##### 



AUDITORS REPORT

To the Directors of

Microcell Telecommunications Inc.


We have audited the consolidated balance sheets
of Microcell Telecommunications Inc. as at
December 31, 2003, May 1, 2003 and December 31,
2002, and the consolidated statements of net income (loss) and
deficit and cash flows for the eight months ended
December 31, 2003, the four months ended April 30,
2003 and the years ended December 31, 2002 and 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
Canadian generally accepted auditing standards and the standards
of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform an
audit to obtain reasonable assurance 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.

In our opinion, these consolidated financial
statements present fairly, in all material respects, the
financial position of the Company as at December 31, 2003,
May 1, 2003 and December 31, 2002, and the results of
its operations and its cash flows for the eight months ended
December 31, 2003, the four months ended April 30,
2003 and the years ended December 31, 2002 and 2001 in
accordance with Canadian generally accepted accounting
principles.



| |                              
| | -----------------------------
| | /s/     ERNST &
    YOUNG LLP
| | Chartered Accountants        

Montreal, Canada,

February 11, 2004


except for note 20 which is as at
November 19, 2004


1



---



##### 



MICROCELL TELECOMMUNICATIONS INC.

CONSOLIDATED BALANCE SHEETS

|                                                                  |  |                                    |         |       |  |                    |         |  |  |  |            |  
|----------------------------------------------------------------- |  | ---------------------------------- | ------- | ----- |  | ------------------ | ------- |  |  |  | ---------- | -
|                                                                  |  |                                    |         |       |  | Pre-reorganization
|                                                                  |  |                                    |         |       |  |                   
|                                                                  |  | December 31                        |         | May 1 |  | December 31       
|                                                                  |  | 2003                               |         | 2003  |  | 2002              
|                                                                  |  |                                    |         |       |  |                   
|                                                                  |  | $                                  |         |       |  | $                 
|                                                                  |  |                                    |         | $     |  | [Note 1]          
|                                                                  |  |                                   
|                                                                  |  | [In thousands of Canadian dollars]
|ASSETS[note 8]                                                   
|Current assets                                                    |  |                                    |         |       |  |                    |         |  |  |  |            |  
|Cash and cash equivalents                                         |  |                                    | 43,094  |       |  |                    | 111,765 |  |  |  | 26,979     |  
|Short-term investments                                            |  |                                    | 60,927  |       |  |                    | 9,912   |  |  |  | 83,181     |  
|Marketable securities                                             |  |                                    |        |       |  |                    |        |  |  |  | 164        |  
|Receivables [note 3]                                              |  |                                    | 76,796  |       |  |                    | 64,552  |  |  |  | 61,889     |  
|Inventories                                                       |  |                                    | 27,593  |       |  |                    | 21,865  |  |  |  | 19,527     |  
|Prepaid license fees, rental sites and other
    prepaid expenses |  |                                    | 26,850  |       |  |                    | 34,043  |  |  |  | 19,021     |  
|Deferred charges                                                  |  |                                    | 10,601  |       |  |                    | 7,044   |  |  |  | 16,525     |  
|Other current assets                                              |  |                                    | 6,188   |       |  |                    | 2,906   |  |  |  | 4,070      |  
|                                                                  |  |                                    |         |       |  |                    |         |  |  |  |            |  
|Total current assets                                              |  |                                    | 252,049 |       |  |                    | 252,087 |  |  |  | 231,356    |  
|Property, plant and equipment [note 4]                            |  |                                    | 318,041 |       |  |                    | 289,692 |  |  |  | 655,646    |  
|Intangible assets [note 5]                                        |  |                                    | 233,819 |       |  |                    | 241,202 |  |  |  | 2,727      |  
|Long-term investments and other non-current
    assets [note 6]   |  |                                    | 4,797   |       |  |                    | 5,227   |  |  |  | 12,335     |  
|                                                                  |  |                                    |         |       |  |                    |         |  |  |  |            |  
|                                                                  |  |                                    | 808,706 |       |  |                    | 788,208 |  |  |  | 902,064    |  
|                                                                  |  |                                    |         |       |  |                    |         |  |  |  |            |  
|                                                                 
|LIABILITIES AND SHAREHOLDERS
    EQUITY                         
|Current liabilities                                               |  |                                    |         |       |  |                    |         |  |  |  |            |  
|Accounts payable and accrued liabilities
    [note 7]             |  |                                    | 91,634  |       |  |                    | 65,026  |  |  |  | 121,539    |  
|Deferred revenues                                                 |  |                                    | 42,328  |       |  |                    | 34,207  |  |  |  | 37,573     |  
|Derivative instruments [notes 8 and
    20]                       |  |                                    | 6,348   |       |  |                    |        |  |  |  |           |  
|Current portion of long-term debt
    [notes 8 and 20]            |  |                                    | 9,298   |       |  |                    | 10,000  |  |  |  | 7,500      |  
|                                                                  |  |                                    |         |       |  |                    |         |  |  |  |            |  
|Total current liabilities                                         |  |                                    | 149,608 |       |  |                    | 109,233 |  |  |  | 166,612    |  
|Long-term debt [notes 8 and 20]                                   |  |                                    | 315,164 |       |  |                    | 340,000 |  |  |  | 2,032,678  |  
|                                                                  |  |                                    |         |       |  |                    |         |  |  |  |            |  
|                                                                  |  |                                    | 464,772 |       |  |                    | 449,233 |  |  |  | 2,199,290  |  
|                                                                  |  |                                    |         |       |  |                    |         |  |  |  |            |  
|Shareholders equity
    (deficiency)                             |  |                                    |         |       |  |                    |         |  |  |  |            |  
|Share capital [notes 9 and 20]                                    |  |                                    | 338,154 |       |  |                    | 321,049 |  |  |  | 1,167,678  |  
|Warrants [notes 9 and 20]                                         |  |                                    | 17,926  |       |  |                    | 17,926  |  |  |  | 1,770      |  
|Deficit                                                           |  |                                    | (12,146 | )     |  |                    |        |  |  |  | (2,466,674 | )
|                                                                  |  |                                    |         |       |  |                    |         |  |  |  |            |  
|                                                                  |  |                                    | 343,934 |       |  |                    | 338,975 |  |  |  | (1,297,226 | )
|                                                                  |  |                                    |         |       |  |                    |         |  |  |  |            |  
|                                                                  |  |                                    | 808,706 |       |  |                    | 788,208 |  |  |  | 902,064    |  
|                                                                  |  |                                    |         |       |  |                    |         |  |  |  |            |  

Commitments and contingencies
[note 15]

Subsequent events [note 20]

See accompanying notes

2



---



##### 



MICROCELL TELECOMMUNICATIONS INC.

