|UNITED STATES                                                                                                                                                                                                                                                                                                                                           
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|SECURITIES AND EXCHANGE COMMISSION                                                                                                                                                                                                                                                                                                                      
|Washington, D. C.   20549                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                        
|FORM 10-K                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                        
|[x] ANNUAL REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934                                                                                                                                                                                                                                                                
|For the fiscal year ended December 31,
2001                                                                                                                                                                                                                                                                                                             
|or                                                                                                                                                                                                                                                                                                                                                      
|[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934                                                                                                                                                                                                                                                           
|For the transition period from _________________________ to______________________________________                                                                                                                                                                                                                                                       
|                                                                                                                                                                                                                                                                                                                                                        
|Commission file number 1-4996                                                                                                                                                                                                                                                                                                                           
|                                                                                                                                                                                                                                                                                                                                                        
|ALLTEL CORPORATION                                                                                                                                                                                                                                                                                                                                      
|(Exact name of registrant as specified in its charter)                                                                                                                                                                                                                                                                                                  
|                                                                                                                                                                                                                                                                                                                                                        
|DELAWARE                                                                                                                        
       34-0868285                                                                                                                                                                                                      
|(State or other jurisdiction of
incorporation or organization)                                                                                                                                                                                                                                                                                          
|                                                                                                                                                                                                                                                                                                                                                        
|One Allied Drive, Little Rock, Arkansas                                                                                             
72202                                                                                                                                                                                                              
|(Address of principal executive offices)                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                        
|Registrant's telephone number, including area code(501) 905-8000                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                        
|Securities registered pursuant to Section
    12 (b) of the Act:                                                                                                                                                                                                                                                                                        
|                                                                                                                                                                                                                                                                                                                                                        
|Title of each class                                                                                                                                                                                                                                                                                                                                     
|Common Stock                                                                                                                                                                                                                                                                                                                                            
|$2.06 No Par Cumulative Convertible                                                                                                                                                                                                                                                                                                                     
|Preferred Stock                                                                                                                                                                                                                                                                                                                                         
|                                                                                                                                                                                                                                                                                                                                                        
|Securities registered pursuant to
    Section 12(g) of the Act:                                                                                                                                                                                                                                                                                         
|NONE                                                                                                                                                                                                                                                                                                                                                    
|(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  XNO                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                        
|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.  (X)              
|                                                                                                                                                                                                                                                                                                                                                        
|Aggregate market value of voting stock held by non-affiliates as of
February
25,
2002
-  $17,507,298,406                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                        
|Common shares
outstanding, February 25, 2002 -   310,854,020                                                                                                                                                                                                                                                                                            
|                                                                                                                                                                                                                                                                                                                                                        
|DOCUMENTS INCORPORATED BY REFERENCE                                                                                                                                                                                                                                                                                                                     
|                                                                                                                                                                                                                                                                                                                                                        
|Document                                                                                                                                                                                                                                                                                                                                                
|Proxy statement for the 2002 Annual Meeting of stockholders                                                                                                                                                                                                                                                                                             
|The Exhibit Index is located on pages 27 to
31.                                                                                                                                                                                                                                                                                                         



