UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    FORM 10-K

(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 X For the Fiscal Year Ended December 31, 2000

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the transition period from              to
                                          --------------   -----------------

Commission file numbers 0-23232/1-14248

                               ARCH WIRELESS, INC.
             (Exact name of Registrant as specified in its Charter)

         DELAWARE                                      31-1358569
  (State of incorporation)                (I.R.S. Employer Identification No.)

        1800 West Park Drive, Suite 250
          Westborough, Massachusetts                          01581
    (address of principal executive offices)               (Zip Code)

                                 (508) 870-6700
              (Registrant's telephone number, including area code)

              SECURITIES REGISTERED PURSUANT TO SECTION 12(b)OF THE
                        SECURITIES EXCHANGE ACT OF 1934:
  10 7/8% Senior Discount Notes due 2008             American Stock Exchange
              (Title of Class)            (Name of exchange on which registered)

             SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE
                        SECURITIES EXCHANGE ACT OF 1934:
                      Common Stock Par Value $.01 Per Share
                  Class B Common Stock Par Value $.01 Per Share
                                    Warrants
                                (Title of class)

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES____X_____ NO________

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

The aggregate market value of the voting stock held by non-affiliates of the
Registrant at March 19, 2001 was approximately $105,422,000.

The number of shares of Registrant's common stock outstanding on March 19, 2001
was 171,640,593. The number of shares of Registrant's Class B common stock
outstanding on March 19, 2001 was 681,497.

Portions of Registrant's Definitive Proxy Statement for the 2001 Annual Meeting
of Stockholders of the Registrant to be held on May 15, 2001, are incorporated
by reference into Part III.



<PAGE>

                                     PART I

ITEM 1.   BUSINESS

GENERAL

   Arch Wireless is a leading provider of wireless messaging and information
services in the United States. Currently, we primarily provide traditional
paging services, which enable subscribers to receive messages on their pagers
composed entirely of numbers, such as a phone number, or on some pagers, numbers
and letters, which enable the subscriber to receive text messages. We have also
begun to market and sell two-way wireless messaging services which enable
subscribers to respond to messages or create and send wireless email messages to
other wireless messaging devices (including pagers and personal digital
assistants or PDAs) and to personal computers. We also offer wireless
information services, such as stock quotes, news and other wireless information
delivery services, voice mail, personalized greeting, message storage and
retrieval, equipment loss protection and equipment maintenance for both
traditional and two-way customers. These services are commonly referred to as
wireless messaging and information services.

PAGENET MERGER

   On November 10, 2000, Paging Network Inc. (PageNet) merged with a
wholly-owned subsidiary of Arch. The merger added 6.0 million units in service.

   Arch had signed a definitive agreement with PageNet in November 1999,
however, on July 14, 2000, before the merger could take place, creditors of
PageNet commenced a proceeding against PageNet under Chapter 11 of the U.S.
Bankruptcy Code. PageNet filed a bankruptcy plan in order to implement the
merger on modified terms agreed to by Arch and PageNet. The bankruptcy plan was
confirmed by the U.S. Bankruptcy Court of the District of Delaware on October
26, 2000.

   In the merger, Arch issued approximately 89.9 million shares of Arch's common
stock for all of PageNet's outstanding senior subordinated notes as well as all
of PageNet's outstanding common stock. The merger was accompanied by a
re-capitalization of Arch and PageNet involving an exchange of common stock for
outstanding debt.

   In connection with the merger, 80.5% of the total equity of PageNet's
subsidiary, Vast Solutions, Inc. was issued to PageNet's current stockholders
and noteholders and Arch holds the remaining 19.5% of Vast's equity.

   Pursuant to the terms of the merger, Joseph A. Bondi, Gregg R. Daugherty,
John P. Frazee, Jr. and John H. Gutfreund joined the Arch board of directors.
Joseph A. Bondi and John P. Frazee, Jr. subsequently resigned from the Arch
board of directors for personal reasons.

INDUSTRY OVERVIEW

   The mobile wireless telecommunications industry currently consists of
multiple voice and data providers which compete among one another, both directly
and indirectly, for subscribers. Traditional paging carriers like Arch provide
customers with services such as numeric and alphanumeric paging. Customers
receive these paging services through a small, handheld device known as a pager.
A pager signals a customer when a message is received through a tone and/or
vibration and displays the incoming message on a small screen. With numeric
paging services the pager displays numeric messages, such as a telephone number.
With alphanumeric paging services, the pager is capable of displaying numeric
messages and text messages. These two types of paging services are commonly
referred to as messaging services.

   Traditional paging carriers like Arch also provide other services via pagers,
commonly referred to as two-way messaging services. These services enable
subscribers to respond to messages or create and send wireless email messages to
other wireless message devices (including pagers and personal digital assistants
or PDAs) and to personal computers. Two-way messaging services have only been


                                       2
<PAGE>

offered by Arch on a commercial scale since August 2000 and account for less
than 5% of Arch's revenue. Traditional paging carriers, like Arch, also offer
wireless information services.

   Mobile telephone service providers such as cellular and broadband PCS
carriers provide telephone voice services as well as services that are
functionally identical to the messaging and two-way messaging services provided
by wireless messaging carriers such as Arch. Customers subscribing to cellular,
broadband PCS or other mobile phone services utilize a wireless handset through
which they can make and receive voice telephone calls. These handsets are
commonly referred to as cellular or PCS phones. These handsets are also capable
of receiving numeric and alphanumeric messages as well as information services,
such as stock quotes, news, voice mail, personalized greeting and message
storage and retrieval. Messaging services offered by cellular, PCS and other
mobile phone providers are substantially similar to the numeric and alphanumeric
messaging services offered by Arch and are now available in conjunction with
most mobile phone services.

   Technological improvements have generally contributed to strong growth in the
market for mobile wireless services and the provision of better quality services
at lower prices to subscribers. Companies providing traditional messaging
services have benefited from technological advances resulting from research and
development conducted by vendors of messaging equipment. These advances include
microcircuitry, liquid crystal display technology and standard digital encoding
formats. These advances have enhanced the capability and capacity of mobile
wireless messaging services while lowering equipment and air time costs. These
technological improvements, and the degree of similarity in messaging devices,
coverage and battery life have resulted in messaging services becoming commodity
products with price likely to be the most significant factor in a subscriber's
decision making.

   The number of new subscribers to cellular, PCS and other mobile phone
services continues to increase each year. At the end of 2000, one analyst
estimated there were a total of over 97 million such subscribers in the United
States. This estimate reflects an increase of approximately 13% over the
approximately 86 million subscribers estimated at the end of 1999. This trend is
expected to continue. Up to 90% of all PCS and other mobile phone devices sold
in the United States today are capable of sending and receiving data messages
according to estimates cited by another analyst.

   One analyst report estimates that approximately 42 million subscribers
subscribed to basic numeric and alphanumeric paging services in the United
States as of the end of 2000. Arch believes that demand for traditional paging
services declined in 2000 and will continue to decline in 2001, and that future
growth, if any, in the wireless messaging industry will be attributable to
two-way messaging services. The decline in traditional paging services was
attributable to traditional paging customers discontinuing their use of
messaging services in favor of using their mobile phones for combined voice and
messaging services.

   Traditional messaging subscribers such as those served by Arch typically pay
a flat monthly service fee for service, unlike subscribers to cellular telephone
or PCS services, whose bills historically have had a significant variable usage
component. However, cellular, PCS and other mobile phone companies now offer
bundled service plans which include both local and long distance minutes with
caller ID, voicemail and numeric paging for use at no additional charge. These
and other plans have lowered the price point so that these services compete
directly with the traditional and two-way messaging services Arch offers. Arch
is sensitive to these technological and availability changes and has attempted
to expand its service offerings, especially its two-way messaging services, to
ensure that its services remain competitive under rapidly changing market
conditions. There can be no assurances it will be successful in these attempts.

   The wireless messaging industry originally distributed its services through
direct marketing and sales activities. Additional channels of distribution have
evolved. These channels include:
   o  resellers, who purchase services on a wholesale basis from the companies
      and resell those services on a retail basis to their own customers;
   o  retail outlets that often sell a variety of merchandise, including pagers
      and other telecommunications equipment;
   o  most recently, the Internet; and
   o  to a lesser extent, through company-operated stores.

                                       3
<PAGE>

WIRELESS MESSAGING SERVICES, PRODUCTS AND OPERATIONS

   Arch is a provider of traditional paging services and two-way messaging
services throughout the United States and in the U.S. Virgin Islands, Puerto
Rico and Canada. Arch operates in all 50 states and the District of Columbia and
in each of the 100 largest markets in the United States. Arch offers these
services on a local, regional and nationwide basis employing digital networks
covering more than 90% of the United States population.

   The following table sets forth information about the approximate number of
units in service with Arch subscribers and net changes in number of units
through internal operations and acquisitions since 1996:
<TABLE>
<CAPTION>
                                                 Net Increase
                                  Units in       (Decrease) in
                                 Service at      Units through     Increase in       Units in
                                Beginning of       Internal       Units through     Service at
   Year Ended December 31,        Period          Operations       Acquisitions    End of Period
   -----------------------        ------          ----------       ------------    -------------
<S>                              <C>               <C>                 <C>            <C>
   1996...................       2,006,000         815,000             474,000        3,295,000
   1997...................       3,295,000         595,000                  --        3,890,000
   1998...................       3,890,000         386,000                  --        4,276,000
   1999...................       4,276,000         (89,000)          2,762,000        6,949,000
   2000...................       6,949,000      (2,073,000)          7,018,000       11,894,000
</TABLE>

   Net increase (decrease) in units through internal operations includes
internal or definitional changes from acquired paging businesses after their
acquisition by Arch and is net of subscriber cancellations during each
applicable period. Increase in units through acquisitions is based on units in
service of acquired paging businesses at the time of their acquisition by Arch.

   Numeric messaging service, which was introduced nearly 20 years ago,
currently represents a majority of all units in service. The growth of
alphanumeric messaging, which was introduced in the mid-1980s, has been
constrained by its difficulties, such as inputting data, specialized equipment
requirements and its relatively high use of system capacity during transmission,
which has, to some extent, been relieved by deploying alternate communications
pathways, such as the Internet.

   Arch launched interactive two-way messaging services, incorporating send and
receive data messaging with wireless email and instant messaging applications,
and other interactive features, in August 2000. Two-way messaging services allow
subscribers to send and receive messages to and from any email address
worldwide, send and receive messages to and from another device activated on
Arch's network and access information on the Internet such as weather, sports,
headline news and financial market information. Prior to August 2000, Arch
offered limited two-way messaging services in the form of guaranteed receipt
messaging, providing the sender with a receipt acknowledgment once the message
had been received, as well as send and receive messaging, enabling multiple
subscribers to send messages to each other on the device alone. Arch previously
reported data for these limited two-way messaging services as part of Arch's
alphanumeric messaging unit information. Due to Arch's current focus on two-way
messaging services, with expanded interactive applications, two-way messaging is
now reported as a separate service.

   The following table summarizes the types of Arch's units in service at
specified dates:
<TABLE>
<CAPTION>
                                                               December 31,
                                            ----------------------------------------------------
                                                 1998               1999               2000
                                            ---------------   ---------------   ----------------
                                              Units      %      Units     %        Units      %
<S>                                         <C>        <C>    <C>        <C>    <C>         <C>
   Local Numeric..........................  3,586,000   84%   5,299,000   76%    8,804,000   74%
   Local Alphanumeric.....................    621,000   14    1,215,000   18     2,210,000   20
   Tone-only..............................     69,000    2       48,000    1        41,000   --
   Nationwide Numeric.....................         --   --      219,000    3       413,000    3
   Nationwide Alphanumeric................         --   --      168,000    2       268,000    2
   Two-way Messaging......................         --   --           --   --       158,000    1
                                            ---------  ---    ---------  ---    ----------  ---
        Total.............................  4,276,000  100%   6,949,000  100%   11,894,000  100%
                                            =========  ===    =========  ===    ==========  ===
</TABLE>

                                       4
<PAGE>

   Arch provides messaging services to subscribers for a monthly fee.
Subscribers either lease the unit from Arch for an additional fixed monthly fee
or they own the unit, having purchased it either from Arch or from another
vendor. Units leased to subscribers require capital investment by Arch, while
customer-owned units and those owned by resellers do not. The monthly service
fee is generally based upon the type of service provided, the geographic area
covered, the number of units provided to the customer and the period of the
subscriber's commitment. Subscriber-owned units provide a more rapid recovery of
Arch's capital investment than units owned by Arch, but may generate less
recurring revenue. Arch also sells units to third-party resellers who lease or
resell units to their own subscribers and resell Arch's wireless messaging
services under marketing agreements. Resellers are responsible for sales,
billing, collection and equipment maintenance costs. Arch sells other products
and services, including units and accessories and unit replacement and
maintenance contracts. The following table summarizes the number of Arch-owned
and leased, subscriber-owned and reseller-owned units in service at specified
dates:
<TABLE>
<CAPTION>
                                                               December 31,
                                            ----------------------------------------------------
                                                 1998               1999               2000
                                            ---------------   ---------------   ----------------
                                              Units      %      Units     %        Units      %
<S>                                         <C>        <C>    <C>        <C>    <C>         <C>
   Arch-owned and leased..................  1,857,000   43%   3,605,000   52%    4,918,000   41%
   Subscriber-owned.......................  1,135,000   27    1,518,000   22     2,451,000   21
   Reseller-owned.........................  1,284,000   30    1,826,000   26     4,525,000   38
                                            ---------  ---    ---------  ---    ----------  ---
          Total...........................  4,276,000  100%   6,949,000  100%   11,894,000  100%
                                            =========  ===    =========  ===    ==========  ===
</TABLE>

   Arch provides wireless information services such as voice mail, wireless
information delivery services, personalized greetings, message storage and
retrieval, device loss protection and device maintenance services. Voice mail
allows a caller to leave a recorded message that is stored in Arch's
computerized message retrieval center. When a message is left, the subscriber
can be automatically alerted through the subscriber's messaging device and can
retrieve the stored message by calling a designated telephone number.
Personalized greetings allow the subscriber to record a message to greet callers
who reach the subscriber's messaging device or voice mail box. Message storage
and retrieval allows a subscriber who leaves Arch's service area to retrieve
calls that arrived during the subscriber's absence from the service area. Loss
protection allows subscribers who lease devices to limit their costs of
replacement upon loss or destruction of a messaging device. Maintenance services
are offered to subscribers who own their own equipment. Wireless information
services allow subscribers to receive stock quotes, news and weather through
their Arch service.

   Arch launched its interactive two-way services in August 2000 with the
introduction of the Arch Webster TM series of products and services. The Webster
TM 100 service, initiated in August 2000, enables users to send, receive and
forward data messages and email wirelessly, as well as access various other
interactive services, such as retrieving content (such as stock quotes, travel
information, weather and entertainment) on command, through added software
applications. To enhance the operability of its send and receive messaging
services, Arch also announced the Arch Message Center in October 2000, which
consolidates office and Internet email accounts into a single Web-based address,
accessible through two-way messaging devices as well as a personal computer with
Internet access. Arch also recently announced the introduction of its Webster TM
200 services, which integrate the functionality of the Arch Webster 100 services
with PDA capabilities, so that a subscriber can also maintain his or her contact
and calendar data as well as beam business card and event information to other
units through infrared data. Another service, operating through a two-way
wireless messaging module that plugs into the back of a PDA, enables a
subscriber to maintain constant connectivity with the Arch network, so that the
subscriber can send messages from the PDA to email accounts as well as other
devices, and access information such as stock quotes, weather and travel updates
from the Internet. Other planned two-way messaging services include telemetry
products, such as vehicle location services that report the location of vehicles
at predetermined intervals to a Web-based map and a sales force automation
product to allow sales personnel to input and process sales orders, and submit
information regarding product exchanges, new accounts or address changes to its
billing system, wirelessly.

NETWORKS AND LICENSES

   Arch operates local, regional and national networks, which enable its
customers to receive messages over a broad geographical area. Many of these
networks were acquired through Arch's acquisitions of PageNet and MobileMedia.


                                       5
<PAGE>

Arch's extensive geographic coverage may be attractive to large corporate
clients and retail chains, which frequently demand national network coverage
from their service provider.

   Arch's networks provide local, regional and national coverage and its
networks operate over numerous frequencies. Although the capacity of Arch's
networks varies significantly market by market, Arch has an adequate amount of
licensed spectrum to meet capacity demands projected for the next several years.

   Arch is seeking to improve overall network efficiency by deploying paging
terminals, consolidating subscribers on fewer, higher capacity networks and
increasing the transmission speed, or baud rate, of certain of its existing
networks. Arch believes its investments in its network infrastructure will
facilitate and improve the delivery of high quality communication services while
at the same time reducing associated costs of such services.

Nationwide Wireless Networks

   Arch operates four nationwide 900 MHz one way networks. As part of its
acquisition of PageNet, Arch acquired two fully operational nationwide wireless
networks in addition to the two Arch was already operating. These networks all
use high-speed FLEX (TM) technology developed by Motorola. These four networks
provide significant capacity for nationwide wireless messaging subscribers.

Narrowband PCS Networks and Licenses

   The Federal Communications Commission has allocated a set of radio
frequencies, called narrowband PCS frequencies, that enable wireless messaging
companies such as Arch to offer advanced two-way messaging services and to make
more efficient use of radio spectrum than do traditional paging networks. Arch
was able to accelerate its two-way infrastructure deployment by integrating
PageNet's nationwide two-way wireless messaging network into Arch's existing
infrastructure. Arch's network uses ReFLEX 25(TM) technology developed by
Motorola as its messaging protocol. Arch believes that ReFLEX 25(TM) offers
superior performance relative to other messaging technologies because it takes
advantage of simulcast transmission and macro receiver diversity to improve the
radio coverage and reception. This improved wireless performance reduces
infrastructure deployment costs relative to cellular-based networks because
fewer base stations may be used to achieve the same coverage and reliability.
ReFLEX (TM) promotes spectrum efficiency and high network capacity through
frequency reuse by dividing coverage areas into zones and sub-zones. Messages
are directed to the zone or sub-zone where the subscriber is located allowing
the same frequency to be reused to carry different traffic in other zones or
sub-zones.

   Arch's Narrowband PCS Licenses. Prior to the PageNet acquisition, Arch held
one nationwide narrowband PCS license and five regional narrowband PCS licenses,
each with 50 kHz outbound and 12.5 kHz inbound bandwidth. The five regional
licenses provide the equivalent of one nationwide channel. Through the PageNet
transaction, Arch acquired three more narrowband PCS nationwide licenses, two
with 50 kHz inbound and outbound bandwidth and one with 50 kHz outbound
bandwidth. In total, Arch now holds 250 kHz outbound and 125 kHz inbound
spectrum nationwide. All of these licenses were initially acquired at Federal
Communications Commission spectrum auctions.

   In order to retain these narrowband PCS licenses, Arch must comply with
specified minimum build-out requirements. With respect to each of the regional
narrowband PCS licenses, Arch has built out the related narrowband PCS system to
cover 150,000 sq. km. or 37.5% of each of the five regional populations in
compliance with Federal Communications Commission's applicable build out
requirements. Arch is still required to build-out this system to cover 300,000
sq. km. or 75% of each of the five regional populations by April 27, 2005. With
respect to the nationwide narrowband PCS licenses, Arch has built out the
related narrowband systems to cover 750,000 sq. km. or 37.5% of the U.S.
population. Arch is still required to extend the build-out of these systems to
cover 1,500,000 sq. km. or 75% of the U.S. population by separate construction
deadlines for each license. These deadlines occur during the period September
29, 2004 to January 25, 2005. In each instance, the population percentage will
be determined by reference to population figures at the time of the applicable
deadline. Arch estimates that the costs of these minimum build-outs would be
approximately $9.0 million. Arch plans to exceed these minimum build-out
requirements in order to meet the capacity requirements of its two-way messaging
services, which it estimates will require up to approximately an additional $20
million in capital expenditures.



                                       6
<PAGE>

   Arch's SMR Spectrum. As part of the PageNet transaction, Arch also acquired
900 MHz specialized mobile radio (SMR) spectrum. In January 2001, Arch agreed to
sell the authorizations issued by the Federal Communications Commission for this
spectrum to Nextel Communications, Inc. for $175 million and Nextel agreed to
invest $75 million in Arch concurrently. These authorizations will be
transferred to Nextel upon receipt of approval from the Federal Communications
Commission and satisfaction of other closing conditions.

SUBSCRIBERS AND MARKETING

   Arch's wireless messaging accounts are either businesses with employees who
travel frequently but must be immediately accessible to their offices or
customers or individuals that wish to be accessible to friends or family
members. Arch's customers include proprietors of small businesses,
professionals, management personnel, field sales personnel and service forces,
members of the construction industry and construction trades, real estate
brokers and developers, medical personnel, sales and service organizations,
specialty trade organizations, manufacturing organizations and government
agencies.

   Arch markets its services through three primary sales channels: direct,
reseller and retail.

   Direct. In the direct channel, Arch leases or sells equipment directly to its
customers through a direct marketing and sales organization. Arch's direct
customers range from individuals and small-and medium-sized businesses to
Fortune 500 accounts and government agencies. Business and government accounts
typically experience less turnover than consumer accounts. The direct channel
will continue to have the highest priority among Arch's marketing and sales
efforts, because of its critical contribution to recurring revenue. Arch has
been engaged in efforts to improve sales productivity and strengthen its direct
channel sales force, segments of which had previously suffered from high
turnover and open positions. As of December 31, 2000, the direct channel
accounted for approximately 85% of recurring revenue.

   Reseller. In the reseller channel, Arch sells access to its transmission
networks in bulk to third parties, who then resell such services to consumers or
small businesses or other end users. Arch offers access to its network to
resellers at bulk discounted rates. The third party resellers provide customer
service, are responsible for pager maintenance and repair costs, invoice the end
user and retain the credit risk of the end user, although Arch retains the
credit risk of the reseller. Because resellers are responsible for customer
equipment, the capital costs that would otherwise be borne by Arch are reduced.

   Arch's resellers generally are not exclusive distributors of Arch's services
and often have access to networks of more than one provider. Competition among
service providers to attract and maintain reseller distribution is based
primarily upon price, including the sale of equipment to resellers at discounted
rates. Arch intends to continue to be an active participant in the reseller
channel and to concentrate on accounts that are profitable and where longer term
partnerships can be established with selected resellers. As of December 31,
2000, the reseller channel accounted for approximately 13% of recurring revenue.

   Retail. In the retail channel, Arch sells equipment to retailers and, after
the consumer purchases the pager from the retailer, the consumer contacts Arch
to activate service. The retail channel is targeted at the consumer market and
consists primarily of national retail chains. Consumers served by the retail
channel typically purchase, rather than lease, equipment. This reduces Arch's
capital investment requirements. Subscribers obtained through retailers are
billed and serviced directly by Arch. Retail distribution permits Arch to
penetrate the consumer market by supplementing direct sales efforts. As of
December 31, 2000, the retail channel accounted for approximately 2% of
recurring revenue.

