SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                    FORM 10-Q


(MARK ONE)

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

                  For the quarterly period ended    September 30, 1995
                                                         or

[   ]             TRANSITION REPORT PURSUANT TO SECTION A3 OR 15(d)
                  OF THE SECURITIES AND EXCHANGE ACT OF 1934

                  For the transition period from ________to________

Commission file number            0-16560

                         Vanguard Cellular Systems, Inc.
             (Exact name of registrant as specified in its charter)
              North Carolina                           56-1549590
  (State or other jurisdiction of                    (I.R.S.Employer
    incorporation or organization)                  Identification No.)

  2002 Pisgah Church Road, Suite 300
  Greensboro, North Carolina                            27455
(Address of principal executive offices)              (Zip Code)

Registrant's telephone number, including area code (910) 282-3690

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 ___.

The number of shares  outstanding of the issuer's common stock as of November 1,
1995 was 41,311,993.



<PAGE>



                VANGUARD CELLULAR SYSTEMS, INC. AND SUBSIDIARIES


                                      INDEX






PART I. FINANCIAL INFORMATION

  Item 1.         Financial Statements (Unaudited)

                  Condensed Consolidated Balance Sheets -                I-1
                  September 30, 1995 and December 31, 1994

                  Condensed  Consolidated  Statements  of Operations -    I-2

                  Three months and nine months ended September 30, 1995
                  and 1994

                  Condensed  Consolidated  Statements  of Cash  Flows -   I-3
                  Nine months ended September 30, 1995 and 1994

                  Notes to Condensed Consolidated Financial              I-4
                  Statements

  Item 2.         Management's Discussion and Analysis of                 I-9
                  Results of Operations and Financial Condition


PART II.  OTHER INFORMATION


  Item 6.         Exhibits and Reports on Form 8-K                      II-1


SIGNATURES                                                              II-2

<PAGE>

PART I.  FINANCIAL INFORMATION

    Item 1. Financial Statements


            VANGUARD CELLULAR SYSTEMS, INC. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED BALANCE SHEETS

       (Dollar amounts in thousands)

<TABLE>
<CAPTION>
                                                                                      September 30,        December 31,
                                                        ASSETS                            1995                 1994
                                     (Substantially all pledged on long-term debt)     (Unaudited)           (See note)
<S>                                                                                <C>                  <C>


    Current Assets:
       Cash......................................................................  $           8,706    $           5,745
       Accounts receivable, net of allowances for doubtful accounts of $4,547
         and $2,761..............................................................             30,080               22,664
       Cellular telephone inventories............................................              6,054               10,417
       Prepaid expenses..........................................................              1,252                  717
                  Total current assets...........................................             46,092               39,543

    Investments (Note 2).........................................................            311,236              257,203

    Property and Equipment, net of accumulated depreciation of $94,436 and
      $80,022....................................................................            219,764              120,325

    Other Assets, net of accumulated amortization of $3,002 and $635.............             15,449               14,640
                  Total assets...................................................  $         592,541    $         431,711


                                         LIABILITIES AND SHAREHOLDERS' EQUITY

    Current Liabilities:
       Accounts payable and accrued expenses.....................................             54,567    $          40,689
       Customer deposits ........................................................              1,671                  632
                 Total current liabilities.......................................             56,238               41,321
    Long-Term Debt...............................................................            495,145              348,649
    Minority Interests ..........................................................              2,665                2,534

    Commitments and Contingencies

    Shareholders' Equity:
       Preferred stock - $.01 par value, 1,000,000 shares authorized, no shares
         issued..................................................................          --                   --
       Common stock, Class A - $.01 par value, 250,000,000 shares authorized,
         41,272,430 and 40,529,334 shares issued and outstanding.................                413                  405
       Common stock, Class B - $.01 par value, 30,000,000 shares authorized,
         no shares issued........................................................          --                   --
       Additional capital in excess of par value.................................            237,832              234,731
       Net unrealized holding losses.............................................             (7,940)              (9,310)
       Accumulated deficit.......................................................           (191,812)            (186,619)
                 Total shareholders' equity......................................             38,493               39,207
                 Total liabilities and shareholders' equity......................  $         592,541    $         431,711

</TABLE>


 The         accompanying notes to condensed  consolidated  financial statements
             the audited financial statements at that date.



    Note: The balance sheet at December 31, 1994 has been derived from
            the audited financial statements at that date.

                                             I-1

<PAGE>

            VANGUARD CELLULAR SYSTEMS, INC. AND SUBSIDIARIES
            CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>

    (Dollar amounts in thousands, except per share data)

                                                      THREE MONTHS ENDED SEPTEMBER 30,          NINE MONTHS ENDED SEPTEMBER 30,
                                                         1995                  1994                1995                  1994
                                                      (Unaudited)           (Unaudited)         (Unaudited)           (Unaudited)
<S>                                            <C>                   <C>                 <C>                   <C>
Revenues:
   Service fees................................$           58,823    $           40,101  $          156,670    $          104,076
   Cellular telephone equipment revenues.......             3,130                 3,851              12,231                12,246
   Other.......................................               751                   765               2,374                 2,241
                                                           62,704                44,717             171,275               118,563


Costs and Expenses:
   Cost of service.............................             6,150                 5,956              17,652                15,934
   Cost of cellular telephone equipment........             4,961                 6,680              21,216                19,219
   General and administrative..................            15,824                11,048              43,309                31,220
   Marketing and selling.......................            12,375                 9,004              38,978                23,970
   Depreciation and amortization...............             9,589                 6,040              26,424                17,359
                                                           48,899                38,728             147,579               107,702

Income From Operations.........................            13,805                 5,989              23,696                10,861

Net Loss on Dispositions ......................              (134)                 (219)               (145)                 (212)

Interest Expense...............................            (9,853)               (5,992)            (27,835)              (15,113)