> ALLTEL CorporationForm 10-K, Part I
> Item 1. Business
> THE COMPANY
> GENERAL
> 
> ALLTEL Corporation ("ALLTEL" or the "Company") is a
> customer-focused information technology company that provides communications and
> information services. The Company owns subsidiaries that provide wireless and
> wireline local, long-distance, network access and Internet services, wide-area
> paging service and information processing management services and advanced
> application software. Telecommunications products are warehoused and sold by the
> Company's distribution subsidiary. A subsidiary also publishes telephone
> directories for affiliates and other independent telephone companies. The
> Company is incorporated in the state of Delaware.
> FORWARD-LOOKING STATEMENTS
> 
> This Form 10-K contains "forward-looking statements" within the
> meaning of the Private Securities Litigation Reform Act of 1995. Such
> forward-looking statements involve known and unknown risks, uncertainties and
> other factors that could cause ALLTEL's actual results to be materially
> different from historical results or from any future results expressed or
> implied by such forward-looking statements. The factors that could cause actual
> results of ALLTEL or a combined ALLTEL and CenturyTel, Inc. ("CenturyTel")
> to differ materially, many of which are beyond the control of ALLTEL include,
> but are not limited to, the following: (1) the businesses of ALLTEL and
> CenturyTel may not be integrated successfully or such integration may be more
> difficult, time-consuming or costly than expected; (2) expected benefits and
> synergies from the combination may not be realized within the expected time
> frame or at all; (3) revenues following the transaction may be lower than
> expected; (4) operating costs, customer loss and business disruption including,
> without limitation, difficulties in maintaining relationships with employees,
> customers or suppliers, may be greater than expected following the transaction;
> (5) generating the incremental growth in the customer base of the combined
> company may be more costly or difficult than expected; (6) the regulatory
> approvals required for the transaction may not be obtained on the terms expected
> or on the anticipated schedule; (7) the effects of legislative and regulatory
> changes; (8) the introduction of new technologies and competitors; (9) changes
> in labor, equipment and capital costs; (10) future acquisitions, strategic
> partnerships and divestitures; (11) general business and economic conditions;
> and (12) other risks described from time to time in ALLTEL's and CenturyTel's
> periodic reports filed with the Securities and Exchange Commission.
> You are urged to consider statements that include the words "may,"
> "will," "would," "could," "should,"
> "believes," "estimates," "projects,"
> "potential," "expects," "plans,"
> "anticipates," "intends," "continues" or the
> negative or other forms of those words or other comparable words to be uncertain
> and forward-looking. This cautionary statement applies to all forward-looking
> statements contained in this Form 10-K. The Company disclaims any obligation to
> update or revise any forward-looking statement based on the occurrence of future
> events, the receipt of new information, or otherwise.
> 
>   
> 1
> 
> 
> ALLTEL Corporation
> Form 10-K, Part I
> Item 1. Business
> THE COMPANY (continued)
> ACQUISITIONS
> 
> On October 31, 2001, ALLTEL signed an agreement with Verizon Communications
> Inc. ("Verizon") to purchase local telephone properties located in the
> state of Kentucky. Under terms of the purchase agreement, ALLTEL will acquire
> approximately 600,000 access lines for $1.9 billion in cash. The acquired
> wireline properties will overlap ALLTEL's existing wireless service in
> northeastern Kentucky and will increase the Company's total access lines by
> approximately 25 percent to more than 3.0 million wireline customers. The
> transaction is expected to be completed in the third quarter of 2002. Upon the signing of this purchase agreement, ALLTEL paid Verizon
> a deposit equal to 10 percent of the
> total purchase price, or $190.7 million, with the balance of the
> cash payment (net of interest on the $190.7 million deposit) due at the time the transaction is completed.
> On October 3, 2000, ALLTEL purchased wireless properties in New Orleans,
> Baton Rouge and three rural service areas in Louisiana from SBC Communications,
> Inc. ("SBC"). In connection with this transaction, ALLTEL paid SBC
> $387.6 million in cash and acquired approximately 150,000 wireless customers and
> 300,000 paging customers. The Company disposed of the paging operations in 2001.
> On January 31, 2000, ALLTEL, Bell Atlantic Corporation ("Bell
> Atlantic") and GTE Corporation ("GTE") signed agreements to
> exchange wireless properties in 13 states. On April 3, 2000, ALLTEL completed
> the initial exchange of wireless properties with Bell Atlantic in five states,
> acquiring operations in Arizona, New Mexico and Texas and divesting operations
> in Nevada and Iowa. In addition to the exchange of wireless assets, ALLTEL also
> paid Bell Atlantic $624.3 million in cash to complete this transaction. On June
> 30, 2000, ALLTEL completed the remaining wireless property exchanges with Bell
> Atlantic and GTE, in which ALLTEL acquired operations in Alabama, Florida, Ohio,
> and South Carolina, and divested operations in Illinois, Indiana, New York and
> Pennsylvania. ALLTEL also transferred to Bell Atlantic or GTE certain of its
> minority investments in unconsolidated wireless properties, representing
> approximately 2.6 million potential customers ("POPs"). In connection
> with the transfer of the remaining wireless assets, ALLTEL received $216.9
> million in cash and prepaid vendor credits of $199.6 million and assumed
> long-term debt of $425.0 million. Through the completion of the above
> transactions, ALLTEL acquired interests in 27 wireless markets representing
> about 14.6 million POPs and approximately 1.5 million wireless customers, while
> divesting interests in 42 wireless markets representing 6.9 million POPs and
> approximately 778,000 customers.
> During 2000, ALLTEL also acquired the remaining ownership interests in
> wireless properties
> in Florida and Georgia in which ALLTEL already owned a controlling interest. The
> Company also purchased two information services companies, Benchmark Consulting
> International, a privately held company that specialized in the design and
> improvement of operations processes for financial services providers, and
> Datamatic Services, Inc., a privately held company that provided data and image
> processing and back office operations to 28 community banks in Arkansas,
> Mississippi and Nevada. In connection with these acquisitions, the Company paid
> $28.1 million in cash and issued approximately 730,000 shares of ALLTEL common
> stock.
> In September 1999, ALLTEL completed its mergers with Liberty Cellular, Inc.
> ("Liberty") and its affiliate, KINI L.C. Liberty, which prior to the
> merger, provided wireless, long-distance and Internet services under the name
> "Kansas Cellular" to approximately 200,000 communications customers in
> Kansas.
> In July 1999, ALLTEL completed its merger with Aliant Communications Inc.
> ("Aliant"), a communications company that provided wireless, wireline,
> paging, long-distance and Internet services in Nebraska to more than 600,000
> communications customers.
> 
> 2
> 
> 
> ALLTEL Corporation
> Form 10-K, Part I
> Item 1. Business
> THE COMPANY (continued)
> ACQUISITIONS (continued)
>   
> In January 1999, the Company completed its merger with Standard Group, Inc.
> ("Standard"), a communications company that served more than 71,000
> customer lines in northeast Georgia. The customer lines acquired in this
> transaction were in areas adjacent to the Company's other wireline market areas
> in Georgia and increased ALLTEL's total wireline customers in the state to more
> than 550,000. The transaction also included Standard's cable television
> operations, which served approximately 30,000 customers. Including this
> acquisition, the Company currently provides cable television service to
> approximately 37,000 customers in Georgia and Missouri. These cable television
> properties are not significant to the ongoing operations of ALLTEL.
> During 1999, the Company acquired a 100 percent ownership interest in a
> wireless services business serving the Dothan, Alabama Metropolitan Statistical Area
> ("MSA"), representing approximately 135,000 cellular POPs. The Company
> also purchased 100 percent ownership interests in a wireless services business
> serving a Colorado Rural Service Area ("RSA") representing
> approximately 75,000 cellular POPs, and a wireless services business serving an
> Illinois RSA representing more than 200,000 cellular POPs. In addition, the
> Company increased its ownership interest to 100 percent in the Richmond,
> Virginia market, representing approximately 835,000 cellular POPs, through the
> exchange of its minority interest investment in a partnership serving the
> Orlando, Florida market.
> To expand its information services business, ALLTEL completed the
> acquisitions of ACE Software Sciences ("ACE"), Advanced Information
> Resources, Limited ("AIR"), Corporate Solutions International
> ("CSI"), and Southern Data Systems ("Southern Data") during
> 1999. ACE produced mortgage servicing software that enhanced ALLTEL's existing
> mortgage servicing software products. AIR, a privately held company, provided
> wholesale commercial lending software to large global financial institutions.
> CSI, a privately held company headquartered in Atlanta, Georgia, developed a
> consumer loan origination system, which when combined with the Company's other
> loan processing software products, allowed ALLTEL to provide a state-of-the-art
> loan origination solution to current and prospective clients in the financial
> services industry. Southern Data, a privately held company also headquartered in
> Atlanta, provided a full array of application software and services to the
> community banking market.
> In July 1998, the Company completed its merger with 360 Communications
> Company ("360"), a wireless communications company, that served more
> than 2.6 million customers in 15 states. With this merger, ALLTEL significantly
> expanded its wireless presence and enhanced its ability to deliver bundled
> communications services across its geographically focused markets.
> During 1998, the Company acquired a 100 percent ownership interest in two
> Georgia RSAs, representing approximately 181,000 cellular POPs. In addition, the
> Company increased its ownership interest in wireless properties in North
> Carolina and Texas.
> In October 1997, the Company acquired Georgia Telephone Corporation, which
> served more than 6,700 customer lines in southwest Georgia. The customer lines
> acquired in this transaction were in areas adjacent to the Company's wireline
> market areas in Georgia and were located within the Company's existing wireless
> service area.
> During 1997, the Company increased its ownership to 100 percent in two
> Alabama RSAs, representing approximately 260,000 cellular POPs. In addition, the
> Company and BellSouth Corporation ("BellSouth") combined their
> interests in two partnerships that owned and controlled cellular licenses and
> operations in Richmond, Virginia and Orlando, Florida. Also in 1997, the Company
> acquired minority interests in 16 of its controlled markets, which increased its
> ownership interest to 100 percent in ten of those markets.
> 3
> 
> 
> ALLTEL Corporation
> Form 10-K, Part I
> Item 1. Business
> THE COMPANY (continued)
> DISPOSITIONS
> 
> During 2001, the Company sold 20 Personal Communications Services
> ("PCS") licenses in six states to Verizon Wireless for a total cash
> purchase price of $410 million.
> During 2000, the Company sold its Personal Communications Services
> ("PCS") operations in Birmingham and Mobile, Alabama and PCS licenses
> in nine other markets for approximately $112 million in cash. Giving effect to
> these sales, the Company offers PCS service is Jacksonville, Florida and holds
> PCS licenses in 41 other markets.
> During 1998, the Company sold its 27.9 percent ownership interest in a
> cellular partnership serving the Omaha, Nebraska market for approximately $18
> million in cash.
> In 1997, the Company sold its wire and cable subsidiary, HWC Distribution
> Corp. ("HWC"), to Code, Hennessy & Simmons, Inc., an investment
> firm, for approximately $45 million in cash. HWC was one of two companies that
> comprised ALLTEL's product distribution operations.
> In 1997, the Company sold the healthcare portion of its information services
> business to Integrated Healthcare Solutions, Inc. for approximately $154 million
> consisting of cash and shares of preferred stock. During 1998, the preferred
> stock was converted into common stock representing a 15 percent interest in a
> publicly held company, Eclipsys Corporation.
> MANAGEMENT
> 
> The Company's staff at its headquarters and regional offices supervise,
> coordinate and assist subsidiaries in management activities, investor relations,
> acquisitions, corporate planning, tax planning, cash management, insurance,
> sales and marketing support, government affairs, legal matters, engineering
> services, and technical research. They also coordinate the financing program for
> all of the Company's operations.
> EMPLOYEES
> 
> At December 31, 2001, the Company had 23,955 employees. Within the Company's
> work force, approximately 1,320 employees are part of collective bargaining
> units. During 2001, ALLTEL had no material work stoppages due to labor disputes
> with its unionized employees.
> OPERATING SEGMENTS
> 
> ALLTEL is organized based on the products and services that it offers. Under
> this organizational structure, the Company operates in two principal areas:
> communications and information services. The Company's communications operations
> consist of its wireless, wireline and emerging businesses segments. Emerging
> businesses consist of the Company's long-distance, competitive local exchange
> carrier ("CLEC"), Internet access and network management operations.
> The Company also sells telecommunications products and publishes telephone
> directories. For financial information about ALLTEL's operating segments, refer
> to pages F-47 to F-50 of the Financial Supplement, which is incorporated by
> reference herein.
> 
>   
> 4
> 
> 
> ALLTEL Corporation
> Form 10-K, Part I
> Item 1. Business
>   
> During the first quarter of 2002, ALLTEL will reclassify the operating units
> of its emerging businesses to better align its financial reporting with the
> Company's business segment mix and to provide clear comparisons to other
> communications companies within ALLTEL's peer group. The CLEC and Internet
> access operations will be reported as part of the wireline business segment. The
> long-distance and network management operations will be combined with ALLTEL's
> communications products and directory publishing operations and reported
> together under a new segment classification "Communications Support
> Services". In addition, ALLTEL's information services segment will no
> longer include services provided to ALLTEL affiliates. These affiliate
> transactions will be reported in the corresponding communications segments, and
> accordingly, information services will include results from the Company's
> financial services business and non-affiliated telecommunications operations.
> These reclassifications will have no effect on previously reported
> consolidated operating income, net income or earnings per share of ALLTEL.
> Consolidated revenues and sales for both 2001 and 2000 will be reduced by
> approximately $120.0 million as a result of reclassifying information services
> revenues previously billed to the wireline operations that were not eliminated
> pursuant to Statement of Financial Accounting Standards ("SFAS") No.
> 71 "Accounting for the Effects of Certain Types of Regulation". In
> accordance with SFAS No. 131 "Disclosures about Segments of an Enterprise
> and Related Information", ALLTEL will restate all previously reported
> segment information to conform to the new financial reporting presentation.
> ALLTEL will first present its reclassified financial statements as of and for
> the interim periods ended March 31, 2002 and 2001.
> COMMUNICATIONS SERVICES
> 
> Over the past four years, the Company has focused its communications business
> strategy on growing its customer base and enhancing the value of its customer
> relationships by offering additional products and services and providing
> superior customer service. Since 1998, the Company has significantly expanded
> its communications customer base. The merger with 360 completed in 1998, along
> with the mergers with Aliant and Liberty completed in 1999 and the property
> swaps completed with Bell Atlantic and GTE in 2000, significantly expanded
> ALLTEL's wireless business and enhanced the Company's ability to provide
> multiple communications services to its customers. The acquisition of Verizon's
> wireline properties in Kentucky, expected to be completed in the third quarter of
> 2002, will increase ALLTEL's total number of communications customers to more
> than 11 million.
> In 2001, ALLTEL took several significant steps to align its core wireless
> business with emerging market opportunities by expanding its offering of
> regional and nationwide calling plans without roaming or long-distance charges.
> The Company continued to upgrade it wireless network infrastructure and invest
> in state-of-the-art code division multiple access ("CDMA")
> technology. ALLTEL also streamlined its regional communications organization
> from five regions to three to better serve the Company's growing customer base.
> ALLTEL operates its communications businesses as a single operation capable of
> delivering to customers one-stop shopping for a full range of communications
> products and services including wireless and wireline (local and long-distance),
> paging and Internet services.
> WIRELESS OPERATIONS
> 
> As of December 31, 2001, the Company provided wireless communications service
> to approximately 6.7 million customers in 21 states. ALLTEL owns a majority
> interest in wireless operations in 69 MSAs, representing approximately 33.2
> million wireless POPs and a majority interest in 132 RSAs, representing
> approximately 16.3 million wireless POPs. In addition, ALLTEL owns a minority
> interest in 35 other wireless markets, including the Chicago, Illinois and
> Houston, Texas MSAs. As of December 31, 2001, ALLTEL's penetration rate (number
> of customers as a percentage of the total population in the Company's service
> areas) was 13.5 percent.
> 
> 5
> 
>   
> ALLTEL Corporation
> Form 10-K, Part I
> Item 1. Business
> WIRELESS OPERATIONS (continued)
> 
> The wireless operations also include the Company's PCS and paging operations.
> ALLTEL has offered PCS service in Jacksonville, Florida, since March 1998. As
> previously discussed, the Company sold its PCS operations in Birmingham and
> Mobile, Alabama and PCS licenses in nine other markets in 2000 and sold 20
> additional PCS licenses in 2001. Giving effect to these sales transactions, the
> Company has 42 PCS licenses representing approximately 17.0 million POPs. ALLTEL
> provides paging services in select markets to customers on both a
> facilities-based and resale basis. The Company operates wide-area
> computer-driven paging networks in Arkansas, Florida and Ohio. As of December
> 31, 2001, ALLTEL provided paging service to approximately 206,000 customers.
> PRODUCT OFFERINGS AND PRICING
> 
> Wireless revenues are derived primarily from monthly access and airtime
> charges, roaming and long-distance charges and charges for custom calling and
> other enhanced service features. Wireless revenues comprised 48 percent of
> ALLTEL's total operating revenues from business segments in 2001, compared to 47
> percent in 2000. Prices of wireless services are not regulated by the Federal
> Communications Commission ("FCC") or by state regulatory commissions.
> ALLTEL seeks to stimulate additional usage, increase penetration and improve
> customer retention rates through product offerings and pricing strategies. The
> Company designs local, regional and national service plans to meet customer
> needs and to address prevailing market and competitive conditions. The Company's
> rate plans are designed to address the needs of customers from all market
> segments. These plans typically consist of a fixed monthly rate for network
> access, a package of airtime minutes included in the monthly rate and a per
> minute rate for airtime used in excess of the minutes included in the package.
> Customers who frequently use wireless service generally prefer rate plans with a
> fixed monthly rate, a large package of included minutes and a lower than average
> per minute airtime rate. Conversely, customers who use wireless service less
> frequently generally prefer a lower monthly fixed rate and a higher per minute
> airtime rate. ALLTEL provides custom calling features to enhance its product
> offering. These features include call waiting, call forwarding, three-way
> calling, no-answer transfer and voicemail.
> The Company also offers unlimited local calling plans, advance pay and
> prepaid calling plans to further penetrate the market. Customers who subscribe
> to one of ALLTEL's local calling plans receive unlimited local airtime for a
> fixed monthly rate. The advance pay and prepaid plans allow customers to receive
> service in a cost-effective manner without entering into a service contract or
> paying a monthly access fee. Currently advance pay and prepaid customers
> represent a small portion of ALLTEL's wireless customer base.
> The wireless industry has shifted to the use of one-rate pricing plans, which
> include roaming and long-distance at no extra charge for a specified number of
> minutes. In order to offer one-rate plans on a profitable basis, the Company has
> endeavored to negotiate lower roaming rates under its roaming agreements with
> other domestic wireless companies. These roaming agreements provide ALLTEL's
> customers with the capability to use their wireless telephones while traveling
> outside the Company's service territories. In conjunction with the agreements to
> exchange wireless assets, ALLTEL, Bell Atlantic and GTE also signed reciprocal
> roaming agreements. These agreements allow customers of each of the companies to
> roam on each other's networks across a footprint that covers approximately 95
> percent of the U.S. population. As a result of these roaming agreements, in May
> 2000, ALLTEL began offering new rate plans to customers that provide national
> wireless coverage with no long-distance or roaming charges. While these national
> rate plans provide the Company the ability to compete effectively for the high
> volume, roaming customer, retail roaming revenues will continue to decline to
> the extent customers migrate to these national rate plans.
> 6
> 
>   
> ALLTEL Corporation
> Form 10-K, Part I
> Item 1. Business
> WIRELESS OPERATIONS (continued)
> PRODUCT OFFERINGS AND PRICING (continued)
> 
> Primarily as a result of decreased wholesale roaming rates and continued
> penetration into more competitive retail and non-traditional market segments, average revenue
> per customer per month decreased to $47.09 in 2001, compared to $49.40 in 2000
> and $50.99 in 1999. The decreases in average revenue per customer per month
> attributable to decreased wholesale roaming rates and continued penetration into
> more competitive retail market segments were partially offset by the expansion
> of higher-yield local, regional and national calling plans.
> Maintaining low customer churn rates is a primary goal of the Company,
> particularly as customer growth rates slow due to increased competition and
> higher penetration levels occur in the marketplace. The Company experienced an
> average monthly churn rate in its wireless service areas of 2.34 percent, 2.33
> percent and 2.20 percent for the years ended December 31, 2001, 2000 and 1999,
> respectively. In addition to offering competitively-priced rate plans to
> customers, ALLTEL implemented several initiatives designed to improve customer
> retention. These initiatives included analyzing customer usage patterns over a
> six-month period and notifying the customer if a better rate plan was available,
> and migrating customers from analog to digital equipment through the use of
> equipment subsidies.
> DISTRIBUTION AND MARKETING
> 
> ALLTEL utilizes four methods of distributing its wireless products and
> services in each of its markets: Company retail stores, Company retail kiosks,
> dealers and direct sales representatives. Using multiple distribution channels
> in each of its markets enables the Company to provide effective and extensive
> marketing of ALLTEL's products and services and to reduce its reliance on any
> single distribution channel. Dealer and direct sales channels remain important
> components of the Company's overall distribution strategy, with the primary
> objective for all channels being to produce the best combination of lower
> customer acquisition costs and higher customer retention rates.
> ALLTEL currently conducts its retail operations through nearly 1,000
> locations strategically located in neighborhood retail centers and shopping
> malls to capitalize on favorable demographics and retail traffic patterns. The
> Company's retail focus is to attract new customers through competitive service
> offerings and an efficient sales process. For ALLTEL, the incremental cost of
> obtaining a customer through a Company retail store is the lowest of any
> distribution channel.
> ALLTEL also partners with large national retail stores to sell wireless
> products and services directly through its own kiosks. The Company utilizes
> retail sales representatives at kiosks in large retailers to take advantage of
> high traffic generated by the retailers, to reduce the cost of the sale, and to
> ensure customers receive proper training in the use of wireless equipment and
> services. Existing customers can purchase wireless telephone accessories, pay
> bills or inquire about ALLTEL's services and features while in retail stores or
> at kiosks. Through dedicated customer service at its retail stores and kiosks,
> the Company's goal is to build customer loyalty and increase the retention rate
> of new and existing customers.
> The Company has entered into dealer agreements with electronics retailers and
> discounters in its markets. These local dealers may offer other wireless
> services like paging. In exchange for a commission payment, these dealers
> solicit customers for the Company's wireless service. The commission payment is
> subject to charge-back provisions if the customer fails to maintain service for
> a specified period of time. This arrangement increases store traffic and sales
> volume for the dealers and provides a valuable source of new customers for the
> Company. ALLTEL actively supports its dealers with regular training and
> promotional support.
> 7
> 
>   
> ALLTEL Corporation
> Form 10-K, Part I
> Item 1. Business
> WIRELESS OPERATIONS (continued)
> DISTRIBUTION AND MARKETING (continued)
> 
> ALLTEL's direct sales force focuses its efforts on business customers with
> high wireless telephone usage and multiple lines of service. This channel
> produces the lowest churn and highest revenue per customer compared with any
> other distribution channel.
> COMPETITION
> 
> Currently, up to 10 wireless carriers (2 cellular, 6 PCS and 2 Enhanced
> Specialized Mobile Radio) may operate in the same geographic area, along with
> any number of resellers that buy bulk wireless services from one of the wireless
> providers and resell it to their customers. PCS services generally consist of
> wireless two-way communications services for voice, data and other transmissions
> employing digital technology. During the past three years, PCS providers have
> begun operations within ALLTEL's wireless markets. The entry of multiple
> competitors within the Company's wireless markets has made it increasingly
> difficult to attract new customers and retain existing ones. ALLTEL has
> responded to this growing competitive environment by enhancing its networks,
> expanding its service areas, developing innovative rate plans and offering new
> products and services. ALLTEL capitalizes on its position as an incumbent
> wireless service provider by providing high capacity networks, strong
> distribution channels and superior customer service.
> TECHNOLOGY
> 
> As of December 31, 2001, approximately 80 percent of ALLTEL's wireless POPs
> were covered by digital network facilities, and approximately 70 percent of the
> Company's wireless customer base was covered by digital service plans. CDMA
> digital technology provides expanded channel capacity and the ability to offer
> advanced services and functionality. In addition, digital technology improves
> call quality, lengthens the battery life of wireless telephones and offers
> improved customer call privacy. ALLTEL continues to transition its remaining
> analog markets to CDMA digital technology. ALLTEL believes that its networks
> have sufficient capacity to handle new customer growth in the near term. The
> Company intends to meet any capacity requirements through frequency planning,
> network optimization and the deployment of additional network infrastructure.
> Through several strategic partnerships with other wireless data providers, the
> Company continues to invest in third generation wireless technologies in order
> to be among the first carriers to offer its customers access to high speed
> wireless data services.
> REGULATION
> 
> The Company is subject to regulation by the FCC as a provider of wireless
> communications services. The FCC has rules governing the construction and
> operation of wireless communications systems and licensing and technical
> standards for the provision of wireless communications service. The FCC also
> regulates wireless service resale practices and the terms under which certain
> ancillary services may be provided through wireless facilities. The FCC has
> exercised its authority to refrain from rate regulation of wireless
> communications services, but retains its statutory authority to impose such
> regulation. The 1993 Omnibus Budget Reconciliation Act largely preempted state
> rate and entry regulation of wireless carriers, although the states are
> permitted to regulate the other terms and conditions of wireless services
> unrelated to either rates or market entry. The siting and construction of
> wireless facilities may also be subject to state and local zoning, land use and
> other regulation.
> 
>   
> 8
> 
>   
> ALLTEL Corporation
> Form 10-K, Part I
> Item 1. Business
> WIRELESS OPERATIONS (continued)
> REGULATION (continued)
> 
> The Telecommunications Act of 1996 (the "96 Act") provides wireless
> carriers numerous opportunities to provide an alternative to the telephony
> services provided by local exchange telephone companies and interexchange
> carriers. These opportunities include the ability to provide calling plans that
> integrate or bundle both local calling and long-distance service. Wireless
> carriers are also entitled to compensation from other telecommunications
> carriers for calls transmitted from the other carriers' networks and terminated
> on the wireless carriers' networks. Wireless carriers are characterized as
> telecommunications carriers under the 96 Act and are not subject to the
> interconnection, resale, unbundling and other obligations applicable to local
> exchange companies until such time as the FCC makes a finding that such
> treatment is warranted. The 96 Act also eliminated any requirement that wireless
> carriers provide subscribers with equal access to their long distance carrier of
> choice, although the FCC is empowered under the 96 Act to impose an equal access
> requirement on wireless carriers through rule making should market conditions so
> warrant.
> The Company holds FCC authorizations for Cellular Radiotelephone Service
> ("CRS"), PCS, and paging services, as well as ancillary authorizations
> in the private radio and microwave services (collectively, the "FCC
> Licenses"). FCC Licenses are originally issued for 10-year terms and may be
> renewed for additional 10-year terms subject to FCC approval of the renewal
> application. The Company has routinely sought and been granted renewal of its
> FCC Licenses without contest as such licenses become due for renewal and
> anticipates that future renewals of its FCC Licenses will be granted.
> Significant changes in ownership or control of a FCC license require prior
> approval by the FCC, and interested parties are afforded the opportunity to file
> comments or formal petitions contesting the transaction. Minority interests in a
> FCC license may be transferred or assigned without prior FCC approval.
> All of the Company's PCS licenses are for 10 MHz broadband PCS systems. PCS
> licenses are granted for 10-year terms and must meet certain network build-out
> requirements established by the FCC. In order to meet the FCC's build-out
> requirements, the Company must construct networks in each market with coverage
> to at least 1/4 of the population within five years after the initial grant of
> the license or, alternatively, make a showing of "substantial service"
> within that same five-year period. Failure to meet the FCC's requirements may
> result in revocation of the Company's PCS licenses. The Company expects that
> it will meet the FCC requirements for its PCS licenses by the April 2002
> deadline.
> Pursuant to a recent FCC decision, the limitation on the amount of licensed
> spectrum that a licensee may hold and the limitation on holding both cellular
> licenses in MSA markets will be eliminated in January of 2003. Current FCC rules
> prohibit a licensee from holding a combined attributable interest in broadband
> PCS, cellular and specialized mobile radio licenses totaling more than 55 MHz of
> spectrum in a geographic area. FCC rules also prohibit any single entity from
> either owning or having a substantial interest in both cellular licenses in the
> same market.
> In accordance with FCC guidance, all Commercial Mobile Radio Services
> ("CMRS") providers must provide number portability in the nation's
> largest MSAs markets and comply with certain FCC performance criteria, including
> support for roaming customers, by November 24, 2002. Wireless service carriers
> must also provide 911 emergency service in a two-phased approach. In phase one,
> the carriers must provide service capabilities to determine station locations
> for originated calls. In phase two, wireless carriers must determine the
> location of a caller within fifty meters of an originated call. Implementation of
> the second phase requirements were set to begin by October 1, 2001, but due to
> technology unavailability, the Company requested a limited waiver of the
> requirements. The FCC has stated that no enforcement or other action will be
> taken against the Company or other carriers pending FCC action on waiver
> requests.
> 9
> 
>   
> ALLTEL Corporation
> Form 10-K, Part I
> Item 1. Business
> WIRELESS OPERATIONS (continued)
> REGULATION (continued)
> 
> Under FCC and Federal Aviation Administration regulations, wireless carriers
> must comply with certain regulations regarding the siting, lighting and
> construction of transmitter towers and antennas. In addition, federal
> environmental regulations require carriers to comply with land use and radio
> frequency standards and requires that wireless facilities and handsets comply
> with radio frequency radiation guidelines.
> WIRELINE OPERATIONS
> 
> The Company's wireline operations consist of subsidiaries that are incumbent
> local exchange carriers ("ILECs"), and, as such, provide local
> telephone service to more than 2.6 million customers primarily located in rural
> areas in 15 states. The wireline subsidiaries also offer facilities for private
> line, data transmission and other communications services. Wireline revenues,
> which consist of local service, network access and long-distance and
> miscellaneous revenues, comprised 23 percent of ALLTEL's total operating
> revenues from business segments in both 2001 and 2000.
> Local service operations provide lines from telephone exchange offices to
> customer premises for the origination and termination of telecommunications
> services including basic dial-tone service and dedicated private line facilities
> for the transport of data and video. ALLTEL also offers various enhanced service
> features including call waiting, call forwarding, three-way calling, no-answer
> transfer and voicemail.
> Additional local service revenues are derived from charges for equipment
> rentals, equipment maintenance contracts, information and directory assistance
> and public payphone services. Network access and interconnections services are
> provided by ALLTEL by connecting the equipment and facilities of its customers
> to the communications networks of long-distance carriers, CLECs, competitive
> switched and special access providers, and wireless service providers. These
> companies pay access and network usage charges to the Company's local exchange
> subsidiaries for the use of their local networks to originate and terminate
> their voice and data transmissions. Miscellaneous revenues primarily consist of
> charges for billing and collections services provided to long-distance
> companies, customer premise equipment sales and directory advertising services.
> LOCAL SERVICE - REGULATION
> 
> Prior to 1996, ALLTEL's wireline subsidiaries provided local telephone
> service under exclusive franchises granted by state regulatory commissions and
> subject to regulation by those regulatory commissions. These regulatory
> commissions have had primary jurisdiction over various matters including local
> and intrastate toll rates, quality of service, the issuance of securities,
> depreciation rates, the disposition of public utility property, the issuance of
> debt, and the accounting systems used by those subsidiaries. The FCC has
> historically had primary jurisdiction over the interstate toll and access rates
> of these companies and issues related to interstate telephone service.
> The 96 Act substantially modified certain aspects of the states' and the
> FCC's jurisdictions in the regulation of local exchange telephone companies. The
> 96 Act prohibits state legislative or regulatory restrictions or barriers to
> entry regarding the provision of local telephone service. The 96 Act also
> requires ILECs to interconnect with the networks of other telecommunications
> carriers, unbundle services into network elements, offer their
> telecommunications services at wholesale rates to allow resale of those
> services, and allow other telecommunications carriers to locate their equipment
> on the premises of the incumbent local exchange carriers. The 96 Act requires
> all local exchange telephone companies to compensate one another for the
> transport and termination of calls on one anothers' networks.
> 10
> 
>   
> ALLTEL Corporation
> Form 10-K, Part I
> Item 1. Business
> WIRELINE OPERATIONS (continued)
> LOCAL SERVICE - REGULATION (continued)
> 
> Except for its subsidiaries in Nebraska, Ohio and New York, the Company's
> local exchange subsidiaries are rural telephone companies, as defined under the
> 96 Act, and are exempt from certain of the foregoing obligations unless, in
> connection with a bona fide request, a state regulatory commission removes that
> exemption. Subsequent to such removal, the local exchange subsidiaries may still
> seek specific exemptions under the 96 Act as a company that serves less than two
> percent of the nation's access lines, where such interconnection obligations
> would otherwise cause undue economic burden or is technically infeasible.
> In 1996, the FCC issued regulations implementing the local competition
> provisions of the 96 Act. These regulations established pricing rules for state
> regulatory commissions to follow with respect to entry by competing carriers
> into the local, intrastate markets of ILECs and addressed interconnection,
> unbundled network elements and resale rates. The FCC's authority to adopt such
> pricing rules, including permitting new entrants to "pick and choose"
> among the terms and conditions of approved interconnection agreements, was
> considered first by the U.S. Eighth Circuit Court of Appeals and then by the
> U.S. Supreme Court. In January 1999, the Supreme Court ruled that the FCC had
> the jurisdiction to carry out certain local competition provisions of the 96
> Act. As part of its ruling, the Supreme Court reinstated the FCC's "pick
> and choose" rule. The Supreme Court remanded a portion of the decision to
> the Eighth Circuit Court for it to rule on certain issues that it had not
> previously decided, such as whether the FCC's pricing rules were consistent with
> the 96 Act. Other issues were remanded to the FCC.
> In July 2000, the Eighth Circuit Court issued a decision on the earlier
> remand from the Supreme
> Court and rejected, as contrary to the 96 Act, the use of hypothetical network
> costs which the FCC had used in developing certain of its pricing rules. The
> FCC's pricing rules related to unbundled network elements, termination and
> transport were also vacated. The Eighth Circuit Court upheld its prior decision
> that ILECs' universal service subsidies should not be included in the costs of
> providing network elements. Finally, the Eighth Circuit Court also vacated the
> FCC's rules requiring that:  (1) ILECs recombine unbundled network elements for
> competitors in any technically feasible combination; (2) all preexisting
> interconnection agreements be submitted to the states for review; and (3) the
> burden of proof for retention of a rural exemption be shifted to the ILEC.
> Pending disposition by the Supreme Court, the Eighth Circuit Court has stayed
> its earlier decision, which vacated the FCC's use of hypothetical network costs
> in the development of certain pricing rules applicable to ILECs.
> In October 1999, the FCC adopted two orders, later appealed, involving
> universal service. In the first order, the FCC completed development of the cost
> model that will be used to estimate non-rural ILECs' forward-looking costs of
> providing telephone service. In the second order, the FCC adopted a methodology
> that uses the costs generated by the cost model to calculate the appropriate
> level of support for non-rural carriers serving rural areas. Under the new
> funding mechanism, high-cost support will be targeted to the highest cost wire
> center within the state and support will be portable, so that, when a non-rural
> ILEC loses a customer to a competitor, the competitor may receive the universal
> service high-cost support for service provided to that customer. The new
> high-cost support mechanism should ensure that rates are reasonably comparable
> on average among states, while the states will continue to ensure that rates are
> reasonably comparable within their borders.
> On May 23, 2001, the FCC adopted an interim universal service mechanism that
> will govern compensation for rural telephone companies for the ensuing five
> years. Among other provisions, the FCC's interim plan adopted a modified
> embedded cost mechanism while retaining an indexed cap on the fund. The
> high-cost loop support fund will be permitted to grow, based on annual changes
> in the Gross Domestic Product - Chained Price Index and the total number of
> working loops of rural carriers. This order also adopted three paths for the
> disaggregation and targeting of high-cost universal service support. At this
> time, ALLTEL cannot estimate the
> 11
> 
>   
> ALLTEL Corporation
> Form 10-K, Part I
> Item 1. Business
> WIRELINE OPERATIONS (continued)
> LOCAL SERVICE - REGULATION (continued)
> 
> effect of the changes to its universal service support, if any, that may
> occur once the FCC adopts a permanent plan for rural carriers.
> In July 2001, the U.S Tenth Circuit Court of Appeals reversed and remanded
> aspects of the FCC's order that dealt with a federal funding mechanism for
> non-rural ILECs to support universal service in high cost areas. The Court ruled
> that the FCC did not provide sufficient reasoning or record evidence to support
> its decision. Specifically, the FCC did not: 1) adequately define key terms,
> including "reasonably comparable" and "sufficient"; 2) did
> not justify setting the funding benchmark at 135 percent of the national
> average; 3) did not provide any inducements for the state mechanism that it
> concedes are necessary to implement universal service; and 4) did not explain
> how this funding mechanism will interact with other universal service programs.
> In September 2001, the U.S. Fifth Circuit Court of Appeals remanded the
> provision of the FCC order that established a $650.0 million Universal Service
> Fund ("USF"). The Court questioned whether the funding level was
> appropriate to provide explicit support for poor and rural customers, stating
> that the FCC acted "arbitrarily and capriciously" in establishing the
> $650.0 million amount. The current USF amount will remain in effect pending a
> response from the FCC.
> Periodically, the Company's local exchange subsidiaries receive requests from
> wireless communications providers for renegotiation of existing transport and
> termination agreements. In these cases, the Company's local exchange
> subsidiaries renegotiate the appropriate terms and conditions in compliance with
> the 96 Act. The Company's local exchange subsidiaries have also executed
> contracts for transport and termination services with CLECs.
> During 2001 and 2000, some of the Company's local exchange subsidiaries were
> subject to certain regulatory commission orders designed to reduce earnings
> levels. In Georgia, the Company agreed to reduce the funds it receives annually
> from the state's Universal Access fund by $11.7 million in 2000 and to reduce
> its intrastate access charges by $6.9 million per year effective July 1, 2000.
> The Company also agreed to issue $11.5 million in customer credits, reduce rates
> on certain local calling plans, and to assure Internet access and xDSL
> availability to certain customers. Additionally, effective June 30, 2001, the
> Company agreed not to pursue continuance of $16.0 million of existing Universal
> Access funds for its respective Georgia subsidiaries. Other orders did not
> materially affect the results of operations of the Company.
> Certain states in which ALLTEL's local exchange subsidiaries operate have
> adopted alternatives to rate-of-return regulation, either through legislative or
> regulatory commission actions. The Company has elected alternative regulation
> for certain of its local exchange subsidiaries in Alabama, Arkansas, Florida,
> Georgia, Kentucky, Nebraska, North Carolina, Pennsylvania and Texas. Operations
> in the states of Mississippi, Missouri, New York, Ohio, Oklahoma and South
> Carolina are subject to rate-of-return regulation. The Company continues to
> evaluate alternative regulation for other states where its local exchange
> subsidiaries are regulated under rate-of-return. The following summary sets
> forth a description of the alternative regulation plan for each of the states in
> which the Company has elected alternative regulation:
> ALLTEL's regulated Alabama wireline subsidiary has operated since 1996
>     under a Public Service Commission ("PSC") established alternative
>     regulation plan. Under this plan, basic service rates have been capped.
>     Non-basic service prices may be increased annually as long as the aggregate
>     annual change is 10 percent or less. Access charges are also capped under
>     this plan. The Alabama alternative regulation plan is presently being
>     reviewed by the state PSC for possible modifications.12
>   
>   
>   ALLTEL Corporation
>   Form 10-K, Part I
>   Item 1. Business
>   WIRELINE OPERATIONS (continued)
>   LOCAL SERVICE - REGULATION (continued)
>   
>   ALLTEL's regulated Arkansas wireline subsidiary has operated since 1997
>     under an alternative regulation plan established by statute. Under this
>     plan, basic local rates and access rates may be adjusted annually by up to
>     75 percent of the annual change in the Gross Domestic Product-Price Index
>     ("GDP-PI").
>     Other local rates may be changed without PSC approval and become effective
>     upon the filing of revised tariffs.
> 
> ALLTEL's regulated Florida wireline subsidiary operates under alternative
>     regulation established by Florida statute. Under this plan, basic local
>     rates may be increased once in any twelve-month period by an amount not to
>     exceed the twelve month change in the GDP-PI less one percent. The Company may increase rates for
>     non-basic services as long as the annual increase for any category does not
>     exceed six percent in any twelve-month period. Non-basic rates can be increased by
>     up to 20 percent annually in exchanges where another local provider is
>     providing service. Intrastate access rates can be increased by the annual
>     change in GDP-PI or three percent, whichever is less, only after access rates
>     reach parity with the Company's interstate rates.ALLTEL's regulated Georgia wireline subsidiaries operate under an
>     alternative regulation plan established by statute. Under this plan, basic
>     local rates may be increased annually based on the annual change in GDP-PI.
>     Other local rates may be increased by filing revised tariffs.ALLTEL's regulated Kentucky wireline subsidiary has operated under
>     alternative regulation established by statute beginning in 1998. Under this
>     plan, the subsidiary may adjust basic business and residential rates, zone
>     charges and installation once during any 24 month period by an amount not to
>     exceed the sum of the annual percentage change in GDP-PI for the immediately
>     preceding two calendar years multiplied by the existing rate or charge to be
>     adjusted subject to the following limitations: 1) basic business and
>     residence rates may not exceed the average basic rates of the state's
>     largest telephone utility, and 2) rates may not be increased by more than 20
>     percent. Access charges may not be adjusted if the change would result in
>     intrastate access rates that exceed the company's interstate rates. Other
>     local rates may be adjusted by filing tariffs.ALLTEL's regulated Nebraska operations are subject to alternative
>     regulation established by statute. (Nebraska law exempts telecommunications
>     companies from rate-of-return regulation.) In exchanges where competition
>     exists, companies are required to file rate lists, which are effective after
>     10 days notice to the PSC. In exchanges where competition does not exist,
>     companies file rate lists for all services except basic local with 10 days
>     notice to the PSC and basic local rates may be increased after 90 days
>     notice to affected subscribers. Basic local rate increases are reviewed by
>     the PSC only if rates are increased more than 10 percent in twelve consecutive
>     months or in response to a formal complaint signed by two percent of affected
>     subscribers.ALLTEL's regulated North Carolina subsidiary has operated since 1998 under
>     alternative regulation established by the State Utility Commission. Local
>     rates are adjusted annually by the annual change in GDP-PI less two percent.
>     Rate changes are effective upon 14 days notice.ALLTEL's regulated Pennsylvania subsidiary has operated under the
>     Alternative Form of Regulation and Network Modernization Plan established by
>     the Pennsylvania Public Utility Commission ("PUC"). Under the
>     plan, rates of competitive services are not regulated, but the PUC retains
>     authority over the quality of these services. Rate changes for
>     noncompetitive services are restricted to the GDP-PI less two percent. Revenue
>     neutral rate rebalancing is also permitted for noncompetitive services.
>     Under the plan, the total amount of an increase in the basic rates cannot
>     exceed $3.50 annually.13
>   
>   
>   ALLTEL Corporation
>   Form 10-K, Part I
>   Item 1. Business
>   WIRELINE OPERATIONS (continued)
>   LOCAL SERVICE - REGULATION (continued)
>   
>   The Company has two operating subsidiaries in Texas. One subsidiary is
>     subject to rate-of-return regulation. The other subsidiary is subject to
>     alternative regulation established by statute and renewed its alternative
>     regulation election on October 20, 2001, effective for an additional
>     two-year period. All rates are capped for the duration of the plan.
> 
>   COMPETITION
>   
>   ALLTEL's local exchange subsidiaries have not experienced substantial
>   competition in their service areas to date. As a result of the passage of the
>   96 Act, the Supreme Court's decision affirming FCC jurisdiction in the local
>   competition arena, and state telecommunications reform legislation, the
>   Company's local exchange subsidiaries should experience increased competition
>   during the next several years. Sources of competition to ALLTEL's local
>   exchange business include, but are not limited to, resellers of local exchange
>   services, large end users installing their own networks, interexchange
>   carriers, satellite transmission services, cellular communications providers,
>   cable television companies, radio-based personal communications companies,
>   competitive access providers and other systems capable of completely or
>   partially bypassing the Company's local telephone facilities. ALLTEL cannot
>   predict the specific degree or effects of competition on its local exchange
>   business, but is intent on taking advantage of the various opportunities that
>   competition should provide. The Company is currently addressing potential
>   competition by focusing on improved customer satisfaction, increasing
>   efficiencies, restructuring rates and offering new products and services.
>   NETWORK ACCESS SERVICES - REGULATION
>   
>   In June 1998, the FCC began a rulemaking proceeding to consider access
>   charge reform for rate-of-return ILECs. In October 1998, the FCC began a
>   proceeding to consider the represcription of the authorized rate-of-return for
>   the interstate access services of approximately 1,300 ILECs, including the
>   ALLTEL subsidiaries operating under rate-of-return regulation. The
>   Multi-Association Group ("MAG"), a coalition of ILEC trade
>   associations, filed with the FCC a comprehensive access charge reform and
>   deregulation plan for rate-of-return ILECs.
>   On October 11, 2001, the FCC adopted rate-of-return reform that implemented
>   several MAG access reform proposals, modified or rejected others, and
>   initiated a further round of rulemaking to consider other rate-of-return
>   carrier issues. The order lowered access charges per minute, increased the
>   subscriber line charge ("SLC") over time to bring it in line with
>   SLCs adopted for price cap carriers and phased out carrier common line charges
>   in favor of a new portable "Interstate Common Line Support"
>   universal service mechanism, and retained the authorized 11.25 percent rate of
>   return. The residential and single-line business SLC cap phase-in began on
>   January 1, 2002, and may increase again on July 1, 2002 and on July 1, 2003,
>   subject to a FCC review of SLC caps for price cap carriers. The Company does
>   not expect that the order will have a material adverse effect on its
>   consolidated financial results during 2002 and 2003.
>   On April 27, 2001, the FCC released a notice of proposed rulemaking
>   addressing inter-carrier compensation issues. Under this rulemaking, the FCC
>   has proposed a "bill and keep" compensation method that would
>   overhaul the existing rules governing reciprocal compensation and access
>   charge regulation. The outcome of this proceeding could change the way ALLTEL
>   receives compensation from other carriers and its end users. At this time,
>   ALLTEL cannot estimate whether any such changes will occur or, if they do,
>   what the effect of the changes on its wireline revenues and expenses would be.
>   
>   14
>   
>   
>   ALLTEL Corporation
>   Form 10-K, Part I
>   Item 1. Business
>   WIRELINE OPERATIONS (continued)
>   NETWORK ACCESS SERVICES - REGULATION (continued)
>   
>   On May 22, 2001, the FCC released an order adopting the recommendation of
>   the Federal-State Joint Board to impose an interim freeze of the Part 36
>   category relationships and jurisdictional cost allocation factors for price
>   cap ILECs and a freeze of all allocation factors for rate-of-return ILECs.
>   This order also gave rate-of-return ILECs a one-time option to freeze their
>   Part 36 category relationships in addition to their jurisdictional allocation
>   factors. The freeze will continue for five years, from July 1, 2001 through
>   June 30, 2006, or until the FCC has completed comprehensive separations
>   reform, whichever comes first. The frozen allocation factors and category
>   relationships will be based on carriers' separations studies for calendar year
>   2000. ALLTEL opted not to freeze its allocation factors.
>   On June 14, 2001, the FCC, on its own motion, waived certain elements of
>   its Part 69 access charge rules to allow non-price cap ILECs to include in
>   their tariff filings an end-user charge to recover their universal service
>   contributions. ALLTEL ILECs tariffed the surcharge in their annual interstate
>   access tariff filing and began assessing the surcharge effective August 1,
>   2001.
>   To date, the Company's local exchange subsidiaries, except for the Nebraska
>   operations, have elected to remain under rate base rate-of-return regulation
>   with respect to interstate services. For companies remaining under
>   rate-of-return regulation, the FCC authorizes a rate-of-return that local
>   exchange companies may earn on interstate services they provide. The currently
>   prescribed rate of return is 11.25 percent. The Nebraska operations, which
>   were acquired in 1999, operate under price cap regulation pursuant to waivers
>   granted by the FCC. On June 12, 2001, the FCC granted ALLTEL's request to
>   extend the waiver to July 1, 2002. The Company's local exchange subsidiaries
>   currently receive compensation from long-distance companies for intrastate,
>   intraLATA services through access charges or toll settlements that are subject
>   to state regulatory commission approval.
>   EMERGING BUSINESSES OPERATIONS
>   
>   Revenues and sales from emerging businesses comprised 6 percent of ALLTEL's
>   total operating revenues from business segments in 2001, compared to 5 percent
>   in 2000, and primarily consist of the Company's long-distance and CLEC
>   operations.
>   LONG-DISTANCE OPERATIONS
>   
>   The Company began offering long-distance telecommunications services during
>   1996. Long-distance services are provided on both a facilities-based and
>   resale basis by ALLTEL subsidiaries. ALLTEL provides long-distance service in
>   all of the states in which local exchange service is provided. In addition,
>   ALLTEL offers long-distance service outside its ILEC service areas. As of
>   December 31, 2001, ALLTEL provided long-distance service to nearly 1.3 million
>   customers. The long-distance marketplace is extremely competitive and
>   continues to receive relaxed regulation from both the FCC and state regulatory
>   commissions. To meet the competitive demands of the long-distance industry,
>   ALLTEL has created several business and residential service offerings to
>   attract potential customers, such as volume price discounts, calling cards and
>   simplified one-rate plans.
>   As a long-distance service provider, ALLTEL's intrastate long-distance
>   business is subject to limited regulation by state regulatory commissions, and
>   its interstate business is subject to limited regulation by the FCC. State
>   regulatory commissions currently require long-distance service providers to
>   obtain a certificate of operating authority, and the majority of states, as
>   well as the FCC, also require long-distance service providers to file tariffs.
>   Most state regulatory commissions also require such companies to meet certain
>   minimum service standards.
>   15
>   
>   
>   ALLTEL Corporation
>   Form 10-K, Part I
>   Item 1. Business
>  EMERGING BUSINESSES OPERATIONS (continued)
>   CLEC OPERATIONS
>   
>   ALLTEL has received approval to provide competitive local exchange service
>   in 17 states. ALLTEL has negotiated interconnection agreements with the
>   appropriate incumbent local exchange carriers in the states where it is
>   currently offering CLEC service. ALLTEL has invested in state-of-the-art
>   networks to provide services on both a facilities-based and resale basis.
>   ALLTEL's strategy is to provide local service in combination with other
>   services provided by subsidiaries of the Company, including long-distance,
>   wireless and Internet services. As of December 31, 2001, CLEC services were
>   provided in 43 markets in 10 states. During January 2002, in evaluating its
>   existing CLEC operations, the Company determined that a business model that
>   relies on interconnection with other carriers has limited potential for
>   profitably acquiring market share. Accordingly, on January 24, 2002, the
>   Company announced its plans to exit its CLEC operations in seven states
>   representing less than 20 percent of ALLTEL's CLEC access lines. In the course
>   of exiting these markets, ALLTEL will honor all existing customer contracts,
>   licenses and other obligations and work to minimize the inconvenience to
>   affected customers. This change should allow the remaining CLEC operations to
>   generate positive cash flows in 2002.
>   On April 26, 2001 the FCC established a benchmark to govern the access
>   charges imposed by CLECs. The FCC established a three year transition process
>   to phase down these access prices to rates comparable to their ILEC
>   competitors. Specifically, during the first year, CLEC access charges are
>   capped at $.025 per minute, during the second year, the cap drops to $.018 per
>   minute, and during the third year, the cap drops to $.012 per minute. After
>   that transition, CLEC access charges will be capped at the rate charged by
>   their ILEC competitors. The FCC also adopted an exception that would permit
>   rural CLECs competing with non-rural ILECs to charge access rates above those
>   charged by the ILEC in certain circumstances. The access charges assessed by
>   ALLTEL's CLEC operations are currently below the first year cap, so this order
>   has no immediate financial impact on ALLTEL's operations. ALLTEL's CLEC
>   operations may be required to lower their rates in subsequent years.
>   INTERNET AND NETWORK MANAGEMENT OPERATIONS
>   
>   Internet access services are currently marketed to residential and business
>   customers in the majority of states in which ALLTEL provides communications
>   services. Network management services are currently marketed to business
>   customers in select areas. The Company's Internet access and network
>   management services are ancillary service offerings and are not yet
>   significant components of ALLTEL's communications operations.
>   INFORMATION SERVICES
>   
>   The Company's information services
>   subsidiary, ALLTEL Information Services, Inc. ("Information
>   Services"),  provides a wide range of information processing
>   services primarily to the financial services and telecommunications industries
>   through information processing centers that it staffs, equips and operates.
>   Information processing contracts are generally for a multi-year period.
>   Information Services also develops and markets software worldwide to financial
>   services and telecommunications companies operating their own information
>   processing departments. Information Services revenues and sales comprised 17
>   percent of ALLTEL's total operating revenues from business segments in 2001
>   and 2000. The principal operating units of the Company's information services
>   business consist of the Financial Services Division and the Telecommunications
>   Division.
>   The Financial Services Division markets software and services that have
>   been developed and improved continuously and are designed to fulfill
>   substantially all of the retail and wholesale information processing and
>   management information requirements of financial institutions. In addition,
>   the Financial Services Division also provides data processing and related
>   computer software and systems to financial institutions originating or
>   servicing single family mortgage loans. This division's software products and
>   processing services, combined
>   16
>   
>   
>   ALLTEL Corporation
>   Form 10-K, Part I
>   Item 1. Business
>   INFORMATION SERVICES (continued)
>   
>   with its team of consultants, are intended to
>   offer a cost-effective alternative to the extensive technical support staff and the enlarged group of mortgage bankers which would otherwise have
>   to be assembled in-house by each customer. The Financial Services Division's
>   on-line systems automate processing functions required in the origination of
>   mortgage loans, the management of such loans while in inventory before they
>   are sold in the secondary market, and their subsequent servicing.
>   The Telecommunications Division is primarily engaged in the development and
>   marketing of billing services and customer care software, including its
>   state-of-the-art Virtuoso II billing and customer care product, to local
>   telephone, wireless and PCS companies. In addition, the Telecommunications
>   Division provides data processing and outsourcing services to both wireline
>   and wireless telecommunications service providers.
>   CUSTOMERS
>   
>   The Financial Services Division's primary markets for its financial
>   products and services are the nation's commercial banks and savings
>   institutions and financial institutions throughout the world. Financial
>   software and services are also marketed to credit unions and to financial
>   institutions originating or servicing single family mortgage loans. These
>   financial institutions, which include many of the largest servicers of
>   residential mortgages, are located throughout the United States. In total,
>   more than 22 million mortgage loans representing over $2.3 trillion are
>   processed using the Financial Services Division's software.
>   The Telecommunications Division's primary markets for its
>   telecommunications products and services consist of telephone, cellular and
>   PCS companies in the United States and Canada which serve more than 10,000
>   customers, or a market consisting of approximately 200 telecommunications
>   companies.
>   COMPETITION
>   
>   The Financial Services Division's competition primarily comes from
>   "in-house" bank information processing departments and other
>   companies engaged in active competition for financial institution outsourcing
>   contracts. Numerous large financial institutions provide information
>   processing for smaller institutions in their respective geographic areas,
>   along with other companies that perform such services for small institutions.
>   The Telecommunications Division also faces strong competition from internal
>   information technology departments.
>   In addition, there are also other information services companies that
>   provide information processing and management services to the
>   telecommunications industry. The Company competes in each of its markets by
>   providing a high level of service and support. Information Services
>   substantially relies upon and enforces contract and trade secret laws and
>   internal non-disclosure safeguards to protect the proprietary nature of its
>   computer software and service methodologies.
>   EXAMINATION
>   
>   The Financial Services Division is examined by the federal agencies that
>   have supervisory authority over banking, thrift, and credit union operations.
>   The Financial Services Division is also classified as one of 12 national
>   vendors that, as a result of their market share, process a significant portion
>   of the financial industry's assets. These industry leaders are also examined
>   by the federal Financial Institutions Examination Council on an ongoing basis.
>   Information Services' management practices, policies, procedures, standards,
>   and overall financial condition are components of these reviews.
>   
>   17
>   
>   
>   ALLTEL Corporation
>   Form 10-K, Part I
>   Item 1. Business
>   INFORMATION SERVICES (continued)
>   EXAMINATION (continued)
>   
>   In addition to these corporate examinations, individual processing sites
>   are subject to examination, as if they were departments of their respective
>   clients, by federal and state regulators, as well as the clients' internal
>   audit departments and their independent auditing firms. The same standards of
>   performance are applied to those information processing centers as are applied
>   to the client financial institutions. Reports of the individual data center
>   performance are furnished to the board of directors of Information Services
>   and to the board of directors of the examined client.
>   The supervisory agencies include applicable state banking departments, the
>   Federal Deposit Insurance Corporation, the Office of Thrift Supervision, the
>   Office of the Comptroller of the Currency, the Board of Governors of the
>   Federal Reserve System, and the National Credit Union Administration.
>   Information Services' processing contracts include a commitment to install all
>   necessary changes in its computer software that are required by changes in
>   regulations.
>   PRODUCT DEVELOPMENT AND SUPPORT
>   
>   In the past five years, Information Services has spent approximately $650.3
>   million ($197.0 million in 2001) on mainframe and client/server software
>   design and development. Information Services has developed and continues to
>   develop products that are utilized in a UNIX based environment, including the
>   Telecommunications Division's Virtuoso II billing and customer care product.
>   Changes in regulatory requirements of both state and federal authorities,
>   increasing competition, and the development of new products and markets create
>   the need to continually update or modify existing software and systems offered
>   to customers. Information Services intends to continue to maintain, improve
>   and expand the functions and capabilities of its software products over the
>   next several years.
>   OTHER OPERATIONS
>   
>   Other operations consist of the Company's product distribution and
>   directory publishing operations. Revenues and sales from other operations
>   comprised 6 percent of ALLTEL's total operating revenues from business
>   segments in 2001, compared to 8 percent in 2000.
>   PRODUCT DISTRIBUTION
>   
>   The Company's product distribution subsidiary, ALLTEL Communications
>   Products, Inc. ("Communications Products"), is headquartered in
>   Atlanta, Georgia, and operates six warehouses and twelve counter-sales showrooms
>   across the United States. Communications Products is a major distributor of
>   telecommunications equipment and materials. Communications Products supplies
>   equipment to affiliated and non-affiliated communications companies, business
>   systems suppliers, railroads, governments, and retail and industrial
>   companies.
>   Communications Products offers more than 50,000 products for sale. Certain
>   of these products are inventoried including single and multi-line telephone
>   sets, local area networks, switching equipment modules, interior cable, pole
>   line hardware, and various other telecommunications supply items. The Company
>   has not encountered any material shortages or delays in delivery of products
>   from their suppliers.
>   
>   
>   18
>   
>   
>   ALLTEL Corporation
>   Form 10-K, Part I
>   Item 1. Business
>  OTHER OPERATIONS (continued)
>   PRODUCT DISTRIBUTION (continued)
>   
>   Communications Products experiences substantial competition throughout its
>   sales territories from other distribution companies and from direct sales by
>   manufacturers. Competition is based primarily on quality, product
>   availability, service, price, and technical assistance. Since other
>   competitors offer similar products, Communications Products differentiates
>   itself from competitors by providing value-added services. The services
>   include offering expert technical assistance, maintaining extensive
>   inventories in strategically located warehouses and counter-sales showrooms to
>   facilitate single supplier sourcing and "just-in-time" delivery,
>   maintaining a full range of alternative product lines, and by providing
>   staging, assembly and other services. The Company is continually evaluating
>   and implementing policies and strategies, which will meet customer
>   expectations and position Communications Products in the market as a quality
>   customer-focused distributor.
>   DIRECTORY PUBLISHING
>   
>   ALLTEL Publishing Corporation ("ALLTEL Publishing") coordinates
>   advertising, sales, printing, and distribution for 452 telephone directory
>   contracts in 35 states. Under terms of an agreement with Verizon, ALLTEL
>   Publishing provides all directory publishing services including contract
>   management, production and marketing. As subcontractor, Verizon provides
>   directory sales and printing services through a separate contract with ALLTEL
>   Publishing.
>   INVESTMENTS
>   ECLIPSYS CORPORATION
>   
>   During 2001, the Company completed the sale of its investment in Eclipsys
>   Corporation, a publicly traded healthcare information technology company.
>   HUGHES ISPAT LIMITED
>   
>   The Company owns equity securities representing approximately a 6.5 percent
>   interest in Hughes Tele.com Limited ("HTCL"), a public company
>   headquartered in Mumbai, India. HTCL provides communications services in the
>   state of Maharashtra, India. Francis X. Frantz, Executive Vice President of
>   ALLTEL, is a member of HTCL's Board of Directors. As of December 31, 2001, the
>   fair market value of the HTCL equity securities based on quoted market prices
>   was $15.0 million. HTCL is also a customer of the Company's information
>   services subsidiary. In 2001, revenues earned by the Company in connection
>   with its service agreement with HTCL were $6.0 million.
>   
>   
>   19
>   
>   
>   ALLTEL Corporation
>   Form 10-K, Part I
>   Item 2. Properties
>   
>   The Company's properties do not provide a basis for description by
>   character or location of principal units. All of the Company's property is
>   considered to be in good working condition and suitable for its intended
>   purposes. A summary of the Company's investment in property, plant and
>   equipment segregated between the Company's regulated wireline operations and
>   all other non-regulated business operations is presented below.
>   WIRELINE PROPERTY
>   
>   The Company's wireline subsidiaries own property in their respective
>   operating territories which consists primarily of land and buildings, central
>   office equipment, telephone lines, and related equipment. The telephone lines
>   include aerial and underground cable, conduit, poles and wires. Central office
>   equipment includes digital switches and peripheral equipment. The gross
>   investment by category in wireline property as of December 31, 2001, was as
>   follows:
>   (Millions)Land
>         $     
>           20.7Buildings and
>           leasehold improvements
>         239.9Central office
>           equipment
>         2,168.4Outside plant
>         3,332.9Furniture,
>           fixtures, vehicles and other
>         222.4Total
>         $
>           5,984.3Certain properties of the wireline subsidiaries are pledged as collateral
>   on $293.6 million of long-term debt.
>   OTHER PROPERTY
>   
>   Other properties in service consist primarily of property, plant and
>   equipment used in providing wireless communications services and information
>   services. Wireless plant consists of cell site towers, switching, controllers
>   and other radio frequency equipment. Information services plant consists of
>   data processing equipment, purchased software and capitalized internal use
>   software costs. Properties of the product distribution and directory
>   publishing operations mainly consist of office and warehouse facilities to
>   support the business units in the distribution of telecommunications products
>   and publication of telephone directories. The total investment by category for
>   the non-wireline operations of the Company as of December 31, 2001, was as
>   follows:
>   (Millions)Land
>         $     219.1Buildings and
>           leasehold improvements
>         811.5Wireless
>           plant and equipment
>         4,160.6Data
>           processing equipment and computer software
>         1,126.5Furniture,
>           fixtures, vehicles and other
>         395.9Total
>         $
>           6,713.6Item 3. Legal Proceedings
>   
>   The Company is party to various legal proceedings arising from the ordinary
>   course of business. Although the ultimate resolution of these various
>   proceedings cannot be determined at this time, management of ALLTEL does not
>   believe that such proceedings, individually or in the aggregate, will have a
>   material adverse effect on the future consolidated results of operations or
>   financial condition of the Company. To the knowledge of ALLTEL's management,
>   no other material legal proceedings, either private or governmental, currently
>   are contemplated or threatened.
>   
>   
>   20
>   
>   
>   ALLTEL Corporation
>   Form 10-K, Part II
>   Item 4. Submission of Matters to a Vote of Security Holders
>   
>   No matters were submitted to the security holders for a vote during the
>   fourth quarter of 2001.
>   Item 5. Market for the Registrant's Common Equity and Related
>   Stockholder Matters
>   
>   The outstanding shares of ALLTEL's Common Stock are listed and traded on
>   the New York Stock Exchange and the Pacific Exchange and trade under the
>   symbol AT. The following table reflects the range of high, low and closing
>   prices of ALLTEL's Common Stock as reported by Dow Jones & Company, Inc.
>   for each quarter in 2001 and 2000:
>   DividendYear
>         Qtr.
>         High
>         Low
>         Close
>         Declared2001
>         4th
>         $65.15
>         $56.90
>         $61.73
>         $.343rd
>         $65.15
>         $54.57
>         $57.95
>         $.332nd
>         $61.30
>         $50.01
>         $61.26
>         $.331st
>         $68.69
>         $49.43
>         $52.46
>         $.332000
>         4th
>         $65.63
>         $50.50
>         $62.44
>         $.333rd
>         $64.94
>         $47.75
>         $52.19
>         $.322nd
>         $70.44
>         $59.06
>         $61.94
>         $.321st
>         $82.38
>         $55.88
>         $63.06
>         $.32As of February 25, 2002, the approximate number of stockholders of common
>   stock including an estimate for those holding shares in brokers' accounts was
>   256,759.
>   Item 6. Selected Financial Data
>   
>   For information pertaining to Selected Financial Data of ALLTEL
>   Corporation, refer to page F-23 of the Financial Supplement, which is
>   incorporated by reference herein.
>   Item 7. Management's Discussion and Analysis of Financial Condition
>   and Results of Operations
>   
>   For information pertaining to Management's Discussion and Analysis of
>   Financial Condition and Results of Operations of ALLTEL Corporation, refer to
>   pages F-2 to F-20 of the Financial Supplement, which is incorporated by
>   reference herein.
>   Item 7A. Quantitative and Qualitative Disclosures About Market Risk
>   
>   For information pertaining to the Company's market risk disclosures,
>   refer
>   to pages F-18 and F-19 of the Financial Supplement, which is incorporated by reference
>   herein.
>   Item 8. Financial Statements and Supplementary Data
>   
>   For information pertaining to Financial Statements and Supplementary Data
>   of ALLTEL Corporation, refer to pages F-21, F-22 and F-24 to F-52 of the
>   Financial Supplement, which is incorporated by reference herein.
>   Item 9. Changes in and Disagreements with Accountants on Accounting
>   and Financial Disclosure
>   
>   During the two most recent fiscal years or the subsequent interim period up
>   to the date of this Form 10-K, there were no disagreements with the Company's
>   independent certified public accountants on any matter of accounting
>   principles or practices, financial statement disclosures or auditing scope or
>   procedures. In addition, none of the "kinds of events" described in
>   item 304(a)(1)(v)(A), (B), (C) and (D) of Regulation S-K have occurred.
>   21
>   
>   
>   ALLTEL Corporation
>   Form 10-K, Part III
>   Item 10. Directors and Executive Officers of the Registrant
>   
>   For information pertaining to Directors of ALLTEL Corporation refer to
>   "Election of Directors" in ALLTEL's Proxy Statement for its 2002
>   Annual Meeting of Stockholders, which is incorporated herein by reference.
>   Executive officers of the Company are as follows:
>   Name
>         Age
>         PositionJoe T. Ford
>         64
>         Chairman and Chief
>           Executive OfficerScott T. Ford
>         39
>         President
>           and Chief Operating OfficerKevin L.
>           Beebe
>         42
>         Group
>           President - CommunicationsMichael T.
>           Flynn
>         53
>         Group
>           President - CommunicationsJeffrey H.
>           Fox
>         39
>         Group
>           President - Information ServicesFrancis
>           X. Frantz
>         48
>         Executive
>           Vice President-External
>           Affairs,
>           General Counsel and SecretaryJeffery
>           R. Gardner
>         42
>         Senior Vice
>           President - Chief Financial OfficerJohn
>           S. Haley
>         46
>         Senior Vice
>           President - Chief Technology OfficerKeith
>           A. Kostuch
>         39
>         Senior Vice
>           President - Strategic PlanningFrank
>           A. O'Mara
>         41
>         Vice
>           President - Human ResourcesDavid
>           A. Gatewood
>         44
>         ControllerScott
>           H. Settlemyer
>         33
>         TreasurerThere are no arrangements between any officer and any other person pursuant
>   to which he was selected as an officer. Joe T. Ford will serve as ALLTEL's
>   Chief Executive Officer until July 1, 2002, whereupon he will retire as Chief
>   Executive Officer and thereafter continue to serve as Chairman of ALLTEL's
>   Board of Directors. Joe T. Ford's son, Scott T. Ford, who is currently
>   President and Chief Operating Officer, will become ALLTEL's President and
>   Chief Executive Officer, effective July 1, 2002.
>   Except for Kevin L. Beebe, Jeffery R. Gardner, Keith A. Kostuch, Frank A.
>   O'Mara, and Scott H. Settelmyer, each of the officers named above has been
>   employed by ALLTEL or a subsidiary for the last five years. Prior to joining
>   ALLTEL in October 1999, Mr. Kostuch served as Vice President and Director with
>   The Boston Consulting Group, Inc. ("BCG"). In his role with BCG, Mr.
>   Kostuch specialized in strategic and corporate development, including mergers
>   and acquisitions. Prior to joining ALLTEL in 1997, Mr. O'Mara served as legal
>   counsel for KIM Sports Management. Prior to joining ALLTEL in July 1998,
>   Messrs. Beebe and Gardner were executive officers of 360. Mr. Beebe was
>   Executive Vice President-Operations of 360 since February 1996. Mr. Beebe
>   joined 360 in February 1994 as Vice President-Marketing and Administration,
>   and in February 1995, he became Vice President-Operations. Mr. Gardner was
>   Senior Vice President-Finance of 360 since July 1997. Mr. Gardner served as
>   President of 360's Mid-Atlantic regional operations from February 1994 to June
>   1997. Prior to joining ALLTEL in May 1998, Mr. Settelmyer was a manager with
>   the accounting firm of Arthur Andersen LLP in Chicago, Illinois.
>   Item 11. Executive Compensation
>   
>   For information pertaining to Executive Compensation, refer to
>   "Management Compensation" in ALLTEL's Proxy Statement for its 2002
>   Annual Meeting of Stockholders, which is incorporated herein by reference.
>   Item 12. Security Ownership of Certain Beneficial Owners and
>   Management
>   
>   For information pertaining to beneficial ownership of ALLTEL securities,
>   refer to "Security Ownership of Certain Beneficial Owners and
>   Management" in ALLTEL's Proxy Statement for its 2002 Annual Meeting of
>   Stockholders, which is incorporated herein by reference.
>   22
>   
>   
>   ALLTEL Corporation
>   Form 10-K, Part III
>   Item 13. Certain Relationships and Related Transactions
>   
>   For information pertaining to Certain Relationships and Related
>   Transactions, refer to "Certain Transactions" in ALLTEL's Proxy
>   Statement for its 2002 Annual Meeting of Stockholders, which is incorporated
>   herein by reference.
>   Form 10-K, Part IV
>   Item 14. Exhibits, Financial Statement Schedules and Reports on Form
>   8-K
>   
>   (a) The following documents are filed as a part of this report:
>     1.
>         Financial Statements:The following Consolidated Financial
>           Statements of ALLTEL Corporation and subsidiaries for the year ended
>           December 31, 2001, included in the Financial Supplement, which is
>           incorporated by reference herein:Financial
>           SupplementPage NumberReport of Independent Public Accountants
>         F-22Consolidated Statements of Income -for the years ended December
>           31, 2001, 2000 and 1999
>         F-24Consolidated Balance Sheets - December 31,
>           2001 and 2000
>         F-25Consolidated Statements of Cash Flows -for the years ended December
>           31, 2001, 2000 and 1999
>         F-26Consolidated Statements of Shareholders' Equity -for the years ended December
>           31, 2001, 2000 and 1999
>         F-27Notes to Consolidated Financial Statements
>         F-28 to
>           F-52Form 10-K2.
>         Financial Statement Schedules:
>         Page NumberReport of Independent Public
>           Accountants
>         25Schedule II.  Valuation
>           and Qualifying Accounts
>         26
>       3.
>         Exhibits:"Exhibit Index"
>         27-31
>   (b) Reports on Form 8-K:
>   Current Report on Form 8-K dated October 31, 2001, reporting under
>         Item 5, Other Events, the Company's Press Release announcing an
>         agreement to purchase local telephone properties in Kentucky from
>         Verizon Communications Inc.
>         No other reports on Form 8-K were filed during the fourth quarter of
>         2001.
>   Separate condensed financial statements of ALLTEL Corporation have been
>   omitted since the Company meets the tests set forth in Regulation S-X Rule
>   4-08(e)(3). All other schedules are omitted since the required information is
>   not present or is not present in amounts sufficient to require submission of
>   the schedule, or because the information required is included in the
>   consolidated financial statements and notes thereto.
>   
>   
>   23
>   
>   
>   
>   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.
>     ALLTEL Corporation
>     Registrant
>   By /s/ Joe T.
>     FordJoe
>     T. Ford, Chairman and Chief Executive
>         Officer
>     Date: March 5,
>       2002Pursuant 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.
>   By
>     /s/ Jeffery R.
>     GardnerJeffery
>     R. Gardner, Senior Vice President
>     -
>     Date: March 5,
>       2002Chief
>     Financial Officer(Principal
>     Financial Officer)
>   * Joe T. Ford, Chairman, Chief Executive Officer and Director
>   * Scott T. Ford, President, Chief Operating Officer and Director
>   By/s/ Jeffery R. Gardner* (Jeffery R. Gardner,*David
>         A. Gatewood, Controller
>       Attorney-in-fact)(Principal Accounting Officer)
>       Date:
>     March 5,
>     2002* John R. Belk, Director
>   * Dennis E. Foster, Director
>   * Lawrence L. Gellerstedt III, Director
>   * Charles H. Goodman, Director
>   * Emon A. Mahony, Jr., Director
>   * John P. McConnell, Director
>   * Josie C. Natori, Director
>   * Gregory W. Penske, Director
>   * Frank E. Reed, Director
>   * Fred W. Smith, Director
>   * Warren A. Stephens, Director
>   * Ronald Townsend, Director
>   24
>   
>   
>   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
>     
>     
>     To the Shareholders of
>     ALLTEL Corporation:
>     
>     We have audited in accordance with auditing standards generally accepted
>     in the United States, the financial statements included in ALLTEL
>     Corporation's Financial Supplement incorporated by reference in this Form
>     10-K, and have issued our report thereon dated January 21, 2002. Our audit
>     was made for the purpose of forming an opinion on those statements taken as
>     a whole. The schedule on page 26 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 financial
>     statements. This schedule has been subjected to the auditing procedures
>     applied in the audit of the basic 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 financial statements taken as a
>     whole.
>     
>     
>     /s/ARTHUR ANDERSEN  LLP
>     
>     
>     Little Rock, Arkansas,
>     January 21, 2002
>   25



ALLTEL CORPORATION

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

(Dollars in Millions)



|                                     |                |                | Column C  |                |                 
|------------------------------------ | -------------- | -------------- | --------- | -------------- | ----------------
|Column A                             | Column
      B |                | Additions | Column
      D | Column
      E  
|                                     | Per            |                | Adjusted  |                | Charged
      to
|                                     | Previous       | (A)            | Beginning |                | Cost
      and  
|Description                          | Report         | Adjustments    | Balance   |                | Expenses        
|Allowance for doubtful               |                |                |           |                |                 
|accounts,
      customers            |                |                |           |                |                 
|and
      others:                    |                |                |           |                |                 
|For the years ended:                 |                |                |           |                |                 
|December 31, 2001                    | $52.7          | $     
      - | $52.7     |                | $144.0          
|December 31, 2000                    | $35.0          | $10.4          | $45.4     |                | $113.1          
|December 31, 1999                    | $30.2          | $    
      -  | $30.2     |                | $  97.6         
|                                     |                |                |           |                |                 
|Valuation allowance
      for        |                |                |           |                |                 
|deferred
      tax assets:           |                |                |           |                |                 
|For the years ended:                 |                |                |           |                |                 
|December 31, 2001                    | $ 
      3.4   | $    
      -  | $  3.4    |                | $  
      0.5   
|December 31, 2000                    | $11.7          | $    
      -  | $11.7     |                | $     
      -  
|December 31, 1999                    | $15.3          | $    
      -  | $15.3     |                | $     
      -  
|                                     |                |                |           |                |                 
|Accrued liabilities
      related to |                |                |           |                |                 
|merger
      and integration         |                |                |           |                |                 
|expenses
      and other charges:    |                |                |           |                |                 
|For the years ended:                 |                |                |           |                |                 
|December 31, 2001                    | $16.5          | $    
      -  | $16.5     |                | $92.2(D)        
|December 31, 2000                    | $66.5          | $    
      -  | $66.5     |                | $25.4(F)        
|December 31, 1999                    | $91.3          | $    
      -  | $91.3     |                | $90.5(H)        

Notes:

> 

1. Reclassification of amounts for companies purchased in 2000.  See Note 3 on
pages F-35 to F-36 of the Financial Supplement, which is incorporated herein by reference, for additional information regarding the companies purchased in 2000.
2. Accounts charged off net of recoveries of amounts previously written off.
3. Reduction in valuation allowance due to utilization of state net operating
    loss carryforwards.
4. During 2001, the Company recorded integration expenses and other charges
    of $77.1 million incurred in connection with the restructuring of the
    Company's regional communications, information services, product
    distribution and corporate operations. The Company also recorded write-downs
    in the carrying value of certain cell site equipment totaling $15.1 million.
5. Includes cash outlay of $45.0 million for expenses paid in 2001 and
    non-cash charges of $46.6 million consisting of write-downs in the carrying
    value of cell site equipment and other assets of $24.0 million, $21.5
    million in additional pension and postretirement benefit costs related to a
    special early retirement program offered to employees meeting certain age
    and service requirements and $1.1 million in compensation expense related to
    the accelerated vesting of certain stock options.
6. During 2000, the Company recorded integration expenses and other charges
    incurred it connection with the acquisition of wireless assets and with
    certain restructuring activities of the Company's information services
    business.
7. Includes cash outlays of $73.8 million for expenses paid in 2000 and a
    non-cash charge of $1.6 million resulting from write-downs in the carrying
    value of capitalized leasehold improvements related to facilities abandoned
    by the Company.
8. During 1999, the Company recorded merger and integration expenses and
    other charges related to its mergers with Aliant Communications Inc.,
    Liberty Cellular, Inc., its affiliate KINI L.C., Advanced Information
    Resources, Limited and Southern Data Systems and with certain loss
    contingencies and other restructuring activities.
9. Includes cash outlay of $105.6 million for expenses paid in 1999 and a
    non-cash charge of $9.7 million resulting from write-downs in the carrying
    value of certain in-process software development assets with no alternative
    future use or functionality and capitalized leasehold improvements related
    to leased facilities abandoned by the Company.
10. See Note 9 on pages F-42 to F-44 of the Financial Supplement, which is
    incorporated herein by reference, for additional information regarding the
    merger and integration expenses and other charges recorded by the Company in
    2001, 2000 and 1999.