   The wireless messaging industry is highly competitive. Companies in this
industry compete on the basis of price, coverage area, services offered,
transmission quality, system reliability and customer service.

   Arch competes by maintaining competitive pricing of its products and
services, by providing broad coverage options through high-quality, reliable
transmission networks and by providing quality customer service. Arch's primary
competitors in the traditional messaging market include Metrocall, Verizon
Wireless and Weblink Wireless, each of which offers similar services. Other
principal competitors in the two-way messaging market include Bell South
Wireless Data, Skytel (a division of MCI/Worldcom) and Motient, Inc. The


                                       7
<PAGE>

products and services Arch offers also compete with a broad array of wireless
messaging services provided by cellular and PCS phone companies. This
competition has intensified as prices for these services have declined rapidly,
and these providers have incorporated messaging capability into their handsets.
Many of these companies possess financial, technical and other resources greater
than those of Arch. Such providers currently competing with Arch in one or more
markets include AT&T Wireless, Cingular, MCI/WorldCom, Sprint PCS, Verizon and
Nextel.

   Insofar as cellular, PCS and other mobile phone service providers provide
subscribers with both messaging and voice service using the same hand-held
device, services like cellular and PCS are more sophisticated than basic
messaging services and command a greater price. The price of cellular and PCS
and other mobile phone services, however, has fallen dramatically. Moreover,
today many cellular and PCS providers offer basic service packages for less than
$20.00 per month. By contrast, Arch management believes that currently the
average revenue per month per unit in service from the direct channel of
distribution is approximately $12.00.

   While cellular, PCS and other mobile phone services are more expensive than
traditional messaging services, such mobile telephone service providers
typically provide traditional messaging service as an element of their basic
service package without additional charges. It is estimated that as much as 90%
of all PCS and other mobile phone devices sold in the United States in early
2001 are capable of sending and receiving data messages, according to one
analyst report. Subscribers that purchase these combined services no longer need
to subscribe to a separate messaging service as well. As a result, a large
number of traditional messaging customers can readily switch to cellular, PCS
and other mobile telephone services. The decrease in prices for cellular, PCS
and other mobile telephone services has led many customers to select combined
voice and messaging services as an alternative to stand alone messaging
services. Indeed, survey data indicates that roughly 20% of paging customers
that drop their service do so in favor of cellular, PCS and other mobile phone
services. Arch is sensitive to these technological and availability changes and
is working to design competitively attractive values for the customer even in
the midst of these changes by cellular, PCS and other mobile phone service
providers.

SOURCES OF EQUIPMENT

   Arch does not manufacture any of the messaging equipment or other equipment
used in operations. The equipment used in Arch's operations is generally
available for purchase from only a few sources. Arch centralizes price and
quantity negotiations for all of its operating subsidiaries to achieve cost
savings from volume purchases. Arch buys customer equipment primarily from
Motorola and purchases terminals and transmitters primarily from Glenayre.

   Arch routinely evaluates new developments in technology in connection with
the design and enhancement of its paging systems and selection of products to be
offered to subscribers. Arch has entered into development agreements with
certain other vendors to obtain alternative sources of network equipment. Arch
anticipates that equipment will continue to be available in the foreseeable
future, consistent with normal manufacturing and delivery lead times. Arch
believes that its system equipment is among the most technologically
sophisticated in the data messaging industry.

REGULATION

Federal Regulation--Overview

   Arch's wireless messaging operations are subject to regulation by the Federal
Communications Commission under federal communication laws and regulations. The
Federal Communications Commission has granted Arch licenses to use the radio
frequencies necessary to conduct its business. Licenses issued by the Federal
Communications Commission to Arch set forth the technical parameters, such as
power strength and tower height, under which Arch is authorized to use those
frequencies. Each Federal Communications Commission license held by Arch has
construction and operational requirements that must be satisfied within set time
frames. The Federal Communications Commission has the authority to auction most
new licenses over which wireless mobile services are traditionally offered but
does not have the authority to use auctions for license renewals or license
modifications.

   The Federal Communications Commission licenses granted to Arch have varying
terms of up to 10 years, at which time the Federal Communications Commission
must approve renewal applications. In the past, Federal Communications


                                       8
<PAGE>

Commission renewal applications have been routinely granted, in most cases upon
a demonstration of compliance with Federal Communications Commission regulations
and adequate service to the public. The Federal Communications Commission has
granted each renewal license Arch has filed, other than those which are pending.
Although Arch is unaware of any circumstances which would prevent the grant of
any pending or future renewal applications, no assurance can be given that the
Federal Communications Commission will renew any of Arch's licenses.
Furthermore, although revocation and involuntary modification of licenses are
extraordinary regulatory measures, the Federal Communications Commission has the
authority to restrict the operation of licensed facilities or revoke or modify
licenses. No license of Arch has ever been revoked or modified involuntarily.

   The Federal Communications Commission's review and revision of rules
affecting companies such as Arch is ongoing. The regulatory requirements to
which Arch is subject may change significantly over time. For example, the
Federal Communications Commission has adopted rules for licensing particular
messaging channels throughout a broad geographic area. These licenses are being
awarded through an auction. Incumbent messaging carriers that are already
licensed by the Federal Communications Commission in these broad geographic
areas are entitled to continue to operate without interference from the auction
winners.

   In some instances, Arch still requires the prior approval of the Federal
Communications Commission before it can implement significant changes to its
messaging networks. Once the Federal Communications Commission's geographic
licensing rules are fully implemented, however, most of these licensing
obligations will be eliminated.

   Licenses held by companies like Arch are required by federal communication
laws and regulations to obtain prior approval from the Federal Communications
Commission to transfer the control of any construction permit or station
license. These regulations also require prior approval by the Federal
Communications Commission of acquisitions of other messaging companies by Arch
and transfers by Arch of a controlling interest in any of its licenses or
construction permits. The Federal Communications Commission has approved each
acquisition and transfer of control for which Arch has sought approval. Arch
also regularly applies for Federal Communications Commission authority to use
additional frequencies, modify the technical parameters of existing licenses,
expand its service territory, provide new services and modify the conditions
under which it provides service. Although there can be no assurance that any
requests for approval of applications filed by Arch will be approved or acted
upon in a timely manner by the Federal Communications Commission, or that the
Federal Communications Commission will grant the relief requested, Arch knows of
no reason to believe any such requests, applications, or relief will not be
approved or granted. Arch makes no representations about the continued
availability of additional frequencies used to provide its services.

Foreign Ownership Restrictions

   Foreign ownership of entities that directly or indirectly hold certain
licenses from the Federal Communications Commission is limited. Because Arch
holds licenses from the Federal Communications Commission only through
subsidiaries, up to 25% of its common stock can be owned or voted by aliens or
their representatives, a foreign government or its representatives, or a foreign
corporation, without restriction. However, if more than 25% of its common stock
is owned or voted by aliens or their representatives, a foreign corporation, or
a foreign government or its representatives, the Federal Communications
Commission has the right to revoke or refuse to grant licenses if it finds that
such revocation or refusal serves the public interest. The Federal
Communications Commission has indicated that, pursuant to the World Trade
Organization Telecommunications Agreement, it would waive the 25% limitation in
appropriate circumstances. Based upon information obtained by Arch, Arch
believes that substantially less than 25% of its issued and outstanding common
stock is owned by aliens or their representatives, foreign governments or their
representatives, or foreign corporations. Arch subsidiaries that are radio
common carrier licensees are subject to more stringent requirements and may have
only up to 20% of their stock owned or voted by aliens or their representatives,
a foreign government or their representatives or a foreign corporation. This
ownership restriction is not subject to waiver.

Limitations on Allocation of Numbers

   Increased demand for telephone numbers, particularly in metropolitan areas,
is causing depletion of numbers in some of the more popular area codes. Recent
plans to address this increased demand have included elements that could impact
Arch's operations, including the take-back of numbers already assigned for use


                                       9
<PAGE>

and service-specific plans whereby only some services, such as messaging and
voice services, would be assigned numbers using a new area code, or plans which
require the pooling of blocks of numbers for use by multiple carriers. Arch
cannot provide any assurance that such plans will not be adopted by the Federal
Communications Commission or a state commission, or that such plans will not
require Arch to incur further, substantial expenses in order to continue to
obtain telephone numbers for its customers.

Interconnection

   Recent amendments to the federal communications laws are intended to promote
competition in local provision of phone services by removing legal or other
barriers to entry. Specifically, all telecommunications carriers have the duty
to interconnect with the facilities and equipment of other telecommunications
carriers. The Federal Communications Commission, and the 9th Circuit Court of
Appeals, among others, have interpreted this duty as requiring certain local
telephone companies to compensate mobile wireless companies for calls originated
by customers of the local telephone companies which terminate on a mobile
wireless company's network. The Federal Communications Commission has also found
unlawful charges to messaging companies for the use of interconnection
facilities, including telephone numbers. These findings by the Federal
Communications Commission have been challenged at the Federal Communications
Commission and in the courts. Arch cannot predict with certainty the ultimate
outcome of these proceedings. Compensation amounts may be determined in
subsequent proceedings either at the federal or state level, or may be
determined based on negotiations between the local telephone companies and the
messaging companies. Any agreements reached between the local telephone
companies and the messaging companies may be required to be submitted to state
regulatory commission for approval. Arch is in negotiations with local telephone
companies, but it may or may not be successful in securing refunds, future
relief, or both, with respect to charges for termination of local telephone
companies originated local traffic. If these issues are ultimately decided in
favor of the local telephone companies, Arch may be required to pay past due
contested charges and may also be assessed interest and late charges for amounts
withheld.

Additional Regulatory Obligations

   The Federal Communications Commission has determined that companies such as
Arch are required to contribute to a "Universal Service" fund to assure the
continued availability of local phone service to high cost areas, as well as to
contribute to other funds to cover other designated costs or societal goals.
Further, providers of payphones must be compensated for all calls placed from
pay telephones to toll-free numbers. This latter requirement increases Arch's
costs of providing toll-free number service, and there are no assurances that
Arch will be able to continue to pass on to their customers these, or other
increased costs imposed by federal or state telecommunication regulators.
Beneficially, the laws now limit the circumstances under which states and local
governments may deny a request by most messaging and voice companies to place
transmission facilities in residential communities and business districts, and
give the Federal Communications Commission the authority to preempt the states
in some circumstances.

   Federal laws also require some telecommunications companies, including Arch,
to modify the design of their equipment or services to ensure that electronic
surveillance or interceptions can be performed. Technical parameters applicable
to the messaging industry have been established but not acknowledged by all
governmental bodies to date. Therefore, Arch cannot determine at this time what
compliance measures will be required or the costs thereof. In addition, the
Federal Communications Commission has an ongoing proceeding addressing the
manner in which telecommunications carriers are permitted to market certain
types of services. Depending on the outcome of this proceeding, Arch, like other
telecommunications carriers could incur higher administration and other costs in
order to comply.

State Regulation

   In addition to potential regulation by the Federal Communications Commission,
some states have the authority to regulate messaging services, except where such
regulation affects or relates to the rates charged to customers and/or the
ability of companies like Arch to enter a market. The federal communication laws
have preempted such regulations. If certain conditions are met, states may
petition the Federal Communications Commission for authority to continue to
regulate rates for commercial mobile radio services. State filings seeking rate
authority have all been denied by the Federal Communications Commission,
although new petitions seeking such authority may be filed in the future.


                                       10
<PAGE>

Furthermore, some states and localities continue to exert jurisdiction over (1)
approval of acquisitions of assets and transfers of licenses of mobile wireless
systems and (2) resolution of consumer complaints. Arch believes that to date
all required filings for their respective messaging operations have been made.
All state approvals of acquisitions or transfers made by Arch have been
approved, and Arch does not know of any reason to believe such approvals will
not continue to be granted in connection with any future requests, even if
states exercise that review.

   The laws do not preempt state regulatory authority over other aspects of
Arch's operations, and some states may choose to exercise such authority. Some
state and local governments have imposed additional taxes or fees upon some of
the activities in which Arch is engaged. In addition, the construction and
operation of radio transmitters may be subject to zoning, land use, public
health and safety, consumer protection and other state and local taxes, levies
and ordinances. As noted above, the Federal Communications Commission may
delegate to the state authority over telephone number allocation and assignment.

TRADEMARKS

   On September 25, 2000 Arch changed its name from Arch Communications Group,
Inc. to Arch Wireless, Inc. in order to reposition the Company from a
traditional paging company to a provider of two-way wireless messaging and
wireless information products and services. Arch also unveiled a new company
logo and brand identification tagline, Net@Hand. Arch believes the new tagline
conveys its ability to offer subscribers the convenience of Internet
functionality through portable handheld devices, anytime across the United
States.

   Arch owns the service marks "Arch", "Arch Paging", "Arch Communications" and
"Arch Wireless", and holds federal registrations for the service marks
"MobileComm", "MobileMedia" and "PageNet" as well as various other trademarks.

EMPLOYEES

   At December 31, 2000, Arch employed approximately 8,350 persons. None of
Arch's employees is represented by a labor union. Arch believes that its
employee relations are good.


ITEM 2.   PROPERTIES

   At December 31, 2000, Arch owned eight office buildings and leased office
space, including its executive offices, in approximately 375 locations in 42
states. Arch leases transmitter sites and/or owns transmitters on commercial
broadcast towers, buildings and other fixed structures in approximately 17,500
locations in all 50 states, the U.S. Virgin Islands, Puerto Rico and Canada.
Arch's leases are for various terms and provide for monthly lease payments at
various rates. Arch believes that it will be able to obtain additional space as
needed at acceptable cost. Substantially all of Arch's tower sites were sold
during 1998 and 1999 and Arch currently rents transmitter space.


ITEM 3.   LEGAL PROCEEDINGS

   Arch, from time to time, is involved in lawsuits arising in the normal course
of business. Arch believes that its currently pending lawsuits will not have a
material adverse effect on its financial condition or results of operations.




                                       11
<PAGE>

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

   At the Company's Special Meeting of Stockholders held on October 5, 2000 the
following proposals were adopted by the votes specified below:
<TABLE>
<CAPTION>
                                                                                               Broker
Proposal                                                  For         Against     Abstain      Non-votes
--------                                                  ---         -------     -------      ---------
<S>                                                    <C>             <C>         <C>         <C>

To issue shares of Arch's common stock pursuant
to an agreement and plan of merger, dated
November 7, 1999, as subsequently amended,
among Arch, Paging Network, Inc. and a wholly
owned subsidiary of Arch.                              48,291,689       89,769     691,157          --

To amend Arch's restated certificate of
incorporation to increase the number of
authorized shares of Arch common stock from
150,000,000 to 300,000,000 shares                      48,263,344      114,847     694,424          --
</TABLE>


                                     PART II

ITEM 5.   MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

   Arch's common stock, $0.01 par value per share, is included in the NASDAQ
National Market under the symbol "ARCH". On February 16, 2001, Arch announced
that Nasdaq had informed Arch that its common stock did not meet the
requirements for continued listing because the common stock did not trade above
$5.00 per share. Arch has appealed the potential delisting and a Nasdaq panel is
scheduled to hear Arch's appeal on March 29, 2001. If Arch's common stock
continues to trade at current levels and the Nasdaq panel does not grant Arch a
favorable exemption, Arch's common stock will be delisted from the Nasdaq
National Market to the over-the-counter electronic bulletin board following the
hearing. The following table sets forth, for the periods indicated, the high and
low sales prices per share of Arch common stock as reported by the NASDAQ
National Market.

   2000                                                      High        Low
   ----                                                      ----        ---
   First Quarter....................................       $16.250     $ 5.563
   Second Quarter...................................       $ 8.500     $ 4.000
   Third Quarter....................................       $ 7.500     $ 4.500
   Fourth Quarter...................................       $ 4.938     $ 0.469

   1999                                                      High        Low
   ----                                                      ----        ---
   First Quarter....................................       $ 7.500     $ 3.188
   Second Quarter...................................       $11.625     $ 3.375
   Third Quarter....................................       $ 8.875     $ 4.000
   Fourth Quarter...................................       $ 7.750     $ 3.500

   The number of common stockholders of record as of March 16, 2001 was 2,112.
Arch believes that the number of beneficial common stockholders is in excess of
50,000.

   Arch has never declared or paid cash dividends on its common stock and does
not intend to declare or pay cash dividends on its common stock in the
foreseeable future. Covenants in the credit facility and debt obligations of
Arch and its subsidiaries effectively prohibit the declaration or payment of
cash dividends by Arch for the foreseeable future. In addition, the terms of
Arch's Series C and Series F preferred stock generally prohibit the payment of
cash dividends on common stock unless all accrued and unpaid dividends on the
Series C and Series F preferred stock are paid in full. For additional
information, see Note 4 to the consolidated financial statements.


                                       12
<PAGE>

ITEM 6.   SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA

   The following table sets forth selected historical consolidated financial and
operating data of Arch for each of the five years ended December 31, 2000. The
selected financial and operating data as of December 31, 1996, 1997, 1998, 1999
and 2000 and for each of the five years ended December 31, 2000 have been
derived from Arch's audited consolidated financial statements and notes. You
should read the following consolidated financial information in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements and notes set forth below.

   The extraordinary item is an extraordinary gain or loss resulting from
prepayment of indebtedness. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations".

   Adjusted earnings before interest, income taxes, depreciation and
amortization, as determined by Arch, does not reflect interest, income taxes,
depreciation and amortization, restructuring charges, equity in loss of
affiliate and extraordinary items; consequently adjusted earnings before
interest, income taxes, depreciation and amortization may not necessarily be
comparable to similarly titled data of other wireless messaging companies.
Earnings before interest, income taxes, depreciation and amortization is
commonly used by analysts and investors as a principal measure of financial
performance in the wireless messaging industry. Adjusted earnings before
interest, income taxes, depreciation and amortization is also one of the primary
financial measures used to calculate whether Arch and its subsidiaries are in
compliance with financial covenants under their debt agreements. These
covenants, among other things, limit the ability of Arch and its subsidiaries
to: incur additional indebtedness, make investments, pay dividends, grant liens
on its assets, merge, sell or acquire assets, repurchase or redeem capital
stock, incur capital expenditures and prepay certain indebtedness. Earnings
before interest, income taxes, depreciation and amortization is also one of the
financial measures used by analysts to value Arch. Therefore Arch management
believes that the presentation of earnings before interest, income taxes,
depreciation and amortization provides relevant information to investors.
Earnings before interest, income taxes, depreciation and amortization should not
be construed as an alternative to operating income or cash flows from operating
activities as determined in accordance with generally accepted accounting
principles or as a measure of liquidity. Amounts reflected as earnings before
interest, income taxes, depreciation and amortization or adjusted earnings
before interest, income taxes, depreciation and amortization are not necessarily
available for discretionary use as a result of restrictions imposed by the terms
of existing indebtedness or limitations imposed by applicable law upon the
payment of dividends or distributions among other things. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations".

   Adjusted earnings before interest, income taxes, depreciation and
amortization margin is calculated by dividing Arch's adjusted earnings before
interest, income taxes, depreciation and amortization by total revenues less
cost of products sold. Earnings before interest, income taxes, depreciation and
amortization margin is a measure commonly used in the wireless messaging
industry to evaluate a company's earnings before interest, income taxes,
depreciation and amortization relative to total revenues less cost of products
sold as an indicator of the efficiency of a company's operating structure.



                                       13
<PAGE>


<TABLE>
<CAPTION>
                                                                           Year Ended December 31,
                                                         ----------------------------------------------------------
                                                            1996        1997        1998        1999        2000
                                                         ----------  ----------  ----------  ----------  ----------
                                                                (dollars in thousands except per share amounts)
<S>                                                      <C>         <C>         <C>         <C>         <C>
Statements of Operations Data:
   Service, rental and maintenance revenues............  $  291,399  $  351,944  $  371,154  $  591,389  $  794,997
   Product sales.......................................      39,971      44,897      42,481      50,435      56,085
                                                         ----------  ----------  ----------  ----------  ----------
   Total revenues......................................     331,370     396,841     413,635     641,824     851,082
   Cost of products sold...............................     (27,469)    (29,158)    (29,953)    (34,954)    (35,861)
                                                         ----------  ----------  ----------  ----------  ----------
                                                            303,901     367,683     383,682     606,870     815,221
   Operating expenses:
     Service, rental and maintenance...................      64,957      79,836      80,782     132,400     182,993
     Selling...........................................      46,962      51,474      49,132      84,249     107,208
     General and administrative........................      86,181     106,041     112,181     180,726     263,901
     Depreciation and amortization.....................     191,871     232,347     221,316     309,434     500,831
     Restructuring charge..............................          --          --      14,700      (2,200)      5,425
                                                         ----------  ----------  ----------  ----------  ----------
   Operating income (loss).............................     (86,070)   (102,015)    (94,429)    (97,739)   (245,137)
   Interest and non-operating expenses, net............     (75,927)    (97,159)   (104,213)   (188,249)   (169,252)
   Equity in loss of affiliate.........................      (1,968)     (3,872)     (5,689)     (3,200)         --
                                                         ----------  ----------  ----------  ----------  ----------
   Income (loss) before income tax benefit,
     extraordinary item and accounting change..........    (163,965)   (203,046)   (204,331)   (289,188)   (414,389)
   Income tax benefit..................................      51,207      21,172          --          --      46,006
                                                         ----------  ----------  ----------  ----------  ----------
   Income (loss) before extraordinary item and                                     (204,331)               (368,383)
     accounting change.................................    (112,758)   (181,874)               (289,188)
   Extraordinary item..................................      (1,904)         --      (1,720)      6,963      58,603
   Cumulative effect of accounting change..............          --          --          --      (3,361)         --
                                                         ----------  ----------  ----------  ----------  ----------
   Net income (loss)...................................  $ (114,662) $ (181,874) $ (206,051) $ (285,586) $ (309,780)
                                                         ==========  ==========  ==========  ==========  ==========

   Basic/diluted income (loss) per common share before
     extraordinary item and accounting change..........  $   (16.59) $   (26.31) $   (29.34) $    (9.21)$     (4.86)
   Extraordinary item per basic/diluted common share...       (0.27)         --       (0.25)       0.22        0.76
   Cumulative effect of accounting change per
     basic/diluted common share........................          --          --          --       (0.11)         --
                                                         ----------  ----------  ----------  ----------  ----------
   Basic/diluted net income per common share...........  $   (16.86) $   (26.31) $   (29.59) $    (9.10) $    (4.10)
                                                         ==========  ==========  ==========  ==========  ==========

