications services network and build our customer base. Our
operating profitability will depend upon many factors, including, among others,
our ability to market our services successfully, achieve our projected market
penetration and manage customer turnover rates effectively. Our expectation of
becoming cash flow positive during 2003 is based upon our current business
model. Our business model is based, in large part, upon our expectations as to
future events, including future costs and revenues. We are a new company with a
limited operating history upon which to base our model. We may not become cash
flow positive during 2003 for numerous reasons, including the risks identified
in this report. If we do not achieve and maintain operating profitability and
positive cash flow on a timely basis, we may not be able to meet our debt
service requirements.

  We may need more capital than we currently project to build out our portion
  of the Sprint PCS network and fund our business plan.

   The build-out of our portion of the Sprint PCS network will require
substantial capital. Additional funds could be required for a variety of
reasons, including unanticipated capital expenditures, expenses or operating
losses. In addition, we may need additional funding if we bring in new
customers more quickly than expected because the up-front costs associated with
new customers will likely exceed the initial revenue generated by these
customers. Additional funds may not be available. Even if those funds are
available, we may not be able to obtain them on a timely basis, on terms
acceptable to us or within limitations permitted by the covenants under our
senior credit facility. Failure to obtain additional funds, should the need for
them develop, could result in the delay or abandonment of our development and
expansion plans. If we do not have sufficient funds to complete our build-out,
we may be in breach of our management agreement with Sprint PCS or in default
under our senior credit facility.

  Our lenders could control our assets if we default on our debt.

   Due to the liens on substantially all of our assets that secure our senior
credit facility, our lenders may control our assets upon a default. Our failure
to make payments on our debt would constitute a default. Our ability to make
these payments depends upon our future operating performance which is subject
to general economic and competitive conditions and to financial, business and
other factors, many of which we cannot control. If our cash flow is
insufficient, we may be forced to take actions such as delaying or reducing
capital expenditures, attempting to restructure or refinance our debt, selling
assets or operations or seeking additional equity capital. None of these
actions may be sufficient to allow us to service our debt obligations. Further,
we may be unable to take any of these actions on satisfactory terms, in a
timely manner or at all. Our senior credit facility limits our ability to take
several of these actions. Under our current business plan, we expect to incur
substantial debt before achieving positive cash flow. Our failure to generate
sufficient funds to pay our debts or to successfully undertake any of these
actions could, among other things, result in our lenders controlling our
assets.

  If we do not meet all of the conditions required under our senior credit
  facility, we may not be able to borrow all of the funds we anticipate
  receiving and may not be able to complete the build-out of our portion of the
  Sprint PCS network.

   Our anticipated future borrowings under our senior credit facility will be
subject at each funding date to several conditions, including:

  .  acquiring minimum numbers of Sprint PCS subscribers and achieving minimum
     network coverage on schedule; and

  .  adhering to financial and performance related covenants.

   If we do not meet these conditions, among others, at each funding date, our
lenders may choose not to lend any or all of the remaining amounts. If other
sources of funds are not available, we may be unable to complete

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the build-out of our portion of the Sprint PCS network. If we do not have
sufficient funds to complete our network build-out, we may be in breach of our
management agreement with Sprint PCS and be in default under our senior credit
facility.

  If we default under our senior credit facility, our lenders may declare our
  debt immediately due and payable and Sprint PCS may force us to sell our
  assets without stockholder approval.

   Our senior credit facility requires that we comply with specified financial
ratios and other performance covenants. If we fail to comply with these
covenants or we default on our obligations under our senior credit facility,
our lenders may accelerate the maturity of our debt. If our lenders accelerate
our debt, Sprint PCS has the option to purchase our operating assets at a
discount to market value and assume our obligations under the senior credit
facility, without further stockholder approval. If Sprint PCS does not exercise
this option, our lenders may sell our assets to third parties without approval
of our stockholders. If Sprint PCS provides notice to our lenders that we are
in breach of our management agreement with Sprint PCS and, as a result, our
obligations under the senior credit facility are accelerated and Sprint PCS
does not elect to operate our business, our lenders may designate a third party
to operate our business without the approval of our stockholders.

  Our indebtedness will place restrictions on us which may limit our operating
  flexibility and our ability to engage in some transactions.