> 26
> EXHIBIT INDEX
>     Number and Name
> 
>     (3)(a)
>         Amended
>           and Restated Certificate of Incorporation of ALLTEL Corporation
>           (incorporated
>           herein by reference to Exhibit B to Proxy Statement, dated
>           March 9,
>           l990).
>         *(a)(1)
>         Amendment
>           No. 1 to Amended and Restated Certificate of Incorporation of ALLTEL
>           Corporation
>           (incorporated herein by reference to Annex F of ALLTEL Corporation
>           Registration
>           Statement (File No. 333-51915) on Form S-4 dated May 6, 1998).
>         *(b)
>         Bylaws of
>           ALLTEL Corporation (As amended as of January 29, 1998).
>           (incorporated
>           herein by reference to Exhibit 3(b) to Form 10-K for the fiscal
>           year ended
>           December 31, 1997).
>         *(4)(a)
>         Rights
>           Agreement dated as of January 30, l997, between ALLTEL Corporation
>           and First
>           Union National Bank of North Carolina (incorporated herein by
>           reference
>           to Form
>           8-K dated February 3, l997, filed with the Commission on February 4,
>           l997).
>         *(b)
>         The
>           Company agrees to provide to the Commission, upon request, copies of
>           any
>           agreement defining rights of long-term debt holders.
>         --(10)(a)
>         Amended
>           and Restated Credit Agreement dated as of June 28, 2001, between
>           ALLTEL
>           Corporation
>           and Bank of America, N.A., The Chase Manhattan Bank, Citibank, N.A.,
>           KeyBank
>           National Association, and Banc of America Securities LLC.
>         (a)(b)(1)
>         Executive
>           Compensation Agreement and amendments thereto by and between
>           the
>           Company and Joe T. Ford (incorporated herein by reference to Exhibit
>           10(b)
>           to Form
>           10-K for the fiscal year ended December 31, 1983).
>         *(b)(2)
>         Modification
>           to Executive Compensation Agreement by and between the Company
>           and Joe T.
>           Ford effective as of January 1, 1987 (incorporated herein by reference
>           to Exhibit
>           10(b)(2) to Form 10-K for the fiscal year ended December 31, 1986).
>         *(b)(3)
>         Modification
>           to Executive Compensation Agreement by and between ALLTEL
>           Corporation
>           and Joe T. Ford, effective as of January 1, 1991 (incorporated herein
>           by
>           reference to Exhibit 10 of ALLTEL Corporation Registration Statement
>           (File No.
>           33-44736) on Form S-4 dated December 23, 1991).
>         *(b)(4)
>         Employment Agreement by and between ALLTEL Corporation and Joe T.
>           Ford,effective
>           as of July 26, 2001.
>         (a)(c)(1)
>         Change in
>           Control Agreement by and between the Company and Scott T. Ford
>           effective
>           as of April 25, 1996 (incorporated herein by reference to Exhibit
>           10(c)(6)
>           to Form
>           10-Q for the period ended June 30, 1996).
>         *(c)(2)
>         Change in
>           Control Agreement by and between the Company and Kevin L. Beebe
>           effective
>           as of July 23, 1998 (incorporated herein by reference to Exhibit
>           10(c)(2)
>           to Form
>           10-K for the fiscal year ended December 31, 1998).
>         ** Incorporated
>     herein by reference as indicated.
>     a) Filed
>     herewith.
> 27
>     EXHIBIT INDEX, Continued
>     Number and Name
>     
>     (10)(c)(3)
>         Change in
>           Control Agreement by and between the Company and Michael T. Flynn
>           effective
>           as of July 23, 1998 (incorporated herein by reference to Exhibit
>           10(c)(3)
>           to Form
>           10-K for the fiscal year ended December 31, 1998).
>         *(c)(4)
>         Change in
>           Control Agreement by and between the Company and Jeffrey H. Fox
>           effective
>           as of January 30, 1997 (incorporated herein by reference to Exhibit
>           10(c)(4)
>           to Form
>           10-K for the fiscal year ended December 31, 1998).
>         *(c)(5)
>         Change in
>           Control Agreement by and between the Company and Francis X. Frantz
>           effective
>           as of October 24, 1994 (incorporated herein by reference to Exhibit
>           10(c)(4)
>           to Form
>           10-K for the fiscal year ended December 31, 1994).
>         *(c)(6)
>         Change in
>           Control Agreement by and between the Company and Jeffrey R. Gardner
>           effective
>           as of January 28, 1999 (incorporated herein by reference to Exhibit
>           10(c)(8)
>           to Form
>           10-K for the fiscal year ended December 31, 1998).
>         *(c)(7)
>         Change in
>           Control Agreement by and between the Company and David A. Gatewood
>           effective
>           as of February 15, 2001 (incorporated herein by reference to Exhibit
>           10(c)(7)
>           to
>           Form 10-K for the fiscal year ended December 31, 2000).
>         *(c)(8)
>         Change in
>           Control Agreement by and between the Company and John S. Haley
>           effective
>           as of February 15, 2001 (incorporated herein by reference to Exhibit
>           10(c)(8)
>           to Form 10-K for the fiscal year ended December 31, 2000).
>         *(c)(9)
>         Change in
>           Control Agreement by and between the Company and Keith A. Kostuch
>           effective
>           as of February 15, 2001 (incorporated herein by reference to Exhibit
>           10(c)(9)
>           to Form 10-K for the fiscal year ended December 31, 2000).
>         *(c)(10)
>         Change in
>           Control Agreement by and between the Company and Frank A. O'Mara
>           effective
>           as of February 15, 2001 (incorporated herein by reference to Exhibit
>           10(c)(10)
>           to Form 10-K for the fiscal year ended December 31, 2000).
>         *(d)(1)
>         Split-dollar
>           Life Insurance Agreement by and between the Company and
>           Francis X.
>           Frantz effective as of March 1, 1994 (incorporated herein by reference
>           to Exhibit
>           10(d)(2) to Form 10-K for the fiscal year ended December 31, 1994).
>         *(e)(1)
>         Amended
>           and Restated ALLTEL Corporation Supplemental Executive Retirement
>           Plan.
>         (a)(f)(1)
>         ALLTEL
>           Corporation 1998 Management Deferred Compensation Plan,
>           effective
>           June 23, 1998 (incorporated herein by reference to Exhibit 10(f)(5)
>           to Form
>           10-Q for the period ended June 30, 1998).
>         *(f)(2)
>         ALLTEL
>           Corporation 1998 Directors' Deferred Compensation Plan,
>           effective
>           June 23, 1998 (incorporated herein by reference to Exhibit 10(f)(6)
>           to Form
>           10-Q for the period ended June 30, 1998).
>         *(g)(1)
>         ALLTEL
>           Corporation 1991 Stock Option Plan (incorporated herein by reference
>           to Exhibit
>           A to Proxy Statement, dated March 8, 1991).
>         *
>     * Incorporated
>     herein by reference as indicated.
>     (a) Filed
>     herewith.
> 28
>     
>     
>     EXHIBIT INDEX, Continued
>     Number and Name
>     
>     (10)(g)(2)
>         First
>           Amendment to ALLTEL Corporation l991 Stock Option Plan
>           (incorporated
>           herein
>           by reference to Exhibit 10(g)(3) to Form 10-K for the fiscal year
>           ended
>           December
>           31, 2000).
>         *(g)(3)
>         ALLTEL
>           Corporation l994 Stock Option Plan for Employees (incorporated herein
>           by
>           reference to Exhibit A to Proxy Statement dated March 4, l994).
>         *(g)(4)
>         First
>           Amendment to ALLTEL Corporation l994 Stock Option Plan for Employees
>           (incorporated herein by
>           reference to Exhibit (10)(g)(5) to Form 10-K for the fiscal
>           year
>           ended December 31, 2000).
>         *(g)(5)
>         ALLTEL
>           Corporation l994 Stock Option Plan for Nonemployee Directors
>           (incorporated
>           herein by reference to Exhibit B to Proxy Statement dated March 4,
>           l994).
>         *(g)(6)
>         First
>           Amendment to ALLTEL Corporation l994 Stock Option Plan for
>           Nonemployee
>           Directors (incorporated herein by reference to Exhibit 10(g)(5)
>           to Form
>           10-K for the fiscal year ended December 31, 1996).
>         *(g)(7)
>         Second,
>           Third and Fourth Amendments to ALLTEL Corporation l994 Stock
>           Option
>           Plan for Nonemployee Directors (incorporated herein by reference to
>           Exhibit
>           10(g)(8) to Form 10-K for the fiscal year ended December 31, 2000).
> 
>         *(g)(8)
>         ALLTEL
>           Corporation l998 Equity Incentive Plan (incorporated herein by
>           reference
>           to Annex G
>           of ALLTEL Corporation Registration Statement (File No. 333-51915)
>           on Form
>           S-4 dated May 6, 1998).
>         *(g)(9)
>         First and
>           Second Amendments to ALLTEL Corporation l998 Equity Incentive Plan
>           (incorporated
>           herein by reference to Exhibit 10(g)(9) to Form 10-K for the
>           fiscal
>           year
>           ended December 31, 2000).
> 
>         *(g)(10)
>         ALLTEL Corporation 2001 Equity
>           Incentive (incorporated herein by reference to
>           Appendix
>           C to Proxy Statement dated March 5, 2001).
> 
>         *(h)(1)
>         Amended
>           and Restated 360 Communications Company 1996 Equity Incentive Plan
>           (incorporated
>           herein by reference to Form S-8 (File No. 333-88923) of ALLTEL
>           Corporation
>           filed with the Commission on October 13, 1999).
> 
>         *(h)(2)
>         Lincoln
>           Telecommunications Company 1989 Stock and Incentive Stock Plan
>           (incorporated
>           herein by reference to Form S-8 (File No. 333-88907) of ALLTEL
>           Corporation
>           filed with the Commission on October 13, 1999).
>         *(i)
>         ALLTEL
>           Corporation Performance Incentive Compensation Plan as amended,
>           effective
>           January 1, 1993 (Exhibit 10(i) to Form SE dated February 17, 1993).
>         *(i)(1)
>         Amendment
>           No. 1 to ALLTEL Corporation Performance Incentive Compensation
>           Plan effective January 29, 1998, (incorporated
>           herein by reference to Exhibit 10(i)(1)
>           to Form 10-K for the fiscal year ended
>           December 31, 1997).
>         *
> 
>     * Incorporated
>     herein by reference as indicated.
>     (a) Filed
>     herewith.
> 29
>     EXHIBIT INDEX, Continued
>     Number and Name
>     
>     (10)(j)
>         ALLTEL
>           Corporation Long-Term Performance Incentive Compensation Plan, as
>           amended
>           and restated effective January 1, 1993 (Exhibit 10(j) to Form SE dated
>           February
>           17, 1993).
>         *(j)(1)
>         Amendment
>           No. 1 to ALLTEL Corporation Long-Term Performance Incentive
>           Compensation
>           Plan as amended and restated effective January 1, 1993,
>           (incorporated
>           herein by reference to Exhibit 10(j)(1) to Amendment No. 1 to
>           Form 10-K
>           for the fiscal year ended December 31, 1993).
> 
>           *(j)(2)
>         Amendment
>     No. 2 to ALLTEL Corporation Long-Term Performance Incentive
>     Compensation
>     Plan (January 1, 1993 Restatement), effective January 29, 1998,
>     (incorporated
>     herein by reference to Exhibit 10(j)(2) to Form 10-K for the fiscal
>     year ended
>     December 31, 1997).
> 
>           *(k)
>         ALLTEL
>     Corporation Pension Plan (January 1, 2001 Restatement)
> 
>           (a)(l)
>         ALLTEL
>     Corporation Profit-Sharing Plan (January 1, 1994 Restatement)
>     (incorporated
>     herein by reference to Exhibit 10(l) to Form 10-K for
>     the fiscal year
>     ended December 31, 1994).
> 
>           *(l)(1)
>         Amendments No. 1 and 2 to ALLTEL Corporation Profit-Sharing Plan
>     (January 1, 1994
>     Restatement) (incorporated herein by reference to Exhibit 10(l)(1)
>     to Form 10-Q for
>     the period ended June 30, 1995).
> 
>           *(l)(2)
>         Amendments No. 3 and 4 to ALLTEL Corporation Profit-Sharing Plan
>     (January 1, 1994
>     Restatement) (incorporated herein by reference to Exhibit 10(l)(2)
>     to Form 10-K for
>     the fiscal year ended December 31, 1995).
> 
>           *(l)(3)
>         Amendment
>     No. 5 to ALLTEL Corporation Profit-Sharing Plan
>     (January 1, 1994
>     Restatement) (incorporated herein by reference to Exhibit 10(l)(3)
>     to Form 10-Q for
>     the period ended September 30, 1996).
> 
>           *(l)(4)
>         Amendment
>     No. 6 to ALLTEL Corporation Profit-Sharing Plan
>     (January 1, 1994
>     Restatement) (incorporated herein by reference to Exhibit 10(l)(4)
>     to Form 10-Q for
>     the period ended March 31, 1997).
> 
>           *(l)(5)
>         Amendment
>     No. 7 to ALLTEL Corporation Profit-Sharing Plan
>     (January 1, 1994
>     Restatement) (incorporated herein by reference to Exhibit 10(l)(5)
>     to Form 10-K for
>     the fiscal year ended December 31, 1997).
> 
>           *(l)(6)
>         Amendment
>     No. 8 to ALLTEL Corporation Profit-Sharing Plan
>     (January 1, 1994
>     Restatement) (incorporated herein by reference to Exhibit 10(l)(6)
>     to Form 10-Q for
>     the period ended March 31, 1998).
> 
>           *(l)(7)
>         Amendments No. 9 and 10 to ALLTEL Corporation Profit-Sharing Plan
>     (January 1, 1994
>     Restatement) (incorporated herein by reference to Exhibit 10(l)(7)
>     to Form 10-K for
>     the fiscal year ended December 31, 1998).
> 
>           *
>     * Incorporated
>     herein by reference as indicated.
>     (a) Filed
>     herewith.
> 30
>     EXHIBIT INDEX, Continued
>     Number and Name
>     
>     (10)(l)(8)
>         Amendment No. 11 to ALLTEL Corporation Profit-Sharing Plan
>     (January 1, 1994
>     Restatement) (incorporated herein by reference to Exhibit 10(l)(8)
>     to Form 10-Q for
>     the period ended June 30, 1999).
> 
>           *(l)(9)
>         Amendment No. 12 to ALLTEL Corporation Profit-Sharing Plan
>     (January 1, 1994
>     Restatement) (incorporated herein by reference to Exhibit 10(l)(9)
>     to Form 10-Q for
>     the period ended September 30, 1999).
> 
>           *(l)(10)
>         Amendment No. 13 to ALLTEL Corporation Profit-Sharing Plan
>     (January 1, 1994
>     Restatement) (incorporated herein by reference to Exhibit 10(l)(10)
>     to Form 10-K for
>     the fiscal year ended December 31, 1999).
> 
>           *(l)(11)
>         Amendment No. 14 to ALLTEL Corporation Profit-Sharing Plan
>     (January 1, 1994
>     Restatement) (incorporated herein by reference to Exhibit 10(1)(11)
>     to
>     Form 10-K for the fiscal year ended December 31, 2000).
> 
>           *(l)(12)
>         Amendment No. 15 to ALLTEL Corporation Profit-Sharing Plan
>     (January 1, 1994
>     Restatement) (incorporated herein by reference to Exhibit 10(1)(12)
>     to
>     Form 10-Q for the fiscal year ended March 31, 2001).
> 
>           *(l)(13)
>         Amendment
>     No. 16 to ALLTEL Corporation Profit-Sharing Plan
>     (January
>     1, 1994 Restatement).
> 
>           (a)(m)
>         ALLTEL
>     Corporation Benefit Restoration Plan (January 1, 1996 Restatement)
>     (incorporated
>     herein by reference to Exhibit 10(m) to Form 10-K for the fiscal
>     year ended
>     December 31, 1995).
> 
>           *(n)
>         Amended and
>     Restated ALLTEL Corporation Supplemental Medical Expense
>     Reimbursement
>     Plan (incorporated herein by reference to Exhibit 10(p) to Form
>     10-K for the
>     fiscal year ended December 31, 1990).
> 
>           *(n)(1)
>         First
>     Amendment to ALLTEL Corporation Supplemental Medical Expense
>     Reimbursement
>     Plan.
> 
>           (a)(o)
>         ALLTEL
>     Corporation 401(k) Plan (formerly the ALLTEL Corporation Thrift Plan)
>     (January
>     1, 2001 Restatement)
> 
>           (a)(11)
>         Statement Re: Computation of per share earnings.
> 
>           (a)(21)
>         Subsidiaries of ALLTEL Corporation.
> 
>           (a)(23)
>         Consent of Arthur Andersen LLP.
> 
>           (a)(24)
>         Powers of
>       attorney.
> 
>           (a)(99)(a)
>         Annual
>       report on Form 11-K for the ALLTEL Corporation 401(k) Plan
>       for the year
>       ended December 31, 2001, will be filed by amendment.
> 
>           --* Incorporated
>     herein by reference as indicated.
>     (a) Filed
>     herewith.
> 31























ALLTEL CORPORATION



FINANCIAL
SUPPLEMENT

TO
ANNUAL REPORT ON FORM 10-K

FOR
THE YEAR ENDED DECEMBER 31, 2001

























































|ALLTEL CORPORATION                                         
|-----------------------------------------------------------
|                                                           
|INDEX TO FINANCIAL
SUPPLEMENT                              
|TO ANNUAL REPORT ON
FORM 10-K                              
|FOR THE YEAR ENDED
DECEMBER 31, 2001                       
|                                                           
|                                                           
|Management's Discussion and Analysis of Financial
Condition
|                                                           
|                                                           
|Report of Management                                       
|                                                           
|Report of Independent Public
Accountants                   
|                                                           
|Selected Financial Data                                    
|                                                           
|Annual Financial Statements:                               
|                                                           
|                                                           
|                                                           
|                                                           
|                                                           
|                                                           
|                                                           
|                                                           
|                                                           
|                                                           
|                                                           
|                                                           
|                                                           
|                                                           
|                                                           
|                                                           







































F-1

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

During 2001, ALLTEL Corporation ("ALLTEL" or the
"Company") achieved solid financial results reflecting continued
demand for the Company's communication services and the successful integration
of wireless properties acquired in 2000, as further discussed below. The Company
continued to expand its core communications business during 2001, as evidenced
by ALLTEL's announcement on October 31, 2001, of an agreement to purchase
approximately 600,000 wireline access lines in Kentucky from Verizon
Communications Inc. ("Verizon") for approximately $1.9 billion in
cash. This transaction, which is expected to be completed in the third quarter
of 2002, will increase the number of communications customers served by ALLTEL
to more than 11.0 million. The Company expects to finance the transaction
through a combination of commercial paper borrowings, issuance of long-term debt
or the issuance of equity or equity-related securities. (See Note 17 to the
consolidated financial statements for additional information regarding this
pending acquisition.)

During 2001, the Company also continued its focus on controlling costs by
restructuring its regional communications, information services, product
distribution and corporate operations. ALLTEL enhanced its strong financial
position by monetizing non-strategic assets, including the sale of 20 Personal
Communications Services ("PCS") licenses to Verizon Wireless for
$410.1 million in cash and the leasing of 1,748 cell site towers to American
Tower Corporation for $524.4 million in cash paid in advance at the inception of
the lease.

ACQUISITIONS

On October 3, 2000, ALLTEL purchased wireless properties in Louisiana from
SBC Communications, Inc. ("SBC"). ALLTEL paid SBC $387.6 million in
cash and acquired approximately 150,000 wireless customers and 300,000 paging
customers. The accompanying consolidated financial statements include the
accounts and results of operations of these acquired wireless properties from
the date of acquisition. During the fourth quarter of 2001, the Company
completed the final purchase price allocation related to this acquisition and
assigned the $250.3 million excess of the aggregate purchase price over the fair
market value of the tangible net assets acquired to customer lists ($27.0
million), cellular licenses ($61.0 million) and goodwill ($162.3 million).

During 2000, ALLTEL, Bell Atlantic Corporation ("Bell Atlantic")
and GTE Corporation ("GTE") exchanged wireless properties in 13
states. On April 3, 2000, ALLTEL completed the exchange of wireless properties
with Bell Atlantic in five states, acquiring operations in Arizona, New Mexico
and Texas and divesting operations in Nevada and Iowa. In addition to the
exchange of wireless assets, ALLTEL paid Bell Atlantic $624.3 million in cash to
complete this transaction. On June 30, 2000, ALLTEL completed the remaining
wireless property exchanges with Bell Atlantic and GTE, acquiring operations in
Florida, Ohio, South Carolina and Alabama, while divesting operations in
Illinois, Indiana, New York and Pennsylvania. ALLTEL also transferred to Bell
Atlantic or GTE certain minority investments in unconsolidated wireless
properties, representing approximately 2.6 million potential customers
("POPs"). In connection with the transfer of the remaining wireless
assets, ALLTEL received $216.9 million in cash and prepaid vendor credits of
$199.6 million and assumed long-term debt of $425.0 million. Through the
completion of the above transactions, ALLTEL acquired interests in 27 wireless
markets, representing about 14.6 million POPs and approximately 1.5 million
wireless customers, while divesting interests in 42 wireless markets,
representing 6.9 million POPs and approximately 778,000 customers. ALLTEL
accounted for these exchange transactions as purchases, and accordingly, the
accompanying consolidated financial statements include the accounts and results
of operations of the acquired wireless properties from the applicable dates of
acquisition. During the second quarter of 2001, the Company completed the final
purchase price allocation related to these acquisitions and assigned the
$1,749.7 million excess of the aggregate purchase price over the fair market
value of the tangible net assets acquired to customer lists ($185.0 million),
cellular licenses ($448.0 million) and goodwill ($1,116.7 million).

Amortization of the customer lists, cellular licenses and goodwill recorded
in connection with the SBC, Bell Atlantic and GTE acquisitions is being recorded
on a straight-line basis over 6, 40 and 25 years, respectively. (See Notes 1 and
3 to the consolidated financial statements for a discussion of new accounting
rules effective in 2002 related to the amortization of goodwill and other
intangible assets and for additional information regarding these acquisitions.)

CONSOLIDATED RESULTS OF OPERATIONS

(Millions, except per share amounts)

|                           | 2001     | 2000     | 1999     
|-------------------------- | -------- | -------- | ---------
|Revenues and sales         | $7,598.9 | $7,253.9 | $6,582.6 
|Operating income           | $1,664.7 | $1,667.5 | $1,525.1 
|Net income                 | $1,067.0 | $1,928.8 | $  
783.6
|Basic earnings per share   | $3.42    | $6.13    | $2.50    
|Diluted earnings per share | $3.40    | $6.08    | $2.47    

F-2

Revenues and sales increased $345.0 million or 5 percent in 2001 and $671.3
million or 10 percent in 2000. Operating income decreased $2.8 million or less
than 1 percent in 2001 and increased $142.4 million or 9 percent in 2000. Net
income decreased $861.8 million or 45 percent in 2001 and increased $1,145.2
million or 146 percent in 2000. Basic and diluted earnings per share both
decreased 44 percent in 2001 and increased 145 percent and 146 percent,
respectively in 2000.

Reported operating income, net income and earnings per share for all three
years included the effects of various special charges and unusual items. As
further discussed below, the special charges and unusual items include merger
and integration expenses, restructuring and other charges and gains realized
from the exchange or sale of assets. Excluding the effects of the special
charges and unusual items in each year, operating income would have increased
$52.5 million or 3 percent in 2001 and $88.8 million or 5 percent in 2000 and
net income would have increased $26.5 million or 3 percent in 2001 and $40.6
million or 5 percent in 2000. When excluding the effects of the special charges
and unusual items in each year, basic and diluted earnings per share both would
have increased 4 percent in 2001 and increased 4 percent and 5 percent,
respectively in 2000.

Operating results for 2001 reflected additional goodwill and other intangible
assets amortization of approximately $44.0 million related to the acquisitions
of wireless assets previously discussed and a decrease in pension income of
$25.7 million over 2000, reflecting special termination benefits incurred in
connection with an early retirement program offered by the Company, as further
discussed in Note 9 to the consolidated financial statements, and lower
investment returns on pension plan assets. Conversely, operating results for
2000 included an increase in pension income of $15.1 million over 1999,
reflecting strong investment returns on pension plan assets and a $4.1 million
effect of a change in accounting for certain actuarial gains and losses, as
further discussed in Note 7 to the consolidated financial statements. Operating
results for 2000 were also adversely affected by additional goodwill and other
intangible assets amortization of $33.7 million related to the acquisitions of
wireless assets previously discussed.

Operating income, net income and earnings per share, adjusted for the
non-extraordinary, special charges and unusual items, are summarized in the
following tables:

(Millions, except per share amounts)

|                                               | 2001                                                   | 2000     | 1999     
|---------------------------------------------- | ------------------------------------------------------ | -------- | ---------
|Operating income, as
reported                  | $1,664.7                                               | $1,667.5 | $1,525.1 
|Special charges and unusual
items:             |                                                        |          |          
|                                               | Litigation settlement                                  | -        | 11.5     
|                                               | Merger and integration
expenses and other charges      | 92.2     | 25.4     
|Operating income, as
adjusted                  | $1,756.9                                               | $1,704.4 | $1,615.6 
|Net income,
as reported                        | $1,067.0                                               | $1,928.8 | $  
783.6
|Special charges and unusual items, net of
tax: |                                                        |          |          
|                                               | Cumulative effect of
accounting change                 | (19.5)   | 36.6     
|                                               | Litigation settlement                                  | -        | 7.0      
|                                               | Merger and integration
expenses and other charges      | 54.8     | 15.0     
|                                               | Gain on disposal of assets                             | (214.4)  | (1,133.5)
|                                               | Write-down of investment                               | -        | 9.2      
|                                               | Termination fees on early retirement of long-term debt | 1.7      | -        
|Net income, as
adjusted                        | $  889.6                                               | $  863.1 | $  822.5 

|                                               | Basic                                             |                   | Diluted
|---------------------------------------------- | ------------------------------------------------- | ----------------- | -------
|                                               | 2001                                              | 2000              | 1999   
|Earnings per share, as reported                | $3.42                                             | $6.13             | $2.50  
|Special charges and unusual items, net of tax: |                                                   |                   |        
|                                               | Cumulative effect of accounting change            | (.06)             | .12    
|                                               | Litigation settlement                             | -                 | .02    
|                                               | Merger and integration expenses and other charges | .18               | .05    
|                                               | Gain on disposal of assets                        | (.69)             | (3.61) 
|                                               | Write-down of investment                          | -                 | .03    
|                                               | Termination fees on early retirement              |                   |        
|                                               |                                                   | of long-term debt | .01    
|Earnings per share, as adjusted                | $2.86                                             | $2.74             | $2.63  
|                                              

F-3

The operating income, net income and earnings per share impact of the asset
dispositions and the special charges and unusual items have been presented as
supplemental information only. The special charges and unusual items reflected
in the above tables are discussed below in reference to the caption in the
consolidated statements of income in which they are reported.

Cumulative Effect of Accounting Change

During the second quarter of 2001, ALLTEL changed the method of accounting
for the defined benefit pension plan of a subsidiary acquired in 1999 to conform
with the accounting principles followed by the ALLTEL Pension Plan (the
"ALLTEL Plan"), a defined benefit pension plan covering substantially
all employees working in the Company's communications and corporate operations.
The change in accounting was completed in conjunction with the Company's
decision to conform future benefits earned under the subsidiary's plan with the
ALLTEL Plan, effective June 1, 2001. The change in accounting, retroactive to
January 1, 2001, affected both the computation and amortization of unrecognized
actuarial gains and losses for purposes of computing annual pension cost related
to the subsidiary's pension plan. The change included modifying the method by
which the market-related value of plan assets was determined from a calculated
five-year average to actual fair value. In addition, unrecognized actuarial
gains or losses that exceed 17.5% of the greater of the projected benefit
obligation or market-related value of plan assets will be amortized on a
straight-line basis over five years. Unrecognized actuarial gains and losses
below the 17.5% corridor will be amortized over the average remaining service
life of active plan participants (approximately 13 years). Under the method
previously followed by the subsidiary's plan, only unrecognized actuarial gains
and losses in excess of 10% of the greater of the projected benefit obligation
or market-related value of plan assets were amortized over the average remaining
service life of active plan participants. The Company believes the changes in
computing the market-related value of plan assets and accelerating the
amortization periods are preferable because these changes result in more timely
recognition of actuarial gains and losses in computing annual pension cost
related to the subsidiary's pension plan, and achieve consistency with the
ALLTEL Plan. The effect of these changes in 2001 was to increase pension income
by $1.7 million and income before cumulative effect of accounting change by $1.0
million.

Effective January 1, 2000, the Company changed its method of recognizing
wireless access revenues and certain customer activation fees to conform
ALLTEL's revenue recognition policies to the requirements of the Securities and
Exchange Commission's Staff Accounting Bulletin No. 101, "Revenue
Recognition in Financial Statements". Prior to January 1, 2000, the Company
recognized monthly non-refundable wireless access revenues when billed in
accordance with contractual arrangements with customers. With the change in
accounting, the Company recognizes wireless access revenues over the period in
which the corresponding services are provided. Because ALLTEL bills its
customers on a cycle basis throughout the month, this accounting change resulted
in the continuous deferral of approximately 15 days of wireless access revenue.
In addition, ALLTEL previously recognized when billed certain fees assessed to
communications customers to activate service. With the change in accounting, the
Company now recognizes these fees over the expected life of the customer. These
changes in revenue recognition decreased income before cumulative effect of
accounting change by $4.6 million or $.01 per share in 2000. (See Note 2 to the
consolidated financial statements for additional information regarding these
changes in accounting principles).

Litigation Settlement

As reported in Note 13 to the consolidated financial statements, on September
19, 2000, ALLTEL and the Georgia Public Service Commission (the "Georgia
PSC") reached a final settlement agreement to resolve all pending
litigation involving the two parties. Under terms of the final agreement, ALLTEL
agreed to issue a one-time credit of about $25 to approximately 450,000 wireline
customers in Georgia. The credits were issued to business and residential
customers during the fourth quarter of 2000 and totaled $11.5 million. The
Company recorded the credits as a reduction in wireline operating revenues. The
one-time customer credits were in addition to other commitments agreed to by
ALLTEL under an earlier version of the settlement agreement signed on April 11,
2000. As part of the earlier agreement, ALLTEL agreed to accelerate deployment
of digital subscriber lines and Internet service to its customers in Georgia and
to reduce certain optional local calling plan rates prospectively. In addition,
ALLTEL agreed to future reductions in funds received from the Georgia Universal
Service Fund. These revenue reductions totaled approximately $11.7 million in
2000 and $26.0 million in 2001.

Merger and Integration Expenses and Other Charges

During 2001, the Company restructured its regional communications,
information services, product distribution and corporate operations. In
connection with these restructuring efforts, ALLTEL recorded restructuring
charges during each of the four quarters of 2001. During the third and fourth
quarters of 2001, the Company also recorded write-downs in the carrying value of
certain cell site equipment to fair value. The write-downs in cell site
equipment resulted from the Company's exchange of its existing equipment for new
equipment under terms of a product replacement program initiated by a vendor in
2001.

F-4

A summary of the restructuring and other charges recorded in 2001 by quarter
was as follows:

|(Millions)                               | 1st
      Quarter          | 2nd
      Quarter | 3rd
      Quarter | 4th
      Quarter | Total      
|---------------------------------------- | -------------------------- | ----------------- | ----------------- | ----------------- | -----------
|Severance and employee benefit costs     | $54.9                      | $1.6              | $ 
      5.5      | $ 
      0.1      | $62.1      
|Lease termination costs                  | 5.2                        | 0.5               | 0.4               | -                 | 6.1        
|Write-down of software development costs | 8.9                        | -                 | -                 | -                 | 8.9        
|Write-down of cell site equipment        | -                          | -                 | 9.5               | 5.6               | 15.1       
|                                         | Total restructuring charge | $69.0             | $2.1              | $15.4             | $
      5.7
|Number
      of employees terminated     | 1,247                      | 170               | 216               | 11                | 1,644      
|Number
      of lease sites terminated   | 48                         | 10                | 2                 | 3                 | 63         
|                                        

As indicated in the table above, the restructuring charges consisted of $62.1
million in severance and employee benefit costs related to planned workforce
reductions, $6.1 million in lease termination costs associated with the closing
of certain retail and other operating locations and a $8.9 million write-down in
the carrying value of certain software development costs. Included in the
severance and employee benefit component of the restructuring charges were
non-cash charges of $22.6 million. These non-cash charges consisted of $21.5
million in additional pension and post-retirement benefit costs related to a
special early retirement program offered by the Company to employees meeting
certain age and service requirements and $1.1 million in compensation expense
related to the accelerated vesting of certain stock options. Eligible employees
who elected the early retirement incentive received five years of additional
vested service for purposes of calculating their retirement benefits available
under the Company's pension and post-retirement benefit plans. During the first
quarter of 2001, 230 employees accepted the retirement incentive offer. The
restructuring plans were completed in December 2001 and resulted in the
elimination of 1,644 employees, including the employees who accepted the early
retirement incentive. The work force reductions occurred primarily in operations
management, engineering, sales and the corporate support functions. As of
December 31, 2001, the Company had paid $37.9 million in severance and
employee-related expenses, and all of the employee reductions had been
completed.