CONSOLIDATED STATEMENTS OF

NET INCOME (LOSS) AND DEFICIT


|                                                                                                                              |  |                                    |         |                            |  |              |            |              |  |  |            |   |  |  |            |  
|----------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------- | ------- | -------------------------- |  | ------------ | ---------- | ------------ |  |  | ---------- | - |  |  | ---------- | -
|                                                                                                                              |  |                                    |         |                           
|                                                                                                                              |  |                                    |         | Pre-reorganization[note 1]
|                                                                                                                              |  |                                    |         |                           
|                                                                                                                              |  | Eight months                       |         | Four months                |  |             
|                                                                                                                              |  | Ended                              |         | Ended                      |  | Year Ended   |            | Year Ended  
|                                                                                                                              |  | December 31,                       |         | April 30,                  |  | December 31, |            | December 31,
|                                                                                                                              |  | 2003                               |         | 2003                       |  | 2002         |            | 2001        
|                                                                                                                              |  |                                    |         |                            |  |              |            |             
|                                                                                                                              |  | $                                  |         | $                          |  | $            |            | $           
|                                                                                                                              |  |                                   
|                                                                                                                              |  | [In thousands of Canadian dollars,
|                                                                                                                              |  | except for per share data]        
|Revenues                                                                                                                      |  |                                    |         |                            |  |              |            |              |  |  |            |   |  |  |            |  
|Services                                                                                                                      |  |                                    | 357,483 |                            |  |              | 170,196    |              |  |  | 566,706    |   |  |  | 509,082    |  
|Products                                                                                                                      |  |                                    | 35,610  |                            |  |              | 7,498      |              |  |  | 24,356     |   |  |  | 32,408     |  
|                                                                                                                              |  |                                    |         |                            |  |              |            |              |  |  |            |   |  |  |            |  
|                                                                                                                              |  |                                    | 393,093 |                            |  |              | 177,694    |              |  |  | 591,062    |   |  |  | 541,490    |  
|                                                                                                                              |  |                                    |         |                            |  |              |            |              |  |  |            |   |  |  |            |  
|Costs and expenses[notes 10 and 12]                                                                                           |  |                                    |         |                            |  |              |            |              |  |  |            |   |  |  |            |  
|Cost of services [exclusive of depreciation and
    amortization of $43,567, $56,246, $226,567 and $164,386
    respectively] |  |                                    | 123,029 |                            |  |              | 59,079     |              |  |  | 187,042    |   |  |  | 193,539    |  
|Cost of products                                                                                                              |  |                                    | 93,552  |                            |  |              | 23,416     |              |  |  | 102,110    |   |  |  | 143,214    |  
|Selling and marketing                                                                                                         |  |                                    | 73,185  |                            |  |              | 24,585     |              |  |  | 103,953    |   |  |  | 119,410    |  
|General and administrative                                                                                                    |  |                                    | 55,306  |                            |  |              | 32,058     |              |  |  | 106,945    |   |  |  | 95,130     |  
|Restructuring charges [note 10]                                                                                               |  |                                    |        |                            |  |              |           |              |  |  | 7,494      |   |  |  | 5,226      |  
|Depreciation and amortization
    [note 10]                                                                                   |  |                                    | 46,771  |                            |  |              | 59,388     |              |  |  | 465,815    |   |  |  | 177,990    |  
|                                                                                                                              |  |                                    |         |                            |  |              |            |              |  |  |            |   |  |  |            |  
|                                                                                                                              |  |                                    | 391,843 |                            |  |              | 198,526    |              |  |  | 973,359    |   |  |  | 734,509    |  
|                                                                                                                              |  |                                    |         |                            |  |              |            |              |  |  |            |   |  |  |            |  
|Operating income (loss)                                                                                                       |  |                                    | 1,250   |                            |  |              | (20,832    | )            |  |  | (382,297   | ) |  |  | (193,019   | )
|Interest income                                                                                                               |  |                                    | 2,609   |                            |  |              | 1,888      |              |  |  | 5,479      |   |  |  | 6,553      |  
|Interest expenses [note 10]                                                                                                   |  |                                    | (14,817 | )                          |  |              | (70,608    | )            |  |  | (226,829   | ) |  |  | (224,237   | )
|Foreign exchange gain (loss)                                                                                                  |  |                                    | 13,926  |                            |  |              | 136,553    |              |  |  | 926        |   |  |  | (51,129    | )
|Gain on financial instruments
    [note 10]                                                                                   |  |                                    |        |                            |  |              |           |              |  |  | 6,570      |   |  |  |           |  
|Write-down of deferred financing costs and
    deferred gain and loss on financial instruments
    [note 10]                  |  |                                    |        |                            |  |              |           |              |  |  | (16,947    | ) |  |  |           |  
|Gain (loss) on investments, marketable securities
    and other assets [note 10]                                              |  |                                    | 2,578   |                            |  |              | 312        |              |  |  | (16,086    | ) |  |  | (33,093    | )
|Share of net loss in investees                                                                                                |  |                                    |        |                            |  |              |           |              |  |  | (13,212    | ) |  |  | (5,282     | )
|                                                                                                                              |  |                                    |         |                            |  |              |            |              |  |  |            |   |  |  |            |  
|Income (loss) before income taxes                                                                                             |  |                                    | 5,546   |                            |  |              | 47,313     |              |  |  | (642,396   | ) |  |  | (500,207   | )
|Income tax benefit (expense) [note 13]                                                                                        |  |                                    | (587    | )                          |  |              | (1,796     | )            |  |  | 71,895     |   |  |  | 1,722      |  
|                                                                                                                              |  |                                    |         |                            |  |              |            |              |  |  |            |   |  |  |            |  
|Net income (loss)                                                                                                             |  |                                    | 4,959   |                            |  |              | 45,517     |              |  |  | (570,501   | ) |  |  | (498,485   | )
|Accretion on redemption price 
    Preferred Shares [note 9]                                                                 |  |                                    | (17,105 | )                          |  |              |           |              |  |  |           |   |  |  |           |  
|                                                                                                                              |  |                                    |         |                            |  |              |            |              |  |  |            |   |  |  |            |  
|Net income (loss) applicable to Class A
    and Class B shares[for the eight
    months ended December 31, 2003 only]         |  |                                    | (12,146 | )                          |  |              | 45,517     |              |  |  | (570,501   | ) |  |  | (498,485   | )
|Deficit, beginning of period                                                                                                  |  |                                    |        |                            |  |              | (2,466,674 | )            |  |  | (1,896,173 | ) |  |  | (1,397,688 | )
|                                                                                                                              |  |                                    |         |                            |  |              |            |              |  |  |            |   |  |  |            |  
|Deficit, end of period                                                                                                        |  |                                    | (12,146 | )                          |  |              | (2,421,157 | )            |  |  | (2,466,674 | ) |  |  | (1,896,173 | )
|                                                                                                                              |  |                                    |         |                            |  |              |            |              |  |  |            |   |  |  |            |  
|Basic and diluted earnings (loss) per share
    [note 11]                                                                     |  |                                    | (3.22   | )                          |  |              | 0.19       |              |  |  | (2.37      | ) |  |  | (4.56      | )
|                                                                                                                              |  |                                    |         |                            |  |              |            |              |  |  |            |   |  |  |            |  

See accompanying notes

3



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##### 



MICROCELL TELECOMMUNICATIONS INC.