Other, net.....................................              (517)                   84                (724)                   70
Income (Loss) Before Minority Interests .......             3,301                  (138)             (5,008)               (4,394)

Minority Interests.............................               (10)                 (125)               (185)                 (167)
Net Income (Loss)..............................$            3,291    $             (263) $           (5,193)   $           (4,561)


Net Income (Loss) Per Share ...................$             0.08    $            (0.01) $            (0.13)   $            (0.12)


Weighted Average Number of Common
  Shares Outstanding ..........................        41,207,035            38,581,748          41,029,439            38,477,457
</TABLE>



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


                                  I-2
<PAGE>



            VANGUARD CELLULAR SYSTEMS, INC. AND SUBSIDIARIES
            CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
             NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994

<TABLE>
<CAPTION>
(Dollar amounts in thousands)                                                    1995                  1994
                                                                              (Unaudited)           (Unaudited)
<S>                                                                       <C>                   <C>
Cash flows from operating activities:

    Net loss..............................................................$          (5,193)    $          (4,561)

    Adjustments  to  reconcile  net  loss  to net  cash  provided  by  operating
       activities:
       Depreciation and amortization......................................           26,424                17,359
       Amortization of deferred debt issuance costs.......................              748                   988
       Equity in losses of unconsolidated entities........................              685                    64
       Minority interests.................................................              185                   167
       Net loss on dispositions...........................................              145                   212
       Non-cash compensation for management consulting services...........           (1,874)               (1,831)
       Changes in current items:
         Accounts receivable, net.........................................           (7,059)               (7,083)
         Cellular telephone inventories...................................            4,552                (1,482)
         Account payable and accrued expenses.............................           (6,068)                5,264
         Other, net.......................................................              (70)                  229
                Net cash provided by operating activities.................           12,475                 9,326

Cash flows from investing activities:

    Purchase of property and equipment....................................          (94,629)              (38,912)
    Proceeds from dispositions of property and equipment..................               95                    85
    Payments for acquisition of investments...............................          (64,038)              (37,300)
    Proceeds from dispositions of cellular interests......................        --                          431
    Capital contributions to unconsolidated cellular entities.............             (318)                 (458)
                Net cash used in investing activities.....................         (158,890)              (76,154)

Cash flows from financing activities:

    Principal payments of long-term debt..................................               (4)               (3,006)
    Net proceeds from issuance of common stock............................            3,108                   940
    Proceeds of long-term debt............................................          146,500                67,500
    Debt issuance costs...................................................              (88)               (2,203)
    Decrease (increase) in other assets...................................             (140)                   14
                Net cash provided by financing activities.................          149,376                63,245

Net increase (decrease) in cash...........................................            2,961                (3,583)

Cash, beginning of period.................................................            5,745                 9,098

Cash, end of period.......................................................$           8,706     $           5,515

SUPPLEMENTAL DISCLOSURE OF INTEREST PAID..................................$          23,058     $          13,941
</TABLE>


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




                                  I-3

<PAGE>

VANGUARD CELLULAR SYSTEMS, INC. AND SUBSIDIARIES
(Unaudited)
Note 1:           Basis of Presentation

The  accompanying   condensed  consolidated  financial  statements  of  Vanguard
Cellular Systems, Inc. and Subsidiaries (the Company) have been prepared without
audit  pursuant to Rule 10-01 of Regulation  S-X of the  Securities and Exchange
Commission ("SEC").  Accordingly, they do not include all of the information and
footnotes  required by generally  accepted  accounting  principles  for complete
financial statements. In the opinion of management,  all adjustments (consisting
of normal recurring accruals)  considered necessary for a fair presentation have
been  included.  Operating  results for the three  month and nine month  periods
ended September 30, 1995 are not necessarily  indicative of the results that may
be expected  for the year ending  December 31,  1995.  For further  information,
refer to the consolidated financial statements and footnotes thereto included in
the Company's annual report on Form 10-K.

The consolidated  financial  statements include the accounts of the Company, its
wholly owned  subsidiaries  and cellular  entities in which the Company  holds a
majority  ownership  interest.  Investments  in  entities  in which the  Company
exercises  significant  influence but does not exercise control through majority
ownership  have  been  accounted  for  using the  equity  method of  accounting.
Ownership  interests  in  entities  in  which  the  Company  does  not  exercise
significant  influence or does not control  through  majority  ownership and for
which there is no readily  determinable fair value have been accounted for using
the cost method of accounting.

The Company  maintains  an  ownership  interest in Geotek  Communications,  Inc.
("Geotek"),  a publicly  held  company.  Under the  provisions  of  Statement of
Financial  Accounting  Standards No. 115, "Accounting for Certain Investments in
Debt and Equity  Securities",  this  investment is classified as "available  for
sale".  As  such,  the  investment  is  recorded  at its  market  value  and any
unrealized gains or losses are recorded as a separate component of shareholders'
equity but do not affect results of operations.

------------------------------------------------------------
Note 2:           Investments

Cellular Entities

The  Company  continues  to expand its  ownership  of cellular  markets  through
strategic  acquisitions.  The  Company's  significant  activity  relating to its
cellular investments during the first nine months of 1995 was as follows:


                                       I-4

<PAGE>



In January 1995, the Company purchased the Union,  Pennsylvania (PA-8) RSA for a
cash price of $51.3 million with borrowings under its 1994 Credit Facility.  The
PA-8 RSA lies in the center of the Company's Mid-Atlantic Supersystem.

Pro forma consolidated results of operations,  as if the acquisition of the PA-8
RSA had occurred January 1, 1994, are as follows (in thousands, except per share
data):

                                                           Nine Months
                                                        Ended September 30,
                                                        1995            1994

Revenues.................................             $171,782        $122,550
Net loss.................................               (5,434)         (7,412)
Net loss per share.......................                 (.13)           (.19)

Geotek Communications, Inc.