The lease termination costs recorded in 2001 included $5.0 million
representing the estimated minimum contractual commitments over the next one to
five years for 63 operating locations that the Company abandoned, net of
anticipated sublease income. The lease termination costs also included $1.1
million of unamortized leasehold improvement costs related to the abandoned
locations. The write-down in the carrying value of certain software development
costs resulted from the Company's formation of a joint venture with IBM
announced in March 2001. The joint venture, which operates as ALLTEL Corebanking
Solutions, markets IBM's Corebank software, a real time, continuous banking
system, to financial service organizations in Europe. Prior to forming the joint
venture, ALLTEL had been developing its own real-time processing software.
Following the signing of the joint venture agreement, ALLTEL ceased further
development of its software product and wrote off the portion of the capitalized
software development costs that had no alternative future use or functionality.

During the fourth quarter of 2000, in connection with the purchase of
wireless assets from SBC, the Company recorded integration expenses and other
charges of $1.9 million, consisting of branding and signage costs. Also during
the fourth quarter of 2000, as a result of completing the restructuring of its
wireline operations initiated in September 1999, the Company recorded a $1.1
million reduction in the liabilities associated with this restructuring plan.
The adjustment reflected differences between estimated and actual severance
costs paid and a slight reduction to 242 in the number of employees to be
terminated under the plan.

In connection with the exchange of wireless assets with Bell Atlantic and
GTE, the Company recorded integration expenses and other charges during the
second and third quarters of 2000, consisting of severance and employee benefit
costs related to a planned workforce reduction and branding and signage costs.
The total charge recorded by the Company in the third quarter of 2000 was $9.2
million and consisted of $8.9 million in branding and signage costs and $0.3
million in severance and employee-related expenses. In the second quarter of
2000, the Company recorded a charge of $8.8 million, consisting of $5.0 million
in severance and employee benefit costs and $3.8 million in branding and signage
costs. During 2000, the Company paid $5.3 million in severance and
employee-related expenses and completed all of the planned employee reductions.

During the third quarter of 2000, the Company also recorded a $1.5 million
reduction in the liabilities associated with its merger and integration
activities initiated during 1999. The reduction consisted of a $1.0 million
decrease in estimated severance costs to complete the September 1999
restructuring of the Company's wireline operations and decreases in estimated
severance costs of $0.3 million and $0.2 million, respectively, related to the
1999 acquisitions of Aliant Communications Inc. ("Aliant") and Liberty
Cellular, Inc. ("Liberty"). The adjustment to the wireline
restructuring

F-5

plan reflected a reduction to 248 in the expected number of employees to be
terminated under the plan, while the adjustments to the Aliant and Liberty
merger and integration plans reflected differences between actual and estimated
severance costs paid. During the second quarter of 2000, the Company also
recorded a $2.0 million reduction in the merger and integration liability
related to its acquisition of Aliant. This adjustment primarily reflected a
decrease in severance and employee benefit costs to be paid as a result of
reducing to 132 the expected number of Aliant employees to be terminated under
the plan.

In an effort to realign the cost structure in its information services
business, the Company recorded a restructuring charge of $10.1 million during
the first quarter of 2000. This charge consisted of $5.9 million in severance
and employee benefit costs related to a planned workforce reduction and $4.2
million in lease termination costs related to the consolidation of certain
operating locations. The lease termination costs represented the estimated
minimum contractual commitments over the next one to four years for leased
facilities that the Company abandoned, net of anticipated sublease income. As of
December 31, 2001, the Company had paid all of the severance and
employee-related expenses and completed all of the scheduled employee
reductions.

During 1999, the Company recorded a pretax charge of $90.5 million in
connection with its mergers with Aliant, Liberty, Advanced Information
Resources, Ltd. ("AIR") and Southern Data Systems ("Southern
Data") and with certain loss contingencies and other restructuring
activities. The merger and integration expenses totaled $73.4 million and
consisted of professional and financial advisors' fees of $24.4 million,
severance and employee-related expenses of $15.4 million and other integration
costs of $33.6 million. The other integration costs included $12.5 million of
lease termination costs, $10.2 million of costs associated with the early
termination of certain service obligations and a $4.6 million write-down in the
carrying value of certain in-process and other software development assets that
had no future alternative use or functionality. The other integration costs also
included branding and signage costs of $4.1 million and other expenses of $2.2
million incurred in the third quarter of 1999. The lease termination costs
consisted of a cancellation fee of $7.3 million to terminate the Company's
contractual commitment to lease building space previously occupied by the former
360 Communications Company ("360") operations acquired in 1998, a $4.1
million write-off of capitalized leasehold improvements and $1.1 million in
other disposal costs. The contract termination fees included $5.2 million
related to long-term contracts with an outside vendor for customer billing
services to be provided to the Aliant and Liberty operations. As part of its
integration plan, ALLTEL will convert both the Aliant and Liberty operations to
its own internal billing system. Conversion of the Liberty operations was
completed in 1999, while conversion of the Aliant operations began in the first
quarter of 2001. Through December 31, 2001, the Company had paid $2.4 million of
the termination fee with the remainder due in installments upon completion of
the conversion of the Aliant operations to ALLTEL's billing system expected to
be completed in 2002. The Company also recorded an additional $5.0 million
charge to reflect the actual cost of terminating its contract with Convergys
Corporation ("Convergys") for customer billing services to be provided
to the former 360 operations. In September 1999, ALLTEL and Convergys agreed to
a final contract termination fee of $55.0 million, of which $50.0 million was
recorded in 1998. Through December 31, 2001, the Company had paid $50.0 million
of the termination fee with the final $5.0 million payment in January 2002. As
previously discussed, in the second and third quarters of 2000, the Company
reduced the accrued liabilities related to the Aliant and Liberty mergers by
$2.5 million. As of December 31, 2001, the Company had paid $11.8 million in
severance and employee-related expenses, and all of the employee reductions had
been completed.

Also during 1999, the Company recorded a restructuring charge of $17.1
million consisting of $10.8 million in severance and employee benefit costs
related to a planned workforce reduction and $6.3 million in lease termination
costs related to the consolidation of certain operating locations. The original
restructuring plan provided for the termination of 308 employees in the
Company's wireline operations support functions. As previously discussed, in the
third and fourth quarters of 2000, the Company reduced the number of employees
to be terminated to 242 and decreased the related liability by $2.1 million. The
lease termination costs represented the minimum estimated contractual
commitments over the next one to four years for leased facilities that the
Company abandoned. During 2000, the Company completed the employee reductions
and paid $8.7 million in severance and employee-related expenses.

As of December 31, 2001, the remaining unpaid liability related to the
Company's merger and integration and restructuring activities was $17.1 million,
consisting of contract termination fees of $7.8 million, severance and
employee-related expenses of $4.5 million and lease cancellation and termination
costs of $4.8 million. Cash outlays for the remaining contract termination fees,
employee-related expenses and lease termination costs will be disbursed over the
ensuing 12 to 48 months. Funding for the remaining unpaid merger and integration
and restructuring liability will be internally financed from operating cash
flows. As a result of its restructuring efforts, ALLTEL realized cost savings
through a reduction in employee salaries and other benefit costs of
approximately $63.0 million in 2001. (See Note 9 to the consolidated financial
statements for additional information regarding the merger and integration
expenses and other charges.)

F-6

Gain on Disposal of Assets and Other

In 2001, the Company recorded pretax gains of $347.8 million from the sale of
20 PCS licenses to Verizon Wireless. In addition, the Company recorded a pretax
gain of $9.5 million upon the dissolution of a partnership with BellSouth
Mobility, Inc. ("BellSouth"), involving wireless properties in four
states. Upon dissolution, the partnership's assets were distributed to the
partners at fair value resulting in a gain for financial reporting purposes. The
Company also recorded pretax gains of $3.2 million from the sale of certain
investments. In addition, the Company prepaid $73.5 million of long-term debt
prior to its stated maturity date and incurred pretax termination fees of $2.9
million in connection with the early retirement of that debt.

During 2000, the Company recorded pretax gains of $1,345.5 million from the
exchange of wireless properties with Bell Atlantic and GTE. The Company also
recorded pretax gains of $36.0 million from the sale of its PCS operations in
Birmingham and Mobile, Ala. and nine other PCS licenses, including the license
covering the Pensacola, Fla. market. The sales of the Mobile, Ala. and
Pensacola, Fla. PCS assets were necessary in order for ALLTEL to meet the U.S.
Department of Justice guidelines regarding the overlap of wireless properties so
that the Company could complete the wireless asset exchanges with Bell Atlantic
and GTE. The Company also recorded pretax gains totaling $562.0 million from the
sale of equity securities, including ALLTEL's remaining investment in WorldCom,
Inc. ("WorldCom") common stock. In addition, the Company recorded a
pretax write-down of $15.0 million on its investment in APEX Global Information
Services, Inc. ("APEX"), a provider of Internet access services. The
write-off was recorded due to adverse market conditions and APEX's bankruptcy
filing.

In 1999, ALLTEL recorded a pretax gain of $43.1 million from the sale of a
portion of its investment in WorldCom common stock. (See Note 10 to the
consolidated financial statements for additional information regarding these
special charges and unusual items.)

RESULTS OF OPERATIONS BY BUSINESS SEGMENT

In 2001, the Company changed the reporting presentation for wireless
equipment sales to a gross basis. Previously, the Company netted equipment sales
against charges incurred to acquire new or retain existing customers and
included the net amount in cost of products sold or operations expense. Prior
period revenue and expense information has been reclassified to conform to the
new reporting presentation. This change does not affect previously reported
operating income or net income of the Company.

ALLTEL also changed its business segment reporting presentation in 2001. As a
result of this change, the Company's wireless segment now consists of both its
cellular and PCS operations. Previously, the PCS operations were included in the
Company's emerging businesses segment. Following this change, ALLTEL's emerging
businesses segment consisted of its long-distance and network management
services and its competitive local access ("CLEC") and Internet access
operations.

Communications-Wireless Operations

|(Dollars in millions, customers in
  thousands) | 2001                          | 2000                     | 1999     
|----------------------------------------------- | ----------------------------- | ------------------------ | ---------
|Revenues and sales:                             |                               |                          |          
|                                                | Service revenues              | $3,639.8                 | $3,349.6 
|                                                | Product sales                 | 192.2                    | 187.0    
|                                                |                               | Total revenues and sales | 3,832.0  
|Costs and expenses:                             |                               |                          |          
|                                                | Operations                    | 1,973.5                  | 1,909.6  
|                                                | Cost of products sold         | 467.1                    | 322.9    
|                                                | Depreciation and amortization | 572.8                    | 443.9    
|                                                |                               | Total costs and expenses | 3,013.4  
|Operating income                                | $  818.6                      | $   860.2                | $   848.2
|Total customers                                 | 6,683.0                       | 6,241.6                  | 5,018.6  
|Gross customer additions                        | 2,297.6                       | 2,906.6                  | 1,892.6  
|Net customer additions                          | 441.4                         | 1,223.0                  | 566.6    
|Market penetration rate                         | 13.5%                         | 12.6%                    | 12.8%    
|Churn                                           | 2.34%                         | 2.33%                    | 2.20%    
|Average revenue per customer per month          | $47.09                        | $49.40                   | $50.99   
|Cost to acquire a new customer                  | $302                          | $307                     | $309     
|                                               

Excluding the effect of acquisitions, ALLTEL added nearly 2.3 million gross
customers in 2001, compared to 2.1 million gross customers in 2000 and 1.7
million in 1999. As a result of this increase in gross customer additions, the
total number of wireless customers served by ALLTEL increased 7 percent during
2001, compared to an annual growth rate in

F-7

customers of 24 percent in 2000. As previously noted, during 2000, ALLTEL
completed the exchange of wireless properties with Bell Atlantic and GTE and
purchased wireless properties in Louisiana. These transactions accounted for
779,000 of the overall increase in wireless customers that occurred during 2000.
The level of customer growth during 2002 will be dependent upon the Company's
ability to attract new customers in an increasingly competitive marketplace
currently supporting up to seven competitors in each market. Economic factors,
including weakening customer demand and consumer credit, affected the wireless
industry in the fourth quarter of 2001 and are expected to continue during 2002.
The Company will continue to focus its efforts on sustaining value-added
customer growth by managing its distribution channels and customer segments,
offering attractively priced rate plans and enhanced services and other
features, selling additional phones to existing customers and making strategic
acquisitions. In 2002, managing the growth of a value-creating customer base
will likely result in slower customer growth rates than ALLTEL experienced in
2001.

As a result of customer growth, the Company's market penetration rate (number
of customers as a percent of the total population in ALLTEL's service areas)
increased nearly one percent during 2001. ALLTEL's market penetration rate
decreased slightly in 2000, due to lower penetration levels in the markets
acquired from Bell Atlantic, GTE and SBC. The Company continues to focus its
efforts on lowering customer churn (average monthly rate of customer
disconnects). In addition to offering competitively-priced rate plans to
customers, ALLTEL implemented several initiatives designed to improve customer
retention. These initiatives included analyzing customer usage patterns over a
six-month period and notifying the customer if a better rate plan was available
and migrating customers from analog to digital equipment through the use of
equipment subsidies in order to provide enhanced service offerings to customers.
As a result of these efforts, customer churn during 2001 remained consistent
with 2000 despite heightened competition and declining economic conditions.

Wireless revenues and sales increased $295.4 million or 8 percent in 2001 and
$503.0 million or 17 percent in 2000. Service revenues increased $290.2 million
or 9 percent and $437.3 million or 15 percent in 2001 and 2000, respectively.
The increases in wireless service revenues in both years primarily resulted from
growth in ALLTEL's customer base. The acquisition of wireless properties in
Louisiana and the exchange of wireless properties with Bell Atlantic and GTE
accounted for approximately $248.9 million and $241.4 million of the overall
increases in wireless service revenues in 2001 and 2000, respectively. Revenues
from enhanced services increased $33.2 million and $19.8 million in 2001 and
2000, respectively, reflecting increased demand for these services and the
effect of acquisitions. Service revenue growth in 2001 and 2000 attributable to
customer growth, acquisitions and additional revenues earned from enhanced
services were partially offset by declines in retail roaming revenues reflecting
the expansion of local, regional and national calling areas and a decrease in
wholesale roaming rates. The decreases in average revenue per customer per month
in 2001 and 2000 reflected the effects of the local, regional and national
calling plans, decreased wholesale roaming rates and continued penetration into
more competitive retail and non-traditional market segments. Service revenue
growth during 2002 will depend upon ALLTEL's ability to maintain market share in
an increasingly competitive marketplace by adding new customers, retaining
existing customers, increasing customer usage, and selling additional enhanced
services. Product sales revenues increased $5.2 million or 3 percent and $65.7
million or 54 percent in 2001 and 2000, respectively. The increase in product
sales in 2001 reflected the growth in gross customer additions, partially offset
by lower retail prices resulting from increased competition. Product sales
increased in 2000 primarily due to the growth in gross customer activations and
the selling of higher-priced digital phones.

Operating income decreased $41.6 million or 5 percent in 2001 and increased
$12.0 million or 1 percent in 2000, as growth in operating revenues were offset
by increases in costs and expenses. Operations expense increased $63.9 million
in 2001 and $292.3 million in 2000. Network-related expenses accounted for $22.2
million and $147.7 million of the overall increases in operations expense in
2001 and 2000, respectively, and primarily resulted from increased network
traffic due to customer growth and expansion of calling areas. Selling and
marketing expenses increased $2.9 million in 2001, reflecting increased
advertising costs of $42.5 million, partially offset by lower commission costs.
Selling and marketing expenses increased $64.1 million in 2000, consistent with
the overall growth in revenues and sales and the roll-out of new rate plans.
Operations expense for 2001 also reflected increased bad debt expense of $34.6
million, primarily due to the overall decline in economic conditions and
weakening consumer credit. The increase in operations expense in 2001
attributable to increased network-related costs, advertising and bad debt
expense was partially offset by decreased commission costs of $34.1 million,
primarily reflecting a shift in the Company's distribution mix, as further
discussed below. Cost of products sold increased $144.2 million in 2001 and
$114.6 million in 2000 consistent with the growth in gross customer activations,
the selling of higher-priced digital phones and the Company's continuing efforts
to migrate customers from analog to digital equipment. Depreciation and
amortization expense reflected additional amortization of goodwill and other
intangible assets of $43.9 million in 2001 and $34.6 million in 2000, associated
with the acquisitions of wireless assets previously discussed. Depreciation
expense also increased $85.0 million in 2001 and $49.5 million in 2000,
primarily due to growth in wireless plant in service.

F-8

The cost to acquire a new wireless customer represents sales, marketing and
advertising costs and the net equipment cost, if any, for each new customer
added. The decrease in customer acquisition costs in 2001 primarily resulted
from lower commissions expense due to a shift in the Company's distribution mix,
as noted above, as proportionately higher sales volumes were generated from
ALLTEL's internal sales distribution channels. The Company has expanded its
internal sales distribution channels through Company retail stores and kiosks
located in shopping malls and other retail outlets. Incremental sales costs at a
Company retail store or kiosk are significantly lower than commissions paid to
dealers. During 2001, approximately 80 percent of the gross customer additions
came through ALLTEL's internal distribution channels. In addition, commissions
paid to outside agents also decreased in 2001, reflecting a shift in the mix of
the Company's external distribution channels from national to local dealers.
While ALLTEL intends to manage the costs of acquiring new customers during 2002
by continuing to expand and enhance its internal distribution channels, the
Company will also continue to utilize its large dealer network. The decreases in
cost to acquire a new customer in 2001 attributable to lower commission costs
were partially offset by increased advertising costs attributable to a
nationwide branding campaign and other promotional activities. In addition,
margins earned from the sale of digital handsets and other accessories declined
driven by lower retail prices, reflecting very competitive market conditions.

Regulatory Matters-Wireless Operations

The Company is subject to regulation by the Federal Communications Commission
("FCC") as a provider of wireless communications services. The
Telecommunications Act of 1996 (the "96 Act") provides wireless
carriers numerous opportunities to provide an alternative to the long distance
and local exchange services provided by local exchange telephone companies and
interexchange carriers. Wireless carriers are also entitled to compensation from
other telecommunications carriers for calls transmitted from the other carriers'
networks and terminated on the wireless carriers' networks.

In accordance with FCC guidance, all Commercial Mobile Radio Services ("CMRS")
providers must provide number portability in the nation's largest Metropolitan
Statistical Area markets and comply with certain FCC performance criteria,
including support for roaming customers, by November 24, 2002. In addition,
wireless service carriers must also provide 911 emergency service in a
two-phased approach. In phase one, the carriers must provide service
capabilities to determine station locations for originated calls. In phase two,
wireless carriers must determine the location of a caller within fifty meters of
an originated call. The second phase requirements were set to begin by October
1, 2001, but, due to technology unavailability, the Company requested a limited
waiver of these requirements. The FCC has stated that no enforcement or other
action will be taken against the Company or other carriers pending FCC action on
the waiver requests.

Communications-Wireline Operations

|(Millions, except access lines in
  thousands) | 2001                             | 2000                     | 1999     
|---------------------------------------------- | -------------------------------- | ------------------------ | ---------
|Revenues and sales:                            |                                  |                          |          
|                                               | Local service                    | $  862.3                 | $   809.7
|                                               | Network access and long-distance | 824.1                    | 818.5    
|                                               | Miscellaneous                    | 126.9                    | 117.8    
|                                               |                                  | Total revenues and sales | 1,813.3  
|Costs and expenses:                            |                                  |                          |          
|                                               | Operations                       | 705.1                    | 719.3    
|                                               | Cost of products sold            | 16.6                     | 13.6     
|                                               | Depreciation and amortization    | 368.3                    | 345.2    
|                                               |                                  | Total costs and expenses | 1,090.0  
|Operating income                               | $  723.3                         | $   667.9                | $  619.1 
|Access lines in service                        | 2,612.3                          | 2,572.3                  | 2,433.1  

Wireline revenues and sales increased $67.3 million or 4 percent in 2001 and
$68.5 million or 4 percent in 2000. Operating income increased $55.4 million or
8 percent in 2001 and $48.8 million or 8 percent in 2000. Wireline operating
results for 2000 included the effect of the $11.5 million Georgia PSC litigation
settlement previously discussed. Excluding the effect of this settlement,
revenues and sales would have increased $55.8 million or 3 percent in 2001 and
$80.0 million or 5 percent in 2000 and operating income would have increased
$43.9 million or 6 percent in 2001 and $60.3 million or 10 percent in 2000.
Customer access lines increased 2 percent in 2001 and 6 percent in 2000,
reflecting increased sales of residential and second access lines. Internal
access line growth during 2002 is expected to result primarily from population
growth in the Company's service areas. As with its wireless business, ALLTEL
expects that the continuation of slower economic growth will lower internal
access line growth rates during 2002. To drive revenue growth in 2002, the
Company will continue to emphasize customer service and sales of enhanced
services.

F-9

Local service revenues increased $52.6 million or 6 percent in 2001 and $39.5
million or 5 percent in 2000. Local service revenues for 2000 included the
effect of the Georgia PSC litigation settlement previously discussed. Excluding
the effect of the settlement, local service revenues would have increased $41.1
million or 5 percent in 2001 and $51.0 million or 7 percent in 2000. Growth in
customer access lines accounted for $9.8 million and $22.6 million of the
overall growth in local service revenues in 2001 and 2000, respectively. Growth
in custom calling and other enhanced services, reflecting increased demand for
these services, also contributed to the overall increases in local service
revenues in 2001 and 2000, as revenues from these enhanced services increased
$18.4 million in 2001 and $15.4 million in 2000. Revenues derived from
integrated service digital network ("ISDN"), which increased $7.0
million and $6.4 million in 2001 and 2000, and from the sale of equipment
protection plans, which increased $6.7 million in 2001 and $4.1 million in 2000,
also contributed to the growth in local service revenues in each year.

Network access and long-distance revenues increased $5.6 million or 1 percent
in 2001 and $39.5 million or 5 percent in 2000. Network access and long-distance
revenues increased in both years primarily as a result of higher volumes of
network usage and growth in customer access lines, partially offset by a
reduction in intrastate toll revenues. Network access and long-distance revenues
also reflected reductions of $14.6 million in 2001 and $11.7 million in 2000 in
revenues received from the Georgia Universal Service Fund, in connection with
the litigation settlement previously discussed.

Miscellaneous revenues primarily consist of charges for billing and
collections services provided to long-distance companies, customer premise
equipment sales and directory advertising services. Miscellaneous revenues
increased $9.1 million or 8 percent in 2001 and decreased $10.5 million or 8
percent in 2000. The increase in 2001 primarily resulted from increased
directory advertising revenues of $4.1 million and from additional sales of
customer premise equipment of $3.4 million. The decrease in miscellaneous
revenues in 2000 primarily resulted from a reduction in revenues earned from
other carriers for billing and collection services.

Growth in operating income for 2001 and 2000 reflected the increases in
wireline operating revenues and reductions in customer service and general and
administrative expenses, primarily resulting from the Company's restructuring
efforts, as previously discussed. The increase in operating income in 2001
attributable to revenue growth and cost savings was partially offset by
increases in network-related expenses and depreciation and amortization.
Network-related expenses increased in 2001 reflecting higher network usage due
to customer access line growth and increased maintenance costs. The increase in
operating income in 2000 attributable to revenue growth and cost savings was
partially offset by increases in depreciation and amortization, and selling and
marketing expenses. Selling and marketing expenses increased in 2000 primarily
due to additional advertising as a result of a nationwide branding campaign.
Depreciation and amortization expense increased in both years primarily due to
growth in wireline plant in service.

Regulatory Matters-Wireline Operations

ALLTEL's wireline operations, except for the Nebraska operations, follow the
accounting for regulated enterprises prescribed by Statement of Financial
Accounting Standards ("SFAS") No. 71, "Accounting for the Effects
of Certain Types of Regulation". Criteria that would give rise to the
discontinuance of SFAS No. 71 include (1) increasing competition that restricts
the wireline subsidiaries' ability to establish prices to recover specific costs
and (2) significant changes in the manner in which rates are set by regulators
from cost-based regulation to another form of regulation. The Company
periodically reviews these criteria to determine whether the continuing
application of SFAS No. 71 is appropriate. As a result of the passage of the 96
Act and state telecommunications reform legislation or regulations, ALLTEL's
wireline subsidiaries have begun to experience some competition in their local
service areas, but through year-end 2001 this competition had not had a material
adverse effect on the results of operations of ALLTEL's wireline subsidiaries.

While the Company believes that the application of SFAS No. 71 continues to
be appropriate, it is possible that changes in regulation, legislation or
competition could result in the Company's wireline operations no longer
qualifying for the application of SFAS No. 71 in the near future. If ALLTEL's
wireline subsidiaries no longer qualified for the application of SFAS No. 71,
the accounting impact to the Company would be an extraordinary non-cash charge
to operations ranging in an amount of approximately $15.0 to $25.0 million. The
non-cash charge would consist primarily of the write-off of previously
established regulatory assets and liabilities, as the Company would not expect
to record any impairment charge related to the carrying value of its wireline
plant. Under SFAS No. 71, the Company currently depreciates its wireline plant
based upon asset lives approved by regulatory agencies. Upon discontinuance of
SFAS No. 71, the Company will be required to revise the lives of its property,
plant and equipment to reflect the estimated economic useful lives of the
assets. The Company does not expect that the revisions in asset lives would be
significant.

Certain states in which the Company's wireline subsidiaries operate have
adopted alternatives to rate-of-return regulation, either through legislative or
regulatory commission actions. The Company has elected alternative regulation
for certain of its wireline subsidiaries in Alabama, Arkansas, Florida, Georgia,
Kentucky, North Carolina, Pennsylvania and Texas.

F-10

The Company continues to evaluate alternative regulation options in other
states where its wireline subsidiaries operate. The Nebraska wireline
properties, which were acquired in 1999, operate under price cap regulation
pursuant to waivers granted by the FCC. On June 12, 2001, the FCC granted
ALLTEL's request to extend the waiver to July 1, 2002.

In April 2001, the FCC released a notice of proposed rulemaking addressing
inter-carrier compensation issues. Under this rulemaking, the FCC has proposed a
"bill and keep" compensation method that would overhaul the existing
rules governing reciprocal compensation and access charge regulation. The
outcome of this proceeding could change the way ALLTEL receives compensation
from other carriers and its end users. At this time, ALLTEL cannot estimate
whether any such changes will occur or, if they do, what the effect of the
changes on its wireline revenues and expenses would be.

In May 2001, the FCC adopted an interim universal service mechanism that will
govern compensation for rural telephone companies for the ensuing five years.
Among other provisions, the FCC's interim plan adopted a modified embedded cost
mechanism while retaining an indexed cap on the fund. At this time, ALLTEL
cannot estimate the effect of the changes to its universal service support, if
any, that may occur once the FCC adopts a permanent plan for rural carriers.

Also in May 2001, the FCC released an order adopting the recommendation of
the Federal-State Joint Board to impose an interim freeze of the Part 36
category relationships and jurisdictional cost allocation factors for price cap
Incumbent Local Exchange Carriers ("ILECs") and a freeze of all
allocation factors for rate-of-return ILECs. This order also gave rate-of-return
ILECs a one-time option to freeze their Part 36 category relationships in
addition to their jurisdictional allocation factors. ALLTEL opted not to freeze
its allocation factors. In June 2001, the FCC waived certain elements of its
Part 69 access charge rules to allow non-price cap ILECs to include in their
tariff filings an end-user charge to recover their universal service
contributions. ALLTEL ILECs tariffed the surcharge in their annual interstate
access tariff filing and began assessing the surcharge effective August 1, 2001.

In October 2001, the FCC adopted rate-of-return access charge reform and
initiated a further round of rulemaking to consider other rate-of-return carrier
issues. The order lowered access charges per minute, increased the subscriber
line charge ("SLC") over time to bring it in line with SLCs adopted
for price cap carriers and phased out carrier common line charges in favor of a
new portable "Interstate Common Line Support" universal service
mechanism, and retained the authorized 11.25 percent rate of return. The
residential and single-line business SLC cap phase-in began on January 1, 2002,
and may increase again on July 1, 2002 and on July 1, 2003, subject to a FCC
review of SLC caps for price cap carriers. The Company does not expect that the
order will have a material adverse effect on its consolidated financial results
during 2002 and 2003.

Because certain of the regulatory matters discussed above are under FCC or
judicial review, resolution of these matters continues to be uncertain, and
ALLTEL cannot predict at this time the specific effects, if any, that the 96
Act, regulatory decisions and rulemakings, and future competition will
ultimately have on its wireline operations.

Communications-Emerging Businesses

|(Millions)              | 2001                          | 2000                     | 1999     
|----------------------- | ----------------------------- | ------------------------ | ---------
|Revenues and sales      | $ 461.5                       | $ 382.6                  | $ 270.2  
|Costs and expenses:     |                               |                          |          
|                        | Operations                    | 369.8                    | 345.6    
|                        | Cost of products sold         | 11.9                     | 13.8     
|                        | Depreciation and amortization | 41.5                     | 28.1     
|                        |                               | Total costs and expenses | 423.2    
|Operating income (loss) | $   38.3                      | $   (4.9)                | $   (9.0)

The Company's long-distance and network management services and Internet
access services are currently marketed to residential and business customers in
the majority of states in which ALLTEL provides communications services, and
CLEC services are provided in 10 states. During January 2002, in evaluating its
existing CLEC operations, the Company determined that a business model that
relies on interconnection with other carriers has limited potential for
profitably acquiring market share. Accordingly, on January 24, 2002, the Company
announced its plans to exit its CLEC operations in seven states representing
less than 20 percent of ALLTEL's CLEC access lines. In the course of exiting
these markets, ALLTEL will honor all existing customer contracts, licenses and
other obligations and work to minimize the inconvenience to affected customers.
This change should allow the remaining CLEC operations to generate positive cash
flows in 2002.



F-11

The increases in revenues and sales in 2001 and 2000 primarily reflected
growth in each of the emerging businesses' product groups, primarily driven by
growth in ALLTEL's customer base for these services. Revenues from long-distance
and network management services, CLEC and Internet access increased in 2001 by
$37.5 million, $30.5 million and $10.9 million, respectively, compared to
increases in 2000 of $75.4 million, $25.6 million and $11.4 million,
respectively.

The increase in operating income in 2001 reflected strong growth in
long-distance and network management services, which accounted for $25.7 million
of the overall increase in emerging businesses operating income in 2001.
Operating income for 2001 also reflected improved profitability of both the
Internet access and CLEC operations. Internet access operations became
marginally profitable during the second half of 2001, while operating losses
sustained by the CLEC operations decreased $7.7 million during 2001. Operating
losses sustained by emerging businesses decreased $43.2 million or 882 percent
in 2001 and $4.1 million or 46 percent in 2000, primarily due to strong revenue
growth and improved profit margins in the Company's long-distance operations.
The improved profit margins reflect reduced network costs as a result of
transporting more traffic on ALLTEL's own fiber network.

Information Services Operations

|(Millions)          | 2001                          | 2000                     | 1999     
|------------------- | ----------------------------- | ------------------------ | ---------
|Revenues and sales  | $1,322.9                      | $1,279.9                 | $1,245.5 
|Costs and expenses: |                               |                          |          
|                    | Operations                    | 967.1                    | 938.5    
|                    | Cost of products sold         | 0.7                      | 2.3      
|                    | Depreciation and amortization | 164.5                    | 154.1    
|                    |                               | Total costs and expenses | 1,132.3  
|Operating income    | $  190.6                      | $   185.0                | $   175.3

Information services revenues and sales increased 3 percent in 2001 and 2000,
or $43.0 million and $34.4 million, respectively. Revenues and sales increased
in 2001 primarily due to growth in the financial services operations. Financial
services revenues, which include the residential lending and international
operations, increased $33.6 million in 2001, primarily due to growth in mortgage
processing revenues, reflecting increased mortgage refinancing activity due to
declines in consumer borrowing rates and additional revenues earned from new
businesses. Software licensing revenues increased $9.5 million also contributing
to the growth in financial services revenues in 2001. During the second half of
2000, ALLTEL acquired Benchmark Consulting International and Datamatic Services,
Inc., two privately held companies serving the financial services industry and
formed ALLTEL Mortgage Solutions, a joint venture with Bradford & Bingley
Group, a large United Kingdom mortgage lender. In March 2001, the Company also
announced the formation of a joint venture with IBM, which operates as ALLTEL
Corebanking Solutions, and will provide corebanking software to financial
service organizations in Europe. These new businesses accounted for $30.2
million of the overall increase in financial services revenues in 2001. Growth
in financial services revenues in 2001 attributable to new business and
additional license fee revenues was partially offset by reduced revenues from
several large customers and lost operations due to contract terminations.
Telecommunications revenues increased $10.8 million in 2001, primarily due to
growth in existing contracts and the effect of two new outsourcing agreements,
partially offset by lost operations due to contract terminations. Revenues and
sales increased in 2000 primarily due to growth in the telecommunications
outsourcing operations, which increased $53.8 million, primarily due to growth
in existing data processing contracts including additional billings to
affiliates, reflecting the Company's recent acquisitions. Financial services
revenues declined $11.5 million in 2000 primarily due to reduced revenues from
several large customers and lost operations due to contract terminations.

The changes in operations expense for 2001 and 2000 were consistent with the
changes in revenues and sales noted above. In addition, operations expenses for
2001 and 2000 reflect reduced overhead and other general and administrative
expenses, reflecting the Company's 2001 and 2000 restructuring activities, as
previously discussed. Depreciation and amortization expense increased in both
years primarily due to the acquisition of additional data processing equipment
and an increase in amortization of internally developed software.

Primarily as a result of the changes in revenues and sales, operating income
increased $5.6 million or 3 percent in 2001 and $9.7 million or 6 percent in
2000. Growth in operating income for 2001 attributable to revenue growth and
reduced administrative costs was partially offset by losses sustained by the
recently acquired operations and new joint ventures previously discussed.
Financial services operating income increased slightly in 2000, as new business
growth was partially offset by the loss of higher margin operations from
contract terminations. Telecommunications operating income increased $7.9
million in 2000 primarily due to the growth in its operating revenues.





F-12

In connection with the Company's joint ventures with IBM and with Bradford
& Bingley Group, ALLTEL capitalized $35.8 million in software development
costs during 2001. The Company expects to capitalize in 2002 approximately $20.0
to $25.0 million of additional software development costs related to these joint
ventures. The process of developing new software products is complex and
requires the Company to make long-term investments and commit significant
resources before realizing revenue streams from these joint ventures.
Accordingly, the future profitability of these joint ventures and the Company's
ability to recover its investment will be dependent upon ALLTEL's success in
marketing the software and related services to customers.

Other Operations

|(Millions)          | 2001                          | 2000                     | 1999    
|------------------- | ----------------------------- | ------------------------ | --------
|Revenues and sales  | $ 513.9                       | $ 634.2                  | $ 579.8 
|Costs and expenses: |                               |                          |         
|                    | Operations                    | 42.2                     | 54.2    
|                    | Cost of products sold         | 444.6                    | 556.2   
|                    | Depreciation and amortization | 3.1                      | 1.7     
|                    |                               | Total costs and expenses | 489.9   
|Operating income    | $   24.0                      | $   22.1                 | $   21.6

Other operations consist of the Company's product distribution and directory
publishing operations. Revenues and sales decreased $120.3 million or 19 percent
in 2001 and increased $54.4 million or 9 percent in 2000. The decrease in
revenues and sales in 2001 resulted from a reduction in sales of
telecommunications and data products, which decreased $133.7 million. Sales to
affiliates accounted for $94.3 million of the overall decrease in sales of
telecommunications and data products in 2001, primarily due to a reduction in
purchases made by the Company's wireline subsidiaries, reflecting timing
differences in the purchases of materials and equipment related to long-term
construction projects. Sales to non-affiliates also declined $39.4 million in
2001, primarily reflecting a general reduction in capital spending by
telecommunications companies due to economic conditions and the industry's
emphasis on controlling costs. Directory publishing revenues increased $15.9
million in 2001, primarily reflecting an increase in the number of directory
contracts published. Revenues and sales increased in 2000 primarily due to
additional sales of telecommunications and data products, including sales to
affiliates. Sales of telecommunications and data products increased $49.0
million in 2000, with affiliate sales accounting for $26.8 million of the
overall increase. Sales to affiliates increased primarily due to additional
purchases made by the Company's wireline subsidiaries attributable to the Aliant
acquisition completed in 1999.

The changes in cost of products sold for 2001 and 2000 were consistent with
the changes in revenues and sales noted above. Operations expense decreased in
2001 primarily due to the Company's 2001 restructuring efforts, as previously
discussed, which primarily accounted for the modest growth in operating income
in 2001 of $1.9 million or 9 percent from 2000. Other operations operating
income increased $0.5 million or 2 percent in 2000 primarily due to the growth
in revenues and sales noted above, partially offset by lower gross profit
margins realized by the product distribution operations. The lower gross profit
margins resulted from lower margins earned on affiliated sales and increased
competition from other distributors and from direct sales by manufacturers.

Non-Operating
Income, Net

|(Millions)                                     | 2001                      | 2000     | 1999    
|---------------------------------------------- | ------------------------- | -------- | --------
|Equity earnings in unconsolidated
partnerships | $   57.0                  | $ 120.5  | $ 105.0 
|Minority interest in consolidated
partnerships | (71.8)                    | (97.2)   | (116.6) 
|Other income, net                              | 33.2                      | 42.2     | 54.4    
|                                               | Non-operating income, net | $   18.4 | $   65.5
|                                              

Non-operating income, net decreased $47.1 million or 72 percent in 2001 and
increased $22.7 million or 53 percent in 2000. The decrease in equity earnings
in unconsolidated partnerships in 2001 primarily reflected the sale of certain
minority investments to Bell Atlantic and GTE completed during 2000 and the
transfer to BellSouth of certain minority investments in unconsolidated wireless
properties resulting from the dissolution of a partnership completed in 2001, as
previously discussed. The decreases in minority interest in 2001 and 2000
primarily reflected ALLTEL's acquisition of the remaining ownership interest in
a Georgia Rural Service Area ("RSA") completed in January 2000 and in
a Florida RSA completed in August 2000. Other income, net for 2000 included a
pretax gain of $4.7 million from the sale of a minority interest in a wireless
property and pretax gains of $6.6 million realized from the sale of
miscellaneous stock investments. The decrease in other income, net in 2000
primarily reflected a reduction in capitalized interest costs attributable to
ALLTEL's deployment plans for PCS service.