CONSOLIDATED STATEMENTS OF CASH
FLOWS

|                                                                                                                                    |  |                                    |          |                    |  |              |          |              |  |  |          |   |  |  |          |  
|----------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------- | -------- | ------------------ |  | ------------ | -------- | ------------ |  |  | -------- | - |  |  | -------- | -
|                                                                                                                                    |  |                                    |          |                   
|                                                                                                                                    |  |                                    |          | Pre-reorganization
|                                                                                                                                    |  |                                    |          |                   
|                                                                                                                                    |  | Eight Months                       |          | Four Months        |  |             
|                                                                                                                                    |  | Ended                              |          | Ended              |  | Year Ended   |          | Year Ended  
|                                                                                                                                    |  | December 31,                       |          | April 30,          |  | December 31, |          | December 31,
|                                                                                                                                    |  | 2003                               |          | 2003               |  | 2002         |          | 2001        
|                                                                                                                                    |  |                                    |          |                    |  |              |          |             
|                                                                                                                                    |  | $                                  |          | $                  |  | $            |          | $           
|                                                                                                                                    |  |                                   
|                                                                                                                                    |  | [In thousands of Canadian dollars,
|                                                                                                                                    |  | except for per share data]        
|OPERATING ACTIVITIES                                                                                                                |  |                                    |          |                    |  |              |          |              |  |  |          |   |  |  |          |  
|Net income (loss)                                                                                                                   |  |                                    | 4,959    |                    |  |              | 45,517   |              |  |  | (570,501 | ) |  |  | (498,485 | )
|Adjustments to reconcile net income (loss) to
    cash provided by (used in) operating activities Depreciation and
    amortization |  |                                    | 46,771   |                    |  |              | 59,388   |              |  |  | 465,815  |   |  |  | 177,990  |  
|Accreted interest on long-term debt                                                                                                 |  |                                    | 2,693    |                    |  |              | 13,425   |              |  |  | 72,762   |   |  |  | 158,194  |  
|Amortization of deferred financing costs                                                                                            |  |                                    |         |                    |  |              |         |              |  |  | 9,128    |   |  |  | 7,674    |  
|Income tax provision                                                                                                                |  |                                    | (507     | )                  |  |              |         |              |  |  | (73,519  | ) |  |  | (3,966   | )
|Foreign exchange (gain) loss                                                                                                        |  |                                    | (14,542  | )                  |  |              | (130,166 | )            |  |  | (493     | ) |  |  | 50,281   |  
|Write-down of deferred financing costs and
    deferred gain and loss on financial instruments                                      |  |                                    |         |                    |  |              |         |              |  |  | 16,947   |   |  |  |         |  
|Reversal of provision for sales tax                                                                                                 |  |                                    |         |                    |  |              |         |              |  |  | (13,806  | ) |  |  |         |  
|Gain on financial instruments                                                                                                       |  |                                    |         |                    |  |              |         |              |  |  | (6,570   | ) |  |  |         |  
|Loss (gain) in value of investments and
    marketable securities                                                                   |  |                                    | (2,436   | )                  |  |              | 14       |              |  |  | 16,005   |   |  |  | 33,079   |  
|Gain on disposal of assets                                                                                                          |  |                                    |         |                    |  |              | (326     | )            |  |  |         |   |  |  |         |  
|Share of net loss in investees                                                                                                      |  |                                    |         |                    |  |              |         |              |  |  | 13,212   |   |  |  | 5,282    |  
|                                                                                                                                    |  |                                    |          |                    |  |              |          |              |  |  |          |   |  |  |          |  
|                                                                                                                                    |  |                                    | 36,938   |                    |  |              | (12,148  | )            |  |  | (71,020  | ) |  |  | (69,951  | )
|Changes in operating assets and liabilities
    [note 14]                                                                           |  |                                    | 17,616   |                    |  |              | 26,665   |              |  |  | 30,038   |   |  |  | (52,303  | )
|                                                                                                                                    |  |                                    |          |                    |  |              |          |              |  |  |          |   |  |  |          |  
|Cash provided by (used in) operating
    activities                                                                                 |  |                                    | 54,554   |                    |  |              | 14,517   |              |  |  | (40,982  | ) |  |  | (122,254 | )
|                                                                                                                                    |  |                                    |          |                    |  |              |          |              |  |  |          |   |  |  |          |  
|INVESTING ACTIVITIES                                                                                                                |  |                                    |          |                    |  |              |          |              |  |  |          |   |  |  |          |  
|Decrease (increase) in short-term investments and
    marketable securities                                                         |  |                                    | (51,015  | )                  |  |              | 73,680   |              |  |  | 75,851   |   |  |  | 35,529   |  
|Additions to property, plant and equipment                                                                                          |  |                                    | (67,318  | )                  |  |              | (5,500   | )            |  |  | (124,683 | ) |  |  | (277,395 | )
|Additions to intangible assets                                                                                                      |  |                                    |         |                    |  |              |         |              |  |  |         |   |  |  | (130,000 | )
|Proceeds from termination of derivative
    instruments                                                                             |  |                                    |         |                    |  |              |         |              |  |  | 31,041   |   |  |  |         |  
|Additions to long-term investments and other
    non-current assets                                                                 |  |                                    | (133     | )                  |  |              |         |              |  |  | (3,728   | ) |  |  | (12,023  | )
|Proceeds from the sale of long-term investments                                                                                     |  |                                    | 2,581    |                    |  |              | 2,089    |              |  |  | 949      |   |  |  |         |  
|                                                                                                                                    |  |                                    |          |                    |  |              |          |              |  |  |          |   |  |  |          |  
|Cash provided by (used in) investing
    activities                                                                                 |  |                                    | (115,885 | )                  |  |              | 70,269   |              |  |  | (20,570  | ) |  |  | (383,889 | )
|                                                                                                                                    |  |                                    |          |                    |  |              |          |              |  |  |          |   |  |  |          |  
|FINANCING ACTIVITIES                                                                                                                |  |                                    |          |                    |  |              |          |              |  |  |          |   |  |  |          |  
|Issuance of shares                                                                                                                  |  |                                    |         |                    |  |              |         |              |  |  |         |   |  |  | 450,755  |  
|Share issuance costs                                                                                                                |  |                                    |         |                    |  |              |         |              |  |  |         |   |  |  | (11,434  | )
|Increase in long-term debt                                                                                                          |  |                                    |         |                    |  |              |         |              |  |  | 100,000  |   |  |  | 270,813  |  
|Repayment of long-term debt                                                                                                         |  |                                    | (7,340   | )                  |  |              |         |              |  |  | (10,732  | ) |  |  | (270,809 | )
|Deferred financing costs                                                                                                            |  |                                    |         |                    |  |              |         |              |  |  | (19,742  | ) |  |  | (1,555   | )
|                                                                                                                                    |  |                                    |          |                    |  |              |          |              |  |  |          |   |  |  |          |  
|Cash provided by (used in) financing
    activities                                                                                 |  |                                    | (7,340   | )                  |  |              |         |              |  |  | 69,526   |   |  |  | 437,770  |  
|                                                                                                                                    |  |                                    |          |                    |  |              |          |              |  |  |          |   |  |  |          |  
|Increase (decrease) in cash and cash equivalents
    for the period                                                                 |  |                                    | (68,671  | )                  |  |              | 84,786   |              |  |  | 7,974    |   |  |  | (68,373  | )
|Cash and cash equivalents, beginning of period                                                                                      |  |                                    | 111,765  |                    |  |              | 26,979   |              |  |  | 19,005   |   |  |  | 87,378   |  
|                                                                                                                                    |  |                                    |          |                    |  |              |          |              |  |  |          |   |  |  |          |  
|Cash and cash equivalents, end of
    period                                                                                        |  |                                    | 43,094   |                    |  |              | 111,765  |              |  |  | 26,979   |   |  |  | 19,005   |  
|                                                                                                                                    |  |                                    |          |                    |  |              |          |              |  |  |          |   |  |  |          |  
|Additional information                                                                                                              |  |                                    |          |                    |  |              |          |              |  |  |          |   |  |  |          |  
|Interest paid                                                                                                                       |  |                                    | 12,710   |                    |  |              | 13       |              |  |  | 82,348   |   |  |  | 49,933   |  
|Income taxes paid                                                                                                                   |  |                                    | 1,034    |                    |  |              | 639      |              |  |  | 2,294    |   |  |  | 2,249    |  

