United States
Securities and Exchange Commission
Washington, D.C.   20549 Form 10-Q Mark One x
  QUARTERLY REPORT PURSUANT TO SECTION 13 OR
  15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For The Quarterly Period Ended March 31, 2001  ̈
  TRANSITION REPORT PURSUANT TO SECTION 13 OR
  15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
 Commission File Number 0-27024  METRO ONE TELECOMMUNICATIONS, INC.(Exact name of registrant as
specified in its charter)  OREGON
  93-0995165(State or other jurisdiction of
  (I.R.S. Employerincorporation or organization)
  Identification No.)11200 Murray
  Scholls Place, Beaverton, Oregon 
  97007(Address of principal executive offices)
  (503) 643-9500(Registrants telephone number)  Indicate by check mark whether the registrant
has (1) 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.   YesxNo ̈  Number of shares of common stock outstanding
as of May 8, 2001:  15,990,089 shares,
no par value per share   METRO ONE TELECOMMUNICATIONS,
INC.

INDEX TO FORM 10 - Q



Part
  I
  Financial
  InformationItem
  1.
  Financial
  Statements (Unaudited)Condensed Statements of
  Income for the three months ended March 31, 2001 and 2000Condensed Balance Sheets as of
  March 31, 2001 and December 31, 2000Condensed Statements
  of Cash Flows for the three months ended March 31, 2001 and 2000Notes to
  Condensed Financial StatementsItem
  2.
  Managements
  Discussion and Analysis of Financial Condition and Results of OperationsItem
  3.
  Quantitative
  and Qualitative Disclosures About Market RiskPart II
  Other InformationItem 2.
  Changes in Securities
  and Use of ProceedsItem
  4.
  Submission
  of Matters to a Vote of Security HoldersItem 6.
  Exhibits and Reports
  on Form 8-KSignature


Metro One Telecommunications, Inc.Condensed Statements of Income
(Unaudited) 
 Three
  Months Ended March 31,(In thousands, except
  per share data)
  2001
  2000Revenues
  $50,216
  $29,711Costs and expenses:Direct operating
  28,778
  18,523General and administrative
  14,474
  9,31943,252
  27,842Income from operations
  6,964
  1,869Other income
  (expense), net
  417
  (98)Interest expense and
  loan fees
  (852)
  (609)Income before income
  taxes
  6,529
  1,162Income tax expense
  1,526
  41Net income
  $5,003
  $1,121Earnings per shareBasic
  $.35
  $.10Diluted
  $.33
  $.09  The
accompanying notes are an integral part of these condensed financial
statements.


Metro One Telecommunications, Inc.Condensed Balance Sheets (Unaudited) 
 March
  31,
  December
  31,(In thousands)
  2001
  2000AssetsCurrent assets:Cash
  and cash equivalents
  $34,779
  $6,463Accounts receivable
  34,769
  36,559Prepaid costs and other current
  assets
  2,365
  1,864Total current assets
  71,913
  44,886Furniture, fixtures
  and equipment, net
  57,095
  54,749Other assets
  8,392
  2,663$137,400
  $102,298Liabilities and Shareholders
  EquityCurrent liabilities:Accounts payable
  $3,276
  $2,633Accrued liabilities
  7,739
  6,088Accrued payroll and related costs
  7,829
  9,181Operating line of credit
  -
  4,750Current portion of long-term debt
  -
  9,511Total current liabilities
  18,844
  32,163Long-term debt
  -
  24,73118,844
  56,894Commitments and
  contingencies
  -
  -Shareholders' equity:Preferred stock, no
  par value; 10,000 shares authorized, no shares issued or outstanding
  -
  -Common stock, no par
  value; 50,000 shares authorized, 15,959 and 11,832 shares issued and
  outstanding at March 31, 2001 and December 31, 2000 respectively
  112,140
  43,991Retained Earnings
  6,416
  1,413Shareholders' equity
  118,556
  45,404$137,400
  $102,298 The
accompanying notes are an integral part of these condensed financial
statements.