F-13

Interest Expense

Interest expense decreased $21.9 million or 7 percent in 2001 and increased
$30.6 million or 11 percent in 2000. The decrease in interest expense in 2001
primarily reflected reductions in both the weighted average borrowing amount and
interest rates applicable to ALLTEL's commercial paper program. The decrease in
interest expense attributable to reduced borrowings outstanding under the
commercial paper program was partially offset by additional interest costs
related to the $425.0 million of long-term debt assumed by ALLTEL in completing
the wireless property exchange with GTE. The increase in interest expense in
2000 reflected increases in both the weighted average borrowing amounts and
rates applicable to ALLTEL's commercial paper program. Additional borrowings
under this program in 2000 were incurred to finance the Company's wireless
property acquisitions and to fund the stock repurchase plan. Interest expense
for 2000 also included additional interest costs related to the $425.0 million
of long-term debt assumed by ALLTEL in completing the wireless property exchange
with GTE previously discussed.

Income Taxes

Income tax expense decreased $681.0 million or 49 percent in 2001 and
increased $838.1 million or 153 percent in 2000. The changes in income tax
expense for both periods primarily reflected the tax-related effects of the gain
on disposal of assets, merger and integration expenses and the other special
charges and unusual items previously discussed. Excluding the effects on tax
expense of these items in each year, income tax expense would have increased
$0.7 million or less than 1 percent in 2001 and $40.3 million or 7 percent in
2000. Income tax expense for 2001 also reflected a one percent reduction in the
Company's effective state income tax rate from 2000. State income tax expense
for 2000 included the effects of certain gain transactions taxed in states with
statutory rates that exceeded ALLTEL's overall state tax rates for its
communications operations. Net of the related federal and state tax effects, the
increase in income tax expense in 2000 was consistent with the overall growth in
ALLTEL's earnings from continuing operations excluding special charges and
unusual items.

Average Common Shares Outstanding

The average number of common shares outstanding decreased 1 percent in
2001, primarily due to the Company's repurchase of 3.3 million of its common
shares. The effect on the average number of common shares outstanding resulting
from the repurchase of stock was partially offset by 0.7 million shares issued
upon the exercise of options granted under employee stock option plans. The
average number of common shares outstanding increased 1 percent in 2000. Shares
issued in connection with acquisitions completed in 2000 totaled 0.7 million
shares, and common shares issued through stock option plans totaled 0.9 million
shares. These increases were offset by the Company's repurchase on the open
market of nearly 3.0 million of its common shares.

FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

|(Millions, except per share amounts) | 2001                                      | 2000       | 1999       
|------------------------------------ | ----------------------------------------- | ---------- | -----------
|Cash flows from (used in):           |                                           |            |            
|                                     | Operating activities                      | $2,070.5   | $ 1,496.3  
|                                     | Investing activities                      | (570.3)    | (1,264.3)  
|                                     | Financing activities                      | (1,476.7)  | (183.4)    
|                                     | Effect of exchange rate changes           | (5.4)      | 1.0        
|                                     | Change in cash and short-term investments | $     18.1 | $      49.6
|Total capital structure              | $ 9,480.2                                 | $ 9,776.8  | $ 8,028.9  
|Percent equity to total capital      | 58.7%                                     | 52.1%      | 52.4%      
|Interest coverage ratio              | 6.14x                                     | 5.66x      | 5.92x      
|Book value per share                 | $17.92                                    | $16.28     | $13.38     
|                                    

Cash Flows from Operations

Cash provided from operations continued to be ALLTEL's primary source of
funds. Cash provided from operations in all three years reflected growth in
earnings of the Company before depreciation and amortization, interest expense,
income taxes and special charges and unusual charges. The increase in 2001
resulting from earnings growth was partially offset by changes in working
capital requirements, including timing differences in the receipt and payment of
trade receivables and payables. Cash provided from operations in 2000 was
adversely affected by working capital changes, including timing differences in
the billing and collection of accounts receivable and additional income tax
payments primarily associated with gains realized from the exchange of wireless
assets and the sale of WorldCom stock.

Cash Flows Used in Investing Activities

Capital expenditures continued to be ALLTEL's primary use of capital
resources. Capital expenditures were $1,231.9 million in 2001, $1,164.7 million
in 2000 and $1,006.5 million in 1999. During each of the past three years, the
Company funded most of its capital expenditures through internally generated
funds. Capital expenditures were incurred primarily

F-14

to construct additional network facilities and to deploy digital wireless
technology in select markets. Capital expenditures were also incurred to upgrade
ALLTEL's telecommunications network in order to offer other communications
services including long-distance, Internet and local competitive access
services. The Company expects capital expenditures to be approximately $1.2
billion for 2002, which will be funded primarily from internally generated
funds.

Cash flows from investing activities for 2001 included $524.4 million of
advance lease payments received from American Tower Corporation for the leasing
of cell site towers. As further discussed in Note 14 to the consolidated
financial statements, in December 2000, ALLTEL signed an agreement to lease
American Tower Corporation certain of the Company's cell site towers in exchange
for cash. In turn, ALLTEL will pay American Tower a monthly fee per tower for
management and maintenance services for the duration of the agreement. As of
December 31, 2001, the Company had closed on 1,748 towers.

Cash flows used in investing activities for 2001 included cash outlays of
$217.5 million for the purchase of property, principally consisting of a $190.7
million deposit paid by ALLTEL in connection with the Company's pending purchase
of wireline properties in Kentucky, as previously discussed. This deposit is
forfeitable if the Company fails to meet certain financing or other commitments.
Cash flows used in investing activities for 2000 included $1,040.0 million of
cash outlays for the acquisition of property. This amount principally consisted
of $624.3 million paid by ALLTEL in connection with the wireless transaction
with Bell Atlantic completed in April 2000 and $387.6 million paid by ALLTEL in
October 2000 to acquire wireless properties in Louisiana, as previously
discussed. Also during 2000, the Company acquired additional ownership interests
in wireless properties in Florida and Georgia and purchased two privately held
companies serving the financial services industry. In connection with these
acquisitions, the Company paid $28.1 million in cash and issued approximately
730,000 shares of ALLTEL common stock. Cash outlays for the acquisition of
property in 1999 were $99.9 million. This amount was net of cash acquired of
approximately $24.1 million received in the Standard acquisition, and
principally consisted of cash outlays of $46.5 million for a wireless property
in Colorado, $30.6 million for a wireless property in Illinois and $20.0 million
for a wireless property in Alabama. In addition to these acquisitions, the
Company paid $12.1 million for the remaining ownership interest in a wireless
property in Nebraska in which the Company already owned a controlling interest.

Cash flows from investing activities for 2001 included $411.4 million of
proceeds from the sale of assets, principally consisting of $410.1 million
received by ALLTEL from the sale of 20 PCS licenses, as previously discussed.
Cash flows from investing activities for 2000 included $328.9 million of
proceeds from the sale of assets. These amounts consisted of $216.9 million
received by ALLTEL to complete the exchange of wireless assets with GTE in June
2000 and $112.0 million received from the sale of PCS assets in Birmingham and
Mobile, Ala. and PCS licenses in nine other markets including Pensacola, Fla.,
as previously discussed. Cash flows from investing activities for 2000 and 1999
included proceeds from the sale of investments of $630.3 million and $45.0
million. These amounts included proceeds of $595.8 million and $45.0 million,
respectively, received from the sale of ALLTEL's investment in WorldCom common
stock. Cash flows from investing activities also included proceeds from the
return on investments of $54.8 million in 2001, $94.2 million in 2000 and $87.8
million in 1999. These amounts primarily consisted of cash distributions
received from ALLTEL's wireless minority investments. The significant decrease
in distributions received in 2001 primarily reflected the sale of certain
minority investments to Bell Atlantic and GTE, as previously discussed.

The proceeds received in 2001 from the asset sales and the leasing of cell
site towers were used primarily to reduce borrowings under the Company's
commercial paper program. The proceeds received in 2000 and 1999 from the sales
of investments and other assets were used primarily to reduce borrowings under
the Company's commercial paper program in 2000 and the revolving credit
agreement in 1999.

Cash Flows Used in Financing Activities

Dividend payments remained a significant use of the Company's capital
resources. Common and preferred dividend payments amounted to $411.8 million in
2001, $403.0 million in 2000 and $378.2 million in 1999. The increases in each
year primarily reflected growth in the annual dividend rates on ALLTEL's common
stock. In October 2001, ALLTEL's Board of Directors approved an increase in the
quarterly common stock dividend rate from $.33 to $.34 per share. This action
raised the annual dividend rate to $1.36 per share and marked the 41st
consecutive year in which ALLTEL has increased its common stock dividend.

The Company has a $1.0 billion unsecured line of credit under a revolving
credit agreement of which $50.0 million will expire in October 2003 and $950.0
million will expire in October 2005. During 2000, the Company established a
commercial paper program with a maximum borrowing capacity of $1.25 billion.
Under this program, commercial paper borrowings are supported by the Company's
revolving credit agreement and are deducted from the amount available for
borrowing under that agreement. Accordingly, the total amount outstanding under
the commercial paper program and the

F-15

indebtedness incurred under the revolving credit agreement may not exceed
$1.25 billion. ALLTEL classifies commercial paper borrowings up to $1.0 billion
as long-term debt because the revolving credit agreement supports these
borrowings. Commercial paper borrowings outstanding as of December 31, 2001 were
$230.1 million, compared to $835.5 million outstanding as of December 31, 2000.
Commercial paper borrowings outstanding as of December 31, 2001 had a weighted
average interest rate of 2.2 percent. Borrowings in 2001 under the commercial
paper program were incurred primarily to finance the deposit delivered in
connection with the pending wireline property acquisition and to fund stock
repurchases. Additional borrowings under the commercial paper program in 2000
were incurred to finance the wireless property acquisitions, to fund the stock
repurchase plan and to retire amounts outstanding under the revolving credit
agreement. No borrowings were outstanding under the revolving credit agreement
as of December 31, 2001 and 2000, compared to $341.0 million outstanding as of
December 31, 1999.

Long-term debt issued was $835.5 million in 2000 and $298.2 million in 1999.
The commercial paper borrowings represented all of the long-term debt issued in
2000. In April 1999, ALLTEL issued $300.0 million of 6.8 percent debentures,
under a $500.0 million shelf registration statement. The net proceeds of $298.2
million were used to reduce borrowings outstanding under the revolving credit
agreement. On May 11, 2001, the Company deregistered the remaining unsold
securities under its April 1999 shelf registration statement and filed a new
shelf registration statement providing for the issuance of up to $1.0 billion in
the aggregate initial offering price of unsecured debt securities. Currently, no
debt securities have been issued under the May 2001 shelf registration
statement.

Retirements of long-term debt totaled $782.5 million in 2001, $405.9 million
in 2000 and $344.5 million in 1999. The net reduction from December 31, 2000 in
commercial paper borrowings of $605.4 million represented the majority of the
long-term debt retired in 2001. Retirements of long-term debt for 2001 also
included the early retirement of $73.5 million of high-cost debt completed in
the second quarter of 2001, as previously discussed. The net reductions from
December 31, 1999 and 1998 in revolving credit borrowings of $341.0 million and
$237.5 million, respectively, represented the majority of the long-term debt
retired in 2000 and 1999, respectively. Scheduled long-term debt retirements,
net of commercial paper and revolving credit agreement activity and the
prepayment of long-term debt, amounted to $103.6 million in 2001, $64.9 million
in 2000 and $107.0 million in 1999. (See Note 5 to the consolidated financial
statements for additional information regarding the Company's long-term debt.)

Distributions to minority investors were $117.8 million in 2001, compared to
$76.8 million in 2000 and $113.3 million in 1999. The increase in 2001 reflected
additional payments of $48.4 million, representing the minority investors' share
of the proceeds received from the leasing of cell site towers discussed above.
Distributions in 2001 and 2000 included the effects of the acquisition of the
remaining minority interests in wireless properties in Florida and Georgia and
the disposition of certain majority-owned partnerships in connection with the
property exchanges with Bell Atlantic and GTE, as previously discussed.

On July 20, 2000, ALLTEL's Board of Directors adopted a stock repurchase plan
that allowed the Company to repurchase up to 7.5 million shares of its
outstanding common stock. During 2001, ALLTEL repurchased 1.4 million of its
common shares at a total cost of $78.1 million, compared to 3.0 million common
shares repurchased at a total cost of $164.3 million in 2000. In November 2000,
the Company entered into three forward purchase contracts with a financial
institution in conjunction with the stock repurchase program. Under terms of the
contracts, the Company agreed to purchase ALLTEL common shares from the
financial institution at a specified price (the "forward price"). The
forward price was equal to the financial institution's cost to acquire the
shares plus a premium based on the net carrying cost of the shares to the
financial institution and accrued over the period that the contract was
outstanding. During the second quarter of 2001, the Company settled these
contracts by acquiring 1.9 million of its common shares at a cost of $114.2
million. Through December 31, 2001, ALLTEL had repurchased 6.3 million of the
7.5 million shares the Company was authorized to repurchase under the stock
repurchase plan.

The Company believes it has adequate operating cash flows to finance its
ongoing operating requirements including capital expenditures and the payment of
dividends. The Company's primary source for funding its pending wireline
acquisition or any future acquisitions will be its access to external capital
markets. ALLTEL's access to the capital markets include additional borrowings
available to the Company under both its $1.0 billion shelf registration
statement and $1.25 billion commercial paper program, as well as the possible
additional issuances of long-term debt and equity or equity-related securities
issued through the private placement and public debt and equity markets. The
Company and its subsidiaries expect these sources of capital to continue to be
available during 2002.







F-16

ALLTEL's commercial paper and long-term credit ratings with Moody's Investors
Service ("Moody's"), Standard & Poor's Corporation ("Standard
& Poor") and Fitch Ratings during 2001 remained unchanged from 2000 and
were Prime-1, A-1 and F1 for commercial paper, respectively and A2, A and A for
long-term credit, respectively. Factors that could affect ALLTEL's short and
long-term credit ratings would include, but not be limited to, a substantial
decline in the Company's operating results and increased debt levels relative to
operating cash flows resulting from future acquisitions or increased capital
expenditure requirements. The Company believes that using debt to finance its
purchase of the wireline properties from Verizon will not result in a
significant change to its debt to equity and interest coverage ratios and should
not adversely affect the Company's current short and long-term credit ratings.
If ALLTEL's credit ratings were to be downgraded from current levels, the
Company would incur higher interest costs on new borrowings and the Company's
access to the public capital markets could be adversely affected. A downgrade in
ALLTEL's current short or long-term credit ratings would not accelerate
scheduled principal payments of ALLTEL's existing long-term debt.

The revolving credit agreement contains various covenants and restrictions
including a requirement that, at the end of each calendar quarter, ALLTEL
maintain a long-term debt-to-capitalization ratio of less than 65 percent. For
purposes of calculating this ratio under the agreement, long-term debt would
include current maturities related to long-term debt outstanding and any
borrowings under the revolving credit agreement. As of December 31, 2001, the
Company's long-term debt to capitalization ratio was 41.3 percent. Under terms
of the revolving credit agreement, if the Company were to lose its investment
grade rating (defined as Baa3 or higher by Moody's and BBB- by Standard &
Poor's), the Company would be restricted from incurring new short-term debt.

Contractual Obligations and Commitments

Set forth below is a summary of
Company's material contractual obligations and commitments as of December 31,

2001:



|                                                 | Due in          | Due
      in   | Due in          | Due      |         
|------------------------------------------------ | --------------- | -------------- | --------------- | -------- | --------
|                                                 | One
      Year  | 2-3            | 4-5             | After 5  |         
|                                                 | or
      Less   | Years          | Years           | Years    | Total   
|(Millions)                                       |                 |                |                 |          |         
|Long-term debt,
      excluding commercial paper | $   
      51.6 | $ 
      789.4 | $  
      883.6 | $1,958.4 | $3,683.0
|Commercial paper                                 | 230.1           | -              | -               | -        | 230.1   
|Operating leases                                 | 90.1            | 122.1          | 64.0            | 93.2     | 369.4   
|Site maintenance fees
      - cell sites         | 26.0            | 56.1           | 61.8            | 396.5    | 540.4   
|Agreement to purchase
      wireline properties  | 1,716.3         | -              | -               | -        | 1,716.3 
|Total contractual obligations and commitments    | $2,114.1        | $ 
      967.6 | $1,009.4        | $2,448.1 | $6,539.2



Under the Company's long-term debt
borrowing agreements, acceleration of principal payments would occur upon
payment default, violation of debt covenants not cured within 30 days or breach
of certain other conditions set forth in the borrowing agreements. At December
31, 2001, the Company was in compliance with all of its debt covenants. There
are no provisions within the Company's leasing agreements that would trigger
acceleration of future lease payments. (See Notes 5, 8, 14 and 17 to the
consolidated financial statements for additional information regarding the
obligations and commitments listed above.)

The Company does not use securitization of trade receivables, affiliation
with special purpose entities or synthetic leases to finance its operations.
Additionally, the Company has not entered into any arrangement requiring the
Company to guarantee payment of third party debt or to fund losses of an
unconsolidated special purpose entity.

Legal Proceedings

ALLTEL is party to various legal proceedings arising in the ordinary course
of business. Although the ultimate resolution of these various proceedings
cannot be determined at this time, management of the Company does not believe
that such proceedings, individually or in the aggregate, will have a material
adverse effect on the future results of operations or financial condition of
ALLTEL. In addition, management of the Company is currently not aware of any
environmental matters that, individually or in the aggregate, would have a
material adverse effect on the consolidated financial condition or results of
operations of the Company.











F-17

Recently Issued Accounting Pronouncements

In July 2001, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 141
"Business Combinations" and SFAS No. 142 "Goodwill and Other
Intangible Assets". SFAS No. 141 requires that all business combinations
initiated after June 30, 2001 be accounted for using the purchase method of
accounting. Accordingly, the use of the pooling-of-interests method of
accounting for business combinations has been eliminated. In addition, SFAS No.
141 requires that, on the date of acquisition, identifiable intangible assets
should be recognized separate and apart from goodwill if the intangible assets
meet certain criteria. SFAS No. 142 will change the accounting for goodwill and
other indefinite lived intangible assets from an amortization method to an
impairment-only approach. Accordingly, amortization of goodwill, including
goodwill recorded in past business combinations, ceased as of January 1, 2002
for calendar year companies such as ALLTEL. Under SFAS No. 142, goodwill will be
assigned to a company's reporting units and an initial impairment test by
reporting unit must be completed by June 30, 2002.

Goodwill will be tested for impairment annually using a consistent
measurement date. Amortization of intangible assets with indefinite lives other
than goodwill also ceased as of January 1, 2002, although such intangible assets
will be required to be tested for impairment at least annually, in a manner
similar to goodwill. Intangible assets with finite lives are required to be
amortized over their estimated useful lives. Accordingly, the current 40-year
maximum estimated life specified in Accounting Principles Board
("APB") Opinion No. 17 "Intangible Assets" will no longer
apply.

The Company has determined its applicable reporting units and assigned
goodwill to them. In addition, the Company is conducting a review of its other
identifiable intangible assets to determine whether any of those assets would
meet the indefinite life criteria outlined in SFAS No. 142. By the end of the
first quarter of 2002, ALLTEL expects to complete the initial impairment review
of its indefinite-lived intangible assets, including goodwill. At this time, the
Company has not determined whether an impairment charge will be recognized upon
adoption of these standards. Accordingly, ALLTEL cannot determine the full
impact that adopting these standards will have on the Company's consolidated
financial statements other than the effects of no longer amortizing goodwill,
which will result in pretax annual expense savings of approximately $85.0
million.

In June 2001, the FASB issued SFAS No. 143 "Accounting for Asset
Retirement Obligations". SFAS No. 143 will apply to fiscal years beginning
after June 15, 2002, and will address financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. This standard applies to legal obligations
associated with the retirement of long-lived assets that result from the
acquisition, construction, development or normal use of the assets and requires
that a liability for an asset retirement obligation be recognized when incurred,
recorded at fair value and classified as a liability in the balance sheet. The
Company does not expect that this standard will have a material effect on its
consolidated financial statements.

In August 2001, the FASB issued SFAS No. 144 "Accounting for the
Impairment or Disposal of Long-Lived Assets". SFAS No. 144 applies to
fiscal years beginning after December 15, 2001, and addresses financial
accounting and reporting for the impairment or disposal of long-lived assets and
supersedes SFAS No. 121 "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of". This standard retains the
fundamental provisions of SFAS No. 121 for the recognition and measurement of an
impairment of long-lived assets to be held and used and the measurement of
long-lived assets to be disposed of by sale. SFAS No. 144 also supersedes the
accounting and reporting provisions of APB Opinion No. 30 "Reporting the
Results of Operations-Reporting the Effects of Disposal of a Segment of a
Business and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions" for the disposal of a segment of a business, but retains the
requirement of APB Opinion No. 30 to report discontinued operations separately
from continuing operations and extends that reporting obligation to a component
of an entity that either has been disposed of or is classified as held for sale.
The Company does not expect that this standard will have a material effect on
its consolidated financial statements.

Market Risk

The Company is exposed to market risk from changes in marketable equity
security prices and from changes in interest rates on its long-term debt
obligations that affect the fair value of these obligations. The Company's
financial instruments are described further in Notes 4 and 5 to the consolidated
financial statements. The Company has estimated its market risk using
sensitivity analysis. Market risk is defined as the potential change in fair
value of a financial instrument due to a hypothetical adverse change in market
prices or interest rates. Fair value for investments is determined using quoted
market prices, if available, or the carrying amount of the investment if no
quoted market price is available. Fair value of long-term debt obligations is
determined based on a discounted cash flow analysis, using the rates and
maturities of these obligations compared to terms and rates currently available
in the long-term markets. The results of the sensitivity analysis used to
estimate market risk are presented below, although the actual results may differ
from these estimates.

F-18

As of December 31, 2001 and 2000, investments of the Company were recorded at
fair value and totaled $251.6 million and $322.4 million, respectively. The
decrease in fair value primarily reflected the transfer to BellSouth of certain
minority investments in unconsolidated wireless properties resulting from the
dissolution of a partnership completed in the first quarter of 2001, as
previously discussed. Marketable equity securities totaled $19.1 million and
$13.7 million and included a net unrealized holding loss of $4.5 million and a
net unrealized holding gain of $9.7 million as of December 31, 2001 and 2000,
respectively. A hypothetical ten percent decrease in quoted market prices would
result in a $1.9 million and $1.4 million decrease in the fair value of these
securities as of December 31, 2001 and 2000, respectively.

Substantially all of the Company's long-term debt obligations are fixed rate
obligations. Changes in interest rates can result in fluctuations in the fair
value of the Company's long-term debt obligations. As of December 31, 2001 and
2000, the fair value of the Company's long-term debt was estimated to be
$3,955.7 million and $4,653.4 million, respectively. A hypothetical increase of
70 basis points (ten percent of the Company's overall weighted average borrowing
rate) would result in an approximate $140.1 million and $157.5 million decrease
in the fair value of the Company's long-term debt as of December 31, 2001 and
2000, respectively. Conversely, a hypothetical decrease of 70 basis points would
result in an approximate $150.6 million and $171.9 million increase in the fair
value of the Company's long-term debt as of December 31, 2001 and 2000,
respectively.

The Company uses derivative instruments to reduce its exposure to adverse
fluctuations in interest rates and to obtain a targeted mixture of variable and
fixed-interest-rate long-term debt, such that the portion of debt subject to
variable rates does not exceed 30 percent of the Company's total long-term debt
outstanding. The Company has established policies and procedures for risk
assessment and the approval, reporting and monitoring of derivative instrument
activities. The Company does not hold or issue derivative financial instruments
for trading purposes or enter into interest rate transactions for speculative
purposes. Management continually reviews the Company's exposure to interest rate
fluctuations and implements strategies to mitigate the exposure. During the
third quarter of 2001, the Company entered into four, pay variable receive
fixed, interest rate swap agreements on notional amounts totaling $500.0 million
to convert fixed interest rate payments to variable. As of December 31, 2001,
the fair market value of the interest rate swaps was $8.6 million. A
hypothetical increase of 70 basis points (ten percent of the Company's overall
weighted average borrowing rate) would result in an approximate $21.9 million
decrease in the fair value of the Company's interest rate swaps as of December
31, 2001. Conversely, a hypothetical decrease of 70 basis points would result in
an approximate $23.3 million increase in the fair value of the Company's
interest rate swaps as of December 31, 2001.

The Company's business operations in foreign countries are not material to
the Company's consolidated operations, financial condition and liquidity.
Foreign currency translation gains and losses were not material to the Company's
consolidated results of operations for the years ended December 31, 2001 and
2000. Additionally, the Company is not currently subject to material foreign
currency exchange rate risk from the effects that exchange rate movements of
foreign currency would have on the Company's future costs or on future cash
flows it would receive from its foreign subsidiaries. The Company has not
entered into any significant foreign currency forward exchange contracts or
other derivative financial instruments to hedge the effects of adverse
fluctuations in foreign currency exchange rates.

Critical Accounting Policies

ALLTEL prepares its consolidated financial statements in accordance with
accounting principles generally accepted in the United States. ALLTEL's
significant accounting policies are discussed in detail in Note 1 to the
consolidated financial statements. Certain of these accounting policies as
discussed below require management to make estimates and assumptions about
future events that could materially affect the reported amounts of assets,
liabilities, revenues and expenses and disclosure of contingent assets and
liabilities. Certain fees assessed to communications customers to activate
service are deferred and recognized over the expected life of the customer
relationship which is based on historical weighted average service lives of
customers. ALLTEL does not anticipate any significant changes to the expected
life of its communications customer base, but a material increase in the churn
rates associated with the customer base could materially affect the Company's
future consolidated operating results. The percentage-of-completion method of
accounting is utilized for long-term information services contracts that include
a software license element. Under this method, revenue and profit are recognized
throughout the term of the contract, based upon estimates of the total costs to
be incurred and revenues to be generated throughout the term of the contract.
Changes in estimates for revenues, costs and profits are recognized in the
period in which they are determinable, and such changes have occurred in the
past and have been material. Accordingly, changes in revenue, cost and profit
estimates related to the Company's long-term contracts could occur and have a
material effect on the Company's consolidated operating results in the period of
change.





F-19

In evaluating the collectibility of its trade receivables, ALLTEL assesses a
number of factors including a specific customer's ability to meet its financial
obligations to the Company, as well as general factors, such as the length of
time the receivables are past due and historical collection experience. Based on
these assessments, the Company records both specific and general reserves for
bad debt to reduce the related receivables to the amount the Company ultimately
expects to collect from customers. If circumstances related to specific
customers change or economic conditions worsen such that the Company's past
collection experience is no longer relevant, ALLTEL's estimate of the
recoverability of its trade receivables could be further reduced from the levels
provided for in the consolidated financial statements.

At each balance sheet date, ALLTEL performs a detailed assessment of its
capitalized software development costs to be marketed which includes a review
of, among other factors, projected revenues, customer demand requirements,
product lifecycle, changes in software and hardware technologies, and product
development plans. Based on this analysis, ALLTEL records adjustments, when
appropriate, to reflect the net realizable value of its capitalized software
development costs. The estimates of expected future revenues generated by the
software, the remaining economic life of the software, or both, could be reduced
in the near term, materially affecting the carrying value of capitalized
software development costs and the Company's consolidated operating results in
the period of change.

The calculation of depreciation and amortization expense is based on the
estimated economic useful lives of the underlying property, plant and equipment
and intangible assets. Although ALLTEL believes it is unlikely that any
significant changes to the useful lives of its tangible or intangible assets
will occur in the near term, rapid changes in technology, the discontinuance of
accounting under SFAS No. 71 by the Company's wireline subsidiaries, or changes
in market conditions could result in revisions to such estimates that could
materially affect the carrying value of these assets and the Company's future
consolidated operating results.

Forward-Looking Statements

This Management's Discussion and Analysis of Financial Condition and Results
of Operations includes, and future filings by the Company on Form 10-K, Form
10-Q and Form 8-K and future oral and written statements by ALLTEL and its
management may include, certain "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors that could cause ALLTEL's actual results to be materially
different from historical results or from any future results expressed or
implied by such forward-looking statements. The factors that could cause actual
results of ALLTEL or a combined ALLTEL and CenturyTel, Inc. ("CenturyTel")
to differ materially, many of which are beyond the control of ALLTEL include,
but are not limited to, the following: (1) the businesses of ALLTEL and
CenturyTel may not be integrated successfully or such integration may be more
difficult, time-consuming or costly than expected; (2) expected benefits and
synergies from the combination may not be realized within the expected time
frame or at all; (3) revenues following the transaction may be lower than
expected; (4) operating costs, customer loss and business disruption including,
without limitation, difficulties in maintaining relationships with employees,
customers or suppliers, may be greater than expected following the transaction;
(5) generating the incremental growth in the customer base of the combined
company may be more costly or difficult than expected; (6) the regulatory
approvals required for the transaction may not be obtained on the terms expected
or on the anticipated schedule; (7) the effects of legislative and regulatory
changes; (8) the introduction of new technologies and competitors; (9) changes
in labor, equipment and capital costs; (10) future acquisitions, strategic
partnerships and divestitures; (11) general business and economic conditions;
and (12) other risks described from time to time in ALLTEL's and CenturyTel's
periodic reports filed with the Securities and Exchange Commission.

You are urged to consider statements that include the words "may,"
"will," "would," "could," "should,"
"believes," "estimates," "projects,"
"potential," "expects," "plans,"
"anticipates," "intends," "continues" or the
negative or other forms of those words or other comparable words to be uncertain
and forward-looking. This cautionary statement applies to all forward-looking
statements contained in this Management's Discussion and Analysis of Financial
Condition and Results of Operations. The Company disclaims any obligation to
update or revise any forward-looking statement based on the occurrence of future
events, the receipt of new information, or otherwise.















F-20







REPORT OF MANAGEMENT



ALLTEL Corporation's management is responsible for the integrity and
objectivity of all financial data included in this Financial Supplement. The
consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the United States. The financial
data includes amounts that are based on the best estimates and judgments of
management. All financial information in this Financial Supplement is consistent
with that in the consolidated financial statements.

The Company maintains an accounting system and related internal accounting
controls designed to provide reasonable assurance that assets are safeguarded
against loss or unauthorized use and that the financial records are adequate and
can be relied upon to produce financial statements in accordance with accounting
principles generally accepted in the United States. Arthur Andersen LLP,
Independent Public Accountants, have audited these consolidated financial
statements and have expressed herein their unqualified opinion.

The Company diligently attempts to select qualified managers, to provide
appropriate division of responsibility and to assure that its policies and
standards are understood throughout the organization. The Company's Ethics in
the Workplace Program serves as a guide for all employees with respect to
business conduct and conflicts of interest.

The Audit Committee of the Board of Directors, composed of independent
directors (as defined by the New York Stock Exchange), meets periodically with
management, the independent accountants and the internal auditors to review
matters relating to the Company's annual financial statements, internal audit
program, internal accounting controls and non-audit services provided by the
independent accountants. As a matter of policy, the internal auditors and the
independent accountants periodically meet alone with the Audit Committee and
have access to the Audit Committee at any time.



|Scott
      T. Ford           |  | Jeffery
      R. Gardner     
|----------------------------- |  | -----------------------------
|President
      and           |  | Senior
      Vice President- 
|Chief
      Operating Officer |  | Chief
      Financial Officer









































F-21







REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



To the Shareholders of ALLTEL Corporation:



We have audited the accompanying consolidated balance sheets of ALLTEL
Corporation (a Delaware corporation) and subsidiaries as of December 31, 2001
and 2000, and the related consolidated statements of income, shareholders'
equity and cash flows for each of the three years in the period ended December
31, 2001. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits 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 financial statements referred to above present fairly, in
all material respects, the financial position of ALLTEL Corporation and
subsidiaries as of December 31, 2001 and 2000, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2001, in conformity with accounting principles generally accepted
in the United States.

As explained in Note 2 to the financial statements, effective January 1,
2001, the Company changed its method of accounting for computing and amortizing
unrecognized actuarial gains and losses related to a subsidiary's defined
benefit pension plan, and effective January 1, 2000, the Company changed its
method of accounting for certain communications revenues.



/s/ARTHUR ANDERSEN LLP

Little Rock, Arkansas,

January 21, 2002









































F-22

SELECTED FINANCIAL DATA

|For
      the years ended December 31,                      |                                      |                   |                   |                   |                    |                
|----------------------------------------------------------- | ------------------------------------ | ----------------- | ----------------- | ----------------- | ------------------ | ---------------
|(Millions,
      except per share amounts)                  | 2001                                 | 2000              | 1999              | 1998              | 1997               | 1996           
|Revenues
      and sales                                    | $ 7,598.9                            | $
      7,253.9   | $
      6,582.6   | $
      5,874.8   | $
      5,160.4    | $
      4,815.1
|Operating
      expenses                                    | 5,842.0                              | 5,561.0           | 4,967.0           | 4,541.9           | 4,014.3            | 3,785.8        
|Merger
      and integration expenses                       |                                      |                   |                   |                   |                    |                
|                                                            | and other
      charges              | 92.2              | 25.4              | 90.5              | 252.0              | -              
|Provision
      to reduce carrying                          |                                      |                   |                   |                   |                    |                
|                                                            | value of
      certain assets        | -                 | -                 | -                 | 55.0               | 16.9           
|                                                            | Total
      costs and expenses       | 5,934.2           | 5,586.4           | 5,057.5           | 4,848.9            | 4,031.2        
|Operating
      income                                      | 1,664.7                              | 1,667.5           | 1,525.1           | 1,025.9           | 1,129.2            | 909.0          
|Non-operating
      income, net                             | 18.4                                 | 65.5              | 42.8              | 64.7              | 22.5               | 13.1           
|Interest
      expense                                      | (288.9)                              | (310.8)           | (280.2)           | (278.4)           | (274.9)            | (250.8)        
|Gain
      (loss) on disposal of assets and other           | 357.6                                | 1,928.5           | 43.1              | 292.7             | 209.6              | (2.3)          
|Income before income
      taxes                            | 1,751.8                              | 3,350.7           | 1,330.8           | 1,104.9           | 1,086.4            | 669.0          
|Income
      taxes                                          | 704.3                                | 1,385.3           | 547.2             | 501.8             | 433.9              | 262.3          
|Income
      before cumulative effect                       |                                      |                   |                   |                   |                    |                
|                                                            | of
      accounting change           | 1,047.5           | 1,965.4           | 783.6             | 603.1              | 652.5          
|Cumulative effect of
      accounting change                | 19.5                                 | (36.6)            | -                 | -                 | -                  | -              
|Net
      income                                            | 1,067.0                              | 1,928.8           | 783.6             | 603.1             | 652.5              | 406.7          
|Preferred
      dividends                                   | 0.1                                  | 0.1               | 0.9               | 1.2               | 1.3                | 1.3            
|Net
      income applicable to common shares                | $ 
      1,066.9                     | $ 
      1,928.7  | $  
      782.7   | $  
      601.9   | $ 
      651.2     | $ 
      405.4 
|Earnings
      per share:                                   |                                      |                   |                   |                   |                    |                
|Income
      before cumulative effect of accounting change: |                                      |                   |                   |                   |                    |                
|                                                            | Basic                                | $3.36             | $6.25             | $2.50             | $1.97              | $2.12          
|                                                            | Diluted                              | $3.34             | $6.20             | $2.47             | $1.95              | $2.10          
|Net income:                                                 |                                      |                   |                   |                   |                    |                
|                                                            | Basic                                | $3.42             | $6.13             | $2.50             | $1.97              | $2.12          
|                                                            | Diluted                              | $3.40             | $6.08             | $2.47             | $1.95              | $2.10          
|Dividends
      per common share                            | $1.33                                | $1.29             | $1.235            | $1.175            | $1.115             | $1.055         
|Weighted
      average common shares:                       |                                      |                   |                   |                   |                    |                
|                                                            | Basic                                | 311.4             | 314.4             | 312.8             | 305.3              | 307.9          
|                                                            | Diluted                              | 313.5             | 317.2             | 316.8             | 308.4              | 309.9          
|Pro
      forma amounts assuming accounting                 |                                      |                   |                   |                   |                    |                
|                                                            | changes
      applied retroactively: |                   |                   |                   |                    |                
|                                                            | Net income                           | $  
      1,047.5 | $  
      1,969.5 | $    
      766.9 | $    
       595.9 | $    652.1     
|                                                            | Basic earnings per share             | $3.36             | $6.26             | $2.45             | $1.95              | $2.11          
|                                                            | Diluted earnings per share           | $3.34             | $6.21             | $2.42             | $1.93              | $2.10          
|Total
      assets                                          | $
      12,609.0                     | $
      12,182.0  | $10,774.2         | $
      10,155.5  | $
      9,232.0    | $
      8,799.6
|Total
      shareholders' equity                            | $  
      5,565.8                    | $  
      5,095.4 | $ 
      4,205.7  | $  
      3,632.0 | $
      3,052.0    | $
      2,865.2
|Total redeemable
      preferred                            |                                      |                   |                   |                   |                    |                
|                                                            | stock and long-term debt             | $  
      3,862.8 | $  
      4,613.1 | $ 
      3,751.9  | $  
      3,683.6  | $
      3,859.8

> Notes:
> A. Net income for 2001 included pretax gains of $347.8 million from the sale
> of PCS licenses, a pretax gain of $9.5 million from the dissolution of a
> wireless partnership and a pretax gain of $3.2 million from the sale of certain
> investments. Net income also included pretax termination fees of $2.9 million
> incurred due to the early retirement of debt. These transactions increased net
> income $212.7 million or $.68 per share. (See Note 10.) Net income also included
> pretax charges of $77.1 million incurred in connection with the restructuring of
> the Company's regional communications, information services, product
> distribution and corporate operations. The Company also recorded write-downs in
> the carrying value of certain cell site equipment totaling $15.1 million. These
> charges decreased net income $54.8 million or $.18 per share. (See Note 9.)
> Effective January 1, 2001, the Company changed its method of accounting for a
> subsidiary's pension plan to conform to the Company's primary pension plan. The
> cumulative effect of this accounting change resulted in a non-cash credit of
> $19.5 million, net of income tax expense of $13.0 million or $.06 per share.
> (See Note 2.)
> B. Net income for 2000 included pretax gains of $1,345.5 million from the
> exchange of wireless properties with Bell Atlantic and GTE, pretax gains of
> $36.0 million from the sale of certain PCS assets and pretax gains of $562.0
> million from the sale of investments, principally consisting of WorldCom common
> stock. Net income also included a pretax write-down of $15.0 million in the
> Company's investment in an Internet access service provider. These transactions
> increased net income $1,124.3 million or $3.58 per share. (See Note 10.) Net
> income also included integration costs and other charges of $25.4 million
> primarily incurred in connection with the acquisition of wireless assets and
> with certain restructuring activities of the Company's information services
> business. These charges decreased net income $15.0 million or $.05 per share.
> (See Note 9.) The Company also incurred a pretax charge of $11.5 million in
> connection with a litigation settlement. This charge decreased net income $7.0
> million or $.02 per share. (See Note 13.) Effective January 1, 2000, the Company
> changed its method of recognizing wireless access revenues and certain customer
> activation fees. The cumulative effect of this accounting change resulted in a
> non-cash charge of $36.6 million, net of income tax benefit of $23.3 million or
> $.12 per share. (See Note 2.)
> C. Net income for 1999 included a pretax gain of $43.1 million from the sale
> of WorldCom common stock. The gain increased net income by $27.2 million or $.08
> per share. (See Note 10). Net income also included a pretax charge of $90.5
> million in connection with the closing of the Company's mergers with Aliant
> Communications Inc., Liberty Cellular, Inc. and its affiliate KINI L.C.,
> Advanced Information Resources, Limited and Southern Data Systems and with
> certain loss contingencies and other restructuring activities. These charges
> decreased net income $66.1 million or $.21 per share. (See Note 9.)
> D. Net income for 1998 included pretax gains of $296.2 million from the sale
> of certain investments, principally consisting of WorldCom common stock. These
> gains increased net income by $179.7 million or $.59 per share. Net income also
> included merger and integration expenses of $252.0 million related to the
> closing of the merger with 360 Communications Company. These merger and
> integration expenses decreased net income $201.0 million or $.66 per share. Net
> income also included a pretax charge of $55.0 million resulting from changes in
> a customer care and billing contract with a major customer and termination fees
> of $3.5 million incurred due to the early retirement of long-term debt. These
> charges decreased net income $35.7 million or $.12 per share.
> E. Net income for 1997 included pretax gains of $209.6 million from the sale
> of certain investments, principally consisting of WorldCom common stock and from
> the sale of the Company's healthcare operations. These gains increased net
> income by $121.5 million or $.40 per share. Net income also included a pretax
> write-down of $16.9 million to reflect the fair value less cost to sell the
> Company's wire and cable operations. This write-down decreased net income $11.7
> million or $.04 per share.
> F. Net income for 1996 included pretax write-downs of $120.3 million to
> adjust the carrying value of certain software and other assets. The write-downs
> decreased net income $72.7 million or $.23 per share.