See accompanying notes.

4



---



##### 



MICROCELL TELECOMMUNICATIONS INC.

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



|   |                                                                                
|-- | -------------------------------------------------------------------------------
|1. | Description of Business, Financial
    Reorganization and Basis of Presentation



| |                        
| | -----------------------
| | Description of Business

Microcell Telecommunications Inc.
[Microcell] is incorporated under the Canada
Business Corporations Act[CBCA] and is a
provider of wireless telecommunications services in Canada. As
at December 31, 2003, Microcell conducted its wireless
communications business through two wholly-owned subsidiaries
[collectively, the Company], which were: Microcell
Solutions Inc. [Solutions] and Inukshuk Internet
Inc. [Inukshuk].

Solutions operates a Global System for Mobile
Communication [GSM] network across Canada and
markets Personal Communications Services [PCS] and
General Packet Radio Service [GPRS] under the Fido
brand name pursuant to a 30Mhz PCS license [the PCS
license] issued by the Minister of Industry (Canada)
[Industry Canada].

Inukshuk was awarded Multipoint Communication
Systems [MCS] Licenses to deploy a high-speed
Internet Protocol-based data network using MCS technology in
Canada. In November 2003, Inukshuk entered into a new venture
with two partners which, depending on the results of
phase 1 of the project, may result in the deployment of a
MCS network in Canada. As at December 31, 2003, the
activities of this venture were not significant for the Company.

The Company continues to experience
growth-related capital requirements arising from the need to
fund network capacity improvements, ongoing maintenance and the
cost of acquiring new PCS customers. Microcells ability to
generate positive net income and cash flow in the future is
dependent upon various factors, including the level of market
acceptance of its services, the degree of competition
encountered by the Company, the cost of acquiring new customers,
technology risks, general economic conditions and regulatory
requirements.



| |                         
| | ------------------------
| | Financial Reorganization

On May 1, 2003, the predecessor company of
Microcell [Old Microcell], and certain subsidiaries
of Old Microcell, emerged from a restructuring plan under the
Companies Creditors Arrangement Act[CCAA] and CBCA. The terms of Old
Microcells restructuring plan are set out in Old
Microcells plan of reorganization and of compromise and
arrangement [the Plan], a copy of which is contained
in the Information Circular and Proxy Statement dated
February 17, 2003 [the Circular] filed on SEDAR
on February 19, 2003 and on EDGAR with the
U.S. Securities and Exchange Commission [SEC]
on Form 6-K on February 20, 2003. Pursuant to the
Plan, Microcell became a holding company for Old Microcell, its
previous subsidiaries, which amalgamated together to form
Solutions and Inukshuk. The Board of directors was replaced by a
new Board of directors and Microcells long-term debt
obligations decreased by approximately $1.6 billion. On
December 31, 2003, Old Microcell was liquidated into
Microcell.

Prior to May 1, 2003, Old Microcells
Class B Non-Voting Shares were registered pursuant to
Section 12(g) of the Securities Exchange Act of 1934. Under
the terms of the Plan, Microcell issued First Preferred Voting
Shares, First Preferred Non-Voting Shares, Second Preferred
Voting Shares, Second Preferred Non-Voting Shares, Class A
Restricted Voting Shares [Class A Shares], new
Class B Non-Voting Shares [Class B Shares]
and warrants. Two series of warrants [collectively the
Warrants] were issued pursuant to the Plan:
[i] 2-year warrants entitling the holders thereof to
subscribe, until May 1, 2005, for Class A Shares or
Class B Shares of Microcell, as the case may be, at an
exercise price of $19.91 per share [the Warrants
2005]; and [ii] 5-year warrants entitling the holders
thereof to subscribe, until May 1, 2008, for Class A
Shares or Class B Shares of Microcell, as the case may be,
at an exercise price of $20.69 per share [the
Warrants 2008].

5



---



##### 



MICROCELL TELECOMMUNICATIONS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

For a more detailed description of the
transactions related to the Plan, readers are referred to the
Plan.



| |                      
| | ---------------------
| | Basis of Presentation

Effective May 1, 2003, the date of
reorganization, the Company has accounted for its financial
reorganization by using the principles of fresh start
accounting. Accordingly, all assets and liabilities were
revalued at estimated fair values and Microcells deficit
was eliminated. Microcell determined that its enterprise value
was $689 million of which $350 million has been
allocated to long-term debt and $339 million to equity.
This enterprise value was determined based on several
traditional valuation methodologies, utilizing projections
developed by management including discounted cash flow analysis
and comparable company trading analysis. A comprehensive
revaluation of the assets and liabilities of the Company has
been done based on this enterprise value.