In February 1994, the Company and Geotek Communications,  Inc. ("Geotek") formed
a  strategic  alliance  whereby the  Company  purchased  from Geotek 2.5 million
shares of Geotek  common  stock for $30 million and received a series of options
to purchase additional shares in Geotek in three separately linked transactions.
Geotek  is  a   telecommunications   company  that  is  developing  an  Enhanced
Specialized  Mobile Radio (ESMR) wireless  communications  network in the United
States  based  on its  Frequency  Hopping  Multiple  Access  digital  technology
(FHMATM).  Geotek's common stock is traded on the NASDAQ National Market System.
In addition,  the Company entered into a 5-year management  consulting agreement
to provide  operational and marketing  support in exchange for 300,000 shares of
Geotek  common  stock per year.  In the first nine  months of 1995,  the Company
earned and recorded as revenue approximately 225,000 shares under the management
agreement with an aggregate value of $1.9 million based upon the average closing
price of Geotek stock during the periods  held.  During the same period in 1994,
the Company  earned and  recorded as revenue  180,000  shares with an  aggregate
value of $1.8  million.  The  rights  to  future  shares  under  the  management
agreement  are  subject to  continued  exercise  of options  to  purchase  stock
discussed below.

On May 25,  1995,  the Company  and  Toronto  Dominion  Investments  ("TDI"),  a
subsidiary  of Toronto  Dominion  Bank,  entered into an  agreement  with Geotek
pursuant to which the Company and TDI each agreed to purchase  for $5.0  million
in cash 531,163 shares of Series L Convertible  Preferred Stock of Geotek with a
stated  value of $9.408  per share (the  "Geotek  Preferred  Stock").  Under the
agreement,  TDI completed its $5.0 million  investment in Geotek Preferred Stock
on May 25, 1995, and the Company  completed its investment on September 1, 1995.
Dividends on the shares are payable  quarterly at a rate of 7-1/2% per annum, in
cash or preferred shares. The shares are convertible into common shares

                                  I-5

<PAGE>



of Geotek at a conversion price of $9.408 per share subject to
certain adjustments.

Pursuant to the May 25, 1995 agreement with Geotek, the stock options previously
granted  to the  Company  by Geotek in 1994 have been  amended  to extend  their
expiration  dates and reduce the number of shares  subject to the  options  such
that the  Company  will have the right to  purchase  1,000,000  shares of Geotek
Common  Stock at $15 per share  ("Series A  Option")  and  1,714,200  additional
shares  at $16 per  share  ("Series  B  Option")  until  September  1,  1996 and
2,571,300 additional shares at $17 per share until 12 months from the expiration
date of the Series B Option  ("Series C  Option").  The  Company  may extend the
Series B and  Series C  Options  by six  months  and the  Series C Option  by an
additional six months and, if any portion of any series of options expires,  all
unexercised  options  will  expire  immediately.   In  addition,  the  Company's
five-year  management agreement with Geotek has been amended to provide that, if
the Series C Option is  exercised  prior to the fourth  anniversary  date of the
Agreement,  the 300,000 shares issuable on the fifth  anniversary  date would be
issuable on the fourth anniversary date of the Agreement.  TDI has received from
Geotek an option to purchase  1,000,000 shares at $15 per share,  285,800 shares
at $16 per share and 428,700 shares at $17 per share, each with the same term as
the Company's Series A, Series B and Series C Options, respectively.

Other Investments

The Company owns  approximately  22% of the outstanding  stock of  International
Wireless  Communications,  Inc.  ("IWC") and has  invested an aggregate of $12.1
million, including $5.5 million invested during 1995. IWC is a development stage
company  specializing in securing,  building and operating  wireless  businesses
other than cellular  telephone  systems primarily in Latin America and Southeast
Asia. The Company's investment in IWC is recorded in the accompanying  financial
statements using the equity method.

On July 31, 1995 the Company  agreed to merge its subsidiary  company,  Vanguard
International  Telecommunications,  Inc., into IWC in exchange for 99,306 shares
of IWC Series E Preferred Stock. (The 99,306 shares represent 100% of the issued
and  outstanding  Series E shares.) In addition,  the Company will convert notes
for $1.49 million and $1.485 million into Series F Preferred Stock. The exchange
is expected to close in the fourth quarter of 1995.

The  Company  has  invested  approximately  $3 million in
Inter(Bullet)Act  Systems, Incorporated  and has entered into an
agreement  with  Inter(Bullet)Act  whereby the Company  will  invest up
to an  additional  $7 million,  subject to  Inter(Bullet)Act raising  an
additional  $7  million  from  other  investors.  Inter(Bullet)Act  is a
development  stage company that provides  targeted product  promotions
to retail customers at the

                                 I-6

<PAGE>



point  of  entry  of  a  retail  outlet,   primarily  supermarkets,   through  a
computer-equipped  kiosk. The Company's  investment is recorded using the equity
method in the accompanying financial statements.

------------------------------------------------------------
Note 3:           Long-Term Debt

Long-term  debt  consists of the following as of September 30, 1995 and December
31, 1994 (in thousands):

                                                September 30,      December 31,
                                                    1995              1994
                                                 (Unaudited)

Borrowings under the 1994 Credit Facility:
         Term Loan                             $     325,000           $ 325,000
         Revolving Loan                              170,000              23,500
         Other Long-Term Debt                            145                 149
                                                     -------           ---------
                                               $     495,145           $ 348,649
                                                     =======           =========

On December 23, 1994, the Company completed the closing of a $675 million credit
facility,  pursuant to an Amended and Restated Loan  Agreement (the "1994 Credit
Facility"),  with various lenders led by The Toronto-Dominion  Bank and The Bank
of New York.