Other Operating Data:
   Capital expenditures, excluding acquisitions........  $  165,206  $  102,769  $  113,184  $  113,651  $  140,285
   Cash flows provided by operating activities.........  $   37,802  $   63,590  $   83,380  $   99,536  $   32,325
   Cash flows used in investing activities.............  $ (490,626) $ (102,769) $  (82,868) $ (627,166) $  (92,500)
   Cash flows provided by (used in) financing activities $  452,678  $   39,010  $   (2,207) $  529,158  $  111,996
   Adjusted earnings before interest, income taxes,
     depreciation and amortization.....................  $  105,801  $  130,332  $  141,587  $  209,495  $  261,119
   Adjusted earnings before interest, income taxes,
     depreciation and amortization margin..............         35%         35%         37%         35%         32%
   Units in service at end of period...................   3,295,000   3,890,000   4,276,000   6,949,000  11,894,000
</TABLE>
<TABLE>
<CAPTION>
                                                                             As of December 31,
                                                         ----------------------------------------------------------
                                                            1996        1997        1998        1999        2000
                                                         ----------  ----------  ----------  ----------  ----------
 Balance Sheet Data:                                                         (dollars in thousands)
<S>                                                      <C>         <C>         <C>         <C>         <C>
   Current assets......................................  $   43,611  $   51,025  $   50,712  $   85,303  $  211,443
   Total assets........................................   1,146,756   1,020,720     904,285   1,353,045   2,309,609
   Long-term debt, less current maturities.............     918,150     968,896   1,001,224   1,322,508   1,679,219
   Redeemable preferred stock..........................       3,712          --          --          --          --
   Stockholders' equity (deficit)......................     147,851     (33,255)   (213,463)   (217,559)    (63,759)
</TABLE>


                                       14
<PAGE>



   The following table reconciles net income to the presentation of adjusted
earnings before interest, income taxes, depreciation and amortization:


<TABLE>
<CAPTION>
                                                                          Year Ended December 31,
                                                         ----------------------------------------------------------
                                                            1996        1997        1998        1999        2000
                                                         ----------  ----------  ----------  ----------  ----------
                                                                            (dollars in thousands)
<S>                                                      <C>         <C>         <C>         <C>         <C>
   Net income (loss)...................................  $ (114,662) $ (181,874) $ (206,051) $ (285,586) $ (309,780)
   Interest and non-operating expenses, net............      75,927      97,159     104,213     188,249     169,252
   Income tax benefit..................................     (51,207)    (21,172)         --          --     (46,006)
   Depreciation and amortization.......................     191,871     232,347     221,316     309,434     500,831
   Restructuring charge................................          --          --      14,700      (2,200)      5,425
   Equity in loss of affiliate.........................       1,968       3,872       5,689       3,200          --
   Extraordinary item..................................       1,904          --       1,720      (6,963)    (58,603)
   Cumulative effect of accounting change..............          --          --          --       3,361          --
                                                         ----------  ----------  ----------  ----------  ----------
   Adjusted earnings before interest, income taxes,
     depreciation and amortization.....................  $  105,801  $  130,332  $  141,587  $  209,495  $  261,119
                                                         ==========  ==========  ==========  ==========  ==========
</TABLE>




                                       15
<PAGE>



ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

   This annual report contains forward-looking statements and information
relating to Arch and its subsidiaries that are based on the beliefs of Arch's
management as well as assumptions made by and information currently available to
Arch's management. These statements are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. When used
herein, words such as "anticipate", "believe", "estimate", "expect", "intend"
and similar expressions, as they relate to Arch or its management, identify
forward-looking statements. Such statements reflect the current views of Arch
with respect to future events and are subject to certain risks, uncertainties
and assumptions, including but not limited to those factors set forth below
under the caption "Factors Affecting Future Operating Results". Should one or
more of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results or outcomes may vary materially from
those described herein as anticipated, believed, estimated, expected or
intended. Investors are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of their respective dates. Arch
undertakes no obligation to update or revise any forward-looking statements. All
subsequent written or oral forward-looking statements attributable to Arch or
persons acting on behalf of Arch are expressly qualified in their entirety by
the discussion under "Factors Affecting Future Operating Results".

OVERVIEW

   The following discussion and analysis should be read in conjunction with
Arch's consolidated financial statements and notes.

     Arch  derives the  majority  of its  revenues  from fixed  monthly or other
periodic fees charged to subscribers for wireless messaging services.  Such fees
are not  generally  dependent  on  usage.  As long as a  subscriber  remains  on
service,  operating  results  benefit from the  recurring  payments of the fixed
periodic fees without incurrence of additional selling expenses. Arch's service,
rental and maintenance  revenues and the related expenses exhibit  substantially
similar  growth trends.  Excluding the effect of  definitional  changes,  Arch's
average  revenue per unit in service has declined  over the last three years for
two principal  reasons:
   o  primarily due to an increase in competition in certain of the markets in
      which Arch operates, particularly competition from telephone, cellular and
      PCS providers; and
   o  to a lesser extent, an increase in the number of reseller customers whose
      airtime is purchased at wholesale rates.

   The reduction in average revenue per unit in service resulting from these
trends has been offset by the reduction of expenses so that margins had been
improving until Arch's merger in June 1999 with MobileMedia which resulted in
redundant management and administrative headcount. While the integration of Arch
and MobileMedia's operations are substantially complete, the consummation of the
PageNet merger in November 2000 also resulted in redundant management and
administrative headcount. Arch expects margins to improve upon the integration
of PageNet.

   Arch has achieved significant growth in units in service and adjusted
earnings before interest, income taxes, depreciation and amortization through
acquisitions and, prior to 1999, internal growth. During 1999, units in service
decreased by 89,000 units, excluding the addition of subscribers from the
MobileMedia acquisition. As a result of the MobileMedia and PageNet acquisitions
units in service were adjusted to eliminate intercompany accounts and to reflect
a common definition of units in service. During 2000, units in service decreased
by a further 2,073,000 units, 888,000 due to subscriber cancellations and
1,185,000 due to definitional changes, excluding the addition of subscribers
from the PageNet acquisition. Arch believes it will experience a substantial net
decline in the number of units in service during 2001 as Arch's addition of
two-way messaging subscribers is likely to be exceeded by its loss of
traditional messaging subscribers. Arch's ability to compete against telephone,
cellular and PCS providers providing two-way messaging services is as yet
unproven. From January 1, 1998 through December 31, 2000, Arch's total number of
units in service grew from 3.9 million to 11.9 million units. Arch's total
revenues have increased from $413.6 million in the year ended December 31, 1998
to $641.8 million in the year ended December 31, 1999 and to $851.1 million in
the year ended December 31, 2000. Arch had net losses of $206.1 million, $285.6
million and $309.8 million in the years ended December 31, 1998, 1999 and 2000,
respectively, as a result of significant depreciation and amortization expenses
related to acquired and developed assets and interest charges associated with


                                       16
<PAGE>

indebtedness. As its subscriber base has grown, Arch's adjusted earnings before
interest, income taxes, depreciation and amortization has increased from $141.6
million in the year ended December 31, 1998 to $209.5 million in the year ended
December 31, 1999 and to $261.1 million in the year ended December 31, 2000.

   Earnings before interest, income taxes, depreciation and amortization is a
commonly used measure of financial performance in the wireless messaging
industry. Adjusted earnings before interest, income taxes, depreciation and
amortization is one of the financial measures used to calculate whether Arch and
its subsidiaries are in compliance with the covenants under their respective
debt agreements. Adjusted earnings before interest, income taxes, depreciation
and amortization should not be construed as an alternative to operating income
or cash flows from operating activities as determined in accordance with
generally accepted accounting principles. One of Arch's financial objectives is
to increase its adjusted earnings before interest, income taxes, depreciation
and amortization, since this is a significant source of funds for servicing
indebtedness and for investment in continued growth, including purchase of
messaging units, messaging system equipment, construction and expansion of
messaging systems and possible acquisitions. Adjusted earnings before interest,
income taxes, depreciation and amortization, as determined by Arch, may not
necessarily be comparable to similarly titled data of other wireless messaging
companies. Amounts reflected as adjusted earnings before interest, income taxes,
depreciation and amortization are not necessarily available for discretionary
use as a result of restrictions imposed by the terms of existing or future
indebtedness, including the repayment of such indebtedness or the payment of
associated interest, limitations imposed by applicable law upon the payment of
dividends or distributions or capital expenditure requirements.

PAGENET MERGER

   On November 10, 2000, Arch completed its acquisition of PageNet for $1.35
billion consisting of 89,896,907 shares of Arch common stock valued at $263.4
million, the assumption of liabilities of $1.06 billion and $27.6 million of
transaction costs. In the merger, each outstanding share of PageNet's common
stock was exchanged for 0.04796505 shares of Arch's common stock. In connection
with the merger, 80.5% of the total equity of PageNet's subsidiary, Vast
Solutions, Inc. was issued to PageNet's current stockholders and noteholders and
Arch holds the remaining 19.5% of Vast's equity.

   During the fourth quarter of 2000, Arch management commenced the development
of plans to integrate PageNet operations, including the elimination of redundant
headcount and facilities. It is expected that integration will be completed by
December 31, 2001. Since Arch currently anticipates a net reduction of
approximately 50% of PageNet's workforce and the closing of certain facilities,
it established a $76.0 million acquisition reserve which is included as part of
the purchase price of PageNet. The initial acquisition reserve consisted of
approximately:
   o  $66.1 million for employee severance;
   o  $9.4 million for lease obligations and terminations; and
   o  $0.5 million of other costs.

   Cash payments of $29.3 million for employee severance were made in the fourth
quarter of 2000, and the remaining severance costs will be paid during 2001.
Cash payments on the leases and lease terminations will occur over the remaining
lease terms, the majority of which expire prior to 2005. There can be no
assurance that the desired cost savings will be achieved or that the integration
of the two companies will be accomplished smoothly, expeditiously or
successfully. For additional information, see Note 10 to the consolidated
financial statements.

MOBILEMEDIA MERGER

   In June 1999, Arch acquired MobileMedia Communications, Inc. Arch acquired
MobileMedia for a combination of cash and Arch securities, as follows:
   o  Arch paid approximately $479.0 million in cash to secured creditors of
      MobileMedia;
   o  Arch paid a total of $37.6 million of fees, expenses and other debts;
   o  Arch issued 4,781,656 shares of its common stock to unsecured creditors of
      MobileMedia;
   o  Arch issued 36,207,265 additional shares of its common stock to unsecured
      creditors of MobileMedia and Arch stockholders for a total purchase price
      of $217.2 million; and
   o  Arch issued to four unsecured creditors, who had agreed to purchase shares
      not purchased by other unsecured creditors, warrants to acquire 1,225,219
      shares of its common stock on or before September 1, 2001 for $9.03 per
      share.



                                       17
<PAGE>

   Arch also issued to the holders of its common stock and Series C preferred
stock on January 27, 1999 102,964 shares of common stock and warrants to
purchase 14,861,424 shares of its common stock on or before September 1, 2001
for $9.03 per share.

   Subsidiaries of Arch also borrowed a total of $320.8 million to help fund the
MobileMedia acquisition.

   During the third quarter of 1999, Arch's board of directors approved plans
covering the elimination of redundant headcount and facilities in connection
with the overall integration of operations. The integration was substantially
complete at December 31, 2000. Arch established a $14.5 million acquisition
reserve which is included as part of the purchase price of MobileMedia. The
initial acquisition reserve consisted of approximately:
   o  $6.1 million for employee severance;
   o  $7.9 million for lease obligations and terminations; and
   o  $0.5 million of other costs.
   For additional information, see Note 10 to the consolidated financial
statements.

RESULTS OF OPERATIONS

   The following table presents certain items from Arch's consolidated
statements of operations as a percentage of net revenues and certain other
information for the periods indicated (dollars in thousands except per unit
data):
<TABLE>
<CAPTION>
                                                                        Year Ended December 31,
                                                                        -----------------------
                                                                   1998          1999          2000
                                                                   ----          ----          ----
<S>                                                             <C>           <C>           <C>
Total revenues                                                      107.8%         105.8%       104.4%
Cost of products sold                                                (7.8)          (5.8)        (4.4)
                                                                ---------     ----------    ---------
Net revenues                                                        100.0          100.0        100.0
Operating expenses:
  Service, rental and maintenance                                    21.1           21.8         22.4
  Selling                                                            12.8           13.9         13.1
  General and administrative                                         29.2           29.8         32.4
  Depreciation and amortization                                      57.7           51.0         61.4
  Restructuring charge                                                3.8           (0.4)         0.7
                                                                ---------     ----------    ---------

Operating income (loss)                                             (24.6)%        (16.1)%      (30.0)%
                                                                =========     ==========    =========

Net income (loss)                                                   (53.7)%        (47.1)%      (38.0)%
                                                                =========     ==========    =========


Cash flows provided by operating activities                     $  83,380     $   99,536    $  32,325
Cash flows used in investing activities                         $ (82,868)    $ (627,166)   $ (92,500)
Cash flows (used in) provided by financing activities           $  (2,207)    $  529,158    $ 111,996
Adjusted earnings before interest, income taxes, depreciation
  and amortization                                                   36.9%          34.5%        32.0%
                                                                =========     ==========    =========
</TABLE>

   Adjusted earnings before interest, income taxes, depreciation and
amortization, as determined by Arch does not reflect restructuring charge,
equity in loss of affiliate and extraordinary items; consequently adjusted
earnings before interest, income taxes, depreciation and amortization may not
necessarily be comparable to similarly titled data of other wireless messaging
companies. Earnings before interest, income taxes, depreciation and amortization
is commonly used by analysts and investors as a principal measure of financial
performance in the wireless messaging industry. Adjusted earnings before
interest, income taxes, depreciation and amortization is one of the primary
financial measures used to calculate whether Arch and its subsidiaries are in
compliance with financial covenants under their debt agreements. These
covenants, among other things, limit the ability of Arch and its subsidiaries
to:
   o  incur additional indebtedness;
   o  make investments;
   o  pay dividends;
   o  grant liens on its assets;


                                       18
<PAGE>

   o  merge, sell or acquire assets;
   o  repurchase or redeem capital stock;
   o  incur capital expenditures; and
   o  prepay certain indebtedness.

   Earnings before interest, income taxes, depreciation and amortization is also
one of the financial measures used by analysts to value Arch. Therefore Arch
management believes that the presentation of earnings before interest, income
taxes, depreciation and amortization provides relevant information to investors.
Earnings before interest, income taxes, depreciation and amortization should not
be construed as an alternative to operating income or cash flows from operating
activities as determined by generally accepted accounting principles or as a
measure of liquidity. Amounts reflected as earnings before interest, income
taxes, depreciation and amortization or adjusted earnings before interest,
income taxes, depreciation and amortization are not necessarily available for
discretionary use as a result of restrictions imposed by the terms of existing
indebtedness and limitations imposed by applicable law upon the payment of
dividends or distributions, among other things.



Year Ended December 31, 2000 Compared with Year Ended December 31, 1999

   Total revenues increased to $851.1 million, a 32.6% increase, in 2000 from
$641.8 million in 1999 as the number of units in service increased from 6.9
million at December 31, 1999 to 11.9 million at December 31, 2000 due to the
PageNet acquisition in November 2000. Net revenues (total revenues less cost of
products sold) increased to $815.2 million, a 34.3% increase, at December 31,
2000 from $606.9 million at December 31 1999. Total revenues and net revenues in
1999 and 2000 were adversely affected by (1) the declining demand for
traditional messaging services and (2) subscriber cancellations which led to a
decrease of 888,000 units in service for the year ended December 31, 2000.

   Service, rental and maintenance revenues, which consist primarily of
recurring revenues associated with the provision of messaging services and
rental of leased units, increased to $795.0 million, a 34.4% increase, in 2000
from $591.4 million in 1999. The increase in revenue was due primarily to the
net increase in the number of units in service from 6.9 million at December 31,
1999 to 11.9 million at December 31, 2000. The net increase in units in service
was due to the acquisition of PageNet, offset by a net decrease of 888,000 units
in service. Maintenance revenues represented less than 10% of total service,
rental and maintenance revenues in 2000 and 1999. Arch does not differentiate
between service and rental revenues. Product sales, less cost of products sold,
increased to $20.2 million, a 30.6% increase, in 2000 from $15.5 million in
1999, respectively, as a result of the PageNet acquisition.

   Arch believes the traditional messaging industry did not grow during 1999 and
2000, the demand for traditional messaging services will decline in the
following years and that future growth in the industry, if any, will be
attributable to two-way messaging and information services. As a result, Arch
experienced a net decline in the number of units in service in 2000, excluding
the addition of subscribers from the PageNet acquisition and expects future
declines in 2001.

   Service, rental and maintenance expenses, which consist primarily of
telephone, third party carrier fees, site rental expenses and repairs and
maintenance expenses, increased to $183.0 million, or 22.4% of net revenues, in
2000 from $132.4 million, or 21.8% of net revenues, in 1999. Approximately half
of this increase was due to the acquisition of PageNet in November 2000. The
remaining increase was primarily due to a full year of expenses for the
provision of alphanumeric and nationwide messaging services to a higher
percentage of customers which resulted from the MobileMedia acquisition in June
1999. In 2000, there was $12.3 million of service, rental and maintenance
expenses associated with the provision of two-way messaging and information
services.

   Selling expenses increased to $107.2 million, or 13.2% of net revenues, in
2000 from $84.2 million, or 13.9% of net revenues, in 1999. Approximately
one-third of this increase in dollar amount was due to the acquisition of
PageNet. The remaining increase in dollar amount was primarily due to a full
year of increased headcount associated with the MobileMedia acquisition. Selling
expenses related to two-way messaging and information services were $6.5 million
in 2000.

   General and administrative expenses increased to $263.9 million, or 32.4% of
net revenues, in 2000 from $180.7 million, or 29.8% of net revenues, in 1999.
Approximately one-third of the increase was due to increased headcount,
administrative and facility costs associated with PageNet. The remaining


                                       19
<PAGE>

increase was primarily due to a full year of increased headcount, administrative
and facility costs associated with MobileMedia. General and administrative
expenses associated with the provision of two-way messaging and information
services were $6.9 million in 2000.

   Depreciation and amortization expenses increased to $500.8 million in 2000
from $309.4 million in 1999. The increase in these expenses principally
reflected the acquisition of PageNet and a full year of depreciation and
amortization of the assets purchased in the MobileMedia acquisition. This
increase also included $19.3 and $103.5 million of incremental depreciation and
amortization expense, respectively, as a result of reducing the remaining lives
on messaging equipment and certain intangible assets.

   Operating losses were $245.1 million in 2000 compared to $97.7 million in
1999, as a result of the factors outlined above.

   Net interest expense increased to $166.2 million in 2000 from $143.0 million
in 1999. The increase was principally attributable to an increase in Arch's
outstanding debt due to the MobileMedia and PageNet acquisitions. Interest
expense for 1999 and 2000 included approximately $41.6 million and $28.3
million, respectively, of accreted interest on Arch's senior debt, the payment
of which was deferred.

   In 2000 and 1999, Arch recognized extraordinary gains of $58.6 million and
$7.0 million, respectively, on the retirement of debt exchanged for Arch stock.

   Arch recognized an income tax benefit of $46.0 million in 2000. The benefit
represented the tax benefit of operating losses incurred subsequent to the
acquisition of PageNet which were available to offset deferred tax liabilities
arising from the PageNet acquisition.

   Net loss increased to $309.8 million in 2000 from $285.6 million in 1999, as
a result of the factors outlined above.


Year Ended December 31, 1999 Compared with Year Ended December 31, 1998

   Total revenues increased to $641.8 million, a 55.2% increase, in 1999 from
$413.6 million in 1998 as the number of units in service increased from 4.3
million at December 31, 1998 to 6.9 million at December 31, 1999 due to the
MobileMedia acquisition in June 1999. Net revenues increased to $606.9 million,
a 58.2% increase, in 1999 from $383.7 million in 1998. Total revenues and net
revenues in 1999 were adversely affected by (1) the declining demand for
traditional messaging services and (2) Arch subscriber cancellations which led
to a decrease of 89,000 units in service, excluding the addition of subscribers
from the MobileMedia acquisition.

   Service, rental and maintenance revenues increased to $591.4 million, a 59.3%
increase, in 1999 from $371.2 million in 1998. The increase in revenue was due
primarily to the net increase in the number of units in service from 4.3 million
at December 31, 1998 to 6.9 million at December 31, 1999 which was entirely due
to the acquisition of MobileMedia. Maintenance revenues represented less than
10% of total service, rental and maintenance revenues in 1999 and 1998. Product
sales, less cost of products sold, increased to $15.5 million, a 23.6% increase,
in 1999 from $12.5 million in 1998, respectively, as a result of the MobileMedia
acquisition.

   Service, rental and maintenance expenses increased to $132.4 million or 21.8%
of net revenues, in 1999 from $80.8 million or 21.1% of net revenues, in 1998.
The increase was due primarily to increased expenses associated with the
provision of wireless messaging services to a greater number of units due to the
MobileMedia acquisition.

   Selling expenses increased to $84.2 million or 13.9% of net revenues, in 1999
from $49.1 million or 12.8% of net revenues, in 1998. The increase in absolute
dollars was primarily due to increased headcount and the increase as a
percentage of net revenues was primarily due to redundant headcount as a result
of the MobileMedia merger.

   General and administrative expenses increased to $180.7 million or 29.8% of
net revenues, in 1999 from $112.2 million or 29.2% of net revenues, in 1998. The
increase in absolute dollars was due primarily to increased headcount,
administrative and facility costs and the increase as a percentage of net
revenues was primarily due to the redundant headcount, administrative and
facility costs associated with MobileMedia.

   Depreciation and amortization expenses increased to $309.4 million in 1999
from $221.3 million in 1998. The increase in these expenses principally
reflected the acquisition of MobileMedia. Additionally, depreciation expense in
1999 included the write-off of approximately $7.1 million of costs associated


                                       20
<PAGE>

with the development of an integrated billing and management system. Arch
decided to discontinue further development of that system due to the
capabilities of the system acquired through the MobileMedia merger.

   Operating loss was $97.7 million in 1999 compared to $94.4 million in 1998,
as a result of the factors outlined above.

   Net interest expense increased to $143.0 million in 1999 from $102.3 million
in 1998. The increase was principally attributable to an increase in Arch's
outstanding debt due to the MobileMedia acquisition. Interest expense for 1999
included approximately $41.6 million of accreted interest on Arch's senior
discount notes, the payment of which is deferred. Interest expense for 1998
included approximately $37.1 million of accretion on these notes.

   Other expense increased to $45.2 million in 1999 from $2.0 million in 1998.
Other expense in 1999 included:
   o  $6.5 million for a write-off of Arch's entire investment in CONXUS
      Communications, Inc., a holder of narrowband PCS licenses. CONXUS filed
      for bankruptcy protection in May 1999.
   o  a $35.8 million write-off of Arch's investment in Benbow PCS Ventures,
      Inc. another holder of narrowband PCS licenses. In June 1999, Arch, Benbow
      and Benbow's controlling shareholder agreed to terminate their business
      relationship and wind-up Benbow's business.

   In October 1999, Arch recognized an extraordinary gain of $7.0 million on the
retirement of debt exchanged for Arch common stock. In June 1998, Arch
recognized an extraordinary charge of $1.7 million representing the write-off of
unamortized deferred financing costs associated with the prepayment of
indebtedness under prior credit facilities.

