<PAGE>

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

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

                               -----------------
                                   FORM 10-K

                       FOR ANNUAL AND TRANSITION REPORTS
                    PURSUANT TO SECTIONS 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

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

    For the fiscal year ended December 31, 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 333-39746

                               -----------------
                              IWO Holdings, Inc.
            (Exact Name of Registrant as Specified in Its Charter)

                      Delaware
                   (State or Other
                    Jurisdiction               14-1818487
                 of Incorporation or        (I.R.S. Employer
                    Organization)          Identification No.)

                52 Corporate Circle,
                  Albany, New York
                (Address of Principal             12203
                 Executive Offices)            (Zip Code)


      Registrant's telephone number, including area code:  (518) 862-6000

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

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

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

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

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

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

   As of March 1, 2002, there were 37,588,383.6968 shares of the registrant's
common stock outstanding (consisting of 15,000,000.0000 shares of Class A
Common Stock, 13,429,098.6965 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).

                      DOCUMENTS INCORPORATED BY REFERENCE

                                     None.

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

<PAGE>

                              IWO HOLDINGS, INC.

                          ANNUAL REPORT ON FORM 10-K

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                Page
                                                                                               Number
                                                                                               ------
<C>      <S>                                                                                   <C>
Cautionary Note Regarding Forward-Looking Statements..........................................    1

                                            PART I
Item 1   Business.............................................................................    2
Item 2   Properties...........................................................................   31
Item 3   Legal Proceedings....................................................................   31
Item 4   Submission of Matters to a Vote of Security Holders..................................   31

                                           PART II
Item 5   Market for Registrant's Common Equity and Related Stockholder Matters................   32
Item 6   Selected Financial Data..............................................................   32
Item 7   Management's Discussion and Analysis of Financial Condition and Results of Operations   34
Item 7A  Quantitative and Qualitative Disclosures About Market Risk...........................   58
Item 8   Financial Statements and Supplementary Data..........................................   58
Item 9   Change in and Disagreements with Accountants on Accounting and Financial Disclosure..   59

                                           PART III
Item 10  Directors and Executive Officers of the Registrant...................................   59
Item 11  Executive Compensation...............................................................   62
Item 12  Security Ownership of Certain Beneficial Owners and Management.......................   67
Item 13  Certain Relationships and Related Transactions.......................................   72

                                           PART IV
Item 14  Exhibits, Financial Statement Schedules, and Reports on Form 8-K.....................   74

SIGNATURES....................................................................................   80
FINANCIAL STATEMENTS..........................................................................  F-1
FINANCIAL STATEMENT SCHEDULES.................................................................  S-1
EXHIBITS
</TABLE>


<PAGE>

Cautionary Note Regarding Forward-Looking Statements

   This annual report on Form 10-K 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 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 and 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's 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 facilities;

  .  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;

  .  changes or advances in technology; and

  .  risks relating to our pending merger with US Unwired Inc.

   Readers are cautioned not to place undue reliance on these forward-looking
statements, which reflect our 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.
In addition, if our merger with US Unwired is completed, we will be an
indirect, wholly-owned subsidiary of US Unwired, and aspects of our business
and operations could change significantly, such as our business strategy, our
network build-out plan, our marketing and sales, our relationship with Sprint
PCS and the agreements governing this relationship, and the composition of our
management team and board of directors. Readers should carefully review the
risk factors described in "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations."

                                      1

<PAGE>

                                    PART I

Item 1.  Business.

Overview

   We provide digital wireless personal communications services, or PCS, and
related products to customers in the northeastern United States as part of
Sprint PCS's network. Digital wireless personal communications services employ
advanced digital technologies to provide voice, data and internet services.
These advanced digital technologies enable new and enhanced services, including
greater call privacy and faster and more accurate transmission of data
appropriate for facsimiles, electronic mail and connecting notebook computers
and wireless hand-held devices with data networks.

   Sprint PCS operates the only 100% digital personal communications services
network in the United States with licenses to provide nationwide service
utilizing a single frequency band and a single technology. Our territory is
comprised of approximately 6.2 million residents located in 20 contiguous
markets across a large portion of upstate New York, New Hampshire (other than
the Nashua market), Vermont, and portions of Massachusetts and Pennsylvania.
Under an affiliation agreement between Sprint PCS and our operating subsidiary,
Independent Wireless One Corporation, we have the exclusive right to use all
the Sprint PCS-owned spectrum in our territory for all wireless communications
services. Sprint PCS currently owns 30 MHz of spectrum throughout our
territory. We also have the exclusive right to market and provide personal
communications services under the Sprint(R) and Sprint PCS(R) brand names in
our territory.

   As of December 31, 2001, we provided service to approximately 155,000
subscribers, and our network covered approximately 4.0 million residents or 65%
of the residents in our territory.

Relationship with Sprint PCS

   Sprint PCS is a wholly-owned subsidiary of Sprint, a diversified
telecommunications service provider. Sprint PCS operates the only 100% digital,
100% PCS wireless network in the United States with licenses to provide
nationwide service using a single frequency and a single technology. Sprint PCS
does not currently offer personal communications services in every state in the
United States, and the actual scope of Sprint PCS service is limited. Where
service on the Sprint PCS digital network is not available, subscribers may
roam on the analog cellular networks of other providers using dual-frequency
handsets that are both digital and analog capable.

   Sprint PCS has adopted a strategy to rapidly extend its 100% digital, 100%
PCS network by entering into agreements with independent wireless companies
such as us, which we refer to as affiliates, to construct and manage Sprint PCS
markets and market Sprint PCS services. Through these affiliations, Sprint PCS
services will be available in key cities contiguous to current and future
Sprint PCS markets. The Sprint PCS network uses code division multiple access,
or CDMA, technology nationwide.

Merger with US Unwired

   On December 19, 2001, we entered into a definitive agreement and plan of
merger with US Unwired Inc., a Sprint PCS affiliate, pursuant to which we and
an indirect, wholly-owned subsidiary of US Unwired will merge in a tax-free
reorganization. US Unwired provides wireless personal communications services
in eastern Texas, southern Oklahoma, southern Arkansas, significant portions of
Louisiana, Alabama and Mississippi, the Florida panhandle and southern
Tennessee. The transaction will be accounted for as a purchase transaction,
with US Unwired as the accounting acquiror. The combined company will be called
US Unwired.

   The merger agreement provides for, among other things, the following at the
effective time of the merger:

  .  Each issued and outstanding share of our outstanding common stock will be
     converted into the right to receive approximately 1.0371 shares of US
     Unwired common stock, referred to as the exchange ratio.

  .  US Unwired will assume each unexpired and unexercised option to purchase
     shares of our common stock and each unexpired and unexercised warrant to
     purchase shares of our common stock issued as part of our

                                      2

<PAGE>

     units and convert the option or warrant into an option or warrant to
     purchase a number of shares of US Unwired common stock equal to the number
     of shares of our common stock subject to the assumed option or warrant
     multiplied by the exchange ratio, rounded down to the nearest whole share.
     The options will remain exercisable in accordance with the terms of our
     stock option plan, the agreements evidencing grants thereunder and any
     other existing agreements between us and an optionee. The warrants will
     remain subject to the terms and conditions set forth in the warrant
     agreement for the warrants.

  .  US Unwired will exchange half of each unexpired and unexercised warrant
     initially issued to our founders and management (except for warrants
     issued to our chief executive officer) for a new warrant to purchase a
     number of shares of US Unwired common stock equal to the number of shares
     of our common stock subject to the exchanged warrant multiplied by the
     exchange ratio, rounded down to the nearest whole share. The other
     remaining half of each warrant will be canceled. These new warrants will
     remain subject to the terms and conditions set forth in the certificates
     representing the exchanged warrants except that they will become
     exercisable in full at the effective time of the merger.

  .  US Unwired will exchange each unexpired and unexercised warrant issued to
     our chief executive officer for a new warrant to purchase a number of
     shares of US Unwired common stock equal to the number of shares of our
     common stock subject to the exchanged warrant multiplied by the exchange
     ratio, rounded down to the nearest whole share. The new warrants issued to
     our chief executive officer will remain subject to the terms and
     conditions set forth in the certificates representing the exchanged
     warrants except that they will become exercisable in full on December 31,
     2003.

   The exercise price per share of US Unwired common stock issuable under each
converted option, converted warrant or exchanged warrant will be equal to the
exercise price per share of our common stock subject to the option or warrant
divided by the exchange ratio, rounded up to the nearest whole cent. The total
number of fully diluted shares of US Unwired common stock to be issued by US
Unwired in connection with the merger will be approximately 45.9 million.

   In addition, our outstanding 14% senior notes due 2011 will remain
outstanding after the merger under the existing indenture governing the notes.
In order for US Unwired to comply with the indenture governing its own senior
notes, US Unwired will designate us as its unrestricted subsidiary. As a
result, for purposes of our and US Unwired's respective public debt indentures,
we and US Unwired will operate as separate business entities following the
merger. Despite this, if the merger is completed, aspects of our business and
operations described in this Item 1 and elsewhere in this report could change
significantly, such as our business strategy, our network build-out plan, our
marketing and sales, our relationship with Sprint PCS and the agreements
governing this relationship, and the composition of our management team and
board of directors.

   The transaction is subject to customary regulatory review, and approvals by
the stockholders of US Unwired and our company, both companies' senior secured
lenders and Sprint PCS. Of these approvals and review, approval by the
stockholders of US Unwired remains outstanding.

   The merger agreement will terminate if the merger is not consummated on or
before June 18, 2002. We must pay US Unwired a termination fee of $7,000,000 if
the merger has not occurred before June 18, 2002, and as of that date holders
of at least 6% of our common stock have exercised and not withdrawn their
appraisal rights.

   A copy of the merger agreement is filed as an exhibit to this report on Form
10-K.

Business Strategy

   We are a full-service provider of wireless voice, data and internet personal
communications services and products in our territory. We believe that the
following elements of our business strategy will enable us to expand our
portion of the Sprint PCS network, distinguish our wireless service offerings
from those of our competitors and compete successfully in the wireless
communications marketplace.

                                      3

<PAGE>

  Capitalize on Our Sprint PCS Affiliation

   We will use our Sprint PCS affiliation to provide us with important
marketing and operational advantages. These include:

  .  exclusive right to use the Sprint(R) and Sprint PCS(R) brand names,
     products and services;

  .  Sprint PCS advertising, marketing and promotional programs;

  .  ability to purchase network and subscriber equipment at Sprint PCS
     discounted rates; and

  .  benefits of Sprint PCS research and development.

  Build High Quality Personal Communications Services Network

   We are constructing a state-of-the-art, high quality 100% personal
communications services network using 100% digital technology:

  .  Our network design allows our system to handle higher traffic demand than
     cellular operators and other personal communications services operators
     who do not employ CDMA technology. This allows us to offer lower
     per-minute rates.

  .  The use of cost-effective equipment in our network design will enable us
     to reach difficult locations and fill in isolated coverage gaps, reducing
     our capital expenditures and overall operating costs.

  .  We plan to reduce construction costs for our network by locating our
     equipment on existing towers with other wireless providers as our primary
     strategy and developing our radio frequency design around this strategy.

  .  We plan for our network to cover both densely populated areas, in order to
     provide a higher quality network to a significant portion of the residents
     in our territory, and highways and destination points, including
     well-known ski resorts and vacation spots, in order to capture traveling
     revenues.

  Execute an Integrated Marketing Plan

   Our marketing approach leverages Sprint PCS's highly recognizable brand name
and reputation and its relationship with major national retailers. We emphasize
the improved quality, enhanced features and favorable pricing of Sprint PCS
service. In addition, we benefit from Sprint PCS's:

  .  organized national accounts sales force;

  .  e-commerce web site; and

  .  pre-negotiated contracts with national retailers.

   To complement our national benefits from Sprint PCS on the local level, we:

  .  market our products and services using point-of-sale, direct mail,
     telemarketing, radio and print campaigns; and

  .  distribute our products and services through our own Sprint-branded and
     Sprint PCS stores, a business focused sales force and local agents and
     retailers.

   We believe that our strategy will help us to maximize market penetration and
minimize customer turnover.

                                      4

<PAGE>

  Develop an Efficient Operating Structure

   We intend to maximize operating efficiency by using Sprint PCS's existing
back office services. As the customer base in our territory grows, we may elect
to develop our own internal systems for certain back office functions, such as
customer activation, billing and customer care, or outsource such functions
directly to third-party vendors if it is more cost-effective. In the interim,
the immediate availability of Sprint PCS's back office services significantly
reduces our risks of execution in starting and growing our business and allows
us to focus more attention on building our network and acquiring and keeping
customers. For example, we currently purchase billing and customer care from
Sprint PCS on a per-subscriber basis, thereby avoiding the costly,
time-consuming and labor-intensive tasks of building our own systems.

Markets and Build-Out Plan

  Markets

   Our territory encompasses approximately 6.2 million people located within 20
markets in the northeastern United States. Our territory is cradled by the
metropolitan areas of New York City, Boston, Buffalo, Philadelphia, Rochester,
Montreal and Toronto. The territory extends from suburban New York City (Orange
and Sullivan Counties) north to the Canadian border. Our territory reaches from
the eastern suburbs of Rochester to Syracuse, Ithaca, Binghamton and Elmira in
central New York State, east to include all of Vermont and New Hampshire
(except Nashua, New Hampshire, but including the extreme northwestern suburbs
of Boston). Details of our market and build-out plan as of December 31, 2001
are set forth in the following table. The estimated market population
represents our potential market and not the number of our expected customers or
our growth prospects. As of December 31, 2001, we provided service to
approximately 155,000 subscribers in 13 markets. The number of our subscribers
who are located in the markets we have launched varies based upon the total
population of the markets, how long the markets have been launched and the
extent of our marketing efforts to date in such markets.

<TABLE>
<CAPTION>
                                                                            Percentage of
                                                                              Estimated
                                                    Estimated                  Covered
                                                      Market     Expected      Market
                                             Basic  Population Initial Date Population at
                                            Trading    (In          of      December 31,  Spectrum
                  Market                     Area   thousands)  Operation       2003       (MHz)
                  ------                    ------- ---------- ------------ ------------- --------
<S>                                         <C>     <C>        <C>          <C>           <C>
Albany/Schenectady, NY.....................     7     1,048     Operating        81%         30
Syracuse, NY...............................   438       779     Operating        82%         30
Poughkeepsie, NY...........................   361       461     Operating        91%         30
Orange/Sullivan County, NY.................   321       419     Operating        95%         30
Binghamton, NY, PA.........................    43       344     Operating        75%         30
Utica, NY..................................   453       298     Operating        73%         30
Elmira, NY, PA.............................   127       313     Operating        50%         30
Watertown, NY..............................   463       302     Operating        38%         30
Plattsburgh, NY............................   352       119      Q2 2002         65%         30
Glens Falls, NY............................   164       125     Operating        55%         30
Oneonta, NY................................   333       110     Operating        40%         30
Ithaca, NY.................................   208        97      Q2 2002         94%         30
Manchester, NH.............................   274       478     Operating        75%         30
Rockingham/Strafford County, NH............    51       393     Operating        93%         30
Lebanon, NH................................   249       180       2003           49%         30
Keene, NH..................................   227       118       2003           66%         30
Burlington, VT.............................    63       412      Q2 2002         58%         30
Rutland, VT................................   388       100      Q2 2002         70%         30
Pittsfield, MA.............................   351       134     Operating        80%         30
                                                      -----
   Total--Estimated 2001 Market Population.           6,230
</TABLE>

                                      5

<PAGE>

   A basic trading area, or BTA, is a collection of counties surrounding a
metropolitan area in which there is a commercial community of interest. The
basic trading area number in the table is assigned to that market by the FCC
for the purpose of issuing licenses for wireless services. The estimated 2001
market population in the table is based on the report dated January 16, 2002 by
Kagan World Media, as compiled from U.S. Department of Census, U.S. Department
of Transportation and SRC, LLC data. Reprinted with permission of Paul Kagan
World Media.

   Within the region there are significant volumes of traffic on major highways
including the Massachusetts Turnpike (I-90), the New York State Thruway (I-87),
the Northway, and several other interstate highways.

<TABLE>
<CAPTION>
                                                                       Linear Miles              Avg. Daily
                                                                         Between    Linear Miles  Traffic
                                                                          Areas        Within     Count in
Interstate                        Areas Linked                            Linked     Territory   Territory
----------                        ------------                         ------------ ------------ ----------
<C>        <S>                                                         <C>          <C>          <C>
   I-84    Danbury, CT to the Catskill Mountains......................       79           58        20,745
   I-87    Main route from New York City to Albany to Montreal, Canada      376          288        21,292
   I-89    Burlington, VT to Concord, NH..............................      189          189        21,396
   I-90    Boston to Buffalo via Albany, Syracuse & Rochester, NY.....      456          212        31,365
   I-95    Boston, MA to Portland, ME.................................      107           16        53,587
   I-93    St. Johnsbury, VT to Boston, MA............................      171          141        28,856
   I-81    Canadian border south through the Appalachian Mountains via
             Syracuse and Binghamton, NY..............................    1,302          170        14,800
   I-91    Canadian border south to New Haven, CT via Hartford, CT and
             Springfield, MA..........................................      310          174        15,200
                                                                          -----        -----     ---------
              Total...................................................    2,990        1,248        22,528
                                                                                                 (weighted
                                                                                                   average)
</TABLE>

  Build-Out Strategy

   Sprint PCS developed an operating network in seven markets within our
territory which was the foundation for our network. In 2000, we expanded
coverage of the markets acquired from Sprint PCS. In 2001, we developed our
network in our territory, launched service in six markets and expanded
interconnecting highway coverage. In 2002, we plan to launch four additional
markets and expand coverage of our existing markets. We plan to launch our
remaining two markets in 2003. The following table summarizes cumulative
operating data and timing of this network build-out plan. The total number of
residents covered and the total number of cell sites will depend on the final
network design and site availability.

<TABLE>
<CAPTION>
                                                    As of December 31,
                                              ------------------------------
            Network Build-Out Plan              2000     2001   2002   2003
            ----------------------            -------- -------- -----  -----
                                              (Actual) (Actual)
  <S>                                         <C>      <C>      <C>    <C>
  Number of Markets..........................      7       13      17     19
  Residents in Launched Markets (in millions)    3.9      5.2     5.9    6.2
  % Total 2001 Residents.....................     63%      83%     95%   100%
  Covered Residents (in millions)............    2.7      4.0     4.3    4.6
  % Total 2001 Residents.....................     44%      65%     69%    74%
  Miles of Highway...........................  1,427    3,538   3,789  3,789
  Switches...................................      2        3       3      3
  Cell Sites.................................    219      469     709    859
</TABLE>

                                      6

<PAGE>

Products and Services

   We offer products and services throughout our territory under the Sprint(R)
and Sprint PCS(R) brand names. Our products and services are designed to mirror
the service offerings of Sprint PCS and to integrate with the Sprint PCS
network. The Sprint PCS products and services we currently offer include the
following:

  100% Digital, 100% PCS Network

   We are part of the only 100% digital, 100% wireless PCS network in the
country. Sprint PCS and its affiliates reach more than 230 million people.
Sprint PCS operates personal communications systems in more than 300
metropolitan areas across the country. Although Sprint PCS and its affiliates
do not currently offer personal communications services in every state in the
United States, they provide an extended coverage area for our customers,
allowing access to Sprint PCS services throughout the Sprint PCS network.
Dual-frequency handsets that are both digital and analog capable allow roaming
on wireless networks where Sprint PCS has roaming agreements. For a discussion
of the Sprint PCS network technology, its benefits and limitations, see
"Technology--Code Division Multiple Access Technology" below.

  Access to the Sprint PCS Wireless Web

   We offer and support the "Sprint PCS Wireless Web" in our territory. The
Sprint PCS Wireless Web allows customers with handsets capable of data
transmission to connect their portable computers or wireless hand-held devices
to the internet. Sprint PCS customers with handsets capable of data
transmission also have the ability to receive selected information updates,
including e-mail, stock prices, sports scores and weather reports. Sprint PCS
customers with web-browser enabled handsets have the ability to connect to and
browse specially designed text-based internet sites on an interactive basis.
Sprint PCS has agreements with internet companies including AOL, Yahoo!,
Amazon.com, Bloomberg.com, ABCNews.com, FOXSports.com, Google.com,
MapQuest.com, CBS MarketWatch, E*Trade, ESPN.com, Forbes.com, New York Times
Digital, eBay.com, Weather.com, Walt Disney Internet Group, Washingtonpost.com,
FTD.com and USAToday.com.

  Service Packages

   The Sprint PCS "Free and Clear" plans include a fixed number of minutes for
a set price with enhanced features such as voicemail with numeric paging,
caller ID, call waiting and three-way calling. At no additional charge, the
customer can select domestic long distance calling from anywhere on the
network, a set amount of night and weekend minutes, access to the Sprint PCS
Wireless Web, or "Voice Command" voice dialing service. For an additional
charge, the customer can add other options including a select number of
information updates or messages from the Sprint PCS Wireless Web, additional
off-peak minutes and the ability to share the plan minutes with another
customer.

  Advanced Handsets and Longer Battery Life

   We primarily offer a selection of CDMA-compatible dual-frequency handsets
with various advanced features and technology, such as internet readiness
described above in "--Access to the Sprint PCS Wireless Web." All handsets are
equipped with pre-programmed features such as caller ID, call waiting, phone
books, speed dial and last number redial and are sold under the Sprint(R)/ and
Sprint PCS(R) brand names. CDMA-compatible handsets weighing approximately 2.3
to 7.3 ounces offer up to twelve days of standby time and approximately five
hours of talk time.

   In addition, we offer dual-frequency handsets that also are both digital and
analog capable which allow customers to make and receive calls on the networks
of other wireless service providers with whom Sprint PCS or we have agreements.
These handsets allow roaming on cellular networks where Sprint PCS digital
service is not available. When roaming in analog markets, stand-by and talk
times for these handsets are greatly reduced.

                                      7

<PAGE>

  Privacy and Security

   Sprint PCS provides voice transmissions encoded into a digital format with a
significantly lower risk of unauthorized use and eavesdropping than
analog-based systems. Sprint PCS customers using dual-frequency handsets in
analog mode, such as when roaming, do not have the benefit of digital security.

  Improved Voice Quality

   We believe that, compared to other digital and analog technologies used for
managing wireless transmissions such as time division multiple access, CDMA
technology offers significantly improved voice quality, more powerful error
correction and less susceptibility to call fading and enhanced interference
rejection; all of which result in fewer dropped calls.

  Simple Activation

   Customers can purchase a Sprint PCS handset at a retail location and
activate their service and program the handset by calling Sprint PCS customer
care.

  Customer Care

   Sprint PCS provides customer care services to customers based in our
territory under our services agreement. Sprint PCS offers customer care 24
hours a day, seven days a week. Customers can call the Sprint PCS toll-free
customer care number from anywhere in the country. All Sprint PCS handsets are
pre-programmed with a speed dial feature that allows customers to easily reach
customer care at any time by dialing "*2." Customers may also check their
accounts by dialing "*4" from their Sprint PCS phone. In addition, customers
may manage their Sprint PCS accounts through the internet on the Sprint PCS web
site.

  Other Services

   In addition to the services described above, and since Sprint is not a local
phone company in our territory, We may also offer wireless local loop services
for voice, data and internet throughout our territory. We also believe that new
features and services will be developed on the Sprint PCS network to capitalize
on CDMA technology. Sprint PCS conducts ongoing research and development to
produce innovative services that are intended to give Sprint PCS a competitive
advantage. We expect to benefit from Sprint PCS's research and development,
although we may incur additional expenses in modifying our technology to
provide these additional features and services.

  Traveling and Roaming

   Sprint PCS Traveling.  On-network usage between Sprint PCS and its affiliate
markets is referred to as "travel." Sprint PCS traveling includes inbound
travel, when a Sprint PCS subscriber based outside of our territory uses our
portion of the Sprint PCS network, and outbound travel, when a Sprint PCS
subscriber based in our territory uses the Sprint PCS network outside of our
territory. Sprint PCS pays us a per minute fee for inbound Sprint PCS travel.
Similarly, we pay a per minute fee to Sprint PCS for outbound Sprint PCS
travel. Pursuant to our affiliation agreements with Sprint PCS, Sprint PCS has
the discretion to change the per minute rate for Sprint PCS inbound travel
revenues and outbound travel fees. During 2000, outbound travel fees exceeded
inbound travel revenues. We believe this was due to our small network build
compared to the extensive builds in the surrounding metropolitan areas. During
2001, inbound travel revenues exceeded outbound travel fees resulting from our
continued network expansion. In order to relieve us of the cash outflow that
might otherwise occur during our network build-out, our management agreement
with Sprint PCS provides that until December 31, 2002, we will not be required
to pay more fees for outbound travel than the amount of revenues we receive for
inbound travel.

                                      8

<PAGE>

   Non-Sprint PCS Roaming.  Non-Sprint PCS roaming includes both inbound
non-Sprint PCS roaming, when a non-Sprint PCS subscriber uses our portion of
the Sprint PCS network, and outbound non-Sprint PCS roaming, when a Sprint PCS
subscriber based in our territory uses a non-Sprint PCS network. Pursuant to
roaming agreements between Sprint PCS and other wireless service providers,
when another wireless service provider's subscriber uses our portion of the
Sprint PCS network, we earn inbound non-Sprint PCS roaming revenue. These
wireless service providers must pay fees for their subscribers' use of our
portion of the Sprint PCS network and, as part of our collected revenues under
our management agreement with Sprint PCS, we are entitled to 92% of these fees.
Currently, pursuant to our services agreement with Sprint PCS, Sprint PCS bills
these wireless service providers for these fees. When another wireless service
provider provides service to one of the Sprint PCS subscribers based in our
territory, we pay outbound non-Sprint PCS roaming fees for that service. Sprint
PCS then bills the Sprint PCS subscriber for use of that provider's network at
rates specified in his or her contract and pays us 100% of this outbound
non-Sprint PCS roaming revenue collected from that subscriber on a monthly
basis.

   For a discussion of products and services provided under our management
agreement with Sprint PCS, see "Sprint PCS Agreements--The Management
Agreement--Products and Services" below. For a discussion of roaming fees and
prices under our management agreement with Sprint PCS, see "Sprint PCS
Agreements--The Management Agreement--Service Pricing, Roaming, Travel and
Fees" below.

Marketing

   We use a marketing approach that leverages Sprint PCS's nationwide license
and brand name and the strategies which have helped Sprint PCS to become a
leading provider of personal communications services in the United States.
Simultaneously, our marketing approach capitalizes on our regional focus and
flexibility, through pricing and marketing enhancements, to respond quickly to
changing customer needs.

  Use of Sprint PCS's Brand Name and Marketing

   We continue to build on Sprint PCS's national distribution channels and
advertising programs by featuring exclusively and prominently the nationally
recognized Sprint(R) and Sprint PCS(R) brand names in our marketing efforts. We
expect our customers to perceive and use our personal communications services
network, the Sprint PCS network and its affiliates' networks as a unified
network.

  Pricing

   We use Sprint PCS's pricing strategy to offer our customers simple,
easy-to-understand pricing plans. Sprint PCS's consumer pricing plans are
typically structured with competitive monthly recurring charges for a fixed
number of minutes and per-minute rates for excess usage beyond the plan amount.
Lower per-minute rates relative to analog cellular providers are possible in
part because the CDMA technology that both we and Sprint PCS employ has greater
capacity than current analog cellular systems, enabling us to market high-use
customer plans at significantly lower prices. Sprint PCS's current national
plans typically:

  .  include large local calling areas;

  .  offer the option of service features such as voicemail, enhanced caller
     ID, call waiting, and three-way calling;

  .  include minutes in any Sprint PCS market with no traveling charges;

  .  offer a wide selection of feature-rich phones to meet the needs of
     consumers and businesses; and

  .  provide a limited-time money-back guarantee on Sprint PCS phones.

   In addition, Sprint PCS's "Free and Clear" national calling plans include
long distance calling from anywhere on the Sprint PCS network to anywhere in
the United States at no additional charge. Total Digital

                                      9

<PAGE>

Connection Plans are available to both consumer and business customers and
include nationwide long distance, Sprint PCS Voice Command and Sprint PCS
Wireless Web.

  Advertising

   We can use the Sprint PCS brand and logo in all of our wireless
communications marketing efforts and external communications. Sprint PCS has
launched a national advertising campaign to promote its products, and we expect
to use the Sprint PCS name and reputation to attract customers more efficiently
than we could if we did not have the benefit of the use of the Sprint PCS name.

   In addition, Sprint PCS is a sponsor of numerous selective, broad-based
national and regional events. These sponsorships provide Sprint PCS with brand
name and product recognition in high profile events, provide a forum for sales
and promotional events and enhance our promotional efforts in our territory.

  Local Focus

   Our advertising and promotional program is tailored to our territory and may
consist of local radio, television, printed collateral, billboards, and
newspaper advertising. We are expanding a local sales force to execute our
marketing strategy through direct business-to-business contacts, company owned
retail stores, local distributors and other channels. See "Sprint PCS
Agreements--The Management Agreement--Advertising and Promotions" below.

  Bundling of Services

   We capitalize on the complete array of communications services offered by
bundling Sprint PCS services with other Sprint products, such as residential
long distance.

  Customer Segmentation

   We have two customer target segments.

  .  Consumer Market.  We target two consumer market segments: wireless
     intenders and wireless users. The wireless intender does not currently own
     or use a wireless phone but believes he or she will purchase a phone in
     the next six months, while the wireless user currently subscribes to a
     wireless service. We prepare appropriate marketing programs to target
     these customer segments, specifically addressing key service needs
     including clarity, base level services, functional quality and service
     reliability.

  .  Business Market.  We target small- to medium-sized business customers with
     a differentiated, more locally oriented wireless product by highlighting
     the all-digital nature of Sprint PCS's network, the network's quality,
     capacity and coverage, increased security, and increased functionality
     through advanced features. Business professional users typically have much
     higher average minutes of use and are more receptive to lower-priced
     bundled packages.

Sales and Distribution

   Our sales and distribution plan mirrors and builds upon Sprint PCS's
multiple channel sales and distribution plan. We have identified the following
six distribution channels that combine traditional cellular channels like
retail stores, with more innovative outlets such as web-based sales, to reach
our target markets.

  .  Sprint PCS retail sales.  We operate our own Sprint PCS-branded retail
     stores within our coverage area, primarily targeting the non-business
     consumer. As of December 31, 2001, we had 20 retail stores and plan to
     expand to 23 stores by the end of 2003. We will locate our stores in
     principal metropolitan markets within our territory, providing us with a
     strong local presence and a high degree of visibility. Our showrooms are
     designed in accordance with Sprint PCS specifications and branded as
     Sprint PCS stores.

                                      10

<PAGE>

  .  Business-to-business sales.  Our direct sales force is focused on business
     users.

  .  Sprint PCS national sales effort.  Sprint PCS has an extensive national
     account marketing program that focuses on the corporate headquarters of
     Fortune 1,000 companies. Once a Sprint PCS representative reaches an
     agreement with the corporate headquarters, we service the offices of that
     corporation on a local basis and record the revenue generated by the
     corporate client. We reimburse Sprint PCS for certain purchase costs
     related to those customers. We visit local branches of Sprint PCS's
     national accounts to reinforce the relationship with Sprint PCS.

  .  Indirect sales.  Indirect sales is also commonly referred to as the dealer
     channel. Within our territory, as of December 31, 2001, Sprint PCS had
     approximately 376 retail points of sale under third-party agent
     agreements, including 121 Radio Shack stores/franchisees, 42 Wal-Mart
     stores, 34 Staples stores, 19 Ritz Camera stores, 19 Kmart stores, 15
     Office Max stores, nine Best Buy stores, nine Circuit City stores, five
     Target stores, four Tweeter stores, three CompUSA stores, three Boscov's
     stores, two Office Depot stores and 91 local agents.

  .  Telemarketing.  Sprint PCS operates both inbound and outbound
     telemarketing services. Sprint PCS's telemarketing efforts are targeted
     primarily to current or previous Sprint long distance customers. As the
     exclusive provider of Sprint PCS products and services in our market, we
     use the national Sprint "1-800-480-4PCS" number campaigns that generate
     call-in leads. These leads are handled by Sprint PCS's inbound
     telemarketing group.

  .  Alternative sales channels.  Sprint PCS launched an internet web site in
     December 1998 which contains information on Sprint PCS products and
     services. We sell personal communications services over Sprint PCS's web
     site and use Sprint PCS's "phone-in-a-box" program, which enables
     activation by dialing 1-800-480-4PCS.

Technology

  General

   In the commercial wireless communications industry, there are two principal
services licensed by the FCC for transmitting two-way, real-time voice and data
signals: "cellular" and "personal communications services." In addition,
enhanced specialized mobile radio service, a relatively new technology, allows
for interconnected two-way real time voice and data services. The FCC licenses
these applications, each of which operates in a distinct radio frequency block.
Cellular, which uses the 800 MHz frequency block, was the original form of
widely-used commercial wireless voice communications. Cellular systems are
predominantly analog-based, but over the last several years cellular operators
have started to use digital service in the 800 MHz frequency block. Digital
services have been deployed, as a complement to the analog-based services, in
most of the major metropolitan markets.

   In 1993, the FCC allocated the 1900 MHz frequency block of the radio
spectrum for wireless personal communications services. Wireless personal
communications services differ from traditional analog cellular telephone
service principally in that wireless personal communications services systems
operate at a higher frequency and employ advanced digital technology.
Analog-based systems send signals in which the transmitted signal resembles the
input signal, the caller's voice. Digital systems convert voice or data signals
into a stream of digits that permit a single radio channel to carry multiple
simultaneous transmissions. Digital systems are also able to re-use the same
frequency more quickly than analog systems, resulting in greater capacity than
analog systems. This enhanced capacity allows digital-based wireless
technologies to offer new and enhanced services, including greater call privacy
and faster and more accurate transmission of data appropriate for facsimiles,
electronic mail and connecting notebook computers and wireless hand-held
devices with data networks.

   Wireless communications systems, whether personal communications services or
cellular, are divided into multiple geographic coverage areas, known as
"cells." In both personal communications services and cellular systems, each
cell contains a transmitter, a receiver and signaling equipment, known as the
"base station." The

                                      11

<PAGE>

base station is connected by microwave or landline telephone lines to a switch
that uses computers to control the operation of the cellular or personal
communications services network system. The system:

  .  controls the transfer of calls from cell to cell as a subscriber's handset
     travels;

  .  coordinates calls to and from handsets;

  .  allocates calls among the cells within the system; and

  .  connects calls to the local landline telephone system or to a long
     distance carrier.

   Wireless communications providers establish interconnection agreements with
local phone companies and long distance carriers, thereby integrating their
system with the existing landline public telecommunications system and the
internet. Because the signal strength of a transmission between a handset and a
base station declines as the handset moves away from the base station, the
switching office and the base station monitor the signal strength of calls in
progress. When the signal strength of a call declines to a predetermined level,
the switching office may "hand off" the call to another base station where the
signal strength is stronger.

   Wireless digital signal transmission is accomplished through the use of
various forms of frequency management technology or "air interface protocols."
Personal communications systems operate under one of three principal air
interface protocols, code division multiple access, commonly referred to as
CDMA, time division multiple access, commonly referred to as TDMA, or global
system for mobile communications, commonly referred to as GSM.

   Time division multiple access and global system for mobile communications
are both time division multiple access systems but are incompatible with each
other. The CDMA system is incompatible with both of those systems. Accordingly,
a subscriber of a system that utilizes CDMA technology is unable to use a CDMA
handset when traveling in an area not served by CDMA-based wireless personal
communications services operators, unless the customer carries a dual-frequency
handset that is both digital and analog capable which permits the customer to
use the analog cellular system in that area. The same issue would apply to
users of the other systems.

   All of the wireless personal communications services operators now have
dual-mode or tri-mode handsets available to their customers. Because digital
networks do not cover all areas in the country, these handsets will remain
necessary for segments of the subscriber base.

  Code Division Multiple Access Technology

   Sprint PCS's network and its affiliates' networks all use digital CDMA
technology. We believe that CDMA technology provides important system
performance benefits such as:

  .  Greater capacity.  We believe, based on studies by manufacturers of CDMA
     products, that CDMA systems can provide system capacity that is
     approximately eight to ten times greater than that of current analog
     technology and approximately three to six times greater than time division
     multiple access systems including global system for mobile communications
     systems.

  .  Superior voice quality.  We believe that CDMA technology provides superior
     voice quality and reduces background noise.

  .  Privacy and security.  One of the benefits of CDMA technology is that it
     combines a constantly changing digital coding scheme with a low power
     signal to enhance call security and privacy.

  .  Soft hand-off.  CDMA systems transfer calls throughout the CDMA network
     using a technique referred to as a soft hand-off, which connects a mobile
     customer's call with a new cell site while maintaining a connection with
     the cell site currently in use. CDMA networks monitor the quality of the
     transmission received by multiple cell sites simultaneously to select a
     better transmission path and to ensure that the network does not
     disconnect the call in one cell unless replaced by a stronger signal from
     another cell site. Analog, time division multiple access technology and
     global system for mobile communications

                                      12

<PAGE>

     technology networks use a "hard hand-off" that disconnects the call from
     the current cell site and connects with a new cell site without any
     simultaneous connection to both cell sites, which results in more dropped
     calls.

  .  Simplified frequency planning.  Frequency planning is the process used to
     analyze and test alternative patterns of frequency use within a wireless
     network to minimize interference and maximize capacity. Unlike systems
     based on time division multiple access technology or global system for
     mobile communications technology, systems based on CDMA technology can
     re-use the same subset of allocated frequencies in every cell,
     substantially reducing the need for costly frequency patterning and
     constant frequency plan management.

  .  Longer battery life.  Due to their greater efficiency in power
     consumption, CDMA handsets can provide longer standby time and more talk
     time availability when used in the digital mode than handsets using
     alternative digital or analog technologies.

   While CDMA technology has the inherent benefits discussed above, time
division multiple access networks are generally less expensive when overlaying
existing analog systems because time division multiple access spectrum usage is
more compatible with analog spectrum planning. In addition, global system for
mobile communications technology, unlike CDMA technology, allows multi-vendor
equipment to be used in the same network. This, along with the fact that global
system for mobile communications technology is currently more widely used
throughout the world than CDMA technology, provides economies of scale for
handset and equipment purchases. A standards process is also underway which
will allow wireless handsets to support analog, time division multiple access
and global system for mobile communications technologies in a single unit.
Currently, there are no plans to have CDMA handsets that also support either
the time division multiple access or global system for mobile communications
technologies.

Equipment

   We utilize Sprint PCS's approved vendors to obtain switch and cell site
equipment and handsets at estimated savings of up to 30% to 40% of the price we
would otherwise pay as a small independent wireless company. We are entitled to
these discounts as a result of equipment and handset agreements between Sprint
PCS and its suppliers.

  .  Cell sites and switch equipment.  Currently, we are operating three 5ESS
     Lucent switches and related cell site equipment. We have negotiated and
     completed a contract with Lucent to provide the cell site and switch
     equipment necessary for the further build-out of our markets.

  .  Handsets.  We offer both single-frequency CDMA and dual-frequency
     CDMA/analog multi-network telephone handsets. Handset costs are expensive
     for the typical consumer and require subsidy, although in the long term,
     such prices are expected to decline. We expect to continue to subsidize
     handset costs. All handsets are subject to Sprint PCS discount purchase
     savings averaging an estimated 30-40% of the wholesale price. In addition,
     because Sprint PCS is a participant in the handset development process, we
     expect to gain access to newer handsets earlier than non-Sprint PCS
     carriers using CDMA technology.

Competition

   We compete with a number of cellular carriers and new personal
communications services entrants in each of our markets. Our major competitors
in terms of market coverage are Verizon Wireless, Cingular Wireless, AT&T
Wireless, Nextel Communications/Nextel Partners and VoiceStream Wireless. These
providers in our service area serve different geographic segments but no single
carrier provides complete coverage throughout our service territory.
Additionally, some of our competitors operate analog networks which require
significant upgrades and therefore cannot offer the quality service provided by
our 100% digital, 100% personal communications services wireless network.

                                      13

<PAGE>

   Subject to the completion of our network build-out, we believe we will
compete effectively against these wireless competitors primarily by targeting
business and personal users who benefit from the voice clarity, reliability and
coverage of the Sprint PCS network. For a description of the costs and timing
of our network build-out, see "Markets and Build-Out Plan--Build-Out Strategy"
above. We offer Sprint PCS's nationwide value and competitively priced packages
to our customers, which include a variety of advanced features such as caller
ID, voice mail, messaging, wireless data and internet services, call waiting,
conference calling, and call forwarding. We will also exercise the flexibility
enabled under our management agreement to establish our own pricing programs
and promotions tailored to our markets and customer demographics. Since we
benefit substantially from Sprint PCS's national "spillover" brand marketing
campaigns, we are able to utilize funds which otherwise would have been
designated for creative fees to fund more advertising to more efficiently
attract additional subscribers for advertising dollars expended. Currently, our
network coverage is limited, creating a competitive disadvantage. However, we
plan to build a state-of-the-art CDMA network that we believe should exceed the
coverage, capacity and reliability of our competitors' networks. We, along with
Sprint PCS and its other affiliates, will be the only wireless provider in our
entire service area offering 100% digital, 100% PCS using CDMA technology over
a single frequency band on a nationwide network.

   There has recently been a trend in the wireless communications industry
towards consolidation of wireless service providers through joint ventures,
mergers and acquisitions. We expect this consolidation to lead to larger
competitors over time. These larger competitors may have substantial resources
or may be able to offer a variety of services to a large customer base.

   We also face competition from paging, specialized mobile radio and dispatch
companies in our markets. Potential users of personal communications services
systems may find their communications needs satisfied by other current and
developing technologies. In addition, we face competition from resellers that
provide wireless services to customers but do not hold FCC licenses or own
facilities. The FCC requires all cellular and personal communications services
licensees to permit resale of their services. In the future, we expect to face
competition from other entities using additional frequencies to be licensed by
the FCC for advanced mobile services or providing similar services using other
communications technologies, including satellite-based telecommunications and
wireless cable systems. Although some of these technologies are currently
operational, others are being developed or may be developed in the future. In
addition, over the past several years the FCC has auctioned, and will continue
to auction, large amounts of wireless spectrum that could be used to compete
with Sprint PCS services. Based on increased competition, we anticipate that
market prices for wireless services generally will decline in the future.

Employees

   As of December 31, 2001, we had 313 employees, of which 157 were in sales
and marketing, 68 were in operations, 31 were in customer service and 57 were
in administration. We expect the number of employees to increase steadily as
our network expands and as the number of subscribers justifies the addition of
new personnel. None of our employees are represented by a labor union or
subject to a collective bargaining agreement.

Intellectual Property

   The Sprint diamond design logo is a service mark registered with the United
States Patent and Trademark Office. The service mark is owned by Sprint. We use
the Sprint(R) and Sprint PCS(R) brand names, the Sprint diamond design logo and
other service marks of Sprint in connection with marketing and providing
wireless services within our territory. The terms of the trademark and service
mark license agreements with Sprint and Sprint PCS provide for the use of the
Sprint(R) and Sprint PCS(R) brand names and Sprint service marks.

   Except in instances that are noncompetitive and other than in connection
with the national distribution agreements, Sprint PCS has agreed not to grant
to any other person a right or license to use the licensed marks in our
territory.


                                      14

<PAGE>

   The trademark license agreements contain numerous restrictions with respect
to the use and modification of any of the licensed marks. See "Sprint PCS
Agreements--The Trademark and Service Mark License Agreements" below.