F-23



CONSOLIDATED STATEMENTS OF INCOME

For the years ended
December 31,

|(Millions,
      except per share amounts)                 | 2001                                                    | 2000                                                       | 1999         
|---------------------------------------------------------- | ------------------------------------------------------- | ---------------------------------------------------------- | -------------
|Revenues
      and sales:                                  |                                                         |                                                            |              
|                                                           | Services revenues                                       | $6,830.1                                                   | $6,419.6     
|                                                           | Product sales                                           | 768.8                                                      | 834.3        
|                                                           | Total revenues and
      sales                          | 7,598.9                                                    | 7,253.9      
|                                                           |                                                         |                                                            |              
|Costs
      and expenses:                                  |                                                         |                                                            |              
|                                                           | Operations                                              | 3,766.4                                                    | 3,732.5      
|                                                           | Cost of products sold                                   | 907.9                                                      | 840.1        
|                                                           | Depreciation and
      amortization                     | 1,167.7                                                    | 988.4        
|                                                           | Merger and integration
      expenses and other charges | 92.2                                                       | 25.4         
|                                                           | Total costs and
      expenses                          | 5,934.2                                                    | 5,586.4      
|                                                           |                                                         |                                                            |              
|Operating
      income                                     | 1,664.7                                                 | 1,667.5                                                    | 1,525.1      
|                                                           |                                                         |                                                            |              
|Equity
      earnings in unconsolidated partnerships       | 57.0                                                    | 120.5                                                      | 105.0        
|Minority
      interest in consolidated partnerships       | (71.8)                                                  | (97.2)                                                     | (116.6)      
|Other
      income, net                                    | 33.2                                                    | 42.2                                                       | 54.4         
|Interest
      expense                                     | (288.9)                                                 | (310.8)                                                    | (280.2)      
|Gain on
      disposal of assets and other                 | 357.6                                                   | 1,928.5                                                    | 43.1         
|                                                           |                                                         |                                                            |              
|Income
      before income taxes                           | 1,751.8                                                 | 3,350.7                                                    | 1,330.8      
|Income
      taxes                                         | 704.3                                                   | 1,385.3                                                    | 547.2        
|                                                           |                                                         |                                                            |              
|Income
      before cumulative effect of accounting change | 1,047.5                                                 | 1,965.4                                                    | 783.6        
|Cumulative
      effect of accounting change               |                                                         |                                                            |              
|                                                           | (net of
      income taxes of $13.0 in 2001 and         |                                                            |              
|                                                           | tax
      benefit of $23.3 in 2000)                     | 19.5                                                       | (36.6)       
|                                                           |                                                         |                                                            |              
|Net income                                                 | 1,067.0                                                 | 1,928.8                                                    | 783.6        
|Preferred
      dividends                                  | 0.1                                                     | 0.1                                                        | 0.9          
|Net income
      applicable to common shares               | $1,066.9                                                | $1,928.7                                                   | $
      782.7
|                                                          
|Earnings
      per share:                                  |                                                         |                                                            |              
|                                                           | Basic:                                                  |                                                            |              
|                                                           |                                                         | Income before
      cumulative effect of accounting change | $3.36        
|                                                           |                                                         | Cumulative effect of
      accounting change               | .06          
|                                                           |                                                         | Net income                                                 | $3.42        
|                                                           |                                                         |                                                            |              
|                                                           | Diluted:                                                |                                                            |              
|                                                           |                                                         | Income before
      cumulative effect of accounting change | $3.34        
|                                                           |                                                         | Cumulative effect of
      accounting change               | .06          
|                                                           |                                                         | Net income                                                 | $3.40        

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



F-24

CONSOLIDATED BALANCE SHEETS

December
31,

(Dollars
in millions, except per share amounts)

|                                                 |                                                                                   |                                                 
|------------------------------------------------ | --------------------------------------------------------------------------------- | ------------------------------------------------
|Assets                                           | 2001                                                                              | 2000                                            
|Current
      Assets:                            |                                                                                   |                                                 
|                                                 | Cash
      and short-term investments                                             | $   
      85.3                                 
|                                                 | Accounts
      receivable (less allowance for doubtful                            |                                                 
|                                                 |                                                                                   | accounts
      of $52.2  and $52.7, respectively
|                                                 | Inventories                                                                       | 163.8                                           
|                                                 | Prepaid
      expenses and other                                                  | 277.5                                           
|                                                 | Total
      current assets                                                        | 1,767.8                                         
|Investments                                      | 251.6                                                                             | 322.4                                           
|Goodwill
      and other intangibles, net        | 3,432.1                                                                           | 3,242.1                                         
|Property,
      Plant and Equipment:             |                                                                                   |                                                 
|                                                 | Land                                                                              | 239.8                                           
|                                                 | Buildings
      and improvements                                                  | 1,051.4                                         
|                                                 | Wireline                                                                          | 5,501.3                                         
|                                                 | Wireless                                                                          | 4,160.6                                         
|                                                 | Information
      services                                                        | 1,166.8                                         
|                                                 | Other                                                                             | 578.0                                           
|                                                 | Under
      construction                                                          | 384.1                                           
|                                                 | Total
      property, plant and equipment                                         | 13,082.0                                        
|                                                 | Less
      accumulated depreciation                                               | 6,300.7                                         
|                                                 | Net
      property, plant and equipment                                           | 6,781.3                                         
|Other
      assets                               | 376.2                                                                             | 287.8                                           
|Total
      Assets                               | $12,609.0                                                                         | $12,182.0                                       
|                                                 |                                                                                   |                                                 
|                                                 |                                                                                   |                                                 
|Liabilities
      and Shareholders' Equity       |                                                                                   |                                                 
|Current
      Liabilities:                       |                                                                                   |                                                 
|                                                 | Current
      maturities of long-term debt                                        | $     
      51.6                               
|                                                 | Accounts
      payable                                                            | 522.1                                           
|                                                 | Advance
      payments and customer deposits                                      | 218.0                                           
|                                                 | Accrued
      taxes                                                               | 141.0                                           
|                                                 | Accrued
      dividends                                                           | 105.9                                           
|                                                 | Other
      current liabilities                                                   | 246.5                                           
|                                                 | Total
      current liabilities                                                   | 1,285.1                                         
|Long-term
      debt                             | 3,861.5                                                                           | 4,611.7                                         
|Deferred
      income taxes                      | 738.0                                                                             | 217.0                                           
|Other
      liabilities                          | 1,158.6                                                                           | 742.0                                           
|Shareholders'
      Equity:                      |                                                                                   |                                                 
|                                                 | Preferred
      stock, Series C, $2.06, no par value, issued and outstanding:     |                                                 
|                                                 | 16,880
      shares in 2001 and 19,471 shares in 2000                             | 0.4                                             
|                                                 | Common
      stock, par value $1 per share, 1.0 billion shares authorized, issued |                                                 
|                                                 | and outstanding: 310,529,902 shares in 2001 and 312,983,882 shares in 2000        | 310.5                                           
|                                                 | Additional
      paid-in capital                                                  | 769.2                                           
|                                                 | Unrealized
      holding gain (loss) on investments                               | (4.5)                                           
|                                                 | Foreign
      currency translation adjustment                                     | (9.9)                                           
|                                                 | Retained
      earnings                                                           | 4,500.1                                         
|                                                 | Total
      shareholders' equity                                                  | 5,565.8                                         
|Total
      Liabilities and Shareholders' Equity | $12,609.0                                                                         | $12,182.0                                       



The accompanying notes are an integral part of these
consolidated balance sheets.



F-25

CONSOLIDATED STATEMENTS OF CASH FLOWS

|For the
      years ended December 31,                                   |                                                    |                                                           |                                                        
|------------------------------------------------------------------------ | -------------------------------------------------- | --------------------------------------------------------- | -------------------------------------------------------
|(Millions)                                                               | 2001                                               | 2000                                                      | 1999                                                   
|                                                                         |                                                    |                                                           |                                                        
|Cash
      Provided from Operations:                                     |                                                    |                                                           |                                                        
|                                                                         |                                                    | Net
      Income                                          | $1,067.0                                               
|                                                                         |                                                    | Adjustments
      to reconcile net income to net cash     |                                                        
|                                                                         |                                                    | provided from operations:                                 |                                                        
|                                                                         |                                                    |                                                           | Depreciation
      and amortization                    
|                                                                         |                                                    |                                                           | Provision
      for doubtful accounts                  
|                                                                         |                                                    |                                                           | Cumulative
      effect of accounting change           
|                                                                         |                                                    |                                                           | Merger and
      integration expenses and other charges
|                                                                         |                                                    |                                                           | Gain
      on disposal of assets and other             
|                                                                         |                                                    |                                                           | Increase
      in deferred income taxes                
|                                                                         |                                                    |                                                           | Other, net                                             
|                                                                         | Changes
      in operating assets and liabilities, |                                                           |                                                        
|                                                                         | net of effects of
acquisitions:                    |                                                           |                                                        
|                                                                         |                                                    |                                                           | Accounts
      receivable                              
|                                                                         |                                                    |                                                           | Inventories                                            
|                                                                         |                                                    |                                                           | Accounts
      payable                                 
|                                                                         |                                                    |                                                           | Other
      current liabilities                        
|                                                                         |                                                    |                                                           | Other, net                                             
|                                                                         |                                                    | Net cash provided from operations                         | 2,070.5                                                
|Cash
      Flows Used in Investing Activities:                           |                                                    |                                                           |                                                        
|                                                                         |                                                    | Additions
      to property, plant and equipment          | (1,231.9)                                              
|                                                                         |                                                    | Additions
      to capitalized software development costs | (171.4)                                                
|                                                                         |                                                    | Additions
      to investments                            | (5.3)                                                  
|                                                                         |                                                    | Purchases
      of property, net of cash acquired         | (217.5)                                                
|                                                                         |                                                    | Proceeds
      from the lease of cell site towers         | 524.4                                                  
|                                                                         |                                                    | Proceeds
      from the sale of assets                    | 411.4                                                  
|                                                                         |                                                    | Proceeds
      from the sale of investments               | 2.6                                                    
|                                                                         |                                                    | Proceeds
      from the return on investments             | 54.8                                                   
|                                                                         |                                                    | Other, net                                                | 62.6                                                   
|                                                                         |                                                    | Net cash used in investing activities                     | (570.3)                                                
|Cash
      Flows Used in Financing Activities:                           |                                                    |                                                           |                                                        
|                                                                         |                                                    | Dividends
      on preferred and common stock             | (411.8)                                                
|                                                                         |                                                    | Reductions
      in long-term debt                        | (782.5)                                                
|                                                                         |                                                    | Purchases
      of common stock                           | (192.3)                                                
|                                                                         |                                                    | Preferred
      stock redemptions and purchases           | (0.1)                                                  
|                                                                         |                                                    | Distributions
      to minority investors                 | (117.8)                                                
|                                                                         |                                                    | Long-term debt
      issued                               | -                                                      
|                                                                         |                                                    | Common
      stock issued                                 | 27.8                                                   
|                                                                         |                                                    | Net cash used in financing activities                     | (1,476.7)                                              
|Effect
      of exchange rate changes on cash and short-term investments | (5.4)                                              | 1.0                                                       | 0.1                                                    
|                                                                         |                                                    |                                                           |                                                        
|Increase
      (decrease) in cash and short-term investments             | 18.1                                               | 49.6                                                      | (71.5)                                                 
|Cash
      and Short-term Investments:                                   |                                                    |                                                           |                                                        
|                                                                         |                                                    | Beginning
      of the year                               | 67.2                                                   
|                                                                         |                                                    | End of the
      year                                     | $   
      85.3                                        
|                                                                         |                                                    |                                                           |                                                        
|Supplemental
      Cash Flow Disclosures:                                |                                                    |                                                           |                                                        
|                                                                         |                                                    | Interest
      paid, net of amounts capitalized           | $ 
      289.0                                         
|                                                                         |                                                    | Income
      taxes paid                                   | $ 
      515.7                                         



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

F-26









CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(Millions)

|                                   |                                                   |           |            | Unrealized    | Foreign     |          |         
|---------------------------------- | ------------------------------------------------- | --------- | ---------- | ------------- | ----------- | -------- | --------
|                                   |                                                   |           | Additional | Holding Gain  | Currency    |          |         
|                                   | Preferred                                         | Common    | Paid-In    | (Loss) On     | Translation | Retained |         
|                                   | Stock                                             | Stock     | Capital    | Investments   | Adjustment  | Earnings | Total   
|Balance at
      December 31, 1998 | $9.1                                              | $306.0    | $919.0     | $554.3        | $(5.6)      | $1,849.2 | $3,632.0
|                                   | Net income                                        | -         | -          | -             | -           | -        | 783.6   
|                                   | Other comprehensive
      income,                 |           |            |               |             |          |         
|                                   | net of tax:(see
    Note 12)                      |           |            |               |             |          |         
|                                   | Unrealized
      holding gains on investments,    |           |            |               |             |          |         
|                                   | net of reclassification adjustments               | -         | -          | -             | 45.3        | -        | -       
|                                   | Foreign
      currency translation adjustment     | -         | -          | -             | -           | 0.1      | -       
|                                   | Comprehensive income                              | -         | -          | -             | 45.3        | 0.1      | 783.6   
|                                   | Acquisition of subsidiaries                       | -         | 6.5        | 16.3          | -           | -        | 80.5    
|                                   | Employee plans, net                               | -         | 1.7        | 37.9          | -           | -        | -       
|                                   | Conversion of
      preferred stock               | -         | 0.1        | 0.1           | -           | -        | -       
|                                   | Redemption of
      preferred stock               | (8.5)     | -          | -             | -           | -        | -       
|                                   | Dividends:                                        |           |            |               |             |          |         
|                                   |                                                   | Common    | -          | -             | -           | -        | -       
|                                   |                                                   | Preferred | -          | -             | -           | -        | -       
|Balance at
      December 31, 1999 | $0.6                                              | $314.3    | $973.3     | $599.6        | $(5.5)      | $2,323.4 | $4,205.7
|                                   | Net income                                        | -         | -          | -             | -           | -        | 1,928.8 
|                                   | Other comprehensive
      loss,                   |           |            |               |             |          |         
|                                   | net of tax:(see
    Note 12)                      |           |            |               |             |          |         
|                                   | Unrealized
      holding losses on investments,   |           |            |               |             |          |         
|                                   | net of reclassification adjustments               | -         | -          | -             | (589.9)     | -        | -       
|                                   | Foreign
      currency translation adjustment     | -         | -          | -             | -           | 1.0      | -       
|                                   | Comprehensive income                              | -         | -          | -             | (589.9)     | 1.0      | 1,928.8 
|                                   | Acquisition of subsidiaries                       | -         | 0.7        | 57.3          | -           | -        | -       
|                                   | Employee plans, net                               | -         | 0.9        | 30.2          | -           | -        | -       
|                                   | Tax
      benefit for non-qualified stock options | -         | -          | 29.4          | -           | -        | -       
|                                   | Conversion
      of preferred stock               | (0.1)     | 0.1        | 0.1           | -           | -        | -       
|                                   | Repurchase
      of stock                         | -         | (3.0)      | (161.3)       | -           | -        | -       
|                                   | Dividends:                                        |           |            |               |             |          |         
|                                   |                                                   | Common    | -          | -             | -           | -        | -       
|                                   |                                                   | Preferred | -          | -             | -           | -        | -       
|Balance at
      December 31, 2000 | $0.5                                              | $313.0    | $929.0     | $  
      9.7 | $(4.5)      | $3,847.7 | $5,095.4
|                                   | Net
      income                                  | -         | -          | -             | -           | -        | 1,067.0 
|                                   | Other
      comprehensive loss,                   |           |            |               |             |          |         
|                                   | net of tax:(see Note 12)                          |           |            |               |             |          |         
|                                   | Unrealized holding losses on investments,         |           |            |               |             |          |         
|                                   | net of reclassification adjustments               | -         | -          | -             | (14.2)      | -        | -       
|                                   | Foreign currency translation adjustment           | -         | -          | -             | -           | (5.4)    | -       
|                                   | Comprehensive
      income                        | -         | -          | -             | (14.2)      | (5.4)    | 1,067.0 
|                                   | Employee
      plans, net                         | -         | 0.7        | 24.5          | -           | -        | -       
|                                   | Tax
      benefit for non-qualified stock options | -         | -          | 4.5           | -           | -        | -       
|                                   | Conversion
      of preferred stock               | (0.1)     | 0.1        | 0.2           | -           | -        | -       
|                                   | Repurchase
      of stock                         | -         | (3.3)      | (189.0)       | -           | -        | -       
|                                   | Dividends:                                        |           |            |               |             |          |         
|                                   |                                                   | Common    | -          | -             | -           | -        | -       
|                                   |                                                   | Preferred | -          | -             | -           | -        | -       
|Balance
      at December 31, 2001 | $0.4                                              | $310.5    | $769.2     | $
      (4.5) | $(9.9)      | $4,500.1 | $5,565.8

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



F-27

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



1. Summary of Significant Accounting Policies:

Description of Business - ALLTEL Corporation ("ALLTEL" or the
"Company"), a Delaware corporation, is a customer-focused information
technology company that provides wireless and wireline communications and
information services. The Company owns subsidiaries that provide wireless and
wireline local, long-distance, network access and Internet services, and
information processing management services and advanced application software.
(See Note 15 for information regarding ALLTEL's business segments.)

Basis of Presentation - ALLTEL prepares its consolidated financial
statements in accordance with accounting principles generally accepted in the
United States, which require management to make estimates and assumptions that
affect the reported amounts of assets, liabilities, revenues and expenses and
disclosure of contingent assets and liabilities. The estimates and assumptions
used in the accompanying consolidated financial statements are based upon
management's evaluation of the relevant facts and circumstances as of the date
of the financial statements. Actual results may differ from the estimates and
assumptions used in preparing the accompanying consolidated financial statements
and such differences could be material. The consolidated financial statements
include the accounts of ALLTEL, its subsidiary companies, majority-owned
partnerships and controlled joint ventures. Investments in 20% to 50% owned
entities and all unconsolidated partnerships are accounted for using the equity
method. Investments in less than 20% owned entities and in which the Company
does not exercise significant influence over operating and financial policies
are accounted for under the cost method. All intercompany transactions, except
those with certain affiliates described below, have been eliminated in the
consolidated financial statements.

Service revenues consist of wireless access and network usage revenues, local
service, network access, Internetaccess,long-distance and
miscellaneous wireline operating revenues, information services' data processing
and software maintenance revenues. Product sales primarily consist of the
product distribution and directory publishing operations, information services'
software licensing revenues and sales of communications and data processing
equipment.

Reclassifications - Certain prior-year amounts have been reclassified to
conform with the 2001 financial statement presentation, including the
reclassification of the Personal Communications Services ("PCS")
operations from the emerging businesses segment to the wireless segment. The
Company also changed the reporting presentation for wireless equipment sales to
a gross basis. Previously, the Company netted equipment sales against charges
incurred to acquire new or retain existing customers and included the net
amount in cost of products sold or operations expense. These reclassifications
did not affect previously reported operating income or net income of the
Company.

Transactions with Certain Affiliates - ALLTEL Communications Products,
Inc. sells equipment to wireline subsidiaries of the Company ($108.3 million in
2001, $165.2 million in 2000 and $180.3 million in 1999) as well as to other
affiliated and non-affiliated communications companies and other companies in
related industries. The cost of equipment sold to the wireline subsidiaries is
included, principally, in wireline plant in the consolidated financial
statements. ALLTEL Information Services, Inc. provides data processing services
to the Company's wireline operations ($123.8 million in 2001, $120.6 million in
2000 and $105.9 million in 1999) in addition to other affiliated and
non-affiliated companies. ALLTEL Publishing Corporation ("Publishing")
provides directory publishing services to the wireline subsidiaries. Wireline
revenues and sales include directory royalties received from Publishing ($50.0
million in 2001, $49.8 million in 2000 and $35.4 million in 1999) and amounts
billed to other affiliates ($74.5 million in 2001 and $45.3 million in 2000) for
interconnection and toll services. These intercompany transactions have not been
eliminated because the revenues received from the affiliates and the prices
charged by the communications products and information services subsidiaries are
included in the wireline subsidiaries' (excluding the Nebraska operations) rate
base and/or are recovered through the regulatory process.

Regulatory Accounting - The Company's wireline subsidiaries, except for
the Nebraska operations, follow the accounting for regulated enterprises
prescribed by Statement of Financial Accounting Standards ("SFAS") No.
71, "Accounting for the Effects of Certain Types of Regulation". This
accounting recognizes the economic effects of rate regulation by recording costs
and a return on investment as such amounts are recovered through rates
authorized by regulatory authorities. Accordingly, SFAS No. 71 requires the
Company's wireline subsidiaries to depreciate wireline plant over the useful
lives approved by regulators, which could be different than the useful lives
that would otherwise be determined by management. SFAS No. 71 also requires
deferral of certain costs and obligations based upon approvals received from
regulators to permit recovery of such amounts in future years. The Company's
wireline subsidiaries periodically review the applicability of SFAS No. 71 based
on the developments in their current regulatory and competitive environments.

Cash and Short-term Investments - Cash and short-term investments consist
of highly liquid investments with original maturities of three months or less.

F-28

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



1. Summary of Significant Accounting Policies, Continued:

Inventories - Inventories are stated at the lower of cost or market
value. Cost is determined primarily using either an average original cost or
first-in, first-out method of valuation.

Investments - Investments in equity securities are recorded at fair value
in accordance with SFAS No. 115, "Accounting for Certain Investments in
Debt and Equity Securities". Investments in unconsolidated partnerships are
accounted for using the equity method. All other investments are accounted for
using the cost method. Investments are periodically reviewed for impairment. If
the carrying value of the investment exceeds its fair value and the decline in
value is determined to be other-than-temporary, an impairment loss would be
recognized for the difference. Investments were as follows at December 31:

| |                                            | (Millions)    |              
| | ------------------------------------------ | ------------- | -------------
| |                                            | 2001          | 2000         
| | Equity securities                          | $ 
      19.1 | $ 
      13.7
| | Investments in unconsolidated partnerships | 173.3         | 231.8        
| | Other cost investments                     | 59.2          | 76.9         
| | Investments                                | $251.6        | $322.4       



Investments in unconsolidated partnerships include the related excess of the
purchase price paid over the underlying net book value of the wireless
partnerships. The excess cost is being amortized on a straight-line basis over
periods up to 40 years. As of December 31, 2001 and 2000, excess cost included
in investments was $19.4 million and $25.4 million and was net of accumulated
amortization of $9.1 million and $9.3 million, respectively. Amortization
expense was $0.5 million in 2001, $2.9 million in 2000 and $7.0 million in 1999
and is included in equity earnings in unconsolidated partnerships in the
accompanying consolidated statements of income.

Goodwill and Other Intangibles - Goodwill represents the excess of cost
over the fair value of net identifiable tangible and intangible assets acquired
through various business combinations and is amortized on a straight-line basis
over its estimated useful life. The Company has acquired identifiable intangible
assets through its acquisitions of interests in various wireless systems and
acquisitions of wireline properties and information services companies. The cost
of acquired entities at the date of the acquisition is allocated to identifiable
assets and the excess of the total purchase price over the amounts assigned to
identifiable assets is recorded as goodwill. (See Note 3 for a discussion of
significant acquisitions and purchase price allocations completed in the last
three years.) Goodwill was as follows at December 31:

| |                                | (Millions)         
| | ------------------------------ | -------------------
| |                                | Amortization Period
| | Goodwill                       | 7-40 years         
| | Accumulated
      amortization |                    
| | Goodwill, net                  | $2,633.6           

Other intangible assets primarily consist of the cost of PCS licenses,
cellular licenses, franchise rights and customer lists. Amortization of the PCS
licenses begins upon commencement of operations. Of the total costs capitalized
related to PCS licenses, $13.9 million were subject to amortization at December
31, 2001 and 2000, respectively. During 2001, the Company sold 20 PCS licenses.
(See Note 10.) Other intangible assets were as follows at December 31:

| |                                | (Millions)         
| | ------------------------------ | -------------------
| |                                | Amortization Period
| | PCS
      licenses             | 40 years           
| | Cellular
      licenses        | 40 years           
| | Franchise
      rights         | 25 years           
| | Customer
      lists           | 5-6 years          
| | Other                          | 5-6 years          
| |                                |                    
| | Accumulated
      amortization |                    
| | Other intangibles, net         | $
      798.5      



Amortization of goodwill and other intangible assets is computed on a
straight-line basis over the periods specified above. Goodwill amortization
amounted to $84.3 million in 2001, $88.6 million in 2000 and $57.1 million in
1999. Amortization expense for other intangible assets was $54.7 million in
2001, $6.4 million in 2000 and $4.2 million in 1999.

> F-29

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



1. Summary of Significant Accounting Policies, Continued:

Property, Plant and Equipment - Property, plant and equipment are stated
at original cost. Wireless plant consists of cell site towers, switching,
controllers and other radio frequency equipment. Wireline plant consists of
aerial and underground cable, conduit, poles, switches and other central office
and transmission-related equipment. Information services plant consists of data
processing equipment, purchased software and capitalized internal use software
costs. Other plant consists of furniture, fixtures, vehicles, machinery and
equipment. The costs of additions, replacements and substantial improvements are
capitalized, while the costs of maintenance and repairs are expensed as
incurred. For the Company's non-regulated operations, plant retirements are
recorded at net book value plus salvage value, if any, with the corresponding
gain or loss reflected in operating results. The Company's wireline subsidiaries
utilize group composite depreciation. Under this method, when plant is retired,
the original cost, net of salvage value, is charged against accumulated
depreciation, and no gain or loss is recognized on the disposition of the plant.
Depreciation expense amounted to $943.2 million in 2001, $824.8 million in 2000
and $754.5 million in 1999. Depreciation for financial reporting purposes is
computed using the straight-line method over the following estimated useful
lives:



| |                                  | Depreciable
      Lives
| | -------------------------------- | -----------------------
| | Buildings
      and improvements | 5-46 years             
| | Wireline                         | 16-58 years            
| | Wireless                         | 4-20 years             
| | Information
      services       | 3-10 years             
| | Other                            | 3-20 years             

The Company capitalizes interest during the construction period. Capitalized
interest during construction amounted to $20.4 million in 2001, $18.2 million in
2000 and $29.8 million in 1999 and is included in other income, net in the
accompanying consolidated statements of income.

Impairment of Long-Lived Assets - Long-lived assets and intangibles
including goodwill are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying value of the asset may not be
recoverable from future, undiscounted net cash flows expected to be generated by
the asset. If the asset is not fully recoverable, an impairment loss would be
recognized for the difference between the carrying value of the asset and its
estimated fair value based on discounted net future cash flows or quoted market
prices. Assets to be disposed of are reported at the lower of their carrying
amount or fair value less cost to sell.

Capitalized Software Development Costs - For the Company's information
services operations, research and development expenditures related to internally
developed computer software are charged to expense as incurred. Software
development costs incurred in the application development stage of internal use
software are capitalized and recorded in plant in the accompanying consolidated
balance sheets. The development costs of software to be marketed are charged to
expense until technological feasibility is established. After that time, the
remaining software development costs are capitalized and recorded in other
assets in the accompanying consolidated balance sheets. Total capitalized software
development costs were as follows at December 31:

| |                                              | (Millions)   
| | -------------------------------------------- | -------------
| |                                              |              
| | Capitalized software
      development costs |              
| | Accumulated
      amortization               |              
| | Capitalized software development costs, net  | $
      464.7



Amortization of the capitalized amounts is computed on a product-by-product
basis using the straight-line method over the remaining estimated economic life
of the product, generally three to six years for software to be marketed.
Internal use software is amortized over ten years. Amortization expense amounted
to $85.5 million in 2001, $68.6 million in 2000 and $46.4 million in 1999. The
Company periodically evaluates the carrying value of capitalized software
development costs to be marketed. If the net realizable value of the capitalized
software development costs is less than its carrying value, an impairment loss
is recognized for the difference. The determination of net realizable value
requires considerable judgment by management with respect to certain external
factors, including, but not limited to, expected future revenues generated by
the software, the estimated economic life of the software and changes in
software and hardware technologies. Accordingly, it is reasonably possible that
estimates of expected future revenues generated by the software, the remaining
economic life of the software, or both, could be reduced in the near term,
materially affecting the carrying value of capitalized software development
costs.

> F-30
>   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



1. Summary of Significant Accounting Policies, Continued:

Derivative Instruments - The Company uses derivative instruments to
reduce its exposure to adverse fluctuations in interest rates and to obtain a
targeted mixture of variable and fixed-interest-rate long-term debt. The Company
has established policies and procedures for risk assessment and the approval,
reporting and monitoring of derivative instrument activities. Derivative
instruments are entered into for periods consistent with the related underlying
exposure and are not entered into for trading or speculative purposes. The
Company has entered into interest rate swap agreements and designated these
derivatives as fair value hedges. In accordance with SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities", the
interest rate swaps are recorded as assets or liabilities in the consolidated
balance sheets at fair value, with changes in the fair value of the derivative
and of the underlying hedged item attributable to the hedged risk recognized in
earnings. Settlements of the interest rate swap agreements are recorded as
adjustments to interest expense in the consolidated statements of income when
paid or received.

Preferred Stock - Cumulative preferred stock is issuable in series. The
Board of Directors is authorized to designate the number of shares and fix the
terms. There are 50.0 million no par value and 50.0 million $25 par value,
non-voting shares authorized. Two series of no par value preferred stock were
outstanding at December 31, 2001 and 2000. There were no shares of $25 par value
preferred stock outstanding at December 31, 2001 and 2000. The Series C
non-redeemable preferred shares are convertible at any time prior to redemption
into 5.963 shares of ALLTEL common stock. The Series D redeemable preferred
shares are convertible at any time prior to redemption into 5.486 shares of
ALLTEL common stock. The Series D shares may be redeemed at the option of the
Company or the holder at the $28 per share stated value. There were 44,881
shares and 50,233 shares of Series D stock outstanding at December 31, 2001 and
2000, respectively. The outstanding Series D stock of $1.3 million and $1.4
million at December 31, 2001 and 2000, respectively, is included in other
liabilities in the accompanying consolidated balance sheets. During 2001,
$150,000 of Series D stock was converted into ALLTEL common stock compared to
$84,000 in 2000 and $119,000 in 1999.

Unrealized Holding Gain (Loss) on Investments - Equity securities of
certain publicly traded companies owned by the Company have been classified as
available-for-sale and are reported at fair value, with cumulative unrealized
gains and losses reported, net of tax, as a separate component of shareholders'
equity. The Company had unrealized gains (losses), net of tax, on investments in
equity securities of $(4.5) million, $9.7 million and $599.6 million at December
31, 2001, 2000 and 1999, respectively. The unrealized gains (losses), including
the related tax impact, are non-cash items, and accordingly, have been excluded
from the accompanying consolidated statements of cash flows.

Foreign Currency Translation Adjustment - For the Company's foreign
subsidiaries, assets and liabilities are translated from the applicable local
currency to U.S. dollars using the current exchange rate as of the balance sheet
date. Revenue and expense accounts are translated using the weighted average
exchange rate in effect during the period. The resulting translation gains or
losses are recorded as a separate component of shareholders' equity.

Revenue Recognition - Communications revenues are recognized when
services are rendered to customers and are primarily derived from usage of the
Company's networks and facilities. Sales of communications products including
wireless handsets and accessories represent a separate earnings process and are
recognized when products are delivered and accepted by customers. For
transactions involving both the activation of service and the sale of equipment,
the Company has allocated revenues based on fair value for the service element
and the residual method for all other elements of the transaction. The Company
has determined that the fair value of the service is reliable, verifiable and
objective, since the pricing of the service element would not vary based on the
pricing of equipment or the waiver of an activation fee. Certain fees assessed
to communications customers to activate service are deferred and recognized over
the expected life of the customer relationship. Direct incremental customer
acquisition costs incurred in the activation of service not involving the sale
of equipment are deferred up to the amount of the related revenues.

Information services revenues consist of data processing revenue recognized
as services are performed, software licensing revenue recognized when delivery
of the software occurs, and software maintenance revenue recognized ratably over
the maintenance period. Certain long-term information services contracts that
include a software license element are accounted for using the
percentage-of-completion method. Under this method, revenue and profit are
recognized throughout the term of the contract, based upon estimates of the
total costs to be incurred and revenues to be generated throughout the term of
the contract. Changes in estimates for revenues, costs and profits are
recognized in the period in which they are determinable. Due to the uncertainty
of these estimates, it is reasonably possible that these estimates could change
in the near term and the change could be material to the accompanying
consolidated financial statements. For all other operations, revenue is
recognized when products are delivered and accepted by customers or when
services are rendered to customers in accordance with contract terms.

> F-31

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



1. Summary of Significant Accounting Policies, Continued:

Included in accounts receivable are unbilled receivables of $217.1 million
and $250.9 million at December 31, 2001 and 2000, respectively. Included in
these unbilled receivables are amounts totaling $36.3 million and $55.4 million
at December 31, 2001 and 2000, respectively, which represent costs and estimated
earnings in excess of billings related to long-term information services
contracts accounted for under the percentage-of-completion method.

Advertising - Advertising costs are expensed as incurred. Advertising
expense totaled $260.8 million in 2001, $265.9 million in 2000 and $237.2
million in 1999.

Income Taxes - Income taxes are accounted for under the asset and
liability method. Deferred tax assets and liabilities are recognized for the
estimated future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax balances are adjusted to reflect tax
rates, based on currently enacted tax laws, which will be in effect in the years
in which the temporary differences are expected to reverse. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
the results of operations in the period that includes the enactment date. For
the Company's regulated operations, the adjustment in deferred tax balances for
the change in tax rates is reflected as regulatory assets or liabilities. These
regulatory assets and liabilities are amortized over the lives of the related
depreciable asset or liability concurrent with recovery in rates. A valuation
allowance is recorded to reduce the carrying amounts of deferred tax assets
unless it is more likely than not that such assets will be realized.

Earnings Per Share - Basic earnings per share of common stock was
computed by dividing net income applicable to common shares by the weighted
average number of common shares outstanding during each year. Diluted earnings
per share reflects the potential dilution that could occur assuming conversion
or exercise of all unexercised stock options and outstanding preferred stock.
Options to purchase approximately 9.6 million, 8.3 million and 0.2 million
shares of common stock at December 31, 2001, 2000 and 1999, respectively, were
excluded from the computation of diluted earnings per share because the effect
of including them was anti-dilutive.