   The indenture governing the notes and our senior credit facility both impose
material operating and financial restrictions on us. These restrictions,
subject to exceptions in the ordinary course of business, may limit our ability
to engage in some transactions, including the following:

  .  designated types of mergers or consolidations;

  .  creating liens;

  .  paying dividends or other distributions to our stockholders;

  .  making investments;

  .  selling assets;

  .  repurchasing our common stock;

  .  changing lines of business;

  .  borrowing additional money; and

  .  transactions with affiliates.

   These restrictions could limit our ability to obtain debt financing,
repurchase stock, refinance or pay principal or interest on our outstanding
debt, consummate acquisitions for cash or debt or react to changes in our
operating environment.

  We will be in default under our indebtedness if we fail to pass financial and
  business tests.

   Our senior credit facility requires us to maintain specified financial
ratios and to satisfy specified tests, including tests relating to:

  .  minimum covered population;

  .  minimum number of subscribers to our services; and

  .  minimum annualized revenues.

   If we fail to satisfy any of the financial ratios and tests, we could be in
default under our senior credit facility.

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  Because we depend heavily on outsourcing, the inability of third parties to
  fulfill their contractual obligations to us may disrupt our services or the
  build-out of our portion of the Sprint PCS network.

   Because we outsource portions of our business, we depend heavily on
third-party vendors, suppliers, consultants, contractors and local telephone
and utility companies. We have retained those persons to:

  .  design and engineer our systems;

  .  design and construct retail stores;

  .  obtain permits for the construction of base stations, switch facilities
     and towers;

  .  construct cell sites and switching facilities;

  .  obtain cell site leases;

  .  install transmission lines; and

  .  deploy our wireless personal communications services network systems.

   The failure by any of our vendors, suppliers, consultants, contractors or
local telephone and utility companies to fulfill their contractual obligations
to us could materially delay construction and disrupt the operations of our
portion of the Sprint PCS network.

   In addition, we lease a portion of the cell sites for our network systems
through master lease agreements with communication site management companies.
Many of the companies, in turn, have separate leasing arrangements with each of
the owners of the sites. If these companies were to become insolvent or were to
breach those arrangements, we may lose access to those cell sites and
experience extended service interruption in the areas serviced by those sites.

  We may not be able to respond effectively to the significant competition in
  the wireless communications services industry or keep pace with our
  competitors in the introduction of new products, services and equipment,
  which could impair our ability to attract new customers.

   Our dependence on Sprint PCS to develop competitive products and services
and the requirement that we obtain Sprint PCS' consent to sell non-Sprint PCS
approved equipment may limit our ability to keep pace with our competitors in
the introduction of new products, services and equipment. Additionally, we
expect existing cellular providers will upgrade their systems and provide
expanded, digital services to compete with the Sprint PCS products and services
we 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 customers away from us.

  We may not be able to compete with larger, more established wireless
  providers who have resources to competitively price their products and
  services, which could result in a reduction of our subscribers.

   We compete with several wireless providers, some of which have an
infrastructure in place and have been operational for a number of years. Our
major competitors include Verizon Wireless, Cingular Wireless (a joint venture
formed by SBC Communications and BellSouth), AT&T Wireless, Nextel
Communications/Nextel Partners and VoiceStream Wireless. Some of our
competitors:

  .  have substantially greater financial, technological, marketing and sales
     and distribution resources than us;

  .  have more extensive coverage in specific areas of our markets and have
     broader regional coverage than us;

  .  have or may obtain access to more licensed spectrum than the amount
     licensed to Sprint PCS in most of our territory and therefore will be able
     to provide greater network call volume capacity than our network to the
     extent that network usage begins to reach or exceed the capacity of our
     licensed spectrum; and

  .  may market other services, such as traditional telephone service, cable
     television access and access to the Internet, with their wireless
     communications services.

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   We may be unable to compete successfully with these larger competitors who
have substantially greater resources or who offer more services than we do to a
larger subscriber base, which could result in a reduction in new subscribers.

  We may not be able to respond to the recent trend toward consolidation of the
  wireless communications industry or compete with potential acquirers for
  acquisitions, which could result in a reduction of our subscribers, decline
  in prices for our products and services and dilution to our stockholders if
  we issue our common stock in acquisitions.