Metro One Telecommunications, Inc.Condensed Statements of Cash Flows
(Unaudited) 
 Three
  Months Ended March 31,(In thousands)
  2001
  2000Cash flows from
  operating activities:Net income
  $5,003
  $1,121Adjustments to reconcile net income
  to net cash provided by (used in) operating activities:Depreciation and amortization
  3,504
  2,183Loss on disposal of fixed
  assets
  16
  152Changes in certain assets and
  liabilities:Accounts receivable
  1,790
  (6,219)Prepaid expenses and other
  assets
  875
  (147)Accounts payable, accrued
  liabilities and payroll and related costs
  (1,019)
  (1,297)Net cash provided by
  (used in) operating activities
  10,169
  (4,207)Cash flows from
  investing activities:Capital expenditures
  (4,368)
  (5,497)Cash paid in business combination
  (3,638)
  -Proceeds from sale of assets
  195
  -Maturity of short-term investments
  -
  400Net cash used in
  investing activities
  (7,811)
  (5,097)Cash flows from
  financing activities:Proceeds from issuance of debt
  -
  3,448Repayment of debt
  (34,241)
  (1,262)Net (repayment) borrowings on line of
  credit
  (4,750)
  3,000Repayment of capital lease
  obligations
  -
  (49)Net proceeds from sale of common
  stock
  64,695
  -Proceeds from exercise of stock options
  254
  1,177Net cash provided by
  financing activities
  25,958
  6,314Net increase
  (decrease) in cash and cash equivalents
  28,316
  (2,990)Cash and cash
  equivalents, beginning of period
  6,463
  9,564Cash and cash
  equivalents, end of period
  $34,779
  $6,574Supplementary
  disclosure of non-cash transactionsIssuance of 103,651
  shares of common stock in business combination
  $3,200
  - The
accompanying notes are an integral part of these condensed financial
statements.


Metro One Telecommunications, Inc.Notes to Condensed Financial
Statements (in 000s, except per share amounts, unaudited) 
 1.Basis of Presentation The accompanying interim condensed
financial statements have been prepared by Metro One Telecommunications, Inc.
without audit and in conformity with accounting principles generally accepted
in the United States of America for interim financial information.  Accordingly, certain financial information
and footnotes have been omitted or condensed. 
In the opinion of management, the condensed financial statements include
all adjustments, consisting only of normal recurring adjustments, necessary for
a fair statement of the results for the interim periods.  These condensed financial statements and
notes thereto should be read in conjunction with our audited financial
statements included in our Annual Report on Form 10-K for the year ended
December 31, 2000.  The results of
operations for the interim period shown in this report are not necessarily
indicative of results for any future interim period or the entire fiscal year.  2.Earnings Per Share Basic earnings per share is based on the
weighted average number of common shares outstanding.  Diluted earnings per share reflects the dilutive effect of stock
options outstanding.  Net income for the
calculation of both basic and diluted earnings per share is the same for all
periods. A reconciliation of basic weighted
average shares outstanding to diluted weighted average shares outstanding is as
follows:  Three
  Months Ended March 31,2001
  2000Weighted average
  shares outstanding  Basic
  14,456
  11,493Dilutive effect of
  stock options
  655
  504Weighted average shares outstanding -
  Diluted
  15,111
  11,997 The amount of dilution attributable to
the stock options, determined by the treasury stock method, is dependent on the
average market price of our common stock for each period.  3.Commitments and Contingencies From time to time, we are party to
various legal actions and administrative proceedings arising in the ordinary
course of business.  We believe the
disposition of these matters will not have a material adverse effect on our
financial position, results of operations or cash flows.  4.Supplemental Cash Flow Information Three
  Months Ended March 31,Cash Paid For:
  2001
  2000Interest
  $950
  $581Income taxes
  86
  10 5.Income Taxes

At December 31, 2000, we had
approximately $11.4 million of net operating loss carryforwards expiring during
the years 2005 to 2010.  Ownership
changes as defined by section 382 of the Internal Revenue Code could limit the
amount of net operating loss carryforwards used in any one year or in the
aggregate.

During the quarter, we reduced our
deferred tax valuation allowance to reflect deferred tax assets used to reduce
current year income taxes.  Our
quarterly and annual operating results have in the past and may in the future
vary significantly depending on factors such as changes in the
telecommunications market, the addition or expiration of customer contracts,
increased competition, changes in pricing policies by us or our competitors,
lengthy sales cycles, lack of market acceptance or delays in the introduction
of new versions of our products or features, the timing of the initiation of
wireless services or their acceptance in new market areas by telecommunications
customers, the timing and expense of the 
expansion of our national call center network, general employment environment,
general economic conditions and other factors. 
Given the variability in operating results, we will continue to review
the valuation allowance on a quarterly basis and make adjustments as
appropriate.