   On January 1, 1999, Arch adopted the Accounting Standards Executive Committee
of the American Institute of Certified Public Accountants Statement of Position
98-5 (SOP 98-5). SOP 98-5 requires costs of start-up activities and organization
costs to be expensed as incurred. Initial application of SOP 98-5 resulted in a
$3.4 million charge in the quarter ended March 31, 1999, which was reported as
the cumulative effect of a change in accounting principle. This charge
represents the unamortized portion of start-up and organization costs, which had
been deferred in prior years.

   Net loss increased to $285.6 million in 1999 from $206.1 million in 1998, as
a result of the factors outlined above.


LIQUIDITY AND CAPITAL RESOURCES

   Arch's business strategy requires the availability of substantial funds to
finance capital expenditures for subscriber equipment and network system
equipment and to service debt. Arch's net cash flows from operating, investing
and financing activities for the periods indicated in the table below are as
follows:
<TABLE>
<CAPTION>
                                                               Year Ended December 31,
                                                             1998       1999       2000
                                                             ----       ----       ----
                                                                (dollars in millions)
<S>                                                        <C>        <C>        <C>
   Net cash provided by operating activities.............  $  83.4    $  99.5    $  32.3
   Net cash used for investing activities................  $ (82.9)   $(627.2)   $ (92.5)
   Net cash (used in) provided by financing activities...  $  (2.2)   $ 529.2    $ 112.0
</TABLE>

   Investing activities in 1999 and 2000 included a cash outflow of $516.6
million and a cash inflow of $47.8 million for the acquisitions of MobileMedia
and PageNet, respectively. Financing activities in 2000 included borrowings of
$175.0 million offset by cash repayments of debt of $63.6 million. Financing
activities in 1999 included $217.2 million from the sale of common stock to
unsecured creditors of MobileMedia and borrowings of $320.8 million in
connection with the acquisition of MobileMedia as described above.

Capital Expenditures and Commitments

   Excluding acquisitions of wireless messaging businesses, Arch's capital
expenditures were $113.2 million in 1998, $113.7 million in 1999 and $140.3
million in 2000. To date, Arch generally has funded its capital expenditures
with net cash provided by operating activities and the incurrence of debt.



                                       21
<PAGE>

   Arch's 2000 capital expenditures primarily involved the purchase of wireless
messaging units, system and transmission equipment, information systems and
capitalized financing costs.

   Arch estimates that capital expenditures for 2001-2003 will be approximately
$130 million per year. Such expenditures will be used primarily for subscriber
equipment, network infrastructure, information systems and expansion of Arch's
two-way messaging network. However, the actual amount of capital to be required
by Arch will depend on a number of factors, including; subscriber growth, the
type of products and services demanded by customers, service revenues, and the
nature and timing of Arch's strategy to enhance its two-way messaging networks.

Other Commitments and Contingencies

   Interest payments commence September 15, 2001 on Arch's 107/8% senior
discount notes. Through March 16, 2001 a total of $329.8 million principal
amount at maturity of the discount notes has been exchanged for Arch common
stock. Arch expects to service required interest payments out of cash made
available to it by its subsidiaries. Based on the principal amount outstanding
at March 16, 2001 ($137.6 million), such interest payments will equal $7.5
million on March 15 and September 15 of each year, beginning September 15, 2001,
until scheduled maturity on March 15, 2008.

Sources of Funds

  Sale of SMR Licenses

   In January 2001, Arch announced an agreement with Nextel Communications, Inc.
to sell its Specialized Mobile Radio (SMR) licenses to Nextel for an aggregate
purchase price of $175 million. Concurrent with this transaction, Nextel agreed
to invest $75 million in Arch Series F 12% Redeemable Cumulative Junior
Preferred Stock.

   Pursuant to these transactions, in February 2001, Nextel advanced $250
million to Arch in the form of a $175 million loan secured by a pledge of the
shares of the Arch subsidiary which owns the SMR licenses, and a $75 million
unsecured loan. Upon receipt of regulatory approvals, the SMR licenses will be
transferred to Nextel and the principal amount of the $175 million loan will be
satisfied in consideration for such transfer, and the principal amount of the
$75 million unsecured loan will be exchanged for shares of Arch Series F
Preferred stock. Interest payments on such loans shall be made in shares of
Series F preferred stock.

   Arch used $175.2 million of the proceeds from these transactions to prepay
all required 2001 amortization payments under its senior credit facility. The
remaining $75 million of proceeds, with the exception of $5 million of escrowed
cash, is available for working capital purposes. Following the completion of
these transactions, including the prepayment of the senior credit facility, Arch
had approximately $100 million of cash on hand, and no additional borrowing
capacity under its senior credit facility.

  Credit Facility

   At December 31, 2000, an Arch subsidiary had a senior credit facility in the
amount of $1,298.8 million. After consideration of the $175.2 million prepayment
that occurred in February 2001 in connection with the pending sale of SMR
licenses to Nextel, the senior credit facility was reduced to $1,119.6 million
consisting of (i) a $122.5 million Tranche A reducing revolving facility, (ii) a
$64.1 million Tranche B term loan, (iii) a $662.7 million Tranche B-1 term loan
and (iv) a $270.3 million Tranche C term loan.

   The February 2001 prepayment of $175.2 million satisfied all required 2001
amortization payments under the senior credit facility. The Tranche A facility
will reduce on a quarterly basis commencing March 31, 2002 and will mature on
June 30, 2005. The Tranche B term loan will amortize in quarterly installments
commencing March 31, 2002, with an ultimate maturity date of June 30, 2005. The
Tranche B-1 term loan will amortize in quarterly installments commencing March
31, 2002, with an ultimate maturity date of June 30, 2006. The Tranche C term
loan will amortize in annual installments commencing December 31, 2002, with an
ultimate maturity date of June 30, 2006.

   Arch believes that based on its current cash position and projected
requirements, it will have sufficient cash to fund operations through December
31, 2001. For additional information, see Note 4 to Arch's consolidated
financial statements. Arch's ability to borrow in the future will depend, in
part, on its ability to continue to increase its adjusted earnings before
interest, income taxes, depreciation and amortization.



                                       22
<PAGE>

  Equity Issued in Exchange for Debt

   In 2000, Arch issued 285,973 shares of Arch common stock in exchange for $3.5
million principal amount of Arch convertible debentures. Arch also issued
12,182,659 shares of its common stock in exchange for $165.3 million accreted
value ($184.2 million maturity value) of its 107/8% senior discount notes.

   In May 2000, Arch completed a transaction with Resurgence Asset Management
L.L.C. for the exchange of $91.1 million accreted value ($100.0 million maturity
value) of senior discount notes held by various Resurgence entities for
1,000,000 shares of a new class of Arch's preferred stock called Series D
preferred stock. Upon completion of the PageNet acquisition in November 2000 the
Series D preferred stock was converted into an aggregate of 6,613,180 shares of
Arch common stock.

   In the first quarter of 2001, Arch issued 8,793,350 shares of Arch common
stock in exchange for $26.3 million accreted value ($26.5 million maturity
value) of its 107/8% senior discount notes.

INFLATION

   Inflation has not had a material effect on Arch's operations to date. Systems
equipment and operating costs have not increased in price and wireless messaging
units have tended to decline in recent years. This reduction in costs has
generally been reflected in lower prices charged to subscribers who purchase
their wireless messaging units. Arch's general operating expenses, such as
salaries, employee benefits and occupancy costs, are subject to normal
inflationary pressures.

FACTORS AFFECTING FUTURE OPERATING RESULTS

   The following important factors, among others, could cause Arch's actual
operating results to differ materially from those indicated or suggested by
forward-looking statements made in this Form 10-K or presented elsewhere by
Arch's management from time to time.

Arch may not be able to amend the terms of, or refinance, scheduled debt
repayments. Failure to amend scheduled 2002 debt repayments could lead to
possible defaults and liquidity problems.

   Arch's credit facility originated in June 1998 and was amended in conjunction
with both the MobileMedia and PageNet acquisitions. Scheduled debt repayments
between March 2002 and June 2006 were established based on expectations at the
time of these transactions. Arch may not be able to repay amounts currently
scheduled to be paid in 2002. If Arch's lenders do not agree to amend scheduled
repayments Arch may not be able to meet its repayment obligations and its
lenders could declare a default and seek immediate repayment. Such actions by
Arch's lenders would prohibit interest payments on Arch's senior notes and would
allow senior noteholders to declare a default and seek immediate repayment. Any
action that would accelerate Arch's debt obligations could result in immediate
liquidity problems.

Leverage is significant and may continue to burden Arch's operations, impair its
ability to obtain additional financing, reduce the amount of cash available for
operations and required debt repayments and make Arch more vulnerable to
financial downturns.

   Arch has been highly leveraged, and remains leveraged to a substantial
degree. Arch's ratio of total debt to latest quarter pro forma annualized
adjusted earnings before interest, income taxes, depreciation and amortization
was 5.4 to 1 as of December 31, 2000.

   Adjusted earnings before interest, income taxes, depreciation and
amortization is not a measure defined by generally accepted accounting
principles and should not be considered in isolation or as a substitute for
measures of performance prepared in accordance with generally accepted
accounting principles. Adjusted earnings before interest, income taxes,
depreciation and amortization, as determined by Arch, may not necessarily be
comparable to similarly titled data of other wireless messaging companies.

   Leverage may:
   o  limit Arch's ability to refinance or amend the terms of its existing debt
      obligations, including scheduled repayments between March 2002 and June
      2006.
   o  impair Arch's ability to obtain additional financing necessary for working
      capital, capital expenditures or other purposes on acceptable terms, if at
      all.


                                       23
<PAGE>

   o  require a substantial portion of Arch's cash flow to be used to pay
      interest expense; for example, interest payments will commence on
      September 15, 2001 on Arch's 107/8% senior discount notes requiring
      interest payments of $7.5 million on March 15 and September 15 of each
      year until March 15, 2008.

   Arch may not be able to reduce its financial leverage as it intends, and may
not be able to achieve an appropriate balance between growth which it considers
acceptable and future reductions in financial leverage. If Arch is not able to
achieve continued growth in adjusted earnings before interest, income taxes,
depreciation and amortization, it may not be able to amend or refinance its
existing debt obligations and it may be precluded from incurring additional
indebtedness due to cash flow coverage requirements under existing or future
debt instruments.

Restrictions under debt instruments may prevent Arch from declaring dividends,
incurring or repaying debt, making acquisitions, altering lines of business or
taking actions which its management considers beneficial.

   Various debt instruments impose operating and financial restrictions on Arch.
Arch's credit facility requires various operating subsidiaries to maintain
specified financial ratios, including a maximum leverage ratio, a minimum
interest coverage ratio, a minimum debt service coverage ratio and a minimum
fixed charge coverage ratio. It also limits or restricts, among other things,
Arch's operating subsidiaries' ability to:
   o  declare dividends or repurchase capital stock;
   o  incur or pay back indebtedness;
   o  engage in mergers, consolidations, acquisitions and asset sales; or
   o  alter its lines of business or accounting methods, even though these
      actions would otherwise benefit Arch.

   A breach of any of these covenants could result in a default under the credit
facility and/or other debt instruments. Upon the occurrence of an event of
default, the creditors could elect to declare all amounts outstanding to be
immediately due and payable, together with accrued and unpaid interest. If Arch
were unable to repay any such amounts, the lenders could proceed against any
collateral securing the indebtedness. If the lenders under the credit facility
or other debt instruments accelerated the payment of such indebtedness, there
can be no assurance that the assets of Arch would be sufficient to repay in full
such indebtedness and other indebtedness of Arch.

Recent declines in Arch's units in service may continue or even accelerate; this
trend may impair Arch's financial results.

   In 1999, Arch experienced a decrease of 89,000 units in service, excluding
the addition of subscribers from the MobileMedia acquisition. In 2000 Arch
experienced a further decrease of 2,073,000 units in service; 888,000 due to
subscriber cancellations and 1,185,000 due to definitional changes. Arch
believes the traditional messaging industry did not grow during 1999, the demand
for traditional messaging services declined in 2000 and will continue to decline
in the following years and that future growth in the wireless messaging industry
will be attributable to two-way messaging and information services. As a result,
Arch expects to continue to experience significant declines of units in service
during 2001 as Arch's addition of two-way messaging subscribers will likely be
exceeded by its loss of traditional messaging subscribers.

   Cancellation of units in service can significantly affect the results of
operations of wireless messaging service providers. The sale and marketing costs
associated with attracting new subscribers are substantial compared to the costs
of providing service to existing customers. Because the wireless messaging
business is characterized by high fixed costs, cancellations directly and
adversely affect earnings before interest, income taxes, depreciation and
amortization.

Competition from larger telephone, cellular and PCS companies is intensifying
and may reduce Arch's revenues and adjusted earnings before interest, income
taxes, depreciation and amortization.

   Wireless messaging companies like Arch, whose units in service have been
declining, increasingly compete for market share against large telephone,
cellular and PCS providers like AT&T Wireless, Cingular, MCI/WorldCom, Sprint
PCS, Verizon and Nextel. Arch will also compete with other messaging companies
that continue to offer traditional and two-way messaging services. Some
competitors possess greater financial, technical and other resources than those
available to Arch. If any of such competitors were to devote additional
resources to their wireless messaging business or focus on Arch's historical
business segments, they could secure Arch's customers and reduce demand for its
products. This could materially reduce Arch's revenues and earnings before
interest, income taxes, depreciation and amortization and have a material
adverse effect on earnings before interest, income taxes, depreciation and
amortization.


                                       24
<PAGE>


Mobile, cellular and PCS telephone companies have introduced phones and services
with substantially the same features and functions as the two-way messaging
products and services provided by Arch, and have priced such devices and
services competitively. The future growth and profitability of Arch depends on
the success of its two-way messaging services.

   Arch's two-way messaging services will compete with other available mobile
wireless services, which have already demonstrated high levels of market
acceptance, including cellular, PCS and other mobile phone services. Many of
these other mobile wireless phone services now include wireless messaging as an
adjunct service or may replace send-and-receive messaging services entirely. It
is less expensive for an end user to enhance a cellular, PCS or other mobile
phone with modest data capability than to use both a mobile phone and a pager.
This is because the nationwide cellular, PCS and other mobile phone carriers
have subsidized the purchase of mobile phones more heavily and because prices
for mobile wireless services have been declining rapidly. In addition, the
availability of coverage for these services has increased, making the two types
of service and product offerings more comparable. Thus, companies other than
Arch seeking to provide wireless messaging services may be able to bring their
products to market faster or in packages of products that consumers and
businesses find more valuable than those to be provided by Arch. If this occurs,
Arch's market share will erode and financial operations will be impaired.

Arch may need additional capital to expand its business and to refinance
existing debt, which could be difficult to obtain. Failure to obtain additional
capital may preclude Arch from developing or enhancing its products, taking
advantage of future opportunities, growing its business or responding to
competitive pressures.

   Arch's business strategy requires substantial funds to be available to
finance the continued development and future growth and expansion of its
operations, including the development and implementation of two-way messaging
services. Arch's future capital requirements will depend on factors that
include:
   o  subscriber growth;
   o  the type of wireless messaging devices and services demanded by customers;
   o  technological developments;
   o  competitive conditions;
   o  the nature and timing of Arch's strategy for developing technical
      resources to provide two-way messaging services; and
   o  acquisition strategies and opportunities.

Revenues and operating results may fluctuate, leading to fluctuations in trading
prices and possible liquidity problems.

   Arch believes that future fluctuations in its revenues and operating results
may occur due to many factors, particularly the decreased demand for traditional
messaging services and the uncertain market for two-way messaging services.
Arch's current and planned expenses and debt repayment levels, are to a large
extent, fixed in the short term, and are based in part on past expectations as
to future revenues and cash flow growth. Arch may be unable to adjust spending
in a timely manner to compensate for any past or future revenue or cash flow
shortfall. It is possible that, due to these fluctuations, Arch's revenue, cash
flow or operating results may not meet the expectations of securities analysts
or investors. If shortfalls were to cause Arch not to meet the financial
covenants or debt repayment schedules contained in its debt instruments, the
debtholders could declare a default and seek immediate repayment. This may have
a material adverse effect on the price of Arch's common stock and its liquidity.

Continued net losses are likely and Arch cannot predict whether it will ever be
profitable.

   Arch has reported net losses in the past. Arch expects that it will continue
to report net losses and cannot give any assurance about when, if ever, it is
likely to attain profitability. Many of the factors that will determine whether
or not Arch attains profitability are inherently difficult to predict. These
include the decreased demand for traditional messaging services and the
uncertain market for two-way messaging services which compete against services
offered by telephone, cellular and PCS providers, new service developments and
technological change.


                                       25
<PAGE>


Obsolescence in company-owned units may impose additional costs on Arch.

   Technological change may also adversely affect the value of the units owned
by Arch that are leased to its subscribers. If Arch's current subscribers
request more technologically advanced units, including two-way messaging
devices, Arch could incur additional inventory costs and capital expenditures if
required to replace units leased to its subscribers within a short period of
time. Such additional costs or capital expenditures could have a material
adverse effect on Arch's results of operations.

Because Arch depends on Motorola for pagers and on Glenayre for other equipment,
Arch's operations may be disrupted if it is unable to obtain equipment from them
in the future.

   Arch does not manufacture any of the equipment customers need to take
advantage of its services. It is dependent primarily on Motorola, Inc. to obtain
sufficient equipment inventory for new subscribers and replacement needs and on
Glenayre Electronics, Inc. for sufficient terminals and transmitters to meet its
expansion and replacement requirements. Significant delays in obtaining any of
this equipment, could lead to disruptions in operations and adverse financial
consequences. Arch's purchase agreement with Motorola for messaging devices
expires on October 1, 2001. There can be no assurance that the agreement with
Motorola for messaging devices will be renewed or, if renewed, that the renewed
agreement will be on terms and conditions as favorable to Arch as those under
the current agreement.

   Arch relies on third parties to provide satellite transmission for some
aspects of its wireless messaging services. To the extent there are satellite
outages or if satellite coverage is impaired in other ways, Arch may experience
a loss of service until such time as satellite coverage is restored, which could
have a material adverse effect due to customer complaints.

Challenges involved in integrating Arch and PageNet may strain Arch's capacities
and may prevent the combined company from achieving intended synergies.

   Arch may not be able to successfully integrate PageNet's operations. The
combination of the two companies will require, among other things, coordination
of administrative, sales and marketing, customer billing and services
distribution, accounting and finance functions and conversion of information and
management systems. The difficulties of such integration will initially be
increased by the need to coordinate geographically separate organizations and to
integrate personnel with disparate business backgrounds and corporate cultures
and by the fact that PageNet has suspended a significant restructuring of its
own operations.

   The integration process could cause the disruption of the activities of the
two businesses that are being combined. Arch may not be able to retain key
employees of PageNet. The process of integrating the businesses of Arch and
PageNet may require a disproportionate amount of time and attention of Arch's
management and financial and other resources of Arch. Even if integrated in a
timely manner, there is no assurance that Arch will operate smoothly or that it
will fulfill management's objective of achieving cost reductions and synergies.

   In addition to the specific risks described above, an investment in Arch is
also subject to many risks which affect all companies, or all companies in its
industry.

RECENT AND PENDING ACCOUNTING PRONOUNCEMENTS

   In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 133 "Accounting for Derivative
Instruments and Hedging Activities". SFAS No. 133 requires that every derivative
instrument be recorded in the balance sheet as either an asset or liability
measured at its fair value and that changes in the derivative's fair value be
recognized in earnings. Arch adopted this standard effective January 1, 2001.
The impact of adopting SFAS No. 133 was not material; however, adopting SFAS No.
133 could increase volatility in future earnings and other comprehensive income.

   The Securities and Exchange Commission released Staff Accounting Bulletin
(SAB) No. 101, "Revenue Recognition in Financial Statements", on December 3,
1999. SAB 101 provides additional guidance on the accounting for revenue
recognition, including both broad conceptual discussions as well as certain
industry-specific guidance. Arch adopted SAB 101 in 2000, it did not have a
material impact on its results of operations.


                                       26
<PAGE>



ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

   The majority of the Company's long-term debt is subject to fixed rates of
interest or interest rate protection. In the event that the interest rate on the
Company's non-fixed rate debt fluctuates by 10% in either direction, Arch
believes the impact on its results of operations would be immaterial. The
Company transacts infrequently in foreign currency and therefore is not exposed
to significant foreign currency market risk.


ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

   The financial statements and schedules listed in Item 14(a)(1) and (2) are
included in this Report beginning on Page F-1.

ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
          FINANCIAL DISCLOSURE

   None.

                                    PART III

   The information required by Items 10 through 13 are incorporated by reference
to the Registrant's definitive Proxy Statement for its 2001 annual meeting of
stockholders scheduled to be held on May 15, 2001.

                                     PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) (1)   Financial Statements

          Consolidated Balance Sheets as of December 31, 1999 and 2000
          Consolidated Statements of Operations for Each of the Three Years in
           the Period Ended December 31, 2000
          Consolidated Statements of Stockholders' Equity (Deficit) for Each of
           the Three Years in the Period Ended December 31, 2000
          Consolidated Statements of Cash Flows for Each of the Three Years in
           the Period Ended December 31, 2000
          Notes to Consolidated Financial Statements

(a) (2)   Financial Statement Schedule

          Schedule II - Valuation and Qualifying Accounts

(b)       Reports on Form 8-K

          The following reports on Form 8-K were filed during the three months
          ended December 31, 2000:

          Current Report on Form 8-K dated November 10, 2000 (reporting the
           Company's acquisition of Paging Network, Inc.)

(c)       Exhibits

          The exhibits listed in the accompanying index to exhibits are filed as
           part of this annual report on Form 10-K.



                                       27
<PAGE>


                                   SIGNATURES

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

                                        ARCH WIRELESS, INC.