   There has been a recent trend in the wireless communications industry toward
consolidation of wireless service providers through joint ventures, mergers and
acquisitions. We expect this consolidation to lead to larger competitors over
time. We may not be able to respond to pricing pressures that may result from a
consolidation in our industry, which could result in a reduction of new
subscribers or cause market prices for our products and services to continue to
decline.

   If we expand our operations through acquisitions, we will compete with other
potential acquirers, some of which may have greater financial or operational
resources than us. If we issue shares of our common stock in connection with
any acquisition, this may result in dilution to our stockholders. In addition,
we may not be able to participate in any Sprint PCS affiliate consolidation,
which may adversely affect the value of our common stock.

  We may have difficulty in obtaining handsets and equipment, which could cause
  delays and increased costs in the build-out of our network.

   We currently purchase all our handsets through Sprint PCS. The demand for
specific types of handsets is strong and the manufacturers of those handsets
may have to distribute their limited supply or products among the
manufacturers' numerous customers. If Sprint PCS modifies its handset logistics
and delivery plan or if we are not able to continue to rely on Sprint PCS'
relationships with suppliers and vendors, some of which provide us with vendor
discounts on handsets, we could have difficulty obtaining specific types of
handsets in a timely manner and our handset costs could increase.

   The demand for the equipment we require to construct our portion of the
Sprint PCS network is considerable and manufacturers of this equipment have
substantial order backlogs. As a result, we could suffer delays in the
build-out of our portion of the Sprint PCS network, disruptions in service and
a reduction in subscribers.

  The technology we use has limitations and could become obsolete, which would
  require us to implement new technology at substantially increased costs and
  limit our ability to compete effectively.

   We intend to employ digital wireless communications technology selected by
Sprint PCS for its network. Code division multiple access, known as CDMA, 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.

   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 are unable to keep pace with these
technological changes, the technology used on our network may become obsolete.
In addition, wireless carriers are seeking to implement a new "third
generation," or "3G," technology throughout the industry. The 3G technology
would support new wireless services, including multimedia mobile applications.
We may not be able to implement the 3G technology successfully on a timely or
cost-effective basis.

                                      38

<PAGE>

  We may experience a high rate of customer turnover which would increase our
  costs of operations and reduce our revenue.

   Our strategy to reduce customer turnover may not be successful. The rate of
customer turnover may be the result of several factors, including network
coverage, reliability issues such as blocked calls and dropped calls, handset
problems, non-use of phones, change of employment, the non-use of customer
contracts, affordability, customer care concerns and other competitive factors.
Price competition and other competitive factors could also cause increased
customer turnover. A high rate of customer turnover could adversely affect our
competitive position, results of operations and our costs of, or losses
incurred in, obtaining new subscribers, especially because we subsidize some of
the costs of initial purchases of handsets by customers.

  Unauthorized use of our network could disrupt our business.

   We will likely incur costs associated with the unauthorized use of our
personal communications services 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.

  Our projected build-out plan does not cover all of our territory, which could
  make it difficult to maintain a profitable customer base.

   Our projected build-out plan for our territory does not cover all areas of
our territory. By the end of 2003, we expect to cover 77% of the resident
population in our territory. As a result, our plan may not adequately serve the
needs of the potential customers in our territory or attract enough subscribers
to operate our business successfully. To correct this potential problem, we may
have to cover a greater percentage of our territory than we anticipate, which
we may not have the financial resources to complete or may be unable to do
profitably.

  Investcorp S.A. and co-investors arranged by Investcorp which control us may
  take actions that conflict with your interests.

   Approximately 64.7% of the voting power of our outstanding common stock is
held by Investcorp S.A. and co-investors arranged by Investcorp. Accordingly,
the Investcorp investors control the power to elect our directors, to appoint
new management and to approve many actions requiring the approval of our
stockholders, such as adopting most amendments to our certificate of
incorporation and approving mergers or sales of all or substantially all of our
assets. The elected directors have the authority, subject to the terms of our
debt, to issue additional stock, implement stock repurchase programs, declare
dividends and make other decisions about our capital stock.