The 1994 Credit Facility  consists of a "Term Loan" and a "Revolving  Loan". The
Term  Loan,  in the  amount of $325  million,  was used to repay  the  Company's
borrowings  under the 1993 Loan Agreement.  The Revolving Loan, in the amount of
up to $350 million, is available for capital expenditures,  to make acquisitions
of and investments in cellular and other wireless communication  interests,  and
for other general corporate purposes.

The Company maintains  interest rate swap and interest rate cap agreements which
provide  protection  against  interest  rate risk.  At September  30, 1995,  the
Company had interest rate cap agreements in place covering a notional  amount of
$150 million.  The interest rate cap agreements provide protection to the extent
that LIBOR exceeds the strike level through the expiration date as follows:

  Strike Level                Notional Amount     Expiration Date

          9.0%                  50 Million         December, 1996
          9.0%                  50 Million         December, 1997
 7.63% - 9.75%                  50 Million         December, 1997
                               -----------
                              $150 Million

The total  cost of these  interest  rate cap  agreements  of  $597,000  has been
recorded in other assets in the consolidated balance

                                   I-7

<PAGE>



sheet and is being amortized over the lives of the agreements as a
component of interest expense.

Additionally,  the Company  maintains an interest rate swap agreement that fixes
the LIBOR  interest  rate at 6.1% on a notional  amount of $100 million  through
May,  1996.  Under the swap  agreement,  the Company  benefits if LIBOR interest
rates increase above the fixed rate, and incurs  additional  interest expense if
rates  remain  below the fixed  rate.  Any  amounts  received  or paid under the
agreement are reflected as interest expense over the period covered.

The effect of interest rate  protection  agreements on the operating  results of
the  Company was to decrease  interest  expense in the third  quarter of 1995 by
$125,000  and increase  interest  expense by $34,000 in the same period in 1994.
The interest rate protection  agreements  decreased  interest expense by $94,000
for the nine months ended  September  30, 1995 and  increased  interest  expense
$103,000 in the same period in 1994.

For further  information on the terms and conditions of the 1994 Credit Facility
refer to  Management's  Discussion  and  Analysis of Results of  Operations  and
Financial Conditions - Liquidity and Capital Resources.


Note 4: Common Stock

Effective May 10, 1995, the number of shares of Class A Common Stock  authorized
to be issued was increased from 60 million to 250 million.





                                          I-8

<PAGE>



VANGUARD CELLULAR SYSTEMS, INC. AND SUBSIDIARIES

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

The  following  is a summary of the  Company's  ownership  interests in cellular
markets in which the Company's ownership interests exceeded 20% at September 30,
1995 and 1994.  This table does not include any  ownership  interests  that were
contracted for at these dates.

                                                         September 30,
Cellular Markets                                    1995               1994
----------------                                    ----               ----

MID-ATLANTIC SUPERSYSTEM:
         Allentown, PA/NJ                           100.0%           100.0%
         Wilkes-Barre/Scranton, PA                  100.0            100.0
         Harrisburg, PA                              86.8             86.8
         Lancaster, PA                              100.0            100.0
         York, PA                                   100.0            100.0
         Reading, PA                                100.0            100.0
         Altoona, PA                                100.0             99.9
         State College, PA                           97.0             97.0
         Williamsport, PA                            92.5             90.9
         Union, PA (PA-8 RSA)                       100.0              --
         Chambersburg, PA (PA-10 East RSA)           91.6             90.8
         Lebanon, PA (PA-12 RSA)                    100.0            100.0
         Mifflin, PA (PA-11 RSA)                    100.0            100.0
         Wayne, PA (PA-5 RSA)                       100.0            100.0
         Orange County, NY                          100.0            100.0
         Binghamton, NY                             100.0              1.0
         Elmira, NY                                 100.0              --

NEW ENGLAND METRO-CLUSTER:
         Portland, ME                               100.0            100.0
         Portsmouth, NH/ME                          100.0            100.0
         Bar Harbor, ME (ME-4 RSA)                  100.0              --

FLORIDA METRO-CLUSTER:
         Pensacola, FL                              100.0            100.0
         Fort Walton Beach, FL                      100.0            100.0

WEST VIRGINIA METRO-CLUSTER:
         Huntington, WV/KY/OH                       100.0            100.0
         Charleston, WV                             100.0            100.0
         Ripley, WV (WV-1 East RSA)                 100.0              --

CAROLINAS METRO-CLUSTER:
         Myrtle Beach, SC (SC-5 RSA)                100.0            100.0
         Wilmington, NC                              47.7             47.7
         Jacksonville, NC                            47.3             47.3


                                   I-9

<PAGE>



RESULTS OF OPERATIONS

Three Months Ended September 30, 1995 and 1994

Service  revenues  increased by $18.7  million or 47% primarily as a result of a
79%  increase  in the  number  of  subscribers  in  majority  owned  markets  to
approximately  340,000 as of September  30, 1995,  as compared to the end of the
third  quarter  of 1994.  Approximately  80% of the  increase  in the  number of
subscribers was due to subscriber growth in markets controlled by the Company in
both periods,  and the remainder was due to the  acquisition  of new markets and
subsequent subscriber additions in those markets.

Total net  subscribers  in the Company's  majority  owned  markets  increased by
26,000  during  the third  quarter  of 1995 as  compared  to 21,000 in the third
quarter  of  1994.  This  24%  increase  in the  growth  rate of net  subscriber
additions is the result of an increase in  productivity by sales personnel which
the Company  believes has been augmented by increased  sales  training,  and the
growing  acceptance  of cellular  communications.  The growth in net  subscriber
additions  also  reflects an  increase in the number of agents in the  Company's
indirect  distribution  channels  combined with moderate  economic growth in the
Company's  operating  regions.  As discussed below, the Company added 95,000 net
subscribers  in the first nine months of 1995,  a 65%  increase in the number of
subscriber  additions during the first nine months of 1994. The Company believes
that the decrease in the subscriber growth rate in the third quarter of 1995 was
the  result  of the  Company's  decision  to reduce  the level of  discretionary
advertising  and  promotional  expenses  during the quarter while  continuing to
explore more cost effective distribution channels.