Sprint PCS Agreements

   The transactions defining our relationship with Sprint PCS were completed in
a multi-phase closing process. Stage one was completed in December 1999, when
we executed an agreement with Sprint PCS to manage the subscribers in our
territory. Stage two was completed in January 2000 when we paid Sprint PCS a
fee of $32.1 million and began our operations, managing approximately 45,000
subscribers previously managed by Sprint PCS in our territory. Stage three was
completed in February 2000 when we occupied retail locations previously
operated by Sprint PCS. The final stage was completed in March 2000 when we
purchased from Sprint PCS its existing wireless infrastructure in our
territory, which included all network equipment and 170 operating cell sites
covering approximately 2.5 million residents for approximately $84.3 million.

   Our major agreements with Sprint PCS are:

  .  the management agreement;

  .  the services agreement; and

  .  two trademark and service mark license agreements with different Sprint
     entities.

   In addition, Sprint PCS entered into a consent and agreement with an
administrative agent for the senior lenders under our credit facilities that
modifies Sprint PCS's rights and remedies under our management agreement for
the benefit of these lenders.

   The following is a description of the material terms and provisions of our
affiliation agreements with Sprint PCS. Unless otherwise stated, any reference
in this report to any agreement shall mean such agreement and all schedules,
exhibits and attachments thereto as amended, supplemented or otherwise modified
and in effect as of the date hereof. We have filed our Sprint PCS agreements
and the consent and agreement as exhibits to our filings with the SEC. We urge
you to carefully review our Sprint PCS agreements and the consent and
agreement. The actual party to our agreements with Sprint PCS is our operating
subsidiary Independent Wireless One Corporation.

   Under our affiliation agreements with Sprint PCS, we have the exclusive
right to provide wireless services under the Sprint(R)/ and Sprint PCS(R) brand
names in our territory. Sprint PCS owns the spectrum licenses and then controls
the network through its agreements with us. Our affiliation agreements with
Sprint PCS require us to interface with the Sprint PCS wireless network by
building our portion of the Sprint PCS network to operate on the personal
communications services frequencies licensed to Sprint PCS in the 1900 MHz
range. The management agreement has an initial term of 20 years and three
ten-year renewal options which would lengthen the contract to a total term of
50 years. The three ten-year renewal terms automatically occur unless we or
Sprint PCS provide the other with two years prior written notice to terminate
the agreements or unless we are in material default of our obligations under
the agreements.

  The Management Agreement

   Under our management agreement with Sprint PCS, we have agreed to:

  .  construct and manage a network in our territory in compliance with Sprint
     PCS's licenses and the terms of the management agreement;

  .  share with Sprint the costs associated with its relocation of interfering
     microwave sources in our territory;

  .  distribute Sprint PCS products and services;

  .  use Sprint PCS's and our own distribution channels in our territory;

                                      15

<PAGE>

  .  conduct advertising and promotion activities in our territory; and

  .  manage that portion of Sprint PCS's customer base assigned to our
     territory.

   Sprint PCS will supervise our personal communications services network
operations and has the right to unconditional access to our personal
communications services network.

    Exclusivity

   We are designated as the only person or entity that can manage or operate a
personal communications services network for Sprint PCS in our territory.
Sprint PCS is prohibited from owning, operating, building or managing another
wireless mobility communications network, as defined in the management
agreement, in our territory while our management agreement is in place. Sprint
PCS is permitted under our agreement to make national sales to companies in our
territory and, as required by the FCC, to permit resale of the Sprint PCS
products and services in our territory. If Sprint PCS decides to expand the
geographic size of our build-out, Sprint PCS must provide us with written
notice of the proposed expansion. We have the right to appeal this decision to
Sprint PCS's management if the proposed expansion:

  .  causes us to incur a cost exceeding 5% of the sum of our equity plus our
     outstanding long-term debt; or

  .  causes our long-term operating expenses to increase by more than 10% on a
     net present value basis.

   If Sprint PCS denies our appeal and we fail to confirm within 90 days that
we will comply with the proposed expansion, Sprint PCS has the termination
rights described below.

    Network Build-Out

   The management agreement specifies the terms of the Sprint PCS affiliation,
including the required network build-out plan. We have agreed to a minimum
build-out plan which includes specific coverage and deployment schedules for
the network planned within our service area as depicted in the table below. The
aggregate required coverage will result in network coverage of approximately
67% of the population in our territory of 6.2 million by the end of 2003. We
have agreed to operate our personal communications services network to provide
for a seamless hand-off of a call initiated in our territory to a neighboring
Sprint PCS network.

<TABLE>
<CAPTION>
                                                           Required Build-Out by Market by Sprint PCS
       ----------------------------------------------------------------------------------------------------------------------
         December    September    October     November       December     November     December       March         April
           2000        2001        2001         2001           2001         2002         2002         2003          2003
       ------------ ----------- ----------- ------------- -------------- ----------- ------------ ------------- -------------
<S>    <C>          <C>         <C>         <C>           <C>            <C>         <C>          <C>           <C>
Market Albany/      Utica, NY   Binghamton, Glens Falls,  Rockingham     Elimra, NY  Binghamton,  Albany-       Binghamton,
       Schenectady,   --Phase I NY, PA      NY            County, NH     PA          NY, PA       Schenectady,  NY, PA
       NY           Syracuse,     --Phase I Poughkeepsie, Stratford       --Phase II   --Phase II NY              --Phase III
       Orange       NY                      NY--Phase I   County, NH                 Burlington,    --Phase III
       County, NY                                         Burlington, VT             VT
         --Phase I                                          --Phase I                  --Phase II
                                                          Ithaca, NY                 Oneonta, --
                                                          Keene, NH                  NY--Phase I
                                                            --Phase I                Utica, NY
                                                          Lebanon, NH                  --Phase II
                                                          Manchester,                Plattsburgh,
                                                          NH                         NY
                                                            --Phase I                  --Phase II
                                                          Sullivan
                                                          County, NY
                                                          Pittsfield, MA
                                                            --Phase I
                                                          Plattsburgh,
                                                          NY --Phase I
                                                          Poughkeepsie,
                                                          NY--Taconic
                                                          State Parkway
                                                          Rutland, VT
                                                            --Phase I
                                                          Elmira, NY, PA
                                                          Syracuse, NY
                                                          Watertown, NY
</TABLE>
<TABLE>
<CAPTION>


           May            June
           2003           2003
       ------------- --------------
<S>    <C>           <C>
Market Manchester,   Burlington,
       NH            VT
         --Phase III   --Phase III
        Keene, NH
          --Phase III
        Orange
        County,NY
          --Phase III
        Pittsfield, MA
          --Phase III
        Poughkeepsie,
        NY
          --Phase III
        Rutland, VT
          --Phase III












</TABLE>


                                      16

<PAGE>

    Products and Services

   The management agreement identifies the products and services that we can
offer in our territory. These services include, but are not limited to, Sprint
PCS consumer and business products and services available as of the date of the
agreement, or as modified by Sprint PCS. We are also allowed to sell wireless
products and services that are not Sprint PCS products and services if those
additional products and services do not cause distribution channel conflicts
or, in Sprint PCS's sole determination, consumer confusion with Sprint PCS's
products and services. We may cross-sell services such as long distance
service, internet access, handsets, and prepaid phone cards with Sprint, Sprint
PCS and other Sprint PCS affiliates. If we decide to use third parties to
provide these services, we must give Sprint PCS an opportunity to provide the
services on the same terms and conditions. We can also offer wireless local
loop services specifically designed for the competitive local exchange market
in all of our markets.

   We will participate in the Sprint PCS sales programs for national sales to
customers, and will pay the expenses and receive the compensation from national
accounts located in our territory. As a participant in these sales programs,
our responsibilities include assisting Sprint PCS's national sales team in our
territory in connection with implementing national sales programs, negotiating
customer contracts and managing customer accounts. We must use Sprint's long
distance service for calls made from within designated portions of our
territory to areas outside those designated portions and to connect our network
to the national platforms Sprint PCS uses to provide some of its services under
our services agreement. We must pay Sprint PCS the same price for this service
that Sprint PCS pays to Sprint, along with an additional administrative fee.

   Sprint has a right of last offer to provide backhaul and transport services.

    Service Pricing, Roaming, Travel and Fees

   We must offer Sprint PCS subscriber pricing plans designated for regional or
national offerings, including Sprint PCS's "Free and Clear" plans. We are
permitted to establish our own local pricing plans for Sprint PCS products and
services offered only in our territory, subject to Sprint PCS's approval. We
are entitled to receive a weekly fee from Sprint PCS equal to 92% of "collected
revenues" for all obligations under the management agreement, adjusted by the
cost of customer services provided by Sprint PCS. "Collected revenues" include
revenue from Sprint PCS subscribers based in our territory and inbound
non-Sprint PCS roaming. Sprint PCS will receive 8% of the collected revenues.
Collected revenues do not include outbound non-Sprint PCS roaming revenue,
inbound and outbound Sprint PCS travel fees, proceeds from the sales of
handsets and accessories, proceeds from sales not in the ordinary course of
business, and amounts collected with respect to taxes. Except in the case of
taxes, we will retain 100% of these revenues. Many Sprint PCS subscribers
purchase bundled pricing plans that allow Sprint PCS traveling anywhere on the
Sprint PCS network without incremental Sprint PCS travel charges. We will earn
revenue from Sprint PCS based on a per minute rate established by Sprint PCS
when Sprint PCS's or its affiliates' subscribers travel on our portion of the
Sprint PCS network. Similarly, we will pay the same rate for every minute our
subscribers in our territory use the Sprint PCS network outside our territory.
During the period from January 1, 2000 to December 31, 2002, we are not
required to pay any amounts by which the travel revenues generated by customers
from within our territory using the Sprint PCS network outside our territory
exceed the travel revenues generated by Sprint PCS customers from outside our
territory using the Sprint PCS network within our territory. The analog roaming
rate onto a non-Sprint PCS provider's network is set under Sprint PCS's
third-party roaming agreements.

    Advertising and Promotions

   Sprint PCS is responsible for all national advertising and promotion of the
Sprint PCS products and services. We are responsible for advertising and
promotion in our territory. Sprint PCS's service area includes the urban
markets around our territory. Sprint PCS will pay for advertising in these
markets. Given the proximity of those markets to our territory, we expect
considerable spill-over from Sprint PCS's advertising in surrounding urban
markets.

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    Program Requirements

   We are required to comply with Sprint PCS's program requirements for
technical standards, travel, roaming and interservice area calls, customer
service standards, national and regional distribution and national accounts
programs. Some of these technical standards relate to network up-time, dropped
calls, blocked call attempts and call origination and termination failures. We
are required to build a network that meets minimum transport requirements
established by Sprint PCS for links between our cell sites and switches and
between our switches and the public telephone system. We must meet
substantially high network up-time percentages. Also, we must meet a minimum
dropped call rate percentage and a minimum ratio of blocked call attempts to
total call attempts as well as a minimum ratio of call origination to
termination failures. Sprint PCS can adjust the program requirements at any
time so long as it gives us at least 30 days prior notice. Sprint PCS program
requirements with respect to such standards as dropped calls, blocked calls,
origination failures, interference and switch maintenance applicable to us are
not more stringent than the requirements applicable to Sprint PCS as to the
portions of the network it owns and operates and to other Sprint PCS affiliates
with respect to the portion of the Sprint PCS network which they own and
operate. We do not believe that the program requirements applicable to us under
the Sprint PCS agreements are more restrictive than what Sprint PCS experiences
or that experienced by the wireless industry in general. Moreover, we do not
believe that standards for customer service, should we elect not to acquire
such services from Sprint PCS, would be substantially restrictive nor that
participation in the national accounts program is burdensome. We have the right
to appeal to Sprint PCS's management adjustments which could cause an
unreasonable increase in cost to us if the adjustment:

  .  causes us to incur a cost exceeding 5% of the sum of our equity plus our
     outstanding long-term debt, or

  .  causes our long-term operating expenses to increase by more than 10% on a
     net present value basis.

   If Sprint PCS denies our appeal and we fail to confirm within 90 days that
we will comply with the adjustment, Sprint PCS has the termination rights
described below.

   We have elected to use Sprint PCS's established support services which
include customer service. Under our services agreement with Sprint PCS, Sprint
PCS may terminate, upon nine months' advance written notice, customer service.
We would then be required to establish and operate our own customer service
center to, among other things, handle customer inquiries 24 hours a day, 365
days a year, and activate handsets and accounts and handle billing and
collections within stringent time guidelines established by Sprint PCS, which
may range from 24 to 72 hours.

    Non-Competition

   We may not offer Sprint PCS products and services outside our territory
without the prior written approval of Sprint PCS. Within our territory, we may
offer, market or promote telecommunications products and services only under
the Sprint PCS brands, our own brand, brands of related parties of ours or
other products and services approved under the management agreement, except
that no brand of a significant competitor of Sprint PCS or its related parties
may be used for those products and services. To the extent we have or obtain
licenses to provide personal communications services outside our territory, we
may not use the spectrum to offer Sprint PCS products and services without
prior written consent from Sprint PCS. Additionally, if customers from our
territory travel to other geographic areas, we must route those customers'
incoming and outgoing calls according to Sprint PCS's roaming and inter-service
area requirements, without regard to any wireless networks that we or our
affiliates operate.

    Inability to Use Non-Sprint PCS Brand

   We may not market, promote, advertise, distribute, lease or sell any of the
Sprint PCS products and services on a non-branded, "private label" basis or
under any brand, trademark or trade name other than the Sprint PCS brand,
except for sales to resellers or as otherwise permitted under the trademark and
service mark license agreements.

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    Change of Control

   Sprint PCS must consent to a change of control of our company, but this
consent cannot be unreasonably withheld.

    Assignment

   We cannot assign the Sprint PCS agreements to any person without the prior
consent of Sprint PCS, except that we can assign the agreements to any
affiliate of ours that is not a significant competitor of Sprint PCS in the
telecommunications business.

    Rights of First Refusal

   Sprint PCS has rights of first refusal to buy our assets, without further
stockholder approval, upon a proposed sale of all or substantially all of our
assets that are used in connection with the operation or management of the
Sprint PCS network in our territory.

    Termination of Management Agreement

   The management agreement can be terminated as a result of:

  .  termination of Sprint PCS's personal communications services licenses;

  .  we or our related parties fail to make any payment due under the Sprint
     PCS agreements and such failure is not cured;

  .  an uncured breach under the management agreement;

  .  bankruptcy of a party to the management agreement;

  .  the management agreement not complying with any applicable law in any
     material respect;

  .  the termination of either of the trademark and service mark license
     agreements; or

  .  our failure to obtain financing necessary for the build-out of our network
     and for our working capital needs.

   However, Sprint PCS's rights of termination have been modified by the
consent and agreement and are discussed more particularly under "Consent and
Agreement for the Benefit of Lenders Under Our Credit Facilities" below The
termination or non-renewal of the management agreement triggers certain of our
rights and those of Sprint PCS.

    Transfer of Sprint PCS Network

   Sprint PCS can sell, transfer or assign its wireless personal communications
services network to a third party if the third party agrees to be bound by the
terms of the Sprint PCS agreements.

    Rights on Termination

   If we have the right to terminate the management agreement because of an
event of termination caused by Sprint PCS, generally we may:

  .  require Sprint PCS to purchase all of our operating assets used in
     connection with our network for an amount equal to 80% of our entire
     business value (as defined in the management agreement and described below
     in "--Rights on Non-Renewal");

  .  if Sprint PCS is the licensee for 20 MHz or more of the spectrum on the
     date of the management agreement, require Sprint PCS to assign to us,
     subject to governmental approval, up to 10 MHz of licensed spectrum for an
     amount equal to the greater of:

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<PAGE>

    .  the original cost to Sprint PCS of the license plus any microwave
       relocation costs paid by Sprint PCS; or

    .  10% of our entire business value; or

  .  sue Sprint PCS for damages or submit the matter to arbitration and thereby
     not terminate the management agreement.

   If Sprint PCS has the right to terminate the management agreement because of
an event of termination caused by us, generally Sprint PCS may:

  .  require us, without further stockholder approval, to sell our operating
     assets to Sprint PCS for an amount equal to 72% of our entire business
     value;

  .  require us to purchase, subject to governmental approval, the licensed
     spectrum for an amount equal to the greater of:

    .  the original cost to Sprint PCS of the license plus any microwave
       relocation costs paid by Sprint; or

    .  10% of our entire business value;

  .  take any action Sprint PCS deems necessary to cure our breach of the
     management agreement, including assuming responsibility for, and
     operating, our network; or

  .  sue us for damages or submit the matter to arbitration and thereby not
     terminate the management agreement.

    Rights on Non-Renewal

   If Sprint PCS gives us timely notice that it does not intend to renew the
management agreement, we may:

  .  require Sprint PCS to purchase all of our operating assets used in
     connection with our network for an amount equal to 80% of our entire
     business value; or

  .  if Sprint PCS is the licensee for 20 MHz or more of the spectrum on the
     date of the management agreement, require Sprint PCS to assign to us,
     subject to governmental approval, up to 10 MHz of licensed spectrum for an
     amount equal to the greater of:

    .  the original cost to Sprint PCS of the license plus any microwave
       relocation costs paid by Sprint PCS; or

    .  10% of our entire business value.

   If we give Sprint PCS timely notice of non-renewal of the management
agreement, or we and Sprint PCS both give notice of non-renewal, or the
management agreement is terminated for failure to comply with legal
requirements or regulatory considerations or expires by its terms if no notice
is provided, Sprint PCS may:

  .  purchase all of our operating assets, without further stockholder
     approval, for an amount equal to 80% of our entire business value; or

  .  require us to purchase, subject to governmental approval, the licensed
     spectrum in our territory for an amount equal to the greater of:

    .  the original cost to Sprint PCS of the license plus any microwave
       relocation costs paid by Sprint PCS; or

    .  10% of our entire business value.

   If the entire business value is to be determined, we and Sprint PCS will
each select one independent appraiser and the two appraisers will select a
third appraiser. Each appraiser must be an expert in valuing

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wireless telecommunications companies. The three appraisers will determine the
entire business value on a going concern basis using the following guidelines:

  .  the entire business value will be based on the price a willing buyer would
     pay a willing seller for the entire on-going business;

  .  the appraisers will use then-current customary means of valuing a wireless
     telecommunications business;

  .  the appraisers will value the business as it is conducted under the Sprint
     and Sprint PCS brands and the Sprint PCS agreements;

  .  where Sprint PCS may, or is required to, purchase our operating assets,
     the appraisers will value the business as if we own the spectrum and
     frequencies that we actually use. Where we may, or are required to,
     purchase a portion of Sprint PCS's licensed spectrum, the business will be
     valued as if we already own that portion of the spectrum and frequencies
     that we are going to purchase; and

  .  the valuation will not include any value for the business not directly
     related to the Sprint PCS products and services.

   The rights and remedies of Sprint PCS outlined in the management agreement
resulting from an event of termination of the management agreement have been
materially amended by the consent and agreement as discussed below.

    Insurance

   We are required to obtain and maintain with financially reputable insurers
who are licensed to do business in all jurisdictions where any work is
performed under the management agreement and who are reasonably acceptable to
Sprint PCS, workers' compensation insurance, commercial general liability
insurance, business automobile insurance, umbrella excess liability insurance
and "all risk" property insurance.

    Indemnification

   We have agreed to indemnify Sprint PCS and its directors, employees and
agents and related parties of Sprint PCS and their directors, managers,
officers, employees, agents and representatives against any and all claims
against any of the foregoing arising from our violation of any law, a breach by
us of any representation, warranty or covenant contained in the management
agreement or any other agreement between us and Sprint PCS, our ownership of
the operating assets or the actions or the failure to act of anyone employed or
hired by us in the performance of any work under the management agreement,
except we will not indemnify Sprint PCS for any claims arising solely from the
negligence or willful misconduct of Sprint PCS. Sprint PCS has agreed to
indemnify us and our directors, managers, officers, employees, agents and
representatives against all claims against any of the foregoing arising from
Sprint PCS's violation of any law and from Sprint PCS's breach of any
representation, warranty or covenant contained in the management agreement or
any other agreement between Sprint PCS and us, except Sprint PCS will not
indemnify us for any claims arising solely from our negligence or willful
misconduct.

  The Services Agreement

   The services agreement outlines various fees and back office functions
provided by Sprint PCS and available to us at a per-subscriber rate. Some of
the available services and fees include:

  .  network monitoring through Sprint PCS's network operating control center;

  .  billing (including the administration of pre-paid services);

  .  customer care;

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  .  activation;

  .  credit checks;

  .  handset logistics;

  .  remote switching;

  .  home locator record;

  .  voice mail;

  .  directory assistance;

  .  operator services;

  .  long distance;

  .  roaming fees;

  .  roaming clearinghouse fees;

  .  interconnect fees; and

  .  inter service area fees.

   The services agreement allows us to discontinue our use of a particular
service upon three months notice to Sprint PCS. Sprint PCS may decide to
discontinue providing a service upon nine months notice to us. Sprint PCS has
the right to change the fee it charges for these services, but Sprint PCS has
agreed to provide to us a discount to the 1999 prices of these services through
2002.

   Sprint PCS offers three packages of available services. Each package
includes services which must be purchased from Sprint PCS and services which
may be purchased from a vendor or provided in-house. Our package includes
services such as billing, activation and customer care which must all be
purchased from Sprint PCS. We have chosen to engage Sprint PCS to perform these
services but may develop an independent capability over time. Sprint PCS may
also contract with third parties to provide expertise and services identical or
similar to those to be made available or provided to us.

   We have agreed not to use the services performed by Sprint PCS in connection
with any other business or outside our territory. We have agreed with Sprint
PCS to indemnify each other as well as officers, directors, employees and other
related parties and their officers, directors and employees for violations of
law or the services agreement except for any liabilities resulting from the
negligence or willful misconduct of the person seeking to be indemnified or its
representatives. The services agreement also provides that no party to the
agreement will be liable to the other party for special, indirect, incidental,
exemplary, consequential or punitive damages, or loss of profits arising from
the relationship of the parties or the conduct of business under, or breach of,
the services agreement except as may otherwise be required by the
indemnification provisions. The services agreement automatically terminates
upon the management agreement's termination, and neither party may terminate
the services agreement for any other reason.

  The Trademark and Service Mark License Agreements

   We have non-transferable licenses to use, at no additional cost to us, the
Sprint(R)/ and Sprint PCS(R) brand names and "diamond" symbol, and several
other U.S. trademarks and service marks of Sprint and Sprint PCS such as "The
Clear Alternative to Cellular" and "Clear Across the Nation." Our use of the
licensed marks is subject to our adherence to quality standards determined by
Sprint and Sprint PCS and use of the licensed marks in a manner which would not
reflect adversely on the image of quality symbolized by the licensed marks. We
have agreed to promptly notify Sprint and Sprint PCS of any infringement of any
of the licensed marks within our territory of which we become aware and to
provide assistance to Sprint and Sprint PCS in connection with Sprint's and
Sprint PCS's enforcement of their rights. We have agreed with Sprint and Sprint
PCS to indemnify

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<PAGE>

each other for losses incurred in connection with a material breach of the
trademark license agreements. In addition, we have agreed to indemnify Sprint
and Sprint PCS from any loss suffered by reason of our use of the licensed
marks or marketing, promotion, advertisement, distribution, lease or sale of
any Sprint or Sprint PCS products and services other than losses arising solely
out of our use of the licensed marks in compliance with certain guidelines.
Sprint and Sprint PCS can terminate the trademark and service mark license
agreements if we file for bankruptcy, materially breach the agreement or our
management agreement is terminated. We can terminate the trademark and service
mark license agreements upon Sprint's or Sprint PCS's abandonment of the
licensed marks or if Sprint or Sprint PCS files for bankruptcy or the
management agreement is terminated. Sprint and Sprint PCS can assign their
interests in the licensed marks to a third party if that third party agrees to
be bound by the terms of the trademark and service mark license agreements.

  Consent and Agreement for the Benefit of Lenders Under Our Credit Facilities

   Sprint PCS entered into a consent and agreement with an administrative agent
for the senior lenders under our credit facilities that we acknowledged. This
agreement modifies Sprint PCS's rights and remedies under our management
agreement for the benefit of our lenders.

   General

   The consent and agreement generally provides, among other matters, for the
following:

  .  Sprint PCS's consent to the pledge of substantially all of our assets to
     the administrative agent, including our rights under the Sprint PCS
     affiliation agreements, as collateral for our credit facilities;

  .  Sprint PCS and the administrative agent will provide each other with
     notices of default by us under the Sprint PCS management agreement and
     senior financing;

  .  at the administrative agent's request, Sprint PCS will redirect any
     payments due to us under the management agreement to the administrative
     agent during the continuation of our default under our credit facilities;

  .  Sprint PCS or the administrative agent will have certain rights to appoint
     interim replacements to operate our portion of the network under our
     Sprint PCS affiliation agreements after an acceleration of our credit
     facilities or an event of termination under our Sprint PCS affiliation
     agreements;

  .  upon the acceleration of our obligations under our credit facilities, the
     administrative agent or Sprint PCS will have rights to sell our assets or
     the ownership interests of our operating subsidiaries to any party, and to
     assign our rights under the Sprint PCS affiliation agreements to a
     qualified purchaser, which must not be a major competitor of Sprint PCS or
     Sprint;

  .  Sprint PCS will not be able to terminate our Sprint PCS affiliation
     agreements until our credit facilities are satisfied, unless our
     subsidiaries or assets are sold or transferred to a non-qualifying party;
     this sale requires the approval of the administrative agent;

  .  Sprint PCS will maintain at least 10 MHz of personal communications
     services spectrum in all of our markets until our credit facilities are
     satisfied or our operating assets, including in certain cases spectrum,
     are sold if we default under our credit facilities; and

  .  in the event that Sprint PCS enters into a consent and agreement with the
     secured lender of another affiliate on terms and conditions different from
     those provided to the administrative agent, under certain conditions and
     upon notice to the administrative agent and at the administrative agent's
     request, Sprint PCS will amend our consent and agreement to adopt the
     different terms and conditions in whole.

    Sprint PCS's Right to Purchase Operating Assets or Ownership Interests in
   Our Operating Subsidiaries upon Acceleration

   Subject to the requirements of applicable law and following an acceleration
by the administrative agent of our obligations under our credit facilities, the
consent and agreement permits Sprint PCS to purchase our operating assets or
the interests of our operating subsidiaries on the following general terms:


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<PAGE>

  .  Sprint PCS elects to make such a purchase within a specified period; and

  .  the purchase price is the greater of an amount equal to 72% of our entire
     business value or the amount outstanding under our credit facilities.

   If Sprint PCS gives notice of its intention to exercise its purchase right,
then the administrative agent may not foreclose on its security interest in our
assets for a specified period or until Sprint PCS rescinds its intention to
purchase. If we receive an acceptable written offer for our operating assets or
the ownership interests of our operating subsidiaries from another prospective
purchaser, Sprint PCS has the right to make the purchase on terms at least as
favorable to us. Sprint PCS must agree to purchase the operating assets or the
ownership interests of our operating subsidiaries within 14 business days of
its receipt of the offer on acceptable conditions and in a prescribed amount of
time.

    Sale of Operating Assets or Ownership Interests of Our Operating
  Subsidiaries to Third Parties

   If Sprint PCS does not purchase our operating assets or the ownership
interests of our operating subsidiaries after an acceleration of the
obligations under our credit facilities, then the administrative agent may sell
the operating assets or ownership interests. Subject to the requirements of
applicable law, including the law relating to foreclosures of security
interests, the administrative agent has two options:

  .  to sell the assets or ownership interests of our operating subsidiaries,
     including our rights under the Sprint PCS affiliation agreements, to a
     permitted successor; or

  .  to sell the assets or ownership interests to any third party, subject to
     specified conditions and limitations.

Regulation of Wireless Telecommunications Industry

   The following summary of regulatory developments and litigation does not
purport to describe all present and proposed federal, state and local
regulation and litigation affecting the telecommunications industry. Many
federal and state regulations are currently the subject of judicial
proceedings, legislative hearings, administrative proposals and waiver
requests, all of which could change, in varying degrees, the manner in which
this industry operates. Neither the outcome of these proceedings nor their
impact upon the telecommunications industry, spectrum licensees or service
providers can be predicted at this time.

  Federal Regulation

   The FCC has a substantial impact upon entities that manage and/or provide
personal communications services, fixed wireless services and other
telecommunications services because the FCC licenses spectrum and regulates the
technical characteristics of networks, the provision of service and the
arrangements for interconnection among telecommunications carriers in the
United States.

   The FCC has promulgated, or is in the process of promulgating, rules,
regulations and policies to, among other things:

  .  grant, revoke or deny licenses for PCS frequencies;

  .  grant or deny PCS license renewals;

  .  grant or deny consent for assignments and/or transfers of control of PCS
     licenses;

  .  regulate foreign investment in common carrier radio licenses;

  .  regulate the technical standards of PCS networks;

  .  govern the interconnection of PCS networks with other wireless and
     landline service providers;

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  .  establish access charges and universal service funding provisions;

  .  impose fines and forfeitures for violations of the Communications Act of
     1934, as amended, and FCC's rules; and

  .  impose other obligations that it determines to be in the public interest.

   Spectrum Aggregation Rules

   The FCC recently eased its limitations on the amount of spectrum that a
licensee in the cellular, personal communications services or specialized
mobile radio, or SMR, services may hold in overlapping service areas.
Specifically, the FCC raised its commercial mobile radio service, or CMRS,
spectrum aggregation limit in metropolitan statistical areas from 45 MHz to 55
MHz. The limit remains 55 MHz in rural service areas. On January 1, 2003, the
spectrum cap will be eliminated in favor of a case-by-case review of spectrum
transactions. The FCC also eliminated its cellular cross-interest rule as it
applies to ownership interests in cellular carriers in the metropolitan
statistical areas, but retained it for rural service areas, subject to request
for waivers to be considered on a case-by-case basis.

   Transfers and Assignments of Wireless Personal Communications Services
Licenses

   The FCC must give prior approval to the assignment or transfer of ownership
or control of a personal communications services license. With the exception of
transactions deemed pro forma by the FCC, which require post-consummation
notification, we and our stockholders will receive advance notice of
transactions affecting control of Sprint PCS or the assignment or transfer of
control of any personal communications services licenses held by Sprint PCS.
Interests that do not affect control of an entity that holds a personal
communications services license generally may be bought or sold without prior
FCC approval. The Communications Act and FCC rules impose limitations on
foreign investment in or ownership of common carrier radio licenses, including
personal communications services licenses.

   Conditions of Wireless Personal Communications Services Licenses

   Personal communications services licenses are granted for ten-year terms and
conditioned upon timely compliance with the FCC's build-out requirements and
other service rules. Pursuant to the FCC's build-out requirements, all 30 MHz
broadband personal communications services licensees must construct facilities
that offer coverage to one-third of the population of their license area within
five years and to two-thirds of the population within ten years. All 10 MHz and
15 MHz broadband personal communications services licensees must construct
facilities that offer coverage to at least one-quarter of the population of
their license area within five years or make a showing of "substantial service"
within that five-year period. FCC rules provide that a license will be
forfeited if the build-out requirements are not satisfied.

   The FCC also requires licensees to maintain both legal and actual control
over their licenses. Our affiliation agreements with Sprint PCS reflect a
management agreement that the parties believe meets the FCC requirements for
licensee control of licensed spectrum. If the FCC were to determine that our
affiliation agreements with Sprint PCS need to be modified to increase the
level of licensee control, we have agreed with Sprint PCS to use our best
efforts to modify the agreements as necessary to cause the agreements to comply
with applicable law and to preserve to the extent possible the economic
arrangements set forth in the agreements. If the agreements cannot be modified,
the agreements may be terminated pursuant to their terms. In addition to
modifying or revoking the licenses, the FCC could impose monetary penalties on
us.

   Personal communications services licensees must also comply with rules
governing the relocation of fixed microwave service licensees previously
licensed in the personal communications services spectrum band to alternate
spectrum. For a period of time (potentially up to ten years after the grant of
a license and subject to extension), personal communications services licensees
must share spectrum with existing fixed microwave service licensees within
their geographic markets. To secure a sufficient amount of unencumbered
spectrum to

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<PAGE>

offer our personal communications services efficiently, we may need to
negotiate agreements to relocate many of these existing licensees and may need
to pay for part or all of the relocation costs of these existing licensees.
Delay in the relocation of these licensees could adversely affect our ability
to commence timely commercial operation of our personal communications services.

   The FCC microwave relocation rules include a transition plan for
negotiations and a cost sharing plan to allocate the cost of relocating a
microwave incumbent among all personal communications services operators
benefiting from the relocation. For the licenses our network uses, this
transition plan allows most microwave licensees to operate in the personal
communications services spectrum for a two-year voluntary negotiation period
and an additional one-year mandatory negotiation period. For microwave
licensees providing public safety services, the voluntary negotiation period is
three years, with a two-year mandatory negotiation period. Parties unable to
reach agreement within those time periods may refer the matter to the FCC for
resolution, but the existing microwave user is permitted to continue its
operations until final FCC resolution of the matter. The transition and cost
sharing plans expire in April 2005, at which time remaining fixed microwave
service incumbents in the personal communications services spectrum will be
responsible for their costs to relocate to alternate spectrum locations. We
believe that we are in compliance with applicable spectrum relocation
requirements enacted by the FCC.

   Personal Communications Services License Renewal

   Personal communications services licensees can renew their licenses for
additional ten-year terms. Renewal applications are not subject to re-auction.
However, under the FCC's rules, third parties may oppose renewal applications
and/or file competing applications. If one or more competing applications are
filed, a renewal application will be subject to a comparative renewal hearing.
The FCC's rules afford personal communications services renewal applicants a
preference referred to as a "renewal expectancy." The renewal expectancy is the
most important factor in a comparative renewal hearing and is applicable if the
renewal applicant has:

  .  provided "substantial service" during its license term; and

  .  substantially complied with all applicable laws and FCC rules and policies.

   The FCC's rules define "substantial service" in this context as service that
is sound, favorable and substantially above the level of mediocre service that
might minimally warrant renewal.

   Interconnection

   The FCC has the authority to order interconnection between CMRS providers,
including personal communications services providers, and any other common
carrier. The FCC has ordered local phone companies and CMRS providers to
provide mutual compensation for the termination of traffic originating on each
other's network. The FCC has denied requests for mandatory interconnection
between resellers' switches and CMRS providers' networks and declined to impose
general interconnection obligations between such networks. We will negotiate
interconnection agreements for the Sprint PCS network in our market area with
Verizon and several smaller local telephone companies.

   Interconnection agreements are negotiated on a statewide basis. If an
agreement cannot be reached, parties to interconnection negotiations can submit
outstanding disputes to state authorities for arbitration. Agreements are
subject to state approval and compliance with the Telecommunications Act of
1996 and implementing rules of the FCC, some of which are subject to pending
regulatory proceedings or court review. The FCC rules, as well as the state
arbitration proceedings, directly affect the nature and cost of the facilities
necessary for interconnection of the Sprint PCS systems with local, national
and international telecommunications networks. These agreements determine the
nature and amount of revenues we and Sprint PCS can receive for terminating
calls originating on the networks of local exchange and other
telecommunications carriers, as well as the charges we must pay to other
telecommunications carriers for terminating our traffic.

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  Other FCC Requirements

   Resale Requirements

   An FCC rule presently prohibits broadband personal communications services
providers from unreasonably restricting resale of their services. This
restriction does not extend to the sale of equipment such as handsets, whether
sold alone or in bundled packages. This rule expires in November 2002, although
personal communications services providers will still be subject to the
Communications Act's prohibition against unjust or unreasonable discrimination
in charges or practices. The expiration of the resale rule may affect the
number of resellers competing with us and with Sprint PCS in various markets.

   Roaming

   The FCC's rules currently require licensees in broadband personal
communications services, cellular and most specialized mobile radio services to
provide manual roaming service to any subscriber of another service provider
whose handset is capable of accessing their systems. The FCC is presently
considering (1) whether the manual roaming service obligation should be
eliminated and (2) whether the carriers should be required to provide automatic
roaming. With automatic roaming, a customer's call can be processed and
completed without interruption, whereas with manual roaming the serving carrier
will not complete a call unless the customer provides call billing information.
Automatic roaming presently is available only where the serving carrier has a
roaming agreement with the customer's home carrier.

   Local Number Portability

   FCC rules require that local exchange carriers and most CMRS providers
enable their customers to retain their telephone number in the event they
choose to switch service providers. This capability is referred to as service
provider local number portability. The FCC previously granted CMRS providers an
extension until November 2002 to provide full number portability in top
metropolitan markets. The FCC currently requires most CMRS providers to be able
to deliver calls from their networks to ported numbers anywhere in the country,
and to contribute to the Local Number Portability Fund. Implementation of full
number portability will require personal communications services providers like
us and Sprint PCS to purchase more expensive switches and switch upgrades.
However, it will also enable existing cellular customers to change to personal
communications services without losing their existing wireless telephone
numbers, which should make it easier for personal communications services
providers to market their services to existing cellular users. The FCC is
presently considering a request for an additional extension of time for CMRS
carriers to implement local number portability.

   Radio Frequency Emissions

   The FCC requires that aggregate radio wave emissions from every site
location meet certain standards. Although we believe that our existing networks
meet these standards, a site audit may reveal the need to reduce or modify
emissions at one or more sites. This would increase our costs and have a
material adverse affect on our operations. In addition, these regulations will
also affect site selection for new network build-outs and may increase the
costs of building out our network. The increased costs and delays from these
regulations may have a material adverse affect on our operations.

   Communications Assistance for Law Enforcement Act

   The Communications Assistance for Law Enforcement Act, or CALEA, enacted in
1994, requires personal communications service and other telecommunications
service providers to meet capability and capacity requirements needed by
federal, state and local law enforcement to preserve their electronic
surveillance capabilities. Compliance may require changes to a carrier's
equipment, facilities and services. Personal communications services providers
were required to comply with an initial CALEA capability standard by

                                      27

<PAGE>

June 30, 2000, and implementation of several additional capabilities has been
suspended pending FCC action on a federal court decision requiring the FCC to
reconsider its original requirements. Many carriers, including Sprint PCS, have
filed petitions with the FCC for extension of the deadline for compliance. The
FCC has provided several extensions of the deadline and is considering
extension requests that have been coordinated with the Federal Bureau of
Investigation pursuant to a flexible deployment plan. If Sprint PCS's request
is not granted, Sprint PCS and we could be subject to fines if we are unable to
comply with a surveillance request from a law enforcement agency due to failure
to provide the required surveillance capabilities.

   Most personal communications services providers are ineligible for federal
reimbursement for the software and hardware upgrades necessary to comply with
the CALEA capability and capacity requirements. In sum, CALEA capability and
capacity requirements are likely to impose some additional switching and
network costs upon us, Sprint PCS and other wireless entities.

   Enhanced 911

   FCC rules require broadband personal communications services providers and
other CMRS providers to provide enhanced 911 capabilities allowing for
identification of the source and location of a mobile call placed to 911.
Certain requirements known as Phase I enhanced 911 services are currently in
effect. Phase II enhanced 911 service requirements require broadband personal
communications services providers and other CMRS providers to provide to
designated public safety answering points the location of all 911 calls by
longitude and latitude in conformance with accuracy standards set out in the
FCC's rules. To comply, licensees may elect either network-based location
technologies or mobile radio handset-based location technologies and thereafter
meet, according to a phased-in schedule, the Phase II enhanced 911 service
standards stated in the FCC's rules. Sprint PCS has been granted a waiver of
its Phase II requirements with a phase-in of compliance benchmarks through 2005.

   Access to Telecommunications for People with Disabilities

   The Communications Act requires that providers of telecommunications
services ensure that their services are accessible to and usable by people with
disabilities. In addition, voicemail and interactive voice services must be
accessible. The FCC's implementing rules and interpretations rely substantially
upon standards, definitions, and precedent from the Americans with Disabilities
Act. In general, a service provider must consider accessibility, usability and
compatibility throughout all stages of design, development and fabrication. In
addition, telecommunications carriers have an obligation not to install
features or functions in their networks that would be incompatible with the
FCC's standards for accessibility. Compliance with the statute and the rules
could require us to make material changes to our network or services at our own
expense.

   Partitioning and Disaggregation of Spectrum Licenses

   The FCC's rules allow broadband personal communications services licensees
to partition their market areas and/or to disaggregate their assigned spectrum
and to transfer partial market areas or spectrum assignments to eligible third
parties, subject to FCC approval.

   Equal Access

   Wireless providers are not required to provide equal access to common
carriers for toll services. However, the FCC is authorized to require unblocked
access to toll carriers subject to certain conditions.

   Removal of Regulatory Barriers

   The FCC has opened a proceeding to consider actions it could take to remove
unnecessary regulatory barriers to the development of more robust secondary
markets in radio spectrum usage rights. The proceeding includes an examination
of how leasing of spectrum usage rights by wireless licensees could be
accomplished in

                                      28

<PAGE>

a manner which promotes the efficient utilization of spectrum. The FCC
indicated that it will examine ways to facilitate spectrum leasing without
implicating transfer of control issues.

  New Spectrum Allocations

   The FCC has an open proceeding to explore the possible use of frequency
bands below 3 GHz to support the introduction of new advanced wireless
services, including third generation as well as future generations of wireless
systems. The FCC identified spectrum in five frequency bands below 3 GHz that
currently are not used for cellular, broadband personal communications services
or specialized mobile radio services but which could be made available for
advanced wireless services. Recently the FCC adopted an order that will allow
the use of one of these spectrum blocks (2500-2690 MHz) for mobile services.
Eventually additional spectrum identified for third generation and advanced
wireless services will be auctioned. Current and future licensees in this and
other spectrum bands may become competitors in the CMRS market.

   On January 26, 2001, the FCC completed a re-auction of broadband personal
communications services licenses in the C and F blocks that had been returned
voluntarily to the FCC by prior licensees or that had been deemed by the FCC to
have been forfeited by prior auction winners because of default on payment
obligations. NextWave Telecom, Inc., previously held most of the licenses in
that auction. On June 22, 2001, the U.S. Court of Appeals for the District of
Columbia Circuit ordered the FCC to reinstate NextWave's licenses. The U.S.
Supreme Court has agreed to review this case, with a decision expected sometime
in 2003. Whoever eventually obtains the spectrum in question may be our direct
competitor.

   It is not clear whether or how the allocation of additional spectrum for
third generation or advanced services, the auction of the 700 MHz band and the
resolution of ownership of the NextWave licenses will affect the value of
Sprint PCS's existing PCS licenses.

   The Communications Act of 1934, as amended, requires the FCC to auction
spectrum in the 698-806 MHz band that is reclaimed from broadcast television
licensees as a result of the transition from analog to digital television.
Permissible uses of the spectrum include commercial wireless services, and it
is possible that the eventual licensees of the spectrum will be our direct
competitors. A portion of the band was auctioned in 2001. The FCC has announced
that the remaining portion of the spectrum will be auctioned in June 2002.

   The FCC has adopted rules finding that commercial mobile radio services
include fixed services provided on an ancillary basis. In addition, personal
communications services licensees may provide fixed services on a co-primary
basis with mobile operations. Such services could include wireless local loop
and other fixed services that would directly compete with the wireless services
of local telephone companies.

  Other Federal Regulations

   We must bear the expense of compliance with FCC and Federal Aviation
Administration regulations regarding the siting, construction, lighting and
marking of transmitter towers and antennas. In addition, some of our cell site
locations may be subject to the National Environmental Policy Act and the
National Historical Preservation Act. The FCC is required to implement the
National Environmental Policy Act by requiring service providers to meet land
use and radio frequency standards. These statutes and FCC regulations may
prevent or delay the siting of cell towers in certain locations.