The following table summarizes the adjustments
recorded to implement the financial reorganization and to
reflect the fresh start basis of accounting:

|                                         |  |                 |            |                 |  |  |            |                   |  |  |      |  |  |  |         | 
|---------------------------------------- |  | --------------- | ---------- | --------------- |  |  | ---------- | ----------------- |  |  | ---- |  |  |  | ------- | 
|                                         |  | Microcell as at |            |                 |  |  |            |                  
|                                         |  | April 30, 2003  |            | Reorganization  |  |  |            | Microcell as at  
|                                         |  | Prior to        |            | and Fresh Start |  |  |            | May 1, 2003      
|                                         |  | Reorganization  |            | Adjustments     |  |  |            | After Adjustments
|                                         |  |                 |            |                 |  |  |            |                  
|                                         |  | $               |            | $               |  |  |            | $                
|Assets                                   |  |                 |            |                 |  |  |            |                   |  |  |      |  |  |  |         | 
|Current assets                           |  |                 | 288,849    |                 |  |  | (36,762    | )                 |  |  | [i]  |  |  |  | 252,087 | 
|Property, plant and equipment            |  |                 | 602,066    |                 |  |  | (312,374   | )                 |  |  | [i]  |  |  |  | 289,692 | 
|Intangible assets                        |  |                 | 2,727      |                 |  |  | 238,475    |                   |  |  | [i]  |  |  |  | 241,202 | 
|Long-term investments and other assets   |  |                 | 8,972      |                 |  |  | (3,745     | )                 |  |  | [i]  |  |  |  | 5,227   | 
|                                         |  |                 |            |                 |  |  |            |                   |  |  |      |  |  |  |         | 
|                                         |  |                 | 902,614    |                 |  |  | (114,406   | )                 |  |  |      |  |  |  | 788,208 | 
|                                         |  |                 |            |                 |  |  |            |                   |  |  |      |  |  |  |         | 
|                                        
|Liabilities                              |  |                 |            |                 |  |  |            |                   |  |  |      |  |  |  |         | 
|Accounts payable and accrued liabilities |  |                 | 196,501    |                 |  |  | (131,475   | )                 |  |  | [ii] |  |  |  | 65,026  | 
|Deferred revenues                        |  |                 | 34,207     |                 |  |  |           |                   |  |  |      |  |  |  | 34,207  | 
|Current portion of long-term debt        |  |                 | 10,000     |                 |  |  |           |                   |  |  |      |  |  |  | 10,000  | 
|                                         |  |                 |            |                 |  |  |            |                   |  |  |      |  |  |  |         | 
|                                         |  |                 | 240,708    |                 |  |  | (131,475   | )                 |  |  |      |  |  |  | 109,233 | 
|Senior Secured Term Loans                |  |                 | 543,925    |                 |  |  | (203,925   | )                 |  |  | [ii] |  |  |  | 340,000 | 
|Senior Discount Notes                    |  |                 | 1,369,690  |                 |  |  | (1,369,690 | )                 |  |  | [ii] |  |  |  |        | 
|                                         |  |                 |            |                 |  |  |            |                   |  |  |      |  |  |  |         | 
|                                         |  |                 | 2,154,323  |                 |  |  | (1,705,090 | )                 |  |  |      |  |  |  | 449,233 | 
|                                         |  |                 |            |                 |  |  |            |                   |  |  |      |  |  |  |         | 
|Shareholders equity
    (deficiency)    |  |                 |            |                 |  |  |            |                   |  |  |      |  |  |  |         | 
|Share capital                            |  |                 | 1,167,678  |                 |  |  | (846,629   | )                 |  |  | [ii] |  |  |  | 321,049 | 
|Warrants                                 |  |                 | 1,770      |                 |  |  | 16,156     |                   |  |  | [ii] |  |  |  | 17,926  | 
|Deficit                                  |  |                 | (2,421,157 | )               |  |  | 2,421,157  |                   |  |  |      |  |  |  |        | 
|                                         |  |                 |            |                 |  |  |            |                   |  |  |      |  |  |  |         | 
|                                         |  |                 | (1,251,709 | )               |  |  | 1,590,684  |                   |  |  |      |  |  |  | 338,975 | 
|                                         |  |                 |            |                 |  |  |            |                   |  |  |      |  |  |  |         | 
|                                         |  |                 | 902,614    |                 |  |  | (114,406   | )                 |  |  |      |  |  |  | 788,208 | 
|                                         |  |                 |            |                 |  |  |            |                   |  |  |      |  |  |  |         | 

6



---



##### 



MICROCELL TELECOMMUNICATIONS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                       
| | ----------------------
| | Summary of Adjustments

[i] The Company revalued its assets and
liabilities and adjusted their carrying values to reflect the
enterprise value of the Company following the financial
reorganization. This resulted in a reduction of the current
assets [mainly consisting of the deferred charges incurred
during the recapitalization process], the property, plant and
equipment, the long-term investments and the accrued
liabilities. The Company also assigned a value, calculated at
managements best estimate of fair value, to the
Companys intangible assets, which are the PCS license at
$188 million, determined using the replacement cost based
on comparable transactions, the Fido brand name at
$28.5 million, determined using the replacement cost
method, and the customer list at $24.7 million, determined
using the discounted future cash flows method.

[ii] Pursuant to the Plan, the senior secured
term loans of Old Microcell [carrying value of
$553.9 million], the unpaid accrued interest
[$12.2 million], and a net payable to Old Microcells
secured creditors relating to cross currency and interest rate
swaps terminated in December 2002 [$9.4 million], were
converted into a term loan of $300 million [the
Tranche B Debt], a term loan of
$50 million [the Tranche C Debt],
11,766,667 First Preferred Shares [$176.5 million] and
3,600,186 Second Preferred Shares [$54 million] for a total
equity interest in the new Company of 68% and 95.6% of voting
rights.

Old Microcells senior discount
notes [carrying value of $1.4 billion] and the unpaid
accrued interest thereon [$103.6 million] were converted
into 3,600,186 Second Preferred Shares [$54 million],
30,000 Class A Shares [$0.3 million], 3,578,676
Class B Shares [$36 million], 1,329,312 Warrants 2005
[$1.5 million] and 2,215,521 Warrants 2008
[$4.4 million] for a total equity interest in the new
Company of 31.9% and 4.4% of voting rights.