Service  revenues  attributable to the Company's own  subscribers  increased 62%
during the third quarter of 1995 to $46.4 million as compared to the same period
in 1994.  Average  monthly  local  revenue per  subscriber  declined  11% to $47
compared to $53 a year ago.  Approximately  one-fifth of this decline was due to
the acquisition of markets with subscribers who produce lower local revenue. The
balance of this decline was due to increased  incremental  penetration  into the
segment of consumers who generally use their  cellular  phones less  frequently.
Service revenues generated by customers of other cellular providers roaming into
the Company's markets increased 9% to $12.4 million as compared to $11.4 million
a year ago.  This  increase was the result of  increased  usage and is partially
offset by daily  access and usage rate  reductions  of 30-40%  initiated  by the
Company  and  entered  into  with  certain  other  cellular   providers  in  the
MidAtlantic  Region of the United  States in 1995.  The reduced rates charged to
other cellular  carriers is the result of negotiations in which the Company also
pays lower rates.  When  combining  revenue from the  Company's  customers  with
roaming revenue,


                                      I-10

<PAGE>



overall average  monthly revenue per subscriber for the quarter  declined 19% to
$60 from $74 a year ago.

Cellular  equipment  revenues  decreased $721,000 or 19% to $3.1 million for the
three  months ended  September  30, 1995 as compared to the same period in 1994.
This decrease was primarily due to the continuing decline in the retail price of
cellular  equipment  charged  to the  Company's  subscribers.  Cost of  cellular
equipment  decreased 26% to $5.0 million during the 1995 period due to increased
activity in the rental phone program.  The Company  continues to sell telephones
at or below cost in response to  competitive  pressures  and also  continues the
availability of its rental program.

Cost of service  expenses as a  percentage  of service  fees  improved  from 15%
during  the  third  quarter  of 1994 to 10%  during  the third  quarter  of 1995
primarily  as a result of the  intercarrier  roaming rate  reductions  described
above. The balance of the decrease was due to the continued  negotiation of more
favorable long distance and interconnection  agreements and, to a lesser extent,
the higher utilization of the Company's cellular systems.

General and  administrative  expenses  increased 43% or $4.8 million  during the
three months ended  September  30, 1995 but decreased as a percentage of service
fees to 27% from 28% in the same period in 1994.  These  expenses  declined as a
percentage of service fees primarily as a result of controlled increases of many
overhead  expenses  resulting in higher  utilization  of the Company's  existing
personnel and systems.  General and  administrative  expenses should continue to
decline as a  percentage  of service  fees as the Company  continues to add more
subscribers  without  commensurate   increases  in  general  and  administrative
overhead.

Marketing and selling  expenses  increased 37% to $12.4 million during the three
months ended  September  30,1995,  as compared to the same period in 1994.  As a
percentage of service fees, these expenses decreased to 21% from 22%. During the
three months ended September 30, 1995, marketing and selling expenses, including
the net loss on  subscriber  equipment,  increased  to $14.2  million from $11.8
million for the same period in 1994. This increase was primarily attributable to
the higher rate of growth in net subscriber  additions  described  above for the
1995  period as  compared  to the 1994  period  and the  resulting  increase  in
salaries and  commissions.  Marketing  and selling  expenses per net  subscriber
addition including the loss on cellular  equipment  decreased 3% to $546 in 1995
from $563 during the same period in 1994.  This  decrease was primarily a result
of the Company's  decision to reduce the level of discretionary  advertising and
promotional expenses as discussed above.


Depreciation and amortization increased $3.5 million or 59%

                                      I-11

<PAGE>



during the three  months  ended  September  30, 1995 as  compared  with the same
period in 1994. The addition of  approximately  $100 million of new property and
equipment  placed in service during the twelve months ended  September 30, 1995,
accounts  for  approximately  $2.2 million of the  increase.  The balance of the
increase  is the  result of the  amortization  of  licenses  and  customer  base
acquired through acquisitions during the same period.

Interest  expense  increased  $3.9  million or 64% during the three months ended
September 30, 1995. This increase resulted primarily from an increase in average
borrowings of approximately  $186.5 million,  and to a lesser extent an increase
in average interest rates charged.

In the third quarter of 1995, the Company reported net income of $3.3 million or
$.08 per share as  compared  to a net loss of $263,000 or $.01 per share for the
same  period in 1994.  The  increase in net income is due to the rate of revenue
growth exceeding the rate of growth in related  operating  expenses as discussed
above.

Nine Months Ended September 30, 1995 and 1994

Generally,  explanations of changes between  specific  components of revenue and
costs and expenses  contained in the results of  operations  for the three month
period  ended  September  30,  1995 apply also to the nine  month  period  ended
September 30, 1995.

Service  fees for the nine months  ended  September  30, 1995  increased  51% to
$156.7  million  primarily  as a  result  of  the  increase  in  the  number  of
subscribers  served in the 1995 period.  Total net  subscribers in the Company's
majority owned markets  increased by 95,000 during the first nine months of 1995
as  compared  to 57,700 in the first  nine  months of 1994,  representing  a 65%
increase in the growth rate of net subscriber additions. Average monthly revenue
per subscriber was $60 and $72 for the nine months ended  September 30, 1995 and
1994, respectively.

Cost of service  expenses as a percentage  of service fees  decreased to 11% for
the nine month period ended  September  30, 1995 from 15% in 1994. As previously
explained,  this decrease in the  relationship  between service fees and cost of
service  is  largely  due  to  more  favorable   negotiated  roaming  agreements
associated with the specific billing practice described previously.