For fiscal year 2001, we expect our
combined effective federal and state income tax rate to be approximately
24%.  The difference between taxes
calculated at the statutory federal and state tax rates and the effective
combined rates for the year ended December 31, 2001 are expected to primarily
result from changes in the deferred tax asset valuation allowance due to the
utilization of net operating loss carryforwards.

6.  Significant Transactions

In February 2001, we completed the sale
and issuance to Sonera Media Holding B.V. ("Sonera") of Finland, of
four million shares of our common stock at a price of US$17.00 per share, for
an aggregate price of $68 million (net proceeds of $64.7 million) and an
approximate 25.5% ownership position. 
Under the terms of the agreement, Sonera has gained representation on
our Board of Directors and can further acquire up to an aggregate 33% ownership
position.  We have utilized a portion of
the cash received to retire approximately $35 million of debt.  We intend to use the additional cash to
further expand our infrastructure and capacity through expansion of existing
call centers and new call centers in selected markets and for other corporate
purposes.

In February 2001, we completed the
purchase of Enthusiasm Technologies, Inc. ("Enthusiasm"), a
Seattle-based developer of web-based data extraction and processing
technology.  The purchase price has been
allocated to assets acquired including proprietary technology, intangibles and
goodwill.


ITEM
  2.
  MANAGEMENTS DISCUSSION AND
  ANALYSIS OF FINANCIAL CONDITION AND
  RESULTS OF OPERATIONS All
statements and trend analyses contained in this item and elsewhere in this
report on Form 10-Q relative to the future constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act
of 1995. These forward-looking statements are subject to the business and
economic risks faced by us and our actual results of operations may differ
materially from those contained in the forward looking statements. Readers are
cautioned not to place undue reliance on these forward-looking statements,
which speak only as of the date hereof. We undertake no obligation to publicly
release any revisions to these forward-looking statements to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events. Results
of operations for the periods discussed below should not be considered
indicative of the results to be expected in any future period and fluctuations
in operating results may also result in fluctuations in the market price of our
common stock. Our quarterly and annual operating results have in the past and
may in the future vary significantly depending on factors such as changes in
the telecommunications market, the addition or expiration of Enhanced Directory
Assistanceâ("EDA") contracts, increased competition, changes in pricing policies
by us or our competitors, lengthy sales cycles, lack of market acceptance or
delays in the introduction of new versions of our products or features, the
timing of the initiation of wireless services or their acceptance in new market
areas by telecommunications customers, the timing and expense of our expansion
and infrastructure investment activities, changes in labor and unemployment
rates, general economic conditions and other factors, including but not limited
to, factors detailed in our annual report on Form 10-K filed with the
Securities and Exchange Commission. Overview We
are the leading developer and provider of Enhanced Directory Assistance and
other enhanced telecom services. We have significant contracts with six
different wireless and landline carriers (customers) to provide EDA and other
services in numerous U.S. markets. Our recent operations have been
characterized by rapid call volume and revenue growth as well as growth in
profits. Call volume and revenues increased 76% and 69%, respectively, in the
first quarter of 2001 from the first quarter of 2000, and profits grew to
$5,003,000 from $1,121,000. Our
marketing strategy includes efforts to increase our share of the directory
assistance and information services markets by expanding services to existing
customers, adding new customers and subsequently expanding our call center
network into new geographic markets. We have had ongoing business discussions
about new contracts with other telecommunications companies. We opened one new
call center in the first three months of 2001 and anticipate that we will open
additional call centers or expand or relocate existing call centers, as needed,
during 2001 and beyond to serve new or existing customers. With our increasing
size, we expect that costs associated with opening each new call center should
have a diminishing impact on results of operations. To
stimulate an increase in call volume and to attract and expand customer
commitments, our strategy has included price discounts based on call volumes.
We expect that our average price per call will continue to decrease in the
remainder of 2001 as increasing call volumes trigger volume-based pricing
discounts. In addition, as we enter into additional or new contracts, the
average price per call may decrease as we attempt to increase market share. We
believe that our reduced pricing better positions us to retain and expand
service with existing customers, to extend service to new customers and to
achieve greater operating margins over time. In
February 2001, we completed the sale and issuance to Sonera Media Holding B.V.
(Sonera) of Finland, of four million shares of our common stock at a price of
US$17.00 per share, for an aggregate price of $68 million (net proceeds of
$64.7 million) and an approximate 25.5% ownership position. Under the terms of
the agreement, Sonera has gained representation on our Board of Directors and
can further acquire up to an aggregate 33% ownership position. We have utilized
a portion of the cash received to retire approximately $35 million of debt. We
intend to use the additional cash to further expand our infrastructure and
capacity through expansion of existing call centers and new call centers in
selected markets and for other corporate purposes. In
February 2001, we completed the purchase of Enthusiasm Technologies, Inc.
(Enthusiasm), a Seattle-based developer of web-based data extraction and
processing technology. Enthusiasm builds application-specific databases for a
variety of portals, be they wired or wireless, voice or data. Enthusiasms
proprietary data extraction and processing technology enables the creation and
ongoing maintenance of high quality databases from distributed and fragmented
data on the web and elsewhere. Enthusiasm will contribute to the expansion of
our services and data offerings to our wireless and other customers.