  State Regulation of Wireless Service

   Section 332 of the Communications Act preempts states from regulating the
rates and entry of CMRS providers. Section 332 does not prohibit a state from
regulating other terms and conditions of commercial mobile services, including
consumer billing information and practices, billing disputes and consumer
protection matters. However, states may petition the FCC to regulate rates of
CMRS providers, and the FCC may grant that petition,

                                      29

<PAGE>

if the state demonstrates that market conditions fail to protect subscribers
from unjust and unreasonable rates or rates that are unjustly or unreasonably
discriminatory, or that such conditions exist and commercial mobile radio
service is a replacement for landline telephone service in a substantial
portion of the state. To date, the FCC has granted no such petition. To the
extent we provide fixed wireless service that is outside the scope of
commercial mobile radio service, we may be subject to additional state
regulation.

   Wireless Facilities Siting

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

   Review of Universal Service Requirements

   The FCC and many states have established universal service programs to
ensure that affordable, quality telecommunications services are available to
all Americans. Sprint PCS is required to contribute to the federal universal
service program as well as existing state programs. The FCC has determined that
Sprint PCS's contribution to the federal universal service program is a
variable percentage of end-user telecommunications revenues, set at
approximately 6.8% for the first quarter of 2002. In May 2001, the FCC
initiated a proceeding to determine whether carrier contributions should be
based upon a per-customer line charge, rather than revenue-based. Although many
states are likely to adopt an assessment methodology similar to the FCC's, the
states are free to calculate telecommunications service provider contributions
in any manner they choose as long as the process is not inconsistent with the
FCC's rules. At the present time it is not possible to predict the extent of
the Sprint PCS total federal and state universal service assessments or its
ability to recover from the universal service fund. However, some wireless
entities have begun to obtain state commission designation as eligible
telecommunications carriers, enabling them to provide covered services and
receive federal and state universal service support, in competition with
wireline telephone companies.

  Litigation

   Class Action Lawsuits

   In August 2000, the FCC addressed the extent to which the Communications Act
limits the ability of plaintiffs in class action lawsuits against CMRS
providers to recover damages and obtain other remedies based on alleged
violations of state consumer protection statues and common law. It ruled that
the Communications Act does not generally preempt the award of damages by state
courts, but that whether a specific damage award is prohibited would depend on
the facts of a particular case. This ruling might promote the filing of
additional class actions against the industry and increase the potential for
damages awards by courts.

   RF Emissions

   Media reports have suggested that radio frequency emissions may be linked to
various health concerns, including cancer, and that they interfere with various
medical devices, including hearing aids and pacemakers. Wireless operators such
as us may be subject to potential litigation relating to these health concerns.
Class action lawsuits asserting products liability, breach of warranty, and
other claims have in fact been filed against many carriers. The complaints seek
damages for personal injuries and the costs of headsets for wireless phone
users as well as injunctive relief. Such litigation could have a material
adverse effect on our results of operations.

                                      30

<PAGE>

   Restrictions on Use

   Another source of potential litigation results from accidents, death and
bodily injuries allegedly attributable to use of wireless phones while driving
motor vehicles. Such litigation, in conjunction with newly adopted laws
prohibiting or restricting use of wireless phones while driving, could have a
material adverse effect on our results of operations. On June 28, 2001, New
York State enacted a law prohibiting the use of handheld wireless phones while
driving other than through the use of hands-free equipment. To date, a number
of communities in the United States have also passed restrictive local
ordinances. Such laws and ordinances could have a material adverse effect on
our results of operations by causing subscriber usage to decline.

   Emergency Services

   As discussed above, the FCC requires that service providers provide
information on the source and location of a 911 call to public safety answering
points. Personal communications services and other CMRS providers are subject
to a variety of accuracy standards and other implementation requirements.
Another source of potential litigation could stem from customers expectations
and use of their wireless telephones in emergencies.

Item 2.  Properties.

   We lease property in a number of locations, primarily for administrative
office space, our Sprint PCS stores, cell sites and switching centers. We have
leased approximately 38,000 square feet of administrative office space at 52
Corporate Circle, Albany, New York for our headquarters. This lease expires on
October 14, 2006. As of December 31, 2001, we paid for leased space on 553
sites, of which we shared approximately 47% with other wireless service
providers. We own property that houses switching equipment which supports our
markets. We believe our properties are currently adequate for our business
operations.

Item 3.  Legal Proceedings.

   We are not a party to any lawsuit or proceeding that is likely, in the
opinion of our management, to have a material adverse effect on our financial
position, results of operations or cash flows. We are a party to routine
filings and customary regulatory proceedings with the FCC relating to our
operations.

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

   During the quarter ended December 31, 2001, resolutions were adopted by the
holders of our common stock by written consent effective on December 12, 2001
to approve certain benefits to our management in compliance with the
requirements of Internal Revenue Code Section 280G(b)(5). Holders of shares
representing 35,264,633.9954 votes of the 37,591,098.6995 total votes
outstanding consented to the adoption of such resolutions.

                                      31

<PAGE>

                                    PART II

Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters.

Price Range of Common Stock

   Currently, there is no established public trading market for our common
stock. The number of stockholders of record for each outstanding class of our
common stock as of March 1, 2002 was as follows:

<TABLE>
                        <S>                   <C>
                        Class A Common Stock: 14 holders
                        Class B Common Stock: 57 holders
                        Class C Common Stock:  2 holders
                        Class D Common Stock: 11 holders
                        Class E Common Stock:  8 holders
</TABLE>

Dividends

   We have never paid cash dividends. Our ability to pay dividends to our
stockholders is, and if the merger is completed, our ability to pay dividends
to the US Unwired subsidiary which will be our direct parent will be, limited
by the terms of our senior secured credit facilities and the indenture
governing our senior notes.

Recent Sales of Unregistered Securities

   During the quarter ended December 31, 2001, we granted options to purchase
an aggregate of 336,764 shares of class B common stock to eight 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
Section 4(2) of the Securities Act as transactions not involving any public
offering. No underwriters were engaged in connection with any of the foregoing
transactions.

Use of Proceeds

   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 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 no warrants have been exercised, we have
received no proceeds from the offering.

Item 6.  Selected Financial Data.

   The selected financial data presented below separately reflects certain
information from our operations for the periods presented and certain
information from the operation of the Albany, Syracuse and Manchester markets
by Sprint PCS for the periods presented prior to our acquisition of those
markets.

IWO Holdings, Inc.

   The selected historical statement of operations and balance sheet data
presented below is derived from our audited consolidated financial statements
as of and for the period from our inception on August 22, 1997 through December
31, 1997, as of and for the year ended December 31, 1998, as of and for the
period January 1, 1999 through December 20, 1999, as of and for the period
December 20, 1999 through December 31, 1999 and as of and for the years ended
December 31, 2000 and 2001. On December 20, 1999, holders of 100% of the equity
in our subsidiary exchanged all of their equity ownership in the subsidiary for
shares of our common stock.

                                      32

<PAGE>

   The data set forth below should be read in conjunction with our consolidated
financial statements and accompanying notes included elsewhere in this report
and "Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations."
<TABLE>
<CAPTION>
                                    For the
                                  Period from
                                   Inception                  For the      For the
                                  (August 22,                  Period       Period
                                     1997)     For the Year  January 1,  December 20, For the Year For the Year
                                    through       Ended     1999 through 1999 through    Ended        Ended
                                  December 31, December 31, December 20, December 31, December 31, December 31,
                                      1997         1998         1999         1999         2000         2001
                                  ------------ ------------ ------------ ------------ ------------ ------------
                                                        (In thousands, except share data)
<S>                               <C>          <C>          <C>          <C>          <C>          <C>
Statement of Operations:
Net revenues(1)..................    $   --       $   --      $     --     $    --      $ 58,836     $110,145
                                     ------       ------      --------     -------      --------     --------
Operating expenses:
    Costs of services and
     equipment...................        --           --            --          --        48,818       88,924
    Selling and marketing........         6            8            36           5        19,497       31,749
    General and administrative...        --           51         5,478         839        20,031       25,335
    Depreciation and
     amortization................        --           --            --          --        12,538       19,102
    Financial advisory fees......        --           --         9,250          --            --           --
                                     ------       ------      --------     -------      --------     --------
       Total operating
        expenses.................         6           59        14,764         844       100,884      165,110
                                     ------       ------      --------     -------      --------     --------
Operating loss...................        (6)         (59)      (14,764)       (844)      (42,048)     (54,965)
Interest income..................        --           --            --         171         2,032        7,594
Interest expense.................        --           --           (78)         --        (3,532)     (24,478)
Amortization of debt issuance
 and offering costs..............        --           --            --         (84)       (2,843)      (3,323)
Other debt financing fees........        --           --            --        (319)       (3,689)      (1,769)
                                     ------       ------      --------     -------      --------     --------
Net loss.........................    $   (6)      $  (59)     $(14,842)    $(1,076)     $(50,080)    $(76,941)
                                     ======       ======      ========     =======      ========     ========
Basic and diluted net loss per
 share(2)........................    $(0.00)      $(0.01)     $  (2.36)    $ (0.04)     $  (1.63)    $  (2.05)
                                     ======       ======      ========     =======      ========     ========
</TABLE>

<TABLE>
<CAPTION>
                                                                    As of December 31,
                                                          --------------------------------------
                                                          1997  1998    1999     2000     2001
                                                          ---- ------ -------- -------- --------
                                                                      (In thousands)
<S>                                                       <C>  <C>    <C>      <C>      <C>
Balance Sheet Data:
Cash and cash equivalents................................ $ 31 $  319 $104,752 $ 36,313 $  3,394
Investment securities at amortized cost--held to maturity   --     --       --       --   73,680
Restricted cash, accrued interest and U.S. Treasury
  obligations at amortized cost--held to maturity........   --     --       --       --   61,719
Property and equipment, net(1)(3)........................   --     --      782  102,564  176,226
Total assets.............................................  185  1,386  129,058  232,699  412,927
Long-term debt...........................................   --     --       --   80,000  297,407
Redeemable common stock..................................   --     --      310      346       --
Total stockholders' equity(4)............................  119    435  122,591  123,494   55,793
</TABLE>
--------
(1) In 2000, we acquired from Sprint PCS certain assets, primarily network
    assets, and obtained the rights to manage 45,000 subscribers, for
    approximately $116,400,000 (see note 3 to the notes to our consolidated
    financial statements).
(2) Basic and diluted net loss per share of common stock is computed by
    dividing net loss by the weighted average number of common shares
    outstanding. We have assumed that the shares issued by us to the prior
    stockholders of our subsidiary on December 20, 1999 were outstanding for
    all of 1997, 1998 and for the period from January 1, 1999 through December
    20, 1999. No options or warrants were included in the calculation of
    diluted loss per share because their impact would have been anti-dilutive.

                                      33

<PAGE>

(3) Includes construction in progress of approximately $243,000, $33,009,000
    and $37,023,000 as of December 31, 1999, 2000 and 2001, respectively.
(4) In 1999, we sold common stock for approximately $135,000,000 (see note 1 to
    the notes to our consolidated financial statements).

Albany, Syracuse and Manchester Markets

   The selected financial data presented below under the caption "Statement of
Revenues and Expenses" for each of the three years in the period ended December
31, 1999, and under the caption "Statements of Assets Sold Data" as of
December 31, 1998 and 1999, are derived from the audited financial statements
of the Albany, Syracuse, and Manchester markets that we acquired.

   The data set forth below should be read in conjunction with the Albany,
Syracuse and Manchester markets' financial statements and accompanying notes
included elsewhere in this report and "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations."

<TABLE>
<CAPTION>
                                                     Year Ended December 31,
                                                     -----------------------
                                                      1997    1998    1999
                                                     ------- ------- -------
                                                         (In thousands)
   <S>                                               <C>     <C>     <C>
   Statement of Revenues and Expenses:
   Net revenues..................................... $ 2,113 $ 9,137 $23,401
   Operating expenses:
      Costs of services and equipment...............   8,381  12,201  20,203
      General and administrative....................   6,675   7,361   8,976
      Selling and marketing.........................   3,998   3,724   5,870
      Depreciation and amortization.................   6,841   9,491  10,205
                                                     ------- ------- -------
          Total operating expenses..................  25,895  32,777  45,254
                                                     ------- ------- -------
   Operating expenses in excess of net revenues..... $23,782 $23,640 $21,853
                                                     ======= ======= =======
</TABLE>

<TABLE>
<CAPTION>
                                                                As of December 31,
                                                                ------------------
                                                                  1998      1999
                                                                 -------  -------
                                                                  (In thousands)
 <S>                                               <C>          <C>       <C>
 Statement of Assets Sold Data:
 Total assets sold................................              $64,175  $62,886
                                                                =======  =======
</TABLE>

Item 7.  Management's Discussion and Analysis of Financial Condition and
Results of Operations.

   The following discussion and analysis should be read in conjunction with our
consolidated financial statements and the related notes included elsewhere in
this report. We emerged from being a development stage company as of January 5,
2000 and have significantly expanded, and will continue to expand, our
operations. Accordingly, we do not believe the discussion and analysis of our
historical financial condition and results of operations set forth below are
indicative nor should they be relied upon as an indicator of our future
performance.

Critical Accounting Policies and Estimates

   Our discussion and analysis of our financial condition and results of
operations are based upon our consolidated financial statements, which have
been prepared in accordance with accounting principles generally accepted in
the United States of America. The preparation of these financial statements
requires us to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenues and expenses, and related disclosure of
contingent assets and liabilities. On an on-going basis, we evaluate our
estimates, including those related to customer programs and incentives, product
returns, bad debts, inventories, investments, intangible assets, income taxes,
financing operations and contingencies. We base our estimates on historical
experience and

                                      34

<PAGE>

on various other assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent
from other sources. Actual results may differ from these estimates under
different assumptions or conditions.

   We believe the following critical accounting policies affect our more
significant judgments and estimates used in the preparation of our consolidated
financial statements. We record estimated reductions to revenue for customer
programs and incentive offerings including promotions and other customer
credits. If market conditions were to decline, we may take actions to increase
customer incentive offerings possibly resulting in an incremental reduction of
revenue at the time the incentive is offered. We maintain allowances for
doubtful accounts for estimated losses resulting from the inability of our
customers to make required payments. If the financial condition of our
customers were to deteriorate, resulting in an impairment of their ability to
make payments, additional allowances may be required. We write down our
inventory for estimated obsolescence or unmarketable inventory when
determinable. If actual market conditions are less favorable than those
projected by management, additional inventory write-downs may be required. We
will record an investment impairment charge if we believe an investment has
experienced a decline in value that is other than temporary. Future adverse
changes in market conditions or poor operating results of underlying
investments could result in losses or an inability to recover the carrying
value of the investments that may require an impairment charge in the future.
We record a full valuation allowance to reduce our deferred tax assets to the
amount that is more likely than not to be realized. While we have considered
prudent and feasible tax planning strategies in assessing the need for the
valuation allowance, in the event we were to determine that we would be able to
realize our deferred tax assets in the future in excess of its net recorded
amount, an adjustment to the deferred tax asset would increase income in the
period such determination was made.

Overview

   We provide digital wireless personal communications services, or PCS, and
related products to customers in the northeastern United States as part of
Sprint PCS's licenses to provide nationwide service. In February 1999, we,
through our operating subsidiary Independent Wireless One Corporation, entered
into a management agreement, a services agreement and trademark and service
mark license agreements with Sprint PCS to provide these services. In December
1999, we and Sprint PCS entered into an addendum to the management agreement.
Our agreements with Sprint PCS have a term of 20 years from December 1999 and
can be extended for an additional 30 years, in ten-year increments.

   We are responsible for building, owning and managing the portion of the
Sprint PCS network located in our territory. Our portion of the Sprint PCS
network is designed to offer a seamless connection with Sprint PCS's and its
affiliates' 100% digital wireless network licensed nationwide. We have the
exclusive right to provide 100% digital wireless services under the Sprint(R)
and Sprint PCS(R) brand names in our territory. We offer national plans
designed by Sprint PCS and may offer specialized local plans tailored to our
local market demographics. We market wireless products and services through a
number of distribution outlets in our territory, including major national
distributors, local sales agents and retailers, and our own Sprint PCS stores
and direct sales force. In addition, we purchase our network infrastructure and
subscriber equipment under Sprint PCS's vendor contracts that reflect its
volume discounts.

   Independent Wireless One, LLC was formed on August 22, 1997 by a consortium
of independent local telephone companies to become a provider of wireless
telecommunications and data services. In September 1998, its status was changed
to a C-corporation and its name was changed to Independent Wireless One
Corporation.

   In October 1999, IWO Holdings, Inc. was formed to hold an investment in
Independent Wireless One Corporation. In December 1999, all of the stockholders
of Independent Wireless One Corporation exchanged their equity ownership for an
aggregate of 6,300,000 shares of IWO Holdings's capital stock, while other
investors and management invested approximately $135.0 million for
approximately 79% of IWO Holdings's equity.

                                      35

<PAGE>

   Under an asset purchase agreement and other agreements between Sprint PCS
and Independent Wireless One Corporation, we purchased assets from Sprint PCS
for approximately $116.4 million and obtained the right to manage approximately
45,000 subscribers in our territory. The asset purchase agreement contained a
multi-phase closing process. In January 2000, we paid Sprint PCS approximately
$32.1 million and received from Sprint PCS certain furniture, fixtures and
equipment and the leasehold interest in our corporate offices. In addition, we
obtained the outstanding accounts receivable balance as of December 31, 1999
and the right to manage approximately 45,000 subscribers based within our
territory. In February 2000, Sprint PCS transferred to us the retail related
assets including furniture, fixtures and equipment and the leasehold interest
at three Sprint PCS retail stores. In March 2000, Sprint PCS transferred to us
certain of its network assets and its interest in various cell site and other
network related leases for approximately $84.3 million. We formed Independent
Wireless One Leased Realty Corporation in February 2000 to hold all of our
leasehold interests in our administrative office space, retail stores, cell
sites and switch facilities.

   In December 2000, we issued a total of $50.0 million of our class B, C, and
E common stock. The purchase price per share of the $50.0 million of our class
B, C, and E common stock was $7.00 per share.

   In addition, in December 2000, we amended our $240.0 million senior credit
facilities 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.

   In February 2001, we issued 160,000 units consisting of $1,000 principal
amount of 14% senior notes due 2011 and one warrant to purchase 12.50025 shares
of our class C common stock at an exercise price of $7.00 per share.

   On December 19, 2001, we entered into a definitive agreement and plan of
merger with US Unwired Inc., a Sprint PCS affiliate, under which we and an
indirect, wholly-owned subsidiary of US Unwired will merge in a tax-free
reorganization. The transaction will be accounted for as a purchase
transaction, with US Unwired as the accounting acquiror. At the effective time
of the merger, each issued and outstanding share of our outstanding common
stock will be converted into the right to receive approximately 1.0371 shares
of US Unwired common stock. If the merger is completed, we will be an indirect,
wholly-owned subsidiary of US Unwired, and the combined company will be called
US Unwired.

   In February 2002, we further amended our $240.0 million senior credit
facilities in connection with the proposed merger with US Unwired. The
amendment consisted of a modification to the change of control definition
contained in the senior credit facilities agreement. The amendment will become
effective upon consummation of the merger.

   We recognize 100% of our revenues from Sprint PCS subscribers based in our
territory, proceeds from the sale of handsets and accessories and fees from
Sprint PCS and its affiliates when their customers travel onto our portion of
the Sprint PCS network. Sprint PCS retains 8% of net collected service revenue,
excluding travel and roaming revenues, from Sprint PCS subscribers based in our
territory. We report the amount retained by Sprint PCS as an operating expense.

   As part of our agreements with Sprint PCS, we have the option to pay Sprint
PCS to provide us with back office services such as customer activation,
handset logistics, billing, customer service and network monitoring services.
We have elected to contract the performance of these services to Sprint PCS in
order to take advantage of Sprint PCS's economies of scale, focus more on
customer acquisition, network build-out and new market launches and lower our
initial capital requirements. The cost of these services is determined by
Sprint PCS and primarily calculated on a per-subscriber and per-transaction
basis. These costs are recorded as an operating expense. Our results of
operations may be adversely affected if Sprint PCS decides to unilaterally
change pricing plans and program requirements or decides not to continue, or to
change the cost of, back office services.

                                      36

<PAGE>

   We incur sales and marketing expenses that include local advertising
expenses, promotional costs, sales commissions and expenses related to our
distribution channels. We expect that our cost per new customer will be higher
in the initial years of operation and will decline as our sales and marketing
expenses are distributed over a greater area of operation and we acquire more
customers. Costs of handsets are also expected to decline. We benefit from the
use of the Sprint(R) and Sprint PCS(R) brand names, Sprint PCS national
advertising and other marketing programs. We must offer Sprint PCS subscriber
pricing plans designated for regional or national offerings, including Sprint
PCS's "Free and Clear" plans. We are permitted to establish our own local
pricing plans for Sprint PCS products and services offered only in our
territory, subject to Sprint PCS's approval. Our costs for handsets and
accessories will reflect Sprint PCS volume discounts. To increase our
subscriber base, we offer our handsets at a price less than our costs, a common
industry practice.

   In addition to the benefits and services provided through our agreements
with Sprint PCS, we utilize the services of third parties to build and support
the operations of our network. As a result of this outsourcing, we are
substantially dependent on Sprint PCS and the other third parties for the
build-out and operation of our network. If we fail to complete our network
build-out on schedule or meet Sprint PCS's program requirements, we would be in
breach of our management agreement with Sprint PCS which could result in
termination of the management agreement, except if such failure results
primarily from (1) any FCC order or any other injunction issued by any
governmental authority impeding our ability to complete our network build-out
or meet Sprint PCS's program requirements, (2) the failure of any governmental
authority to grant any consent or approval or any delay on the part of any
governmental authority in granting any consent or approval, (3) the failure of
any vendor to deliver any equipment or services in a timely manner, or (4) any
act of god, act of war or insurrection or other similar events not reasonably
within our control. If the management agreement is terminated, we will no
longer be able to offer Sprint PCS products and services and may be required to
sell our operating assets to Sprint PCS at 72% of our entire business value and
without further stockholder approval. Our entire business value includes the
value of our right to use the spectrum licenses in our markets, our business
operations and other assets.

   Along with Sprint PCS and its other affiliates, we plan to operate our
personal communications services network seamlessly with the Sprint PCS
network. This allows our customers to use these communications services and
features in any Sprint PCS service area throughout the United States without
incurring additional charges. Similarly, our personal communications services
network is available to customers traveling within our service areas. A
standard service fee as determined by Sprint PCS is exchanged by Sprint PCS and
its affiliates for these inbound and outbound travel services. Our outbound
travel expenses exceeded our inbound travel revenues by approximately $10.6
million in 2000 due to the limitations of our network coverage at that time.
During the year ended December 31, 2001, our inbound travel revenues exceeded
outbound travel expenses by approximately $2.3 million, primarily due to our
expanded network coverage. In accordance with our agreement with Sprint PCS, we
will not be charged outbound travel expenses in excess of our inbound travel
revenue until January 1, 2003.

   As of December 31, 2001, our network covered approximately 4.0 million
residents, or 65% of the licensed population, and served over 155,000
subscribers.

   Until January 2000, we were a development stage company and incurred a loss
of $16.0 million from inception. During the year ended December 31, 2001, we
incurred a net loss of $76.9 million, a $26.8 million increase over our net
loss of $50.1 million for the year ended December 31, 2000. This increase is
primarily due to our continued growth of our network, subscriber base and our
human resource infrastructure. We expect future operating expenses to increase
substantially compared to the year ended December 31, 2001. Our costs of
services and equipment and general and administrative expense will increase as
a result of the accelerated expansion of our network, human resource
infrastructure and subscriber base. Our selling and marketing expenses will
also increase due to the introduction of new sales and marketing programs,
increased levels of advertising expenditures, the launch of new retail stores
and seasonal increases in the fourth quarter holiday season. We also expect
quarterly net revenue to increase as our subscriber base continues to grow and
our network coverage expands. We expect to continue to incur significant
operating losses and to generate significant

                                      37

<PAGE>

negative cash flow from operating activities until at least 2003 while we
continue to develop and construct our network and build our customer base.

Results of Operations

  Net Revenues

   We derive our revenues from four general sources that are described in order
of their significance:

  .  Subscriber revenue.  Subscriber revenue consists of monthly recurring
     service charges, non-recurring activation fees, and monthly non-recurring
     charges for local, long distance, travel, roaming and airtime usage in
     excess of the pre-subscribed usage plan.

  .  Sprint PCS travel revenue.  Sprint PCS travel revenue is generated when a
     Sprint PCS subscriber based outside our markets uses our portion of the
     Sprint PCS network.

  .  Non-Sprint PCS roaming revenue.  Non-Sprint PCS roaming revenue is
     generated when a non-Sprint PCS subscriber uses our portion of the Sprint
     PCS network.

  .  Product sales revenue.  Product sales revenue is generated from the sale
     of handsets and accessories.

  Operating Expenses

   Our operating expenses primarily include costs of services and equipment,
general and administrative expenses, sales and marketing expenses, and
depreciation and amortization, some of which will be incurred through our
management and services agreements with Sprint PCS, and others of which we will
incur directly. These are described in the order of their significance:

  .  Costs of services and equipment.  Costs of services and equipment include
     site lease costs and related utilities and maintenance, engineering
     personnel, transport facilities, interconnect charges, travel and roaming
     expense and handset and equipment costs. The fees we pay to Sprint PCS for
     the use of their support services, including billing and collections
     services and customer care, are also included in this expense category.

  .  Selling and marketing expenses.  Selling and marketing expenses relate to
     our third-party distribution channels, sales representatives, sales
     support personnel, our retail stores, advertising programs, promotions and
     commissions.

  .  General and administrative expenses.  General and administrative expenses
     include our corporate executive payroll, compensation and benefits, bad
     debt provision, insurance and corporate facilities. We also include as an
     expense the 8% of all collected revenue which is paid to Sprint PCS.

  .  Depreciation and amortization expense.  We depreciate the majority of our
     property and equipment using the straight-line method over five to ten
     years. Prior to January 1, 2002, we amortized the intangible asset (excess
     purchase price over the fair value of net assets acquired in the amount of
     $50.1 million) from our Albany, Syracuse and Manchester acquisition over a
     period of 20 years (see description of SFAS No. 142, "Goodwill and other
     Intangible Assets" under "Recent Accounting Pronouncements").

  Interest Expense

   Interest on our senior credit facilities accrues at the prime rate, or at
our option the federal funds rate or the reserve adjusted London Interbank
Offered Rate, plus specified margins. Interest on our senior notes accrues at
14% per annum. Further, the senior notes discount is being amortized as
interest expense using the effective interest method over the term of the
senior notes.

  Amortization of Debt Issuance Costs

   Amortization of debt issuance costs include the amortized amount of deferred
financing fees relating to our senior credit facilities, our senior notes, and
the write-off of the debt issuance costs of the terminated bridge loan facility.

                                      38

<PAGE>

  Other Debt Financing Fees

   Other debt financing fees primarily include annual fees such as loan
commitment fees.

  IWO Holdings, Inc.--Year Ended December 31, 2001 Compared to Year Ended
  December 31, 2000

   Customer Additions.  As of December 31, 2001, we provided personal
communication services to 155,228 customers, a net increase of 73,601 during
the year then ended, compared to a net increase of 36,504 new customers during
the year ended December 31, 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 year ended December 31, 2001, ARPU
(including inbound roaming revenues) was $79 compared to $80 for the year ended
December 31, 2000, a decrease of $1. The slight decrease in ARPU primarily
resulted from the decrease in the Sprint PCS determined inter-service area
usage rate earned per minute when a Sprint PCS subscriber based outside of our
market uses our portion of the Sprint PCS network. Service revenues include the
service revenues billed to our subscribers plus inbound roaming revenues.
Excluding inbound roaming revenues, our subscriber service ARPU for the years
ended December 31, 2001 and 2000, was $54.

   Revenues.  Net revenues were $110.1 million for the year ended December 31,
2001 compared to $58.8 million for the year ended December 31, 2000, an
increase of $51.3 million. The increased revenue reflects the increase in
customer base and the increase in inbound roaming revenues of $14.0 million
associated with our network expansion.

   Costs of Services and Equipment.  The costs of services and equipment were
$88.9 million for the year ended December 31, 2001 compared to $48.8 million
for the year ended December 31, 2000, an increase of $40.1 million. Operations
expense was $36.0 million for the year ended December 31, 2001 and $20.9
million for the year ended December 31, 2000. Roaming expense on Sprint PCS
networks was $28.3 million for the year ended December 31, 2001 and $18.3
million for the year ended December 31, 2000. Cost of equipment was $14.0
million for the year ended December 31, 2001 and $3.7 million for the year
ended December 31, 2000. Customer services and billing related expenses were
$10.7 million for the year ended December 31, 2001 and $5.9 million for the
year ended December 31, 2000. These increases correspond with the network
expansion and increase in subscribers since December 31, 2000. The costs
incurred related to our agreement with Sprint PCS were $66.1 million, or 74% of
total costs of service and equipment, for the year ended December 31, 2001 and
$38.8 million, or 80% of total costs of service and equipment, for the year
ended December 31, 2000.

   Selling and Marketing.  We incurred selling and marketing expenses of $31.7
million during the year ended December 31, 2001 compared to $19.5 million
during the year ended December 31, 2000, an increase of $12.2 million. The
increase in cost is due to increased sales and marketing activities and our
growing subscriber base. Despite this increase, we have decreased our cost per
gross activation by $3 from $357 for the year ended December 31, 2000 to $354
for the year ended December 31, 2001. This decrease is primarily due to
increases in marketing efficiencies. The costs incurred related to our
agreement with Sprint PCS were $12.4 million, or 39% of total selling and
marketing expenses, for the year ended December 31, 2001 and $10.8 million, or
55% of total selling and marketing expenses, for the year ended December 31,
2000.

   General and Administrative.  For the year ended December 31, 2001, we
incurred expenses of $25.3 million compared to $20.0 million for the year ended
December 31, 2000, an increase of $5.3 million. The increase is primarily
attributable to an increase in our Sprint PCS affiliation fee resulting from
growth in net revenues and $2.4 million of merger-related costs incurred during
the fourth quarter of 2001. Noncash stock option compensation expense was $0.3
million for the year ended December 31, 2001 compared to $1.8 million for the
year ended December 31, 2000, a decrease of $1.5 million. The costs incurred
related to our agreement with Sprint PCS were $5.4 million, or 21% of total
general and administrative expenses, for the year ended December 31, 2001 and
$3.1 million, or 16% of total general and administrative expenses, for the year
ended December 31, 2000.

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<PAGE>

   Depreciation and Amortization.  For the year ended December 31, 2001,
depreciation and amortization expense increased to $19.1 million compared to
$12.5 million for the year ended December 31, 2000, an increase of $6.6
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 $86.6 million in the year ended
December 31, 2001, which included approximately $6.9 million of capitalized
interest and labor. As of December 31, 2001, our network covered 4.0 million
people, an increase of 1.3 million people from the 2.7 million people our
network covered at December 31, 2000. We incurred capital expenditures of
$108.6 million in the year ended December 31, 2000, which included the purchase
of assets from Sprint PCS and capitalized interest and labor of $1.8 million.

   Interest Income.  For the year ended December 31, 2001, interest income was
$7.6 million compared to $2.0 million for the year ended December 31, 2000, an
increase of $5.6 million. We had higher average invested balances partially
offset by decreasing interest rates for the year ended December 31, 2001 as
compared to the year ended December 31, 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 personal
communications services network, and as working capital and operating losses
are funded, decreasing average invested balances are expected to result in
lower interest income for 2002.

   Interest Expense.  For the year ended December 31, 2001, interest expense
was $24.5 million compared to $3.5 million for the year ended December 31,
2000, an increase of $21.0 million. The increase is primarily attributable to
increased borrowings under the senior credit facilities and issuance of the
senior notes.

   Amortization of Debt Issuance and Offering Costs.  For the year ended
December 31, 2001, amortization of debt issuance and offering costs was $3.3
million compared to $2.8 million for the year ended December 31, 2000, an
increase of $0.5 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 year ended December 31, 2001, other debt
financing fees were $1.8 million compared to $3.7 million for the year ended
December 31, 2000, a decrease of $1.9 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 combined with the decrease in the undrawn funds under our senior
credit facilities.

   Merger-Related Fees.  We will incur significant direct transaction expenses
in connection with the merger with US Unwired, which we will expense for
accounting purposes as incurred. Following the closing of the merger, we will
incur severance expenses in connection with the termination of the employment
of certain of our officers and employees. Because a portion of the severance
expenses are calculated based upon the market price of US Unwired's common
stock at the effective time of the merger, if the price of US Unwired's common
stock at the effective time of the merger is greater than the price of US
Unwired's common stock at the date of announcement of the merger, the severance
costs will increase.

  IWO Holdings, Inc.--Year Ended December 31, 2000

   We commenced operations on January 5, 2000. For the year ended December 31,
2000, we recognized $58.8 million in net revenues, primarily from monthly
access and airtime fees, which represented 63.2% of net revenues. Our costs of
services and equipment during this period was $48.8 million, or 83.0% of net
revenues. Our selling and marketing expenses were $19.5 million, or 33.2% of
net revenues. Our general and administrative expenses were $18.2 million
(excluding $1.8 million in non-cash, stock-based compensation

                                      40

<PAGE>

expense from stock options granted to our former Chief Executive Officer and
former General Counsel), or 30.1% of net revenues. Depreciation and
amortization during the year ended December 31, 2000 was approximately $12.5
million, of which approximately $11.4 million or 91.0% related to the assets
acquired from Sprint PCS. Included in operating expenses was $52.7 million, or
52.2% of total operating expenses, related to our agreement with Sprint PCS,
including pass-through expenses.

  Albany, Syracuse, and Manchester Markets--Year Ended December 31, 1999
  Compared to Year Ended December 31, 1998

   The 1999 operations reflect the operation of the Albany, Syracuse, and
Manchester markets by Sprint PCS. Historical results are not necessarily
indicative of current and future operations that we are managing and will
manage.

   Net revenues increased by $14.3 million or 156.1% to $23.4 million in 1999
compared to 1998. Net revenues primarily consisted of subscriber revenue from
monthly access and airtime service fees. The increase is primarily attributable
to an increased number of subscribers.

   Costs of services and equipment mainly include handset and accessory costs,
switch and cell site expenses and other network-related costs. These costs
increased by $8.0 million or 65.6% to $20.2 million in 1999 compared to 1998.
These costs were approximately 86% of net revenues in 1999 compared to
approximately 134% in 1998. The increase in costs is primarily attributable to
the increase in subscribers and expanded market coverage. The decrease in costs
as a percentage of net revenues reflects increased efficiencies.

   General and administrative expenses increased by $1.6 million or 21.9% to
$9.0 million in 1999 compared to 1998. These expenses were approximately 38% of
revenues in 1999 compared to approximately 81% in 1998. The increase in costs
is primarily attributable to an expanded workforce to support subscriber
growth. The decrease in expenses as a percentage of net revenues reflects
increased efficiencies.

   Selling and marketing expenses increased by $2.1 million or 57.6% to $5.9
million in 1999 compared to 1998. These expenses were approximately 25% of
revenues in 1999 compared to approximately 41% in 1998. The increase in
expenses is due to increased sales and marketing activities and more customers
acquired. The decrease in expenses as a percentage of net revenues reflects
more customers acquired.

   Depreciation and amortization expense increased $714,000 or 7.5% to $10.2
million in 1999 compared to 1998. This increase is due to increases in
property, plant and equipment.

   Operating expenses in excess of net revenues decreased by approximately $1.8
million or 7.6% to $21.9 million in 1999 compared to 1998. This decrease is a
result of increased costs and expenses more than offset by increased net
revenues.

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 cash generated from operations, as our primary sources of capital.
Specifically, these activities to date have been funded through equity
investments of $188.4 million as well as borrowings of $145.0 million under our
senior credit facilities and net proceeds from the issuance of $160.0 million
of senior notes and warrants.

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<PAGE>

   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 December 31, 2001, had borrowed
$90.0 million under the $120.0 million term loan facility and $5.0 million
under the $70.0 million revolving credit 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 $0.25 million on March 31, 2004 to $31.0
million on September 30, 2008. Generally, amounts repaid under the $70.0
million revolving credit facility may be re-borrowed until its termination on
March 31, 2008. In any case, we must repay the outstanding principal balance
and interest under the $70.0 million revolving credit facility on March 31,
2008.

   The interest rate applicable to the senior credit facilities is based on, at
our option, (1) LIBOR (Eurodollar loans) plus the applicable margin, as defined
in the senior credit facilities agreement, or (2) the higher of the
administrative agent's prime rate or the federal funds effective rate (ABR
loans) plus the applicable margin. The applicable margin for Eurodollar loans
will range from 1.50% to 3.75% based on specified events involving our company.
The applicable margin for ABR loans will range from 0.50% to 2,75% based on
specified events involving our company.

   The loans under the senior credit facilities are subject to a quarterly
commitment fee, which ranges from 0.75% to 1.25% of the available portion of
the $120.0 million term loan, the $50.0 million term loan and the revolving
credit facility. We paid $1,300,000 in connection with amendments to the senior
credit facilities for the year ended December 31, 2000.

   In connection with the senior credit facilities, we deposited $8.0 million
as a compensating balance with the commercial lenders of the credit facilities.
The compensating balance must be maintained until the credit facilities are
repaid in full.

   In December 2000, we amended our $240.0 million senior credit facilities 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.

   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 our 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 the offering, a portion of the proceeds of the
offering was used to purchase a portfolio of U.S. government securities,
referred to as the interest reserve, that will generate sufficient proceeds to
make the first six scheduled interest payments on the senior notes.

   As of December 31, 2001, we had $3.4 million in cash and cash equivalents,
compared to $36.3 million in cash and cash equivalents as of December 31, 2000.
Working capital was $55.2 million as of December 31, 2001 as compared to
working capital of $16.5 million as of December 31, 2000. As of December 31,
2001, we held $73.7 million in investment securities, of which $56.5 million
was included in current assets, and $53.7 million in the interest reserve
account for the senior notes, of which $33.9 million was included in current
assets.

   Net cash used in operating activities was approximately $44.6 million for
the year ended December 31, 2001 and $20.0 million for the year ended December
31, 2000. Cash used in operating activities in 2001 was the

                                      42

<PAGE>

result of our $76.9 million net loss partially offset by a net $8.1 million in
cash provided by changes in working capital, and depreciation and amortization
and other non-cash items totaling $24.2 million. Cash used in operating
activities in 2000 was the result of our $50.1 million net loss partially
offset by a net $12.9 million in cash provided by changes in working capital,
and depreciation and amortization and other non-cash items totaling $17.2
million.

   Net cash used in investing activities was approximately $206.2 million for
the year ended December 31, 2001 and approximately $172.8 million for the year
ended December 31, 2000. The uses for the year ended 2001 included cash outlays
of $77.8 million for purchases of property and equipment and construction in
progress, $105.3 million of investment securities purchased, and the
establishment of the $53.7 million interest reserve related to the 14% senior
notes, offset by $30.7 million in proceeds from matured investments. The uses
for the year ended December 31, 2000 were related primarily to the purchase of
$116.4 million in assets from Sprint PCS, the purchase of $47.7 million of
property and equipment and construction in progress, and restricted cash of
$8.0 million.

   Net cash provided by financing activities was approximately $217.9 million
for the year ended December 31, 2001 and $124.3 million for the year ended
December 31, 2000. In 2001, these sources consisted primarily of proceeds of
$160.0 million on the 14% senior notes less offering costs of approximately
$7.7 million, $65.0 million drawn under the senior credit facilities, $0.4
million from the exercise of stock options, and $0.5 million from the repayment
of promissory notes, reduced by $0.3 million in treasury stock purchases. In
2000, the sources consisted of $80.0 million borrowed net of repayments under
the senior credit facilities and gross proceeds from equity issuances of $49.5
million less offering costs (primarily debt-related) of approximately $5.2
million.

   As of December 31, 2001, $93.9 million remained available under the senior
credit facilities. We expect that cash and cash equivalents and our investments
in securities, together with future advances under the senior credit
facilities, 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 facilities 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 facilities agreement and
senior notes indenture restrict the payment of dividends on our common stock.
Pursuant to the consent and agreement between Sprint PCS and the lenders under
the senior credit facilities, at the administrative agent's request, Sprint PCS
will redirect any payments due to us under the management agreement to the
administrative agent during the continuation of any default by us under the
senior credit facilities.

   The senior credit facilities are collateralized by a perfected security
interest in substantially all of Independent Wireless One Corporation's
tangible and intangible assets, including an assignment of Independent Wireless
One Corporation's affiliation agreements with Sprint PCS and a pledge of all of
the capital stock of our subsidiaries. We have guaranteed all of the
obligations under the senior credit facilities.

   Our future contractual obligations related to long-term debt, noncancellable
operating leases, and unconditional purchase agreements at December 31, 2001
were as follows:

<TABLE>
<CAPTION>
                                                        Payments Due by Period
                                                --------------------------------------
                                                Less than                      After
       Contractual Obligations          Total    1 year   1-3 years 4-5 years 5 years
       -----------------------         -------- --------- --------- --------- --------
                                                            (In thousands)
<S>                                    <C>      <C>       <C>       <C>       <C>
Senior notes.......................... $160,000  $    --   $    --   $    --  $160,000
Long-term debt (1).................... $145,000  $    --   $13,800   $55,200  $ 76,000
Operating leases...................... $ 61,050  $11,529   $22,919   $15,795  $ 10,807
Unconditional purchase obligations (2) $ 97,000  $68,000   $29,000        --        --
</TABLE>
--------
(1) As of December 31, 2001, we had $93.9 million available under our $240.0
    million senior credit facilities, which is net of $1.1 million of
    irrevocable stand-by letters of credit issued to our insurance bonding
    agent as collateral for the insurance bonding agent issuing our insurance
    performance bonds as security for future cell site locations.

                                      43

<PAGE>

(2) Represents estimated budgeted annual expenditures as of December 31, 2001
    for our network build as required under our management agreement with
    Sprint PCS.

   The warrant registration rights agreement for our outstanding warrants
contains certain provisions including the requirement for us to keep the
warrant registration statement continuously effective until the date on which
all of the warrants and warrant shares are not transfer restricted. Upon a
warrant registration default, the liquidated damages required to be paid to
each holder of a transfer restricted warrant will be in an amount equal to
$0.03 per week per warrant for each week or portion of a week that the warrant
registration default continues for the first 90-day period immediately
following the warrant registration default. This amount will increase by an
additional $0.02 per week per warrant with respect to each subsequent 90-day
period, up to a maximum amount equal to $0.07 per week per warrant. The
provision for liquidated damages will continue until the warrant registration
default has been cured. We will not be required to pay liquidated damages for
more than one warrant registration default at any given time.

   Liquidated damages accrued as of January 15 or July 15 of each year will be
payable on that date. All accrued liquidated damages shall be paid by us to
warrant holders entitled to liquidated damages in accordance with the warrant
agreement. No warrant registration defaults have occurred to date.

   On December 19, 2001, we entered into a definitive agreement and plan of
merger with US Unwired Inc., a Sprint PCS affiliate, under which we and an
indirect, wholly-owned subsidiary of US Unwired will merge in a tax-free
reorganization. At the effective time of the merger, each issued and
outstanding share of our outstanding common stock will be converted into the
right to receive approximately 1.0371 shares of US Unwired common stock. The
merger agreement will terminate if the merger is not consummated on or before
June 18, 2002. We must pay US Unwired a termination fee of $7.0 million if the
merger has not occurred before June 18, 2002, and as of that date holders of
least 6% of our common stock have exercised and not withdrawn their appraisal
rights.