                                        By:      /s/ C. Edward Baker, Jr.
                                           -----------------------------------
                                             C. Edward Baker, Jr.
                                             Chairman of the Board and Chief
                                             Executive Officer
     March 23, 2001

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


  /s/ C. Edward Baker, Jr.       Chairman of the Board           March 23, 2001
-------------------------------  and Chief Executive Officer
      C. Edward Baker, Jr.       (principal executive officer)


  /s/ John B. Saynor             Executive Vice President,       March 23, 2001
-------------------------------  Director
      John B. Saynor


  /s/ J. Roy Pottle              Executive Vice President        March 23, 2001
-------------------------------  and Chief Financial Officer
      J. Roy Pottle              (principal financial officer and
                                 principal accounting officer)



  /s/ R. Schorr Berman           Director                        March 23, 2001
-------------------------------
      R. Schorr Berman

  /s/ Gregg R. Daugherty         Director                        March 23, 2001
-------------------------------
      Gregg R. Daugherty

  /s/ John H. Gutfreund          Director                        March 23, 2001
-------------------------------
      John H. Gutfreund

                                 Director                        March 23, 2001
-------------------------------
      John Kornreich

  /s/ H. Sean Mathis             Director                        March 23, 2001
-------------------------------
      H. Sean Mathis

  /s/ Allan L. Rayfield          Director                        March 23, 2001
-------------------------------
      Allan L. Rayfield

                                 Director                        March 23, 2001
-------------------------------
      John A. Shane



                                       28
<PAGE>

                          INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                                                              Page
<S>                                                                                                           <C>
Report of Independent Public Accountants....................................................................   F-2

Consolidated Balance Sheets as of December 31, 1999 and 2000 ...............................................   F-3

Consolidated Statements of Operations for Each of the Three Years in the Period Ended
   December 31, 2000........................................................................................   F-4

Consolidated Statements of Stockholders' Equity (Deficit) for Each of the Three Years in
   the Period Ended December 31, 2000.......................................................................   F-5

Consolidated Statements of Cash Flows for Each of the Three Years in the Period Ended
   December 31, 2000........................................................................................   F-6

Notes to Consolidated Financial Statements..................................................................   F-7

</TABLE>




                                       F-1
<PAGE>




                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Arch Wireless, Inc.:

We have audited the accompanying consolidated balance sheets of Arch Wireless,
Inc. (a Delaware corporation) (the "Company") and subsidiaries as of December
31, 1999 and 2000, and the related consolidated statements of operations,
stockholders' equity (deficit) and cash flows for each of the three years in the
period ended December 31, 2000. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards 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. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Arch
Wireless, Inc. and subsidiaries as of December 31, 1999 and 2000, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 2000, in conformity with accounting principles
generally accepted in the United States.


                                        /s/ ARTHUR ANDERSEN LLP

Boston, Massachusetts
March 1, 2001


                                       F-2
<PAGE>



                               ARCH WIRELESS, INC.

                           CONSOLIDATED BALANCE SHEETS
                      (in thousands, except share amounts)
<TABLE>
<CAPTION>
                                                                                               December 31,
                                                                                            1999          2000
                                                                                        -----------    -----------
                                      ASSETS
<S>                                                                                     <C>            <C>
     Current assets:
        Cash and cash equivalents ...................................................   $     3,161    $    55,007
        Accounts receivable (less reserves of $16,473 and $62,918 in 1999 and
          2000, respectively) .......................................................        61,167        134,396
        Inventories .................................................................         9,101          2,163
        Prepaid expenses and other ..................................................        11,874         19,877
                                                                                        -----------    -----------
          Total current assets ......................................................        85,303        211,443
                                                                                        -----------    -----------
     Property and equipment, at cost:
        Land, buildings and improvements ............................................        20,503         36,334
        Messaging and computer equipment ............................................       667,820      1,347,468
        Furniture, fixtures and vehicles ............................................        26,321         58,270
                                                                                        -----------    -----------
                                                                                            714,644      1,442,072
        Less accumulated depreciation and amortization ..............................       314,445        444,650
                                                                                        -----------    -----------
        Property and equipment, net .................................................       400,199        997,422
                                                                                        -----------    -----------
     Intangible and other assets (less accumulated amortization of $515,195
        and $697,446 in 1999 and 2000, respectively) ................................       867,543      1,100,744
                                                                                        -----------    -----------
                                                                                        $ 1,353,045    $ 2,309,609
                                                                                        ===========    ===========
                     LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
     Current liabilities:
        Current maturities of long-term debt ........................................   $     8,060    $   177,341
        Accounts payable ............................................................        30,016         55,282
        Accrued restructuring charges ...............................................        17,111         60,424
        Accrued expenses ............................................................        43,629        102,959
        Accrued interest ............................................................        30,294         39,140
        Customer deposits ...........................................................         7,526         18,273
        Deferred revenue ............................................................        28,175         44,227
                                                                                        -----------    -----------
          Total current liabilities .................................................       164,811        497,646
                                                                                        -----------    -----------
     Long-term debt, less current maturities ........................................     1,322,508      1,679,219
                                                                                        -----------    -----------
     Other long-term liabilities ....................................................        83,285         74,509
                                                                                        -----------    -----------
     Deferred income taxes ..........................................................          --          121,994
                                                                                        -----------    -----------
     Commitments and contingencies
     Stockholders' equity (deficit):
        Preferred stock--$.01 par value, authorized 10,000,000 shares; issued 250,000
          shares (aggregate liquidation preference of $28,176 and
          $30,504 in 1999 and 2000, respectively) ...................................             3              3
        Common stock--$.01 par value, authorized 300,000,000 shares, issued
          and outstanding: 47,263,500 and 161,536,656 shares in 1999 and
          2000, respectively ........................................................           472          1,615
        Class B common stock--$.01 par value, authorized 10,000,000 shares;
          issued and outstanding: 3,968,164 and 1,991,945 shares in 1999 and
          2000, respectively ........................................................            40             20
        Additional paid-in capital ..................................................       661,413      1,126,281
        Accumulated other comprehensive income ......................................          --              (82)
        Accumulated deficit .........................................................      (879,487)    (1,191,596)
                                                                                        -----------    -----------
          Total stockholders' equity (deficit) ......................................      (217,559)       (63,759)
                                                                                        -----------    -----------
                                                                                        $ 1,353,045    $ 2,309,609
                                                                                        ===========    ===========
</TABLE>

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


                                       F-3
<PAGE>



                               ARCH WIRELESS, INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS
               (in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
                                                                         Years Ended December 31,
                                                                   1998            1999            2000
                                                                   ----            ----            ----
<S>                                                           <C>             <C>             <C>
     Service, rental and maintenance revenues .............   $    371,154    $    591,389    $    794,997
     Product sales ........................................         42,481          50,435          56,085
                                                              ------------    ------------    ------------
          Total revenues ..................................        413,635         641,824         851,082
     Cost of products sold ................................        (29,953)        (34,954)        (35,861)
                                                              ------------    ------------    ------------
                                                                   383,682         606,870         815,221
                                                              ------------    ------------    ------------
     Operating expenses:
        Service, rental and maintenance ...................         80,782         132,400         182,993
        Selling ...........................................         49,132          84,249         107,208
        General and administrative ........................        112,181         180,726         263,901
        Depreciation and amortization .....................        221,316         309,434         500,831
        Restructuring charge ..............................         14,700          (2,200)          5,425
                                                              ------------    ------------    ------------
          Total operating expenses ........................        478,111         704,609       1,060,358
                                                              ------------    ------------    ------------
     Operating income (loss) ..............................        (94,429)        (97,739)       (245,137)
     Interest expense .....................................       (104,019)       (144,924)       (167,621)
     Interest income ......................................          1,766           1,896           1,451
     Other expense ........................................         (1,960)        (45,221)         (3,082)
     Equity in loss of affiliate ..........................         (5,689)         (3,200)           --
                                                              ------------    ------------    ------------
     Income (loss) before income tax benefit, extraordinary
        items and accounting change .......................       (204,331)       (289,188)       (414,389)
     Benefit from income taxes ............................           --              --            46,006
                                                              ------------    ------------    ------------
     Income (loss) before extraordinary items and
        accounting change .................................       (204,331)       (289,188)       (368,383)
     Extraordinary gain (loss) from early extinguishment of
        debt ..............................................         (1,720)          6,963          58,603
     Cumulative effect of accounting change ...............           --            (3,361)           --
                                                              ------------    ------------    ------------
     Net income (loss) ....................................       (206,051)       (285,586)       (309,780)
     Accretion of redeemable preferred stock ..............           --              --            (4,223)
     Preferred stock dividend .............................         (1,030)         (2,146)         (2,329)
                                                              ------------    ------------    ------------
     Net income (loss) applicable to common stockholders ..   $   (207,081)   $   (287,732)   $   (316,332)
                                                              ============    ============    ============
     Basic/diluted income (loss) per common share before
        extraordinary item and accounting change ..........   $     (29.34)   $      (9.21)   $      (4.86)
     Extraordinary gain (loss) from early extinguishment of
        debt per basic/diluted common share ...............          (0.25)           0.22            0.76
     Cumulative effect of accounting change per
        basic/diluted common share ........................           --             (0.11)           --
                                                              ------------    ------------    ------------
     Basic/diluted net income (loss) per common share .....   $     (29.59)   $      (9.10)   $      (4.10)
                                                              ============    ============    ============
     Basic/diluted weighted average number of common shares
        outstanding .......................................      6,997,730      31,603,410      77,122,659
                                                              ============    ============    ============
</TABLE>




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


                                       F-4
<PAGE>


                               ARCH WIRELESS, INC.

            CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
                      (in thousands, except share amounts)
<TABLE>
<CAPTION>
                                                                                   Accumulated                 Total
                                                              Class B  Additional     Other                  Stockholders'
                                            Preferred Common  Common    Paid-in   Comprehensive Accumulated    Equity
                                              Stock   Stock    Stock    Capital       Income      Deficit     (Deficit)
                                             ------- -------  -------  ----------  -----------  -----------  -----------
<S>                                          <C>     <C>      <C>      <C>         <C>          <C>          <C>
Balance, December 31, 1997...............    $    -- $    70  $    --  $  351,349  $        --  $  (384,674) $   (33,255)
   Net loss..............................         --      --       --          --           --     (206,051)    (206,051)
   Exercise of options to purchase
     31,344 shares of common stock.......         --      --       --         294           --           --          294
   Issuance of 250,000 shares of
     preferred stock.....................          3      --       --      24,997           --           --       25,000
   Issuance of 85,996 shares of common
     stock under Arch's employee stock
     purchase plan.......................         --       1       --         548           --           --          549
   Preferred stock dividend..............         --      --       --       1,030           --       (1,030)          --
                                             ------- -------  -------  ----------  -----------  -----------  -----------
Balance, December 31, 1998...............          3      71       --     378,218           --     (591,755)    (213,463)
   Net loss..............................         --      --       --          --           --     (285,586)    (285,586)
   Issuance of 30,847,004 shares of
     common stock and 5,360,261 of Class
     B common stock in rights offering...         --     308       54     216,881           --           --      217,243
   Issuance of 4,781,656 shares of
     common stock to acquire company.....         --      48       --      20,035           --           --       20,083
   Shares to be issued in connection
     with the Benbow settlement..........         --      --       --      22,836           --           --       22,836
   Issuance of 3,136,665 shares of
     common stock in exchange for debt...         --      31       --      21,106           --           --       21,137
   Issuance of 34,217 shares of common
     stock under Arch's employee stock
     purchase plan.......................         --      --       --         191           --           --          191
   Conversion of Class B common stock
     into common stock...................         --      14      (14)         --           --           --           --
   Preferred stock dividend..............         --      --       --       2,146           --       (2,146)          --
                                             ------- -------  -------  ----------  -----------  -----------  -----------
Balance, December 31, 1999...............          3     472       40     661,413           --     (879,487)    (217,559)
   Net loss..............................         --      --       --          --           --     (309,780)    (309,780)
   Foreign currency translation
     adjustments.........................         --      --       --          --          (82)          --          (82)
                                                                                                             -----------
     Total comprehensive loss............                                                                       (309,862)
   Issuance of 89,896,907 shares of
     common stock to acquire company.....         --     899       --     262,499           --           --      263,398
   Issuance of 12,468,632 shares of
     common stock in exchange for debt...         --     125       --     156,851           --           --      156,976
   Issuance of 6,613,180 shares of
     common stock in exchange for
     redeemable preferred stock..........         --      66       --      46,849           --           --       46,915
   Issuance of 2,856,721 shares of
     common stock in connection with the
     Benbow settlement...................         --      28       --         (28)          --           --           --
   Issuance of 459,133 shares of common
     stock under Arch's employee stock
     purchase plan.......................         --       5       --         570           --           --          575
   Exercise of Warrants to purchase
     2,364 shares of common stock........         --      --       --          21           --           --           21
   Conversion of Class B common stock
     into common stock...................         --      20      (20)         --           --           --           --
   Preferred stock accretion.............         --      --       --      (4,223)          --           --       (4,223)
   Preferred stock dividend..............         --      --       --       2,329           --       (2,329)          --
                                             ------- -------  -------  ----------  -----------  -----------  -----------
Balance, December 31, 2000.................  $   3   $ 1,615  $    20  $1,126,281  $       (82) $(1,191,596) $   (63,759)
                                             ======= =======  =======  ==========  ===========  ===========  ===========
</TABLE>




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


                                      F-5
<PAGE>

                               ARCH WIRELESS, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
<TABLE>
<CAPTION>
                                                                            Years Ended December 31,
                                                                       1998           1999           2000
                                                                       ----           ----           ----
<S>                                                               <C>            <C>            <C>
     Cash flows from operating activities:
        Net income (loss) .....................................   $  (206,051)   $  (285,586)   $  (309,780)
        Adjustments to reconcile net income (loss) to net cash
          provided by operating activities:
          Depreciation and amortization .......................       221,316        309,434        500,831
          Deferred income tax benefit .........................          --             --          (46,006)
          Extraordinary loss (gain) from early extinguishment .         1,720         (6,963)       (58,603)
             of debt
          Cumulative effect of accounting change ..............          --            3,361           --
          Equity in loss of affiliate .........................         5,689          3,200           --
          Accretion of discount on long-term debt .............        37,115         41,566         28,277
          Other non-cash interest expense .....................          --            2,904          2,361
          Gain on tower site sale .............................        (1,859)        (1,871)        (1,983)
          Write-off of N-PCS investments ......................          --           37,498           --
          Accounts receivable loss provision ..................         8,545         15,265         33,015
          Changes in assets and liabilities, net of effect
             from acquisitions of companies:
             Accounts receivable ..............................        (9,151)       (18,369)       (41,129)
             Inventories ......................................         2,314          1,728          7,381
             Prepaid expenses and other .......................        (3,090)         7,000          6,944
             Accounts payable and accrued expenses ............        24,649         (2,986)       (74,550)
             Customer deposits and deferred revenue ...........           549         (7,554)        (8,495)
             Other long-term liabilities ......................         1,634            909         (5,938)
                                                                  -----------    -----------    -----------
     Net cash provided by operating activities ................        83,380         99,536         32,325
                                                                  -----------    -----------    -----------

     Cash flows from investing activities:
        Additions to property and equipment, net ..............       (79,249)       (95,208)      (127,833)
        Additions to intangible and other assets ..............       (33,935)       (18,443)       (12,452)
        Net proceeds from tower site sale .....................        30,316          3,046           --
        Acquisition of companies, net of cash acquired ........          --         (516,561)        47,785
                                                                  -----------    -----------    -----------
     Net cash used for investing activities ...................       (82,868)      (627,166)       (92,500)
                                                                  -----------    -----------    -----------

     Cash flows from financing activities:
        Issuance of long-term debt ............................       460,964        473,783        174,960
        Repayment of long-term debt ...........................      (489,014)      (162,059)       (63,560)
        Net proceeds from sale of preferred stock .............        25,000           --             --
        Net proceeds from sale of common stock ................           843        217,434            596
                                                                  -----------    -----------    -----------
     Net cash (used in) provided by financing activities ......        (2,207)       529,158        111,996
                                                                  -----------    -----------    -----------
     Effect of exchange rate changes on cash ..................          --             --               25
                                                                  -----------    -----------    -----------
     Net (decrease) increase in cash and cash equivalents .....        (1,695)         1,528         51,846
     Cash and cash equivalents, beginning of period ...........         3,328          1,633          3,161
                                                                  -----------    -----------    -----------
     Cash and cash equivalents, end of period .................   $     1,633    $     3,161    $    55,007
                                                                  ===========    ===========    ===========

     Supplemental disclosure:
        Interest paid .........................................   $    57,151    $    91,151    $   128,155
                                                                  ===========    ===========    ===========
        Issuance of common stock for acquisitions of companies    $      --      $    20,083    $   263,398
                                                                  ===========    ===========    ===========
        Liabilities assumed in acquisitions of companies ......   $      --      $   134,429    $ 1,059,431
                                                                  ===========    ===========    ===========
        Issuance of common stock for debt .....................   $      --      $    21,137    $   156,976
                                                                  ===========    ===========    ===========
        Issuance of common stock for redeemable preferred stock   $      --      $      --      $    46,915
                                                                  ===========    ===========    ===========
        Preferred stock dividend ..............................   $     1,030    $     2,146    $     2,329
                                                                  ===========    ===========    ===========
        Accretion of redeemable preferred stock ...............   $      --      $      --      $     4,223
                                                                  ===========    ===========    ===========
</TABLE>



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


                                       F-6
<PAGE>


                               ARCH WIRELESS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Significant Accounting Policies

   Organization--Arch Wireless, Inc. ("Arch" or the "Company") is a leading
provider of wireless messaging and information services in the United States.
Currently, Arch primarily provides traditional paging services, which enable
subscribers to receive messages on their pagers composed entirely of numbers,
such as a phone number, or on some pagers, numbers and letters, which enable
subscribers to receive text messages. Arch has also begun to market and sell
two-way wireless messaging services which enable subscribers to respond to
messages or create and send wireless email messages to other wireless messaging
devices (including pagers and personal digital assistants or PDAs) and to
personal computers. Arch also offers wireless information services, such as
stock quotes, news and other wireless information delivery services, voice mail,
personalized greeting, message storage and retrieval, equipment loss protection
and equipment maintenance. These services are commonly referred to as wireless
messaging and information services.

   Risks and Other Important Factors--Arch sustained net losses of $206.1
million, $285.6 million and $309.8 million for the years ended December 31,
1998, 1999 and 2000, respectively. Arch's loss from operations for the year
ended December 31, 2000 was $245.1 million. In addition, at December 31, 2000,
Arch had an accumulated deficit of approximately $63.8 million and a deficit in
working capital of $286.2 million although $175.2 million of current maturities
of long term debt were repaid in February 2001, see Note 4 for description of
the transaction. Arch's losses from operations and net losses are expected to
continue for additional periods in the future. There can be no assurance that
its operations will become profitable.

   Arch's operations require the availability of substantial funds to finance
the maintenance and growth of its existing messaging operations, its subscriber
base and to enhance and expand its two-way messaging networks. At December 31,
2000, Arch had approximately $1,856.6 million outstanding under its credit
facility, senior notes, capital leases and other long-term debt. Amounts
available under its credit facility are subject to certain financial covenants
and other restrictions. At December 31, 2000, Arch was in compliance with each
of the covenants under its credit facility. Arch's ability to borrow additional
amounts in the future, including amounts currently available under the credit
facility is dependent on Arch's ability to comply with the provisions of its
credit facility as well as the availability of financing in the capital markets.
At December 31, 2000, Arch had $4.0 million of borrowings available under its
credit facility. Arch believes that based on its current cash position and
projected requirements, Arch will have sufficient cash to fund operations
through December 31, 2001. It believes that its capital needs for the
foreseeable future will be funded with available cash on hand, , borrowings
under current and future credit facilities, net cash provided by operations and,
depending on Arch's needs and market conditions, possible sales of equity or
debt securities. For additional information, see Note 4.

   Arch is also subject to additional risks and uncertainties including, but not
limited to, changes in technology, business integration, competition, government
regulation and subscriber turnover.

   Principles of Consolidation--The accompanying consolidated financial
statements include the accounts of the Company and its wholly-owned
subsidiaries. All significant intercompany accounts and transactions have been
eliminated in consolidation.

   Use of Estimates--The preparation of financial statements in conformity with
generally accepted accounting principles 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 and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

   Revenue Recognition--Arch recognizes revenue under rental and service
agreements with customers as the related services are performed. Maintenance
revenues and related costs are recognized ratably over the respective terms of
the agreements. Sales of equipment are recognized upon delivery. In some cases,
Arch enters into transactions which include the sale of both products and
services. The Company allocates the value of the arrangement to each element
based on the residual method. Under the residual method, the fair value of the
undelivered elements, typically services, is deferred and subsequently realized
when earned. Commissions are recognized as an expense when incurred. On December
3, 1999, the Securities and Exchange Commission released Staff Accounting
Bulletin (SAB) No. 101, "Revenue Recognition in Financial Statements". SAB 101
provides additional guidance on the accounting for revenue recognition,

                                      F-7
<PAGE>

including both broad conceptual discussions as well as certain industry-specific
guidance. Arch adopted SAB 101 in 2000, it did not have a material impact on its
results of operations.

   Cash Equivalents--Cash equivalents include short-term, interest-bearing
instruments purchased with remaining maturities of three months or less.

   Inventories--Inventories consist of new messaging devices, which are held
primarily for resale. Inventories are stated at the lower of cost or market,
with cost determined on a first-in, first-out basis.

   Property and Equipment--Leased messaging devices sold or otherwise retired
are removed from the accounts at their net book value using the first-in,
first-out method. Property and equipment is stated at cost and is depreciated
using the straight-line method over the following estimated useful lives:

                                                                    Estimated
   Asset Classification                                            Useful Life
   --------------------                                            -----------
   Buildings and improvements.................................       20 Years
   Leasehold improvements.....................................      Lease Term
   Messaging devices..........................................       2 Years
   Messaging and computer equipment...........................      3-8 Years
   Furniture and fixtures.....................................      5-8 Years
   Vehicles...................................................       3 Years

   Depreciation and amortization expense related to property and equipment
totaled $101.1 million, $144.9 million and $211.8 million for the years ended
December 31, 1998, 1999 and 2000, respectively.

   On October 1, 2000, Arch revised the estimated depreciable life of its
subscriber equipment from three to two years. The change in useful life resulted
from Arch's expectations regarding future usage periods for subscriber devices
considering current and projected technological advances and customer desires
for new messaging technology. As a result of this change depreciation expense
increased approximately $19.3 million in the fourth quarter of 2000.

   Long-Lived Assets--In accordance with Statement of Financial Accounting
Standards (SFAS) No. 121 "Accounting for the Impairment of Long-Lived Assets and
Long-Lived Assets To Be Disposed Of" Arch evaluates the recoverability of its
carrying value of the Company's long-lived assets and certain intangible assets
based on estimated undiscounted cash flows to be generated from each of such
assets compared to the original estimates used in measuring the assets. To the
extent impairment is identified, Arch reduces the carrying value of such
impaired assets to fair value based on estimated discounted future cash flows.
To date, Arch has not had any such impairments.

   Fair Value of Financial Instruments--Arch's financial instruments, as defined
under SFAS No. 107 "Disclosures about Fair Value of Financial Instruments",
include its cash, its debt financing and interest rate protection agreements.
The fair value of cash is equal to the carrying value at December 31, 1999 and
2000. The fair value of the debt and interest rate protection agreements are
included in Note 4.

   Reverse Stock Split --On June 28, 1999, Arch effected a one for three reverse
stock split. All share and per share data for all periods presented have been
adjusted to give effect to this reverse split.

   Derivative Instruments and Hedging Activities--In June 1998, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
(SFAS) No. 133 "Accounting for Derivative Instruments and Hedging Activities".
SFAS No. 133 requires that every derivative instrument be recorded in the
balance sheet as either an asset or liability measured at its fair value and
that changes in the derivative's fair value be recognized in earnings. Arch
adopted this standard effective January 1, 2001. The impact of adopting SFAS No.
133 was not material; however, adopting SFAS No. 133 could increase volatility
in future earnings and other comprehensive income.