Results of Operations

The
following table sets forth, for the periods indicated, the items of our
statements of income as a percentage of revenues.



Three
  Months Ended 
  March 31,2001
  2000Revenues
  100.0%
  100.0%Direct operating costs
  57.3
  62.3General and
  administrative costs
  28.8
  31.4Income from operations
  13.9
  6.3Other income(expense),
  net
  0.8
  (0.3)Interest and loan fees
  (1.7)
  (2.1)Income before income taxes
  13.0
  3.9Income tax expense
  3.0
  0.1Net income
  10.0
  3.8



Comparison
of First Quarter 2001 to First Quarter 2000

Revenues increased 69.0% to
$50.2 million in the first quarter of 2001 from $29.7 million in the first
quarter of 2000. Call volume grew to over 99 million calls in the first quarter
of 2001 from approximately 56 million calls during the first quarter of 2000.
These increases resulted primarily from the addition of new subscribers and new
markets from existing customers, as well as increased usage of our services by
existing subscribers.

Direct operating costs increased
55.4% to $28.8 million in the first quarter of 2001 from $18.5 million in the
first quarter of 2000. This increase was primarily due to increased staffing
costs associated with increased call volumes. As a percentage of revenues,
direct operating costs decreased to 57.3% in the first quarter of 2001 from
62.3% in the first quarter of 2000. This decrease was due primarily to
operating efficiencies and lower listings data costs.

General and administrative costs
increased 55.3% to $14.5 million in the first quarter of 2001 from $9.3 million
in the first quarter of 2000. This increase resulted primarily from additional
costs necessary to support our larger base of call centers and increased call
volumes. As a percentage of revenues, general and administrative costs
decreased to 28.8% in the first quarter of 2001 from 31.4% in the first quarter
of 2000. This decrease resulted primarily from efficiencies associated with the
expansion of our national network of call centers. Depreciation and
amortization increased by 64.6% to $3.4 million in the first quarter of 2001
from $2.0 million in the first quarter of 2000 due primarily to equipment purchased
for new call centers, upgrades of existing call centers and product development
activities.

Other income (expense), net for
the three months ended March 31, 2001 was income of $417,000 consisting
primarily of interest income partially offset by loss on disposal of assets.
Other income (expense), net for the three months ended March 31, 2000 was
expense of $98,000 and consisted primarily of loss on disposal of assets offset
by interest income.

Interest
expense and loan fees increased 39.9% to $852,000 from $609,000. This increase
was primarily attributable to an increase in average outstanding debt. The debt
was incurred to finance equipment purchased for existing and new call centers
and for infrastructure and other corporate needs. All debt was paid in full as
of March 31, 2001 using a portion of the proceeds from the investment from
Sonera.

Income tax expense for the three
months ended March 31, 2001 was $1.5 million, for an effective tax rate of
approximately 23.4%. Income tax expense for the three months ended March 31,
2000 was $41,000, for an effective tax rate of approximately 3.5%. These rates
differ from the combined federal and state statutory rate of approximately 41%
due to the use of net operating loss carryforwards.



Liquidity and Capital Resources

Our cash and cash equivalents
are recorded at cost, which approximates fair market value. As of March 31,
2001, we had $34.8 million in cash and cash equivalents compared to $6.5
million at December 31, 2000. The net increase of $28.3 million resulted
primarily from the investment by Sonera and operating cash inflows partially
offset by cash paid for capital expenditures, the repayment of debt and the
acquisition of Enthusiasm.

Working capital was $53.1
million at March 31, 2001, compared to $12.8 million at December 31, 2000. This
increase is due primarily to working capital provided by the investment of
Sonera, offset by the use of cash for capital expenditures, the repayment of
debt and the acquisition of Enthusiasm.