General and administrative  expenses increased $12.1 million or 39% but declined
as a percentage  of service  fees to 28% during the nine months ended  September
30, 1995 as compared to 30% during the same period in 1994.


                                      I-12

<PAGE>



Marketing and selling expenses  increased by $15 million or 63% and increased as
a  percentage  of service  fees to 25% from 23%  during  the nine month  periods
ending September 30, 1995 and 1994,  respectively.  These increased expenditures
were  primarily  due to increases in  commission  expenses  associated  with the
addition of 95,000 net  subscribers  during the nine months ended  September 30,
1995 as compared to 57,700  during the same  period in 1994.  Also  contributing
were advertising and promotions in 1995.  Marketing and selling expenses per net
subscriber  addition  including the loss on cellular  equipment  decreased 6% to
$505 in 1995  from  $536  during  the same  period in 1994.  This  decrease  was
primarily  a  result  of  the   Company's   decision  to  reduce  the  level  of
discretionary  advertising  and  promotional  expenses  during the quarter while
continuing to explore more cost effective distribution channels.

Depreciation and amortization increased $9 million or 52% during the nine months
ended September 30, 1995 as compared to the same period in 1994. The addition of
approximately  $100  million of new  property  and  equipment  placed in service
during the twelve months ended  September 30, 1995,  accounts for  approximately
$4.6 million of the  increase.  The balance of the increase is the result of the
amortization of licenses and customer base acquired through  acquisitions during
the same period.

Interest  expense  increased  $12.7  million or 84% during the nine months ended
September 30, 1995. This increase resulted primarily from an increase in average
borrowings of approximately  $167.2 million,  and to a lesser extent an increase
in the interest rates charged.

Net loss increased from $4.6 million or $.12 per share for the nine months ended
September  30, 1994 to $5.2  million or $.13 per share in the 1995  period.  The
increase in net loss is primarily attributable to the increases in depreciation,
amortization,  and interest expense as discussed above, which offset an increase
in income from operations before depreciation and amortization.





                                      I-13

<PAGE>



LIQUIDITY AND CAPITAL RESOURCES

The Company  requires  capital to acquire,  construct,  and expand its  cellular
systems.  The Company  intends to continue  to pursue  acquisitions  of cellular
systems and properties as well as other investment  opportunities.  In addition,
although the primary  buildout of its cellular  system is complete,  the Company
will continue to construct additional cell sites and purchase cellular equipment
to increase  capacity as subscribers  are added and usage  increases,  to expand
geographic coverage and to provide for increased portable usage.

The specific  capital  requirements of the Company will depend  primarily on the
timing and size of any additional  acquisitions and other investments as well as
property and equipment  needs  associated  with the rate of  subscriber  growth.
Operating  Cash Flow (or  EBITDA)  has been a  significant  source  of  internal
funding in recent years,  but the Company does not expect Operating Cash Flow to
grow  sufficiently  to meet both its  property  and  equipment  and debt service
requirements  for at least the next two years. In recent years,  the Company has
met its capital  requirements  for property and  equipment  purchases  primarily
through bank financing.  Acquisitions  and other  investments have been financed
through a combination of bank borrowings and issuances of Class A Common Stock.

1994 CREDIT FACILITY. On December 23, 1994, the Company completed the closing of
a $675  million  credit  facility,  pursuant  to an Amended  and  Restated  Loan
Agreement  (the  "1994  Credit  Facility"),  with  various  lenders  led  by The
Toronto-Dominion  Bank  and The  Bank of New  York.  The  1994  Credit  Facility
provides the Company with  additional  financial and operating  flexibility  and
enables the Company to  accelerate  its  cellular  network  buildout  and pursue
business  opportunities  that may arise in the future.  The 1994 Credit Facility
refinanced the 1993 Loan Agreement. The 1993 Loan Agreement closed in April 1993
and refinanced  the Company's  previously  existing  credit  facility.  The 1994
Credit Facility consists of a "Term Loan" and a "Revolving Loan." The Term Loan,
in the amount of $325 million,  was used to repay the Company's borrowings under
the 1993  Loan  Agreement.  The  Revolving  Loan,  in the  amount  of up to $350
million,  is available for capital  expenditures,  to make  acquisitions  of and
investments  in cellular and other  wireless  communication  interests,  and for
other general corporate purposes.

As  security  for  borrowings  under the 1994 Credit  Facility,  the Company has
pledged  substantially all of its tangible and intangible assets and future cash
flows. Among other restrictions,  the 1994 Credit Facility restricts the payment
of cash  dividends,  limits  the  use of  borrowings,  limits  the  creation  of
additional  long-term  indebtedness  and  requires  the  maintenance  of certain
financial ratios. The requirements of the 1994 Credit

                                      I-14

<PAGE>



Facility were established in relation to the Company's  projected  capital needs
and projected results of operations and cash flow. These requirements  generally
were  designed  to require  continued  improvement  in the  Company's  operating
performance  such that its  Operating  Cash Flow would be sufficient to continue
servicing the debt as repayments are required. The Company is in compliance with
all loan covenants.

As of September 30, 1995,  $495 million had been borrowed  under the 1994 Credit
Facility.  Under the  restrictive  covenants of the facility,  future  borrowing
availability   generally  increases  as  the  Company's  operating   performance
improves.  The  Company  does not expect  these  covenants  to  curtail  planned
borrowings.  As of September 30, 1995, the most  restrictive of these  covenants
would limit additional available borrowings during the fourth quarter of 1995 to
$147 million.