   If the merger is completed, due to restrictions in our and US Unwired's
respective public debt indentures, we and US Unwired will be unable to provide
direct or indirect credit support to one another. The lenders under our senior
credit facilities will not have any recourse to the stock or assets of US
Unwired or its subsidiaries, and the lenders under US Unwired's credit
facilities will not have any recourse to the stock or assets of us or our
subsidiaries. In addition, our and US Unwired's respective credit agreements
and indentures may restrict or prohibit our subsidiaries from paying dividends
not only to us but also to US Unwired and may also restrict or prohibit US
Unwired's subsidiaries from paying dividends not only to US Unwired but also to
us.

Related Party Transactions

   We received financial advisory and investment banking services from several
stockholders related to our equity and debt financing and acquisition of Sprint
PCS assets. Total amounts incurred for these services were approximately
$9,285,000 for the period January 1, 1999 through December 20, 1999, $3,638,000
for the period December 20, 1999 through December 31, 1999. No such services
were provided for the years ended December 31, 2000 and 2001. For the period
January 1, 1999 through December 20, 1999, we charged to operations $9,250,000
for financial advisory fees (of which $8,750,000 was to related parties not
directly incurred in connection with the successful financing).

   On December 12, 2001, we entered into a financial advisory agreement with
certain investment banking firms (of which certain principals are stockholders
of our company) for a period of three months whereby such firms would advise us
with respect to the sale, recapitalization, merger, consolidation or other
business combination of our company. The fee for the successful completion of
these services is 1.125% of our enterprise value, as defined in the agreement.
We incurred expenses under this agreement in 2001 amounting to $250,000 (which
are included in accrued expenses--related parties).

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   On December 20, 1999, we and an affiliate of a stockholder entered into a
five-year advisory agreement whereby we will receive consulting services from
the affiliate for a $5,000,000 fee. The $5,000,000 fee, which was prepaid on
December 20, 1999, is included in prepaid management fee--related party and is
being amortized over the term of the agreement. In addition, in 1999 the
affiliate provided financial advisory services to us in connection with our
senior credit facilities. Costs incurred related to the senior credit
facilities and paid to the affiliate approximated $3,552,000, all of which are
included in debt issuance costs.

   We utilize the services of a law firm in which a partner of the law firm is
a stockholder of our company. On December 20, 1999, we entered into a
three-year professional services agreement with our outside general
counsel/stockholder, whereby the outside general counsel/stockholder will
provide legal services annually up to $400,000 and participate in our stock
option program. On September 17, 2000, we terminated the professional services
agreement and replaced it with a one-year consulting agreement. Legal fees
incurred under the professional services agreement/consulting agreement were
approximately $1,101,000 for the period January 1, 1999 through December 20,
1999, approximately $15,000 for the period December 20, 1999 through December
31, 1999, approximately $1,243,000 for the year ended December 31, 2000, and
approximately $896,000 for the year ended December 31, 2001. Legal fees
included in accounts payable--related parties were approximately $213,000 at
December 2000 and approximately $115,000 at December 31, 2001. Legal fees
included in accrued expenses--related parties were $250,000 at December 31,
2000 and 2001.

   We utilized two firms for marketing, information technology, and general
management consulting, which are affiliated with its Chairman of the Board.
Fees incurred were approximately $369,000 in the period January 1, 1999 through
December 20, 1999, approximately $51,000 in the period December 20, 1999
through December 31, 1999, approximately $165,000 for the year ended December
31, 2000 and $-0- for the year ended December 31, 2001.

   As of December 31, 2001, our management believed that we were in compliance
with all financial and operational covenants associated with our senior credit
facilities, senior notes and agreements with Sprint PCS.

Recent Accounting Pronouncements

   In June 2001, SFAS No. 141, "Business Combinations" was issued 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. Our adoption of this statement on January 1, 2002 did not have a
material impact on our financial statements.

   In June 2001, SFAS No. 142, "Goodwill and Other Intangible Assets" was
issued 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 will also be required to reassess the useful
lives of all intangible assets. We adopted SFAS No. 142 on its effective date
of January 1, 2002. We expect annual amortization expense relating to goodwill
to decrease by approximately $2.5 million due to the effect of this statement.

   In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations." SFAS No. 143 requires the fair value of a liability
for an asset retirement obligation to be recognized in the period in which it
is incurred if a reasonable estimate of fair value can be made. The associated
asset retirement costs are capitalized as part of the carrying amount of the
long-lived asset. SFAS No. 143 is effective for fiscal years beginning after
June 15, 2002. We believe the adoption of SFAS No. 143 will not have a material
impact on our financial statements.

   In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment
or Disposal of Long-Lived Assets," which supersedes SFAS No. 121, "Accounting
for the Impairment of Long-Lived Assets and for

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Long-Lived Assets to be Disposed of," and the accounting and reporting
provisions of APB No. 30. SFAS No. 144 addresses financial accounting and
reporting for the impairment or disposal of long-lived assets and is effective
for fiscal years beginning after December 15, 2001, and interim periods within
those fiscal years. Our adoption of this statement on January 1, 2002 did not
have a material impact on our financial statements.

Inflation

   Our management believes that inflation has not had, and will not have, a
material adverse effect on our financial position, results of operations or
cash flows.

Seasonality

   Our business is seasonal because the wireless industry is heavily dependent
on fourth quarter results. Among other things, the industry relies on
significantly higher customer additions and handset sales in the fourth quarter
as compared to the other three calendar quarters. The factors contributing to
this trend include the increasing use of retail distribution, which is
dependent on year-end holiday shopping, the timing of new product and service
offerings and competitive pricing.

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

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<PAGE>

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 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 FCC 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's 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's 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's 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, 2001, our inbound travel revenues represented 29% of our
total revenues. We expect this

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<PAGE>

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 and pay for each Sprint PCS travel minute.

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

   We rely on Sprint PCS's 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's 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's 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's 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's 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.


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<PAGE>

   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 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's 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 FCC 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 FCC 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 FCC 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's licenses, which are subject to renewal and revocation. Sprint
PCS's licenses in our markets will expire in June 2005, but may be renewed for
additional ten-year terms. The FCC 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 FCC 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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   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's network and,
to a lesser extent, on the networks of its other affiliates. Sprint PCS's 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. 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 $240.0 million of senior credit facilities and as of
December 31, 2001 borrowed $145.0 million under these facilities. In December
2000 we amended our $240.0 million senior credit facilities 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;

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<PAGE>

  .  we may not be able to obtain additional financing for currently
     unanticipated capital expenditures, working capital requirements and other
     corporate purposes;

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

  .  borrowings under our senior credit facilities are 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 facilities 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 facilities. 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 facilities.

   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 facilities, 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 facilities limit 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.

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   If we do not meet all of the conditions required under our senior credit
   facilities, 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 facilities 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 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 facilities.

   If we default under our senior credit facilities, 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 facilities require 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 facilities,
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
facilities, 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 facilities 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 facilities 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.


                                      52

<PAGE>

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

   Our senior credit facilities require 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 facilities.

   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's 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, 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;


                                      53

<PAGE>

  .  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.

   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's
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

                                      54

<PAGE>

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.

   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 74% 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 our or your interests.

   Approximately 65.5% 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 pursuing
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.

                                      55

<PAGE>

   If the merger is completed, all of our outstanding common stock will be
owned by an indirect, wholly-owned subsidiary of US Unwired.

  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 FCC, 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's 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 FCC
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.

  Risks Related to the Merger with US Unwired

   Our integration with US Unwired following the merger will present
   significant challenges.

   We entered into the merger agreement with the expectation that the merger
will result in expanding our existing network and customer base and taking
advantage of the best operating practices of both organizations. Achieving the
benefits of the merger will depend in part on integrating the operations of the
two companies in an efficient manner. We cannot assure you that this will
occur. To realize the anticipated benefits of this combination, our and US
Unwired's management team must develop strategies and implement a business plan
that will successfully:

  .  manage the combined company's networks and markets;

                                      56

<PAGE>

  .  maintain adequate focus on existing business, operations and network
     build-outs while working to integrate the two companies;

  .  manage both companies' cash and available credit lines for use in
     financing future growth and working capital needs;

  .  manage the geographic distance between our territory and US Unwired's
     territory; and

  .  retain and attract key employees during a period of transition.

   The diversion of our management's attention from ongoing operations and any
difficulties encountered in the transition and integration process could have a
material adverse effect on our financial condition and results of operations.

   Our and US Unwired's ability to operate as a combined company will be
   limited by our and US Unwired's separate public debt indentures and credit
   facilities.

   In order to for US Unwired to comply with its indenture governing its senior
notes, US Unwired will designate us as US Unwired's unrestricted subsidiary. As
a result, for purposes of our and US Unwired's respective public debt
indentures, we and US Unwired will operate as separate business entities
following the merger. Due to restrictions in our and US Unwired's indentures,
we and US Unwired will be unable to provide direct or indirect credit support
to one another. Likewise, we will be restricted under our debt instruments from
paying dividends or freely transferring money to US Unwired. These restrictions
may hinder the combined company's ability to achieve the anticipated benefits
of the merger, react to developments in our or US Unwired's business or take
advantage of business opportunities.

   We and US Unwired depend on the cash flows of our respective subsidiaries to
   satisfy our respective debt obligations.

   As holding companies, we and US Unwired depend on our respective
subsidiaries for cash flow and to service our respective debt obligations.
Existing or future credit agreements may restrict or prohibit our subsidiaries
from paying dividends not only to us but also to US Unwired and may also
restrict or prohibit US Unwired's subsidiaries from paying dividends not only
to US Unwired but also to us. State law may also limit the amount of the
dividends that our respective subsidiaries are permitted to pay.

   We expect to incur significant costs associated with the merger.

   We will incur significant direct transaction expenses, which we will expense
for accounting purposes as incurred. Following the closing of the merger, we
will incur severance expenses in connection with the termination of the
employment of certain of our officers and employees. Because a portion of the
severance expenses are calculated based upon the market price of US Unwired's
common stock at the effective time of the merger, if the price of US Unwired's
common stock at the effective time of the merger is greater than the price of
US Unwired's common stock at the date of announcement of the merger, the
severance costs will increase. We cannot assure you that we will not incur
additional material charges in subsequent quarters to reflect additional costs
associated with the merger.

   Much of our costs related to the merger, such as legal and accounting costs,
some of the fees of our financial advisors and regulatory filing fees, must be
paid even if the merger is not completed.

   Because US Unwired will not be providing us with any indemnification
   following the merger, we will become responsible for any undisclosed
   liabilities of US Unwired.

   US Unwired has made certain representations and warranties to us in the
merger agreement concerning US Unwired's business and operations. The merger
agreement, however, does not provide us with any contractual indemnification
from US Unwired following the merger for any breaches of such representations
and warranties

                                      57

<PAGE>

of US Unwired or any failure of US Unwired to comply with its obligations under
the merger agreement. As a result, if the merger is completed we will bear the
burden of any undisclosed liabilities of US Unwired. We cannot assure you that
any such liabilities will not materially and adversely affect our results of
operations and our financial condition.

   If the merger is not consummated, the value of our common stock could be
   materially adversely affected, our management's attention will have been
   significantly diverted from other important issues, and we must pay a
   termination fee of $7.0 million in certain circumstances.

   The consummation of the proposed merger with US Unwired is subject to a
number of conditions, of which approval by US Unwired's stockholders of the
issuance of shares of US Unwired common stock in connection with the merger
remains outstanding. We cannot provide any assurance that all conditions upon
which the merger is contingent will be met. If the merger is not consummated
for any reason, the value of our common stock could be materially adversely
affected and our operations could suffer if the attention of our management is
diverted from other important issues. We must pay US Unwired a termination fee
of $7.0 million if the merger has not occurred before June 18, 2002, and as of
that date holders of least 6% of our common stock have exercised and not
withdrawn their dissenters' rights of appraisal.

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk.

   We are not exposed to fluctuations in currency exchange rates because all of
our services are invoiced in U.S. dollars. We are exposed to the impact of
interest rate changes on our short-term cash investments, consisting of U.S.
Treasury obligations and other investments in institutions with the highest
credit ratings, all of which have maturities of three months or less. These
short-term investments carry a degree of interest rate risk. We believe that
the impact of a 10% increase or decline in interest rates would not be material
to our investment income.

   In the normal course of business, our operations are exposed to interest
rate risk with respect to our senior credit facilities. Our fixed rate debt
consists of our 14% senior notes. Our primary interest rate risk exposure
relates to the variable interest rate on our senior credit facilities and the
impact of interest rate movements on our ability to meet our interest expense
requirements.

   A 1% increase in interest rates on our senior credit facilities in 2002
would result in an increase of approximately $1.7 million of interest expense.

   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 facilities. While we can not
predict our ability to refinance existing debt or the impact interest rate
movements will have on our existing debt, we continue to evaluate our interest
rate risk on an ongoing basis.

   The following table presents the estimated future balance of outstanding
long-term debt at the end of each period and future required annual principal
payments for each period then ended associated with the 14% senior notes and
our senior credit facilities based on our projected level of long-term
indebtedness:

<TABLE>
<CAPTION>
                                                            Year Ended December 31,
                                               ------------------------------------------------
                                                 2002      2003      2004      2005      2006
                                               --------  --------  --------  --------  --------
                                                            (Dollars in thousands)
<S>                                            <C>       <C>       <C>       <C>       <C>
14% senior notes.............................. $160,000  $160,000  $160,000  $160,000  $160,000
Fixed interest rate...........................     14.0%     14.0%     14.0%     14.0%     14.0%
Principal payments............................       --        --        --        --        --
Senior credit facilities...................... $170,000  $170,000  $156,200  $133,600  $101,000
Variable interest rate(1).....................     6.75%     7.75%     8.25%    8.755%     9.25%
Principal payments on senior credit facilities       --        --  $ 13,800  $ 22,600  $ 32,600
</TABLE>
--------
(1) The interest rate on the senior credit facilities equals the London
    Interbank Offered Rate ("LIBOR") + 3.50%. The interest rates presented here
    are estimates only and do not represent predictions of future interest
    rates.

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<PAGE>

Item 8.  Financial Statements and Supplementary Data.

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

Item 9.  Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.

   None.
                                   PART III

Item 10.  Directors and Executive Officers of the Registrant.

Directors and Executive Officers

   The following table presents information with respect to our directors and
executive officers. Directors serve for a term of one year and are elected at
each annual meeting of stockholders. Each of our directors, except for Messrs.
Nielsen and Marquis, was elected to our board of directors pursuant to the
terms of a stockholders agreement that we entered into with certain of our
stockholders in December 1999.

<TABLE>
<CAPTION>
            Name              Age                    Position
            ----              --- -----------------------------------------------
<S>                           <C> <C>
   Steven M. Nielsen......... 46  President, Chief Executive Officer and Director
   Timothy J. Medina......... 35  Chief Financial Officer
   John S. Stevens........... 38  Chief Technology Officer
   Solon L. Kandel........... 41  Director
   J.K. Hage III............. 51  Director
   Christopher J. Stadler.... 37  Director
   Mamoun Askari............. 38  Director
   James O. Egan............. 53  Director
   Charles K. Marquis........ 59  Director
   Thomas J. Sullivan........ 39  Director
   Savio W. Tung............. 50  Director
   Christopher J. O'Brien.... 43  Director
   Alfred F. Boschulte....... 58  Director
   Brian Kwait............... 40  Director
   Harley Ruppert............ 55  Director
</TABLE>

   Steven M. Nielsen became our President and Chief Executive Officer in
November 2000 and one of our directors in May 2001 and served as our Chief
Financial Officer from May 2000 to November 2000. Most recently, Mr. Nielsen
was the Vice President and General Manager of NEXTLINK-Washington, a
competitive local exchange carrier, where he supervised all operations,
including network build and market launch. Prior to that time Mr. Nielsen spent
over 11 years with Sprint and Sprint PCS in key financial positions. As the
Sprint PCS Area Vice President for the Northwest, Mr. Nielsen contributed
significantly to the rapid early growth of the $10 billion start-up business.
He launched Sprint PCS markets and service in Washington and Oregon, managed
transitions from plan to rollout by building up large sales and marketing teams
and established nearly 500 points of distribution.

   Timothy J. Medina was appointed Vice President and Chief Financial Officer
in May 2001. Prior to his appointment, Mr. Medina served from March 1988
through April 2001 in various positions at GTE Service Corporation, GTE
Overseas Corporation and Verizon Communications. Most recently, he served as
Chief Financial Officer and Board Member of Verizon's wireless subsidiary in
Argentina, CTI Holdings. Previously, Mr. Medina held finance and strategic
planning positions with GTE's full service telecommunications subsidiary in
Venezuela, CANTV, and in governmental relations positions in GTE's Government
Affairs department in Washington, D.C.

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<PAGE>

   John S. Stevens became our Chief Technical Officer in November 2001. Most
recently, Mr. Stevens was the Chief Technical Officer for SBA, Inc., a
developer of structures for wireless communications. In nearly four years at
SBA, Mr. Stevens also served as Vice President of Operations and as General
Manager for the Southeast region. Previously, Mr. Stevens was Director of
Engineering and Operations for Sprint PCS in Atlanta, Georgia and in Albany,
New York. Mr. Stevens also has five years of management experience with NYNEX
Mobile and Clough, Harbour & Associates.

   Solon L. Kandel became one of our directors in June 1999. Mr. Kandel served
as our President and Chief Executive Officer from May 1999 to November 2000.
From January 1997 until February 1999, he held the positions of President,
Chief Executive Officer and member of the board of directors of IDF
International, Inc. and its predecessors. Prior to his employment at IDF
International, Inc., Mr. Kandel held strategic management positions at AT&T
Wireless Services and McCaw Cellular Communications. In these capacities he
guided the implementation of personal communications services networks from
Massachusetts to Virginia and created innovative programs for acquiring
wireless communications site links in bulk deployment throughout the United
States. He also helped to build McCaw's cellular markets in the New York
metropolitan area.

   J.K. Hage III became one of our directors in December 1999. Mr. Hage served
as our Executive Vice President, Secretary and General Counsel from our
inception to September 2000. Mr. Hage is also the Managing Partner of Hage and
Hage LLC, where he has practiced law for over 20 years primarily in the
telecommunications industry. Mr. Hage is Of Counsel to Lukas, Nace, Gutierrez &
Sachs Chartered, a Washington D.C. professional corporation organized to
practice communications law before the FCC, state utility commissions and the
federal courts. Mr. Hage is active in numerous industry associations, including
the New York State Telecommunications Association, the Organization for the
Preservation and Advancement of Small Telephone Companies, the American Mobile
Telecommunications Association, the International Mobile Telecommunications
Association, and the New York State Municipal Electric Association. Mr. Hage is
a member of the New York State Bar Association Committee on Public Utility Law
and the New York State Bar Association Committee on Trusts and Estates.

   Christopher J. Stadler became one of our directors in December 1999. Mr.
Stadler has been an executive of Investcorp or one or more of its wholly-owned
subsidiaries since April 1996. Prior to joining Investcorp, Mr. Stadler was a
Director of CS First Boston Corporation. Mr. Stadler is a director of Werner
Holding Co. (DE), Inc., CSK Auto Corporation and Saks Incorporated.

   Mamoun Askari became one of our directors in December 1999. Mr. Askari has
been an executive of Investcorp or one or more of its wholly-owned subsidiaries
since September 1990. Prior to joining Investcorp, Mr. Askari was an Associate
with Deloitte, Haskins & Sells. Mr. Askari is a director of Werner Holding Co.
(DE), Inc. and CSK Auto Corporation.

   James O. Egan became one of our directors in December 1999. Mr. Egan has
been an executive of Investcorp or one or more of its wholly-owned subsidiaries
since January 1999. Prior to joining Investcorp, Mr. Egan was a partner in the
accounting firm of KPMG from October 1997 to December 1998 and a Senior Vice
President and Chief Financial Officer of Riverwood International, a paperboard,
packaging and machinery company, from May 1996 to September 1997. Previously,
Mr. Egan was a partner in the accounting firm of Coopers & Lybrand L.L.P. (now
PricewaterhouseCoopers LLP). Mr. Egan is a director of CSK Auto Corporation,
Harborside Healthcare Corporation, Werner Holding Co. (DE), Inc. and Jostens,
Inc.

   Charles K. Marquis became one of our directors in May 2001. Mr. Marquis has
been a senior advisor to Investcorp or one or more of its wholly-owned
subsidiaries since January 1999. Prior to joining Investcorp, Mr. Marquis was a
partner in the law firm of Gibson, Dunn & Crutcher LLP. Mr. Marquis is a
director of CSK Auto Corporation, Jostens, Inc., Tiffany & Co. and Werner
Holding Co. (DE), Inc.

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<PAGE>

   Thomas J. Sullivan became one of our directors in December 1999. Mr.
Sullivan has been an executive of Investcorp or one or more of its wholly-owned
subsidiaries since April 1996. Prior to joining Investcorp, Mr. Sullivan was
Vice President and Treasurer of the Leslie Fay Companies, Inc. (now Leslie Fay
Company, Inc.), Mr. Sullivan is a director of Werner Holding Co. (DE), Inc.

   Savio W. Tung became one of our directors in December 1999. Mr. Tung has
been an executive of Investcorp or one or more of its wholly-owned subsidiaries
since September 1984. Mr. Tung is a director of CSK Auto Corporation.

   Christopher J. O'Brien became one of our directors in December 1999. Mr.
O'Brien has been an executive of Investcorp or one or more of its wholly-owned
subsidiaries since December 1993. Prior to joining Investcorp, Mr. O'Brien was
a Managing Director of Mancuso & Company, a private New York-based merchant
bank. Mr. O'Brien is a director of Harborside Healthcare Corporation, SI
Corporation, Stratus Computer Systems International S.A. and U.S. TelePacific
Holdings Corp.

   Alfred F. Boschulte became the chairman of our board of directors in March
1999. Mr. Boschulte is the former President and Chairman of NYNEX Mobile
Communications (which merged to form Bell Atlantic Mobile) where he served from
1990 through 1994. Mr. Boschulte is President and Chief Executive Officer of
Detecon, Inc., an affiliate of Deutsche Telecom. Detecon is a
telecommunications consulting firm specializing in strategic and technical
planning for wireline and wireless telecommunications businesses. Previously,
Mr. Boschulte was the Managing Director of Excelcomindo, a global system for
mobile communications service provider in Indonesia, from January 1996 to
December 1997. Prior to Excelcomindo, Mr. Boschulte was the President of
TOMCOM, L.P., a wireless joint service organization of AirTouch Communications,
Bell Atlantic, NYNEX, US West and their jointly-owned personal communications
services businesses.

   Brian Kwait became one of our directors in December 1999. Mr. Kwait has been
a Managing Principal of Odyssey Investment Partners, LLC since 1997.
Previously, Mr. Kwait was a Principal in the private equity investing group of
Odyssey Partners, LP from 1989 to 1996. Mr. Kwait is a director of William
Scotsman Holdings, Inc. and Velocita Corp.

   Harley Ruppert became one of our directors at our inception. From 1978 to
the present, Mr. Ruppert has been employed by Newport Telephone Company, Inc.,
most recently as President. In 2000, Mr. Ruppert purchased a controlling
interest in Newport Telephone Company, Inc. Mr. Ruppert is also President and
Chief Executive Officer of NTCNet Inc., the holding company of Newport
Telephone Company, Inc., and all subsidiaries of Newport Telephone Company.

Section 16(a) Beneficial Ownership Reporting Compliance

   Our directors and officers are not subject to Section 16(a) reporting
requirements.

                                      61

<PAGE>

Item 11.  Executive Compensation.

Summary Compensation Table

   The following table sets forth information regarding aggregate cash
compensation, stock option awards and other compensation earned by our Chief
Executive Officer and our four other most highly compensated executive officers
for services rendered in 1999, 2000 and 2001, collectively referred to as our
named executive officers.

<TABLE>
<CAPTION>
                                                                            Long-Term
                                            Annual Compensation        Compensation Awards
                                       ------------------------------ ---------------------
                                                                      Restricted Securities
                                                         Other Annual   Stock    Underlying  All Other
  Name and Principal Position     Year  Salary   Bonus   Compensation   Awards    Options   Compensation
  ---------------------------     ---- -------- -------- ------------ ---------- ---------- ------------
<S>                               <C>  <C>      <C>      <C>          <C>        <C>        <C>

Steven M. Nielsen................ 2001 $277,212 $252,000   $  9,992    $    --    111,953     $    408
  President and Chief Executive   2000  129,051  190,000    135,932         --    421,348          272
  Officer                         1999      n/a      n/a        n/a        n/a        n/a          n/a

Timothy J. Medina................ 2001  126,923  185,000     76,316         --    335,859        3,808
 Chief Financial Officer          2000      n/a      n/a        n/a        n/a        n/a          n/a
                                  1999      n/a      n/a        n/a        n/a        n/a          n/a

John Stevens..................... 2001   19,231   20,945     25,000         --    200,000          530
  Chief Technology Officer        2000      n/a      n/a        n/a        n/a        n/a          n/a
                                  1999      n/a      n/a        n/a        n/a        n/a          n/a

David L. Standig................. 2001   55,096       --         --         --         --      311,927
  Former Chief Operating          2000  204,983       --     33,881         --     50,000        4,717
  Officer                         1999   87,347  145,833     61,778     29,167    505,618           --

John P. Hart, Jr................. 2001  173,365       --         --         --         --      239,184
  Former Chief                    2000  251,838  148,394     28,095         --     50,000        4,506
 Technology Officer               1999   91,682  145,833     78,403     29,167    337,079           --
</TABLE>

   Amounts shown in the column "Bonus" reflect bonuses earned in 1999, 2000 and
2001 and paid in March of the succeeding year with the exception of 1999
bonuses which were paid in December 1999. Amounts shown in the column "Other
Annual Compensation" for Messrs. Nielsen, Medina, Stevens, Standig and Hart
include amounts paid in reimbursement of relocation expenses as follows:

  .  $132,288 to Mr. Nielsen in 2000 and $9,992 in 2001;

  .  $76,316 to Mr. Medina in 2001;

  .  $25,000 to Mr. Stevens in 2001;

  .  $53,652 to Mr. Standig in 1999 and $29,617 in 2000; and

  .  $75,000 to Mr. Hart in 1999 and $25,080 in 2000.

   Amounts shown in the column "Long-Term Compensation Awards--Restricted Stock
Awards" include shares of stock received, pursuant to management bonus stock
purchase agreements, in lieu of bonus amounts payable in 1999. The value of
restricted stock holdings at the end of 1999 was calculated by multiplying the
number of shares by a value per share of $5.74468 representing the market value
of our stock at the end of 1999 as follows: Mr. Standig, 5,077 shares valued at
$29,167; and Mr. Hart, 5,077 shares valued at $29,167.

   Amounts shown in the column "All Other Compensation" include severance,
post-employment paid time-off, 401(k) plan matches and term life premiums paid
by us.

                                      62

<PAGE>

   In April 2001, we and Mr. Standig entered into an agreement pursuant to
which Mr. Standig's employment with us was terminated, as described in
"--Employment Agreements--Separation Agreements." The amount shown in the
column "Other Annual Compensation" for Mr. Standig includes $306,250 paid as
severance pursuant to this agreement.

   In November 2001, we and Mr. Hart entered into an agreement pursuant to
which Mr. Hart's employment with us was terminated, as described in
"--Employment Agreements--Separation Agreements." The amount shown in the
column "Other Annual Compensation" for Mr. Hart includes $209,167 paid as
severance pursuant to this agreement.

Stock Option Grants in 2001

   The following table sets forth information regarding stock options to
purchase class B common stock granted to our named executive officers in 2001,
including the potential realizable value of each grant assuming that the market
value of our common stock appreciates at annualized rates of 5% and 10% for the
ten-year term of the option from the date of grant.

<TABLE>
<CAPTION>
                                    Individual Grants
                  -----------------------------------------------------
                                                                         Potential Realizable
                                                                        Value at Assumed Annual
                                Percentage of                            Rates of Stock Price
                    Number of   Total Options                              Appreciation for
                     Shares      Granted to                                   Option Term
-                  Underlying     Employees   Exercise Price Expiration -----------------------
      Name        Option Grants    in 2001     (per share)      Date        5%          10%
      ----        ------------- ------------- -------------- ----------  ---------   ---------
<S>               <C>           <C>           <C>            <C>        <C>         <C>
Steven M. Nielsen    111,953(1)     13.3%         $7.00       11/15/10    492,846   1,248,970
Timothy J. Medina    335,859(2)     40.0%         $7.00         5/7/11  1,478,539   3,746,909
John Stevens.....    200,000(3)     23.8%         $7.00       11/19/11    880,452   2,231,239
David L. Standig.         --         -- %            --             --         --          --
John P. Hart, Jr.         --         -- %            --             --         --          --
</TABLE>
--------
(1) Options vest in thirds at the end of 2001, 2002 and 2003 based upon the
    achievement of performance-based targets set by our board of directors in
    consultation with the option holder. Any portion of the performance-based
    vesting options that have not vested by December 31, 2005 will vest on
    December 31, 2005.
(2) Options for 167,930 shares vest daily over a period of three years
    commencing May 7, 2001, and options for 167,929 shares vest in thirds at
    the end of 2001, 2002 and 2003 based upon the achievement of
    performance-based targets set by our chief executive officer and our board
    of directors in consultation with the option holder. Any portion of the
    performance-based vesting options that have not vested by December 31, 2005
    will vest on December 31, 2005.
(3) Options for 100,000 shares vest daily over a period of three years
    commencing November 19, 2001, and options for 100,000 shares vest 15% at
    the end of the quarter ended March 31, 2002, 40% at the end of 2002 (less
    any amount that vests at the end of the quarter ended March 31, 2002), 30%
    at the end of 2003 and 30% at the end of 2004 based upon the achievement of
    performance-based targets set by our chief executive officer and our board
    of directors in consultation with the option holder. Any portion of the
    performance-based vesting options that have not vested by December 31, 2006
    will vest on December 31, 2006.

   The percentage shown under "Percentage of Total Options Granted to Employees
in 2001" is based on options granted to our employees in 2001 to purchase an
aggregate of 839,895 shares of our stock. The exercise price of each option
granted was equal to the fair market value of our stock as determined by the
board of directors on the date of grant.

Year-End 2001 Option Values

   The following table sets forth information for each of our named executive
officers regarding the number of shares of class B common stock acquired upon
exercise of options during 2001, the value realized upon exercise of options
during 2001 and the number and value of shares of class B common stock
underlying unexercised options that were held by each of our named executive
officers at December 31, 2001.

                                      63

<PAGE>

   There was no public market for our class B common stock at December 31,
2001. Amounts shown under the columns "Value Realized" and "Value of
Unexercised In-the-Money Options at December 31, 2001" are based on an assumed
fair market value of $7.00 per share at December 31, 2001, without taking into
account any taxes that may be payable in connection with the exercise of
options, multiplied by the number of shares underlying the option, less the
exercise price payable for these shares. This assumed fair market value does
not necessarily represent the actual value of our stock at December 31, 2001.

<TABLE>
<CAPTION>
                                      Number of Securities
                                     Underlying Unexercised   Value of Unexercised In-
                   Shares                  Options at           the-Money Options at
                  Acquired              December 31, 2001         December 31, 2001
                    upon    Value   ------------------------- -------------------------
      Name        Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
      ----        -------- -------- ----------- ------------- ----------- -------------
<S>               <C>      <C>      <C>         <C>           <C>         <C>
Steven M. Nielsen    --      $ --     317,800      215,501     $363,807     $165,120
Timothy J. Medina   100        --      84,133      251,626           --           --
John Stevens.....   100        --       3,827      196,073           --           --
David L. Standig.    --        --     299,515           --      375,987           --
John P. Hart, Jr.    --        --     252,973           --      317,563           --
</TABLE>

Compensation of Directors

   Currently, we do not compensate our directors. No director who is one of our
employees receives separate compensation for services rendered as a director.

Compensation Committee Interlocks and Insider Participation

   Messrs. Boschulte, Kwait and Stadler served as members of the compensation
committee during 2001. None of our executive officers has served as a director
or member of the compensation committee, or other committee serving an
equivalent function, of any entity of which an executive officer has served as
a member of the compensation committee of our board of directors.

Management Stock Incentive Plan

   Our Management Stock Incentive Plan was adopted by our board of directors
and stockholders in December 1999 and was amended in September 2000 and May
2001. The purpose of the plan is to attract and retain the services of our key
management employees, outside directors and consultants by providing those
persons with a proprietary interest in us. The plan allows us to provide that
proprietary interest through the grant of:

  .  incentive stock options within the meaning of Section 422 of the Internal
     Revenue Code;

  .  nonqualified stock options;

  .  stock appreciation rights; and

  .  restricted stock.

   A total of 2,500,000 shares of class B common stock may be issued under the
plan. As of December 31, 2001, an aggregate of 2,409,467 shares were subject to
outstanding options granted under the plan, 35,400 shares had been issued upon
exercise of options and 90,533 shares were available for future grants. The
maximum number of shares with respect to which awards may be granted to any
individual may not exceed 606,594 shares during any calendar year.

   Our compensation committee administers the plan and is authorized, subject
to the provisions of the plan, to grant awards and establish rules and
regulations as it deems necessary for the proper administration of the option

                                      64

<PAGE>

plan and to make whatever determinations and interpretations it deems necessary
or advisable. The compensation committee has authority to determine:

  .  to whom awards are granted;

  .  the number of shares subject to an award;

  .  the term and vesting period of the award;

  .  the exercise or purchase price of an award (which price, in the case of
     incentive options, may not be less than the fair market value of the stock
     on the date of grant, or 110% of fair market value if the option recipient
     owns more than 10% of the total voting power of our capital stock);

  .  any restrictions on sale and repurchase rights which are to be placed on
     shares purchased upon exercise of an award; and

  .  other terms, provisions, limitations and performance requirements approved
     by the committee, but not inconsistent with the plan.

   The exercise price for each option may be paid in cash, or if permitted by
the applicable option agreement or the compensation committee, with surrendered
shares of stock or through a procedure involving a broker-assisted sale of
option shares which have been held for at least six months. The maximum term of
incentive stock options is ten years and nonqualified stock options may have a
term of up to ten years and 30 days. No awards may be granted under the plan
after December 20, 2009.

Employment Agreements

  Employment Agreements

   We entered into employment agreements effective in December 1999 with
Messrs. Standig and Hart, in May 2000 with Mr. Nielsen, in May 2001 with Mr.
Medina and in November 2001 with Mr. Stevens. The term of each of Messrs.
Standig's, Hart's and Nielsen's agreements ends on December 31, 2002. The term
of Mr. Medina's agreement ends on May 7, 2004. The term of Mr. Stevens's
agreement ends on November 19, 2004.

   Messrs. Standig and Hart each received an annual base salary of $175,000 for
the first four months of 2000 and $200,000 for the remainder of 2000. Messrs.
Standig and Hart were each entitled to receive $205,000 in 2001. Mr. Nielsen
received an annual base salary of $200,000 from May 1, 2000 to November 15,
2000 and $275,000 during the remainder of 2000 and in 2001. Mr. Nielsen is
entitled to receive $285,000 in 2002. Mr. Medina received an annual base salary
of $200,000 in 2001. Mr. Medina is entitled to receive $205,000 in 2002,
$210,000 in 2003 and $215,000 from January 1, 2004 to May 7, 2004. Mr. Stevens
received an annual base salary of $200,000 in 2001. Mr. Stevens is entitled to
receive $200,000 in 2002, $205,000 in 2003 and $210,000 from January 1, 2004 to
November 19, 2004.

   In addition, Messrs. Nielsen, Medina and Stevens are, and Messrs. Standig
and Hart were, each eligible to receive an annual bonus of up to 100% of their
current base salary upon the achievement of performance-based targets set by
our chief executive officer and our board of directors, and in the case of Mr.
Nielsen, our board of directors. Each officer's bonus is calculated by
multiplying his potential bonus by the percentage of his performance-based
target that he achieves. No bonus will be paid to an officer if he does not
achieve at least 75% of his performance-based target.

   Pursuant to the terms of their agreements, Messrs. Standig and Hart received
a bonus of $175,000, inclusive of restricted stock awards, in 1999. Pursuant to
the terms of their agreements, Mr. Standig received no bonus, Mr. Hart received
a bonus of $148,394 and Mr. Nielsen received a bonus of $190,000 in 2000, which
bonuses were

                                      65

<PAGE>

paid in March 2001. Pursuant to the terms of their agreements, Mr. Nielsen
received a bonus of $252,000, Mr. Medina received a bonus of $185,000 and Mr.
Stevens received a bonus of $20,945 in 2001, which bonuses were paid in March
2002.

   We agreed to lease residential housing for Messrs. Nielsen, Stevens and
Medina at a cost of up to $1,500 per month during the first four months of each
officer's employment and to reimburse the officer for relocation costs of up to
$25,000 plus additional amounts, or in the case of Mr. Nielsen, up to $100,000.
Mr. Medina is also entitled to a housing allowance of up to $3,500 per month
during the period beginning after the first four months of his employment and
ending on May 7, 2003.

   If we terminate Mr. Nielsen's employment agreement for other than cause or
disability, we are required to pay Mr. Nielsen, in addition to accrued bonus
amounts and benefits, the lesser of (1) his base salary for the remainder of
the term of his employment agreement or (2) the base salary he would be
entitled to receive if he remained employed for the 12-month period following
the termination date. If we terminate Mr. Medina's or Mr. Stevens's employment
agreement for other than cause or disability during the first 12 months of the
officer's employment, we are required to pay the officer, in addition to
accrued bonus amounts and benefits, the base salary he would be entitled to
receive if he remained employed for the 24-month period following the
termination date. If we terminate Mr. Medina's or Mr. Stevens's employment
agreement for other than cause or disability during the second 12 months of the
officer's employment, we are required to pay the officer, in addition to
accrued bonus amounts and benefits, the base salary he would be entitled to
receive if he remained employed for the 12-month period following the
termination date. If we terminate Mr. Medina's or Mr. Stevens's employment
agreement for other than cause or disability after the second 12 months of the
officer's employment, we are required to pay the officer, in addition to
accrued bonus amounts and benefits, his base salary for the remainder of the
term of his employment agreement.

  Amendments to Employment Agreements

   In December 2001, in connection with the signing of the merger agreement
with US Unwired, we amended Messrs. Nielsen's and Medina's employment
agreements, effective upon consummation of the proposed merger with US Unwired.

   Mr. Nielsen's employment agreement, as amended, provides that if Mr.
Nielsen's employment were terminated for other than cause or disability, Mr.
Nielsen would be entitled to receive an amount equal to the base salary that
would be due to him for the 12 months following the termination date,
calculated as if Mr. Nielsen were employed during such 12 months. Mr. Nielsen's
amendment also provides that, in the event the proposed merger is consummated,
the provisions of his employment agreement relating to title and duties would
be satisfied if he serves as chief operating officer of US Unwired and performs
such duties as are appropriate to such office, and the term of Nielsen's
employment would be extended from December 31, 2002 to December 31, 2003. The
merger agreement provides that Mr. Nielsen will serve as chief operating
officer of US Unwired.

   Mr. Medina's employment agreement, as amended, provides that if Mr. Medina's
employment were terminated for other than cause or disability, Mr. Medina would
be entitled to receive amounts as follows: (1) if his employment is terminated
within 90 days of the consummation of the merger, or if later, prior to July
31, 2002, an amount equal to two times his base salary then in effect; (2) if
his employment is terminated after such date and prior to May 7, 2003, an
amount equal to the base salary that would be due to him for the 12 months
following the termination date; and (3) if his employment is terminated after
May 7, 2003 and prior to May 7, 2004, an amount equal to the base salary that
would be due to him for the remainder of his term of employment.

  Separation Agreements

   In April 2001, we and Mr. Standig entered into a separation agreement
pursuant to which Mr. Standig's employment with us was terminated. We paid Mr.
Standig approximately $306,000 as severance pursuant to the separation
agreement. We also forgave $19,967 of accrued interest on loans made by us to
Mr. Standig.

                                      66

<PAGE>

Mr. Standig was required to repay in full principal on the loans totaling
$193,313 in accordance with the separation agreement. Mr. Standig retained
vested options to purchase 299,515 shares of class B common stock at an
exercise price of $5.74468 per share and forfeited his remaining options. Mr.
Standig's retained options are exercisable until September 30, 2002. We also
repurchased, at their original cost, 30,077 shares of class B common stock held
by Mr. Standig for a total purchase price of $172,784.

   In November 2001, we and Mr. Hart entered into a separation agreement
pursuant to which Mr. Hart's employment with us was terminated. We paid Mr.
Hart approximately $209,167 as severance pursuant to the separation agreement.
Mr. Hart was required to repay in full accrued interest and principal on loans
made by us to Mr. Hart totaling $168,756 in accordance with the separation
agreement. Mr. Hart retained vested options to purchase 252,973 shares of class
B common stock at an exercise price of $5.74468 per share and forfeited his
remaining options. Mr. Hart's retained options are exercisable until October
29, 2002. We also repurchased, at their original cost, 30,077 shares of class B
common stock held by Mr. Hart for a total purchase price of $172,784.

Option Agreements

   In connection with their employment agreements, we granted Mr. Standig
options to purchase 505,618 shares of class B common stock and Mr. Hart options
to purchase 337,079 shares of class B common stock, each at an exercise price
of $5.74468 per share. In March 2000, we also granted each of Messrs. Standig
and Hart additional options to purchase 50,000 shares of class B common stock
at an exercise price of $5.74468 per share. All of the options retained by
Messrs. Standig and Hart in connection with their separation agreements are
exercisable.

   In connection with Mr. Nielsen's employment agreement, we granted Mr.
Nielsen options to purchase 337,079 shares of class B common stock at an
exercise price of $5.74468 per share. In September 2000, we also granted Mr.
Nielsen additional options to purchase 84,270 shares of class B common stock at
an exercise price of $5.74468 per share. Options for 84,270 shares were vested
upon grant, options for 126,404 shares vest daily over a period of 975 days
commencing May 1, 2000 and options for 126,404 shares vest in thirds at the end
of 2000, 2001 and 2002 based upon the achievement of performance-based targets
set by our chief executive officer and our board of directors in consultation
with the option holder. Any portion of the performance-based vesting options
that have not vested by December 20, 2004 will vest on December 20, 2004. We
also granted additional options to purchase class B common stock to Mr. Nielsen
as shown in the table contained in "--Executive Compensation--Stock Option
Grants in 2001."

   In connection with their employment agreements, we granted options to
purchase class B common stock to Messrs. Medina and Stevens as shown in the
table contained in "--Executive Compensation--Stock Option Grants in 2001."

   All of the unexercisable options held by Messrs. Nielsen, Medina and Stevens
will become immediately exercisable upon a change of control, but only if a
certain annual rate of return has occurred on an investment in our stock. To
the extent only a portion of the annual rate of return has been achieved, a pro
rata portion of the unexercisable options will become exercisable. For each of
Messrs. Nielsen, Medina and Stevens, if the change of control transaction
involves a merger or consolidation under specified circumstances, 20% instead
of 100% of the unexercisable options will become exercisable.

Item 12.   Security Ownership of Certain Beneficial Owners and Management.

   Our outstanding capital stock consists of five classes of common stock,
class A common stock, class B common stock, class C common stock, class D
common stock and class E common stock. Holders of class A common stock, class C
common stock and class E common stock do not have any voting rights. Holders of
class B common stock are entitled to one vote per share, and holders of class D
common stock are entitled to 402.7 votes per share.