A reconciliation of the net income and numbers of shares used in computing
basic and diluted earnings per share was as follows for the years ended December
31:

|(Millions, except
per share amounts)                      | 2001                                       | 2000     | 1999    
|--------------------------------------------------------- | ------------------------------------------ | -------- | --------
|Basic earnings per share:                                 |                                            |          |         
|Income before cumulative effect of
accounting change      | $1,047.5                                   | $1,965.4 | $783.6  
|Preferred dividends                                       | 0.1                                        | 0.1      | 0.9     
|Net income applicable to common shares
before             |                                            |          |         
|                                                          | cumulative effect of accounting change     | $1,047.4 | $1,965.3
|Weighted average common shares outstanding
for the year   | 311.4                                      | 314.4    | 312.8   
|Basic earnings per share before
    cumulative effect    
|                                                          | of accounting change                       | $3.36    | $6.25   
|Diluted earnings per share:                               |                                            |          |         
|Net income applicable to common shares
  before           |                                            |          |         
|                                                          | cumulative effect of accounting change     | $1,047.4 | $1,965.3
|Adjustment for convertible preferred
  stock dividends    | 0.1                                        | 0.1      | 0.2     
|Net income applicable to common shares
  before           |                                            |          |         
|                                                          | cumulative effect of accounting change and |          |         
|                                                          | assuming conversion of preferred stock     | $1,047.5 | $1,965.4
|Weighted average common shares
  outstanding for the year | 311.4                                      | 314.4    | 312.8   
|Increase in shares, which would result
  from:            |                                            |          |         
|                                                          | Exercise of stock options                  | 1.8      | 2.4     
|                                                          | Conversion of convertible preferred stock  | 0.3      | 0.4     
|Weighted average common shares,
  assuming                |                                            |          |         
|                                                          | conversion
of
the above securities         | 313.5    | 317.2   
|Diluted earnings per
    share before cumulative effect  
|                                                          | of accounting change                       | $3.34    | $6.20   





F-32

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



1. Summary of Significant Accounting Policies, Continued:

Recent Accounting Pronouncements
- In July 2001, the Financial Accounting
Standards Board ("FASB") issued  SFAS No. 141 "Business Combinations" and SFAS
No. 142 "Goodwill and Other Intangible Assets". SFAS No. 141 requires
that all business combinations initiated after June 30, 2001 be accounted for
using the purchase method of accounting. Accordingly, the use of the
pooling-of-interests method of accounting for business combinations has been
eliminated. In addition, SFAS No. 141 requires that, on the date of acquisition,
identifiable intangible assets should be recognized separate and apart from
goodwill if the intangible assets meet certain criteria. SFAS No. 142 will
change the accounting for goodwill and other indefinite lived intangible assets
from an amortization method to an impairment-only approach. Accordingly,
amortization of goodwill, including goodwill recorded in past business
combinations, ceased as of January 1, 2002 for calendar year companies such as
ALLTEL. Under SFAS No. 142, goodwill will be assigned to a company's reporting
units and an initial impairment test by reporting unit must be completed by June
30, 2002.

Goodwill will be tested for impairment annually using a consistent
measurement date. Amortization of intangible assets with indefinite lives other
than goodwill also ceased as of January 1, 2002, although such intangible assets
will be required to be tested for impairment at least annually, in a manner
similar to goodwill. Intangible assets with finite lives are required to be
amortized over their estimated useful lives. Accordingly, the current 40-year
maximum estimated life specified in Accounting Principles Board
("APB") Opinion No. 17 "Intangible Assets" will no longer
apply.

The Company has determined its applicable reporting units and assigned
goodwill to them. In addition, the Company is conducting a review of its other
identifiable intangible assets to determine whether any of those assets would
meet the indefinite life criteria outlined in SFAS No. 142. By the end of the
first quarter of 2002, ALLTEL expects to complete the initial impairment review
of its indefinite-lived intangible assets, including goodwill. At this time, the
Company has not determined whether an impairment charge will be recognized upon
adoption of these standards. Accordingly, ALLTEL cannot determine the full
impact that adopting these standards will have on the Company's consolidated
financial statements other than the effects of no longer amortizing goodwill,
which will result in pretax annual expense savings of approximately $85.0
million.

In June 2001, the FASB issued SFAS No. 143 "Accounting for Asset
Retirement Obligations". SFAS No. 143 will apply to fiscal years beginning
after June 15, 2002, and will address financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs. This standard applies to legal obligations
associated with the retirement of long-lived assets that result from the
acquisition, construction, development or normal use of the assets and requires
that a liability for an asset retirement obligation be recognized when incurred,
recorded at fair value and classified as a liability in the balance sheet. The
Company does not expect that this standard will have a material effect on its
consolidated financial statements.

In August 2001, the FASB issued SFAS No. 144 "Accounting for the
Impairment or Disposal of Long-Lived Assets". SFAS No. 144 applies to
fiscal years beginning after December 15, 2001, and addresses financial
accounting and reporting for the impairment or disposal of long-lived assets and
supersedes SFAS No. 121 "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of". This standard retains the
fundamental provisions of SFAS No. 121 for the recognition and measurement of an
impairment of long-lived assets to be held and used and the measurement of
long-lived assets to be disposed of by sale. SFAS No. 144 also supersedes the
accounting and reporting provisions of APB Opinion No. 30 "Reporting the
Results of Operations-Reporting the Effects of Disposal of a Segment of a
Business and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions" for the disposal of a segment of a business, but retains the
requirement of APB Opinion No. 30 to report discontinued operations separately
from continuing operations and extends that reporting obligation to a component
of an entity that either has been disposed of or is classified as held for sale.
The Company does not expect that this standard will have a material effect on
its consolidated financial statements.

















> F-33

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



2.  Cumulative Effect of Accounting Change:

In the second quarter of 2001, the Company changed its method of accounting
for the defined benefit pension plan of a subsidiary acquired in 1999 to conform
with the accounting principles followed by the ALLTEL Pension Plan (the
"ALLTEL Plan"), a defined benefit pension plan covering substantially
all employees working in the Company's communications and corporate operations.
The change in accounting was completed in conjunction with the Company's
decision to conform future benefits earned under the subsidiary's plan with the
ALLTEL Plan, effective June 1, 2001. The change in accounting, retroactive to
January 1, 2001, affected both the computation and amortization of unrecognized
actuarial gains and losses for purposes of calculating annual pension cost
related to the subsidiary's pension plan. The change included modifying the
method by which the market-related value of plan assets was determined from a
calculated five-year average to actual fair value. In addition, unrecognized
actuarial gains or losses that exceed 17.5% of the greater of the projected
benefit obligation or market-related value of plan assets are amortized on a
straight-line basis over five years. Unrecognized actuarial gains and losses below
the 17.5% corridor are amortized over the average remaining service life of
active plan participants (approximately 13 years).

Under the method previously followed by the subsidiary's plan, only
unrecognized actuarial gains and losses in excess of 10% of the greater of the
projected benefit obligation or market-related value of plan assets were
amortized over the average remaining service life of active plan participants.
The Company believes the changes in computing the market-related value of plan
assets and accelerating the amortization periods are preferable because these changes
result in more timely recognition of actuarial gains and losses in
computing annual pension cost related to the subsidiary's pension plan, and
achieve consistency with the ALLTEL
Plan. Effective January 1, 2002, the subsidiary's plan was merged into the
ALLTEL Plan. The effect of these changes in 2001 was to increase pension income
by $1.7 million and income before cumulative effect of accounting change by $1.0
million. The cumulative effect of retroactively applying these changes to
periods prior to 2001 resulted in a one-time non-cash credit of $19.5 million,
net of income tax expense of $13.0 million, and is included in net income for
the year ended December 31, 2001.

Effective January 1, 2000, the Company changed its method of recognizing
wireless access revenues and certain customer activation fees to conform its
revenue recognition policies to the requirements of the Securities and Exchange
Commission's Staff Accounting Bulletin No. 101, "Revenue Recognition in
Financial Statements". In prior years, the Company recognized monthly
non-refundable wireless access revenues when billed in accordance with
contractual arrangements with customers. With the change, the Company now
recognizes wireless access revenues over the period in which the corresponding
services are provided. Because the Company bills its customers on a cycle basis
throughout the month, this change in accounting resulted in the continuous deferral of
approximately 15 days of wireless access revenue. In addition, certain fees
assessed to communications customers to activate service were previously
recognized when billed. With the change in accounting, the Company now
recognizes these fees over the expected life of the customer. The effect of
these changes in revenue recognition for 2000 was to decrease income before
cumulative effect of accounting change by $4.6 million or $.01 per share. The
cumulative effect of retroactively applying this change in accounting principle
to periods prior to 2000 resulted in a one-time non-cash charge of $36.6
million, net of income tax benefit of $23.3 million, and is included in net
income for the year ended December 31, 2000.

The following unaudited pro forma results of operations of the Company for
the years ended December 31, 2001, 2000 and 1999 assume that the changes in
accounting principle were applied retroactively:

|(Millions,
      except per share amounts) |                   | 2001     | 2000     | 1999  
|------------------------------------------ | ----------------- | -------- | -------- | ------
|Net income:                                |                   |          |          |       
|As reported                                |                   | $1,067.0 | $1,928.8 | $783.6
|Effect of change in revenue recognition    |                   | -        | 36.6     | (18.7)
|Effect of change in pension accounting     |                   | (19.5)   | 4.1      | 2.0   
|Pro forma                                  |                   | $1,047.5 | $1,969.5 | $766.9
|Basic
      earnings per share:            | As
      reported | $3.42    | $6.13    | $2.50 
|                                           | Pro forma         | $3.36    | $6.26    | $2.45 
|Diluted
      earnings per share:          | As
      reported | $3.40    | $6.08    | $2.47 
|                                           | Pro
      forma   | $3.34    | $6.21    | $2.42 



> F-34

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



3. Mergers and Acquisitions:

On October 3, 2000, ALLTEL purchased wireless properties in Louisiana from
SBC Communications, Inc. ("SBC"). In connection with this transaction,
ALLTEL paid SBC $387.6 million in cash and acquired approximately 150,000
wireless customers and 300,000 paging customers. The accompanying consolidated
financial statements include the accounts and results of operations of the
acquired wireless properties from the date of acquisition.

In 2000, ALLTEL, Bell Atlantic Corporation ("Bell Atlantic") and
GTE Corporation ("GTE") exchanged wireless properties in 13 states. On
April 3, 2000, ALLTEL completed the exchange of wireless properties with Bell
Atlantic in five states, acquiring operations in Arizona, New Mexico and Texas
and divesting operations in Nevada and Iowa. In addition to the exchange of
wireless assets, ALLTEL also paid Bell Atlantic $624.3 million in cash to
complete this transaction. On June 30, 2000, ALLTEL completed the remaining
wireless property exchanges with Bell Atlantic and GTE, acquiring operations in
Florida, Ohio, South Carolina and Alabama, while divesting operations in
Illinois, Indiana, New York and Pennsylvania. ALLTEL also transferred to Bell
Atlantic or GTE certain of its minority investments in unconsolidated wireless
properties. In connection with the transfer of the remaining wireless assets,
ALLTEL received $216.9 million in cash and prepaid vendor credits of $199.6
million and assumed long-term debt of $425.0 million. ALLTEL accounted for these
exchange transactions as purchase business combinations, and accordingly, the
accompanying consolidated financial statements include the accounts and results
of operations of the acquired properties from the applicable dates of
acquisition.

The following unaudited pro forma consolidated results of operations of the
Company for the years ended December 31, 2000 and 1999 assume that the wireless
property exchanges with Bell Atlantic and GTE were completed as of January 1,
1999:

|(Millions, except per share amounts)                 | 2000                  | 1999     
|---------------------------------------------------- | --------------------- | ---------
|Revenues and sales                                   | $7,359.3              | $6,822.3 
|Income before cumulative effect of accounting
change | $1,090.0              | $   656.9
|Combined earnings per share before cumulative
effect |                       |          
|                                                     | of accounting change: |          
|                                                     |                       | Basic    
|                                                     |                       | Diluted  



The pro forma amounts represent the historical operating results of the
properties acquired from Bell Atlantic and GTE with appropriate preliminary
adjustments that give effect to depreciation and amortization and interest
expense. The pretax gain of $1,345.5 million (net of related tax expense of
$565.9 million) recognized by ALLTEL related to the wireless property exchanges
(see Note 10) has been excluded from the pro forma net income and earnings per
share amounts presented. The pro forma amounts are not necessarily indicative of
the operating results that would have occurred if the Bell Atlantic and GTE
properties had been operated by ALLTEL during the periods presented. In
addition, the pro forma amounts do not reflect potential cost savings related to
full network optimization and the redundant effect of selling and general and
administrative expenses.

Operating results of the wireless properties divested in the transactions
with Bell Atlantic and GTE included in the Company's consolidated results of
operations for the year ended December 31, 2000 were as follows:

|                  
|------------------
|                  
|Revenues and sales
|Operating income  
|                  

During 2000, the Company also acquired the remaining ownership interests in
wireless properties in Florida and Georgia in which ALLTEL already owned a
controlling interest. Additionally, the Company purchased two privately held
companies serving the financial services industry. In connection with these
acquisitions, the Company paid $28.1 million in cash and issued approximately
730,000 shares of ALLTEL common stock.

In 2001, the Company recorded the final purchase price allocation related to
wireless property acquisitions with Bell Atlantic, GTE and SBC.   Amortization of the customer lists,
cellular licenses and goodwill is being recorded on a straight-line basis over
6, 40 and 25 years, respectively.



> F-35

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



3. Mergers and Acquisitions, Continued:

The following table summarizes the assets acquired, liabilities assumed,
common stock issued and assets exchanged, reflecting the final purchase price
adjustments, for the various business combinations completed during 2000:



|                                            | (Millions)                          
|------------------------------------------- | ------------------------------------
|                                            | Acquired
      from                 
|                                            | Bell
      Atlantic                 
|Fair value
      of assets acquired         | $ 332.3                             
|Goodwill                                    | 487.3                               
|Cellular
      licenses                     | 175.0                               
|Customer
      lists                        | 51.0                                
|Net
      deferred tax assets (liabilities) |                                     
|                                            | established on
      acquired assets
|Liabilities
      assumed                   | -                                   
|Common
      stock issued                   | -                                   
|Fair value
      of assets exchanged        | (459.8)                             
|Net cash
      paid (received)              | $
      624.3                       
|                                           

In September 1999, the Company completed mergers with Liberty Cellular, Inc.
("Liberty") and its affiliate KINI L.C. Under terms of the merger
agreements, the outstanding stock of Liberty and the outstanding ownership units
of KINI L.C. were exchanged for approximately 7.0 million shares of ALLTEL's
common stock. In July 1999, the Company completed its merger with Aliant
Communications Inc. ("Aliant"). Under terms of the merger agreement,
each outstanding share of Aliant common stock was converted into the right to
receive .67 shares of ALLTEL common stock, 23.9 million common shares in the
aggregate. These mergers qualified as tax-free reorganizations and were
accounted for as poolings-of-interests. In January 1999, the Company completed a
merger with Standard Group, Inc. In September 1999, the Company also completed
mergers with Advanced Information Resources, Limited ("AIR") and
Southern Data Systems ("Southern Data"). In connection with the
mergers, approximately 6.5 million shares of ALLTEL common stock were issued.
All three mergers qualified as tax-free reorganizations and were accounted for
as poolings-of-interests. Prior period financial information was not restated,
because the operations of the three acquired companies were not significant to
ALLTEL's consolidated financial statements on either a separate or aggregate
basis. The accompanying consolidated financial statements include the accounts
and results of the acquired operations from the dates of acquisition.

In connection with the mergers and acquisitions discussed above, the Company
recorded merger and integration expenses and other charges in 2000 and 1999.
(See Note 9.)

4. Financial Instruments and Investments:

The carrying amount of cash and short-term investments approximates fair
value due to the short maturities of the instruments. The fair values of the
Company's investments, long-term debt, redeemable preferred stock and interest
rate swaps were as follows at December 31:



|(Millions)                       |                   |                   |      |                 |                
|-------------------------------- | ----------------- | ----------------- | ---- | --------------- | ---------------
|                                 | 2001              |                   | 2000
|                                 | Fair              | Carrying          |      | Fair            | Carrying       
|                                 | Value             | Amount            |      | Value           | Amount         
|Investments                      | $  
      251.6   | $  
      251.6   |      | $  
  322.4     | $  
  322.4    
|Long-term
      debt             | $3,955.7          | $3,861.5          |      | $4,653.4        | $4,611.7       
|Redeemable
      preferred stock | $    
      15.2  | $      
      1.3 |      | $    
  17.2    | $      
  1.4  
|Interest
      rate swaps        | $      
      8.6 | $      
      8.6 |      | $          
  - | $          
  -



The fair value of investments was based on quoted market prices and the
carrying value of investments for which there were no quoted market prices. The
fair value of long-term debt, after deducting current maturities, was estimated
based on the overall weighted rates and maturities of the Company's long-term
debt compared to rates and terms currently available in the long-term financing
markets. The fair value of the redeemable preferred stock was estimated based on
the conversion of the Series D convertible redeemable preferred stock to common
stock of the Company. Fair values of the interest rate swaps were based on
quoted market prices. There was no material impact to earnings due to hedge
ineffectiveness for the interest rate swaps designated as fair value hedges. The
fair value of all other financial instruments was estimated by management to
approximate carrying value.

> F-36

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



5.  Debt:

Long-term debt was as follows at December 31:

|                                                            
|------------------------------------------------------------
|                                                            
|                                                            
|Debentures
      and notes, without collateral,             
|                                                            
|                                                            
|Commercial
      paper borrowings,                          
|                                                            
|                                                            
|Rural
      Telephone Bank and Federal Financing Bank notes,
|                                                            
|                                                            
|First
      mortgage bonds and collateralized notes,        
|                                                            
|                                                            
|Rural
      Utilities Service notes,                        
|                                                            
|                                                            
|Industrial
      revenue bonds,                             
|                                                            
|                                                            
|                                                            
|                                                            
|                                                            
|                                                            
|                                                            



Commercial Paper

- Commercial paper borrowings consist of discounted
notes that are exempt from registration under the Securities Act of 1933. Under
terms of the program, the total amount outstanding, including any indebtedness
incurred under the revolving credit agreement, may not exceed $1.25 billion.
Commercial paper borrowings up to $1.0 billion are classified as long-term debt
because these borrowings are a component of the revolving credit agreement.
Commercial paper borrowings in excess of $1.0 billion are classified as
short-term debt.

Revolving Credit Agreement - The Company has a $1.0 billion unsecured line of
credit under a revolving credit agreement. This agreement was amended in 2001 to
provide that $50.0 million will expire in October 2003 and $950.0 million will
expire in October 2005. It is the Company's intention to continue to renew this
agreement. The revolving credit agreement provides for a variety of pricing
options. Commercial paper borrowings are deducted in determining the total
amount available for borrowing under the revolving credit agreement. At December
31, 2001, the amount available for borrowing under the revolving credit
agreement was $769.9 million.

The revolving credit agreement contains various covenants
  and restrictions including a requirement that, at the end of each calendar
  quarter, ALLTEL maintain a long-term debt to capitalization ratio of less than
  65 percent. As of December 31, 2001, the Company's long-term debt to
  capitalization ratio was 41.3 percent. Another covenant of the revolving
  credit agreement would restrict the Company from incurring additional
  short-term debt, if the Company's credit rating were to fall below
  investment grade. In addition, the indentures and borrowing agreements, as
  amended, provide, among other things, for various restrictions on the payment
  of dividends by the Company. Retained earnings unrestricted as to the payment
  of dividends by the Company amounted to $4,167.6 million at December 31, 2001.
  Certain assets of the wireline subsidiaries have been pledged as collateral on
  $293.6 million of obligations.

Interest expense on long-term debt amounted to $285.5 million in 2001, $302.8
million in 2000 and $278.9 million in 1999. At December 31, 2001 and 2000,
accrued interest on long-term debt was $66.4 million and $72.7 million,
respectively, and is included in other current liabilities in the accompanying
consolidated balance sheets. Maturities and sinking fund requirements for the
four years after 2001 for long-term debt outstanding, excluding commercial paper
borrowings, as of December 31, 2001, were $490.7 million, $298.7 million, $240.6
million and $643.0 million for the years 2003 through 2006, respectively.







F-37

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



6. Stock-Based Compensation Plans:

Under the Company's stock-based compensation plans, the Company may grant
fixed and performance-based incentive and non-qualified stock options to
officers and other key employees. The maximum number of shares of the Company's
common stock that may be issued to officers and other key employees under all
stock option plans in effect at December 31, 2001 is 35.3 million shares. Fixed
options granted under the stock option plans generally become exercisable over a
period of one to five years after the date of grant. Certain fixed options
granted in 2000 become exercisable in increments of 50%, 25% and 25% over a
five-year period beginning three years after the date of grant. Certain fixed
options granted in 1997 become exercisable in equal increments over a six-year
period beginning three years after the date of grant. In 1997, performance-based
options were granted that become exercisable one year after the date in which
certain performance goals related to operating income growth and return on
invested capital are achieved for the four most recent consecutive calendar
quarters. Four separate levels of performance goal targets were established,
each specifying different minimum growth and rates of return. Depending upon
which of the four performance goal target levels is attained, 25%, 50%, 75% or
100% of the option award will vest and become exercisable. Options related to
the 25% performance goal target have vested. In 2001, all remaining unvested
performance options were cancelled as the remaining performance targets were not
achieved.

Under the Company's stock option plan for non-employee directors (the
"Directors' Plan"), the Company grants fixed, non-qualified stock
options to directors for up to 1.0 million shares of common stock. Under the
Directors' Plan, directors receive a one-time option grant to purchase 10,000
shares of common stock when they join the Board. Directors are also granted each
year, on the date of the annual meeting of stockholders, an option to purchase a
specified number of shares of common stock (currently 6,500 shares). Options
granted under the Directors' Plan become exercisable the day immediately
preceding the date of the first annual meeting of stockholders following the
date of grant.

For all plans, the exercise price of the option equals the market value of
the Company's common stock on the date of grant. For fixed stock options, the
maximum term for each option granted is 10 years.

The fair value of each stock option granted as identified below was
calculated using the Black-Scholes option-pricing model and the following
weighted average assumptions:

|                             
|-----------------------------
|                             
|Expected life                
|Expected volatility          
|Dividend yield               
|Risk-free interest
      rate
|                             

Set forth below is
certain information related to stock options outstanding under the Company's
stock-based compensation plans:



|                                   | (Thousands)                         |                                       | Weighted
      Average Price
|---------------------------------- | ----------------------------------- | ------------------------------------- | ----------------------------
|                                   | Shares                              |                                       | Per
      Share             
|                                   | 2001                                | 2000                                  | 1999                        
|Outstanding at beginning of period | 14,859.7                            | 10,814.2                              | 10,227.0                    
|Granted                            | 3,283.0                             | 5,710.2                               | 3,429.0                     
|Exercised                          | (946.9)                             | (971.2)                               | (1,827.5)                   
|Forfeited                          | (814.0)                             | (693.5)                               | (1,014.3)                   
|Expired                            | (127.3)                             | -                                     | -                           
|Outstanding at end of period       | 16,254.5                            | 14,859.7                              | 10,814.2                    
|                                  
|Exercisable at end of period       | 5,409.0                             | 4,067.3                               | 3,186.7                     
|Non-vested at end of period:       |                                     |                                       |                             
|                                   | Fixed                               | 10,845.4                              | 10,667.5                    
|                                   | Performance-based                   | -                                     | 124.9                       
|                                   | Weighed average fair value of stock |                                       |                             
|                                   |                                     | options
      granted during the year | $16.98                      



> F-38
>   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



6. Stock-Based Compensation Plans,Continued:

The following is a summary of stock options outstanding as of December 31,
2001:

|
|
|
|
|
|
|
|
|
|
|
|
|
|
|



The Company applies the provisions of Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" and related
Interpretations in accounting for its stock-based compensation plans.
Accordingly, the Company does not record compensation expense for any of the
fixed stock options granted. For performance-based options, compensation expense
is recognized over the expected vesting period of the options and is adjusted
for changes in the number of options expected to vest and the market value of
the Company's common stock. Compensation expense (credit) for the
performance-based options amounted to $(2.3) million in 2001, $0.2 million in
2000 and $(0.5) million in 1999. Had compensation expense for options granted
been determined on the basis of the fair value of the awards at the date of
grant, consistent with the methodology prescribed by SFAS No. 123,
"Accounting for Stock-Based Compensation", the Company's net income
and earnings per share would have been reduced to the following pro forma
amounts for the years ended December 31:



|(Millions,
      except per share amounts)       |                              | 2001        | 2000     | 1999    
|------------------------------------------------ | ---------------------------- | ----------- | -------- | --------
|Income before cumulative effect                  |                              |             |          |         
|                                                 | of accounting change:        | As reported | $1,047.5 | $1,965.4
|                                                 |                              | Pro forma   | $1,020.7 | $1,946.5
|Basic earnings per share before
    cumulative   |                              |             |          |         
|                                                 | effect of accounting change: | As reported | $3.36    | $6.25   
|                                                 |                              | Pro forma   | $3.28    | $6.19   
|Diluted earnings per share before
    cumulative |                              |             |          |         
|                                                 | effect of accounting change: | As reported | $3.34    | $6.20   
|                                                 |                              | Pro forma   | $3.26    | $6.14   



The pro forma amounts presented above may not be representative of the future
effects on reported net income and earnings per share, since the pro forma
compensation expense is allocated over the periods in which options become
exercisable, and new option awards may be granted each year.



7.  Employee Benefit Plans and Postretirement
Benefits Other Than Pensions:

The Company has
trusteed, non-contributory defined benefit pension plans
which provide retirement benefits for eligible employees of the Company. Assets
of these plans include ALLTEL common stock. At December 31, 2001 and 2000, the
plans' investment in ALLTEL common stock was $41.4 million and $40.9 million,
respectively.

During the fourth quarter of 2000, the Company changed its method of
amortizing unrecognized actuarial gains and losses as a component of determining
its annual pension cost. In prior years, the Company amortized unrecognized
actuarial gains and losses over the average remaining service life of active
employees (approximately 13 years). With this change, the Company now amortizes
unrecognized gains or losses that exceed 17.5% of the greater of the projected
benefit obligation or market-related value of plan assets on a straight-line
basis over 5 years. Unrecognized actuarial gains and losses below the 17.5%
corridor will continue to be amortized over the average remaining service life
of active employees. The Company believes the accelerated amortization method is
preferable as it will result in more timely recognition of significant actuarial
gains and losses in computing the Company's annual pension cost. The effect of
this change in 2000 was to increase pension income by $4.1 million and income
before cumulative effect of accounting change by $2.4 million. This change in
accounting principle was not material to previously

F-39

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



7. Employee Benefit Plans and Postretirement Benefits Other Than
Pensions,Continued:

reported 2000 quarterly results of operations, and accordingly, those
quarterly results were not restated. There was no cumulative effect of
retroactively applying this change in accounting principle to periods prior to
2000. (See Note 2 for a discussion of a similar change in accounting for a
subsidiary's pension plan completed in 2001.)

The Company provides postretirement healthcare and life insurance benefits
for eligible employees. Employees share in the cost of these benefits. The
Company funds the accrued costs of these plans as benefits are paid. During
2001, the Company incurred special termination benefits related to an early
retirement program offered to employees meeting certain age and service
requirements. (See Note 9 for a further discussion of these special termination
benefits incurred by the Company in 2001.)

The components of pension income, including provision for executive
compensation agreements, and postretirement expense were as follows for the
years ended December 31:

|                                              | (Millions)            
|--------------------------------------------- | ----------------------
|                                              | Pension
      Benefits
|                                              | 2001                  
|Benefits earned during the year               | $ 24.5                
|Interest cost on benefit obligation           | 45.4                  
|Amortization of transition (asset) obligation | (2.6)                 
|Amortization of prior service (credit) cost   | (8.6)                 
|Recognized net actuarial (gain) loss          | (4.1)                 
|Expected return on plan assets                | (63.7)                
|Net periodic benefit (income) expense         | (9.1)                 
|Special termination benefits and curtailment  | 16.9                  
|Total net periodic benefit (income) expense   | $   
      7.8        
|                                             

The following table presents a summary of plan assets, projected benefit
obligation and funded status of the plans at December 31:



|                                                                        |  | (Millions)            
|----------------------------------------------------------------------- |  | ----------------------
|                                                                        |  | Pension
      Benefits
|                                                                        |  | 2001                  
|Fair value of plan assets at beginning of year                          |  | $783.1                
|Employer contributions                                                  |  | 6.2                   
|Participant contributions                                               |  | -                     
|Actual return on plan assets                                            |  | (31.3)                
|Benefits paid                                                           |  | (46.6)                
|Fair value of plan assets at end of year                                |  | 711.4                 
|Projected benefit obligation at beginning of
      year                 |  | 614.2                 
|Benefits earned                                                         |  | 24.5                  
|Interest cost on projected benefit obligations                          |  | 45.4                  
|Participant contributions                                               |  | -                     
|Special termination benefits and curtailment                            |  | 16.9                  
|Plan amendments                                                         |  | (7.5)                 
|Actuarial loss                                                          |  | 24.6                  
|Benefits paid                                                           |  | (46.6)                
|Projected benefit obligation at end of year                             |  | 671.5                 
|Plan assets in excess of (less than)
      projected benefit obligation |  | 39.9                  
|Unrecognized actuarial (gain) loss                                      |  | 22.1                  
|Unrecognized prior service cost
      (credit)                          |  | (1.1)                 
|Unrecognized net transition (asset) obligation                          |  | (3.4)                 
|Net
      amount recognized                                             |  | $57.5                 
|Amounts
      recognized in the consolidated balance sheet:             |  |                       
|Prepaid
      benefit cost                                              |  | $95.4                 
|Accrued
      benefit cost liability                                    |  | (37.9)                
|Net
      amount recognized                                             |  | $57.5                 

> 

F-40

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



7. Employee Benefit Plans and Postretirement Benefits Other Than
Pensions,Continued:

Actuarial assumptions used to calculate the projected benefit obligations
were as follows for the years ended December 31:



|                                     | Pension Benefits | Postretirement
      Benefits
|------------------------------------ | ---------------- | -----------------------------
|                                     | 2001             | 2000                         
|Discount
      rate                  | 7.25%            | 7.75%                        
|Expected
      return on plan assets | 8.50%            | 8.50%                        
|Rate of
      compensation increase  | 4.50%            | 5.00%                        
|Healthcare
      cost trend rate     | -                | -                            

For the pension plan with accumulated benefit obligations in excess of plan
assets, both the projected benefit obligation and accumulated benefit obligation
were $37.9 million and $35.4 million at December 31, 2001 and 2000,
respectively. There are no assets held in this plan, as the Company funds the
accrued costs of this plan as benefits are paid.

The healthcare cost trend rate will decrease on a graduated basis to an
ultimate rate of five percent in 2006. A one percent change in the assumed
healthcare cost trend rate would affect the postretirement benefit cost by
approximately $0.6 million for the year ended December 31, 2001. A one percent
increase in the assumed healthcare cost trend rate would increase the
postretirement benefit obligation as of December 31, 2001, by approximately
$17.2 million, while a one percent decrease in the rate would reduce the
postretirement benefit obligation as of December 31, 2001, by approximately
$14.5 million.

The Company has a non-contributory defined contribution plan in the form of
profit-sharing arrangements for eligible employees, except bargaining unit
employees. The amount of profit-sharing contributions to the plan is determined
annually by the Company's Board of Directors. Profit-sharing expense amounted to
$26.1 million in 2001, $26.4 million in 2000 and $34.1 million in 1999.

The Company also sponsors employee savings plans under section 401(k) of the
Internal Revenue Code. The plans cover substantially all full-time employees,
except bargaining unit employees. Employees may elect to contribute to the plans
a portion of their eligible pretax compensation up to certain limits as
specified by the plans. The Company also makes annual contributions to the
plans. Expense recorded by the Company related to these plans amounted to $16.9
million in 2001, $16.2 million in 2000 and $15.9 million in 1999.

8. Lease Commitments:

Minimum rental commitments for all non-cancelable operating leases,
consisting principally of leases for office space, office equipment, real estate
and tower space were as follows as of December 31, 2001:



| | Year       | (Millions)
| | ---------- | ----------
| | 2002       | $ 90.1    
| | 2003       | 72.4      
| | 2004       | 49.7      
| | 2005       | 37.7      
| | 2006       | 26.3      
| | Thereafter | 93.2      
| | Total      | $369.4    





Rental expense totaled $114.2 million in 2001, $104.3 million in 2000 and
$71.4 million in 1999.





















> F-41

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



9.  Merger and Integration Expenses and Other Charges:

During 2001, the Company restructured its regional communications,
information services, product distribution and corporate operations. In
connection with these restructuring efforts, the Company recorded restructuring
charges during each of the four quarters of 2001. During
the third and fourth quarters of 2001, the Company also recorded write-downs in
the carrying value of certain cell site equipment to fair value. The write-downs
in cell site equipment resulted from the Company's exchange of its existing
equipment for new equipment under terms of a product replacement program
initiated by a vendor in 2001. A summary of the restructuring and other charges
recorded in 2001 by quarter was as follows:





|(Millions)                               | 1st
      Quarter          | 2nd
      Quarter | 3rd
      Quarter | 4th
      Quarter | Total
|---------------------------------------- | -------------------------- | ----------------- | ----------------- | ----------------- | -----
|Severance and employee benefit costs     | $54.9                      | $1.6              | $ 
      5.5      | $0.1              | $62.1
|Lease termination costs                  | 5.2                        | 0.5               | 0.4               | -                 | 6.1  
|Write-down of software development costs | 8.9                        | -                 | -                 | -                 | 8.9  
|Write-down of cell site equipment        | -                          | -                 | 9.5               | 5.6               | 15.1 
|                                         | Total restructuring charge | $69.0             | $2.1              | $15.4             | $5.7 
|Number
      of employees terminated     | 1,247                      | 170               | 216               | 11                | 1,644
|Number
      of lease sites terminated   | 48                         | 10                | 2                 | 3                 | 63   
|                                        



As indicated in the table above, the restructuring charges consisted of $62.1
million in severance and employee benefit costs related to planned workforce
reductions, $6.1 million in lease termination costs associated with the closing
of certain retail and other operating locations and a $8.9 million write-down in
the carrying value of certain software development costs. Included in the
severance and employee benefit component of the restructuring charges were
non-cash charges of $22.6 million. These non-cash charges consisted of $21.5
million in additional pension and postretirement benefit costs related to a
special early retirement program offered by the Company to employees meeting
certain age and service requirements and $1.1 million in compensation expense
related to the accelerated vesting of certain stock options. Eligible employees
who elected the early retirement incentive received five years of additional
vested service for purposes of calculating their retirement benefits available
under the Company's pension and postretirement benefit plans. During the first
quarter of 2001, 230 employees accepted the retirement incentive offer. The
restructuring plans were completed in December 2001 and resulted in the
elimination of 1,644 employees, including the employees who accepted the early
retirement incentive. The work force reductions occurred primarily in operations
management, engineering, sales and the corporate support functions. As of
December 31, 2001, the Company had paid $37.9 million in severance and
employee-related expenses and all of the employee reductions had been completed.

The lease termination costs consisted of $5.0 million representing the
estimated minimum contractual commitments over the next one to five years for 63
operating locations that the Company abandoned, net of anticipated sublease
income. The lease termination costs also included $1.1 million of unamortized
leasehold improvement costs related to the abandoned locations. The write-down
in the carrying value of certain software development costs resulted from the
Company's formation of a joint venture with IBM announced in March 2001. The
joint venture, which operates as ALLTEL Corebanking Solutions, a consolidated
subsidiary of ALLTEL, markets IBM's Corebank software, a real time banking
system, to financial service organizations in Europe. Prior to forming the joint
venture, ALLTEL had been developing its own real-time processing software.
Following the signing of the joint venture agreement, the Company ceased further
development of its software product and wrote off the portion of the capitalized
software development costs that had no alternative future use or functionality.

During the fourth quarter of 2000, in connection with the purchase of
wireless assets from SBC, the Company recorded integration expenses and other
charges of $1.9 million, consisting
of branding and signage costs. The Company also recorded a $1.1 million
reduction in the liabilities associated with its September 1999 restructuring of
the wireline operations. This adjustment primarily reflected differences between
estimated and actual severance costs paid and a slight reduction in the number
of employees to be terminated under the plan from 248 to 242.

In connection with the exchange of wireless assets with Bell Atlantic and
GTE, the Company recorded integration expenses and other charges during the
second and third quarters of 2000, consisting of severance and employee benefit
costs related to a planned workforce reduction and branding and signage costs.
The integration plan, completed in September 2000, provided for the elimination
of 22 employees in the Company's wireless operations management, engineering and
sales support functions. In connection with this integration plan, the Company
recorded a charge of $9.2 million in the third quarter of 2000, consisting of $8.9
million in branding and signage costs

> F-42

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



9. Merger and Integration Expenses and Other Charges, Continued:

and $0.3 million in severance and employee-related expenses. In the second
quarter of 2000, the Company recorded a charge of $8.8 million, which consisted of $5.0
million in severance and employee benefit costs and $3.8 million in branding and
signage costs. During 2000, the Company paid $5.3 million in severance and
employee-related expenses and completed all of the employee reductions
associated with these integration activities.

During the third quarter of 2000, the Company also recorded a $1.5 million
reduction in the liabilities associated with its merger and integration
activities initiated during 1999. The reduction consisted of a $1.0 million
decrease in estimated severance costs to complete the September 1999
restructuring of the Company's wireline operations and decreases in estimated severance
costs of $0.3 million and $0.2 million, respectively, related to the
acquisitions of Aliant and Liberty. The adjustment to the wireline restructuring
plan reflects a reduction in the expected number of employees to be terminated
from 308 to 248, while the adjustments to the Aliant and Liberty merger and
integration plans reflect differences between estimated and actual severance
costs paid. During the second quarter of 2000, the Company also recorded a $2.0
million reduction in the merger and integration liability related to its
acquisition of Aliant. This adjustment primarily reflects a decrease in
severance and employee benefit costs to be paid as a result of reducing the
expected number of Aliant employees to be terminated from 160 to 132.

In an effort to realign the cost structure in its information services
business, the Company recorded a restructuring charge of $10.1 million during
the first quarter of 2000. This charge consisted of $5.9 million in severance
and employee benefit costs related to a planned workforce reduction and $4.2
million in lease termination costs related to the consolidation of certain
operating locations. The restructuring plan, which resulted in the elimination
of 199 employees, was completed in July 2000. As of December 31, 2001, the
Company had paid $5.9 million in severance and employee-related expenses and all
of the employee reductions had been completed. The lease termination costs
represent the estimated minimum contractual commitments over the next one to
four years for facilities that the Company abandoned, net of anticipated
sublease income.

In 1999, the Company recorded a pretax charge of $90.5 million in connection
with its mergers with Aliant, Liberty, AIR and Southern Data and with certain
loss contingencies and other restructuring activities. The merger and
integration expenses, which totaled $73.4 million, included professional and
financial advisors' fees of $24.4 million, severance and employee-related
expenses of $15.4 million and other integration costs of $33.6 million. The
Company's merger and integration plan, as approved by ALLTEL's Board of
Directors, provided for a reduction of 160 employees of Aliant and 40 employees
of Liberty, primarily in the corporate support functions, to be substantially
completed by the third quarter of 2000. As previously discussed, in the second
quarter of 2000, the Company reduced the expected number of Aliant employees to
be terminated to 132 and decreased the related accrued liability by $2.0
million. In the third quarter of 2000, the Company further reduced the accrued
liabilities related to the Aliant and Liberty mergers by $0.5 million. As of
December 31, 2001, the Company had paid $11.8 million in severance and
employee-related expenses and all of the 172 employee reductions had been
completed. The other integration costs included $12.5 million of lease
termination costs, $10.2 million of costs associated with the early termination
of certain service obligations and a $4.6 million write-down in the carrying
value of certain in-process and other software development assets that have no
future alternative use or functionality. Also included are other integration
costs incurred in the third quarter consisting of branding and signage costs of
$4.1 million and other expenses of $2.2 million.