The outstanding  amount of the Term Loan as of March 30, 1998 is to be repaid in
increasing quarterly  installments  commencing on March 31, 1998 and terminating
at its maturity date of December 31, 2003.  The quarterly  installment  payments
begin at  1.875% of the  outstanding  principal  amount  at March  30,  1998 and
gradually  increase to 5.625% at March 31, 2003. The available  borrowings under
the  Revolving  Loan shall be reduced on a quarterly  basis also  commencing  on
March 31, 1998 and  terminating  on December 31, 2003.  The quarterly  reduction
begins  at  1.875%  of the  Revolving  Loan  Commitment  at March  30,  1998 and
gradually increases to 5.625% on March 31, 2003.

The Term  Loan and the  Revolving  Loan  bear  interest  at a rate  equal to the
Company's choice of the Prime Rate or Eurodollar Rate plus an applicable  margin
based upon a leverage ratio for the most recent fiscal quarter.  As of September
30, 1995 the  leverage  ratio,  which is computed as the ratio of Total Debt (as
defined)  to  Adjusted  Cash  Flow (as  defined),  was at a level  such that the
applicable  margins on the  borrowings  will be reduced to 0.375% and 1.625% per
annum for the Prime Rate and Eurodollar  Rate,  respectively,  during the fourth
quarter of 1995.

ACQUISITIONS. The Company completed several acquisitions in 1994 and early 1995.
On April 26, 1994, the Company completed the acquisition of the Altoona,  PA MSA
and  the  Chambersburg,  PA  (PA-10  East)  RSA,  which  are  contiguous  to its
Mid-Atlantic  Supersystem  in exchange for $4.4 million in cash, the exchange of
the Hagerstown, MD cellular market and the Company's minority ownership interest
in one cellular market.

The Company  purchased  in October  1994,  for $6.9  million in cash and 125,285
shares of the Company's Class A Common Stock,  the Washington,  Maine (ME-4) RSA
and three of the four counties of the Mason, West Virginia (WV-1) RSA. The Maine
RSA is approximately 40 miles north of the Portland, Maine MSA, which

                                      I-15

<PAGE>



is already operated by the Company. The West Virginia RSA is
contiguous to the Company's Charleston, West Virginia MSA.

On December 14, 1994, the Company purchased the Binghamton, New York MSA and the
Elmira, New York MSA  ("Binghamton/Elmira  Transaction") for a purchase price of
approximately  1.8 million shares of the Company's Class A Common Stock and $6.1
million in cash borrowed under its credit facility. These markets are contiguous
to the Company's Mid-Atlantic Supersystem.

In January 1995, the Company purchased the Union,  Pennsylvania (PA-8) RSA for a
cash price of $51.3 million with borrowings under its 1994 Credit Facility.  The
PA-8 RSA lies in the center of the Company's Mid-Atlantic  Supersystem and is an
operational cellular system.  Condensed pro forma financial information for PA-8
as of September 30, 1995,  is contained in Note 2 to the condensed  consolidated
financial statements.

GEOTEK   COMMUNICATIONS,   INC.  In  February   1994,  the  Company  and  Geotek
Communications,  Inc. ("Geotek") formed a strategic alliance whereby the Company
purchased  from Geotek 2.5 million shares of Geotek common stock for $30 million
and  received  a series of options to  purchase  additional  shares in Geotek in
three separately linked  transactions.  Geotek is a  telecommunications  company
that  is  developing  an  Enhanced  Specialized  Mobile  Radio  (ESMR)  wireless
communications  network  in the United  States  based on its  Frequency  Hopping
Multiple Access digital technology (FHMATM).  Geotek's common stock is traded on
the NASDAQ  National  Market  System.  In addition,  the Company  entered into a
5-year  management  consulting  agreement to provide  operational  and marketing
support in exchange for 300,000  shares of Geotek  common stock per year. In the
first  nine  months  of  1995,  the  Company  earned  and  recorded  as  revenue
approximately  225,000 shares under the  management  agreement with an aggregate
value of $1.9  million  based upon the  average  closing  price of Geotek  stock
during the periods held.  During the same period in 1994, the Company earned and
recorded as revenue 180,000 shares with an aggregate value of $1.8 million.  The
rights to future shares under the management  agreement are subject to continued
exercise of options to purchase stock discussed below.

On May 25,  1995,  the Company  and  Toronto  Dominion  Investments  ("TDI"),  a
subsidiary  of Toronto  Dominion  Bank,  entered into an  agreement  with Geotek
pursuant to which the Company and TDI each agreed to purchase  for $5.0  million
in cash 531,163 shares of Series L Convertible  Preferred Stock of Geotek with a
stated  value of $9.408  per share (the  "Geotek  Preferred  Stock").  Under the
agreement,  TDI completed its $5.0 million  investment in Geotek Preferred Stock
on May 25, 1995, and the Company  completed its investment on September 1, 1995.
Dividends on the shares are payable  quarterly at a rate of 7-1/2% per annum, in
cash or preferred shares. The shares are convertible into common

                                      I-16

<PAGE>



shares of Geotek at a conversion price of $9.408 per share
subject to certain adjustments.

Pursuant to the May 25, 1995 agreement with Geotek, the stock options previously
granted  to the  Company  by Geotek in 1994 have been  amended  to extend  their
expiration  dates and reduce the number of shares  subject to the  options  such
that the  Company  will have the right to  purchase  1,000,000  shares of Geotek
Common  Stock at $15 per share  ("Series A  Option")  and  1,714,200  additional
shares  at $16 per  share  ("Series  B  Option")  until  September  1,  1996 and
2,571,300 additional shares at $17 per share until 12 months from the expiration
date of the Series B Option  ("Series C  Option").  The  Company  may extend the
Series B and  Series C  Options  by six  months  and the  Series C Option  by an
additional six months and, if any portion of any series of options expires,  all
unexercised  options  will  expire  immediately.   In  addition,  the  Company's
five-year  management agreement with Geotek has been amended to provide that, if
the Series C Option is  exercised  prior to the fourth  anniversary  date of the
Agreement,  the 300,000 shares issuable on the fifth  anniversary  date would be
issuable on the fourth anniversary date of the Agreement.  TDI has received from
Geotek an option to purchase  1,000,000 shares at $15 per share,  285,800 shares
at $16 per share and 428,700 shares at $17 per share, each with the same term as
the Company's Series A, Series B and Series C Options, respectively.