   Holders of our common stock will be unable to exercise voting control over
matters requiring stockholder approval, including election of directors and
approval of corporate transactions. The controlling stockholders may have no
duty to protect the interests of the minority stockholders. In addition, the
interests of the Investcorp investors could conflict with the interests of
holders of our senior notes. For example, if we encounter financial
difficulties or are unable to pay our debts as they mature, the interests of
the Investcorp investors, as equity holders, might conflict with the interests
of note holders. The Investcorp investors may also have an interest in pursing
acquisitions, divestitures, financings or other transactions that, in their
judgment, could enhance their equity investments, even though these
transactions might involve risks to the holders of the notes.

                                      39

<PAGE>

Risks Particular to Our Industry

  Use of hand-held phones may pose health risks, which could result in a
  reduction in subscribers and increased exposure to litigation.

   Some media reports have suggested that certain radio frequency emissions
from wireless handsets may be linked to various health concerns, including
cancer, and may interfere with various electronic medical devices, including
hearing aids and pacemakers. The actual or perceived risk of radio frequency
emissions from portable telephones could adversely affect us through a reduced
subscriber growth rate, a reduction in subscribers, reduced network usage per
subscriber and increased exposure to potential litigation.

  Regulation by government agencies and taxing authorities may increase our
  costs of providing service, require us to change our services or increase
  competition.

   The licensing, construction, use, operation, sale and interconnection
arrangements of wireless telecommunication systems are regulated to varying
degrees by the Federal Communications Commission, the Federal Trade Commission,
the Federal Aviation Administration, the Environmental Protection Agency, the
Occupational Safety and Health Administration and, depending on the
jurisdiction, state and local regulatory agencies and legislative bodies.
Adverse decisions regarding these regulatory requirements could negatively
impact Sprint PCS' operations and our costs of doing business. For example,
changes in tax laws or the interpretation of existing tax laws by state and
local authorities could subject us to increased income, sales, gross receipts
or other tax costs or require us to alter the structure of our relationship
with Sprint PCS. In addition, the Federal Communications Commission may license
additional spectrum for new carriers, which would increase the competition we
face.

  Several state and local governments are considering, or have recently
  adopted, legislation that restricts the use of wireless handsets while
  driving.

   A number of U.S. state and local governments are considering or have
recently enacted, legislation that would restrict or prohibit the use of a
wireless handset while driving a vehicle or, alternatively, require the use of
a hands-free telephone. The state of New York has recently enacted legislation,
effective November 1, 2001, that bans the use of handheld wireless handsets
while driving a vehicle except in the case of emergencies. The legislation also
provides that, effective December 1, 2001, persons who violate this ban are
subject to fines of up to $100 per violation. Legislation of this sort, if
continued to be enacted, would require wireless service providers to provide
hands-free enhanced services such as voice activated dialing and hands-free
speaker phones and headsets so that they can keep generating revenue from their
subscribers, who make many of their calls while on the road. If we are unable
to provide hands-free services and products to our subscribers in a timely and
adequate fashion, the volume of wireless phone usage would likely decrease, and
our ability to generate revenues would suffer.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

   For the six months ended June 30, 2001, we did not experience any material
change in market risk exposures that affect the quantitative and qualitative
disclosures presented in our Registration Statements on Form S-1 (File No.
333-58890) and Form S-4 (File No. 333-58902), as filed and declared effective
by the Securities and Exchange Commission on July 30, 2001.

   In the normal course of business, our operations are exposed to interest
rate risk with respect to our senior credit facility. Our fixed rate debt
consists of our 14% senior notes. Our primary interest rate risk exposures
related to the interest rate on our senior credit facilities and 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 may use interest rate swaps in the
future to the extent provided by our senior credit facility. 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.

                                      40

<PAGE>

                                    PART II

                               OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

   None.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.

   (a) None.

   (b) None.

   (c) Set forth below is a description of our recent sales of unregistered
securities:

   In May 2001, we issued 50,000 shares of class B common stock to a director
upon exercise of stock options. During the quarter ended June 30, 2001, we
granted options to purchase an aggregate of 371,178.8298 shares of class B
common stock to four individuals under our Management Stock Incentive Plan at
an exercise price of $7.00 per share. The foregoing transactions were
undertaken in reliance upon the exemption from the registration requirements of
the Securities Act afforded by Rule 701 promulgated under the Securities Act as
sales by an issuer to employees, directors, officers, consultants or advisors
pursuant to written compensatory benefit plans or written contracts relating to
the compensation of such persons. No underwriters were engaged in connection
with any of the foregoing transactions.