                                      67

<PAGE>

   As of March 1, 2002, we had 13,429,099 shares of class B common stock
outstanding and 60,000 shares of class D common stock outstanding. Investcorp
S.A. and certain co-investors arranged by Investcorp beneficially own 3.5% of
the outstanding class B common stock and 100% of the outstanding class D common
stock, representing approximately 65.5% of our total voting power.

   The following tables present information regarding the beneficial ownership
of our class B common stock as of March 1, 2002 by:

  .  each person, or group of affiliated persons, who is known by us to
     beneficially own 5% or more of our class B common stock;

  .  each of our named executive officers;

  .  each of our directors; and

  .  all current directors and executive officers as a group;

and our class D common stock as of March 1, 2002 by each person, or group of
affiliated persons, who is known by us to beneficially own 5% or more of our
class D common stock.

   Beneficial ownership is determined in accordance with the rules of the SEC
and generally includes voting or investment power with respect to securities.
Shares of class B common stock subject to options that are currently
exercisable or exercisable within 60 days of March 1, 2002 are deemed
outstanding for purposes of computing the percentage ownership of any person.
These shares, however, are not considered outstanding when computing the
percentage ownership of any other person. Except as indicated in the footnotes
to this table and pursuant to state community property laws, each stockholder
named in the table has sole voting and investment power for the shares shown as
beneficially owned by them. Percentage of ownership is based on 13,429,099
shares of class B and 60,000 shares of class D common stock outstanding as of
March 1, 2002.

   We have entered into a stockholders agreement with certain of our
stockholders with respect to the voting, and in certain circumstances the
disposition, of the shares of our capital stock. All such stockholders may be
deemed to be a control group for such purposes, and each stockholder may thus
be deemed to beneficially own all shares owned by all other such stockholders.
Because we believe that it more accurately reflects ownership of our capital
stock, this table does not reflect shares which may be deemed to be
beneficially owned by any entity solely by virtue of the stockholders agreement.

                                      68

<PAGE>

                             Class B Common Stock

<TABLE>
<CAPTION>
                                          Number of     Options    Percentage
                                            Shares    Included in   of Class
                                         Beneficially Beneficial  Beneficially
 Beneficial Owner                           Owned      Ownership     Owned
 ----------------                        ------------ ----------- ------------
 <S>                                     <C>          <C>         <C>
 5% Stockholders:
 Odyssey Investment Partners Fund, LP(1)   4,992,613          --      37.2%
 Delhi PCS Inc.(2)......................   1,000,069          --       7.4%
 Newport PCS Inc.(3)....................   1,000,069          --       7.4%
 William W. Griswold(4).................     951,411          --       7.1%
 Adirondack Capital LLC(5)..............     950,000          --       7.1%
 Larry S. Roadman(6)....................     932,048          --       6.9%
 Paul H. Griswold(7)....................     925,411          --       6.9%
 Finger Lakes Technologies Group Inc.(8)     894,754          --       6.7%
 Dry Brook Holdings LLC(9)..............     857,143          --       6.4%
 TCW-related entities(10)...............     814,287          --       6.1%
 Charles Lane(11).......................     760,020          --       5.7%

 Named Executive Officers and Directors:
 Steven M. Nielsen(12)..................     409,729     343,729       3.0%
 Timothy J. Medina(12)..................     106,236     102,536       0.8%
 John Stevens(12).......................      31,386      29,786       0.2%
 John P. Hart, Jr.(13)..................     252,973     252,973       1.9%
 David L. Standig(14)...................     306,614     299,515       2.2%
 Solon L. Kandel(15)....................   1,516,853   1,516,853      10.1%
 J.K. Hage III(16)......................   1,340,402     318,079       9.8%
 Christopher J. Stadler(17).............          --          --        --
 Mamoun Askari(17)......................          --          --        --
 James O. Egan(17)......................          --          --        --
 Thomas J. Sullivan(17).................          --          --        --
 Savio W. Tung(17)......................          --          --        --
 Christopher J. O'Brien(17).............          --          --        --
 Charles K. Marquis(17).................          --          --        --
 Alfred F. Boschulte(18)................     391,529     183,146       2.9%
 Brian Kwait(19)........................   4,992,613          --      37.2%
 Harley Ruppert(20).....................   1,000,069          --       7.4%
 All directors and executive officers as
   a group (17 persons).................  10,348,405   3,046,619      62.8%
</TABLE>

                                      69

<PAGE>

                             Class D Common Stock

<TABLE>
<CAPTION>
                                                   Number of Shares  Percentage of Class
Beneficial Owner                                  Beneficially Owned Beneficially Owned
----------------                                  ------------------ -------------------
<S>                                               <C>                <C>
Investcorp S.A.(21)..............................       60,000              100.0%
SIPCO Limited(22)................................       60,000              100.0%
CIP Limited (23).................................       55,200               92.0%
Investcorp Investment Equity Limited(24).........        4,800                8.0%
Ballet Limited(25)...............................        5,520                9.2%
Denary Limited(25)...............................        5,520                9.2%
Gleam Limited(25)................................        5,520                9.2%
Highlands Limited(25)............................        5,520                9.2%
Noble Limited(25)................................        5,520                9.2%
Outrigger Limited(25)............................        5,520                9.2%
Quill Limited(25)................................        5,520                9.2%
Radial Limited(25)...............................        5,520                9.2%
Shoreline Limited(25)............................        5,520                9.2%
Zinnia Limited(25)...............................        5,520                9.2%
</TABLE>
--------
 (1) Includes 35,905 shares of class B common stock owned by Odyssey
     Coinvestors, LLC, an affiliate of Odyssey Investment Partners Fund, LP.
     The address of Odyssey Investment Partners Fund, LP is 280 Park Avenue,
     38th Floor, New York, New York 10017. Brian Kwait is a managing member of
     the general partner of Odyssey Investment Partners Fund, LP and a managing
     member of Odyssey Coinvestors, LLC. Mr. Kwait may be deemed to have
     beneficial ownership of the shares because he shares voting and investment
     power with respect to the shares. Mr. Kwait disclaims beneficial ownership
     of all of the shares. Mr. Kwait's address is c/o Odyssey Investment
     Partners, LLC, 280 Park Avenue, 38th Floor, New York, New York 10017.
 (2) The address of Delhi PCS Inc. is P.O. Box 271, 107 Main Street, Delhi, New
     York 13753. Curtis W. Barker is the president of Delhi PCS Inc. Mr. Barker
     may be deemed to have beneficial ownership of the shares because he shares
     voting and investment power with respect to the shares. Mr. Barker's
     address is c/o Delhi PCS Inc., P.O. Box 271, 107 Main Street, Delhi, New
     York 13753.
 (3) The address of Newport PCS Inc. is P.O. Box 201, Bridge Street, Newport,
     New York 13416. Harley Ruppert is the president of Newport PCS Inc. Mr.
     Ruppert may be deemed to have beneficial ownership of the shares because
     he shares voting and investment power with respect to the shares. Mr.
     Ruppert's address is c/o Newport PCS Inc., P.O. Box 201, Bridge Street,
     Newport, New York 13416.
 (4) Includes 894,754 shares of class B common stock owned by Finger Lakes
     Technologies Group Inc., an affiliate of Mr. William W. Griswold. The
     address of Mr. William W. Griswold is c/o Finger Lakes Technologies Group
     Inc., P.O. Box 39, 75 Main Street, Phelps, New York 14532.
 (5) The address of Adirondack Capital LLC is c/o Hage and Hage LLC, 610
     Charlotte Street, Utica, New York 13501. J.K. Hage III is the manager of
     Adirondack Capital LLC. Mr. Hage may be deemed to have beneficial
     ownership of the shares because he shares voting and investment power with
     respect to the shares. Mr. Hage's address is c/o Hage and Hage LLC, 610
     Charlotte Street, Utica, New York 13501.
 (6) Includes 857,143 shares of class B common stock owned by Dry Brook
     Holdings LLC and 71,678 shares of class B common stock owned by MTC North,
     Inc., each an affiliate of Mr. Roadman. The address of Mr. Roadman is c/o
     Margaretville Telephone Company, P.O. Box 260, 50 Swart Street,
     Margaretville, New York 12455.
 (7) Includes 894,754 shares of class B common stock owned by Finger Lakes
     Technologies Group Inc., an affiliate of Mr. Paul H. Griswold. The address
     of Mr. Paul H. Griswold is c/o Finger Lakes Technologies Group Inc., P.O.
     Box 39, 75 Main Street, Phelps, New York 14532.
 (8) The address of Finger Lakes Technologies Group Inc. is 11 Framark Drive,
     Suite 20, Victor, New York 14564. Paul H. Griswold is the president of
     Finger Lakes Technologies Group Inc. William W. Griswold is

                                      70

<PAGE>

    an associate of Mr. Paul H. Griswold and an affiliate of Finger Lakes
    Technologies Group Inc. Each of Messrs. Griswold and Griswold may be deemed
    to have beneficial ownership of New York 14564. Mr. William W. Griswold's
    address is c/o Trumansburg Home Telephone Co., P.O. Box 712, Trumansburg,
    New York 14886.
 (9) The address of Dry Brook Holdings LLC is c/o Margaretville Telephone
     Company, P.O. Box 260, 50 Swart Street, Margaretville, New York 12455.
     Larry S. Roadman is the manager of Dry Brook Holdings LLC. Mr. Roadman may
     be deemed to have beneficial ownership of the shares because he shares
     voting and investment power with respect to the shares. Mr. Roadman's
     address is c/o Margaretville Telephone Company, P.O. Box 260, 50 Swart
     Street, Margaretville, New York 12455.
(10) Consists of 651,429 shares beneficially owned by TCW/Crescent Mezzanine,
     LLC and 162,858 shares beneficially owned by The TCW Group, Inc. The
     TCW-related parties are each a party to our stockholders agreement. The
     number of shares beneficially owned by TCW/Crescent Mezzanine, LLC
     includes 127,094 shares owned by TCW/Crescent Mezzanine Trust II and
     524,335 shares owned by TCW/Crescent Mezzanine Partners II, L.P. The
     business, property and affairs of TCW/Crescent Mezzanine, LLC are managed
     exclusively by its board of directors, which consists of the following
     individuals: Mark L. Attanasio, Robert D. Beyer, Jean-Marc Chapus, Jack D.
     Furst, Thomas O. Hicks, William C. Sonneborn and Marc I. Stern. The
     address of TCW/Crescent Mezzanine, LLC is 11100 Santa Monica Blvd, Suite
     2000, Los Angeles, California 90025. The number of shares beneficially
     owned by The TCW Group, Inc. includes 53,743 shares owned by TCW Leveraged
     Income Trust, L.P., 53,743 shares owned by TCW Leveraged Income Trust II,
     L.P. and 55,372 shares owned by TCW Leveraged Income Trust IV, L.P. The
     TCW Group, Inc. may be deemed to be controlled by Societe Generale Asset
     Management, S.A., a company incorporated under the laws of France. Societe
     Generale Asset Management, S.A. is owned by Societe Generale, S.A., a
     company incorporated under the laws of France. The address of The TCW
     Group, Inc. is 865 South Figueroa Street, Suite 1800, Los Angeles,
     California 90017.
(11) Includes 421,210 shares of class B common stock owned by Cerberus
     Investments L.P. and 31,520 shares of class B common stock owned by
     Ardinger Investments of Texas L.P., each an affiliate of Mr. Lane. Mr.
     Lane's address is c/o Applebee Group, Inc., 500 Executive Boulevard, Suite
     201, Ossining, New York 10562.
(12) The address of each of Messrs. Nielsen, Medina and Stevens is c/o IWO
     Holdings, Inc., 52 Corporate Circle, Albany, New York 12203. The number in
     the column "Options Included in Beneficial Ownership" for Messrs. Stevens
     are calculated assuming that all performance-based vesting options
     eligible for vesting on March 31, 2002 do in fact vest.
(13) Mr. Hart's address is 2593 Route 21, Mile Hill Road, Valatie, New York
     12184.
(14) Mr. Standig's address is 22 Gullane Drive, Slingerlands, New York 12159.
(15) Mr. Kandel's address is 592 Ashwood Drive, Springfield, New Jersey 07081.
(16) Includes 950,000 shares of class B common stock held by Adirondack Capital
     LLC, an affiliate of J.K. Hage III. Mr. Hage's address is c/o Hage and
     Hage LLC, 610 Charlotte Street, Utica, New York 13501.
(17) The address of each of Messrs. Stadler, Askari, Egan, Sullivan, Tung,
     O'Brien and Marquis is c/o Investcorp International Inc., 280 Park Avenue,
     37th Floor, New York 10017.
(18) Mr. Boschulte's address is c/o Detecon, Inc., 10700 Parkridge Boulevard,
     Suite 100, Reston, Virginia 20191.
(19) Consists of 4,956,708 shares of class B common stock held by Odyssey
     Investment Partners Fund, LP and 35,905 shares of class B stock held by
     Odyssey Coinvestors, LLC. Mr. Kwait is a managing member of the general
     partner of Odyssey Investment Partners Fund, LP and a managing member of
     Odyssey Coinvestors, LLC. Mr. Kwait may be deemed to have beneficial
     ownership of the shares because he shares voting and investment power with
     respect to the shares. Mr. Kwait disclaims beneficial ownership of all of
     the shares. Mr. Kwait's address is c/o Odyssey Investment Partners, LLC,
     280 Park Avenue, 38th Floor, New York, New York 10017.
(20) Consists of 1,000,069 shares of class B common stock held by Newport PCS
     Inc., an affiliate of Mr. Ruppert. Mr. Ruppert's address is c/o Newport
     PCS Inc., P.O. Box 201, Bridge Street, Newport, New York 13416.

                                      71

<PAGE>

(21) Investcorp S.A. does not directly own any of our class D common stock. The
     number of shares of class D common stock shown as beneficially owned by
     Investcorp includes all of the shares of class D stock beneficially owned
     by Investcorp Investment Equity Limited, Ballet Limited, Denary Limited,
     Gleam Limited, Highlands Limited, Noble Limited, Outrigger Limited, Quill
     Limited, Radial Limited, Shoreline Limited and Zinnia Limited. Investcorp
     Investment Equity Limited is a Cayman Islands corporation and a
     wholly-owned subsidiary of Investcorp. Investcorp owns no stock in Ballet
     Limited, Denary Limited, Gleam Limited, Highlands Limited, Noble Limited,
     Outrigger Limited, Quill Limited, Radial Limited, Shoreline Limited or
     Zinnia Limited, each of which is a Cayman Islands corporation, or in the
     beneficial owners of these entities. Investcorp may be deemed to share
     beneficial ownership of the shares of class D common stock held by these
     entities because the entities have entered into revocable management
     services or similar agreements with an affiliate of Investcorp, pursuant
     to which each such entity has granted such affiliate the authority to
     direct the voting and disposition of the shares owned by such entity for
     so long as such agreement is in effect. Investcorp is a Luxembourg
     corporation with its address at 37 rue Notre-Dame, Luxembourg.
(22) SIPCO Limited may be deemed to control Investcorp through its ownership of
     a majority of a company's stock that indirectly owns a majority of
     Investcorp's shares. The address of SIPCO Limited is P.O. Box 1111, West
     Wind Building, George Town, Grand Cayman, Cayman Islands, British West
     Indies.
(23) CIP Limited does not directly own any of our class D common stock. CIP
     Limited indirectly owns less than 0.1% of the stock of each of Ballet
     Limited, Denary Limited, Gleam Limited, Highlands Limited, Noble Limited,
     Outrigger Limited, Quill Limited, Radial Limited, Shoreline Limited and
     Zinnia Limited. CIP Limited may be deemed to share beneficial ownership of
     the shares of our class D common stock held by such entities because CIP
     Limited acts as a director of revocable proxies in companies that own
     those entities' stock. None of the ultimate beneficial owners of such
     entities beneficially owns individually more than 5% of our class D common
     stock. The address of CIP Limited is P.O. Box 2197, West Wind Building,
     George Town, Grand Cayman, Cayman Islands, British West Indies.
(24) The address of Investcorp Investment Equity Limited is P.O. Box 1111, West
     Wind Building, GeorgeTown, Grand Cayman, Cayman Islands, British West
     Indies.
(25) The address of each of Ballet Limited, Denary Limited, Gleam Limited,
     Highlands Limited, Noble Limited, Outrigger Limited, Quill Limited, Radial
     Limited, Shoreline Limited and Zinnia Limited is P.O. Box 2197, West Wind
     Building, George Town, Grand Cayman, Cayman Islands, British West Indies.

Item 13.  Certain Relationships and Related Transactions.

   We have engaged in the following transactions with our directors, executive
officers and holders of more than 5% of our voting securities and their
respective affiliates since the beginning of 2001. Our policy towards entering
into related party transactions is to present proposed transactions to our
board of directors, to the extent that any material value is involved, which
will review such transactions on a case-by-case basis. For additional related
party transactions, see "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations--Related Party Transactions."

Founders and Management Warrants

   In connection with the merger agreement which we and US Unwired entered into
in December 2001, we and US Unwired entered into warrant exchange agreements
with the holders of warrants to purchase shares of class B common stock at an
exercise price of $5.74468 per share which we initially issued to our founders
and management. In connection with the merger, these warrants will be exchanged
for warrants to purchase US Unwired common stock, including founders warrants
and management warrants held by the following directors, executive officers and
holders of more than 5% of our voting securities and their respective
affiliates: J.K. Hage III; Adirondack Capital LLC; Steven M. Nielsen; Odyssey
Investment Partners Fund, LP; Investcorp IWO Limited Partnership; Adirondack
Capital LLC; Delhi PCS Inc.; Newport PCS Inc.; Finger Lakes Technologies Group
Inc.; Dry Brook Holdings LLC; and Cerberus Investments LP.

                                      72

<PAGE>

   With the exception of Mr. Nielsen's warrants, each new warrant will have the
same terms and provisions as the exchanged warrant except that the number of
shares subject to the new warrant will be equal to half of the number of shares
subject to the exchanged warrant, adjusted for the exchange ratio, the exercise
price of the new warrant will be adjusted for the exchange ratio and the new
warrant will be exercisable in full on or after the effective time of the
merger. Mr. Nielsen's new warrant will have the same terms and provisions as
the exchanged warrant except that the number of shares subject to and the
exercise price of the new warrant will be adjusted for the exchange ratio and
the new warrant will be exercisable in full on or after December 31, 2003.

Management Stock Purchase and Loan

   In December 2000, Mr. Nielsen received a loan from our operating subsidiary,
Independent Wireless One Corporation, in the principal amount of $406,000 to
fund the cost of Mr. Nielsen's purchase of 58,000 shares of our class B common
stock for a purchase price of $406,000. The loan was made to facilitate Mr.
Nielsen's investment in us. The loan is collateralized by the shares purchased
by Mr. Nielsen and is a full recourse loan. Half of the loan is payable on
March 31, 2003, and the other half of the loan was paid on March 30, 2001.
Mr. Nielsen is required to make prepayments on the portion of the loan payable
on March 31, 2003 equal to 20% of the annual cash bonus paid to Mr. Nielsen
pursuant to his employment agreement. The loan bears interest, payable
annually, at the prime rate announced by The Chase Manhattan Bank from time to
time plus the applicable margin related to our senior credit facilities.

Stockholders Agreement

   We have entered into a stockholders agreement with certain of our investors,
including most of the holders of our class B common stock, one holder of our
class C common stock and all of the holders of our class D common stock. The
stockholders agreement grants registration rights with respect to shares of our
capital stock held by these investors and participation rights with respect to
future equity financings by us and contains agreements regarding how the
investors will vote in the election of our directors and restrictions on the
transfer of shares of our capital stock. The stockholders agreement also
provides that certain of our stockholders who are independent telephone
companies will use their commercially reasonable efforts to strategically
augment our network build-out program and imposes certain terms and conditions
on these efforts.

   In connection with the proposed merger with US Unwired, we have agreed to
obtain an amendment to and/or termination of the stockholders agreement prior
to the effective time of the merger.

Transactions with Directors

   We issued 35,000 shares of class B common stock to Alfred F. Boschulte, one
of our directors, in January 2001 and 50,000 shares of class B common stock in
May 2001 upon Mr. Boschulte's exercise of options at an exercise price of
$1.45070 per share. The options were granted to Mr. Boschulte in December 1999
in exchange for Mr. Boschulte's option to acquire a 1% equity interest in
Independent Wireless One Corporation, which option was granted to him in August
1999.

   We have used the services of the law firm of Hage and Hage LLC. J.K. Hage
III, a member of Hage and Hage, is one of our directors and stockholders. We
incurred legal fees payable to Hage and Hage of approximately $896,000 in 2001.

                                      73

<PAGE>

                                    PART IV

Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K.

   (a) The following documents are filed as part of this annual report on Form
10-K:

      1.  Financial Statements.

<TABLE>
<CAPTION>
                                                                               Page
                                                                              Number
                                                                              ------
<S>                                                                           <C>
   IWO Holdings, Inc. and Subsidiaries

   Report of Independent Accountants.........................................   F-2
   Consolidated Balance Sheets...............................................   F-3
   Consolidated Statements of Operations.....................................   F-5
   Consolidated Statements of Stockholders' Equity (Deficit).................   F-6
   Consolidated Statements of Cash Flows.....................................   F-7
   Notes to Consolidated Financial Statements................................  F-10
   Sprint Spectrum Albany, Syracuse and Manchester Markets
   Report of Independent Auditors............................................  F-49
   Statement of Assets Sold..................................................  F-50
   Statements of Revenues and Expenses.......................................  F-51
   Notes to Statement of Assets Sold and Statements of Revenues and Expenses.  F-52
</TABLE>

      2.  Financial Statement Schedules.

<TABLE>
<CAPTION>
                                                                         Page
                                                                        Number
                                                                        ------
  <S>                                                                   <C>
     Report of Independent Accountants on Financial Statement Schedule.  S-1
     Schedule II--Valuation and Qualifying Accounts....................  S-2
</TABLE>

      3.  Exhibits.

   The following exhibits are filed herewith or are incorporated by reference
to exhibits previously filed with the Securities and Exchange Commission:

<TABLE>
<CAPTION>
Exhibit
Number                                            Description
------                                            -----------
<C>     <S>

2.1*    Agreement and Plan of Merger, dated as of December 19, 2001, among US Unwired Inc., Northeast
          Unwired Inc. and IWO Holdings, Inc.

2.2*    Form of Support Agreement, dated as of December 19, 2001, executed by each of Ballet Limited,
          Denary Limited, Gleam Limited, Highlands Limited, Noble Limited, Outrigger Limited, Quill
          Limited, Radial Limited, Shoreline Limited, Zinnia Limited, Investcorp Investment Equity
          Limited, Investcorp IWO Limited Partnership, Odyssey Investment Partners Fund, LP, and
          Odyssey Coinvestors, LLC

2.3*    Form of Support Agreement, dated as of December 19, 2001, executed by each of Alloway Limited,
          Carrigan Limited, Frankfort Limited, Paugus Limited, Wireless International Limited, Wireless
          Equity Limited, Wireless Holdings Limited, Wireless Investments Limited, IWO Equity Limited,
          IWO Investments Limited, Cellular Equity Limited, Mobile Holdings Limited, Wireless IIP
          Limited, Equity IWO Limited, New IWO Equity Limited, New Wireless IIP Limited, and New
          Equity IWO Limited

2.4*    Form of Support Agreement, dated as of December 19, 2001, executed by each of William L.
          Henning, William L. Henning GRAT, Lena B. Henning, Lena B. Henning GRAT, William L.
          Henning, Jr., William L. Henning, Jr. Trust, John A. Henning, John A. Henning Trust, Thomas G.
          Henning, Thomas G. Henning Trust, Henco Enterprises, Cameron Communications Corporation,
          Thomas G. Henning as custodian for William T. Henning, Daniel L. Henning, Madeline E.
          Henning, John A. Henning, Jr., Travis G. Henning, Hillary E. Henning, John D. Henning, Warren
          T. Henning, Katherine A. Henning and Grant T. Henning, and William L. Henning as custodian
          for Katherine A. Henning and Grant T. Henning
</TABLE>

                                      74

<PAGE>

<TABLE>
<CAPTION>
Exhibit
Number                                              Description
------                                              -----------
<C>     <S>

3.1     Amended and Restated Certificate of Incorporation of IWO Holdings, Inc. (incorporated by reference
          to Exhibit 3.1 to IWO Holdings, Inc.'s and Independent Wireless One Corporation's Registration
          Statement on Form S-4, Registration No. 333-58902, filed on April 13, 2001)

3.2     Bylaws of IWO Holdings, Inc., as amended (incorporated by reference to Exhibit 3.2 to IWO
          Holdings, Inc.'s and Independent Wireless One Corporation's Registration Statement on
          Form S-4, Registration No. 333-58902, filed on April 13, 2001)

3.3     Certificate of Incorporation of Independent Wireless One Corporation, as amended (incorporated by
          reference to Exhibit 3.3 to IWO Holdings, Inc.'s and Independent Wireless One Corporation's
          Registration Statement on Form S-4, Registration No. 333-58902, filed on April 13, 2001)

3.4     Bylaws of Independent Wireless One Corporation, as amended (incorporated by reference to Exhibit
          3.4 to IWO Holdings, Inc.'s and Independent Wireless One Corporation's Registration Statement
          on Form S-4, Registration No. 333-58902, filed on April 13, 2001)

4.1     Indenture, dated as of February 2, 2001, among IWO Holdings, Inc., Independent Wireless One
          Corporation and Firstar Bank, N.A., as trustee for the Senior Notes (incorporated by reference to
          Exhibit 4.1 to IWO Holdings, Inc.'s and Independent Wireless One Corporation's Registration
          Statement on Form S-4, Registration No. 333-58902, filed on April 13, 2001)

4.2     Form of certificate of Exchange 14% Rule 144A Senior Notes due 2011 (included in Exhibit 4.1)

4.3     Form of certificate of Exchange 14% Regulation S Senior Notes due 2011 (included in Exhibit 4.1)

4.4     Notes Registration Rights Agreement, dated as of February 2, 2001, among IWO Holdings, Inc. and
          Independent Wireless One Corporation and Credit Suisse First Boston Corporation (acting through
          an affiliate, Donaldson, Lufkin & Jenrette Securities Corporation), Chase Securities Inc., BNP
          Paribas Securities Corp. and UBS Warburg LLC as representatives of the Initial Purchasers
          (incorporated by reference to Exhibit 4.6 to IWO Holdings, Inc.'s and Independent Wireless One
          Corporation's Registration Statement on Form S-4, Registration No. 333-58902, filed on April 13,
          2001)

4.5     Security and Control Agreement, dated as of February 2, 2001, among IWO Holdings, Inc.,
          Independent Wireless One Corporation and Firstar Bank, N.A., as securities intermediary for the
          Senior Notes (incorporated by reference to Exhibit 4.7 to IWO Holdings, Inc.'s and Independent
          Wireless One Corporation's Registration Statement on Form S-4, Registration No. 333-58902,
          filed on April 13, 2001)

10.1+   Sprint PCS Management Agreement, dated as of February 9, 1999, among Independent Wireless One
          Corporation, Sprint Spectrum L.P. and WirelessCo, L.P., as amended by Addendum I, Addendum
          II and Addendum III (incorporated by reference to Exhibit 10.3 to Amendment No. 1 to IWO
          Holdings, Inc.'s Registration Statement on Form S-1, Registration No. 333-39746, filed on
          August 14, 2000)

10.2+   Sprint PCS Services Agreement, dated as of February 9, 1999, between Independent Wireless One
          Corporation and Sprint Spectrum L.P. (incorporated by reference to Exhibit 10.5 to Amendment
          No. 1 to IWO Holdings, Inc.'s Registration Statement on Form S-1, Registration No. 333-39746,
          filed on August 14, 2000)

10.3    Sprint Trademark and Service Mark License Agreement, dated as of February 9, 1999, between
          Independent Wireless One Corporation and Sprint Communications Company, L.P. (incorporated
          by reference to Exhibit 10.3 to IWO Holdings, Inc.'s and Independent Wireless One Corporation's
          Registration Statement on Form S-4, Registration No. 333-58902, filed on April 13, 2001)

10.4    Sprint Spectrum Trademark and Service Mark License Agreement, dated as of February 9, 1999,
          between Independent Wireless One Corporation and Sprint Spectrum L.P. (incorporated by
          reference to Exhibit 10.4 to IWO Holdings, Inc.'s and Independent Wireless One Corporation's
          Registration Statement on Form S-4, Registration No. 333-58902, filed on April 13, 2001)
</TABLE>

                                      75

<PAGE>

<TABLE>
<CAPTION>
Exhibit
Number                                              Description
------                                              -----------
<C>      <S>

10.5*    Consent and Agreement, dated as of December 17, 1999, between Sprint Spectrum L.P., Sprint
           Communications Company, L.P., WirelessCo, L.P. and The Chase Manhattan Bank, as
           administrative agent

10.6.1   Credit Agreement, dated as of December 20, 1999, among Independent Wireless One Corporation,
           as borrower, the lenders thereto from time to time, Chase Securities Inc., as book manager and
           lead arranger, First Union National Bank and BNP Paribas (as successor in interest to Paribas),
           as senior managing agents, UBS AG, Stamford Branch, as documentation agent, and The Chase
           Manhattan Bank, as administrative agent (incorporated by reference to Exhibit 10.27 to IWO
           Holdings, Inc.'s Registration Statement on Form S-1, Registration No. 333-39746, filed on June
           21, 2000)

10.6.2   Amendment No. 1, dated as of June 30, 2000, to the Credit Agreement (incorporated by reference
           to Exhibit 10.6.2 to IWO Holdings, Inc.'s and Independent Wireless One Corporation's
           Registration Statement on Form S-4, Registration No. 333-58902, filed on April 13, 2001)

10.6.3   Amendment No. 2, dated as of December 8, 2000, to the Credit Agreement (incorporated by
           reference to Exhibit 10.6.3 to IWO Holdings, Inc.'s and Independent Wireless One
           Corporation's Registration Statement on Form S-4, Registration No. 333-58902, filed on April
           13, 2001)

10.7.1   Amended and Restated Stockholders Agreement, dated as of December 4, 2000, between IWO
           Holdings, Inc. and the stockholders of IWO Holdings, Inc. party thereto (incorporated by
           reference to Exhibit 10.7.1 to IWO Holdings, Inc.'s and Independent Wireless One
           Corporation's Registration Statement on Form S-4, Registration No. 333-58902, filed on April
           13, 2001)

10.7.2   Amendment No. 1, dated as of April 2, 2001, to the Amended and Restated Stockholders
           Agreement (incorporated by reference to Exhibit 10.7.2 to IWO Holdings, Inc.'s and
           Independent Wireless One Corporation's Registration Statement on Form S-4, Registration No.
           333-58902, filed on April 13, 2001)

10.8*    Office Lease, dated as of July 19, 2001, between Fiftytwocc, LP and Independent Wireless One
           Leased Realty Corporation

10.9     Purchase Agreement, dated January 26, 2001, among IWO Holdings, Inc. and Independent
           Wireless One Corporation and Credit Suisse First Boston Corporation (acting through an
           affiliate, Donaldson, Lufkin & Jenrette Securities Corporation), Chase Securities Inc., BNP
           Paribas Securities Corp. and UBS Warburg LLC as representatives of the Initial Purchasers
           (incorporated by reference to Exhibit 1.1 to IWO Holdings, Inc.'s and Independent Wireless One
           Corporation's Registration Statement on Form S-4, Registration No. 333-58902, filed on April
           13, 2001)

10.10    Warrant Agreement, dated as of February 2, 2001, between IWO Holdings, Inc. and Firstar Bank,
           N.A., as warrant agent (incorporated by reference to Exhibit 10.20 to IWO Holdings, Inc.'s and
           Independent Wireless One Corporation's Registration Statement on Form S-4, Registration No.
           333-58902, filed on April 13, 2001)

10.11    Warrant Registration Rights Agreement, dated as of February 2, 2001, among IWO Holdings, Inc.
           and Credit Suisse First Boston Corporation (acting through an affiliate, Donaldson, Lufkin &
           Jenrette Securities Corporation), Chase Securities Inc., BNP Paribas Securities Corp. and UBS
           Warburg LLC as representatives of the Initial Purchasers (incorporated by reference to Exhibit
           10.21 to IWO Holdings, Inc.'s and Independent Wireless One Corporation's Registration
           Statement on Form S-4, Registration No. 333-58902, filed on April 13, 2001)

10.12.1# Employment Agreement, dated as of April 9, 2000, between IWO Holdings, Inc., Independent
           Wireless One Corporation and Steven M. Nielsen (incorporated by reference to Exhibit 10.12.1
           to IWO Holdings, Inc.'s and Independent Wireless One Corporation's Registration Statement on
           Form S-4, Registration No. 333-58902, filed on April 13, 2001)
</TABLE>

                                      76

<PAGE>

<TABLE>
<CAPTION>
Exhibit
Number                                                Description
------                                                -----------
<C>        <S>

10.12.2#   Letter Agreement, dated September 20, 2000, between IWO Holdings, Inc., Independent Wireless
             One Corporation and Steven M. Nielsen (incorporated by reference to Exhibit 10.12.2 to IWO
             Holdings, Inc.'s and Independent Wireless One Corporation's Registration Statement on Form
             S-4, Registration No. 333-58902, filed on April 13, 2001)

10.12.3#   Amendment to Employment Agreement, dated as of November 15, 2000, to Employment
             Agreement, between IWO Holdings, Inc., Independent Wireless One Corporation and Steven M.
             Nielsen (incorporated by reference to Exhibit 10.12.3 to IWO Holdings, Inc.'s Quarterly Report
             on Form 10-Q, File No. 333-39746, filed on November 7, 2001)

10.12.4*#  Amendment to Employment Agreement, dated as of December 19, 2001, to Employment
             Agreement, between IWO Holdings, Inc., Independent Wireless One Corporation and Steven M.
             Nielsen

10.13.1#   Employment Agreement, dated as of December 20, 1999, between IWO Holdings, Inc.,
             Independent Wireless One Corporation and David L. Standig, as amended (incorporated by
             reference to Exhibit 10.14 to IWO Holdings, Inc.'s Registration Statement on Form S-1,
             Registration No. 333-39746, filed on June 21, 2000)

10.13.2#   Letter Agreement, dated September 1, 2000, between IWO Holdings, Inc., Independent Wireless
             One Corporation and David L. Standig (incorporated by reference to Exhibit 10.13.2 to IWO
             Holdings, Inc.'s and Independent Wireless One Corporation's Registration Statement on Form
             S-4, Registration No. 333-58902, filed on April 13, 2001)

10.13.3#   Letter Agreement, dated as of April 24, 2001, between Independent Wireless One Corporation and
             David L. Standig (incorporated by reference to Exhibit 10.13.3 to IWO Holdings, Inc.'s and
             Independent Wireless One Corporation's Registration Statement on Form S-4, Registration No.
             333-58902, filed on April 13, 2001)

10.14.1#   Employment Agreement, dated as of December 20, 1999, between IWO Holdings, Inc.,
             Independent Wireless One Corporation and John P. Hart, Jr., as amended (incorporated by
             reference to Exhibit 10.15 to IWO Holdings, Inc.'s Registration Statement on Form S-1,
             Registration No. 333-39746, filed on June 21, 2000)

10.14.2#   Letter Agreement, dated September 1, 2000, between IWO Holdings, Inc., Independent Wireless
             One Corporation and John P. Hart, Jr. (incorporated by reference to Exhibit 10.14.2 to IWO
             Holdings, Inc.'s and Independent Wireless One Corporation's Registration Statement on Form
             S-4, Registration No. 333-58902, filed on April 13, 2001)

10.14.3*#  Letter Agreement, dated as of November 13, 2001, between IWO Holdings, Inc., Independent
             Wireless One Corporation and John P. Hart, Jr.

10.15#     IWO Holdings, Inc. Management Stock Incentive Plan, as amended (incorporated by reference to
             Exhibit 10.15 to IWO Holdings, Inc.'s Quarterly Report on Form 10-Q, File No. 333-39746,
             filed on August 28, 2001)

10.16.1#   Stock Option Agreement, dated as of December 20, 1999, between IWO Holdings, Inc. and David
             L. Standig (incorporated by reference to Exhibit 10.16.1 to IWO Holdings, Inc.'s and
             Independent Wireless One Corporation's Registration Statement on Form S-4, Registration No.
             333-58902, filed on April 13, 2001)

10.16.2#   Stock Option Agreement, dated as of December 20, 1999, between IWO Holdings, Inc. and John
             Hart, Jr. (incorporated by reference to Exhibit 10.16.2 to IWO Holdings, Inc.'s and Independent
             Wireless One Corporation's Registration Statement on Form S-4, Registration No. 333-58902,
             filed on April 13, 2001)

10.16.3#   Stock Option Agreement, dated as of March 20, 2000, between IWO Holdings, Inc. and David L.
             Standig (incorporated by reference to Exhibit 10.16.3 to IWO Holdings, Inc.'s and Independent
             Wireless One Corporation's Registration Statement on Form S-4, Registration No. 333-58902,
             filed on April 13, 2001)
</TABLE>

                                      77

<PAGE>

<TABLE>
<CAPTION>
Exhibit
Number                                               Description
------                                               -----------
<C>        <S>

10.16.4#   Stock Option Agreement, dated as of March 20, 2000, between IWO Holdings, Inc. and John Hart,
             Jr. (incorporated by reference to Exhibit 10.16.4 to IWO Holdings, Inc.'s and Independent
             Wireless One Corporation's Registration Statement on Form S-4, Registration No. 333-58902,
             filed on April 13, 2001)

10.16.5#   Stock Option Agreement, dated as of April 9, 2000, between IWO Holdings, Inc. and Steven M.
             Nielsen (incorporated by reference to Exhibit 10.16.5 to IWO Holdings, Inc.'s and Independent
             Wireless One Corporation's Registration Statement on Form S-4, Registration No. 333-58902,
             filed on April 13, 2001)

10.16.6#   Stock Option Agreement, dated as of September 13, 2000, between IWO Holdings, Inc. and
             Steven M. Nielsen (incorporated by reference to Exhibit 10.16.6 to IWO Holdings, Inc.'s and
             Independent Wireless One Corporation's Registration Statement on Form S-4, Registration No.
             333-58902, filed on April 13, 2001)

10.16.7#   Stock Option Agreement, dated as of April 27, 2001, between IWO Holdings, Inc. and Timothy J.
             Medina (incorporated by reference to Exhibit 10.16.7 to IWO Holdings, Inc.'s and Independent
             Wireless One Corporation's Registration Statement on Form S-4, Registration No. 333-58902,
             filed on April 13, 2001)

10.16.8#   Stock Option Agreement, dated as of November 15, 2000, between IWO Holdings, Inc. and
             Steven M. Nielsen (incorporated by reference to Exhibit 10.16.8 to IWO Holdings, Inc.'s
             Quarterly Report on Form 10-Q, File No. 333-39746, filed on November 7, 2001)

10.16.9*#  Stock Option Agreement, dated as of November 5, 2001, between IWO Holdings, Inc. and John
             Stevens

10.16.10*# Amendment to Stock Option Agreement, dated as of December 19, 2001, to Stock Option
             Agreement, between IWO Holdings, Inc. and John Stevens

10.17.1#   Stock Option Agreement, dated as of December 20, 1999, between IWO Holdings, Inc. and J.K.
             Hage III (incorporated by reference to Exhibit 10.17.1 to IWO Holdings, Inc.'s and Independent
             Wireless One Corporation's Registration Statement on Form S-4, Registration No. 333-58902,
             filed on April 13, 2001)

10.17.2#   Stock Option Agreement, dated as of December 20, 1999, between IWO Holdings, Inc. and Solon
             L. Kandel (incorporated by reference to Exhibit 10.20 to IWO Holdings, Inc.'s Registration
             Statement on Form S-1, Registration No. 333-39746, filed on June 21, 2000)

10.17.3#   Stock Option Agreement, dated as of December 20, 1999, between IWO Holdings, Inc. and Alfred
             F. Boschulte (incorporated by reference to Exhibit 10.21 to IWO Holdings, Inc.'s Registration
             Statement on Form S-1, Registration No. 333-39746, filed on June 21, 2000)

10.17.4#   Letter Agreement, dated September 17, 2000, between IWO Holdings, Inc., Independent Wireless
             One Corporation and J.K. Hage III (incorporated by reference to Exhibit 10.17.4 to IWO
             Holdings, Inc.'s and Independent Wireless One Corporation's Registration Statement on Form
             S-4, Registration No. 333-58902, filed on April 13, 2001)

10.17.5#   Consulting Agreement, dated September 17, 2000, between IWO Holdings, Inc., Independent
             Wireless One Corporation and J.K. Hage III (incorporated by reference to Exhibit 10.17.5 to
             IWO Holdings, Inc.'s and Independent Wireless One Corporation's Registration Statement on
             Form S-4, Registration No. 333-58902, filed on April 13, 2001)

10.17.6#   Letter Agreement, dated August 24, 2000, between IWO Holdings, Inc., Independent Wireless One
             Corporation and Solon L. Kandel (incorporated by reference to Exhibit 10.17.6 to IWO
             Holdings, Inc.'s and Independent Wireless One Corporation's Registration Statement on Form
             S-4, Registration No. 333-58902, filed on April 13, 2001)
</TABLE>

                                      78

<PAGE>

<TABLE>
<CAPTION>
Exhibit
Number                                               Description
------                                               -----------
<C>        <S>

10.17.7#   Letter Agreement, dated November 6, 2000, between IWO Holdings, Inc., Independent Wireless
             One Corporation and Solon L. Kandel (incorporated by reference to Exhibit 10.17.7 to IWO
             Holdings, Inc.'s and Independent Wireless One Corporation's Registration Statement on Form
             S-4, Registration No. 333-58902, filed on April 13, 2001)

  10.18#   Form of Management Bonus Stock Purchase Agreement (incorporated by reference to Exhibit
             10.23 to IWO Holdings, Inc.'s Registration Statement on Form S-1, Registration No. 333-39746,
             filed on June 21, 2000)

  10.19#   Form of Management Warrant (incorporated by reference to Exhibit 10.24 to IWO Holdings, Inc.'s
             Registration Statement on Form S-1, Registration No. 333-39746, filed on June 21, 2000)

   10.20   Form of Founders Warrant (incorporated by reference to Exhibit 10.1 to IWO Holdings, Inc.'s
             Registration Statement on Form S-1, Registration No. 333-39746, filed on June 21, 2000)

   10.21   Agreement for Management Advisory, Strategic Planning and Consulting Services, dated as of
             December 20, 1999, between Independent Wireless One Corporation and Investcorp
             International Inc. (incorporated by reference to Exhibit 10.22 to IWO Holdings, Inc.'s
             Registration Statement on Form S-1, Registration No. 333-39746, filed on June 21, 2000)

10.22.1#   Employment Agreement, dated as of April 27, 2001, between IWO Holdings, Inc., Independent
             Wireless One Corporation and Timothy J. Medina (incorporated by reference to Exhibit 10.22.1
             to IWO Holdings, Inc.'s and Independent Wireless One Corporation's Registration Statement on
             Form S-4, Registration No. 333-58902, filed on April 13, 2001)

10.22.2*#  Amendment to Employment Agreement, dated as of December 19, 2001, to Employment
             Agreement, between IWO Holdings, Inc., Independent Wireless One Corporation and Timothy J.
             Medina

10.23.1*#  Employment Agreement, dated as of November 5, 2001, between IWO Holdings, Inc., Independent
             Wireless One Corporation and John Stevens

    21.1   Subsidiaries of IWO Holdings, Inc. (incorporated by reference to Exhibit 21.1 to IWO Holdings,
             Inc.'s Registration Statement on Form S-1, Registration No. 333-39746, filed on June 21, 2000)

    24.1   Power of Attorney (see Signature Pages)
</TABLE>
--------
*  Filed herewith.
+  Confidential treatment has been requested for portions of these exhibits.
   Omitted material has been filed separately with the Securities and Exchange
   Commission.
#  Management contract or compensation plan or arrangement required to be filed
   as an exhibit.