The shareholders of Old Microcell [carrying value
of $1.2 billion] received 22,469 Class B Shares
[$0.2 million], 2,668,990 Warrants 2005 [$3.1 million]
and 4,448,422 Warrants 2008 [$8.9 million] for a total
equity interest in the new Company of 0.1% and no voting rights.



| |                    
| | -------------------
| | Comparative Figures

Comparative financial statements for periods
prior to May 1, 2003 have been presented pursuant to
regulatory requirements. In reviewing these comparative
financial statements, readers are reminded that they do not
reflect the effects of the Plan nor the application of fresh
start accounting.



|   |                                               
|-- | ----------------------------------------------
|2. | Summary of Significant Accounting
    Policies

These consolidated financial statements have been
prepared by management in accordance with Canadian generally
accepted accounting principles [Canadian GAAP]. As
further described in note 18, these accounting principles
differ in certain respects from those that would have been
followed if these financial statements had been prepared in
conformity with accounting principles generally accepted in the
United States [US GAAP] and related rules and
regulations adopted by the SEC.

The preparation of financial statements by
management in accordance with Canadian GAAP requires the
selection of accounting policies from existing acceptable
alternatives. The summary of significant accounting policies is
as follows:



| |                 
| | ----------------
| | Use of Estimates

The preparation of the consolidated financial
statements requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities, and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.

7



---



##### 



MICROCELL TELECOMMUNICATIONS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                      
| | ---------------------
| | Long-term Investments

The consolidated financial statements include the
results of operations of Microcell and all of its subsidiaries
as well as its share of assets, liabilities, revenues and
expenses of all joint ventures, if any, in which the Company
participates. Intercompany transactions and balances are
eliminated on consolidation.

The Company accounts for investments in which it
exercises significant influence using the equity method. Other
investments are accounted for at cost. The investments are
reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be
recoverable, and a provision for loss in value is recorded when
a decline in value below the carrying amount is considered to be
other than temporary.



| |                    
| | -------------------
| | Revenue Recognition

Monthly access charges are billed in advance and
recognized when the services are provided and collection is
reasonably assured. Airtime charges are recognized as revenue
when provided. City Fidos activation fees and related
incremental direct costs are deferred and recognized as revenue
and expenses over the estimated life of a subscriber. Sales of
products such as handsets and related equipment are recognized
when goods are delivered, wireless service is activated, and
collection is reasonably assured. Prepaid service revenues are
deferred and recognized when services are provided. When prepaid
airtime vouchers are sold to retailers, the revenue for airtime
is measured at the amount paid by the subscriber and is recorded
when services are provided to the subscriber. Commissions paid
on prepaid airtime vouchers to third party retailers are
classified within cost of products and cost of services. [See
note 20(4)]



| |                             
| | ----------------------------
| | Subscriber Acquisition Costs

The excess of the cost of handsets to the Company
over the amount recovered from sales to subscribers is
recognized when goods are delivered and wireless service is
activated and is recorded in the cost of products. [See
note 20(4)]



| |                  
| | -----------------
| | Advertising Costs

Advertising costs are expensed as incurred.



| |                 
| | ----------------
| | Cash Equivalents

Cash equivalents are short-term, highly liquid,
held-to-maturity, investment-grade debt securities with
maturities of 90 days or less from the date of purchase.



| |                       
| | ----------------------
| | Short-term Investments

Short-term investments consist of highly liquid,
held-to-maturity, investment-grade debt securities, such as term
deposits, commercial paper and similar instruments, with
maturities greater than 90 days but not exceeding twelve
months. Short-term investments are accounted for at the lower of
cost and market value. As at December 31, 2003, interest
rates on most of the short-term investments vary from 2.5% to
2.8% [3.5% on May 1, 2003].



| |                      
| | ---------------------
| | Marketable Securities

Marketable securities are recorded at the lower
of cost and fair market value.

8



---



##### 



MICROCELL TELECOMMUNICATIONS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |            
| | -----------
| | Inventories

Inventories consist of handsets, subscriber
identity module [SIM] cards and accessories held for
resale, and are stated at the lower of cost [on a first-in,
first-out basis] and replacement cost.



| |                              
| | -----------------------------
| | Property, Plant and Equipment

Property, plant and equipment are recorded at
cost. The PCS network includes direct costs such as equipment,
material, labor, engineering, site development, interest
incurred during the network buildout, and overhead costs. The
costs of PCS network construction in progress are transferred to
the PCS network in service as construction projects are
completed and put into commercial service. Depreciation starts
when the assets are put into service, and is provided on a
straight-line basis over their estimated useful lives as follows:

|                                        |  |  |                            | 
|--------------------------------------- |  |  | -------------------------- | 
|PCS network  Switches                  |  |  | 7 years                    | 
|PCS network  Infrastructure and towers |  |  | 20 years                   | 
|PCS network  Radio equipment           |  |  | 8 years                    | 
|Application hardware and software       |  |  | 5 years                    | 
|Computer hardware and software          |  |  | 3 years                    | 
|Office furniture and equipment          |  |  | 5 years                    | 
|Leasehold improvements                  |  |  | Term of the related leases | 

For property, plant and equipment that existed as
at May 1, 2003, the above periods of depreciation were
reduced in order to reflect a new cost basis as a result of
applying fresh start accounting.

The cost of maintenance and replacement of minor
items of property, plant and equipment are charged to
maintenance expense. Enhancements and improvements are
capitalized.



| |                  
| | -----------------
| | Intangible Assets

Intangible assets consist of the Companys
PCS license, the Fido brand name and the customer list. The
customer list is amortized over 30 months. The PCS license
and the Fido brand name were determined to have an indefinite
useful life and are not being amortized. [See note 20(4)]

The annual licensing fees are charged to expense
as incurred.



| |                                    
| | -----------------------------------
| | Impairment of Long-lived
    Assets

When events or changes in circumstances indicate
that the carrying amount of a long-lived asset or group of
assets held for use, including property, plant and equipment and
intangible assets subject to amortization, may not be
recoverable, an impairment loss is recognized when the carrying
amount of those assets exceeds the sum of the undiscounted
future cash flows related to them. The impairment loss is
included in the statement of operations and the carrying value
of the asset or group of assets is reduced to its fair value as
determined by the sum of the discounted future cash flows
related to those assets.

Intangible assets that are not subject to
amortization are tested for impairment on an annual basis, or
more frequently if events or changes in circumstances indicate
that the assets might be impaired. The impairment test consists
of a comparison of the carrying amount with the fair value of
the intangible asset. When the carrying amount of the intangible
asset exceeds its fair value, an impairment loss is recognized
in an amount equal to the excess.

Impairment charge, if any, is presented within
depreciation and amortization expense of the related long-lived
assets in the statement of income (loss).