Cash Flow from Operations.Net
cash provided by operations was $10.2 million for the three months ended March
31, 2001 resulting primarily from net income, the effect of non-cash
depreciation and amortization, a decrease in accounts receivable and a decrease
in prepaid expenses and other assets exclusive of investing activities.  This was partially offset by an increase in
accounts payable and accrued expenses.

Cash Flow from Investing Activities.Cash
used in investing activities was $7.8 million for the three months ended March 31,
2001 resulting primarily from capital expenditures for the purchase of
equipment for new call centers, the upgrade and expansion of existing call
centers and cash paid in the acquisition of Enthusiasm.

Cash Flow from Financing Activities.Net
cash provided by financing activities was $26.0 million for the three months
ended March 31, 2001 resulting primarily from the proceeds of the investment by
Sonera which was partially used for repayment of debt. Additional cash was
provided by the exercise of common stock options.

We have a $10.0 million secured
line of credit agreement with a commercial bank.  The agreement expires in December 2001.  Outstanding borrowings bear interest at the prime rate (8.0% at
March 31, 2001) plus up to 0.5% based on the ratio of debt to cash flow, and
all receivables are pledged to the bank as collateral.  In addition, the line has an unused facility
fee of up to 0.75%, also based on the ratio of debt to cash flow.  The agreement contains minimum quick ratio,
debt to equity and profitability requirements, as well as other restrictive
covenants, and prohibits the payment of any dividends and other distributions
and redemptions of our stock exceeding 10% of our tangible net worth.  As of March 31, 2001, we had no outstanding
borrowings under this agreement.

Future Capital Needs and Resources.
The primary uses of our capital in the near future are expected to be the
development or acquisition of technologies, features and content complementary
to our business, to expand our call center and network capacity to serve
existing and potential new customers and for general corporate purposes,
including possible acquisitions, other corporate development activities and
working capital. We anticipate that our capital expenditures will be approximately
$25 million in 2001, resulting primarily from projected call center expansions,
increased network capacity and corporate development activities.

ITEM 3.            QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Substantially
all of our cash and cash equivalents are invested in money market instruments,
and therefore the fair market value of these instruments is affected by changes
in market interest rates. However, substantially all of our investments at
March 31, 2001 were invested in overnight money market instruments and were
redeemable on a daily basis. Substantially all of the underlying investments in
the money market fund had maturities averaging three months or less. As a
result, we believe the market risk arising from our holdings of financial
instruments is minimal. A hypothetical 1% fluctuation in interest rates would
not have a material adverse effect on our financial position, results of
operations or cash flows.



PART II.           OTHER
INFORMATION



ITEM 2.            CHANGES
IN SECURITIES AND USE OF PROCEEDS

On
February 2, 2001, we issued and sold 4,000,000 shares of our common stock to
Sonera Media Holding B.V., for an aggregate purchase price of $68 million,
pursuant to the terms of a Stock Purchase Agreement dated November 8, 2000.
These securities were issued in a private transaction in reliance on the
exemption to the registration requirements of the Securities Act of 1933, as
amended, provided by Rule 506 of Regulation D, as promulgated under the
Securities Act.

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

On
January 31, 2001, a special meeting was held to approve the proposed sale and
issuance of common stock as described above in Item 2. In addition, the
shareholders were asked to approve an amendment of our 1994 Stock Incentive
Plan to increase the number of shares available for issuance.  The results of the votes were as follows.

Sonera
  Stock
  Incentive PlanFor
  6,690,671
  6,461,897Against
  470,326
  2,815,606Abstain
  8,362
  37,480Broker Non-Votes
  2,145,624
  0

ITEM 6.            EXHIBITS AND
REPORTS ON FORM 8-K

(a)         Exhibits



None

(b)
Reports filed on Form 8-K

On
February 15, 2001, we filed the following current report on Form 8-K under Item
5, Other Events:

Date of Report
  TopicsFebruary
  2, 2001
  Metro
  One Telecommunications completes the sale of 4,000,000 shares of common stock
  to Sonera Media Holding B.V.

SIGNATURE



Pursuant to the requirements 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.



Metro
  One Telecommunications, Inc.RegistrantDate:     May 15, 2001/s/  Dale N. WahlDale
  N. WahlSenior
  Vice PresidentChief
  Financial Officer