   (b) We did not file any Current Reports on Form 8-K during the quarter ended
December 31, 2001.

                                      79

<PAGE>

                                  SIGNATURES

   In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended, the registrant caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized on March 25, 2002.

                                               IWO HOLDINGS, INC.

                                               By:    /s/  STEVEN M. NIELSEN
                                                   -----------------------------
                                                   Name: Steven M. Nielsen
                                                   Title: President and Chief
                                                   Executive Officer

                               POWER OF ATTORNEY

   KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Steven M. Nielsen and Timothy J. Medina and each
of them, his true and lawful attorneys-in-fact and agents, with full power and
substitution and resubstitution for him and in his name, place and stead, in
any and all capacities to sign any and all amendments to this Annual Report on
Form 10-K, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in and about the premises, as fully to all intents and purposes as
he might or could do in person, hereby ratifying and confirming all that each
said attorneys-in-fact and agents or any of them or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.

   In accordance with the Securities Exchange Act of 1934, as amended, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

          Signature                       Title                  Date
          ---------                       -----                  ----

   /s/  STEVEN M. NIELSEN     President and Chief Executive March 25, 2002
_____________________________   Officer (Principal
      Steven M. Nielsen         Executive Officer)

   /s/  TIMOTHY J. MEDINA     Chief Financial Officer       March 25, 2002
_____________________________   (Principal Financial
      Timothy J. Medina         Officer and Principal
                                Accounting Officer)

     /s/  J.K. HAGE III       Director                      March 25, 2002
_____________________________
        J.K. Hage III

    /s/  SOLON L. KANDEL      Director                      March 25, 2002
_____________________________
       Solon L. Kandel

 /s/  CHRISTOPHER J. STADLER  Director                      March 25, 2002
_____________________________
   Christopher J. Stadler

     /s/  MAMOUN ASKARI       Director                      March 25, 2002
_____________________________
        Mamoun Askari

     /s/  JAMES O. EGAN       Director                      March 25, 2002
_____________________________
        James O. Egan

                                      80

<PAGE>

          Signature                       Title                  Date
          ---------                       -----                  ----

   /S/  THOMAS J. SULLIVAN    Director                      March 25, 2002
_____________________________
     Thomas J. Sullivan

     /S/  SAVIO W. TUNG       Director                      March 20, 2002
_____________________________
        Savio W. Tung

 /S/  CHRISTOPHER J. O'BRIEN  Director                      March 25, 2002
_____________________________
   Christopher J. O'Brien

_____________________________ Director                      March   , 2002
     Alfred F. Boschulte

      /S/  BRIAN KWAIT        Director                      March 21, 2002
_____________________________
         Brian Kwait

   /S/  HARLEY M. RUPPERT     Director                      March 25, 2002
_____________________________
      Harley M. Ruppert

   /S/  CHARLES K. MARQUIS    Director                      March 25, 2002
_____________________________
     Charles K. Marquis

                                      81

<PAGE>

                      IWO HOLDINGS, INC. AND SUBSIDIARIES

                  INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                                Page
                                                                               Number
                                                                               ------
<S>                                                                            <C>
   IWO Holdings, Inc. and Subsidiaries
   Report of Independent Accountants..........................................  F-2
   Consolidated Balance Sheets................................................  F-3
   Consolidated Statements of Operations......................................  F-5
   Consolidated Statements of Stockholders' Equity (Deficit)..................  F-6
   Consolidated Statements of Cash Flows......................................  F-7
   Notes to Consolidated Financial Statements.................................  F-10
   Sprint Spectrum Albany, Syracuse and Manchester Markets
   Report of Independent Auditors.............................................  F-49
   Statement of Assets sold...................................................  F-50
   Statements of Revenues and Expenses........................................  F-51
   Notes to Statement of Assets Sold and Statements of Reveneues and Expenses.  F-52
</TABLE>


                                      F-1

<PAGE>

                       REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of
IWO Holdings, Inc. and Subsidiaries

   In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of stockholders' equity (deficit) and
cash flows present fairly, in all material respects, the financial position of
IWO Holdings, Inc. and its Subsidiaries at December 31, 2000 and 2001, and the
results of their operations and their cash flows for the period January 1, 1999
through December 20, 1999, for the period December 20, 1999 through December
31, 1999 and for the years ended December 31, 2000 and 2001 in conformity with
accounting principles generally accepted in the United States of America. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States of America, which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

                                          /s/  PRICEWATERHOUSECOOPERS LLP

Albany, New York
March 8, 2002

                                      F-2

<PAGE>

                      IWO HOLDINGS, INC. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS

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

<TABLE>
<CAPTION>
                                                                                        2000     2001
                                                                                      -------- --------
<S>                                                                                   <C>      <C>
                                       ASSETS
                                       ------
Current assets:
   Cash and cash equivalents......................................................... $ 36,313 $  3,394
   Accounts receivable, net of allowances of $312 and $615 at December 31, 2000 and
     2001, respectively..............................................................    4,218   10,001
   Short-term investments at amortized cost--held to maturity........................       --   56,519
   Inventory.........................................................................    2,567    4,375
   Prepaid expenses..................................................................    1,072    2,734
   Other current assets..............................................................      199    3,056
   Prepaid management fee--related party.............................................    1,000    1,000
   Restricted cash and U.S. Treasury obligations at amortized cost--held to maturity.       --   33,858
                                                                                      -------- --------
       Total current assets..........................................................   45,369  114,937

Restricted cash......................................................................    8,000    8,000
Restricted cash and U.S. Treasury obligations at amortized cost--held to maturity....       --   19,861
Investment securities at amortized cost--held to maturity............................       --   17,161
Prepaid management fee--related party................................................    2,970    1,970
Property and equipment, net..........................................................   69,555  139,203
Construction in progress.............................................................   33,009   37,023
Deferred costs, net..................................................................   14,898   19,300
Intangible assets, net...............................................................   58,874   52,702
Other................................................................................       24    2,770
                                                                                      -------- --------
       Total assets.................................................................. $232,699 $412,927
                                                                                      ======== ========
</TABLE>


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

                                      F-3

<PAGE>

                      IWO HOLDINGS, INC. AND SUBSIDIARIES

                   CONSOLIDATED BALANCE SHEETS--(Continued)

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

<TABLE>
<CAPTION>
                                                                                       2000      2001
-                                                                                    --------  ---------
<S>                                                                                  <C>       <C>
                       LIABILITIES AND STOCKHOLDERS' EQUITY
                       ------------------------------------

Current liabilities:
   Accounts payable................................................................. $  6,388  $  16,149
   Accounts payable--related parties................................................      213        115
   Due to Sprint....................................................................    7,711      9,163
   Accrued expenses.................................................................   12,432     29,163
   Accrued expenses--related parties................................................      463        724
   Unearned revenue.................................................................    1,652      4,413
                                                                                     --------  ---------
       Total current liabilities....................................................   28,859     59,727
Term loan and revolving credit facility.............................................   80,000    145,000
Senior notes........................................................................       --    152,407
                                                                                     --------  ---------
       Total liabilities............................................................  108,859    357,134
                                                                                     --------  ---------
Redeemable common stock.............................................................      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)--$.01 par value, 18,750,000 shares authorized,
     13,274,171 and 13,533,111 shares issued at December 31, 2000 and 2001,
     respectively...................................................................      133        136
   Common stock, Class C (nonvoting)--$.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    184,305
   Deficit accumulated during development stage.....................................   (1,076)    (1,076)
   Retained deficit.................................................................  (50,080)  (127,021)
                                                                                     --------  ---------
                                                                                      124,489     56,585
Treasury stock at cost (43,856 and 104,012 Class B shares at December 31, 2000 and
  2001), respectively...............................................................     (252)      (598)
Promissory notes receivable.........................................................     (743)      (194)
                                                                                     --------  ---------
       Total stockholders' equity...................................................  123,494     55,793
                                                                                     --------  ---------
       Total liabilities and stockholders' equity................................... $232,699  $ 412,927
                                                                                     ========  =========
</TABLE>

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

                                      F-4

<PAGE>

                      IWO HOLDINGS, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS

           For the period January 1, 1999 through December 20, 1999,
          for the period December 20, 1999 through December 31, 1999
              and for the years ended December 31, 2000 and 2001
                       (In thousands except share data)

<TABLE>
<CAPTION>
                                                       For the Period For the Period
                                                         January 1,    December 20,  For the Year For the Year
                                                        1999 through   1999 through     Ended        Ended
                                                        December 20,   December 31,  December 31, December 31,
                                                            1999           1999          2000         2001
                                                       -------------- -------------- ------------ ------------
<S>                                                    <C>            <C>            <C>          <C>
Net revenues..........................................   $       --    $        --   $    58,836  $   110,145
                                                         ----------    -----------   -----------  -----------
Operating expenses:
   Costs of services and equipment (exclusive of
     depreciation and amortization shown below).......           --             --        48,818       88,924
   Selling and marketing..............................           36              5        19,497       31,749
   General and administrative:
       Noncash stock-based compensation...............        2,900             --         1,817          334
       Related parties................................           30             --         2,193        2,146
       Other general and administrative...............        2,548            839        16,021       22,855
   Depreciation and amortization......................           --             --        12,538       19,102
   Financial advisory fees ($8,750 of fees to related
     parties).........................................        9,250             --            --           --
                                                         ----------    -----------   -----------  -----------
          Total operating expenses....................       14,764            844       100,884      165,110
                                                         ----------    -----------   -----------  -----------
Operating loss........................................      (14,764)          (844)      (42,048)     (54,965)
   Interest income....................................           --            171         2,032        7,594
   Interest expense...................................          (78)            --        (2,918)     (22,963)
   Interest expense--related parties..................           --             --          (614)      (1,515)
   Amortization of debt issuance and offering
     costs............................................           --            (84)       (2,843)      (3,323)
   Other debt financing fees..........................           --           (319)       (3,689)      (1,769)
                                                         ----------    -----------   -----------  -----------
          Net loss....................................   $  (14,842)   $    (1,076)  $   (50,080) $   (76,941)
                                                         ==========    ===========   ===========  ===========
Loss per share
   Basic..............................................   $    (2.36)   $      (.04)  $     (1.63) $     (2.05)
   Diluted............................................   $    (2.36)   $      (.04)  $     (1.63) $     (2.05)
Weighted average shares outstanding
   Basic..............................................    6,300,000     30,150,000    30,770,000   37,554,000
   Diluted............................................    6,300,000     30,150,000    30,770,000   37,554,000
</TABLE>


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

                                      F-5

<PAGE>

                      IWO HOLDINGS, INC. AND SUBSIDIARIES

           CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

   For the period January 1, 1999 through December 20, 1999, for the period
                  December 20, 1999 through December 31, 1999
              and for the years ended December 31, 2000 and 2001
                                (In thousands)

<TABLE>
<CAPTION>
                                                                     Capital Stock
                                                                 --------------------
                                                                           Independent
                                                                    IWO     Wireless     Common   Additional
                                                                 Holdings,     One       Stock     Paid-in
                                                                   Inc.    Corporation Subscribed  Capital
                                                                 --------- ----------- ---------- ----------
<S>                                                              <C>       <C>         <C>        <C>
Balance at December 31, 1998....................................   $ --       $  --      $ 500     $     --
Independent Wireless One Corporation stock issued to Founders
 on March 5, 1999...............................................     --         500       (500)          --
Founders contribute capital to Independent Wireless One
 Corporation....................................................     --          --         --           --
Noncash stock-based compensation................................     --          --         --        2,900
Net loss........................................................     --          --         --           --
                                                                   ----       -----      -----     --------
Balance at December 20, 1999....................................     --         500         --        2,900
Founders exchange stock of Independent Wireless One
 Corporation for stock in IWO Holdings, Inc.....................     60        (500)        --        2,690
Proceeds from IWO Holdings, Inc. stock issuance excluding
 Redeemable common stock........................................    241          --         --      134,449
Costs incurred for IWO Holdings, Inc. stock issuance............     --          --         --       (1,766)
Reclassification of Independent Wireless One Corporation deficit
 Accumulated during the development stage against IWO
 Holdings, Inc. additional paid-in capital......................     --          --         --      (14,907)
Net loss........................................................     --          --         --           --
                                                                   ----       -----      -----     --------
Balance at December 31, 1999....................................    301          --         --      123,366
Stock option exercises..........................................      1          --         --          271
IWO Holdings, Inc. stock issuance...............................     72          --         --       49,928
Costs incurred for IWO Holdings, Inc. stock issuance............     --          --         --          (75)
Reclassification of common stock to redeemable common stock.....     --          --         --         (263)
Reclassification of redeemable common stock to common stock.....     --          --         --          227
Common stock repurchased........................................     --          --         --           --
Promissory notes................................................     --          --         --           --
Noncash stock-based compensation................................     --          --         --        1,817
Net loss........................................................     --                     --           --
                                                                   ----       -----      -----     --------
Balance at December 31, 2000....................................    374          --         --      175,271
Stock option exercises..........................................      3          --         --          396
Payment received on promissory notes receivable.................     --          --         --           --
Issuance of warrants in connection with units offering..........     --          --         --        7,958
Reclassification of redeemable common stock to common stock.....     --          --         --          346
Common stock repurchased........................................     --          --         --           --
Noncash stock-based compensation................................     --          --         --          334
Net loss........................................................     --          --         --           --
                                                                   ----       -----      -----     --------
Balance at December 31, 2001....................................   $377       $  --      $  --     $184,305
                                                                   ====       =====      =====     ========
</TABLE>
<TABLE>
<CAPTION>

                                                                                              Deficit
                                                                                            Accumulated
                                                                                              During
                                                                 Contributed                Development Retained   Treasury
                                                                   Capital                     Stage    Deficit     Stock
                                                                 -----------                ----------- ---------  --------
<S>                                                              <C>                        <C>         <C>        <C>
Balance at December 31, 1998....................................   $    --                   $    (65)  $      --   $  --
Independent Wireless One Corporation stock issued to Founders
 on March 5, 1999...............................................        --                         --          --      --
Founders contribute capital to Independent Wireless One
 Corporation....................................................     2,250                         --          --      --
Noncash stock-based compensation................................        --                         --          --      --
Net loss........................................................        --                    (14,842)         --      --
                                                                   -------                   --------   ---------   -----
Balance at December 20, 1999....................................     2,250                    (14,907)         --      --
Founders exchange stock of Independent Wireless One
 Corporation for stock in IWO Holdings, Inc.....................    (2,250)                        --          --      --
Proceeds from IWO Holdings, Inc. stock issuance excluding
 Redeemable common stock........................................        --                         --          --      --
Costs incurred for IWO Holdings, Inc. stock issuance............        --                         --          --      --
Reclassification of Independent Wireless One Corporation deficit
 Accumulated during the development stage against IWO
 Holdings, Inc. additional paid-in capital......................        --                     14,907          --      --
Net loss........................................................        --                     (1,076)         --      --
                                                                   -------                   --------   ---------   -----
Balance at December 31, 1999....................................        --                     (1,076)         --      --
Stock option exercises..........................................        --                         --          --      --
IWO Holdings, Inc. stock issuance...............................        --                         --          --      --
Costs incurred for IWO Holdings, Inc. stock issuance............        --                         --          --      --
Reclassification of common stock to redeemable common stock.....        --                         --          --      --
Reclassification of redeemable common stock to common stock.....        --                         --          --      --
Common stock repurchased........................................        --                         --          --    (252)
Promissory notes................................................        --                         --          --      --
Noncash stock-based compensation................................        --                         --          --      --
Net loss........................................................        --                         --     (50,080)     --
                                                                   -------                   --------   ---------   -----
Balance at December 31, 2000....................................        --                     (1,076)    (50,080)   (252)
Stock option exercises..........................................        --                         --          --      --
Payment received on promissory notes receivable.................        --                         --          --      --
Issuance of warrants in connection with units offering..........        --                         --          --      --
Reclassification of redeemable common stock to common stock.....        --                         --          --      --
Common stock repurchased........................................        --                         --          --    (346)
Noncash stock-based compensation................................        --                         --          --      --
Net loss........................................................        --                         --     (76,941)     --
                                                                   -------                   --------   ---------   -----
Balance at December 31, 2001....................................   $    --                   $ (1,076)  $(127,021)  $(598)
                                                                   =======                   ========   =========   =====
</TABLE>
<TABLE>
<CAPTION>



                                                                 Promissory Stockholders'
                                                                   Notes       Equity
                                                                 Receivable   (Deficit)
                                                                 ---------- -------------
<S>                                                              <C>        <C>
Balance at December 31, 1998....................................   $  --      $    435
Independent Wireless One Corporation stock issued to Founders
 on March 5, 1999...............................................      --            --
Founders contribute capital to Independent Wireless One
 Corporation....................................................      --         2,250
Noncash stock-based compensation................................      --         2,900
Net loss........................................................      --       (14,842)
                                                                   -----      --------
Balance at December 20, 1999....................................      --        (9,257)
Founders exchange stock of Independent Wireless One
 Corporation for stock in IWO Holdings, Inc.....................      --            --
Proceeds from IWO Holdings, Inc. stock issuance excluding
 Redeemable common stock........................................      --       134,690
Costs incurred for IWO Holdings, Inc. stock issuance............      --        (1,766)
Reclassification of Independent Wireless One Corporation deficit
 Accumulated during the development stage against IWO
 Holdings, Inc. additional paid-in capital......................      --            --
Net loss........................................................      --        (1,076)
                                                                   -----      --------
Balance at December 31, 1999....................................      --       122,591
Stock option exercises..........................................      --           272
IWO Holdings, Inc. stock issuance...............................    (456)       49,544
Costs incurred for IWO Holdings, Inc. stock issuance............      --           (75)
Reclassification of common stock to redeemable common stock.....      --          (263)
Reclassification of redeemable common stock to common stock.....      --           227
Common stock repurchased........................................      --          (252)
Promissory notes................................................    (287)         (287)
Noncash stock-based compensation................................      --         1,817
Net loss........................................................      --       (50,080)
                                                                   -----      --------
Balance at December 31, 2000....................................    (743)      123,494
Stock option exercises..........................................      --           399
Payment received on promissory notes receivable.................     549           549
Issuance of warrants in connection with units offering..........      --         7,958
Reclassification of redeemable common stock to common stock.....      --           346
Common stock repurchased........................................      --          (346)
Noncash stock-based compensation................................      --           334
Net loss........................................................      --       (76,941)
                                                                   -----      --------
Balance at December 31, 2001....................................   $(194)     $ 55,793
                                                                   =====      ========
</TABLE>

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

                                      F-6

<PAGE>

                      IWO HOLDINGS, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

   For the period January 1, 1999 through December 20, 1999, for the period
 December 20, 1999 through December 31, 1999 and for the years ended December
                               31, 2000 and 2001
                                (In thousands)

<TABLE>
<CAPTION>
                                                            For the      For the
                                                             Period       Period
                                                           January 1,  December 20, For the Year For the Year
                                                          1999 through 1999 through    Ended        Ended
                                                          December 20, December 31, December 31, December 31,
                                                              1999         1999         2000         2001
                                                          ------------ ------------ ------------ ------------
<S>                                                       <C>          <C>          <C>          <C>
Cash flows from operating activities:
   Net loss..............................................   $(14,842)    $ (1,076)    $(50,080)    $(76,941)
   Adjustments to reconcile net loss to net cash used
     in operating activities:
       Allowances for doubtful accounts and sales
         returns.........................................         --           --          312          303
       Depreciation and amortization of property and
         equipment.......................................         --           --        6,813       12,930
       Loss on disposal of property and equipment........         --           --           --          105
       Amortization of intangible assets.................         --           --        5,725        6,172
       Amortization of debt issuance and offering
         costs...........................................         --           84        2,843        3,323
       Amortization of discount on senior notes..........         --           --           --          365
       Amortization of net premium of investment
         securities......................................         --           --           --          965
       Noncash stock-based compensation..................      2,900           --        1,817          334
   Changes in operating assets and liabilities net of
     acquired assets:
       Accounts receivable...............................         --           --       (2,279)      (6,086)
       Inventory.........................................        (20)        (295)      (2,252)      (1,808)
       Prepaid expenses..................................       (279)          16         (809)      (1,662)
       Other.............................................         (5)         (61)        (418)      (5,612)
       Prepaid management fee--related party.............         --       (4,970)       1,000        1,000
       Accounts payable..................................        829           67          717          894
       Accounts payable--related parties.................       (198)       4,008       (3,597)         (98)
       Due to Sprint.....................................         --           --        7,711        1,452
       Accrued expenses..................................      1,274         (790)      10,428       16,702
       Accrued expenses--related parties.................         --           --          463          261
       Accrued financial advisory fees...................      9,250       (9,250)          --           --
       Unearned revenue..................................         --           --        1,652        2,761
                                                            --------     --------     --------     --------
          Net cash used in operating activities..........     (1,091)     (12,267)     (19,954)     (44,640)
                                                            --------     --------     --------     --------
</TABLE>

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

                                      F-7

<PAGE>

                      IWO HOLDINGS, INC. AND SUBSIDIARIES

              CONSOLIDATED STATEMENTS OF CASH FLOWS--(Continued)

   For the period January 1, 1999 through December 20, 1999, for the period
 December 20, 1999 through December 31, 1999 and for the years ended December
                               31, 2000 and 2001
                                (In thousands)

<TABLE>
<CAPTION>
                                                              For the      For the
                                                               Period       Period
                                                             January 1,  December 20, For the Year For the Year
                                                            1999 through 1999 through    Ended        Ended
                                                            December 20, December 31, December 31, December 31,
                                                                1999         1999         2000         2001
                                                            ------------ ------------ ------------ ------------
<S>                                                         <C>          <C>          <C>          <C>
Cash flows from investing activities:
   Deferred acquisition costs..............................    (1,635)       (2,375)        (740)          --
   Purchase of Sprint assets...............................        --            --     (116,405)          --
   Purchase of investment securities--held to maturity.....        --            --           --     (105,328)
   Proceeds from maturities of investment securities.......        --            --           --       30,684
   Restricted cash.........................................        --            --       (8,000)          --
   Restricted cash and U.S. Treasury obligations at
     amortized cost--held to maturity......................        --            --           --      (53,719)
   Purchase of property and equipment......................      (251)         (288)     (19,926)     (11,016)
   Construction in progress................................       (84)         (159)     (27,749)     (66,777)
                                                              -------      --------    ---------    ---------
          Net cash used in investing activities............    (1,970)       (2,822)    (172,820)    (206,156)
                                                              -------      --------    ---------    ---------
Cash flows from financing activities:
   Gross proceeds received from equity investors...........     2,250       135,000       49,544           --
   Gross proceeds received from equity investors for
     payment of promissory notes...........................        --            --           --          549
   Stock option exercises..................................        --            --          272          399
   Proceeds received from issuance of debt.................     1,400            --       85,000       65,000
   Proceeds received from issuance of senior notes
     and warrants..........................................        --            --           --      160,000
   Payment of debt.........................................        --        (2,000)      (5,000)          --
   Payment for Company common stock........................        --            --         (252)        (346)
   Payment of offering costs...............................        --            --       (2,234)      (7,725)
   Payment of equity issuance costs........................      (656)         (772)         (75)          --
   Payment of debt issuance costs..........................      (239)      (12,400)      (2,920)          --
                                                              -------      --------    ---------    ---------
          Net cash provided by financing activities........     2,755       119,828      124,335      217,877
                                                              -------      --------    ---------    ---------
Net (decrease) increase in cash and cash equivalents.......      (306)      104,739      (68,439)     (32,919)
Cash and cash equivalents, beginning of period.............       319            13      104,752       36,313
                                                              -------      --------    ---------    ---------
Cash and cash equivalents, end of period...................   $    13      $104,752    $  36,313    $   3,394
                                                              =======      ========    =========    =========
</TABLE>

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

                                      F-8

<PAGE>

                      IWO HOLDINGS, INC. AND SUBSIDIARIES

              CONSOLIDATED STATEMENTS OF CASH FLOWS--(Continued)

   For the period January 1, 1999 through December 20, 1999, for the period
 December 20, 1999 through December 31, 1999 and for the years ended December
                               31, 2000 and 2001
                                (In thousands)

<TABLE>
<CAPTION>
                                                    For the      For the
                                                     Period       Period
                                                   January 1,  December 20, For the Year For the Year
                                                  1999 through 1999 through    Ended        Ended
                                                  December 20, December 31, December 31, December 31,
                                                      1999         1999         2000         2001
                                                  ------------ ------------ ------------ ------------
<S>                                               <C>          <C>          <C>          <C>
Non-cash:
   Deferred costs included in accounts payable
     --related parties...........................     $--          $977        $   --      $    --
   Property and equipment included in accounts
     payable.....................................      --            --           950        7,477
   Property and equipment in accrued expenses....      --            --            --        1,550
   Construction in progress included in accounts
     payable.....................................      --            --         3,835        6,184
   Construction in progress included in accrued
     expenses....................................      --            --         1,521           --
   Issuance of common stock for promissory notes.      --            --           456           --
Interest paid....................................      78            --         3,403       18,068
</TABLE>


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

                                      F-9

<PAGE>

                      IWO HOLDINGS, INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  Description of Business

   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 (see Note 3). 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. (see Note 11). 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. Such assets
did not meet the definition of a business under EITF Topic D-81 and accordingly
were recorded at the transferor's historical cost basis in accordance with
Staff Accounting Bulletin No. 48. 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").

   A significant portion of IWO's business operations through December 31, 1999
relates to pre-operating, organizational and acquisition efforts and related
activities to obtain debt and equity financing. Such costs primarily include
consulting and legal fees associated with developing the organization and
raising the necessary capital to finance an acquisition and related future
operations.

   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.

2.  Summary of Significant Accounting Policies

   The following is a summary of significant accounting policies:

  Basis of Consolidation

   The accompanying consolidated financial statements have been prepared in
conformity with accounting principles generally accepted in the United States
of America and include the accounts of IWO Holdings, Inc., and its wholly-owned
subsidiaries.

  Use of Estimates

   The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities
at the date of the financial statements. Estimates also affect the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.

  Segment Information

   The Company believes it operates in only one segment, digital wireless
personal communication services.

                                     F-10

<PAGE>

                      IWO HOLDINGS, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


  Comprehensive Income

   No statement of comprehensive income has been included in the accompanying
financial statements since the Company does not have any other comprehensive
income to report.

  Cash and Cash Equivalents

   Cash and cash equivalents include cash, money market funds, and commercial
paper with original maturities of three months or less at the date of
acquisition. The carrying amount of cash and cash equivalents approximates fair
value.

  Investments

   The Company's investments consist of debt securities (see Note 4). In
accordance with SFAS No. 115, debt securities have been classified in the
accompanying 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.

  Inventory

   Inventory consists of handsets and related accessories. Inventories are
carried at the lower of cost (determined using weighted average method) or
market. Market is determined using replacement cost in accordance with industry
standards.

  Property and Equipment

   Property and equipment are reported at cost less accumulated depreciation.
When assets are sold, retired or otherwise disposed of, the related costs and
accumulated depreciation are removed from the respective accounts, and any
resulting gain or loss is recognized.

   Property and equipment are being depreciated using the straight-line method
based on the following estimated useful lives of assets:

<TABLE>
                  <S>                                <C>
                  Network equipment.................  10 years
                  Building and building improvements  25 years
                  Furniture and office equipment.... 5-7 years
                  Computer software.................   5 years
                  Vehicles..........................   5 years
</TABLE>

   Leasehold improvements are being amortized over the shorter of the estimated
useful lives or lease term.

  Construction in Progress

   Construction in progress includes equipment, engineering and site
development costs in connection with the build out of the Company's network.
The Company capitalizes interest and direct labor on its construction in
progress activities. Total interest and direct labor costs capitalized for the
years ended December 31, 2000 and 2001 approximate $1,379,000 and $484,000, and
$5,004,000 and $1,878,000, respectively. The unamortized capitalized interest
and labor costs for the years ended December 31, 2000 and 2001 were
approximately $1,863,000 and $8,671,000, respectively. When the network assets
are placed in service, the Company transfers the assets from construction in
progress to network assets and depreciates those assets over their estimated
useful life.

                                     F-11

<PAGE>

                      IWO HOLDINGS, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


  Deferred Costs

   Organizational costs were expensed in 1999. Debt issuance costs represents
direct costs incurred in connection with the Senior Credit Facility and Bridge
Loan. Costs related to the Bridge Loan were being amortized over the estimated
eighteen month term using the effective interest method. Costs related to the
Senior Credit Facility are being amortized over the estimated eight year term
using the effective interest method (see Note 10). Deferred offering costs
represents direct costs incurred in connection with the sale of units
consisting of Senior Notes and Warrants. The deferred offering costs are being
amortized over the 10 year term of the Senior Notes using the effective
interest method (see Note 20).

  Intangible Assets

   The excess of purchase price over the fair value of net assets acquired from
Sprint PCS is being amortized over twenty years (the term of the Management
Agreement--see Note 3) using the straight-line method (see "Recent Accounting
Pronouncements").

   The purchased subscriber list and employee work-force are being amortized
over a four year period (estimated average customer life) and a three year
period (estimated employee turnover rate) respectively using the straight-line
method (see "Recent Accounting Pronouncements").

  Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed of

   The Company accounts for long-lived assets in accordance with the provisions
of SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and
Long-Lived Assets to Be Disposed of. SFAS No. 121 requires that long-lived
assets and certain identifiable intangibles be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of an asset to future net cash
flows expected to be generated by the asset. If such assets are considered to
be impaired, the impairment to be recognized is measured by the amount by which
the carrying amount of the assets exceeds the fair value of the assets. The
Company has identified no such impairment losses in the periods presented (see
"Recent Accounting Pronouncements").

  Revenue Recognition

   The Company recognizes revenue as services are performed. Under the
Affiliation Agreements (see Note 3), Sprint PCS performs IWO's billings and
collections and other services and retains 8% of collected service revenues
from Sprint PCS subscribers based in IWO's territory and from non-Sprint PCS
subscribers who roam onto IWO's network. The amount retained by Sprint PCS is
recorded as an operating expense as incurred. Revenues generated from the sale
of handsets and accessories and revenues from Sprint PCS subscribers not based
in IWO's territory who travel onto IWO's network are not subject to the 8% fee.

   Sprint PCS pays IWO a Sprint PCS "travel" fee for each minute that a Sprint
PCS subscriber based outside of the IWO territory roams onto IWO's network.
Conversely, IWO pays Sprint PCS travel fees when a Sprint PCS subscriber based
in IWO's territory roams onto the Sprint PCS network outside of IWO's territory
(see Note 3).

   The Company began charging activation fees in October 2001. The accounting
policy for the recognition of activation fee revenue is to record the revenue
over the periods such revenue is earned in accordance with the current
interpretations of SEC Staff Accounting Bulletin No. 101 (SAB 101), "Revenue
Recognition in Financial

                                     F-12

<PAGE>

                      IWO HOLDINGS, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Statements." Accordingly, activation fee revenue has been deferred and will be
recorded over the average life for those customers (24 months) that are
assessed an activation fee. As of December 31, 2001, the Company has deferred
$1,232,000 of activation fee revenue to future periods.

   Product revenues from the sale of handsets and accessories, which represents
a separate earnings process, are recorded at the time of customer purchase net
of allowance for sales returns. These revenues and related costs of sales are
included in net revenues and costs of services and equipment, respectively. The
allowance is estimated based on Sprint PCS' fourteen day handset return policy.
When handsets are returned to Sprint PCS for refurbishing, the Company receives
a credit from Sprint PCS, which is less than the Company originally paid for
the handset.

   Unearned revenue represents amounts billed in advance of service being
provided.

  Advertising Costs

   The Company expenses all advertising costs as they are incurred. Amounts
incurred for the years ended December 31, 2000 and 2001 were approximately
$3,850,000 and $6,163,000. No advertising costs were incurred in 1999.

  Income Taxes

   IWO accounts for income taxes under SFAS No. 109, "Accounting for Income
Taxes". Under SFAS No. 109, deferred income taxes are recognized for the tax
consequences of "temporary differences" by applying enacted statutory tax rates
applicable for future years to differences between financial statement and tax
basis of existing assets and liabilities. The effect of tax rate changes on
deferred taxes is recognized in the income tax provision in the period that
includes the enactment date. Effective December 20, 1999, Independent Wireless
One Corporation became a wholly-owned subsidiary of IWO Holdings, Inc.
Accordingly, Independent Wireless One Corporation is included in IWO Holdings,
Inc.'s consolidated tax filing.

  Net Loss Per Share

   The Company computes net loss per common share in accordance with Statement
of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS 128").
Under the provisions of SFAS 128, basic and diluted net loss per common share
is computed by dividing the net loss available to common stockholders for the
period by the weighted average number of shares of common stock outstanding
during the period. In accordance with SFAS 128, no conversion of stock options
or warrants has been assumed in the calculation of diluted loss per share since
the effect would be antidilutive. Accordingly, the number of weighted average
shares outstanding as well as the amount of net loss per share are the same for
basic and diluted per share calculations for the periods reflected in the
accompanying financial statements. The Company has assumed that the IWO
Holdings, Inc. shares issued to the Founders on December 20, 1999 were
outstanding for the period January 1, 1999 through December 20, 1999.

  Risks and Uncertainties

   The Company's profitability is dependent upon successful implementation of
the Company's business strategy and development of a sufficient subscriber
base. The Company will continue to incur significant expenditures in connection
with expanding and improving its operations. Such expansion may require
substantial additional financing before construction is completed (see Notes 10
and 20). The Company is highly dependent upon Sprint PCS for certain operating
activities (see Note 3). The Company through Sprint PCS is subject to various
Federal Communications Commission (FCC) regulations, including network
build-out requirements, technical standards and other regulations.

                                     F-13

<PAGE>

                      IWO HOLDINGS, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


  Concentration of Risk

   The Company maintains cash and cash equivalents in accounts with financial
institutions in excess of the amount insured by the Federal Deposit Insurance
Corporation. The Company monitors the financial stability of these institutions
regularly and management does not believe there is a significant credit risk
associated with deposits in excess of federally insured amounts. At December
31, 2000 and 2001, cash and cash equivalent balances maintained with financial
institutions in excess of FDIC limits approximated $8,283,000 and 8,778,000,
respectively.

  Reclassifications

   Certain reclassifications have been made to the 1999 and 2000 amounts to
conform with the 2001 presentations.

  Recent Accounting Pronouncements

   In June 2001, Statement of Financial Accounting Standards (SFAS) No. 141,
"Business Combinations," was issued 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's adoption
of this statement on January 1, 2002 did not have a material impact on its
financial statements.

   In June 2001, SFAS No. 142, "Goodwill and Other Intangible Assets," was
issued 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 will also be required to reassess the
useful lives of all intangible assets. The Company adopted SFAS No. 142 on its
effective date of January 1, 2002. The Company expects annual amortization
expense relating to goodwill to decrease by approximately $2.5 million due to
the effect of this statement.

   In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations." SFAS No. 143 requires the fair value of a liability
for an asset retirement obligation to be recognized in the period in which it
is incurred if a reasonable estimate of fair value can be made. The associated
asset retirement costs are capitalized as part of the carrying amount of the
long-lived asset. SFAS No. 143 is effective for fiscal years beginning after
June 15, 2002. The Company believes the adoption of this statement will not
have a material impact on its financial statements.

   In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment
or Disposal of Long-Lived Assets," which supersedes SFAS No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of," and the accounting and reporting provisions of APB No. 30. SFAS
No. 144 addresses financial accounting and reporting for the impairment or
disposal of long-lived assets and is effective for fiscal years beginning after
December 15, 2001, and interim periods within those fiscal years. The Company's
adoption of this statement on January 1, 2002 did not have a material impact on
its financial statements.

3.  Sprint PCS Agreements

   In 1999, IWO entered into a Management Agreement, a Services Agreement, two
Trademark and Service Mark License Agreements, collectively called the
"Affiliation Agreements", and an Asset Purchase Agreement, with Sprint PCS to
own and operate a wireless business covering a major portion of the
Northeastern United States. This territory covers a population of approximately
6.2 million people and extends from suburban New

                                     F-14

<PAGE>

                      IWO HOLDINGS, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

York City (Orange and Sullivan Countries) north to the Canadian border. The
territory reaches from the eastern suburbs of Rochester to Syracuse, Ithaca,
Binghamton and Elmira in central New York State, east to include all of Vermont
and New Hampshire (except Nashua, New Hampshire, but including the extreme
northwestern suburbs of Boston).

   Under the Asset Purchase Agreement and the Management Agreement, IWO
purchased from Sprint PCS for approximately $116,405,000 certain assets,
primarily network assets, and obtained the right to manage approximately
forty-five thousand subscribers in the aforementioned territory. IWO received
the exclusive right to sell all Sprint PCS wireless products and services in
the aforementioned territory, and also received the benefit of Sprint PCS
national advertising, sales and marketing programs and the ability to purchase
network and subscriber equipment at Sprint PCS discount rates. Sprint PCS
retains 8% of collected revenues as defined.

   The Asset Purchase Agreement contained a four phase closing process.
Effective January 5, 2000 Phase I and II closed. In connection with the Phase I
and II closings, IWO paid Sprint PCS in the aggregate approximately $32,098,000
and received from Sprint PCS certain furniture, fixtures and equipment and the
leasehold interest at IWO's corporate offices. In addition, IWO obtained the
outstanding accounts receivable balance as of December 31, 1999 and the right
to manage approximately forty-five thousand subscribers based within IWO's
territory. On February 1, 2000, the Phase III closing occurred, and Sprint PCS
transferred to IWO the retail related assets including furniture, fixtures and
equipment and the leasehold interest at three Sprint PCS retail stores. The
Phase IV closing occurred on March 31, 2000, at which time Sprint PCS
transferred to IWO, its ownership in certain of its network assets, including
one switch and its interest in 170 cell sites and other network related leases.
IWO paid Sprint PCS approximately $84,307,000 at the Phase IV closing.

   The acquisition of the Sprint PCS assets has been accounted for under the
purchase method of accounting. Accordingly, the operations related to the
Sprint PCS assets acquired have been included in IWO's operations at the
consummation date of each respective Phase closing, discussed above. The total
purchase price aggregating $116,405,000 plus direct acquisition costs
approximating $5,057,000 have been allocated to the estimated fair value of the
assets acquired, including the subscribers to be managed under the Affiliation
Agreements. In March 2000, IWO borrowed $50,000,000 from the Senior Credit
Facility in order to fund a portion of the acquisition (see Note 10).

   The purchase price has been allocated to the fair value of the assets
acquired. The allocation of purchase price is as follows (in thousands):

<TABLE>
          <S>                                                 <C>
          Property and equipment and construction in progress
            (primarily network assets)....................... $ 54,612
          Accounts receivable................................    2,251
          Subscriber lists...................................   14,000
          Employee work-force................................      500
          Excess purchase price over net assets acquired.....   50,099
                                                              --------
                                                              $121,462
                                                              ========
</TABLE>

   In connection with the Management Agreement, the Company has agreed on a
minimum network build-out plan which includes specific coverage and deployment
schedules for the network planned within IWO's service area (see Note 14). The
Company must comply with Sprint PCS program requirements for technical
standards, national and regional distribution and national accounts. The
Company may not offer Sprint PCS products and services outside the Company's
markets.

                                     F-15

<PAGE>

                      IWO HOLDINGS, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


   The Management Agreement also provides that from January 2000 until December
2002, the Company will not be required to pay more fees for outbound travel
than the Company receives for inbound travel (see Note 2). Outbound travel
exceeded inbound travel on the non-affiliate Sprint PCS network by
approximately $10.6 million for the year ended December 31, 2000. For the year
ended December 31, 2001, the Company's inbound travel exceeded outbound travel
by approximately $2.3 million.

   The Management Agreement is in effect for a period of 20 years with three
10-year renewal options unless terminated by either party under provisions
outlined in the Management Agreement.

   If the Management Agreement is terminated by Sprint PCS as a result of an
uncured breach by IWO, an IWO bankruptcy or other events as defined, Sprint PCS
will have the right to purchase all of IWO's operating assets at an amount
equal to seventy-two percent of its entire business value. If the Management
Agreement is terminated by IWO as a result of an uncured breach by Sprint PCS,
a Sprint PCS bankruptcy or other events as defined, IWO will have the right to
require Sprint PCS to purchase all of IWO's operating assets at an amount equal
to eighty percent of its entire business value.

   Under the Services Agreement, Sprint PCS will provide to the Company various
support services such as activation, billing and customer care. These services
are available to the Company at established rates. Sprint PCS can change any or
all of the service rates one time in each twelve month period. The Company may
discontinue the use of any service upon three months written notice. Sprint PCS
may discontinue a service provided that it gives nine months written notice.
The Company does not presently have the infrastructure to provide these support
services on a stand-alone basis and in the event of termination would likely
need to find an alternative third party provider. The Services Agreement
automatically terminates upon termination of the Management Agreement.

   Under the Trademark and Service Mark License Agreements, Sprint PCS will
provide the Company with non-transferable, royalty free licenses to use the
Sprint PCS brand names and several other trademarks and service marks. The
Company's use of the licensed marks is subject to adherence to quality
standards determined by Sprint PCS. Sprint PCS can terminate the Trademark and
Service Mark License Agreements if the Company files for bankruptcy, materially
breaches the agreement or if the Management Agreement is terminated.
   On December 20, 1999, the Company entered into an Interim Services Agreement
with Sprint PCS which terminated upon IWO's acquisition of the Sprint PCS
markets. Pursuant to this agreement, Sprint PCS provided the Company with
network, advertising and other services through March 31, 2000 for a monthly
fee of $1,417,597, certain switching services through December 31, 2000 for a
monthly fee of $41,167 and Retail Operations Services for the month of January,
2000 at a fee of $475,584. Network services primarily include cell site lease
and operating expenses, back haul costs, interconnection expense and network
and engineering payroll and benefits. Retail Store expenses include primarily
retail store lease and occupancy expenses, payroll and benefits to retail store
employees and sales commissions.

   Under the agreements described above, the Company for the years ended
December 31, 2000 and 2001 incurred operating expenses aggregating
approximately $52,707,000 and $83,969,000, respectively. At December 31, 2000
and 2001, $7,711,000 and $9,163,000, respectively, was due to Sprint PCS.

                                     F-16

<PAGE>

                      IWO HOLDINGS, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


4.  Investment Securities

   The amortized cost and approximate fair value of restricted investment
securities held to maturity at December 31, 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  $40,332    $1,063      $--     $41,395
</TABLE>

<TABLE>
<CAPTION>
                                              Amortized Market
                                                Cost    Value
                                              --------- -------
                 <S>                          <C>       <C>
                 Due in one year or less.....  $20,523  $20,941
                 Due in one year through five   19,809   20,454
                                               -------  -------
                                               $40,332  $41,395
                                               =======  =======
</TABLE>

   The above table excludes $13,387,000 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 December 31, 2001 by contractual maturity (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. Governments and Agencies  $22,005    $  272      $--     $22,277
     Corporate debt securities....   51,675       944       --      52,619
                                    -------    ------      ---     -------
                                    $73,680    $1,216      $--     $74,896
                                    =======    ======      ===     =======
</TABLE>

<TABLE>
<CAPTION>
                                              Amortized Market
                                                Cost    Value
                                              --------- -------
                 <S>                          <C>       <C>
                 Due in one year or less.....  $56,519  $57,276
                 Due in one year through five   17,161   17,620
                                               -------  -------
                                               $73,680  $74,896
                                               =======  =======
</TABLE>

   There were no sales of investment securities held to maturity during the
year ended December 31, 2001.