The lease termination costs included a cancellation fee of $7.3 million
representing the negotiated settlement to terminate the Company's contractual
commitment to lease building space previously occupied by the former 360
Communications Company ("360") operations acquired in 1998. The lease
termination costs also included a $4.1 million write-off of capitalized
leasehold improvements and $1.1 million in other disposal costs. The contract
termination fees included $5.2 million related to long-term contracts with an
outside vendor for customer billing services to be provided to the Aliant and
Liberty operations until conversion of these operations to the Company's own
internal billing system occurred. Conversion of the Liberty operations was
completed in November 1999, and conversion of the Aliant operations began in
2001. The $5.2 million amount represented the termination fee specified in the
contracts. Of the total termination fee, $2.4 million has been paid with the
remainder due in installments upon completion of the conversion of the Aliant
operations to ALLTEL's billing system. The Company also recorded an additional
$5.0 million charge to reflect the actual cost of terminating its contract with
Convergys Corporation ("Convergys") for customer billing services to
be provided to the former 360 operations. In September 1999, the Company and
Convergys agreed to a final contract termination fee of $55.0 million, of which
$50.0 million of termination costs were recorded in 1998. Through December 31,
2001, the Company had paid $50.0 million of the termination fee.

> F-43

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



9. Merger and Integration Expenses and Other Charges,Continued:

In connection with management's plan to reduce costs and improve operating
efficiencies, the Company recorded a restructuring charge of $17.1 million in
1999. This charge consisted of $10.8 million in severance and employee benefit
costs related to a planned workforce reduction and $6.3 million in lease
termination costs related to the consolidation of certain operating locations.
The restructuring plan provided for the termination of approximately 308
employees in the Company's wireline operations support functions to be completed
in 2000. As previously discussed, during 2000, the Company reduced the expected
number of employees to be terminated to 242 and decreased the related liability
by $2.1 million. During 2000, the Company completed all of the employee
reductions and paid $8.7 million in severance-related expenses.

The following is a summary of activity related to the liabilities associated
with the Company's merger and integration expenses and other charges at December
31:

| |                                                   | (Millions)
| | ------------------------------------------------- | ----------
| |                                                   | 2001      
| | Balance, beginning of year                        | $
  16.5  
| | Merger and integration expenses and other charges | 92.2      
| | Reversal of acccrued liabilities                  | -         
| | Non-cash charges for employee benefits            | (22.6)    
| | Non-cash write-down of assets                     | (24.0)    
| | Cash outlays                                      | (45.0)    
| | Balance, end of year                              | $
  17.1  
|

As of December 31, 2001, the remaining unpaid liability related to the
Company's merger and integration and restructuring activities consists of
contract termination fees of $7.8 million, severance and employee-related
expenses of $4.5 million and lease cancellation and termination costs of $4.8
million and is included in other current liabilities in the accompanying
consolidated balance sheets. The merger and integration expenses and other
charges decreased net income $54.8 million, $15.0 million and $66.0 million for
the years ended December 31, 2001, 2000 and 1999, respectively.



10.  Gain on Disposal of Assets and Other:

In the second quarter of 2001, the Company recorded a pretax adjustment of
$4.4 million to reduce the gain recognized from the dissolution of a wireless
partnership with BellSouth Mobility, Inc. ("BellSouth") initially
recorded in the first quarter of 2001, as discussed below. The Company also
recorded a pretax adjustment of $2.4 million to increase the gain recognized
from the sale of PCS licenses to Verizon Wireless also completed during the
first quarter of 2001. These adjustments primarily reflected differences between
the actual and estimated book values of the properties transferred. In addition,
during the second quarter of 2001, the Company prepaid $73.5 million of
long-term debt prior to its stated maturity date and incurred pretax termination
fees of $2.9 million in connection with the early retirement of that debt. In
the first quarter of 2001, the Company recorded a pretax gain of $345.4 million
from the sale of 20 PCS licenses to Verizon Wireless completed in February 2001.
In addition, the Company recorded a pretax gain of $13.9 million upon the
dissolution of a wireless partnership with BellSouth involving properties in
four states. Upon dissolution, the partnership assets were distributed to the
partners at fair value resulting in a gain for financial reporting purposes.
Also in the first quarter of 2001, the Company recorded pretax gains of $3.2
million from the sale of certain investments.

During the fourth quarter of 2000, the Company recorded pretax gains totaling
$85.7 million from the sale of investments, including ALLTEL's remaining
investment in WorldCom common stock. Proceeds from the investment sales amounted
to $102.2 million. The Company also recorded a pretax gain of $35.5 million from
the sale of its PCS operations in Birmingham, Ala. In addition, the Company
recorded a pretax adjustment of $5.7 million to decrease the gain recognized
from the exchange of wireless properties with Bell Atlantic and GTE initially
recorded in the second quarter of 2000. These transactions increased net income
in the fourth quarter by $67.0 million. In the third quarter of 2000, the
Company recorded pretax gains totaling $476.3 million from the sale of a portion
of its investment in WorldCom common stock. Proceeds from the investment sales
amounted to $516.0 million. The Company also recorded a pretax adjustment of
$1.4 million to reduce the gain recognized from the property exchanges with Bell
Atlantic and GTE. This adjustment, along with the $5.7 million fourth quarter
adjustment previously discussed, primarily reflected differences between the
actual and estimated book values of the properties transferred. The third
quarter transactions increased net income $282.3 million. During the second
quarter of 2000, the Company recorded pretax gains totaling $1,353.1 million
from the exchange of wireless properties with Bell Atlantic and GTE and from the
sale of certain PCS assets. In addition, the Company recorded a pretax
write-down of $15.0 million on its investment in

> F-44

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



10. Gain on Disposal of Assets and Other,Continued:

APEX Global Information Services, Inc. ("APEX"), a provider of
Internet access services. The write-off was recorded due to adverse market
conditions and APEX's bankruptcy filing. These transactions increased net income
in the second quarter by $775.1 million.

During 1999, the Company recorded a pretax gain of $43.1 million from the
sale of a portion of its investment in WorldCom common stock. Proceeds from this
sale amounted to $45.0 million. This transaction increased net income by $27.2
million.

11. Income Taxes:

Income tax expense was as follows for
the years ended December 31:



|                                      | (Millions)       
|------------------------------------- | -----------------
|                                      | 2001             
|Current                               |                  
|                                      | Federal          
|                                      | State and
  other
|                                      |                  
|Deferred:                             |                  
|                                      | Federal          
|                                      | State and
  other
|                                      |                  
|Investment
      tax credit amortized | (0.4)            
|                                      |                  



Deferred income tax expense for 2001 primarily results from temporary
differences between depreciation expense for income tax purposes and
depreciation expense recorded in the financial statements. Deferred income tax
expense for 2000 primarily reflects the difference in the gain amount recognized
for income tax purposes and the gain amount recorded in the financial statements
related to the wireless property exchanges with Bell Atlantic and GTE.

Differences between the federal income tax statutory rates and effective
income tax rates, which include both federal and state income taxes, were as
follows for the years ended December 31:

|                                  
|----------------------------------
|                                  
|Statutory federal income tax rates
|Increase
      (decrease):        
|                                  
|                                  
|                                  
|                                  
|                                  
|Effective income tax rates        



The significant components of the net deferred income tax liability were as
follows at December 31:

|                                                   
|---------------------------------------------------
|                                                   
|                                                   
|Property,
      plant and equipment                
|Goodwill
      and other intangibles               
|Partnership investments                            
|Capitalized
      computer software                
|Unrealized
      holding gain (loss) on investments
|Operating
      loss carryforwards                 
|Other,
      net                                   
|                                                   
|Valuation
      allowance                          
|                                                   
|                                                   

F-45

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



11. Income Taxes, Continued:

At December 31, 2001 and 2000, total deferred tax assets were $229.6 million
and $678.7 million, respectively, and total deferred tax liabilities were $967.6
million and $895.7 million, respectively. As of December 31, 2001 and 2000, the
Company had available tax benefits associated with federal and state operating
loss carryforwards of $5.4 million and $7.3 million, respectively, which expire
annually in varying amounts to 2012. The valuation allowance primarily
represents tax benefits of certain state operating loss carryforwards and other
deferred tax assets, which may expire and not be utilized.



12.  Other Comprehensive Income (Loss):

For the Company, other comprehensive income (loss) consists of unrealized
holding gains (losses) on its investments in equity securities and foreign
currency translation adjustments. The components of other comprehensive income
(loss) were as follows for the years ended December 31:

|                                                       
|-------------------------------------------------------
|                                                       
|                                                       
|Unrealized
      holding gains (losses) on investments:
|                                                       
|                                                       
|                                                       
|                                                       
|                                                       
|                                                       
|                                                       
|                                                       
|                                                       
|                                                       
|Foreign currency translation                           
|Other
      comprehensive income (loss) before tax     
|Income tax
      benefit                               
|Other
      comprehensive income (loss)                
|                                                       

13. Litigation-Claims and Assessments:

In July 1996, the Georgia Public Service Commission (the "Georgia
PSC") issued an order requiring that ALLTEL's wireline subsidiaries which
operate within its jurisdiction reduce their annual network access charges by
$24.0 million, prospectively, effective July 1, 1996. The Georgia PSC's action
was in response to the Company's election to move from a rate-of-return method
of pricing to an incentive rate structure, as provided by a 1995 Georgia
telecommunications law. The Company appealed the Georgia PSC order. The Georgia
PSC's authority to conduct the rate proceeding was considered first by the
Superior Court of Fulton County, Georgia (the "Superior Court") and
then by the Georgia Court of Appeals and finally the Georgia Supreme Court. In
October 1998, the Georgia Supreme Court ruled that the Georgia PSC had the
authority to conduct the rate proceeding. The case was remanded to the Superior
Court for it to rule on certain issues that it had not previously decided. In
April 1999, the Superior Court vacated and reversed the July 1996 Georgia PSC
order and remanded the case with instructions to dismiss. The Georgia PSC
appealed the Superior Court's decision.

In April 2000, ALLTEL signed a settlement agreement with the Georgia PSC to
settle this case. As part of the agreement, ALLTEL agreed to accelerate
deployment of digital subscriber lines and Internet service to its customers in
Georgia and to reduce certain optional local calling plan rates. In addition,
ALLTEL agreed to future reductions in funds received from the Georgia Universal
Service Fund. These revenue reductions totaled $11.7 million in 2000 and approximately $26.0 million in 2001. In exchange for the Company's
commitments, the Georgia PSC agreed to withdraw its appeal of the Superior
Court's April 1999 decision. In June 2000, the Georgia Court of Appeals
acknowledged that the case had been settled and thus its ruling was moot, but
denied the motion to dismiss and reversed the Superior Court's decision. In
September 2000, ALLTEL and the Georgia PSC reached a final settlement agreement
to resolve all pending litigation involving the two parties. Under terms of the
final agreement, ALLTEL issued a one-time credit of about $25 to approximately
450,000 wireline customers in Georgia. The credits, which totaled $11.5 million,
were issued during the fourth quarter of 2000, and were recorded as a reduction
in wireline operating revenues. These one-time credits were in addition to the
other commitments agreed to by ALLTEL under the settlement agreement signed in
April 2000, as discussed above.

F-46

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



13. Litigation-Claims and Assessments,Continued:

The Company is party to various other legal proceedings arising from the
ordinary course of business. Although the ultimate resolution of these various
proceedings cannot be determined at this time, management of the Company does
not believe that such proceedings, individually or in the aggregate, will have a
material adverse effect on the future consolidated results of operations or financial
condition of the Company.



14.  Agreement to Lease Cell Site Towers:

In December 2000, the Company announced the signing of a definitive agreement
with American Tower Corporation ("American Tower") to lease up to
approximately 2,200 of ALLTEL's cell site towers. Under terms of the 15-year
lease agreement, American Tower agreed to pay ALLTEL up to an aggregate of
approximately $660.0 million in cash at the commencement of the lease term.
American Tower will have the option to purchase the towers for additional
consideration at the end of the lease term. With this transaction, American
Tower will manage, maintain and remarket the remaining space on the towers,
while ALLTEL will continue to own the cell site facilities. ALLTEL will pay
American Tower a monthly fee for management and maintenance services for the
duration of the agreement amounting to $1,200 per tower per month, subject to
escalation not to exceed five percent annually.  The
Company expects to close on approximately 1,780 towers at the completion of this
transaction with American Tower. As of December 31, 2001, the Company had closed
on 1,748 towers and received proceeds of $524.4 million. The remaining towers to
be closed under this transaction are subject to necessary consents and approvals
and should be completed during the first quarter of 2002. Proceeds from this
transaction were recorded by ALLTEL as deferred rental income and are recognized
as service revenues on a straight-line basis over the lease term. At December
31, 2001, deferred rental income of $506.6 million is included in other
liabilities in the accompanying consolidated balance sheets.



15.  Business Segments:

ALLTEL disaggregates its business operations based upon differences in
products and services. The Company's communications operations consist of its
wireless, wireline and emerging businesses segments. Wireless operations include
PCS and paging services and are provided in 21 states. The Company's wireline
subsidiaries provide primary local service and network access in 15 states.
Emerging businesses include the Company's long-distance, local competitive
access, Internet access and network management operations. Long-distance and
Internet access services are marketed in 24 states. The Company is currently
providing local competitive access and network management services in select
areas within its geographically focused communications markets. Information
services provide information processing, outsourcing services and application
software primarily to financial and telecommunications customers. The principal
markets for information services' products and services are commercial banks,
financial institutions and telecommunications companies in the United States and
major international markets. Other operations consist of the Company's product
distribution and directory publishing operations. Corporate items include
general corporate expenses, headquarters facilities and equipment, investments,
goodwill and other special charges and unusual items not allocated to the
segments.

The accounting policies used in measuring segment assets and operating
results are the same as those described in Note 1. The special charges and
unusual items discussed in Notes 9 and 10 are not allocated to the segments and
are included in corporate operations. The Company evaluates performance of the
segments based on segment operating income, excluding special charges and
unusual items. The Company accounts for intercompany sales at current market
prices or in accordance with regulatory requirements.































F-47

15. Business Segments, Continued:

(Millions)



Information
about the Company's business segments was as follows for the year ended December
31, 2001:



|                                                                 |                                | Communications |                   |          |                |                           |             |         |                 |                     |                 |                 |             |              
|---------------------------------------------------------------- | ------------------------------ | -------------- | ----------------- | -------- | -------------- | ------------------------- | ----------- | ------- | --------------- | ------------------- | --------------- | --------------- | ----------- | -------------
|                                                                 |                                | Wireless       |                   | Wireline |                | Emerging
      Businesses |             | Total   |                 | InformationServices |                 | OtherOperations |             | TotalSegments
|Revenues and
      sales from                                    |                                |                |                   |          |                |                           |             |         |                 |                     |                 |                 |             |              
|unaffiliated
      customers:                                    |                                |                |                   |          |                |                           |             |         |                 |                     |                 |                 |             |              
|Domestic                                                         | $3,832.0                       |                | $1,696.7          |          | $338.6         |                           | $5,867.3    |         | $ 840.9         |                     | $ 370.3         |                 | $7,078.5    |              
|International                                                    | -                              |                | -                 |          | -              |                           | -           |         | 163.8           |                     | -               |                 | 163.8       |              
|                                                                 |                                | 3,832.0        |                   | 1,696.7  |                | 338.6                     |             | 5,867.3 |                 | 1,004.7             |                 | 370.3           |             | 7,242.3      
|Intercompany
        revenues and sales                          | -                              |                | 116.6             |          | 122.9          |                           | 239.5       |         | 318.2           |                     | 143.6           |                 | 701.3       |              
|                                                                 | Total
      revenues and sales | 3,832.0        |                   | 1,813.3  |                | 461.5                     |             | 6,106.8 |                 | 1,322.9             |                 | 513.9           |             | 7,943.6      
|Operating
      expenses                                         | 2,440.6                        |                | 721.7             |          | 381.7          |                           | 3,544.0     |         | 967.8           |                     | 486.8           |                 | 4,998.6     |              
|Depreciation
      and amortization                              | 572.8                          |                | 368.3             |          | 41.5           |                           | 982.6       |         | 164.5           |                     | 3.1             |                 | 1,150.2     |              
|Merger and integration expenses                                  |                                |                |                   |          |                |                           |             |         |                 |                     |                 |                 |             |              
|and other charges                                                | -                              |                | -                 |          | -              |                           | -           |         | -               |                     | -               |                 | -           |              
|Total
      costs and expenses                                   | 3,013.4                        |                | 1,090.0           |          | 423.2          |                           | 4,526.6     |         | 1,132.3         |                     | 489.9           |                 | 6,148.8     |              
|                                                                 |                                |                |                   |          |                |                           |             |         |                 |                     |                 |                 |             |              
|Operating
      income (loss)                                    | 818.6                          |                | 723.3             |          | 38.3           |                           | 1,580.2     |         | 190.6           |                     | 24.0            |                 | 1,794.8     |              
|Equity
      earnings in unconsolidatedpartnerships              | 57.0                           |                | -                 |          | -              |                           | 57.0        |         | -               |                     | -               |                 | 57.0        |              
|Minority
      interest in consolidated
      partnerships       | (75.3)                         |                | -                 |          | -              |                           | (75.3)      |         | 3.5             |                     | -               |                 | (71.8)      |              
|Other income, net                                                | 14.9                           |                | 5.7               |          | 1.3            |                           | 21.9        |         | 8.6             |                     | -               |                 | 30.5        |              
|Total
      non-operating income, net                            | (3.4)                          |                | 5.7               |          | 1.3            |                           | 3.6         |         | 12.1            |                     | -               |                 | 15.7        |              
|Interest income (expense)                                        | (254.2)                        |                | (53.3)            |          | (27.8)         |                           | (335.3)     |         | (7.4)           |                     | (1.9)           |                 | (344.6)     |              
|Gain on disposal of assets and
      other                       | -                              |                | -                 |          | -              |                           | -           |         | -               |                     | -               |                 | -           |              
|Income before income taxes                                       | 561.0                          |                | 675.7             |          | 11.8           |                           | 1,248.5     |         | 195.3           |                     | 22.1            |                 | 1,465.9     |              
|Income tax expense                                               | 254.2                          |                | 251.7             |          | 4.6            |                           | 510.5       |         | 79.6            |                     | 8.6             |                 | 598.7       |              
|Income
      before cumulative effect
      of accounting change | 306.8                          |                | 424.0             |          | 7.2            |                           | 738.0       |         | 115.7           |                     | 13.5            |                 | 867.2       |              
|Cumulative
      effect of accounting
      change               | -                              |                | 19.5              |          | -              |                           | 19.5        |         | -               |                     | -               |                 | 19.5        |              
|Net income                                                       | $  306.8                       |                | $    443.5        |          | $    7.2       |                           | $    757.5  |         | $   115.7       |                     | $    13.5       |                 | $     886.7 |              
|Assets                                                           | $7,323.1                       |                | $ 3,112.9         |          | $455.1         |                           | $10,891.1   |         | $  910.8        |                     | $  248.4        |                 | $12,050.3   |              
|Investments in unconsolidated                                    |                                |                |                   |          |                |                           |             |         |                 |                     |                 |                 |             |              
|partnerships                                                     | $  173.3                       |                | $          
    - |          | $       
    - |                           | $     173.3 |         | $        
    - |                     | $        
    - |                 | $     173.3 |              
|Capital expenditures                                             | $  716.9                       |                | $    326.5        |          | $  61.7        |                           | $  1,105.1  |         | $   97.4        |                     | $     8.1       |                 | $  1,210.6  |              



Notes:

a

b

c

F-48

15. Business Segments, Continued:

(Millions)



Information
about the Company's business segments was as follows for the year ended December
31, 2000:



|                                                                              |                                | Communications |                   |          |                 |                           |            |         |                  |                     |                  |                 |             |              
|----------------------------------------------------------------------------- | ------------------------------ | -------------- | ----------------- | -------- | --------------- | ------------------------- | ---------- | ------- | ---------------- | ------------------- | ---------------- | --------------- | ----------- | -------------
|                                                                              |                                | Wireless       |                   | Wireline |                 | Emerging
      Businesses |            | Total   |                  | InformationServices |                  | OtherOperations |             | TotalSegments
|Revenues and
      sales from                                                 |                                |                |                   |          |                 |                           |            |         |                  |                     |                  |                 |             |              
|unaffiliated
      customers:                                                 |                                |                |                   |          |                 |                           |            |         |                  |                     |                  |                 |             |              
|Domestic                                                                      | $3,536.6                       |                | $1,636.8          |          | $315.3          |                           | $5,488.7   |         | $ 853.7          |                     | $ 396.4          |                 | $6,738.8    |              
|International                                                                 | -                              |                | -                 |          | -               |                           | -          |         | 134.2            |                     | -                |                 | 134.2       |              
|                                                                              |                                | 3,536.6        |                   | 1,636.8  |                 | 315.3                     |            | 5,488.7 |                  | 987.9               |                  | 396.4           |             | 6,873.0      
|Intercompany
        revenues and sales                                       | -                              |                | 109.2             |          | 67.3            |                           | 176.5      |         | 292.0            |                     | 237.8            |                 | 706.3       |              
|                                                                              | Total
      revenues and sales | 3,536.6        |                   | 1,746.0  |                 | 382.6                     |            | 5,665.2 |                  | 1,279.9             |                  | 634.2           |             | 7,579.3      
|Operating
      expenses                                                      | 2,232.5                        |                | 732.9             |          | 359.4           |                           | 3,324.8    |         | 940.8            |                     | 610.4            |                 | 4,876.0     |              
|Depreciation
      and amortization                                           | 443.9                          |                | 345.2             |          | 28.1            |                           | 817.2      |         | 154.1            |                     | 1.7              |                 | 973.0       |              
|Merger and integration expenses                                               |                                |                |                   |          |                 |                           |            |         |                  |                     |                  |                 |             |              
|and other charges                                                             | -                              |                | -                 |          | -               |                           | -          |         | -                |                     | -                |                 | -           |              
|Total
      costs and expenses                                                | 2,676.4                        |                | 1,078.1           |          | 387.5           |                           | 4,142.0    |         | 1,094.9          |                     | 612.1            |                 | 5,849.0     |              
|                                                                              |                                |                |                   |          |                 |                           |            |         |                  |                     |                  |                 |             |              
|Operating
      income (loss)                                                 | 860.2                          |                | 667.9             |          | (4.9)           |                           | 1,523.2    |         | 185.0            |                     | 22.1             |                 | 1,730.3     |              
|Equity
      earnings in unconsolidatedpartnerships                           | 120.5                          |                | -                 |          | -               |                           | 120.5      |         | -                |                     | -                |                 | 120.5       |              
|Minority
      interest in consolidated
      partnerships                    | (98.0)                         |                | -                 |          | -               |                           | (98.0)     |         | 0.8              |                     | -                |                 | (97.2)      |              
|Other income, net                                                             | 13.5                           |                | 5.5               |          | 3.2             |                           | 22.2       |         | 18.2             |                     | -                |                 | 40.4        |              
|Total
      non-operating income, net                                         | 36.0                           |                | 5.5               |          | 3.2             |                           | 44.7       |         | 19.0             |                     | -                |                 | 63.7        |              
|Interest expense                                                              | (214.4)                        |                | (57.1)            |          | (22.7)          |                           | (294.2)    |         | (8.3)            |                     | (2.8)            |                 | (305.3)     |              
|Gain on disposal of assets and
      other                                    | -                              |                | -                 |          | -               |                           | -          |         | -                |                     | -                |                 | -           |              
|Income (loss) before income taxes                                             | 681.8                          |                | 616.3             |          | (24.4)          |                           | 1,273.7    |         | 195.7            |                     | 19.3             |                 | 1,488.7     |              
|Income tax expense (benefit)                                                  | 302.7                          |                | 231.4             |          | (9.4)           |                           | 524.7      |         | 81.7             |                     | 7.4              |                 | 613.8       |              
|Income
      (loss)
      before cumulative effect
      of accounting change | 379.1                          |                | 384.9             |          | (15.0)          |                           | 749.0      |         | 114.0            |                     | 11.9             |                 | 874.9       |              
|Cumulative
      effect of accounting
      change                            | (34.8)                         |                | (1.8)             |          | -               |                           | (36.6)     |         | -                |                     | -                |                 | (36.6)      |              
|Net income (loss)                                                             | $   344.3                      |                | $    383.1        |          | $ (15.0)        |                           | $    712.4 |         | $   114.0        |                     | $     11.9       |                 | $     838.3 |              
|Assets                                                                        | $7,036.8                       |                | $ 3,124.1         |          | $ 425.9         |                           | $10,586.8  |         | $   948.3        |                     | $  521.2         |                 | $12,056.3   |              
|Investments in unconsolidated                                                 |                                |                |                   |          |                 |                           |            |         |                  |                     |                  |                 |             |              
|partnerships                                                                  | $   231.8                      |                | $          
    - |          | $        
    - |                           | $    231.8 |         | $         
    - |                     | $         
    - |                 | $    231.8  |              
|Capital expenditures                                                          | $   547.7                      |                | $    330.6        |          | $ 146.5         |                           | $ 1,024.8  |         | $  118.5         |                     | $      5.9       |                 | $ 1,149.2   |              





Notes:

a

b

c

F-49

15. Business Segments, Continued:

(Millions)



Information
about the Company's business segments was as follows for the year ended December
31, 1999:



|                                                           |                                | Communications |                        |          |                |                           |            |         |                |                     |                  |                 |            |              
|---------------------------------------------------------- | ------------------------------ | -------------- | ---------------------- | -------- | -------------- | ------------------------- | ---------- | ------- | -------------- | ------------------- | ---------------- | --------------- | ---------- | -------------
|                                                           |                                | Wireless       |                        | Wireline |                | Emerging
      Businesses |            | Total   |                | InformationServices |                  | OtherOperations |            | TotalSegments
|Revenues and
      sales from                              |                                |                |                        |          |                |                           |            |         |                |                     |                  |                 |            |              
|unaffiliated
      customers:                              |                                |                |                        |          |                |                           |            |         |                |                     |                  |                 |            |              
|Domestic                                                   | $3,033.6                       |                | $1,621.4               |          | $259.8         |                           | $4,914.8   |         | $ 822.1        |                     | $ 368.8          |                 | $6,105.7   |              
|International                                              | -                              |                | -                      |          | -              |                           | -          |         | 155.3          |                     | -                |                 | 155.3      |              
|                                                           |                                | 3,033.6        |                        | 1,621.4  |                | 259.8                     |            | 4,914.8 |                | 977.4               |                  | 368.8           |            | 6,261.0      
|Intercompany
        revenues and sales                    | -                              |                | 56.1                   |          | 10.4           |                           | 66.5       |         | 268.1          |                     | 211.0            |                 | 545.6      |              
|                                                           | Total
      revenues and sales | 3,033.6        |                        | 1,677.5  |                | 270.2                     |            | 4,981.3 |                | 1,245.5             |                  | 579.8           |            | 6,806.6      
|Operating
      expenses                                   | 1,825.6                        |                | 734.7                  |          | 260.3          |                           | 2,820.6    |         | 926.1          |                     | 557.0            |                 | 4,303.7    |              
|Depreciation
      and amortization                        | 359.8                          |                | 323.7                  |          | 18.9           |                           | 702.4      |         | 144.1          |                     | 1.2              |                 | 847.7      |              
|Merger and integration expenses                            |                                |                |                        |          |                |                           |            |         |                |                     |                  |                 |            |              
|and other charges                                          | -                              |                | -                      |          | -              |                           | -          |         | -              |                     | -                |                 | -          |              
|Total
      costs and expenses                             | 2,185.4                        |                | 1,058.4                |          | 279.2          |                           | 3,523.0    |         | 1,070.2        |                     | 558.2            |                 | 5,151.4    |              
|                                                           |                                |                |                        |          |                |                           |            |         |                |                     |                  |                 |            |              
|Operating
      income (loss)                              | 848.2                          |                | 619.1                  |          | (9.0)          |                           | 1,458.3    |         | 175.3          |                     | 21.6             |                 | 1,655.2    |              
|Equity
      earnings in unconsolidatedpartnerships        | 105.0                          |                | -                      |          | -              |                           | 105.0      |         | -              |                     | -                |                 | 105.0      |              
|Minority
      interest in consolidated
      partnerships | (116.6)                        |                | -                      |          | -              |                           | (116.6)    |         | -              |                     | -                |                 | (116.6)    |              
|Other income, net                                          | 18.9                           |                | 6.2                    |          | 6.6            |                           | 31.7       |         | 17.2           |                     | 0.5              |                 | 49.4       |              
|Total
      non-operating income, net                      | 7.3                            |                | 6.2                    |          | 6.6            |                           | 20.1       |         | 17.2           |                     | 0.5              |                 | 37.8       |              
|Interest expense                                           | (185.0)                        |                | (67.2)                 |          | (14.8)         |                           | (267.0)    |         | (9.7)          |                     | (1.4)            |                 | (278.1)    |              
|Gain on disposal of assets and
      other                 | -                              |                | -                      |          | -              |                           | -          |         | -              |                     | -                |                 | -          |              
|Income (loss) before income taxes                          | 670.5                          |                | 558.1                  |          | (17.2)         |                           | 1,211.4    |         | 182.8          |                     | 20.7             |                 | 1,414.9    |              
|Income tax expense (benefit)                               | 285.6                          |                | 204.7                  |          | (6.6)          |                           | 483.7      |         | 75.2           |                     | 8.0              |                 | 566.9      |              
|Net income (loss)                                          | $   384.9                      |                | $    353.4             |          | $  (10.6)      |                           | $    727.7 |         | $   107.6      |                     | $     12.7       |                 | $    848.0 |              
|Assets                                                     | $4,900.3                       |                | $ 3,171.5              |          | $ 326.7        |                           | $ 8,398.5  |         | $   883.6      |                     | $  259.4         |                 | $ 9,541.5  |              
|Investments in unconsolidated                              |                                |                |                        |          |                |                           |            |         |                |                     |                  |                 |            |              
|partnerships                                               | $  490.8                       |                | $        
      
    - |          | $       
    - |                           | $    490.8 |         | $       
    - |                     | $         
    - |                 | $   490.8  |              
|Capital expenditures                                       | $  355.8                       |                | $    352.9             |          | $ 113.2        |                           | $    821.9 |         | $    94.6      |                     | $      1.0       |                 | $   917.5  |              



Notes:

a

b

c





F-50

16. Quarterly Financial Information -
(Unaudited):

(Millions, except per share amounts)

|                                                           | For
      the year ended December 31, 2001                
|---------------------------------------------------------- | ----------------------------------------------------------
|                                                           | Total                                                     
|Revenues
      and sales                                   | $7,598.9                                                  
|Operating
      income                                     | $1,664.7                                                  
|Income
      before cumulative effect of accounting change | $1,047.5                                                  
|Cumulative
      effect of accounting change               | 19.5                                                      
|Net
      income                                           | 1,067.0                                                   
|Preferred
      dividends                                  | 0.1                                                       
|Net
      income applicable to common shares               | $1,066.9                                                  
|Basic
      earnings per share:                           
|                                                           | Income
      before cumulative effect of accounting change
|                                                           | Cumulative
      effect of accounting change              
|                                                           | Net income                                                
|Diluted
      earnings per share:                         
|                                                           | Income
      before cumulative effect of accounting change
|                                                           | Cumulative
      effect of accounting change              
|                                                           | Net income                                                
|                                                           | For
      the year ended December 31, 2000                
|                                                           | Total                                                     
|Revenues
      and sales                                   | $7,253.9                                                  
|Operating
      income                                     | $1,667.5                                                  
|Income
      before cumulative effect of accounting change | $1,965.4                                                  
|Cumulative
      effect of accounting change               | (36.6)                                                    
|Net
      income                                           | 1,928.8                                                   
|Preferred
      dividends                                  | 0.1                                                       
|Net
      income applicable to common shares               | $1,928.7                                                  
|Basic
      earnings per share:                           
|                                                           | Income
      before cumulative effect of accounting change
|                                                           | Cumulative
      effect of accounting change              
|                                                           | Net income                                                
|Diluted
      earnings per share:                         
|                                                           | Income
      before cumulative effect of accounting change
|                                                           | Cumulative
      effect of accounting change              
|                                                           | Net income                                                

> Notes to Quarterly Financial Information:

1. In the fourth quarter of 2001, the Company recorded additional severance of
  $0.1 million in connection with the restructuring of its product distribution
  operations and pretax write-downs of $5.6 million in the carrying value of
  certain cell site equipment to fair value as part of the equipment exchange
  program initiated in the third quarter of 2001. These charges decreased net
  income $3.4 million or $.01 per share. (See Note 9.)
2. In the third quarter of 2001, the Company recorded pretax charges of $5.9
  million in connection with the restructuring of its information services
  operations and additional charges incurred in connection with its first
  quarter 2001 restructuring of its regional communications and corporate
  operations. The Company also recorded pretax write-downs of $9.5 million in
  the carrying value of certain cell site equipment to fair value. The
  write-downs in cell site equipment resulted from the Company's exchange of its
  existing equipment for new equipment under terms of a product replacement
  program initiated by a vendor in 2001. These transactions decreased net income
  $9.3 million or $.03 per share. (See Note 9.)
3. In the second quarter of 2001, the Company recorded a pretax adjustment of
  $2.4 million to increase the gain recognized on the sale of PCS licenses and a
  pretax adjustment of $4.4 million to reduce the gain realized upon the
  dissolution of a wireless partnership initially recorded in the first quarter
  of 2001. The Company also incurred pretax termination fees of $2.9 million
  related to the early retirement of long-term debt and recorded additional
  pretax charges of $2.1 million in connection with its first quarter 2001
  restructuring activities. These transactions decreased net income $4.1 million
  or $.01 per share. (See Notes 9 and 10.)
4. In the first quarter of 2001, the Company recorded a pretax gain of $345.4
  million from the sale of PCS licenses, a pretax gain of $13.9 million from the
  dissolution of a wireless partnership and a pretax gain of $3.2 million from
  the sale of investments. These transactions increased net income $215.6
  million or $.69 per share. Operating income included a pretax charge of $69.0
  million incurred in connection with the restructuring of the Company's
  regional communications, product distribution and corporate operations. These
  charges decreased net income $40.9 million or $.13 per share. Effective
  January 1, 2001, the Company changed the accounting for a subsidiary's pension
  plan. The cumulative effect of this accounting change resulted in a one-time
  non-cash credit of $19.5 million, net of income tax expense of $13.0 million
  or $.06 per share. (See Notes 2, 9 and 10.)

16. Quarterly Financial
Information - (Unaudited)

Continued:

1. During the fourth quarter of 2000, the Company recorded pretax gains
  totaling $85.7 million from the sale of equity securities. The Company also
  recorded a pretax gain of $35.5 million from the sale of PCS operations. The
  Company also recorded a pretax adjustment of $5.7 million to decrease the gain
  recognized from the exchange of wireless properties with Bell Atlantic and GTE
  initially recorded in the second quarter of 2000.These transactions
  increased net income $67.0 million or $.22 per share. Operating income
  included a pretax charge of $1.9 million for branding and signage costs
  incurred in connection with the acquisition of wireless assets from SBC,
  partially offset by a $1.1 million reduction in the merger and integration
  liability related to the Company's September 1999 restructuring of its
  wireline operations. These charges decreased net income $0.5 million or less
  than $.01 per share. (See Notes 9 and 10.)
2. In the third quarter of 2000, the Company recorded pretax gains of $476.3
  million from the sale of WorldCom common stock, partially offset by a pretax
  adjustment of $1.4 million to reduce the gain recognized from the wireless
  property exchanges with Bell Atlantic and GTE. These transactions increased
  net income $282.3 million or $.90 per share. Operating income included a
  pretax charge of $11.5 million related to a litigation settlement. Operating
  income also included a pretax charge of $9.2 million for branding and
  severance costs incurred in connection with the property exchanges with Bell
  Atlantic and GTE, partially offset by a $1.5 million reduction in liabilities
  associated with certain 1999 merger and integration activities. These charges
  decreased net income $11.6 million or $.04 per share. (See Notes 9, 10 and
  13.)
3. During the second quarter of 2000, the Company recorded pretax gains of
  $1,353.1 million from the exchange of wireless properties with Bell Atlantic
  and GTE and from the sale of certain PCS assets. In addition, the Company
  recorded a pretax write-down of $15.0 million on its investment in an Internet
  access service provider. These transactions increased net income $775.1
  million or $2.46 per share. Operating income for the second quarter of 2000
  included a pretax charge of $8.8 million for branding and severance costs
  incurred in connection with the property exchanges with Bell Atlantic and GTE,
  partially offset by a $2.0 million reduction in the merger and integration
  liability related to the Company's July 1999 acquisition of Aliant. These
  charges decreased net income $4.1 million or $.02 per share. (See Notes 9 and
  10.)
4. First quarter 2000 operating income included a pretax charge of $10.1
  million incurred in connection with certain restructuring activities in the
  Company's information services business. This charge decreased net income $5.9
  million or $.01 per share. (See Note 9.) Effective January 1, 2000, the
  Company changed its method of recognizing wireless access revenues and certain
  customer activation fees. The cumulative effect of this accounting change
  resulted in a one-time non-cash charge of $36.6 million, net of income tax
  benefit of $23.3 million or $.12 per share. (See Note 2.)
5. In the opinion of management, all adjustments necessary for a fair
  presentation of results for each period have been included.

17. Agreement to Purchase Wireline Properties:

On October 31, 2001, ALLTEL signed an agreement with Verizon Communications
Inc. ("Verizon") to purchase local telephone properties located in the
state of Kentucky. Under terms of the purchase agreement, ALLTEL will acquire
approximately 600,000 access lines for $1.9 billion in cash. The acquired
wireline properties will overlap ALLTEL's existing wireless service in
northeastern Kentucky and will increase the Company's total access lines by
approximately 25 percent to more than 3.0 million wireline customers. The
transaction is expected to be completed in the third quarter of 2002. Upon the signing of this purchase agreement, ALLTEL paid Verizon a deposit equal to 10 percent of the
total purchase price, or $190.7 million, with the balance of the
cash payment (net of interest on the $190.7 million deposit) due at the time the transaction is completed. At December 31, 2001,
this prepayment is included in prepaid expenses and other current assets in the
accompanying consolidated balance sheets.

> 

F-52