9



---



##### 



MICROCELL TELECOMMUNICATIONS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                       
| | ----------------------
| | Derivative Instruments

Derivative financial instruments are accounted
for at fair value with changes in fair value affecting income
unless designated as effective hedges in which case the gains
(losses) on these instruments are recognized in the income
statement when the hedged item affects earnings. As at
December 31, 2003, the Company has not designated its
financial instruments as hedges [see note 8].



| |                
| | ---------------
| | Financing Costs

The costs of obtaining debt financing are
deferred and amortized over the life of the debt to which they
relate. The costs of issuing equity are recorded as a reduction
of the item to which they relate.



| |                  
| | -----------------
| | Stock Option Plan

The Company has a stock option plan, which is
described in note 9. The Company has chosen to recognize no
compensation when stock options are granted to employees and
directors under stock option plans with no cash settlement
features. Direct awards of stock to employees and stock and
stock option awards granted to non-employees are accounted for
in accordance with the fair value method of accounting for
stock-based compensation. The fair value of direct awards of
stock is determined by the quoted market price of the
Companys stock on the grant date, and the fair value of
stock options is determined using the Black-Scholes option
pricing model. Pro forma information regarding net income is
required and has been determined as if the Company had accounted
for its employee stock options under the fair value method
[see note 9].

Up to December 31, 2003, no compensation
expense was recognized for these plans when stock options were
issued to employees. Any consideration paid by employees on
exercise of stock options is credited to share capital.



| |             
| | ------------
| | Income Taxes

The Company follows the liability method of
accounting for income tax allocation. Under this method,
deferred income tax assets and liabilities are determined based
on the differences between the financial reporting and tax bases
of assets and liabilities, and are measured using the
substantively enacted tax rates and laws that are expected to be
in effect in the periods in which the deferred income tax assets
or liabilities are expected to be realized or settled. Deferred
income tax assets, net of an appropriate valuation allowance,
are recognized only to the extent that management believes it to
be more likely than not that the assets will be realized and
will first be applied to reduce the unamortized amount of
intangible assets that were recognized as at May 1, 2003.



| |                         
| | ------------------------
| | Research and Development

Research costs are charged against income in the
year of expenditure. Development costs are charged against
income in the year of expenditure unless a development project
meets the criteria under Canadian generally accepted accounting
principles for deferral and amortization.



| |                 
| | ----------------
| | Foreign Currency

The Companys functional currency is the
Canadian dollar. Monetary assets and liabilities denominated in
foreign currencies are translated at the rates of exchange
prevailing at the period-end. Revenues and expenses denominated
in foreign currencies are translated at the rates of exchange
prevailing on the transaction dates. Realized and unrealized
gains and losses on currency transactions are included in income
as they arise.

10



---



##### 



MICROCELL TELECOMMUNICATIONS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                          
| | -------------------------
| | Earnings (Loss) Per Share

Basic and diluted earnings (loss) per share are
calculated using the treasury stock method. Basic earnings
(loss) per share is calculated using the weighted average number
of Class A Shares and Class B Shares. Diluted earnings
(loss) per share are calculated taking into consideration the
effect of the exercise of securities, which have a dilutive
effect.



| |                    
| | -------------------
| | Recent Developments

The CICA modified Section 3870, Stock-based
compensation and other stock-based payments. This section has
been amended to require the expensing of certain stock-based
compensation awards for fiscal years beginning on or after
January 1, 2004. As permitted by this amendment, the
Company will apply this new standard retroactively, without
restatement, beginning January 1, 2004, for options granted
since May 1, 2003. Consequently, the opening deficit as at
January 1, 2004 will be adjusted to reflect an expense of
$1.3 million relating to options granted since May 1,
2003.

The CICA also modified Section 3860,
Financial instruments  disclosure and presentation.
This section has been amended to provide guidance for
classifying certain financial instruments that embody
obligations that may be settled by the issuance of the
issuers equity shares when the instrument that embodies
the obligations does not establish an ownership relationship.
The new standard is effective for fiscal years beginning on or
after November 1, 2004. Initial application should be
recognized on a retroactive basis and disclosed as an accounting
policy change. As a result, the Company assesses that its
Preferred Shares having an accreted value of $296.9 million
and $284.5 million as at December 31, 2003 and
May 1, 2003, respectively, which are classified as equity
instruments under current rules, would have to be reclassified
as liabilities. The accreted of their redemption price of
$17.1 million during the eight-month period ended
December 31, 2003 presented as an adjustment to the
retained earnings (deficit) would have to be presented as
an interest expense in the determination of the net income
(loss). There would be no impact on the net loss attributable to
Class A and B shares and on the earnings per share.



|   |            
|-- | -----------
|3. | Receivables

|                                  |  |              |        |        |  |                  |         |   |  |   |         |  
|--------------------------------- |  | ------------ | ------ | ------ |  | ---------------- | ------- | - |  | - | ------- | -
|                                  |  |              |        |        |  | Pre-organization
|                                  |  | December 31, |        | May 1, |  | December 31,    
|                                  |  | 2003         |        | 2003   |  | 2002            
|                                  |  |              |        |        |  |                 
|Trade receivables                 |  | $            | 79,901 |        |  | $                | 73,553  |   |  | $ | 73,024  |  
|Allowance for doubtful accounts   |  |              | (6,627 | )      |  |                  | (11,844 | ) |  |   | (14,885 | )
|Receivable from related companies |  |              |       |        |  |                  |        |   |  |   | 866     |  
|Taxes receivable                  |  |              | 3,164  |        |  |                  | 2,830   |   |  |   | 2,866   |  
|Interest receivable               |  |              | 358    |        |  |                  | 13      |   |  |   | 18      |  
|                                  |  |              |        |        |  |                  |         |   |  |   |         |  
|                                  |  |              | 76,796 |        |  |                  | 64,552  |   |  |   | 61,889  |  
|                                  |  |              |        |        |  |                  |         |   |  |   |         |  