2. Acquisitions

   On June 3, 1999 Arch completed its acquisition of MobileMedia Communications,
Inc. for $671.1 million, consisting of cash paid of $516.6 million, including
direct transaction costs, 4,781,656 shares of Arch common stock valued at $20.1
million and the assumption of liabilities of $134.4 million. The cash payments
were financed through the issuance of approximately 36.2 million shares of Arch
common stock (including approximately 5.4 million shares of Arch Class B common

                                       F-8
<PAGE>

stock) in a rights offering for $6.00 per share, the issuance of $147.0 million
principal amount of 13 3/4% senior notes due 2008 (see Note 4) and additional
borrowings under the Company's credit facility.

   Arch issued to four unsecured creditors, who had agreed to purchase shares
not purchased by other unsecured creditors in the rights offering, warrants to
acquire 1,225,219 shares of its common stock on or before September 1, 2001 for
$9.03 per share. The fair value of these warrants was determined to be
immaterial.

   The acquisition was accounted for as a purchase and the results of
MobileMedia's operations have been included in the consolidated financial
statements from the date of acquisition.

   The liabilities assumed in the MobileMedia transaction, referred to above,
include an unfavorable lease accrual related to MobileMedia's rentals on
communications towers, which were in excess of market rental rates. This accrual
amounted to approximately $52.9 million and is included in other long-term
liabilities. This accrual is being amortized over the remaining lease term of 12
3/4 years. Concurrent with the consummation of the MobileMedia acquisition, Arch
developed a plan to integrate the operations of MobileMedia. The liabilities
assumed, referred to above, includes a $14.5 million restructuring accrual to
cover the costs to eliminate redundant headcount and facilities in connection
with the overall integration of operations (see Note 10).

   On November 10, 2000, Arch completed its acquisition of Paging Network, Inc.
(PageNet) for $1.35 billion consisting of 89,896,907 shares of Arch common stock
valued at $263.4 million, the assumption of liabilities of $1.06 billion,
including a deferred tax liability of $168.0 million arising in purchase
accounting, and $27.6 million of transaction costs. In the merger, each
outstanding share of PageNet's common stock was exchanged for 0.04796505 shares
of Arch's common stock.

   The merger was accompanied by a re-capitalization of Arch and PageNet
involving the exchange of common stock for outstanding debt. Arch offered to
exchange a total of 29,651,984 shares of its common stock for all of its
outstanding 107/8% senior discount notes that were outstanding on November 7,
1999; Arch exchanged shares of its common stock for a significant portion of
these discount notes (see Note 4).

   In connection with the merger, 80.5% of the total equity of PageNet's
subsidiary, Vast Solutions, Inc. was issued to PageNet's current stockholders
and noteholders and Arch holds the remaining 19.5% of Vast's equity.

   The purchase price for these acquisitions was allocated based on the fair
values of assets acquired and liabilities assumed. The purchase price allocation
for PageNet is preliminary as of December 31, 2000, and the Company expects it
to be finalized over the next three quarters. The acquisition was accounted for
as a purchase, and the results of PageNet's operations have been included in the
consolidated financial statements from the date of acquisition.

   Concurrent with the consummation of the PageNet acquisition, Arch management
developed a plan to integrate the operations of PageNet. The liabilities assumed
in the PageNet transaction, referred to above, include a $76.0 million
restructuring accrual related to the costs to eliminate redundant headcount and
facilities in connection with the overall integration of operations (see Note
10).

   The following unaudited pro forma summary presents the consolidated results
of operations as if the acquisitions had occurred at the beginning of the period
presented, after giving effect to certain adjustments, including depreciation
and amortization of acquired assets and interest expense on acquisition debt.
These pro forma results have been prepared for comparative purposes only and do
not purport to be indicative of what would have occurred had the acquisitions
been completed at the beginning of the period presented, or of results that may
occur in the future.
<TABLE>
<CAPTION>
                                                                                    Year Ended          Year Ended
                                                                                 December 31, 1999  December 31, 2000
                                                                                 -----------------  -----------------
                                                                                (unaudited and in thousands except for
                                                                                          per share amounts)
<S>                                                                                  <C>                <C>
   Revenues................................................................          $ 1,803,519        $ 1,534,986
   Income (loss) before extraordinary item.................................             (429,994)          (501,138)
   Net income (loss).......................................................             (433,355)          (442,535)
   Basic/diluted net income (loss) per common share........................                (2.55)             (2.79)
</TABLE>



                                      F-9
<PAGE>


3. Intangible and Other Assets

   Intangible and other assets, net of accumulated amortization, are composed of
the following (in thousands):
<TABLE>
<CAPTION>
                                                                                                December 31,
                                                                                            1999            2000
                                                                                            ----            ----
<S>                                                                                     <C>             <C>
   Purchased Federal Communications Commission licenses...........................      $    354,246    $    451,431
   Purchased subscriber lists.....................................................           239,114         412,015
   Goodwill.......................................................................           249,010         163,027
   Restricted cash................................................................                --          35,280
   Deferred financing costs.......................................................            19,915          24,905
   Other..........................................................................             5,258          14,086
                                                                                        ------------    ------------
                                                                                        $    867,543    $  1,100,744
                                                                                        ============    ============
</TABLE>

   Amortization expense related to intangible and other assets totaled $120.2
million, $164.6 million and $289.1 million for the years ended December 31,
1998, 1999 and 2000, respectively.

   Included in purchased Federal Communications Commissions licenses are $175.0
million of 900 MHz SMR (Specialized Mobile Radio) licenses which are held for
sale to Nextel Communications, Inc. (see Note 12).

   During the fourth quarter of 2000, the Company reviewed the remaining lives
of its intangible assets. Due to the nature of change in the traditional
messaging industry and the new technologies for two-way messaging, effective
October 1, 2000 the Company changed the remaining lives on purchased subscriber
lists, purchased Federal Communications Commission licenses and goodwill which
resulted from acquisitions prior to 2000 as follows:
<TABLE>
<CAPTION>
                                                                                        Book Value at
                                                                                         December 31,    Estimated
   Intangible Asset Classification                                                          2000        Useful Life
   -------------------------------                                                          ----        -----------
<S>                                                                                     <C>              <C>
   Purchased Federal Communications Commission licenses...........................      $    276,420     24 Months
   Purchased subscriber lists.....................................................           137,426     12 Months
   Goodwill.......................................................................           163,027     12 Months
</TABLE>

   These changes resulted in additional amortization expense in 2000 of $103.5
million.

   The purchased subscriber list, acquired in conjunction with the acquisition
of PageNet had a net book value at December 31, 2000 of $274.6 million and is
being amortized over a three year period.

   Deferred financing costs incurred in connection with Arch's credit agreements
(see Note 4) are being amortized over periods not to exceed the terms of the
related agreements. As credit agreements are amended and restated, unamortized
deferred financing costs are written off as an extraordinary charge. During
1998, a charge of $1.7 million was recognized in connection with the closing of
a new credit facility.

   Other assets consist of a note receivable from Vast, contract rights,
organizational and Federal Communications Commission application and development
costs which are amortized using the straight-line method over their estimated
useful lives, not exceeding ten years.

   In April 1998, the Accounting Standards Executive Committee of the Financial
Accounting Standards Board issued Statement of Position (SOP) 98-5 "Reporting on
the Costs of Start-Up Activities". SOP 98-5 requires costs of start-up
activities and organization costs to be expensed as incurred. Development and
start up costs include nonrecurring, direct costs incurred in the development
and expansion of messaging systems. Arch adopted SOP 98-5 effective January 1,
1999. Initial application of SOP 98-5 resulted in a $3.4 million charge, which
was reported as the cumulative effect of a change in accounting principle. This
charge represents the unamortized portion of start-up and organization costs,
which had been deferred in prior years.

   N-PCS Investments--In connection with Arch's May 1996 acquisition of Westlink
Holdings, Inc., Arch acquired Westlink's 49.9% share of the capital stock of
Benbow PCS Ventures, Inc. Benbow holds exclusive rights to a 50kHz
outbound/12.5kHz inbound narrowband PCS license in each of the five regions of
the United States. Arch's investment in Benbow was accounted for under the
equity method whereby Arch's share of Benbow's losses, since the acquisition

                                      F-10
<PAGE>

date of Westlink, are recognized in Arch's accompanying consolidated statements
of operations under the caption equity in loss of affiliate.

   In June 1999, Arch, Benbow and Benbow's controlling stockholder, agreed that:
   o  the shareholders agreement, the management agreement and the employment
      agreement governing the establishment and operation of Benbow would be
      terminated;
   o  Benbow would not make any further Federal Communications Commission
      payments and would not pursue construction of a narrowband PCS system;
   o  Arch would not be obligated to fund Federal Communications Commission
      payments or construction of a narrowband PCS system by Benbow;
   o  the parties would seek Federal Communications Commission approval of the
      forgiveness of Benbow's remaining payment obligations and the transfer of
      the controlling stockholder's equity interest in Benbow to Arch;
   o  the closing of the transaction would occur on the earlier of January 23,
      2001 or receipt of Federal Communications Commission approval;
   o  Arch would pay the controlling stockholder, in installments, an aggregate
      amount of $3.5 million if the transaction closes before January 23, 2001
      or $3.8 million if the transaction closes on January 23, 2001.

   As a result of these arrangements, Benbow does not have any meaningful
business operations and is unlikely to retain its narrowband PCS licenses.
Therefore, Arch wrote off substantially all of its investment in Benbow in the
amount of $8.2 million in June 1999. Arch accrued the payment to the controlling
stockholder of $3.8 million and legal and other expenses of approximately $1.0
million, which are included in accrued expenses. In addition, Arch guaranteed
Benbow's obligations in conjunction with Benbow's June 1998 purchase of the
stock of PageCall. Since Benbow was unable to meet these obligations and Arch
was required to settle the obligation in its stock, Arch recorded the issuance
of $22.8 million of its common stock in additional paid-in capital and as a
charge to operations in June 1999, to satisfy the obligation. In April 2000,
Arch issued the stock to the shareholders of PageCall.

   On November 8, 1994, CONXUS Communications, Inc. was successful in acquiring
the rights to an interactive messaging license in five designated regions in the
United States from the Federal Communications Commission narrowband wireless
spectrum auction. On May 18, 1999, CONXUS filed for Chapter 11 protection in the
U.S. Bankruptcy Court in Delaware, which case was converted to a case under
Chapter 7 on August 17, 1999. In June 1999, Arch wrote-off its $6.5 million
investment in CONXUS. On November 3, 1999, in order to document its disposition
of any interest it has, if any, in CONXUS, Arch offered to transfer to CONXUS
its shares in CONXUS for no consideration. The Chapter 7 trustee accepted this
offer on December 9, 1999.

   All of the above charges, totaling $42.3 million, are included in other
expense in 1999 in the accompanying statement of operations.


4. Long-term Debt

   Long-term debt consisted of the following (in thousands):
<TABLE>
<CAPTION>
                                                                                  December 31,
                                                            ------------------------------------------------------
                                                                        1999                        2000
                                                                        ----                        ----
                                                            Carrying Value  Fair Value  Carrying Value  Fair Value
                                                            --------------  ----------  --------------  ----------
<S>                                                         <C>           <C>           <C>           <C>
   Senior Bank Debt.......................................  $    438,940  $    438,940  $  1,135,113  $  1,070,757
   Canadian Bank Debt.....................................            --            --        63,355        63,355
   10 7/8% Senior Discount Notes due 2008.................       393,917       173,323       160,272        40,068
   9 1/2% Senior Notes due 2004...........................       125,000        95,000       125,000        85,000
   14% Senior Notes due 2004..............................       100,000        83,000       100,000        75,000
   12 3/4% Senior Notes due 2007..........................       127,887       101,030       128,168        46,140
   13 3/4% Senior Notes due 2008..........................       140,365       113,685       141,167        50,820
   Other..................................................         4,459         1,812         3,485         2,539
                                                            ------------                ------------
                                                               1,330,568                   1,856,560
   Less--Current maturities...............................         8,060                     177,341
                                                            ------------                ------------
   Long-term debt.........................................  $  1,322,508                $  1,679,219
                                                            ============                ============
</TABLE>
                                      F-11
<PAGE>

   Arch's debt financing primarily consists of senior bank debt and fixed rate
senior notes. Arch's senior bank debt trades on a limited basis, therefore the
fair value at December 31, 2000 was determined with reference to market quotes.
Arch considers the fair value of the Canadian bank debt to be equal to the
carrying value since the related facilities bear a current market rate of
interest. Arch's fixed rate senior notes are traded publicly. The fair values of
the fixed rate senior notes were based on current market quotes as of December
31, 1999 and 2000.

   Senior Bank Debt--The Company, through its operating subsidiary, Arch
Wireless Holdings, Inc. (AWHI) has a senior credit facility in the current
amount of $1,298.8 million consisting of (i) a $157.5 million tranche A reducing
revolving facility, (ii) a $95.0 million tranche B term loan, (iii) a $746.4
million tranche B-1 term loan which is recorded net of $159.7 million discount
at December 31, 2000, and (iv) a $299.9 million tranche C term loan.

   The tranche A facility began reducing on a quarterly basis on September 30,
2000 and will mature on June 30, 2005. The tranche B term loan began amortizing
in quarterly installments on September 30, 2000, with an ultimate maturity date
of June 30, 2005. The tranche B-1 term loan will be amortized in quarterly
installments commencing March 31, 2001, with an ultimate maturity date of June
30, 2006. The tranche C term loan began amortizing in annual installments on
December 31, 1999, with an ultimate maturity date of June 30, 2006. In addition
to these scheduled reductions and repayments, AWHI is required to repay $110
million of senior bank debt no later than November 10, 2001, with such amount
being applied on a pro rata basis to the tranche B, tranche B-1 and tranche C
term loans.

   AWHI's obligations under the senior credit facility are secured by its pledge
of its interests in certain of its operating subsidiaries. The senior credit
facility is guaranteed by Arch and certain of Arch's operating subsidiaries.
Arch's guarantee is secured by a pledge of Arch's stock and notes in its
wholly-owned subsidiary Arch Wireless Communications, Inc. (AWCI), and the
guarantees of the operating subsidiaries are secured by a security interest in
certain assets of those operating subsidiaries.

   Borrowings under the senior credit facility bear interest based on a
reference rate equal to either the agent bank's alternate base rate or LIBOR, in
each case plus a margin (3.375% on tranche A, tranche B and tranche B-1 and
6.875% on tranche C at December 31, 2000) based on specified ratios of debt to
annualized earnings before interest, income taxes, depreciation and
amortization.

   The senior credit facility requires payment of fees on the daily average
amount available to be borrowed under the tranche A facility. These fees vary
depending on specified ratios of total debt to annualized earnings before
interest, income taxes, depreciation and amortization.

   The senior credit facility requires that at least 50% of total AWCI debt,
including outstanding borrowings under the senior credit facility, be subject to
a fixed interest rate or interest rate protection agreements. Entering into
interest rate protection agreements involves both the credit risk of dealing
with counterparties and their ability to meet the terms of the contracts and
interest rate risk. In the event of nonperformance by the counterparty to these
interest rate protection agreements, Arch would be subject to the prevailing
interest rates specified in the senior credit facility.

   Arch had off-balance-sheet interest rate protection agreements consisting of
an interest rate cap with a notional amount of $10.0 million, at December 31,
1999 and interest rate swaps with an aggregate notional amount of $400.0 million
at December 31, 2000. The cost to terminate the outstanding interest rate cap
and interest rate swaps at December 31, 1999 and 2000 would have been $4.5
million and $9.1 million, respectively.

   Under the interest rate swap agreements, the Company will pay the difference
between LIBOR and the fixed swap rate if the swap rate exceeds LIBOR, and the
Company will receive the difference between LIBOR and the fixed swap rate if
LIBOR exceeds the swap rate. Settlement occurs on the quarterly reset dates
specified by the terms of the contracts. No interest rate swaps on the senior
credit facility were outstanding at December 31, 1999. At December 31, 2000, the
Company had a net payable of $501 thousand, on the interest rate swaps.

   The senior credit facility contains restrictions that limit, among other
things, Arch's operating subsidiaries' ability to:
   o  declare dividends or redeem or repurchase capital stock;
   o  prepay, redeem or purchase debt;
   o  incur liens and engage in sale/leaseback transactions;
   o  make loans and investments;
   o  incur indebtedness and contingent obligations;

                                      F-12
<PAGE>

   o  amend or otherwise alter debt instruments and other material agreements;
   o  engage in mergers, consolidations, acquisitions and asset sales;
   o  alter its lines of business or accounting methods.

   In addition, the senior credit facility requires Arch and its subsidiaries to
meet certain financial covenants, including ratios of earnings before interest,
income taxes, depreciation and amortization to fixed charges, earnings before
interest, income taxes, depreciation and amortization to debt service, earnings
before interest, income taxes, depreciation and amortization to interest service
and total indebtedness to earnings before interest, income taxes, depreciation
and amortization. As of December 31, 2000, Arch and its operating subsidiaries
were in compliance with the covenants of the senior credit facility.

   As of December 31, 2000, $1,294.8 million was outstanding and $4.0 million
was available under the senior credit facility. At December 31, 2000, such
advances bore interest at an average annual rate of 9.73%.

   Canadian Bank Debt--The Company, through its Canadian operating subsidiary,
Paging Network Canada Holdings, Inc., has two credit agreements which provide
for total borrowings of approximately $72.8 million. As of December 31, 2000,
approximately $63.4 million of borrowings were outstanding under these credit
facilities. Additional borrowings are available under these facilities, provided
that minimum collateral requirements and certain financial conditions are met.
Maximum borrowing that may be outstanding under the credit facilities are
permanently reduced beginning on March 31, 2002, by the following amounts: 2002
- $0.7 million; 2003 - $4.0 million and 2004 - $58.7 million. Both credit
agreements expire on December 31, 2004. Borrowings under the agreements bear
interest based on the agent bank's prime rate plus a margin based on specified
ratios of debt to annualized earnings before interest, income taxes,
depreciation and amortization.

   The two Canadian credit agreements are secured by $35.3 million of cash
collateral which is included in other assets and a general security interest in
all the assets of the Canadian subsidiary. Any liabilities of the Canadian
subsidiary, including borrowings under its two credit agreements, have no
recourse to Arch or any of its other assets.

   Senior Notes--Interest on Arch's 107/8% senior discount notes due 2008 does
not accrue prior to March 15, 2001. Commencing September 15, 2001, interest on
the senior discount notes is payable semi-annually at an annual rate of 107/8%.
The maturity value of the senior discount notes outstanding at December 31, 2000
was $164.2 million.

   Interest on AWCI's 13 3/4% senior notes due 2008, 12 3/4% senior notes due
2007, 14% senior notes due 2004 and 9 1/2% senior notes due 2004 (collectively,
the "Senior Notes") is payable semiannually. The senior discount notes and
Senior Notes contain certain restrictive and financial covenants, which, among
other things, limit the ability of Arch or AWCI to:
   o  incur additional indebtedness;
   o  pay dividends;
   o  grant liens on its assets;
   o  sell assets;
   o  enter into transactions with related parties;
   o  merge, consolidate or transfer substantially all of its assets;
   o  redeem capital stock or subordinated debt;
   o  make certain investments.

   The Senior Notes are generally unsecured, however, the 9 1/2% Notes and 14%
Notes are secured on a pari passu basis with the lenders under the senior credit
facility in the assets of certain subsidiaries of AWHI.

   During 1998, AWCI entered into interest rate swap agreements in connection
with the AWCI 14% notes. Under the interest rate swap agreements, Arch
effectively reduced the interest rate on the AWCI 14% notes from 14% to the
fixed swap rate of 9.45%. As of December 31, 1999, one of these interest rate
swap agreements remained outstanding with a notional amount of $107 million. In
December 2000, the Company restructured the $107 million interest rate swap.
Under the terms of the restructured interest rate swap between AWHI and the
counterparty, the notional amount was increased to $350 million and the fixed
swap rate was reduced to 7.1% (see Senior Bank Debt). In the event of
nonperformance by the counterparty to these interest rate protection agreements,
Arch would be subject to the 14% interest rate specified on the notes. As of
December 31, 2000, Arch had received $5.2 million in excess of the amounts paid
under the swap agreements, which is included in other long-term liabilities in
the accompanying balance sheet.

                                      F-13
<PAGE>

   Convertible Subordinated Debentures--At December 31, 2000, $946,000 of Arch
convertible subordinated debentures were outstanding and included in long-term
debt. The debentures are convertible at their principal amount into shares of
Arch common stock at any time prior to redemption or maturity at an initial
conversion price of $50.25 per share, subject to adjustment, and bear interest
at a rate of 6 3/4% per annum, payable semiannually on June 1 and December 1.

   Debt Exchanged for Equity--In October 1999, Arch completed transactions with
four bondholders in which Arch issued an aggregate of 3,136,665 shares of Arch
common stock and warrants to purchase 540,487 shares of Arch common stock for
$9.03 per share in exchange for $25.2 million accreted value of debt securities.
Under two of the exchange agreements, Arch issued 809,545 shares of Arch common
stock and warrants to purchase 540,487 shares of Arch common stock for $9.03 per
share in exchange for $8.9 million principal amount of Arch convertible
debentures. Arch recorded $2.9 million of non-cash interest expense in
conjunction with these transactions. Under the remaining exchange agreements,
Arch issued 2,327,120 shares of Arch common stock in exchange for $16.3 million
accreted value ($19.0 million maturity value) of its senior discount notes. Arch
recorded an extraordinary gain of $7.0 million on the early extinguishment of
debt as a result of these transactions.

   In 2000, Arch issued 285,973 shares of Arch common stock in exchange for $3.5
million principal amount of Arch convertible debentures. Arch also issued
12,182,659 shares of Arch common stock in exchange for $165.3 million accreted
value ($184.2 million maturity value) of its senior discount notes. Arch
recorded an extraordinary gain of $14.2 million on the early extinguishment of
debt as a result of these transactions.

   On May 10, 2000, Arch announced it had completed an agreement with Resurgence
Asset Management L.L.C. for the exchange of $91.1 million accreted value ($100.0
million maturity value) of senior discount notes held by various Resurgence
entities for 1,000,000 shares of a new class of Arch's preferred stock called
Series D preferred stock. The Series D preferred stock was converted into an
aggregate of 6,613,180 shares of common stock upon completion of Arch's merger
with PageNet.

   Arch recorded an extraordinary gain of $44.4 million on the early
extinguishment of debt as a result of this transaction based on the difference
between the carrying value of the exchanged debt, including deferred financing
fees, and the fair value of the preferred stock issued. Arch recorded $4.2
million of accretion on this preferred stock prior to its conversion to common
stock on November 10, 2000.