   (d) From July 30, 2001, the effective date of the Registration Statement on
Form S-4, file no. 333-58890, relating to 160,000 warrants to purchase shares
of our class C common stock and 2,000,040 shares of class C common stock
issuable upon exercise of the warrants, until the date hereof, we did not incur
any expenses for underwriting discounts and commissions, finders fees or
expenses paid to or for underwriters in connection with the issuance and
distribution of securities. During this period, we estimate that we incurred
less than $0.1 million for printing expenses related to the registration. None
of the other expenses were direct or indirect payments to our directors or
officers or our associates, or persons owning 10% or more of any class of our
equity securities or the equity securities of our affiliates. As the warrants
are not exercisable until February 15, 2002, we have received no proceeds from
the offering.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

   None.

                                      41

<PAGE>

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

   On May 31, 2001, we held our annual meeting of stockholders. The matters
voted on at the annual meeting and the votes cast on each were as follows:

      1. The election of 13 directors to hold office until the 2001 Annual
   Meeting and until their respective successors have been elected and
   qualified or until their earlier resignation or removal.

<TABLE>
<CAPTION>
                                        For       Withhold Authority
                                  --------------- ------------------
           <S>                    <C>             <C>
           Mamoun Askari......... 34,955,493.8829         0
           Alfred F. Boschulte... 34,955,493.8829         0
           James O. Egan......... 34,955,493.8829         0
           J.K. Hage III......... 34,955,493.8829         0
           Solon L. Kandel....... 34,955,493.8829         0
           Brian Kwait........... 34,955,493.8829         0
           Charles K. Marquis.... 34,955,493.8829         0
           Steven M. Nielsen..... 34,955,493.8829         0
           Christopher J. O'Brien 34,955,493.8829         0
           Harley Ruppert........ 34,955,493.8829         0
           Christopher J. Stadler 34,955,493.8829         0
           Thomas J. Sullivan.... 34,955,493.8829         0
           Savio W. Tung......... 34,955,493.8829         0
</TABLE>

      2. The approval of an amendment to our Management Stock Incentive Plan
   increasing the number of shares of Class B Common Stock subject thereunder
   by 478,020.7360 shares to an aggregate of 2,500,000.0000 shares, subject to
   adjustments specified in the plan.

<TABLE>
                            <S>      <C>
                            For:     34,868,456.8479
                            Against:     87,037.0350
                            Abstain:          0
</TABLE>

      3. The approval of certain benefits in compliance with the requirements
   of Internal Revenue Code Section 280G(b)(5).

<TABLE>
                            <S>      <C>
                            For:     34,950,493.8829
                            Against:      5,000.0000
                            Abstain:          0
</TABLE>

      4. The ratification of the selection by our Board of Directors of
   PricewaterhouseCoopers LLP as our independent accountants for the fiscal
   year ending December 31, 2001.

<TABLE>
                            <S>      <C>
                            For:     34,955,493.8829
                            Against:          0
                            Abstain:          0
</TABLE>

ITEM 5. OTHER INFORMATION.

   None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

   (a) Exhibits.

<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S>         <C>
   10.15    IWO Holdings, Inc. Management Stock Incentive Plan, as amended as of May 31,
            2001 (replaces previously filed exhibit)
</TABLE>

   (b) No current reports on Form 8-K were filed during the quarter ended June
30, 2001.

                                      42

<PAGE>

                                  SIGNATURES

   Pursuant to the requirements 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.

                                IWO HOLDINGS, INC.
Date: August 28, 2001           By: /S/ STEVEN M. NIELSEN
                                    ---------------------------------------
                                    Steven M. Nielsen
                                    President and Chief Executive Officer
Date: August 28, 2001           By: /S/ TIMOTHY J. MEDINA
                                    ---------------------------------------
                                    Timothy J. Medina
                                    Vice President, Chief Financial Officer
                                    and Treasurer

                                      43