5.  Inventory

   Inventory at December 31, 2000 and 2001 consists of the following (in
thousands):

<TABLE>
<CAPTION>
                                                   December 31, December 31,
                                                       2000         2001
                                                   ------------ ------------
    <S>                                            <C>          <C>
    Handsets......................................    $2,436       $3,938
    Accessories...................................       131          437
                                                      ------       ------
                                                      $2,567       $4,375
                                                      ======       ======
</TABLE>

                                     F-17

<PAGE>

                      IWO HOLDINGS, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


6.  Property and Equipment

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

<TABLE>
<CAPTION>
                                                   December 31, December 31,
                                                       2000         2001
                                                   ------------ ------------
    <S>                                            <C>          <C>
    Land..........................................   $   169      $    169
    Building and building improvements............     5,943         5,943
    Network equipment.............................    62,779       138,923
    Furniture and office equipment................     3,871         5,204
    Computer software.............................     1,261         1,752
    Vehicles......................................       926         1,209
    Leasehold improvements........................     1,419         5,737
                                                     -------      --------
                                                      76,368       158,937
    Accumulated depreciation and amortization.....    (6,813)      (19,734)
                                                     -------      --------
                                                     $69,555      $139,203
                                                     =======      ========
</TABLE>

   Depreciation and amortization expense for the years ended December 31, 2000
and 2001 was $6,813,000 and $12,930,000, respectively.

7.  Deferred Costs

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

<TABLE>
<CAPTION>
                                                   December 31, December 31,
                                                       2000         2001
                                                   ------------ ------------
    <S>                                            <C>          <C>
    Debt issuance costs...........................   $15,591      $15,591
    Deferred offering costs.......................     2,234        9,959
                                                     -------      -------
                                                      17,825       25,550
    Accumulated amortization of debt issuance and
      offering costs..............................    (2,927)      (6,250)
                                                     -------      -------
                                                     $14,898      $19,300
                                                     =======      =======
</TABLE>

   Amortization expense of debt issuance and offering costs for the period
December 20, 1999 through December 31, 1999 and for the years ended December
31, 2000 and 2001 was $84,000, $2,843,000 and $3,323,000, respectively.

8.  Intangible Assets

   Intangible assets at December 31, 2000 and 2001 consist of the following (in
thousands):

<TABLE>
<CAPTION>
                                                   December 31, December 31,
                                                       2000         2001
                                                   ------------ ------------
    <S>                                            <C>          <C>
    Excess purchase price over the fair value of
      net assets acquired.........................   $50,099      $ 50,099
    Subscriber list...............................    14,000        14,000
    Employee work-force...........................       500           500
                                                     -------      --------
                                                      64,599        64,599
    Accumulated amortization......................    (5,725)      (11,897)
                                                     -------      --------
                                                     $58,874      $ 52,702
                                                     =======      ========
</TABLE>

                                     F-18

<PAGE>

                      IWO HOLDINGS, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


   Amortization expense of intangible assets for the years ended December 31,
2000 and 2001 was $5,725,000 and $6,172,000, respectively.

9.  Accrued Expenses

   Accrued expenses at December 31, 2000 and 2001 consist of the following (in
thousands):

<TABLE>
<CAPTION>
                                                   December 31, December 31,
                                                       2000         2001
                                                   ------------ ------------
    <S>                                            <C>          <C>
    Accrued interest and financing costs..........   $ 2,271      $11,468
    Accrued payroll and benefits..................     2,294        2,580
    Accrued network costs.........................     5,071        7,603
    Other accrued expenses........................     2,796        7,512
                                                     -------      -------
                                                     $12,432      $29,163
                                                     =======      =======
</TABLE>

10.  Debt

  Bank Lines of Credit

   During 1999, the Company had two bank lines of credit aggregating $2,000,000
that bore interest at prime plus .5%. The bank lines of credit were repaid
prior to December 31, 1999.

  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 commitment under the Tranche A Term Loan was available at the effective
date (the date on or prior to May 1, 2000 on which certain conditions, as
defined in the Senior Credit Facility, are met) subject to completion

                                     F-19

<PAGE>

                      IWO HOLDINGS, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

of the additional $100,000,000 financing event (see bridge loan below) by March
31, 2001 as defined in the Senior Credit Facility except that $30,000,000
became available as of June 30, 2000 and another $30,000,000 became available
upon the closing of the additional $50,000,000 equity financing (See Note 11).
The remaining availability under the Tranche A Term Loan was reduced by
$30,000,000 on each 6 month anniversary date of the effective date. The
commitment to make loans under the Senior Revolving Credit Facility was
available on the effective date and through the eighth anniversary of that date
subject to the completion of the additional financing event except with respect
to drawing the first $20,000,000 (see Note 20).

   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 as specified in the Senior Credit Facility. The
Applicable Margin for ABR Loans will range from .50% to 2.75% based on certain
events as specified in the Senior Credit Facility.

   The loans from the Senior Credit Facility are subject to a quarterly
commitment fee, which ranges from .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 paid $1,300,000 in connection with amendments to the
Senior Credit Facility for the year ended December 31, 2000.

   The Company must comply with certain financial and operating covenants. The
most restrictive financial covenants include various debt to equity, debt to
EBITDA, interest coverage and fixed charge coverage ratios, as defined in the
Senior Credit Facility. Pursuant to the consent and agreement between Sprint
PCS and the lenders under the Senior Credit Facility, at the administrative
agent's request, Sprint PCS will redirect any payments due to the Company under
the Management Agreement to the administrative agent during the continuation of
any default by the Company under the Senior Credit Facility.

   In connection with the Senior Credit Facility, the Company was required to
deposit $8,000,000 as a compensating balance with the commercial lenders of the
Senior Credit Facility. The compensating balance (restricted cash) will be
maintained by IWO until the Senior Credit Facility borrowings are repaid in
full.

   The Senior Credit Facility is collateralized by tangible and intangible
assets, assignment of the Sprint Affiliation Agreements and all of the issued
and outstanding shares of capital stock of Corp and repayment is guaranteed by
IWO.

   IWO paid a 2.5% underwriting fee ($6,000,000) to enter into the Senior
Credit Facility arrangement, which is included in debt issuance costs (see
Notes 2 and 7). Certain of the commercial lenders who have committed
$57,000,000 under the Senior Credit Facility are stockholders of the Company. A
portion of the fees and interest incurred with the certain commercial lenders
included in the accrued expenses--related parties at December 31, 2000 and 2001
approximated $213,000 and $224,000, respectively.

   At December 31, 2000 and 2001, $80,000,000 and $145,000,000, respectively,
were outstanding under the Senior Credit Facility as follows:

<TABLE>
<CAPTION>
                                                   December 31, December 31,
                                                       2000         2001
                                                   ------------ ------------
    <S>                                            <C>          <C>
    Tranche A Term Loan........................... $30,000,000  $ 90,000,000
    Tranche B Term Loan...........................  50,000,000    50,000,000
    Senior Revolving Credit Facility..............          --     5,000,000
                                                   -----------  ------------
                                                   $80,000,000  $145,000,000
                                                   ===========  ============
</TABLE>


                                     F-20

<PAGE>

                      IWO HOLDINGS, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

   As of December 31, 2001, the Company had $93.9 million available under the
$240.0 million Senior Credit Facility, which is net of $1.1 million of
irrevocable stand-by letters of credit issued to the Company's insurance
bonding agent as collateral for the insurance bonding agent issuing insurance
performance bonds as security for future cell site locations.

  Bridge Loan

   In December 1999 the Company received a commitment through a Bridge Loan
Agreement, as amended, with Credit Suisse First Boston (CSFB) and other lenders
under which the Company may borrow up to $100,000,000. IWO paid a $1,000,000
fee to obtain the bridge loan commitment, and a $500,000 extension fee in
connection with an amendment on June 30, 2000, which are included in debt
issuance costs (see Note 2). Certain lenders are also stockholders of the
Company. Total amount paid to lenders who are stockholders of the Company
approximated $355,000. The commitment terminates upon the earlier of the
issuance of at least $100,000,000 of additional debt or equity by the Company
or March 31, 2001. The commitment terminated in February 2001 upon the sale of
units consisting of Senior Notes and warrants for $160,000,000 (see Note 20).

11.  Equity

   Prior to January 1, 1999, the Founders made capital contributions of
$500,000, for which 14,357 shares of common stock, were issued to the Founders
on March 5, 1999. Also, in 1999, the Founders of the Company contributed
additional capital totaling $2,250,000. On December 20, 1999, the Founders
exchanged their 14,357 shares of common stock for 6,300,000 shares of Class B
common stock in IWO Holdings, Inc. Also, on December 20, 1999 certain investors
and management of IWO invested approximately $135,000,000 into IWO Holdings,
Inc. for approximately 79% of the equity of the Company (see Note 1). The
shares acquired by management were in connection with Management Bonus Stock
Purchase Agreements (see Note 15).

   The Company entered into recourse promissory note agreements effective March
2000 with certain officers to loan such officers approximately $287,000 in the
aggregate to purchase 50,000 shares of the Company's common stock from a
stockholder. The funds were disbursed to the officers in June 2000. The notes
bear interest at prime rate plus the applicable margin related to the Senior
Revolving Credit Facility. Interest is due annually and principal is due on
January 1, 2003. Twenty percent of the officers' annual bonuses will be used to
reduce the outstanding loan balance. Both notes are collateralized by the
Company's common stock owned by the officers. In connection with the
termination of the officers' employment, the officers were required to repay
the loans in full, and the Company repurchased, at their original cost, the
shares of the Company's common stock collateralizing the loans (see Note 18).

   In December, 2000, investors including certain members of management and
other related parties purchased an additional 7,142,857 shares of Class B, C,
and E common stock for $50,000,000. In connection with this stock sale, the
Company entered into recourse promissory note agreements effective December
2000 with two officers to loan such officers approximately $456,000 in the
aggregate to purchase 65,100 shares of the Company's common stock. In
connection with the termination of the former chief technology officer's
employment, the former chief technology officer was required to repay the loan
in full (see Note 18). The notes bear interest at prime rate plus the
applicable margin related to the Senior Revolving Credit Facility. Interest is
due annually. Fifty percent of the notes' principal was repaid in March 2001 by
the officers upon receipt of their bonus with respect to the year ended
December 31, 2000. The remaining fifty percent is due on March 31, 2003 with
the further provision that 20% of the executives' annual bonus, net of
applicable taxes, shall be used to further reduce the outstanding balances of
these notes. The remaining note is collateralized by the Company's common stock
owned by the Chief Executive Officer at December 31, 2001.


                                     F-21

<PAGE>

                      IWO HOLDINGS, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

   The promissory note balances aggregating $743,000 and $194,000 at December
31, 2000 and 2001, respectively, are reflected as a reduction to stockholders'
equity.

  Stock Split and Amendment to Certificate of Incorporation

   On November 8, 2000 the Board of Directors of the Company approved a
thirty-for-one stock split of the Company's common stock which became effective
on November 27, 2000.

   All references to share and per-share data for all periods presented have
been restated to give effect to this thirty-for-one stock split. The Board of
Directors of the Company also approved Holdings restated Certificate of
Incorporation to provide the Company with the authority to issue 116,710,000
shares of capital stock as follows:

<TABLE>
                     <S>                  <C>
                     Preferred Stock.....    500,000 shares
                     Class A Common Stock 15,000,000 shares
                     Class B Common Stock 18,750,000 shares
                     Class C Common Stock 18,750,000 shares
                     Class D Common Stock     60,000 shares
                     Class E Common Stock  5,545,000 shares
                     Common Stock........ 58,105,000 shares
</TABLE>

   At December 31, 2000 and 2001, the outstanding Class B common stock had
13,274,171 and 13,533,111 voting rights (1 vote per share) respectively and the
outstanding Class D common stock had 24,162,000 voting rights (402.7 votes per
share). Holders of Class A, Class C and Class E common stock have no voting
rights. Upon issuance, nonclass common stockholders will have 1 vote per share.
Subject to the rights of the holders of any shares of then outstanding
Preferred Stock, holders of all classes of common stock and non class common
stock are entitled to participate on a pro rata basis in any dividends,
dissolution, or liquidation.

12.  Income Taxes

   Deferred tax assets and liabilities are determined based on the temporary
differences between the financial statements and the tax bases of assets and
liabilities as measured by the enacted tax rates.

   The significant components of deferred income tax expense (benefit) are as
follows (in thousands):

<TABLE>
<CAPTION>
                                For the Period For the Period
                                  January 1,    December 20   For the Year For the Year
                                 1999 through     through        Ended        Ended
                                 December 20,   December 31,  December 31, December 31,
                                     1999           1999          2000         2001
                                -------------- -------------- ------------ ------------
<S>                             <C>            <C>            <C>          <C>
Deferred tax (benefit) expense.    $(5,177)        $(376)       $    232     $  2,818
Net operating loss carryforward         --            --         (17,839)     (28,816)
Valuation allowance............      5,177           376          17,607       25,998
                                   -------         -----        --------     --------
                                   $    --         $  --        $     --     $     --
                                   =======         =====        ========     ========
</TABLE>

                                     F-22

<PAGE>

                      IWO HOLDINGS, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(Continued)


   The Company's effective income tax rate differed from the Federal statutory
tax rate of 35% as follows (in thousands):

<TABLE>
<CAPTION>
                                        For the Period For the Period
                                          January 1,    December 20   For the Year For the Year
                                         1999 through     through        Ended        Ended
                                         December 20,   December 31,  December 31, December 31,
                                             1999           1999          2000         2001
-                                       -------------- -------------- ------------ ------------
<S>                                     <C>            <C>            <C>          <C>
Computed "expected" tax benefit........    $(5,195)        $(376)       $(17,528)    $(26,930)
Other..................................         18            --             (79)         932
Increase in valuation allowance........      5,177           376          17,607       25,998
                                           -------         -----        --------     --------
   Total income tax expense/ (benefit).    $    --         $  --        $     --     $     --
                                           =======         =====        ========     ========
</TABLE>

   The Company's tax effects relating to temporary differences and
carryforwards are as follows (in thousands):

<TABLE>
<CAPTION>
                                                   December 31,
                                           ---------------------------
                                            1999      2000      2001
                                           -------  --------  --------
        <S>                                <C>      <C>       <C>
        Deferred tax assets/(liabilities):
           Net operating loss............. $    --  $ 17,839  $ 46,655
           Start-up costs.................   4,570     3,656     2,765
           Stock-based compensation.......   1,015     1,651     1,768
           Intangible assets..............       2       704     1,357
           Depreciation...................      (5)     (861)   (4,969)
           Accrued expenses and reserves..      (8)      192     1,603
                                           -------  --------  --------
                                             5,574    23,181    49,179
           Valuation allowance............  (5,574)  (23,181)  (49,179)
                                           -------  --------  --------
           Deferred tax asset............. $    --  $     --  $     --
                                           =======  ========  ========
</TABLE>

   In accordance with FASB No. 109, the Company has recorded a full valuation
allowance against its deferred tax asset since it believes it is more than
likely than not that such deferred tax asset will not be realized. The
valuation allowance at December 31, 2000 and 2001 is approximately $23,181,000
and $49,179,000. During the years ended December 31, 2000 and 2001, the
valuation allowance increased by approximately $17,607,000 and $25,998,000,
respectively.

   At December 31, 2001, the Company has unused Federal net operating loss
carryforwards of approximately $133,300,000. The federal net operating loss
carryforwards if unused will begin to expire during the year ended December 31,
2020.

   Under the provisions of the Internal Revenue Code, certain substantial
changes in the Company's ownership (see Note 21) may limit the amount of net
operating loss carryforwards which could be used in future years to offset
taxable income and taxes payable.

13.  Loss Per Common Share

   Loss per common share is as follows (in thousands except share data):

<TABLE>
<CAPTION>
                                                       For the Period
                                        For the Period  December 20,
                                          January 1,        1999      For the Year For the Year
                                         1999 through     through        Ended        Ended
                                         December 20,   December 31,  December 31, December 31,
                                             1999           1999          2000         2001
                                        -------------- -------------- ------------ ------------
<S>                                     <C>            <C>            <C>          <C>
Numerator
   Net loss............................   $  (14,842)   $    (1,076)  $   (50,080) $   (76,941)
Denominator
   Weighted average shares outstanding.    6,300,000     30,150,000    30,770,000   37,554,000
</TABLE>

                                     F-23

<PAGE>

                      IWO HOLDINGS, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


   No options or warrants were included in the calculation of diluted loss per
share because their impact would have been anti-dilutive (see Notes 2 and 15).

14.  Commitments and Contingencies

  Leases

   In 2001, the Company entered into a new operating lease for corporate office
space that expires October 14, 2006. Annual lease payments approximate
$475,000. In 2000 the Company began leasing various cell site, tower and retail
office space. Such leases expire at various dates through 2020. Minimum annual
rental commitments for all non-cancelable operating leases at December 31, 2001
are (in thousands):

<TABLE>
                               <S>        <C>
                               2002...... $11,529
                               2003......  11,506
                               2004......  11,413
                               2005......  10,070
                               2006......   5,725
                               Thereafter  10,807
</TABLE>

   The table excludes renewal options related to certain cell and switch site
leases. These renewal options generally have five-year terms and can be
exercised from time to time.

   Total rent expense for the period January 1, 1999 through December 20, 1999,
for the period December 20, 1999 through December 31, 1999 and for the years
ended December 31, 2000 and 2001, was $4,000, $3,500, $3,115,000 and
$8,611,000, respectively.

  Commitments

   As of December 31, 2000 and 2001, the Company had purchase commitments for
network equipment, hardware, software and related services aggregating
$5,862,000 and $18,686,000, respectively.

   In connection with the Asset Purchase Agreement, the Company is required to
build out the Sprint PCS Network territory it is managing. Estimated budgeted
annual expenditures for this network build are as follows (in thousands):

<TABLE>
<CAPTION>
                                      Unaudited
                                      ---------
                                 <S>  <C>
                                 2002  $68,000
                                 2003   29,000
</TABLE>

  Employment Agreements

   In May 2000, IWO entered into employment agreements with three of its senior
executive officers. The term of each agreement approximates three years and the
aggregate annual compensation obligation under these employment agreements
ranges from $600,000 in year one to $700,000 in year three as well as annual
bonuses based on performance.

   Effective May 7, 2001, the Company entered into a three year employment
agreement with its Chief Financial Officer. The annual compensation under this
agreement includes salary of $200,000 through December 31, 2001 and increases
of $5,000/year thereafter as well as annual bonuses. The officer was also
granted stock options to acquire 335,859 shares of Class B common stock at a
purchase price of $7.00 per share.

                                     F-24

<PAGE>

                      IWO HOLDINGS, INC. AND SUBSIDIARIES

              CONSOLIDATED STATEMENTS OF CASH FLOWS--(Continued)

Options for 167,930 shares vest ratably on a daily basis over a period of three
years commencing May 7, 2001. The remaining options to acquire 167,929 shares,
which become vested on December 31, 2005, also contain accelerated vesting
provisions through December 31, 2004 based upon the achievement of certain
annual performance goals. The agreement also provides for immediate vesting of
20% and 100% of these options in the event of a Merger, as defined, and the
termination of the officer's employment within 12 months of such a Merger,
respectively.

   Effective November 19, 2001, the Company entered into a three year
employment agreement with its Chief Technology Officer. The annual compensation
under this agreement includes salary of $200,000 through December 31, 2002 and
increases of $5,000/year thereafter as well as annual bonuses. The officer was
also granted stock options to acquire 200,000 shares of Class B common stock at
a purchase price of $7.00 per share. Options for 100,000 shares vest ratably on
a daily basis over a period of three years commencing November 19, 2001. The
remaining options to acquire 100,000 shares, which become vested on December
31, 2006, also contain accelerated vesting provisions through December 31, 2005
based upon the achievement of certain annual performance goals. The agreement
also provides for immediate vesting of 20% and 100% of these options in the
event of a Merger, as defined, and the termination of the officer's employment
within 12 months of such a Merger, respectively.

   On December 19, 2001, the Company's employment agreements with its Chief
Executive Officer and Chief Financial Officer were amended to provide in the
event of termination subsequent to a Merger aggregate payments up to $700,000.

  Financial Advisory Agreement

   On December 12, 2001, the Company entered into a financial advisory
agreement with certain investment banking firms (of which certain principals
are stockholders of the Company) for a period of three months whereby such
firms would advise the Company with respect to the sale, recapitalization,
merger, consolidation or other business combination of the Company. The fee for
the successful completion of these services is 1.125% of the Enterprise Value
of the Company as defined in the agreement. The Company incurred expenses under
this agreement in 2001 amounting to $250,000 (which are included in accrued
expenses--related parties).

15.  Stock Option and Performance Award and Warrant Programs

  Stock Incentive Plan

   In December 1999, the Board of Directors and Stockholders approved IWO
Holdings, Inc.'s Stock Incentive Plan. Under the Plan, the Company may grant to
its employees, incentive stock options (ISO), non-qualified stock options
(NSO), stock appreciation rights (SAR) and stock grants as defined by the Plan.
The Company has reserved 2,500,000 shares of Class B common stock for issuance
under the plan.

   In December 1999, the Company granted to certain officers and employees,
stock options to acquire approximately 1,289,340 shares of Class B common stock
at a purchase price of $5.74468 per share (fair value). Options for
approximately 353,940 shares of Class B common stock vested immediately
(December 1999). Options for approximately 581,460 shares of Class B common
stock vest ratably on a daily basis over a three year period commencing January
1, 2000. The remaining options to acquire 353,940 shares of Class B common
stock vest at the end of a five year period. Such options contain accelerated
vesting provisions over a three year period based upon the achievement of
certain annual performance goals.

   In December 1999, the Company granted to its outside General
Counsel/stockholder stock options to acquire 387,079 shares of Class B common
stock at a purchase price of $5.74468 per share (fair value). Options

                                     F-25

<PAGE>

                      IWO HOLDINGS, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

for approximately 184,830 shares of Class B common stock vested immediately in
December 1999 and the remaining options for 202,249 shares of Class B common
stock vest ratably on a daily basis over a three year period commencing January
1, 2000.

   The fair value of the fully vested options approximating $930,000 was
initially being recognized over the term of the professional services agreement
(see Note 16) as stock-based compensation with a corresponding credit to
additional paid-in capital. In connection with the termination of the
professional services agreement of the General Counsel (see Note 18), the
option agreement was modified resulting in the accelerated vesting of options
for 318,079 shares of Class B common stock which were deemed vested and options
for 39,000 shares of Class B common stock were forfeited. The General Counsel
had previously exercised options on 30,000 shares of Class B common stock. The
modification resulted in a new measurement date and the fair value of the
accelerated options which approximated $885,000 was recognized as expense over
the remaining term of the consulting agreement. The fair value of the remaining
fully vested options described above was amortized over the term of the new
consulting agreement which terminated in September 2001. Stock-based
compensation recognized for the years ended December 31, 2000 and 2001 was
$1,070,000 and $334,000, respectively.

   In March 2000, certain officers of the Company were granted vested options
to acquire 99,990 shares of Class B common stock at a purchase price of
$5.74468 per share (fair value).

   In 2000, the Company granted to its chief financial officer and employees,
stock options to acquire approximately 516,854 shares of Class B common stock
at a purchase price of $5.74468 per share (fair value). Options for
approximately 84,270 shares of Class B common stock granted to the chief
financial officer vested immediately (May 1, 2000). Options for approximately
210,674 shares of Class B common stock granted to the chief financial officer
vest ratably on a daily basis over the period May 1, 2000 through December 31,
2002. Options for approximately 95,506 shares of Class B common stock granted
to other employees vest ratably on a daily basis over a three year period
commencing upon the date of the grant. The remaining options to acquire 126,404
shares of Class B common stock granted to the chief financial officer vest at
the end of a five year period. Such options contain accelerated vesting
provisions over a three year period based upon the achievement of certain
annual performance goals. The aforementioned options for 421,348 shares of
Class B common stock granted to the chief financial officer vest and become
exercisable upon an approved sale which provides for a specified rate of return
as provided for in the agreement.

   In 2001, the Company granted (to a certain officer) options to acquire
111,953 shares of Class B common stock at a purchase price of $7 per share
(fair value) which vest at the end of a five year period. Such options contain
accelerated vesting provisions over a three year period based on the
achievement of certain annual performance goals.

   In September 2000, the Company amended stock option agreements for 1,264,045
shares of Class B common stock with three of its officers to provide for the
immediate vesting of 20% of these options upon a Merger, as defined. One
hundred percent of these options are immediately vested in the event the
officers' employment is terminated without cause within 12 months of such a
Merger. Such modification under certain circumstances will result in future
compensation charges to the Company and such amounts could be material.

  Management Stock Purchase Agreements

   In connection with Management Bonus Stock Purchase Agreements dated December
20, 1999, certain Company management acquired in the aggregate 29,012 shares of
Class B common stock at $5.74468 per share (fair value). Under these
agreements, the Company has the right to repurchase the shares from management
and management has the right to put the shares to the Company, and in each case
at the lower of cost or the fair value, subject to certain conditions as
defined in the agreements. Accordingly, the shares issued have been classified
as redeemable common stock in the accompanying consolidated balance sheets (see
Note 11). In December 1999,

                                     F-26

<PAGE>

                      IWO HOLDINGS, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

the Company issued to the General Counsel/stockholder 24,990 shares of Class B
common stock at a purchase price of $5.74468 per share (fair value). Also, in
connection with a Management Stock Purchase Agreement dated January 2000, the
former chief financial officer of the Company acquired 24,990 shares of Class B
common stock at $5.74468 per share (fair value) from a stockholder. As of
December 31, 2001, all shares were repurchased by the Company and are included
in treasury stock.

  Stock Option Plans

   The former President entered into an employment agreement with Corp dated
May 1999, whereby Corp granted the former President an option to acquire a 5%
equity ownership in Corp at purchase prices equal to or in excess of fair value
at date of grant (as determined by the Board of Directors). The option
agreement contained an acceleration clause, whereby all options vest upon a
change in ownership control as defined in the agreement.

   On December 20, 1999, a change in ownership control occurred resulting in
all options vesting immediately. In connection with the change in ownership,
vested options to acquire 337,079 and 505,620 shares of IWO Holdings, Inc.
Class B common stock at exercise prices of $1.45070 per share, and $5.74468 per
share (fair value) respectively, were granted to the former President in
exchange for the former President's option to acquire a 5% equity ownership in
Corp. IWO Holdings, Inc. also granted to the former President unvested options
to acquire 842,695 shares of IWO Holdings, Inc. Class B common stock at an
exercise price of $5.74468 per share (fair value). Such unvested options vest
ratably on a daily basis over three years. On December 20, 1999, Corp.
recognized $1,450,000 of compensation expense with a corresponding credit to
additional paid-in capital for the difference between the option exercise price
($1.45070) and the fair value of its stock on December 20, 1999 ($5.74468).

   In connection with the resignation of the former President (see Note 18),
IWO accelerated the vesting on all unvested options. The intrinsic value of
these options which approximated $747,000 was charged to operations in 2000.
IWO has also repurchased 14,506 shares of class B common stock held by the
former President for a total purchase price of $83,333. The former President
retained vested options to purchase 337,079 shares of class B common stock at
an exercise price of $1.45070 per share and 1,348,315 shares at an exercise
price of $5.74468 per share. The former President's retained options are
exercisable until November 7, 2005, or if IWO's initial public offering occurs
within five years of the date of his separation agreement, the later of
November 7, 2005 or two years after the closing of the initial public offering.
The former President's warrants for 74,400 shares of Class B common stock
terminated upon his resignation.

   On August 12, 1999, the Chairman of the Board was granted by Corp a vested
option to acquire a 1% equity interest in Corp at $489,000. On December 20,
1999, the Chairman of the Board exchanged his right to acquire 1% equity
interest in Corp. for vested options to acquire 337,079 shares of IWO Holdings,
Inc. Class B common stock at an exercise price $1.45070 per share. Corp
recognized $1,450,000 of compensation expense with a corresponding credit to
additional paid-in capital for the difference between the option exercise price
($1.45070) and the fair value of its stock on December 20, 1999 ($5.74468).

   All options are exercisable over a ten-year period unless otherwise
indicated.

  Warrant Programs

   The Founders, certain officers and the General Counsel/stockholder of the
Company have been granted warrants to purchase 828,000, 297,600 and 74,400
shares of Class B common stock, respectively, at a purchase price of $5.74468
per share. The warrants shall vest and become exercisable in full upon the
earliest to occur of the following: an approved sale of the Company or an
initial public offering, either of which results in a specified annual rate of
return to the Class A common stock, Class C common stock and Class D common
stock stockholders, as defined in the agreements. A measurement date is
established for the warrants at the time the

                                     F-27

<PAGE>

                      IWO HOLDINGS, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

aforementioned events become probable (as defined in SFAS No. 5). For the
warrants granted to certain officers, IWO at the measurement date will record a
charge to operations (under APB No. 25 intrinsic value method) for the
difference between the fair value of its stock and the exercise price of the
warrants. For the warrants granted to the General Counsel/stockholder, IWO at
the measurement date will record a charge to operations (under SFAS No. 123
fair value method) for the fair value of the warrant.

   Stock options and warrants outstanding were as follows:

<TABLE>
<CAPTION>
                                  Outstanding Options      Warrants
                                  ------------------- -------------------
                                             Weighted            Weighted
                                             Average             Average
                                  Number of  Exercise Number of  Exercise
                                   Shares     Price    Shares     Price
                                  ---------  -------- ---------  --------
       <S>                        <C>        <C>      <C>        <C>
       Balance, January 1, 1999..        --    $--           --    $ --
       Granted................... 3,707,300      5    1,200,000       6
       Forfeited.................        --     --           --      --
       Exercised.................        --     --           --      --
                                  ---------           ---------
       Balance, December 31, 1999 3,707,300      5    1,200,000       6
       Granted...................   616,855      6       74,400       6
       Forfeited.................  (300,270)     6     (148,800)      6
       Exercised.................   (98,930)     3           --      --
                                  ---------           ---------
       Balance, December 31, 2000 3,924,955      5    1,125,600       6
       Granted...................   839,895      7    2,000,040       7
       Forfeited.................  (396,443)     6     (148,800)      6
       Exercised.................  (258,940)     2           --      --
                                  ---------           ---------
       Balance, December 31, 2001 4,109,467    $ 6    2,976,840    $  6
                                  =========           =========
</TABLE>

   For various price ranges, weighted average characteristics of outstanding
options at December 31, 2001 were as follows:

<TABLE>
<CAPTION>
                       Options Outstanding           Options Exercisable
               ----------------------------------- -----------------------
                               Weighted-
                   Number       Average   Weighted     Number     Weighted
               Outstanding At  Remaining  Average  Exercisable At Average
      Exercise  December 31,  Contractual Exercise  December 31,  Exercise
       Price        2001         Life      Price        2001       Price
       -----   -------------- ----------- -------- -------------- --------
      <S>      <C>            <C>         <C>      <C>            <C>
        $1....     351,685     6.5 years     $1        351,685       $1
        $6-7..   3,757,782       7 years     $6      2,879,507       $6
                 ---------                           ---------
                 4,109,467                           3,231,192
                 =========                           =========
</TABLE>
   For various price ranges, weighted average characteristics of outstanding
options at December 31, 2000 were as follows:

<TABLE>
<CAPTION>
                       Options Outstanding           Options Exercisable
               ----------------------------------- -----------------------
                               Weighted-
                   Number       Average   Weighted     Number     Weighted
               Outstanding At  Remaining  Average  Exercisable At Average
      Exercise  December 31,  Contractual Exercise  December 31,  Exercise
       Price        2000         Life      Price        2000       Price
       -----   -------------- ----------- -------- -------------- --------
      <S>      <C>            <C>         <C>      <C>            <C>
         $1...     605,225     7.5 years     $1        605,225       $1
         $6...   3,319,730       8 years     $6      2,463,661       $6
                 ---------                           ---------
                 3,924,955                           3,068,886
                 =========                           =========
</TABLE>

                                     F-28

<PAGE>

                      IWO HOLDINGS, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS --(Continued)


   The Company follows APB Opinion No. 25, Accounting for Stock Issued to
Employees, to account for stock option plans. Had compensation cost for these
plans been determined based on the minimum value method at the grant dates for
awards as prescribed by SFAS No. 123, Accounting for Stock-Based Compensation,
pro forma net loss and loss per share would have been (in thousands except
share data):

<TABLE>
<CAPTION>
                                           For the Year For the Year For the Year
                                              Ended        Ended        Ended
                                           December 31, December 31, December 31,
                                               1999         2000         2001
                                           ------------ ------------ ------------
<S>                                        <C>          <C>          <C>
Pro forma net loss........................   $(17,588)    $(50,548)    $(77,419)
Pro forma basic and diluted loss per share   $  (2.48)    $  (1.64)    $  (2.06)
</TABLE>

   The weighted average fair value of options granted under the plans during
fiscal years 1999, 2000 and 2001 was $1.27, $1.56 and $1.39, respectively. The
assumptions used for the minimum value calculation are as follows:

<TABLE>
<CAPTION>
                                            1999    2000    2001
                                           ------- ------- -------
             <S>                           <C>     <C>     <C>
             Risk-free interest rate......  6.28%   6.53%   4.52%
             Expected term................ 5 years 5 years 5 years
             Company's expected volatility   0%      0%      0%
             Dividend yield...............  None    None    None
</TABLE>

16.  Related Party Transactions

   The Company received financial advisory and investment banking services from
several stockholders related to the Company's equity and debt financing and
acquisition of Sprint PCS assets. Total amounts incurred for these services
were approximately $9,285,000, $3,638,000, $-0- and $-0-, for the periods
January 1, 1999 through December 20, 1999 and December 20, 1999 through
December 31, 1999, and for the years ended December 31, 2000 and 2001,
respectively. For the period January 1, 1999 through December 20, 1999, the
Company charged to operations $9,250,000 for financial advisory fees (of which
$8,750,000 was to related parties for financial advisory fee not directly
incurred in connection with the successful financing).

   On December 20, 1999, the Company and an affiliate of a stockholder entered
into a five year advisory agreement whereby the Company will receive consulting
services from the affiliate for a $5,000,000 fee. The $5,000,000 fee, which was
prepaid on December 20, 1999 is included in prepaid management fee-related
party and is being amortized over the term of the agreement. In addition, in
1999 the affiliate provided financial advisory services to the Company in
connection with the Senior Credit Facility. Costs incurred related to the
Senior Credit Facility and paid to the affiliate approximated $3,552,000, all
of which are included in debt issuance costs.

   The Company utilizes the services of a law firm in which a partner of the
law firm is a stockholder of IWO. On December 20, 1999, the Company entered
into a three year professional services agreement with its outside General
Counsel/stockholder, whereby the General Counsel/stockholder will provide legal
services annually up to $400,000 and participate in the Company's stock option
program (see Notes 15 and 18). Legal fees incurred under the professional
services agreement/consulting agreement for the periods January 1, 1999 through
December 20, 1999 and December 20, 1999 through December 31, 1999, and for the
years ended December 31, 2000 and 2001, were approximately $1,101,000, $15,000,
$1,243,000 and $896,000, respectively. Legal fees included in accounts
payable-related parties at December 2000 and 2001, were approximately $213,000
and $115,000, respectively. Legal fees included in accrued expenses-related
parties were $250,000 for December 31, 2000 and 2001.

                                     F-29

<PAGE>

                      IWO HOLDINGS, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


   The Company utilized two firms for marketing, information technology, and
general management consulting, which are affiliated with its Chairman of the
Board. Fees incurred in the periods January 1, 1999 through December 20, 1999
and December 20, 1999 through December 31, 1999 and for the years ended
December 31, 2000 and 2001, approximated $369,000, $51,000, $165,000 and $-0-,
respectively.

17.  Fair Value of Financial Instruments

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

<TABLE>
<CAPTION>
                                               December 31, December 31,
                                                   2000         2001
                                               ------------ ------------
       <S>                                     <C>          <C>
       Cash and cash equivalents..............   $36,313      $  3,394
       Accounts receivable....................     4,218        10,001
       Accounts payable.......................     6,388        16,149
       Accounts payable--related parties......       213           115
       Due to Sprint PCS......................     7,711         9,163
       Accrued expenses.......................    12,432        29,163
       Accrued expenses--related parties......       463           724
       Unearned revenue.......................     1,652         4,413
       Term loan and revolving credit facility    80,000       145,000
       Senior Notes...........................        --       172,800
</TABLE>

   The carrying amounts of cash and cash equivalents, accounts receivable,
accounts payable, accounts payable--related parties, due to Sprint PCS, accrued
expenses, accrued expenses--related parties and unearned revenue are a
reasonable estimate of their fair value due to the short-term nature of the
instruments. The carrying value of the term loan and revolving credit facility
are at fair value since they are variable rate debt, and the Senior Notes are
valued based on actual trades made on January 3, 2002.

18.  Termination of Certain Agreements

  Separation Agreements

   IWO and a stockholder/former chief financial officer agreed to separate
effective January 31, 2000. Under the separation agreement, the
stockholder/former chief financial officer was paid $375,000 plus $75,000 for
legal expenses and approximately $169,000 for the repurchase of 29,352 shares
at the fair value of $5.74468 per share (fair value). Further, under the
agreement the stockholder/former chief financial officer retained 154,461
vested stock options. Accordingly, the Company charged operations in the amount
of $450,000 for the year ended December 31, 2000. The stockholder/former chief
financial officer's warrants for 74,400 shares of Class B common stock
terminated upon his resignation (see Note 15).

   In November 2000, IWO's former President resigned from his position. IWO has
engaged the former President as a consultant for the period November 2000
through April 30, 2001 at a fee aggregating $110,000. IWO will also pay the
former president severance approximating $800,000. For the years ended December
31, 2000 and 2001, $820,000 and $60,000, respectively, was charged to
operations.

                                     F-30

<PAGE>

                      IWO HOLDINGS, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


   In April 2001, IWO and its former chief operating officer entered into a
Separation Agreement pursuant to which the former chief operating officer's
employment was terminated. Under the Separation Agreement, the former chief
operating officer was paid approximately $306,000 for severance and
approximately $173,000 for the repurchase, at their original cost, of 30,077
shares of Class B common stock. Further, under the agreement, the former chief
operating officer shall retain vested stock options at an exercise price per
share of $5.74468, for a total of 299,515 shares of Class B common stock earned
through the effective date of employment termination. The former chief
operating officer's warrants for 74,400 shares of Class B common stock
terminated upon his resignation. In addition, the former chief operating
officer repaid approximately $193,000 of principal that was then outstanding
under recourse promissory note agreements. IWO also forgave $19,967 of accrued
interest on the promissory note agreements.

   In October 2001, IWO and its former chief technology officer entered into a
Separation Agreement pursuant to which the former chief technology officer's
employment was terminated. Under the Separation Agreement, the former chief
technology officer was paid approximately $209,000 for severance and
approximately $173,000 for the repurchase, at their original cost, of 30,077
shares of Class B common stock. Further, under the agreement, the former chief
technology officer shall retain vested stock options at an exercise price per
share of $5.74468, for a total of 252,973 shares of Class B common stock earned
through the effective date of employment termination. The former chief
technology officer's warrants for 74,400 shares of Class B common stock
terminated upon his resignation. In addition, the former chief technology
officer repaid approximately $169,000 of principal and accrued interest that
was then outstanding under recourse promissory note agreements.

  Professional Services Agreement

   On September 17, 2000, the Company terminated the Professional Services
Agreement with its General Counsel (see Note 16) and replaced it with a
Consulting Agreement having a term of one year unless terminated earlier as a
result of the culmination of an Approved Sale as defined in the agreement or a
Designated Merger. The Consulting Agreement provides for monthly payments of
$10,000 plus a bonus of up to $250,000, guaranteed upon the culmination of
certain events as defined in the agreement. In addition, the law firm in which
the former General Counsel is a partner was paid $25,000 per month as a
retainer for outside legal services for the period of September 17, 2000
through December 31, 2000.

19.  Defined Contribution Plan

   Effective April 1, 2000, the Company established a 401(k) defined
contribution plan (the Plan) in which all full time employees (as defined) are
eligible to participate in the Plan. Under the Plan, participants may elect to
withhold up to 15% of their annual compensation, subject to IRS limitation. The
Company is required to make matching contributions based on a percentage of the
participant's contributions. Participants vest in the Company matching
contributions ratably over a four-year vesting period (25% per year).
Contribution expense for the years ended December 31, 2000 and 2001
approximated $226,000 and $326,000, respectively.

20.  Sale of Units Consisting of Senior Notes and Warrants

   In February 2001, the Company issued 160,000 units 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 semiannually on January 15 and July 15 of each
year. The gross proceeds from the offering which were $160,000,000, have been
allocated to the fair value of the Senior Notes ($152,042,000) and warrants
($7,958,000). The Senior Notes discount is being amortized using the effective
interest method over the term of the loan. Such amortization for the year ended
December 31, 2001 approximated $365,000. A portion of the proceeds was used to
purchase a portfolio of US Treasury obligations, which is expected to generate
sufficient proceeds to make the first six scheduled interest payments on the
notes. The notes are senior unsecured obligations equal in right of payment to
all existing and future senior debt and senior in right of payment for all
future subordinated debt. The Senior Notes are fully and unconditionally
guaranteed by

                                     F-31

<PAGE>

                      IWO HOLDINGS, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Corp. The warrants are exercisable on or after February 15, 2002 and will
expire on January 15, 2011. The Company and its subsidiaries are restricted
from declaring or paying any dividends prior to January 1, 2004.

   Holders of the Senior Notes have the right to require IWO to acquire all or
part of the notes at a premium (101% of the aggregate principal amount of the
notes to be repurchased plus accrued interest and liquidated damages, if any)
upon the occurrence of events constituting a change in control. However, a
change in control will not occur as a result of a merger or consolidation with
or the sale of substantially all of the assets to a Sprint PCS affiliate.

   The warrant registration rights agreement contains certain provisions
including the requirement for the Company to keep the warrant registration
statement continuously effective until the date on which all of the warrants
and warrant shares are not transfer restricted. Upon a warrant registration
default, the liquidated damages required to be paid to each holder of a
transfer restricted warrant will be in an amount equal to $0.03 per week per
warrant for each week or portion of a week that the warrant registration
default continues for the first 90-day period immediately following the warrant
registration default. This amount will increase by an additional $0.02 per week
per warrant with respect to each subsequent 90-day period, up to a maximum
amount equal to $0.07 per week per warrant. The provision for liquidated
damages will continue until the warrant registration default has been cured.
The Company will not be required to pay liquidated damages for more than one
warrant registration default at any given time.

   Liquidated damages accrued as of January 15 or July 15 of each year will be
payable on that date. All accrued liquidated damages shall be paid by the
Company to warrant holders entitled to liquidated damages in accordance with
the warrant agreement. No warrant registration defaults have occurred to date.