OTHER  INVESTMENTS.  The Company owns approximately 22% of the outstanding stock
of  International  Wireless  Communications,  Inc.  ("IWC") and has  invested an
aggregate of $12.1 million,  including $5.5 million invested during 1995. IWC is
a development  stage company  specializing  in securing,  building and operating
wireless  businesses other than cellular  telephone  systems  primarily in Latin
America  and  Southeast  Asia.  The  Company's  investment  is  recorded  in the
accompanying financial statements using the equity method.

On July 31, 1995 the Company  agreed to merge its subsidiary  company,  Vanguard
International  Telecommunications,  Inc., into IWC in exchange for 99,306 shares
of IWC Series E Preferred Stock. (The 99,306 shares represent 100% of the issued
and  outstanding  Series E shares.) In addition,  the Company will convert notes
for $1.49 million and $1.485 million into Series F Preferred Stock. The exchange
is expected to close in the fourth quarter of 1995.

The  Company  has  invested  approximately  $3 million in  Inter|X|Act  Systems,
Incorporated  and has entered into an  agreement  with  Inter|X|Act  whereby the
Company  will  invest up to an  additional  $7 million,  subject to  Inter|X|Act
raising  an  additional  $7  million  from  other  investors.  Inter|X|Act  is a
development  stage company that provides  targeted product  promotions to retail
customers at

                                      I-17

<PAGE>



the  point of  entry  of a retail  outlet,  primarily  supermarkets,  through  a
computer-equipped  kiosk. The Company's  investment is recorded using the equity
method in the accompanying financial statements.

CAPITAL  EXPENDITURES.  As of September 30, 1995, the Company had  approximately
$264  million  of  property  and  equipment  placed  in  service.   The  Company
historically  has incurred  capital  expenditures  primarily based upon capacity
needs in its existing markets resulting from continued subscriber growth. During
1994,  the Company  initiated a plan to double the number of cell sites in order
to increase geographic coverage and provide for additional portable usage in the
Company's cellular markets. As a result of this accelerated network buildout and
the continued growth of the Company's subscriber base, capital expenditures were
approximately  $95  million  during  the  first  nine  months  of 1995.  Capital
expenditures  for the  remainder of 1995 are estimated to be  approximately  $35
million and are  expected to be funded  primarily  with  proceeds  from the 1994
Credit Facility.

CASH FLOW GOALS.  Operating  Cash Flow  improved  $21.9 million to $50.1 million
during the nine months ended  September  30, 1995 as compared to the same period
last year.  The  Company's  primary goal over the next several  years will be to
maximize  Operating  Cash  Flow.  In order to do so the  Company  must  minimize
decreases in monthly revenue per subscriber and have continued rapid  subscriber
growth with low incremental marketing and sales costs.

The  Company  believes  its  business  strategy  and sales  force will  generate
continued net subscriber growth and that its focus on higher revenue  customers,
principally  business users,  will assist in supporting  revenue per subscriber.
The Company has  substantially  completed  the  development  of its  managerial,
administrative and marketing  functions,  as well as the primary buildout of the
cellular networks in its existing markets, and believes that the rate of service
fee growth will exceed the rate of growth of operating expenses.

Although there can be no assurance  that any of the foregoing  growth goals will
be achieved,  the Company  believes that its internally  generated funds and its
available bank lines of credit will be sufficient  during the next several years
to complete its planned network  expansion and  acquisitions,  to fund operating
expenses and debt service  described above and to provide  flexibility to pursue
business opportunities that might arise in the future.

INFLATION.  The Company believes that inflation affects its
business no more than it generally affects other similar
businesses.



                                      I-18

<PAGE>




ITEM 6.           EXHIBITS AND REPORTS ON FORM 8-K


(a)      The exhibits to this Form 10-Q are listed in the
         accompanying Index to Exhibits.

(b)      There have been no reports filed on Form 8-K during the
         period.


                                      II-1

<PAGE>




                                   SIGNATURES






         Pursuant to the  requirements  of the  Securities  and  Exchange Act of
1934,  the registrant has fully caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.





                                             VANGUARD CELLULAR SYSTEMS, INC.


Date:             November 14, 1995          By:  /s/  Haynes G. Griffin
                                                 ----------------------
                                                   Haynes G. Griffin
                                                        President
                                                            and
                                                  Chief Executive Officer


Date:             November 14, 1995          By: /s/ Stephen L. Holcombe
                                                 -----------------------
                               Stephen L. Holcombe
                              Senior Vice President
                                                           and
                             Chief Financial Officer
                            (principal accounting and
                          principal financial officer)

                                      II-2

<PAGE>



INDEX TO EXHIBITS



                             EXHIBIT NO. DESCRIPTION


*       4 (a) Articles of  Incorporation  of Registrant as amended  through July
        25, 1995, filed as Exhibit 1 to the  Registrant's  Form 8-A/A dated July
        25, 1995.

*       4 (b) Bylaws of  Registrant  (compilation  of July 25,  1995),  filed as
        Exhibit 2 to the Registrant's Form 8-A/A dated July 25, 1995.

    10  Letter  Agreement  dated  October  19,  1995,   between  registrant  and
        Inter|X|Act Systems, Incorporated.

    11  Calculation of fully diluted net loss per share for the three months and
        nine months ended September 30, 1995 and 1994.

    27  Financial Data Schedule.


* Incorporated by reference to the statement or report indicated.




<PAGE>