   Maturities of Debt--Scheduled long-term debt maturities at December 31, 2000
are as follows (in thousands):
<TABLE>
<CAPTION>
   Year Ending December 31,
   ------------------------
<S>                                                                                                     <C>
   2001............................................................................................     $     177,341
   2002............................................................................................           154,433
   2003............................................................................................           196,174
   2004............................................................................................           495,784
   2005............................................................................................           201,867
   Thereafter......................................................................................           790,678
                                                                                                        -------------
                                                                                                            2,016,277
   Less--Discount on assumed bank debt..............................................................          159,717
                                                                                                        -------------
                                                                                                        $   1,856,560
                                                                                                        =============
</TABLE>

   In February 2001, Arch used a portion of the proceeds received in the Nextel
transaction (see Note 12) to voluntarily prepay $175.2 million of amortization
scheduled to occur under its senior credit facility during 2001. Following this
transaction, amounts outstanding under the senior credit facility totaled
$1,119.6 million and consisted of (i) a $122.5 million tranche A reducing
revolving facility, (ii) a $64.1 million tranche B term loan, (iii) a $662.7
million tranche B-1 term loan, and (iv) a 270.3 million tranche C term loan.
Mandatory reductions of the tranche A facility and amortization of the tranche
B, tranche B-1 and tranche C term loans will commence on March 31, 2002 in
accordance with the terms of the senior credit facility.



                                      F-14
<PAGE>


5. Redeemable Preferred Stock and Stockholders' Equity

   Redeemable Series C Cumulative Convertible Preferred Stock--On June 29, 1998,
two partnerships managed by Sandler Capital Management Company, Inc., an
investment management firm, together with certain other private investors, made
an equity investment in Arch of $25.0 million in the form of Series C
Convertible Preferred Stock of Arch. The Series C Preferred Stock: (i) is
convertible into Arch common stock at a conversion price of $16.38 per share,
subject to certain adjustments; (ii) bears dividends at an annual rate of 8.0%,
(A) payable quarterly in cash or, at Arch's option, through the issuance of
shares of Arch common stock valued at 95% of the then prevailing market price or
(B) if not paid quarterly, accumulating and payable upon redemption or
conversion of the Series C Preferred Stock or liquidation of Arch; (iii) permits
the holders after seven years to require Arch, at Arch's option, to redeem the
Series C Preferred Stock for cash or convert such shares into Arch common stock
valued at 95% of the then prevailing market price of Arch common stock; (iv) is
subject to redemption for cash or conversion into Arch common stock at Arch's
option in certain circumstances; (v) in the event of a "Change of Control" as
defined in the indenture governing the senior discount notes, requires Arch, at
its option, to redeem the Series C Preferred Stock for cash or convert such
shares into Arch common stock valued at 95% of the then prevailing market price
of Arch common stock, with such cash redemption or conversion being at a price
equal to 105% of the sum of the original purchase price plus accumulated
dividends; (vi) limits certain mergers or asset sales by Arch; (vii) so long as
at least 50% of the Series C Preferred Stock remains outstanding, limits the
incurrence of indebtedness and "restricted payments" in the same manner as
contained in the senior discount notes indenture; and (viii) has certain voting
and preemptive rights. Upon an event of redemption or conversion, Arch currently
intends to convert such Series C Preferred Stock into shares of Arch common
stock.

   Class B Common Stock--Shares of Arch Class B common stock are identical in
all respects to shares of Arch common stock, except that a holder of Class B
common stock is not entitled to vote in the election of directors and is
entitled to 1/100th vote per share on all other matters voted on by Arch
stockholders. Shares of class B common stock will automatically convert into an
identical number of shares of common stock upon transfer of Class B common
shares to any person or entity, other than any person or entity that received
shares of Class B common stock in the initial distribution of those shares or
any affiliate of such person or entity. During 1999 and 2000, 1,392,097 and
1,976,219 shares of Class B common stock were converted to common stock.

   Warrants--In connection with the acquisition of MobileMedia and certain debt
for equity exchanges previously discussed, Arch issued approximately 50.0
million warrants to purchase Arch common stock. Each warrant represents the
right to purchase one-third of one share of Arch common stock at an exercise
price of $3.01 ($9.03 per share). The warrants expire on September 1, 2001.

   Stock Options--Arch has stock option plans, which provide for the grant of
incentive and nonqualified stock options to key employees, directors and
consultants to purchase Arch common stock. Incentive stock options are granted
at exercise prices not less than the fair market value on the date of grant.
Options generally vest over a five-year period from the date of grant. However,
in certain circumstances, options may be immediately exercisable in full.
Options generally have a duration of 10 years. The plans provide for the
granting of options to purchase a total of 9,131,865 shares of common stock.

   As a result of the PageNet merger, each outstanding option to purchase
PageNet common stock became fully exercisable and vested and was converted into
an option to purchase the same number of shares of Arch common stock that the
holder of the option would have received in the merger if the holder had
exercised the option immediately prior to the merger.

   On December 16, 1997, the Compensation Committee of the board of directors of
Arch authorized the Company to offer an election to its employees who had
outstanding options at a price greater than $15.19 to cancel such options and
accept new options at a lower price. In January 1998, as a result of this
election by certain of its employees, the Company canceled 361,072 options with
exercise prices ranging from $17.82 to $61.88 and granted the same number of new
options with an exercise price of $15.19 per share, the fair market value of the
stock on December 16, 1997.


                                      F-15
<PAGE>


   The following table summarizes the activity under Arch's stock option plans
for the periods presented:
<TABLE>
<CAPTION>

                                                                                                              Weighted
                                                                                                  Number      Average
                                                                                                    of        Exercise
                                                                                                 Options       Price
                                                                                               -----------   ---------
<S>                                                                                            <C>           <C>
   Options outstanding at December 31, 1997................................................        453,643   $   29.22
      Granted..............................................................................        656,096       14.27
      Exercised............................................................................        (31,344)       9.38
      Terminated...........................................................................       (429,627)      28.54
                                                                                               -----------   ---------
   Options outstanding at December 31, 1998................................................        648,768       15.51
      Granted..............................................................................      1,295,666        7.80
      Exercised............................................................................             --         --
      Terminated...........................................................................       (109,672)      13.89
                                                                                               -----------   ---------
   Options outstanding at December 31, 1999................................................      1,834,762       10.16
      Granted..............................................................................      6,147,950        4.07
      Assumed in merger....................................................................        410,183      161.63
      Exercised............................................................................             --         --
      Terminated...........................................................................       (445,903)      17.46
                                                                                               -----------   ---------
   Options outstanding at December 31, 2000................................................      7,946,992       12.86
                                                                                               ===========   =========
   Options exercisable at December 31, 2000................................................        976,576   $   70.83
                                                                                               ===========   =========
</TABLE>

   The following table summarizes the options outstanding and options
exercisable by price range at December 31, 2000:
<TABLE>
<CAPTION>
                                                        Weighted
                                                        Average      Weighted                   Weighted
                                                       Remaining     Average                     Average
                                          Options     Contractual    Exercise     Options       Exercise
   Range of Exercise Prices             Outstanding       Life        Price     Exercisable       Price
   ------------------------             -----------       ----        -----     -----------       -----
<S>                                   <C>                 <C>        <C>         <C>             <C>
    $  0.97--$  0.97..............       2,393,000        9.95       $  0.97             --      $   --
       2.47--   6.06..............       3,561,050        9.36          6.05         38,000         4.70
       6.09--  15.19..............       1,576,026        8.03          9.71        524,049        11.44
      17.12-- 127.70..............         165,814        7.95         59.87        163,425        60.46
     127.70-- 322.18..............         251,102        6.65        211.55        251,102       211.55
    -------  -------                  ------------        ----       -------     ----------      -------
    $  0.97--$322.18..............       7,946,992        9.16       $ 12.86        976,576      $ 70.83
    =======  =======                  ============        ====       =======     ==========      =======
</TABLE>

   Employee Stock Purchase Plans--The Company's employee stock purchase plans
allow eligible employees the right to purchase common stock, through payroll
deductions not exceeding 10% of their compensation, at the lower of 85% of the
market price at the beginning or the end of each six-month offering period.
During 1998, 1999 and 2000, 85,996, 34,217 and 459,133 shares were issued at an
average price per share of $6.39, $5.60 and $1.25, respectively. At December 31,
2000, 6,650 shares are available for future issuance.

   Accounting for Stock-Based Compensation--Arch accounts for its stock option
and stock purchase plans under APB Opinion No. 25 "Accounting for Stock Issued
to Employees". Since all options have been issued at a grant price equal to fair
market value, no compensation cost has been recognized in the statements of
operations. Had compensation cost for these plans been determined consistent
with SFAS No. 123, "Accounting for Stock-Based Compensation", Arch's net income
(loss) and income (loss) per share would have been increased to the following
pro forma amounts:
<TABLE>
<CAPTION>
                                                                                      Years Ended December 31,
                                                                                  1998          1999          2000
                                                                                  ----          ----          ----
                                                                             (in thousands, except per share amounts)
<S>                                                                            <C>           <C>           <C>
   Net income (loss):                           As reported................    $(206,051)    $(285,586)    $(309,780)
                                                Pro forma..................     (208,065)     (288,070)     (315,234)
   Basic net income (loss) per common share:    As reported................       (29.59)        (9.10)        (4.10)
                                                Pro forma..................       (29.88)        (9.18)        (4.17)
</TABLE>

   The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model. In computing these pro forma amounts,
Arch has assumed risk-free interest rates of 4.5% - 6%, an expected life of 5
years, an expected dividend yield of zero and an expected volatility of 50% -
93%.

                                      F-16
<PAGE>

   The weighted average fair values (computed consistent with SFAS No. 123) of
options granted under all plans in 1998, 1999 and 2000 were $8.34, $5.56 and
$3.01, respectively. The weighted average fair value of shares sold under the
employee stock purchase plans in 1998, 1999 and 2000 was $5.64, $3.13 and $2.72,
respectively.

   Deferred Compensation Plan for Nonemployee Directors--Under the deferred
compensation plan for nonemployee directors, outside directors may elect to
defer, for a specified period of time, receipt of some or all of the annual and
meeting fees which would otherwise be payable for service as a director. A
portion of the deferred compensation may be converted into phantom stock units,
at the election of the director. The number of phantom stock units granted
equals the amount of compensation to be deferred as phantom stock divided by the
fair value of Arch common stock on the date the compensation would have
otherwise been paid. At the end of the deferral period, the phantom stock units
will be converted to cash based on the fair market value of Arch common stock on
the date of distribution. Deferred compensation is expensed when earned. Changes
in the value of the phantom stock units are recorded as income/expense based on
the fair market value of Arch common stock.

   Stockholders Rights Plan--In October 1995, Arch's board of directors adopted
a stockholders rights plan and declared a dividend of one preferred stock
purchase right for each outstanding share of common stock to stockholders of
record at the close of business on October 25, 1995. Each Right entitles the
registered holder to purchase from Arch one one-thousandth of a share of Series
B Junior Participating Preferred Stock, at a cash purchase price of $150,
subject to adjustment. Pursuant to the Plan, the Rights automatically attach to
and trade together with each share of common stock. The Rights will not be
exercisable or transferable separately from the shares of common stock to which
they are attached until the occurrence of certain events. The Rights will expire
on October 25, 2005, unless earlier redeemed or exchanged by Arch in accordance
with the Plan.


6. Income Taxes

   Arch accounts for income taxes under the provisions of SFAS No. 109
"Accounting for Income Taxes". Deferred tax assets and liabilities are
determined based on the difference between the financial statement and tax bases
of assets and liabilities, given the provisions of enacted laws.

   The components of the net deferred tax asset (liability) recognized in the
accompanying consolidated balance sheets at December 31, 1999 and 2000 are as
follows (in thousands):
<TABLE>
<CAPTION>
                                                                                                    1999        2000
                                                                                                    ----        ----
<S>                                                                                              <C>         <C>
   Deferred tax assets.......................................................................    $ 312,527   $ 275,211
   Deferred tax liabilities..................................................................      (41,617)   (132,884)
                                                                                                 ---------   ---------
                                                                                                   270,910     142,327
   Valuation allowance.......................................................................     (270,910)   (264,321)
                                                                                                 ---------   ---------
                                                                                                 $      --   $(121,994)
                                                                                                 =========   =========
</TABLE>

   The approximate effect of each type of temporary difference and carryforward
at December 31, 1999 and 2000 is summarized as follows (in thousands):
<TABLE>
<CAPTION>
                                                                                                    1999        2000
                                                                                                    ----        ----
<S>                                                                                              <C>         <C>
   Net operating losses......................................................................    $ 174,588   $ 231,795
   Intangibles and other assets..............................................................       36,029     (45,902)
   Depreciation of property and equipment....................................................       42,703     (53,405)
   Accruals and reserves.....................................................................       17,590       9,839
                                                                                                 ---------   ---------
                                                                                                   270,910     142,327
   Valuation allowance.......................................................................     (270,910)   (264,321)
                                                                                                 ---------   ---------
                                                                                                 $      --   $(121,994)
                                                                                                 =========   =========
</TABLE>

   The effective income tax rate differs from the statutory federal tax rate
primarily due to the nondeductibility of goodwill amortization and the inability
to recognize the benefit of current net operating loss (NOL) carryforwards. The
NOL carryforwards expire at various dates through 2015. The Internal Revenue
Code contains provisions that may limit the NOL carryforwards available to be
used in any given year if certain events occur, including significant changes in
ownership, as defined. The Company has experienced such changes in ownership and
as a result the utilization of net operation losses in any one year are
significantly limited for income tax purposes.

                                      F-17
<PAGE>

   The Company has established a valuation reserve against its net deferred tax
asset until it becomes more likely than not that this asset will be realized in
the foreseeable future. A portion of the valuation allowance at December 31,
2000, will be recorded against goodwill when and if realized.


7. Commitments and Contingencies

   Arch, from time to time is involved in lawsuits arising in the normal course
of business. Arch believes that its pending lawsuits will not have a material
adverse effect on its financial position or results of operations.

   Arch has operating leases for office and transmitting sites with lease terms
ranging from one month to approximately fifty years. In most cases, Arch expects
that, in the normal course of business, leases will be renewed or replaced by
other leases.

   Future minimum lease payments under noncancellable operating leases at
December 31, 2000 are as follows (in thousands):
<TABLE>
<CAPTION>
   Year Ending December 31,
<S>                                                                                                      <C>
   2001............................................................................................      $    83,477
   2002............................................................................................           65,831
   2003............................................................................................           50,497
   2004............................................................................................           36,726
   2005............................................................................................           27,618
   Thereafter......................................................................................          124,472
                                                                                                         -----------
       Total.......................................................................................      $   388,621
                                                                                                         ===========
</TABLE>

   Total rent expense under operating leases for the years ended December 31,
1998, 1999 and 2000 approximated $19.6 million, $48.3 million and $81.2 million,
respectively.


8. Employee Benefit Plans

   Retirement Savings Plans--Arch has retirement savings plans, qualifying under
Section 401(k) of the Internal Revenue Code covering eligible employees, as
defined. Under the plans, a participant may elect to defer receipt of a stated
percentage of the compensation which would otherwise be payable to the
participant for any plan year (the deferred amount) provided, however, that the
deferred amount shall not exceed the maximum amount permitted under Section
401(k) of the Internal Revenue Code. The plans provide for employer matching
contributions. Matching contributions for the years ended December 31, 1998,
1999 and 2000 approximated $278,000, $960,000 and $1.2 million, respectively.


9. Long-term Liabilities

   During 1998 and 1999, Arch sold communications towers, real estate, site
management contracts and/or leasehold interests involving 133 sites in 22 states
and leased space on the towers on which it currently operates communications
equipment to service its own messaging network. Net proceeds from the sales were
approximately $33.4 million, Arch used the net proceeds to repay indebtedness
under its credit facility.

   Arch entered into options to repurchase each site and until this continuing
involvement ends the gain on the sale of the tower sites is deferred and
included in other long-term liabilities. At December 31, 2000, approximately
$20.2 million of the gain is deferred and approximately $1.9 million, $1.9
million and $2.0 million of this gain has been recognized in the statement of
operations and is included in operating income for each of the years ended
December 31, 1998, 1999 and 2000, respectively.

   Also included in other long-term liabilities is an unfavorable lease accrual
related to MobileMedia's rentals on communications towers which were in excess
of market rental rates (see Note 2). At December 31, 2000, the remaining balance
of this accrual was approximately $49.1 million. This accrual is being amortized
over the term of the leases with approximately 12 3/4 years remaining at
December 31, 2000.

                                      F-18
<PAGE>

10. Restructuring Reserves

   Divisional reorganization--In June 1998, Arch's board of directors approved a
reorganization of Arch's operations. This reorganization consisted of the
consolidation of certain regional administrative support functions, such as
customer service, collections, inventory and billing, to reduce redundancy and
take advantage of various operating efficiencies. Arch recognized a
restructuring charge of $14.7 million in 1998 related to the divisional
reorganization.

   In conjunction with the completion of the MobileMedia merger in June 1999,
the timing and implementation of the divisional reorganization was reviewed by
Arch management in the context of the combined company integration plan.
Pursuant to this review, the Company identified certain of its facilities and
network leases that would not be utilized following the MobileMedia integration,
resulting in an additional charge of $2.6 million. This charge was offset by
$4.8 million of reductions to previously provided severance and other costs in
conjunction with the divisional reorganization.

   During the third quarter of 1999, Arch's board of directors approved an
integration plan to eliminate redundant headcount, facilities and tower sites of
MobileMedia in connection with the completion of the MobileMedia acquisition.
The plan anticipated a net reduction of approximately 10% of MobileMedia's
workforce and the closing of certain facilities and tower sites, which resulted
in the establishment a $14.5 million acquisition reserve which was included in
the MobileMedia purchase price allocation. The initial acquisition reserve
consisted of approximately (i) $6.1 million for employee severance, (ii) $7.9
million for lease obligations and terminations and (iii) $0.5 million of other
costs.

   During 2000, Arch completed the actions under the divisional reorganization
and the MobileMedia integration plans. Arch reevaluated the reserves and
determined that each of the reserve balances were adequate to cover the
remaining cash payments which consist primarily of lease costs.

   On November 10, 2000, Arch completed its acquisition of PageNet and
management commenced the development of plans to integrate its operations. In
conjunction with the integration plans, the Company has identified redundant
headcount and certain of its facilities that would not be utilized following the
PageNet integration resulting in an additional charge of $5.4 million.

   The provision for lease obligations and terminations relates primarily to
future lease commitments on local, regional and divisional office facilities
that will be closed as part of this reorganization. The charge represents future
lease obligations on such leases past the dates the offices will be closed, or
for certain leases, the cost of terminating the leases prior to their scheduled
expiration. Cash payments on the leases and lease terminations will occur over
the remaining lease terms, the majority of which expire prior to 2003.

   Through the elimination of certain local and regional administrative
operations, the consolidation of certain support functions and the integration
of MobileMedia and PageNet operations, the Company will eliminate approximately
1,100 net positions formerly held by Arch and MobileMedia personnel. The
majority of the positions, which have been or will be eliminated are related to
management, administrative, customer service, collections, inventory and billing
functions. As of December 31, 1999 and 2000, 588 and 951 employees,
respectively, had been terminated due to the divisional reorganization and the
MobileMedia and PageNet integrations. The remaining severance and benefits costs
will be paid during 2001.

   The Company's restructuring activity as of December 31, 2000 is as follows
(in thousands):
<TABLE>
<CAPTION>
                                                                  Balance at     PageNet-
                                                                  December 31,   Related    Amounts   Remaining
                                                                     1999       Provision     Paid     Reserve
                                                                     ----       ---------     ----     -------
<S>                                                               <C>           <C>         <C>        <C>
   Severance costs...........................................     $  3,708      $  1,725    $  2,476   $  2,957
   Lease obligation costs....................................       13,026         3,700       5,950     10,776
   Other costs...............................................          377            --         215        162
                                                                  --------      --------    --------   --------
   Total.....................................................     $ 17,111      $  5,425    $  8,641   $ 13,895
                                                                  ========      ========    ========   ========
</TABLE>

   PageNet Acquisition Reserve--On November 10, 2000, Arch completed its
acquisition of PageNet and commenced the development of plans to integrate its
operations. During the fourth quarter of 2000, Arch identified redundant PageNet
headcount and facilities in connection with the overall integration of
operations. It is expected that the integration activity relating to the PageNet
merger, will be completed by December 31, 2001.

                                      F-19
<PAGE>

   In connection with the PageNet acquisition, Arch anticipates a net reduction
of approximately 50% of PageNet's workforce and the closing of certain
facilities and tower sites. This resulted in the establishment a $76 million
acquisition reserve which is included as part of the PageNet purchase price
allocation. The initial acquisition reserve consisted of approximately (i) $66.1
million for employee severance, (ii) $9.4 million for lease obligations and
terminations and (iii) $0.5 million of other costs.

   The provision for lease obligations and terminations relates primarily to
future lease commitments on local, regional and divisional office facilities
that will be closed as part of this reorganization. The charge represents future
lease obligations on such leases past the dates the offices will be closed, or
for certain leases, the cost of terminating the leases prior to their scheduled
expiration. Cash payments on the leases and lease terminations will occur over
the remaining lease terms, the majority of which expire prior to 2005.

   Through the elimination of redundant management, administrative, customer
service, collections, finance and inventory functions, the Company will
eliminate approximately 2,000 positions. As of December 31, 2000, 302 former
PageNet employees had been terminated.

   The PageNet acquisition reserve activity as of December 31, 2000 was as
follows (in thousands):
<TABLE>
<CAPTION>
                                                                                   Reserve
                                                                                  Initially                   Remaining
                                                                                 Established   Amounts Paid    Reserve
                                                                                 -----------   ------------    -------
<S>                                                                                <C>           <C>           <C>
     Severance costs........................................................       $ 66,100      $ 29,333      $ 36,767
     Lease obligation costs.................................................          9,400           136         9,264
     Other costs............................................................            500            --           500
                                                                                   --------      --------      --------
     Total..................................................................       $ 76,000      $ 29,469      $ 46,531
                                                                                   ========      ========      ========
</TABLE>


11. Segment Reporting

   The Company has determined that it has three reportable segments; traditional
paging operations, two-way messaging operations and international operations.
Management makes operating decisions and assesses individual performances based
on the performance of these segments. The traditional paging operations consist
of the provision of paging and other one-way wireless messaging services to
Arch's U.S. customers. Two-way messaging operations consist of the provision of
two-way wireless messaging services to Arch's U.S. customers. International
operations consist of the operations of the Company's Canadian subsidiary.

   Each of these segments incur, and are charged, direct costs associated with
their separate operations. Common costs shared by the traditional paging and
two-way messaging operations are allocated based on the estimated utilization of
resources using various factors that attempt to mirror the true economic cost of
operating each segment.