21.  Merger

   On December 19, 2001, the Company entered into a definitive agreement and
plan of merger with US Unwired Inc., a Sprint PCS affiliate, under which US
Unwired and the Company will combine in a tax-free stock for stock merger. At
the effective time of the merger, each issued and outstanding share of the
Company's outstanding common stock will be converted into the right to receive
approximately 1.0371 shares of US Unwired common stock, referred to as the
exchange ratio. All shares of the Company's Class A, Class B, Class C, Class D
and Class E common stock will be converted into the Company's common stock
immediately prior to the effective time of the merger. At the effective time of
the merger, US Unwired will assume each unexpired and unexercised option to
purchase shares of the Company's common stock and each unexpired and
unexercised warrant issued as part of the Company's units to purchase shares of
the Company's common stock and convert it into an option or warrant to purchase
a number of shares of US Unwired common stock equal to the number of shares of
the Company's common stock subject to the assumed option or warrant multiplied
by the exchange ratio. The options will remain subject to the terms and
conditions of the IWO Holdings, Inc. Stock Incentive Plan and any agreements
between IWO and the optionee. The warrants will remain subject to the terms and
conditions set forth in the warrant agreement for the warrants. At the
effective time of the merger, US Unwired will exchange half of each unexpired
and unexercised warrant issued to founders and management of the Company
(except for warrants issued to the Company's Chief Executive Officer) for a new
warrant to purchase a number of shares of US Unwired common stock equal to the
number of shares of the Company's common stock subject to the exchanged warrant
multiplied by the exchange ratio, and the other remaining half of each warrant
will be cancelled. At the effective time of the merger, US Unwired will
exchange each unexpired and unexercised warrant issued to the Company's Chief
Executive Officer for a new warrant to purchase a number of shares of US
Unwired common stock equal to the number of shares of the Company's common
stock subject to the exchanged warrant multiplied by the exchange ratio. The
new warrants issued to founders and management of the Company will remain
subject to the terms and conditions set forth in the certificates representing
the exchanged warrants except that they will become exercisable in full at the
effective time of the merger. The new warrants issued to the Company's Chief
Executive Officer will remain subject to the terms and conditions set forth in
the certificates representing the exchanged warrants except that they will
become exercisable in full on

                                     F-32

<PAGE>

                      IWO HOLDINGS, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

December 31, 2003. The exercise price per share of US Unwired common stock
issuable under each converted option, converted warrant or exchanged warrant
will be equal to the per share exercise price of the Company option or warrant
divided by the exchange ratio. Certain of the aforementioned warrant exchanges
may result in a new measurement date and at such time IWO would record a
compensation charge for the difference between the exercise price of the
warrants and fair value. The total number of fully diluted shares of US Unwired
common stock to be issued by US Unwired in connection with the merger will be
approximately 45.9 million. The transaction is subject to customary regulatory
review, and approvals by the stockholders of US Unwired and the Company, both
companies' senior secured lenders, and Sprint PCS. The merger agreement will
terminate if the merger is not consummated on or before June 18, 2002, but this
date may be extended to September 17, 2002 if the FCC does not grant US
Unwired's request to permit increased foreign ownership. The Company must pay
US Unwired a termination fee of $7,000,000 if the merger has not occurred
before June 18, 2002 and as of that date holders of at least 6% of the
Company's common stock have exercised and not withdrawn their appraisal rights.

22.  Subsequent Event

   In February 2002, the Company's Senior Credit Facility was amended in
connection with the merger with US Unwired. The occurrence of a Change of
Control, as defined in the Senior Credit Facility, constitutes an event of
default under the Senior Credit Facility. The amendment consisted of a
modification to the Change of Control definition. The amendment will become
effective upon completion of the merger.

   In March 2002, the Company amended the Management Agreement with Sprint PCS
(see Notes 3 and 14). The amendment modified the Company's agreed-upon minimum
network build-out plan which includes specific coverage and deployment
schedules for the network planned within the Company's service area.

23.  Selected Quarterly Financial Data (Unaudited)
<TABLE>
<CAPTION>
                                      First    Second     Third    Fourth
                                     Quarter   Quarter   Quarter   Quarter
    -                                --------  --------  --------  --------
    <S>                              <C>       <C>       <C>       <C>

    2001
    Net revenues.................... $ 20,093  $ 24,613  $ 32,245  $ 33,194
    Operating loss..................  (10,084)  (11,154)  (12,264)  (21,463)
    Net loss........................  (14,719)  (16,708)  (18,086)  (27,428)
    Basic and diluted loss per share $  (0.39) $  (0.45) $  (0.48) $  (0.73)

    2000
    Net revenues.................... $ 10,011  $ 12,405  $ 17,387  $ 19,033
    Operating loss..................   (8,203)   (7,912)   (9,983)  (15,950)
    Net loss........................   (8,823)  (10,213)  (12,872)  (18,172)
    Basic and diluted loss per share $  (0.29) $  (0.34) $  (0.42) $  (0.58)
</TABLE>

24.  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 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.

                                     F-33

<PAGE>

                      IWO HOLDINGS, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


   The information which follows presents the condensed consolidating financial
position as of December 31, 2000 and 2001 and the condensed consolidating
results of operations and cash flows for the period December 20, 1999 through
December 31, 1999 and for the years ended December 31, 2000 and 2001 of (a) the
Parent Company, IWO Holdings, Inc., (b) the "Guarantor", Independent Wireless
One Corporation, (c) the "Non-Guarantor", Independent Wireless One Leased
Realty Corporation; and includes eliminating entries and the Company on a
consolidated basis.

                                     F-34

<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
                                                          Independent   Wireless One
                                                IWO       Wireless One  Leased Realty
                                           Holdings, Inc. Corporation    Corporation
                                              (Parent)    (Guarantor)  (Non 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>

                                     F-35

<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
                                             -------------- ------------ --------------- ------------ ------------
<S>                                          <C>            <C>          <C>             <C>          <C>
   LIABILITIES AND STOCKHOLDERS' EQUITY
   ------------------------------------
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
</TABLE>


                                     F-36

<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
                                       -------------- ------------ --------------- ------------ ------------
<S>                                    <C>            <C>          <C>             <C>          <C>
   Common stock, Class C
     (nonvoting)--$.01 par value
     18,750,000 shares authorized,
     3,432,365 shares and 3,555,630
     shares issued and outstanding at
     December 31, 1999 and 2000,
     respectively.....................          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,
     5,543,655 shares issued and
     outstanding at December 31,
     2000.............................          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........................        (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>

                                     F-37

<PAGE>

                      IWO HOLDINGS, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


              CONDENSED CONSOLIDATING BALANCE SHEET--(Continued)

                            As of December 31, 2001
                       (In thousands except share data)

<TABLE>
<CAPTION>
                                                                      Independent
                                                         Independent Wireless One
                                                  IWO     Wireless   Leased Realty
                                               Holdings,     One      Corporation
                                                 Inc.    Corporation     (Non
                                               (Parent)  (Guarantor)  Guarantor)   Eliminations Consolidated
                                               --------- ----------- ------------- ------------ ------------
<S>                                            <C>       <C>         <C>           <C>          <C>
                    ASSETS
Current assets:
   Cash and cash equivalents.................. $     --   $  3,394      $   --      $      --     $  3,394
   Accounts receivable net of allowances of
     $615.....................................       --     10,001          --             --       10,001
   Short-term investments at amortized
     cost--held to maturity...................       --     56,519          --             --       56,519
   Intercompany receivable....................  156,464     55,979          24       (212,467)          --
   Inventory..................................       --      4,375          --             --        4,375
   Prepaid expenses...........................       --      1,072       1,662             --        2,734
   Other current assets.......................       --      3,056          --             --        3,056
   Prepaid management fee--related party......       --      1,000          --             --        1,000
   Restricted cash and US Treasury
     obligation at amortized cost--held to
     maturity.................................   33,858         --          --             --       33,858
                                               --------   --------      ------      ---------     --------
       Total current assets...................  190,322    135,396       1,686       (212,467)     114,937
Restricted cash...............................       --      8,000          --             --        8,000
Restricted cash and US Treasury obligations at
  amortized cost--held to maturity............   19,861         --          --             --       19,861
Investment securities at amortized cost--held
  to maturity.................................       --     17,161          --             --       17,161
Investment in subsidiary......................   74,492         --          --        (74,492)          --
Prepaid management fee--related party.........       --      1,970          --             --        1,970
Property and equipment, net...................       --    139,203          --             --      139,203
Construction in progress......................       --     37,023          --             --       37,023
Deferred costs, net...........................       --     19,300          --             --       19,300
Intangible assets, net........................       --     52,702          --             --       52,702
Other.........................................       --      2,770          --             --        2,770
                                               --------   --------      ------      ---------     --------
       Total assets........................... $284,675   $413,525      $1,686      $(286,959)    $412,927
                                               ========   ========      ======      =========     ========
</TABLE>

                                     F-38

<PAGE>

                      IWO HOLDINGS, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

              CONDENSED CONSOLIDATING BALANCE SHEET--(Continued)

                            As of December 31, 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
                                           -------------- ------------ --------------- ------------ ------------
<S>                                        <C>            <C>          <C>             <C>          <C>

  LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Accounts payable.......................    $     --      $ 16,149       $   --       $      --     $ 16,149
   Accounts payable--related parties......          --           115           --              --          115
   Intercompany payable...................      54,317       156,488        1,662        (212,467)          --
   Due to Sprint..........................          --         9,163           --              --        9,163
   Accrued expenses.......................      10,267        18,872           24              --       29,163
   Accrued expenses--related parties......          --           724           --              --          724
   Unearned revenue.......................          --         4,413           --              --        4,413
                                              --------      --------       ------       ---------     --------
       Total current liabilities..........      64,584       205,924        1,686        (212,467)      59,727
Term loan and revolving credit facility...          --       145,000           --              --      145,000
Senior notes..............................     152,407            --           --              --      152,407
                                              --------      --------       ------       ---------     --------
       Total liabilities..................     216,991       350,924        1,686        (212,467)     357,134
                                              --------      --------       ------       ---------     --------
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 13,533,111 shares
     issued...............................         136            --           --              --          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
</TABLE>


                                     F-39

<PAGE>

                      IWO HOLDINGS, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


              CONDENSED CONSOLIDATING BALANCE SHEET--(Continued)

                            As of December 31, 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
                                                -------------- ------------ --------------- ------------ ------------
<S>                                             <C>            <C>          <C>             <C>          <C>
   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.....................     196,002       173,303           --        (185,000)     184,305
Deficit accumulated during developmental
  stage........................................      (1,076)       (1,076)          --           1,076       (1,076)
Retained deficit...............................    (127,021)     (112,182)          --         112,182     (127,021)
                                                  ---------     ---------       ------       ---------    ---------
                                                     68,282        62,795           --         (74,492)      56,585
Treasury stock at cost (104,012 Class B
  Shares)......................................        (598)           --           --              --         (598)
Promissory notes receivable....................          --          (194)          --              --         (194)
                                                  ---------     ---------       ------       ---------    ---------
       Total stockholders' equity..............      67,684        62,601           --         (74,492)      55,793
                                                  ---------     ---------       ------       ---------    ---------
       Total liabilities and stockholders'
         equity................................   $ 284,675     $ 413,525       $1,686       $(286,959)   $ 412,927
                                                  =========     =========       ======       =========    =========
</TABLE>

                                     F-40

<PAGE>

                      IWO HOLDINGS, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

                CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

          For the period December 20, 1999 through December 31, 1999
                                (In thousands)

<TABLE>
<CAPTION>
                                                               Independent
                                                     IWO       Wireless One
                                                Holdings, Inc. Corporation
                                                   (Parent)    (Guarantor)  Eliminations Consolidated
                                                -------------- ------------ ------------ ------------
<S>                                             <C>            <C>          <C>          <C>
Net revenues...................................    $    --       $    --       $   --      $    --
                                                   -------       -------       ------      -------
Operating expenses:
   Selling and marketing.......................         --             5           --            5
   General and administrative:
       Other general and administrative........         --           839           --          839
                                                   -------       -------       ------      -------
          Total operating expenses.............         --           844           --          844
                                                   -------       -------       ------      -------
Operating loss.................................         --          (844)          --         (844)
   Interest income.............................         --           171           --          171
   Amortization of debt issuance costs.........         --           (84)          --          (84)
   Other debt financing fees...................         --          (319)          --         (319)
   Equity in losses of wholly-owned subsidiary.     (1,076)           --        1,076           --
                                                   -------       -------       ------      -------
       Net loss................................    $(1,076)      $(1,076)      $1,076      $(1,076)
                                                   =======       =======       ======      =======
</TABLE>

                                     F-41

<PAGE>

                      IWO HOLDINGS, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

         CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS--(Continued)

                     For the year ended December 31, 2000
                                (In thousands)

<TABLE>
<CAPTION>
                                                                           Independent
                                                            Independent   Wireless One
                                                  IWO       Wireless One  Leased Realty
                                             Holdings, Inc. Corporation    Corporation
                                                (Parent)    (Guarantor)  (Non Guarantor) Eliminations Consolidated
                                             -------------- ------------ --------------- ------------ ------------
<S>                                          <C>            <C>          <C>             <C>          <C>
Net revenues................................    $     --      $ 58,836       $3,115        $(3,115)     $ 58,836
                                                --------      --------       ------        -------      --------
Operating expenses:
   Costs of services and equipment
     (exclusive of depreciation and
     amortization shown below)..............          --        46,541        2,277             --        48,818
   Selling and marketing....................          --        19,093          404             --        19,497
   General and administrative:
       Noncash stock-based compensation.....          --         1,817           --             --         1,817
       Related parties......................          --         2,193           --             --         2,193
       Other general and administrative.....          --        15,587          434             --        16,021
   Depreciation and amortization............          --        12,538           --             --        12,538
   Intercompany expenses....................          --         3,115           --         (3,115)           --
                                                --------      --------       ------        -------      --------
          Total operating expenses..........          --       100,884        3,115         (3,115)      100,884
                                                --------      --------       ------        -------      --------
Operating loss..............................          --       (42,048)          --             --       (42,048)
   Interest income..........................          --         2,032           --             --         2,032
   Interest expense.........................          --        (2,918)          --             --        (2,918)
   Interest expense--related parties........          --          (614)          --             --          (614)
   Amortization of debt issuance costs......          --        (2,843)          --             --        (2,843)
   Other debt financing fees................          --        (3,689)          --             --        (3,689)
   Equity in losses of wholly-owned
     subsidiaries...........................     (50,080)           --           --         50,080            --
                                                --------      --------       ------        -------      --------
          Net loss..........................    $(50,080)     $(50,080)      $   --        $50,080      $(50,080)
                                                ========      ========       ======        =======      ========
</TABLE>


                                     F-42

<PAGE>

                      IWO HOLDINGS, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


         CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS--(Continued)

                     For the year ended December 31, 2001
                                (In thousands)

<TABLE>
<CAPTION>
                                                                           Independent
                                                            Independent   Wireless One
                                                  IWO       Wireless One  Leased Realty
                                             Holdings, Inc. Corporation    Corporation
                                                (Parent)    (Guarantor)  (Non Guarantor) Eliminations Consolidated
                                             -------------- ------------ --------------- ------------ ------------
<S>                                          <C>            <C>          <C>             <C>          <C>
Net revenues................................    $     --      $110,145       $8,611        $(8,611)     $110,145
                                                --------      --------       ------        -------      --------
Operating expenses:
   Costs of services and equipment
     (exclusive of depreciation and
     amortization shown below)..............          --        82,124        6,800             --        88,924
   Selling and marketing....................          --        30,454        1,295             --        31,749
   General and administrative:
       Noncash stock-based
         compensation.......................          --           334           --             --           334
       Related parties......................          --         2,146           --             --         2,146
       Other general and administrative.....          --        22,339          516             --        22,855
   Depreciation and amortization............          --        19,102           --             --        19,102
   Intercompany expenses....................          --         8,611           --         (8,611)           --
                                                --------      --------       ------        -------      --------
          Total operating expenses..........          --       165,110        8,611         (8,611)      165,110
                                                --------      --------       ------        -------      --------
Operating loss..............................          --       (54,965)          --             --       (54,965)
   Interest income..........................       2,409         5,185           --             --         7,594
   Interest expense.........................     (17,248)       (5,715)          --             --       (22,963)
   Interest expense--related parties........          --        (1,515)          --             --        (1,515)
   Amortization of debt issuance and
     offering costs.........................          --        (3,323)          --             --        (3,323)
   Other debt financing fees................          --        (1,769)          --             --        (1,769)
   Equity in losses of wholly-owned
     subsidiaries...........................     (62,102)           --           --         62,102            --
                                                --------      --------       ------        -------      --------
          Net loss..........................    $(76,941)     $(62,102)      $   --        $62,102      $(76,941)
                                                ========      ========       ======        =======      ========
</TABLE>


                                     F-43

<PAGE>

                      IWO HOLDINGS, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANICIAL STATEMENTS--(Continued)

                CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

          For the period December 20, 1999 through December 31, 1999
                                (In thousands)

<TABLE>
<CAPTION>
                                                                          Independent
                                                                IWO       Wireless One
                                                           Holdings, Inc. Corporation
                                                              (Parent)    (Guarantor)  Eliminations Consolidated
                                                           -------------- ------------ ------------ ------------
<S>                                                        <C>            <C>          <C>          <C>
Cash flows from operating activities:
   Net loss...............................................   $  (1,076)     $ (1,076)   $   1,076     $ (1,076)
   Adjustments to reconcile net loss to net cash (used
     in) provided by operating activities:
       Amortization of debt issuance costs................          --            84           --           84
       Equity in losses of wholly-owned subsidiary........       1,076            --       (1,076)          --
   Changes in operating assets and liabilities:
       Intercompany receivable............................    (135,000)           --      135,000           --
       Inventory..........................................          --          (295)          --         (295)
       Prepaid expenses...................................          --            16           --           16
       Other..............................................          --           (61)          --          (61)
       Prepaid management fee--related party..............          --        (4,970)          --       (4,970)
       Accounts payable...................................          --            67           --           67
       Accounts payable--related parties..................          --         4,008           --        4,008
       Intercompany payable...............................          --       135,000     (135,000)          --
       Accrued expenses...................................          --          (790)          --         (790)
       Accrued financial advisory fees....................          --        (9,250)          --       (9,250)
                                                             ---------      --------    ---------     --------
          Net cash (used in) provided by operating
            activities....................................    (135,000)      122,733           --      (12,267)
                                                             ---------      --------    ---------     --------
Cash flows from investing activities:
   Deferred acquisition costs.............................          --        (2,375)          --       (2,375)
   Purchase of property and equipment.....................          --          (288)          --         (288)
   Construction in progress...............................          --          (159)          --         (159)
                                                             ---------      --------    ---------     --------
          Net cash used in investing activities...........          --        (2,822)          --       (2,822)
                                                             ---------      --------    ---------     --------
Cash flows from financing activities:
   Gross proceeds received from equity investors..........     135,000            --           --      135,000
   Payment of debt........................................          --        (2,000)          --       (2,000)
   Payment of equity issuance costs.......................          --          (772)          --         (772)
   Payment of debt issuance costs.........................          --       (12,400)          --      (12,400)
                                                             ---------      --------    ---------     --------
          Net cash provided by (used in) financing
            activities....................................     135,000       (15,172)          --      119,828
                                                             ---------      --------    ---------     --------
Net increase in cash and cash equivalents.................          --       104,739           --      104,739
Cash and cash equivalents, beginning of period............          --            13           --           13
                                                             ---------      --------    ---------     --------
Cash and cash equivalents, end of period..................   $      --      $104,752    $      --     $104,752
                                                             =========      ========    =========     ========
Non-cash:
   Deferred costs included in accounts payable and
     accounts payable--related parties....................   $      --      $    977    $      --     $    977
</TABLE>


                                     F-44

<PAGE>

                      IWO HOLDINGS, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


         CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS--(Continued)

                     For the year ended December 31, 2000
                                (In thousands)

<TABLE>
<CAPTION>
                                                                         Independent
                                                          Independent   Wireless One
                                                IWO       Wireless One  Leased Realty
                                           Holdings, Inc. Corporation    Corporation
                                              (Parent)    (Guarantor)  (Non Guarantor) Eliminations Consolidated
                                           -------------- ------------ --------------- ------------ ------------
<S>                                        <C>            <C>          <C>             <C>          <C>
Cash flows from operating activities:
   Net loss...............................    $(50,080)     $(50,080)       $  --        $ 50,080     $(50,080)
   Adjustments to reconcile net loss to
     net cash used in operating
     activities:
       Allowances for doubtful
         accounts and sales returns.......          --           312           --              --          312
       Depreciation and amortization
         of property and equipment........          --         6,813           --              --        6,813
       Amortization of intangible
         assets...........................          --         5,725           --              --        5,725
       Amortization of debt issuance
         costs............................          --         2,843           --              --        2,843
       Noncash stock-based
         compensation.....................          --         1,817           --              --        1,817
       Equity in losses of wholly-
         owned subsidiaries...............      50,080            --           --         (50,080)          --
   Changes in operating assets and
     liabilities, net of acquired assets:
       Accounts receivable................          --        (2,279)          --              --       (2,279)
       Intercompany receivable............     (49,816)         (906)        (350)         51,072           --
       Inventory..........................          --        (2,252)          --              --       (2,252)
       Prepaid expenses...................          --          (155)        (654)             --         (809)
       Other..............................          --          (418)          --              --         (418)
       Prepaid management fee--
         related party....................          --         1,000           --              --        1,000
       Accounts payable...................          --           717           --              --          717
       Accounts payable--related
         parties..........................          --        (3,597)          --              --       (3,597)
       Intercompany payable...............         252        50,166          654         (51,072)          --
       Due to Sprint......................          --         7,711           --              --        7,711
       Accrued expenses...................          --        10,078          350              --       10,428
       Accrued expenses--related
         parties..........................          --           463           --              --          463
       Unearned revenue...................          --         1,652           --              --        1,652
                                              --------      --------        -----        --------     --------
          Net cash (used in)
            provided by operating
            activities....................     (49,564)       29,610           --              --      (19,954)
                                              --------      --------        -----        --------     --------
</TABLE>


                                     F-45

<PAGE>

                      IWO HOLDINGS, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

         CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS--(Continued)

                     For the year ended 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
                                                    -------------- ------------ --------------- ------------ ------------
<S>                                                 <C>            <C>          <C>             <C>          <C>
Cash flows from investing activities:
    Deferred acquisition costs.....................         --           (740)         --             --           (740)
    Purchase of Sprint assets......................         --       (116,405)         --             --       (116,405)
    Restricted cash................................         --         (8,000)         --             --         (8,000)
    Purchase of property and equipment.............         --        (19,926)         --             --        (19,926)
    Construction in progress.......................         --        (27,749)         --             --        (27,749)
                                                       -------      ---------        ----           ----      ---------
       Net cash used in investing activities.......         --       (172,820)         --             --       (172,820)
                                                       -------      ---------        ----           ----      ---------
Cash flows from financing activities:
    Gross proceeds received from equity
     investors.....................................     49,544             --          --             --         49,544
    Stock option exercises.........................        272             --          --             --            272
    Proceeds received from issuance of debt........         --         85,000          --             --         85,000
    Payment of debt................................         --         (5,000)         --             --         (5,000)
    Payment for Company common stock...............       (252)            --          --             --           (252)
    Payment of offering costs......................         --         (2,234)         --             --         (2,234)
    Payment of equity issuance costs...............         --            (75)         --             --            (75)
    Payment of debt issuance costs.................         --         (2,920)         --             --         (2,920)
                                                       -------      ---------        ----           ----      ---------
       Net cash provided by financing
        activities.................................     49,564         74,771          --             --        124,335
                                                       -------      ---------        ----           ----      ---------
Net decrease in cash and cash equivalents..........         --        (68,439)         --             --        (68,439)
Cash and cash equivalents, beginning of period.....         --        104,752          --             --        104,752
                                                       -------      ---------        ----           ----      ---------
Cash and cash equivalents, end of period...........    $    --      $  36,313        $ --           $ --      $  36,313
                                                       =======      =========        ====           ====      =========

Non-cash:
    Property and equipment included in accounts
     payable.......................................    $    --      $     950        $ --           $ --      $     950
    Construction in progress included in
     accounts payable..............................         --          3,835          --             --          3,835
    Construction in progress included in accrued
     expenses......................................         --          1,521          --             --          1,521
    Issuance of common stock for promissory
     notes.........................................         --            456          --             --            456
Interest paid......................................         --          3,403          --             --          3,407
</TABLE>


                                     F-46

<PAGE>

                      IWO HOLDINGS, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

         CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS--(Continued)

                     For the year ended December 31, 2001
                                (In thousands)

<TABLE>
<CAPTION>
                                                                             Independent
                                                              Independent   Wireless One
                                                    IWO       Wireless One  Leased Realty
                                               Holdings, Inc. Corporation    Corporation
                                                  (Parent)    (Guarantor)  (Non Guarantor) Eliminations Consolidated
                                               -------------- ------------ --------------- ------------ ------------
<S>                                            <C>            <C>          <C>             <C>          <C>
Cash flows from operating activities:
   Net loss...................................   $ (76,941)     $(62,102)      $    --      $  62,102     $(76,941)
   Adjustments to reconcile net loss to net
     cash used in operating activities:
       Allowances for doubtful accounts
         and sales returns....................          --           303            --             --          303
       Depreciation and amortization of
         property and equipment...............          --        12,930            --             --       12,930
       Loss on disposal of property and
         equipment............................          --           105            --             --          105
       Amortization of intangible assets......          --         6,172            --             --        6,172
       Amortization of debt issuance and
         offering costs.......................          --         3,323            --             --        3,323
       Amortization of discount on senior
         notes................................         366            --            --             --          366
       Amortization of net premium on
         investment securities................          --           965            --             --          965
       Noncash stock-based
         compensation.........................          --           334            --             --          334
       Equity in losses of wholly-owned
         subsidiaries.........................      62,102            --            --        (62,102)          --
   Changes in operating assets and
     liabilities:
       Accounts receivable....................          --        (6,086)           --             --       (6,086)
       Intercompany receivable................    (156,192)      (55,073)          326        210,939           --
       Inventory..............................          --        (1,808)           --             --       (1,808)
       Prepaid expenses.......................          --          (654)       (1,008)            --       (1,662)
       Other..................................          --        (5,613)           --             --       (5,613)
       Prepaid management fee--related
         party................................          --         1,000            --             --        1,000
       Accounts payable.......................          --           894            --             --          894
       Accounts payable--related parties......          --           (98)           --             --          (98)
       Intercompany payable...................      54,064       155,867         1,008       (210,939)          --
       Due to Sprint..........................          --         1,452            --             --        1,452
       Accrued expenses.......................      10,267         6,761          (326)            --       16,702
       Accrued expenses--related parties......          --           261            --             --          261
       Unearned revenue.......................          --         2,761            --             --        2,761
                                                 ---------      --------       -------      ---------     --------
          Net cash (used in) provided
            by operating activities...........    (106,334)       61,694            --             --      (44,640)
                                                 ---------      --------       -------      ---------     --------
</TABLE>

                                     F-47

<PAGE>

                      IWO HOLDINGS, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


         CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS--(Continued)

                     For the year ended December 31, 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
                                              -------------- ------------ --------------- ------------ ------------
<S>                                           <C>            <C>          <C>             <C>          <C>
Cash flows from investing activities:
   Purchase of investment securities--held
     to maturity.............................          --      (105,328)          --            --       (105,328)
   Proceeds from maturities of investment
     securities..............................          --        30,684           --            --         30,684
   Restricted cash and U.S. Treasury
     obligations, at amortized cost--held to
     maturity................................     (53,719)           --           --            --        (53,719)
   Purchase of property and equipment........          --       (11,016)          --            --        (11,016)
   Construction in progress..................          --       (66,777)          --            --        (66,777)
                                                 --------     ---------        -----         -----      ---------
       Net cash used in investing
         activities..........................     (53,719)     (152,437)          --            --       (206,156)
                                                 --------     ---------        -----         -----      ---------
Cash flows from financing activities:
   Gross proceeds received from equity
     investors for payment of promissory
     notes...................................          --           549           --            --            549
   Stock option exercises....................         399            --           --            --            399
   Proceeds received from issuance of debt...          --        65,000           --            --         65,000
   Proceeds received from issuance of senior
     notes and warrants......................     160,000            --           --            --        160,000
   Payment for Company common stock..........        (346)           --           --            --           (346)
   Payment of offering costs.................          --        (7,725)          --            --         (7,725)
                                                 --------     ---------        -----         -----      ---------
       Net cash provided by financing
         activities..........................     160,053        57,824           --            --        217,877
                                                 --------     ---------        -----         -----      ---------
Net decrease in cash and cash equivalents....          --       (32,919)          --            --        (32,919)
Cash and cash equivalents, beginning of
  period.....................................          --        36,313           --            --         36,313
                                                 --------     ---------        -----         -----      ---------
Cash and cash equivalents, end of period.....    $     --     $   3,394        $  --         $  --      $   3,394
                                                 ========     =========        =====         =====      =========
Non-cash:
   Property and equipment included in
     accounts payable........................    $     --     $   7,477        $  --         $  --      $   7,477
   Property and equipment included in
     accrued expenses........................          --         1,550           --            --          1,550
   Construction in progress included in
     accounts payable........................          --         6,184           --            --          6,184
Interest paid................................          --        18,068           --            --         18,068
</TABLE>

                                     F-48

<PAGE>

                        REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders
Independent Wireless One Corporation

   We have audited the accompanying statement of assets sold of the Sprint
Spectrum Albany, Syracuse and Manchester Markets (as described in Note 1),
which are wholly owned by Independent Wireless One Corporation (IWO) since
their acquisition in 2000 from Sprint Spectrum L.P., as of December 31, 1999
and the related statements of revenues and expenses for each of the two years
in the period ended December 31, 1999. These statements are the responsibility
of Sprint Spectrum L.P.'s management. Our responsibility is to express an
opinion on these statements based on our audits.

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

   As described in Note 2, the accompanying statements have been included in
the Annual Report on Form 10-K of IWO Holdings, Inc. for purposes of complying
with the rules and regulations of the Securities and Exchange Commission in
lieu of the full financial statements required by Rule 3-02(a) of Regulation
S-X. The statements are not intended to be a complete presentation of the
Sprint Spectrum Albany, Syracuse and Manchester Markets' financial position or
results of their operations.

   In our opinion, the statements referred to above present fairly, in all
material respects, the assets sold of the Sprint Spectrum Albany, Syracuse and
Manchester Markets as of December 31, 1999, and the related revenues and
expenses for each of the two years in the period ended December 31, 1999, in
conformity with accounting principles generally accepted in the United States.

                                          /S/  ERNST & YOUNG LLP

Kansas City, Missouri
May 2, 2000

                                     F-49

<PAGE>

            SPRINT SPECTRUM ALBANY, SYRACUSE AND MANCHESTER MARKETS
            (wholly owned by Independent Wireless One Corporation)

                           STATEMENT OF ASSETS SOLD

<TABLE>
<CAPTION>
                                                                            December 31
                                                                               1999
                                                                            -----------
<S>                                                                         <C>
Assets:
   Accounts receivable, net of allowance for doubtful accounts of $292,106. $ 3,356,472
   Property, plant and equipment:
       Network equipment...................................................  85,110,717
       Other...............................................................     757,022
       Construction work in progress.......................................     204,275
                                                                            -----------
   Total property, plant and equipment.....................................  86,072,014
       Less: accumulated depreciation......................................  26,914,543
                                                                            -----------
   Net property, plant and equipment.......................................  59,157,471
   Prepaid lease expense...................................................     371,811
                                                                            -----------
Total assets sold.......................................................... $62,885,754
                                                                            ===========
</TABLE>




                            See accompanying notes.

                                     F-50

<PAGE>

            SPRINT SPECTRUM ALBANY, SYRACUSE AND MANCHESTER MARKETS
            (wholly owned by Independent Wireless One Corporation)

                      STATEMENTS OF REVENUES AND EXPENSES

<TABLE>
<CAPTION>
                                                   Year ended December 31
                                                   -----------------------
                                                      1998        1999
                                                   ----------- -----------
     <S>                                           <C>         <C>
     Net revenues................................. $ 9,137,334 $23,401,059
     Operating expenses:
        Costs of services and equipment...........  12,200,739  20,203,145
        General and administrative................   7,360,750   8,975,967
        Selling and marketing.....................   3,724,401   5,869,705
        Depreciation and amortization.............   9,491,437  10,204,886
                                                   ----------- -----------
            Total operating expenses..............  32,777,327  45,253,703
                                                   ----------- -----------
     Operating expenses in excess of net revenues. $23,639,993 $21,852,644
                                                   =========== ===========
</TABLE>



                            See accompanying notes.

                                     F-51

<PAGE>

            SPRINT SPECTRUM ALBANY, SYRACUSE AND MANCHESTER MARKETS
            (wholly owned by Independent Wireless One Corporation)

                     NOTES TO STATEMENT OF ASSETS SOLD AND
                      STATEMENTS OF REVENUES AND EXPENSES

1.  Asset Purchase Agreement

   On February 9, 1999, Independent Wireless One Corporation (IWO) and Sprint
Spectrum L.P. (Sprint Spectrum) entered into an Asset Purchase Agreement (the
Agreement) whereby IWO agreed to purchase from Sprint Spectrum certain assets
and IWO assumed certain leases as stipulated in the Agreement. Under the
Agreement, IWO purchased Sprint Spectrum's assets related to its wireless
mobile telephone services in the Albany and Syracuse, New York and Manchester,
New Hampshire markets (collectively, the "Acquired Markets"), which were wholly
owned by Sprint Spectrum. The assets purchased by IWO primarily consisted of
property, plant and equipment including network assets and retail stores
located in the Acquired Markets. IWO assumed certain operating leases within
the Acquired Markets; however no deferred revenue, commission or other similar
liabilities were assumed. This transaction closed in the first quarter of 2000.

   Following the close of the transaction, IWO began operating the Acquired
Markets as Sprint PCS markets through an affiliation agreement with Sprint
Spectrum. Under the terms of this agreement, IWO sells wireless voice and data
telephone services under the Sprint PCS brand name in exchange for a fee. Also
as part of the agreement, Sprint Spectrum continues to provide network
monitoring, customer service, billing and collection services to IWO.

2.  Basis of Presentation

   Historically, financial statements have not been prepared for the Acquired
Markets as they had no separate legal status or existence. The accompanying
statement of assets sold and statements of revenues and expenses of the
Acquired Markets have been included in the Annual Report on Form 10-K of IWO
Holdings, Inc. for purposes of complying with the rules and regulations of the
Securities and Exchange Commission in lieu of the full financial statements
required by Rule 3-02(a) of Regulation S-X. These statements have been derived
from the historical accounting records of Sprint Spectrum and include revenues
and expenses directly attributable to the Acquired Markets. Certain revenues
and expenses that are indirectly attributable to the Acquired Markets have been
allocated using the methods set forth below. As a result, the statements may
not be indicative of the financial position or operating results of the
Acquired Markets had they been operated as a separate, stand-alone company.
Management believes these allocation methodologies are reasonable and represent
the most appropriate methods of determining the expenses of the Acquired
Markets.

  Accounts Receivable

   The accounts receivable balance included in the accompanying statement of
assets sold are those specifically associated with the subscribers of the
Acquired Markets. Allocations have been made of certain unbilled revenue and
bad debt accruals that are recorded by Sprint Spectrum at levels above the
market level. These allocations are based on average subscribers of the
Acquired Markets relative to total subscribers of Sprint Spectrum.

  Property, Plant & Equipment

   The property, plant and equipment balances included in the accompanying
statement of assets sold are assets specifically associated with the Acquired
Markets that were purchased by IWO pursuant to the Agreement.

                                     F-52

<PAGE>

            SPRINT SPECTRUM ALBANY, SYRACUSE AND MANCHESTER MARKETS
            (wholly owned by Independent Wireless One Corporation)

                     NOTES TO STATEMENT OF ASSETS SOLD AND
               STATEMENTS OF REVENUES AND EXPENSES--(Continued)


  Revenues

   Service revenues included in the statements of revenues and expenses are
those specifically related to subscribers of the Acquired Markets. Allocations
have been made of certain unbilled revenue and bad debt accruals that are
recorded by Sprint Spectrum at levels above the market level. These allocations
are based on average subscribers of the Acquired Markets relative to total
subscribers of Sprint Spectrum.

   Equipment revenues included in the statements of revenues and expenses
related to the Albany and Syracuse, New York markets include those specifically
related to equipment sales occurring in Sprint Spectrum's retail stores and
equipment sales to third-party retail stores located within these markets.

   Certain equipment revenues related to the Manchester, New Hampshire market
are directly attributable to subscribers within that market. The remaining
equipment revenues related to the Manchester, New Hampshire market are based on
allocations of equipment sales occurring in Sprint Spectrum's retail stores and
equipment sales to third-party retail stores located in the Portland, Maine and
Boston, Massachusetts districts, which include the Manchester, New Hampshire
and other nearby markets. These allocations are based on the Manchester, New
Hampshire market's gross subscriber activations relative to total gross
subscriber activations of the markets included in the Portland, Maine and
Boston, Massachusetts districts.

   Also included are allocations of revenues from equipment sales to national
third-party retail chains. These allocations are based on the Acquired Market's
gross subscriber activations via national third-party retail chains relative to
total gross subscriber activations of Sprint Spectrum via national third-party
retail chains.

  Costs of Services and Equipment

   Cost of services expense in the statements of revenues and expenses includes
those expenses directly attributable to the Acquired Markets. In addition,
allocations have been made of cost of services incurred at levels above the
market level. These allocations are based on the Acquired Markets' directly
attributable cost of services relative to the total Company's directly
attributable cost of services.

   Cost of equipment included in the statements of revenues and expenses
related to the Albany and Syracuse, New York markets is that specifically
related to equipment sales occurring in Sprint Spectrum's retail stores and
equipment sales to third-party retail stores located within these markets.

   Cost of equipment associated with certain equipment revenues related to the
Manchester, New Hampshire market are directly attributable to subscribers
within that market. The cost of equipment associated with the remaining
equipment revenues related to the Manchester, New Hampshire market is based on
allocations of the cost of equipment sales occurring in Sprint Spectrum's
retail stores and third-party retail stores located in the Portland, Maine and
Boston, Massachusetts districts, which include the Manchester, New Hampshire
and other nearby markets. These allocations are based on the Manchester, New
Hampshire market's gross subscriber activations relative to total gross
subscriber activations of the markets included in the Portland, Maine and
Boston, Massachusetts districts.

   Also included are allocations of the cost of equipment associated with
equipment sales to national third-party retail chains. These allocations are
based on the Acquired Market's gross subscriber activations via national
third-party retail chains relative to total gross subscriber activations of
Sprint Spectrum via national third-party retail chains.

                                     F-53

<PAGE>

            SPRINT SPECTRUM ALBANY, SYRACUSE AND MANCHESTER MARKETS
            (wholly owned by Independent Wireless One Corporation)

                     NOTES TO STATEMENT OF ASSETS SOLD AND
               STATEMENTS OF REVENUES AND EXPENSES--(Continued)


  General and Administrative Expenses and Selling and Marketing Expenses

   Direct general and administrative expenses and selling and marketing
expenses are those costs that were incurred as a result of providing wireless
mobile telephone services in the Acquired Markets and which are no longer
incurred by Sprint Spectrum subsequent to consummation of the transaction with
IWO.

   General and administrative expenses and selling and marketing expenses of
Sprint Spectrum that are indirectly associated with the Acquired Markets'
operations were allocated to the Acquired Markets' statements of revenues and
expenses based on the number of subscribers of the Acquired Markets relative to
Sprint Spectrum's total subscribers.

  Depreciation Expense

   Depreciation expense included in the statements of revenues and expenses is
related to the assets specifically associated with the Acquired Markets that
were purchased by IWO pursuant to the Agreement.

3.  Summary of Significant Accounting Policies

  Revenue Recognition

   Operating revenues are recognized as services are rendered or as equipment
is delivered to customers. Operating revenues are recorded net of an estimate
for uncollectible accounts.

  Property, Plant and Equipment

   Property, plant and equipment are stated at cost. The cost of property,
plant and equipment is generally depreciated on a straight-line basis over
estimated economic useful lives ranging from seven to 20 years. Repair and
maintenance costs are expensed as incurred.

  Advertising

   Advertising costs are expensed when the advertisement occurs. Total
advertising expense amounted to $2,438,388 in 1998 and $3,503,920 in 1999.

  Use of Estimates

   The statement of assets sold and statements of revenues and expenses are
prepared in conformity with accounting principles generally accepted in the
United States. These principles require management to make estimates and
assumptions that affect the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. Also,
as discussed in Note 2, the statements of revenues and expenses include
allocations and estimates that are not necessarily indicative of the revenues,
costs and expenses that would have resulted if the Acquired Markets had been
operated as a separate stand-alone company.

                                     F-54

<PAGE>

            SPRINT SPECTRUM ALBANY, SYRACUSE AND MANCHESTER MARKETS
            (wholly owned by Independent Wireless One Corporation)

                     NOTES TO STATEMENT OF ASSETS SOLD AND
               STATEMENTS OF REVENUES AND EXPENSES--(Continued)


4.  Operating Leases

   The Acquired Markets' minimum rental commitments at year-end 1999 for all
non-cancelable operating leases, consisting mainly of leases for cell and
switch sites, are as follows:

<TABLE>
                             <S>        <C>
                             2000...... $1,249,543
                             2001......    636,662
                             2002......    358,375
                             2003......    208,700
                             2004......     67,949
                             Thereafter    195,269
</TABLE>

   The table excludes renewal options related to certain cell and switch site
leases. These renewal options generally have five-year terms and may be
exercised from time to time. The Acquired Markets' gross rental expense totaled
$2,585,344 in 1998 and $2,810,292 in 1999.

5.  Cash Flows

   The Acquired Markets' primary requirements for cash have been to fund
operating losses and capital expenditures associated with the network
build-out. Capital expenditures of the Acquired Markets were $13,071,747 in
1998 and $6,560,077 in 1999.

                                     F-55

<PAGE>

                     REPORT OF INDEPENDENT ACCOUNTANTS ON
                         FINANCIAL STATEMENT SCHEDULE

To the Board of Directors and Stockholders of
IWO Holdings, Inc. and Subsidiaries

   Our audits of the consolidated financial statements referred to in our
report dated March 8, 2002 appearing in this Annual Report on Form 10-K of IWO
Holdings, Inc. and its Subsidiaries also included an audit of the financial
statement schedule listed in Item 14(a)2 of this Form 10-K. In our opinion,
this financial statement schedule presents fairly, in all material respects,
the information set forth therein when read in conjunction with the related
consolidated financial statements.

                                          /S/  PRICEWATERHOUSECOOPERS LLP

Albany, New York
March 8, 2002


                                      S-1

<PAGE>

                      IWO HOLDINGS, INC. AND SUBSIDIARIES

                SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>
                                             For the period For the period    Years ended
                                               January 1,    December 20,    December 31,
-                                             1999 through   1999 through  ----------------
                                              December 20,   December 31,
                                                  1999           1999       2000     2001
                                             -------------- -------------- -------  -------
                                                             (in thousands)
<S>                                          <C>            <C>            <C>      <C>
Income tax valuation allowance
   Balance at beginning of year.............     $   21         $5,198     $ 5,574  $23,181
   Additions................................      5,177            376      17,607   25,998
   Reductions...............................         --             --          --       --
                                                 ------         ------     -------  -------

   Balance at end of year...................     $5,198         $5,574     $23,181  $49,179
                                                 ======         ======     =======  =======

Allowance for doubtful accounts
   Balance at beginning of year.............     $   --         $   --     $    --  $   312
   Additions charged to expense.............         --             --       1,308    3,125
   Reductions write-offs, net of recoveries.         --             --        (996)  (2,822)
                                                 ------         ------     -------  -------

   Balance at end of year...................     $   --         $   --     $   312  $   615
                                                 ======         ======     =======  =======
</TABLE>

                                      S-2