   The Company did not begin to market and sell its two-way messaging products
on a commercial scale until August 2000. The Company's Canadian subsidiary was
acquired in November 2000 in the PageNet acquisition. Prior to 2000,
substantially all of the Company's operations were traditional paging
operations. The following table presents segment financial information related
to the Company's segments as of and for the year ended December 31, 2000 (in
thousands):
<TABLE>
<CAPTION>
                                                    Traditional    Two-way Messaging  International
                                                  Paging Operations    Operations       Operations     Consolidated
                                                  -----------------    ----------       ----------     ------------
<S>                                                <C>              <C>               <C>              <C>
   Revenues...................................     $    838,425     $      9,383      $      3,274     $    851,082
   Depreciation and amortization expense......          488,048            9,459             3,324          500,831
   Operating income (loss)....................         (216,591)         (25,709)           (2,837)        (245,137)
   Adjusted EBITDA(1).........................          276,882          (16,250)              487          261,119
   Total assets...............................        1,981,156          265,137            63,316        2,309,609
   Capital expenditures.......................          111,047           28,115             1,123          140,285
</TABLE>
   (1) Adjusted earnings before interest, income taxes, depreciation and
   amortization, as determined by Arch, does not reflect interest, income taxes,
   depreciation and amortization, restructuring charges, equity in loss of
   affiliate and extraordinary items; consequently adjusted earnings before
   interest, income taxes, depreciation and amortization may not necessarily be
   comparable to similarly titled data of other wireless messaging companies.
   Earnings before interest, income taxes, depreciation and amortization should

                                      F-20
<PAGE>

   not be construed as an alternative to operating income or cash flows from
   operating activities as determined in accordance with generally accepted
   accounting principles or as a measure of liquidity. Amounts reflected as
   earnings before interest, income taxes, depreciation and amortization or
   adjusted earnings before interest, income taxes, depreciation and
   amortization are not necessarily available for discretionary use as a result
   of restrictions imposed by the terms of existing indebtedness or limitations
   imposed by applicable law upon the payment of dividends or distributions
   among other things.


12. Subsequent Events

   Nextel Agreement--In January 2001, Arch agreed to sell its 900 MHz SMR
(Specialized Mobile Radio) licenses to Nextel Communications, Inc. Nextel will
acquire the licenses for an aggregate purchase price of $175 million, and invest
$75 million in a new equity issue, Arch Series F 12% Redeemable Cumulative
Junior Preferred Stock. In February 2001, Nextel advanced $250 million in the
form of loans to a newly created, stand-alone Arch subsidiary that will hold the
spectrum licenses until the transfers are approved. The new Arch subsidiary will
not be permitted to engage in any business other than ownership and maintenance
of the spectrum licenses and will not have any liability or obligation with
respect to any of the debt obligations of Arch and its subsidiaries. Upon
transfer of the spectrum licenses to Nextel, the loan obligations will be
satisfied and $75 million of the loans will be converted into Arch series F 12%
Redeemable Cumulative Junior Preferred Stock. Arch acquired the SMR licenses as
part of its acquisition of PageNet in November 2000. In purchase accounting the
licenses were recorded at their fair value of $175.0 million therefore no gains
or losses resulting from changes in the carrying amounts of assets to be
disposed of are included in Arch's statement of operations. No amortization has
been recorded on the licenses. Revenues and operating expenses related to the
SMR operation included in the statement of operations are immaterial.

   Debt Exchanged for Equity--In the first quarter of 2001, Arch issued
8,793,350 shares of Arch common stock in exchange for $26.3 million accreted
value ($26.5 million maturity value) of its senior discount notes. Arch will
record an extraordinary gain of approximately $15.3 million on the early
extinguishment of debt as a result of these transactions.


13. Quarterly Financial Results (Unaudited)

   Quarterly financial information for the years ended December 31, 1999 and
2000 is summarized below (in thousands, except per share amounts):
<TABLE>
<CAPTION>
                                                                          First      Second      Third      Fourth
                                                                         Quarter   Quarter(1)   Quarter     Quarter
                                                                         -------   ----------   -------     -------
<S>                                                                    <C>         <C>         <C>         <C>
YEAR ENDED DECEMBER 31, 1999:
   Revenues.......................................................     $ 100,888   $ 133,493   $ 206,189   $ 201,254
   Operating income (loss)........................................       (16,086)    (34,546)    (27,075)    (20,032)
   Income (loss) before extraordinary item and accounting change..       (45,763)   (110,728)    (67,739)    (64,958)
   Extraordinary gain (2).........................................            --          --          --       6,963
   Cumulative effect of accounting change.........................        (3,361)         --          --          --
   Net income (loss)..............................................       (49,124)   (110,728)    (67,739)    (57,995)
   Basic/diluted net income (loss) per common share:
      Income (loss) before extraordinary item and accounting
        change....................................................         (6.54)      (5.65)      (1.42)      (1.29)
      Extraordinary gain..........................................            --          --          --        0.14
      Cumulative effect of accounting change......................         (0.48)         --          --          --
      Net income (loss)...........................................         (7.02)      (5.65)      (1.42)      (1.15)
</TABLE>


<PAGE>
<TABLE>
<CAPTION>
                                                                          First     Second       Third       Fourth
                                                                         Quarter   Quarter      Quarter     Quarter(3)
                                                                         -------   -------      -------     ----------
<S>                                                                    <C>         <C>         <C>         <C>
YEAR ENDED DECEMBER 31, 2000:
     Revenues.......................................................   $ 189,995   $ 187,852   $ 184,192   $ 289,043
     Operating income (loss)........................................     (27,686)    (27,945)    (26,998)   (162,508)
     Income (loss) before extraordinary item........................     (70,192)    (64,148)    (63,902)   (170,141)
     Extraordinary gain (2).........................................       7,615      44,436          --       6,552
     Net income (loss)..............................................     (62,577)    (19,712)    (63,902)   (163,589)
     Basic/diluted net income (loss) per common share:
        Income (loss) before extraordinary item.....................       (1.28)      (1.01)      (1.00)      (1.42)
        Extraordinary gain..........................................        0.14        0.68          --        0.05
        Net income (loss)...........................................       (1.14)      (0.33)      (1.00)      (1.37)
</TABLE>



   (1) On June 3, 1999 Arch completed its acquisition of MobileMedia (see Note
      2). In June 1999, Arch wrote-off $42.3 million of N-PCS investments (see
      Note 3).

   (2) Extraordinary gains in all periods are the result of early extinguishment
      of debt (see Note 4).

   (3) On November 10, 2000 Arch completed its acquisition of PageNet (see Note
      2). Arch changed the remaining lives certain intangible assets which
      resulted in $103.5 million of additional amortization expense in the
      fourth quarter of 2000 (see Note 3). On October 1, 2000 Arch revised the
      estimated depreciable life of its subscriber equipment which resulted in
      approximately $19.3 million of additional depreciation expense (see Note
      1).

<PAGE>

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To Arch Wireless, Inc.:

We have audited in accordance with auditing standards generally accepted in the
United States, the consolidated financial statements of Arch Wireless, Inc.
included in this Form 10-K and have issued our report thereon dated March 1,
2001. Our audit was made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. Schedule II is the
responsibility of the Company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part of
the basic consolidated financial statements. The schedule has been subjected to
the auditing procedures applied in the audit of the basic consolidated financial
statements and, in our opinion, fairly states in all material respects the
financial data required to be set forth therein in relation to the basic
consolidated financial statements taken as a whole.


                                        /s/ ARTHUR ANDERSEN LLP

Boston, Massachusetts
March 1, 2001



                                      S-1
<PAGE>


                                                                    SCHEDULE II
                               ARCH WIRELESS, INC.
                        VALUATION AND QUALIFYING ACCOUNTS
                  Years Ended December 31, 1998, 1999 and 2000
                                 (in thousands)
<TABLE>
<CAPTION>
                                                Balance at                     Other                     Balance
                                                Beginning     Charged to    Additions to                  at End of
    Allowance for Doubtful Accounts             of Period      Expense      Allowance(1)    Write-Offs     Period
    -------------------------------            -----------   -----------   -------------    ----------    --------
<S>                                            <C>           <C>           <C>              <C>           <C>
Year ended December 31, 1998.............      $     5,744   $     8,545   $          --    $   (7,706)   $  6,583
                                               ===========   ===========   =============    ==========    ========
Year ended December 31, 1999.............      $     6,583   $    15,265   $      13,243    $  (18,618)   $ 16,473
                                               ===========   ===========   =============    ==========    ========
Year ended December 31, 2000.............      $    16,473   $    33,015   $      43,655    $  (30,225)   $ 62,918
                                               ===========   ===========   =============    ==========    ========
</TABLE>

(1) Additions arising through acquisitions of messaging companies

<TABLE>
<CAPTION>
                                                Balance at                                                  Balance
                                                Beginning    Charged to      Other                         at End of
    Accrued Restructuring Charge                of Period      Expense     Additions        Deductions      Period
    ----------------------------               -----------   --------      --------         ----------    -----------
<S>                                            <C>           <C>           <C>              <C>           <C>
Year ended December 31, 1998.............      $        --   $ 14,700      $   --           $   (2,791)   $    11,909
                                               ===========   ========      ========         ==========    ===========
Year ended December 31, 1999.............      $    11,909   $ (2,200)     $ 14,508         $   (7,106)   $    17,111
                                               ===========   ========      ========         ==========    ===========
Year ended December 31, 2000.............      $    17,111   $  5,425      $ 76,000         $  (38,112)   $    60,424
                                               ===========   ========      ========         ==========    ===========
</TABLE>


                                      S-2
<PAGE>

                                  EXHIBIT INDEX

3.1    Restated Certificate of Incorporation. (1)
3.2    Certificate of Designations establishing the Series B Junior
       Participating Preferred Stock, filed with the Secretary of the State of
       Delaware on October 19, 1995. (2)
3.3    Certificate of Correction, filed with the Secretary of State of Delaware
       on February 15, 1996. (1)
3.4    Certificate of Designations establishing the Series C Convertible
       Preferred Stock, filed with the Secretary of State of Delaware on
       June 29, 1998. (3)
3.5    Certificate of Amendment of Restated Certificate of Incorporation, filed
       with the Secretary of State of Delaware on June 4, 1996. (4)
3.6    Certificate of Amendment of Restated Certificate of Incorporation, filed
       with the Secretary of State of Delaware on May 27, 1999. (5)
3.7    Certificate of Amendment of Restated Certificate of Incorporation, filed
       with the Secretary of State of Delaware on June 16, 1999. (5)
3.8    Certificate of Amendment of Restated Certificate of Incorporation, filed
       with the Secretary of State of Delaware on April 3, 2000. (21)
3.9    Certificate of Amendment of Restated Certificate of Incorporation, filed
       with the Secretary of State of Delaware on April 28, 2000. (21)
3.10   By-laws, as amended. (1)
3.11   Certificate of Designations establishing the Series F Cumulative
       Redeemable Preferred Stock, filed with the Secretary of the State of
       Delaware on February 9, 2001. (22)
4.1    Indenture, dated February 1, 1994, between Arch Wireless Communications,
       Inc. (formerly known as USA Mobile Communications, Inc. II) and United
       States Trust Company of New York, as Trustee, relating to the 9 1/2%
       Senior Notes due 2004 of Arch Wireless Communications, Inc. (6)
4.2    Indenture, dated December 15, 1994, between Arch Wireless Communications,
       Inc. (formerly known as USA Mobile Communications, Inc. II) and United
       States Trust Company of New York, as Trustee, relating to the 14% Senior
       Notes due 2004 of Arch Wireless Communications, Inc. (7)
4.3    Indenture, dated June 29, 1998, between Arch Wireless Communications,
       Inc. (formerly known as Arch Communications, Inc.) and U.S. Bank Trust
       National Association, as Trustee, relating to the 12 3/4% Senior Notes
       due 2007 of Arch Wireless Communications, Inc. (3)
4.4    Indenture, dated April 9, 1999, between Arch Wireless Communications,
       Inc. (formerly known as Arch Communications, Inc.) and IBJ Whitehall Bank
       & Trust Company, as Trustee, relating to the 13 3/4% Senior Notes due
       2008. (8)
4.5    Indenture, dated March 1, 1996 between Arch Wireless, Inc. and IBJ
       Schroder Bank & Trust Company, as Trustee (1)
4.6    Rights Agreement, dated October 13, 1995, between Arch Wireless, Inc. and
       The Bank of New York, as Rights Agent (7)
4.7    Amendment No. 1 to Rights Agreement, dated June 29, 1998, amending the
       Rights Agreement between Arch Wireless, Inc. and The Bank of New York (3)
4.8    Amendment No. 2 to Rights Agreement, dated August 18, 1998, amending the
       Rights Agreement between Arch Wireless, Inc. and The Bank of New York (5)
4.9    Amendment No. 3 to Rights Agreement, dated September 3, 1998, amending
       the Rights Agreement between Arch Wireless, Inc. and The Bank of New
       York (5)
4.10   Amendment No. 4 to Rights Agreement, dated May 14, 1999, amending the
       Rights Agreement between Arch Wireless, Inc. and The Bank of New York(24)
4.11   Amendment No. 5 to Rights Agreement, dated November 15, 1999, amending
       the Rights Agreement between Arch Wireless, Inc. and The Bank of New York
       (25)
4.12   Amendment No. 6 to Rights Agreement, dated April 12, 2000, amending
       the Rights Agreement between Arch Wireless, Inc. and The Bank of New York
       (26)

4.13   Amendment No. 7 to Rights Agreement, dated February 13, 2001, amending
       the Rights Agreement between Arch Wireless, Inc. and The Bank of New
       York (23)
10.1   Third Amended and Restated Credit Agreement, dated as of March 23, 2000
       by and among Arch Paging, Inc., the Lenders Party Hereto, the Bank Of New
       York, Royal Bank of Canada, Toronto Dominion (Texas), Inc., Barclays

<PAGE>

       Bank PLC and Fleet National Bank, as amended on May 19, 2000 (Amendment
       No. 1), August 15, 2000 (Amendment No. 2) and October 20, 2000 (Amendment
       No.3). (18)
10.2   Asset Acquisition Agreement dated as of January 24, 2001 by and among
       Unrestricted Subsidiary Funding Company and Arch Wireless, Inc.,
       PageNet SMR Sub, Inc., AWI Spectrum Co. Holdings, Inc. and AWI Spectrum
       Co., LLC (20)
10.3   Amendment Number One to Asset Acquisition Agreement dated as of January
       31, 2001 by and among Unrestricted Subsidiary Funding Company and
       Arch Wireless, Inc., PageNet SMR Sub, Inc., AWI Spectrum Co. Holdings,
       Inc. and AWI Spectrum Co., LLC (20)
10.4   Amendment No. 4, dated as of February 14, 2001, to Third Amended and
       Restated Credit Agreement, dated as of March 23, 2000, by and among Arch
       Paging, Inc., the Lenders party thereto, The Bank of New York, Royal Bank
       of Canada, Toronto Dominion (Texas), Inc., Barclays Bank PLC and Fleet
       National Bank, as amended (23)
+10.5  Amended and Restated Stock Option Plan (12)
+10.6  Non-Employee Directors' Stock Option Plan (13)
+10.7  1989 Stock Option Plan, as amended (1)
+10.8  1995 Outside Directors' Stock Option Plan (14)
+10.9  1997 Stock Option Plan (15)
+10.10 1999 Employee Stock Purchase Plan (19)
+10.11 Deferred Compensation Plan for Nonemployee Directors (16)
+10.12 Form of Executive Retention Agreement by and between Messrs. Baker,
       Daniels, Kuzia, Pottle and Saynor (16)
10.13  Stock Purchase Agreement, dated June 29, 1998, among Arch Wireless, Inc.,
       Sandler Capital Partners IV, L.P., Sandler Capital Partners IV FTE, L.P.,
       Harvey Sandler, John Kornreich, Michael J. Marocco, Andrew Sandler,
       South Fork Partners, the Georgica International Fund Limited, Aspen
       Partners and Consolidated Press International Limited. (2)
10.14  Registration Rights Agreement, dated June 29, 1998, among Arch Wireless,
       Inc., Sandler Capital Partners IV, L.P., Sandler Capital Partners IV FTE,
       L.P., Harvey Sandler, John Kornreich, Michael J. Marocco, Andrew Sandler,
       South Fork Partners, The Georgica International Fund Limited, Aspen
       Partners and Consolidated Press International Limited. (2)
10.15  Amendment No. 1 to Registration Rights Agreement, dated August 19, 1998,
       amending the Registration Rights Agreement dated as of June 29, 1998 by
       and among Arch Wireless, Inc. and the Sandler Capital Partners IV, LP,
       Sandler Capital Partners IV, FTE LP, South Fork Partners, The Georgica
       International Fund Limited, Aspen Partners and Consolidated Press
       International Limited. (11)
10.16  Exchange Agreement, dated June 29, 1998, between Adelphia Communications
       Corporation and Benbow PCS Ventures, Inc. (2)
10.17  Promissory Note, dated June 29, 1998, in the principal amount of
       $285,015, issued by Benbow PCS Ventures, Inc. to Lisa-Gaye Shearing. (2)
10.18  Guaranty, dated June 29, 1998, given by Arch Wireless, Inc. to Adelphia
       Communications Corporation. (2)
10.19  Guaranty, dated June 29, 1998, given by Arch Wireless, Inc. to Lisa-Gaye
       Shearing. (2)
10.20  Registration Rights Agreement, dated June 29, 1998, among Arch Wireless,
       Inc., Adelphia Communications Corporation and Lisa-Gaye Shearing.(2)
10.21  Preferred Distributor Agreement dated June 1, 1998 by and between Arch
       Wireless, Inc. and NEC America, Inc. (9)(17)
10.22  Paging Products Sales Agreement, dated March 17, 1999, by and between
       Motorola, Inc. and the Company. (10) (17)
10.23  Satellite Services Agreement, dated September 1, 1998, between AvData
       Systems, Inc. and MobileMedia Communications, Inc. (10)(17)
10.24  Master Lease For Transmitter Systems Space by and between Pinnacle
       Towers, Inc. and MobileMedia Communications, Inc. (10)
10.25  Letter agreement, dated March 23, 2000, between Arch Wireless, Inc. and
       Resurgence Asset Management L.L.C. (19)
+10.26 2000 Stock Incentive Plan (27)
10.27* Registration Rights Agreement among Arch Communications Group, Inc.,

<PAGE>

       Resurgence Asset Management L.L.C., Resurgence Asset Management
       International L.L.C., and RE/Enterprise Asset Management L.L.C., dated
       June 3, 1999.
10-28* Registration Rights Agreement among Arch Communications Group, Inc., W.R.
       Huff Asset Management Co., L.L.C., Whippoorwill Associates, Inc., Credit
       Suisse First Boston Corporation, The Northwestern Mutual Life Insurance
       Company, The Northwestern Mutual Life Insurance Company for its Group
       Annuity Separate Account and the Northwestern Mutual Series Fund, Inc.
       for the High Yield Bond Portfolio, dated June 3, 1999.
21.1*  Subsidiaries of the Registrant.
23.1*  Consent of Arthur Andersen LLP.

----------------
 *     Filed herewith.
 +     Identifies exhibits constituting a management contract or compensation
       plan.
(1)    Incorporated by reference from the Registration Statement on Form S-3
       (File No. 333-542) of Arch Wireless, Inc.
(2)    Incorporated by reference from the Current Report on Form 8-K of Arch
       Wireless, Inc. dated October 13, 1995 and filed on October 24, 1995.
(3)    Incorporated by referenced from the Current Report on Form 8-K of Arch
       Wireless, Inc. dated June 26, 1998 and filed July 23, 1998.
(4)    Incorporated by reference from the Registration Statement on Form S-8
       (File No. 333-07333) of Arch Wireless, Inc.
(5)    Incorporated by reference from the Registration Statement on Form S-4
       (File No. 333-62211) of Arch Wireless, Inc.
(6)    Incorporated by reference from the Registration Statement on Form S-1
       (File No. 33-72646) of Arch Wireless Communications, Inc.
(7)    Incorporated by reference from the Registration Statement on Form S-1
       (File No. 33-85580) of Arch Wireless Communications, Inc.
(8)    Incorporated by reference from the Registration Statement on Form S-4
       (File No. 333-83027) of Arch Wireless Communications, Inc.
(9)    Incorporated by reference from the Annual Report on Form 10-K of Arch
       Wireless, Inc. for the fiscal year ended December 31, 1998.
(10)   Incorporated by reference from the Quarterly Report on Form 10-Q of
       Arch Wireless, Inc. for the quarter ended June 30, 1999.
(11)   Incorporated by reference from the Registration Statement on Form S-4
       (file No. 333-63519) of Arch Wireless, Inc.
(12)   Incorporated by reference from the Annual Report on Form 10-K of Arch
       Wireless, Inc. (then known as USA Mobile Communications Holdings, Inc.)
       for the fiscal year ended December 31, 1994.
(13)   Incorporated by reference from the Registration Statement on Form S-4
       (File No. 33-83648) of Arch Wireless, Inc. (then known as USA Mobile
       Communications Holdings, Inc.)
(14)   Incorporated by reference from the Registration Statement on Form S-3
       (File No. 33-87474) of Arch Wireless, Inc.
(15)   Incorporated by reference from the Annual Report on Form 10-K of Arch
       Wireless, Inc. for the fiscal year ended December 31, 1996.
(16)   Incorporated by reference from the Annual Report on Form 10-K of Arch
       Wireless, Inc. for the fiscal year ended December 31, 1997.
(17)   A Confidential  Treatment Request has been filed with respect to
       portions of this exhibit so incorporated by reference.
(18)   Incorporated by reference from the Quarterly Report on Form 10-Q of
       Arch Wireless, Inc. for the quarter ended September 30, 2000.
(19)   Incorporated by reference from the Annual Report on Form 10-K of Arch
       Wireless, Inc. for the fiscal year ended December 31, 1999.
(20)   Incorporated by reference from the Current Report on Form 8-K of Arch
       Wireless, Inc. dated January 24, 2001 and filed on February 6, 2001.
(21)   Incorporated by reference from the Registration Statement on Form S-4

<PAGE>

       (File No. 333-95677) of Arch Wireless, Inc.
(22)   Incorporated by reference from the Registration Statement on Form S-4
       (File No. 333-55368) of Arch Wireless, Inc.
(23)   Incorporated by reference from the Current Report on Form 8-K of Arch
       Wireless, Inc. dated February 13, 2001 and filed on February 23, 2001.
(24)   Incorporated by reference from the Current Report on Form 8-K of Arch
       Wireless, Inc. dated May 14, 1999 and filed on May 20, 1999.
(25)   Incorporated by reference from the Current Report on Form 8-K of Arch
       Wireless, Inc. dated November 7, 1999 and filed on November 19, 1999.
(26)   Incorporated by reference from the Current Report on Form 8-K of Arch
       Wireless, Inc. dated April 12, 2000 and filed on April 26, 2000.
(27)   Incorporated by reference from the Definitive Proxy Statement of Arch
       Communications Group, Inc. filed on April 27, 2000