11



---



##### 



MICROCELL TELECOMMUNICATIONS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|   |                              
|-- | -----------------------------
|4. | Property, Plant and Equipment

|                                  |                           |                   |         |              |  |                   |        |              |  |                    |         |              |  |  |   |   |  |  |           |         |  |  |         |         | 
|--------------------------------- | ------------------------- | ----------------- | ------- | ------------ |  | ----------------- | ------ | ------------ |  | ------------------ | ------- | ------------ |  |  | - | - |  |  | --------- | ------- |  |  | ------- | ------- | 
|                                  |                           |                   |         |              |  |                   |        |              |  |                   
|                                  |                           |                   |         |              |  |                   |        |              |  | Pre-reorganization
|                                  |                           |                   |         |              |  |                   |        |              |  |                   
|                                  |                           |                   |         |              |  |                  
|                                  |                           | December 31, 2003 |         | May 1, 2003  |  | December 31, 2002
|                                  |                           |                   |         |              |  |                  
|                                  |                           |                   |         | Accumulated  |  |                   |        | Accumulated  |  |                    |         | Accumulated 
|                                  |                           | Cost              |         | Depreciation |  | Cost              |        | Depreciation |  | Cost               |         | Depreciation
|                                  |                           |                   |         |              |  |                   |        |              |  |                    |         |             
|PCS network                       |                           |                   |         |              |  |                   |        |              |  |                    |         |              |  |  |   |   |  |  |           |         |  |  |         |        
|                                  | Switches                  |                   | $       | 137,461      |  |                   | $      | 18,008       |  |                    | $       | 119,034      |  |  | $ |  |  |  | $         | 533,511 |  |  | $       | 199,433 | 
|                                  | Infrastructure and towers |                   |         | 111,564      |  |                   |        | 6,034        |  |                    |         | 96,303       |  |  |   |  |  |  |           | 352,234 |  |  |         | 231,510 | 
|                                  | Radio equipment           |                   |         | 51,747       |  |                   |        | 4,410        |  |                    |         | 33,931       |  |  |   |  |  |  |           | 256,660 |  |  |         | 168,680 | 
|Application hardware and software |                           |                   | 37,912  |              |  |                   | 7,822  |              |  |                    | 26,991  |              |  |  |  |   |  |  | 198,215   |         |  |  | 110,413 |        
|Computer hardware and software    |                           |                   | 8,280   |              |  |                   | 1,346  |              |  |                    | 5,277   |              |  |  |  |   |  |  | 26,426    |         |  |  | 22,432  |        
|Office furniture and equipment    |                           |                   | 4,860   |              |  |                   | 618    |              |  |                    | 4,491   |              |  |  |  |   |  |  | 32,588    |         |  |  | 23,196  |        
|Leasehold improvements            |                           |                   | 5,187   |              |  |                   | 732    |              |  |                    | 3,665   |              |  |  |  |   |  |  | 26,912    |         |  |  | 15,236  |        
|                                  |                           |                   |         |              |  |                   |        |              |  |                    |         |              |  |  |   |   |  |  |           |         |  |  |         |        
|                                  |                           |                   | 357,011 |              |  |                   | 38,970 |              |  |                    | 289,692 |              |  |  |  |   |  |  | 1,426,546 |         |  |  | 770,900 |        
|Accumulated depreciation          |                           |                   | (38,970 | )            |  |                   |        |              |  |                    |        |              |  |  |   |   |  |  | (770,900  | )       |  |  |         |        
|                                  |                           |                   |         |              |  |                   |        |              |  |                    |         |              |  |  |   |   |  |  |           |         |  |  |         |        
|Net carrying value                |                           |                   | 318,041 |              |  |                   |        |              |  |                    | 289,692 |              |  |  |   |   |  |  | 655,646   |         |  |  |         |        
|                                  |                           |                   |         |              |  |                   |        |              |  |                    |         |              |  |  |   |   |  |  |           |         |  |  |         |        

The PCS network includes PCS network construction
in progress, amounting to $7.7 million as at
December 31, 2003.



|   |                  
|-- | -----------------
|5. | Intangible Assets

|                                                                                           |  |              |         |        |  |                    |         |  |  |   |       | 
|------------------------------------------------------------------------------------------ |  | ------------ | ------- | ------ |  | ------------------ | ------- |  |  | - | ----- | 
|                                                                                           |  |              |         |        |  | Pre-reorganization
|                                                                                           |  |              |         |        |  |                   
|                                                                                           |  | December 31, |         | May 1, |  | December 31,      
|                                                                                           |  | 2003         |         | 2003   |  | 2002              
|                                                                                           |  |              |         |        |  |                   
|PCS license                                                                                |  | $            | 188,002 |        |  | $                  | 188,002 |  |  | $ | 2,727 | 
|Fido brand name                                                                            |  |              | 28,493  |        |  |                    | 28,493  |  |  |   |      | 
|Customer list, net of accumulated amortization of
    $7.4 million as at December 31, 2003 |  |              | 17,324  |        |  |                    | 24,707  |  |  |   |      | 
|                                                                                           |  |              |         |        |  |                    |         |  |  |   |       | 
|                                                                                           |  |              | 233,819 |        |  |                    | 241,202 |  |  |   | 2,727 | 
|                                                                                           |  |              |         |        |  |                    |         |  |  |   |       | 

Radio and spectrum licenses are issued for a term
and may be renewed at Industry Canadas discretion.
Revocation is rare and licenses have a high expectation of
renewal unless a breach of a license condition has occurred, a
fundamental reallocation of spectrum to a new service is
required, or an overriding policy need arises. The Company
intends to renew the PCS license indefinitely, and expects to be
able to do so. The technology used in wireless
telecommunications is not expected to be replaced by another
technology in the foreseeable future. In December of 2003,
Industry Canada issued its Spectrum Licensing Policy for
Cellular and Incumbent Personal Communications Services, in
which it announced the results of its review of the PCS terms,
fees and conditions, as well as its intention to renew the
Companys PCS license up to March 31, 2011. Industry
Canada also announced its intention to renew the PCS license
every 10 years instead of every 5 years. Therefore,
the Company anticipates generating sales and cash flows under
its PCS license for an indefinite period of time and as a
result, has classified the PCS license under this basis.

12



---



##### 



MICROCELL TELECOMMUNICATIONS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The Company has determined that its Fido brand
name has an indefinite life because there are no legal,
regulatory, contractual or other factors that limit the useful
life of the brand name, the Company considers the brand name to
be effective in the market place and the Company anticipates
generating sales and cash flows under this brand name for an
indefinite period of time.



|   |                                                       
|-- | ------------------------------------------------------
|6. | Long-Term Investments and Other Non-Current
    Assets

|                                                           |  |              |       |        |  |                    |       |  |  |   |        | 
|---------------------------------------------------------- |  | ------------ | ----- | ------ |  | ------------------ | ----- |  |  | - | ------ | 
|                                                           |  |              |       |        |  | Pre-reorganization
|                                                           |  |              |       |        |  |                   
|                                                           |  | December 31, |       | May 1, |  | December 31,      
|                                                           |  | 2003         |       | 2003   |  | 2002              
|                                                           |  |              |       |        |  |                   
|Equity interest in a venture capital entity, at
    equity |  | $            | 3,955 |        |  | $                  | 4,100 |  |  | $ | 9,898  | 
|Other equity interest, at cost                             |  |              | 189   |        |  |                    | 189   |  |  |   | 773    | 
|Other non-current assets                                   |  |              | 653   |        |  |                    | 938   |  |  |   | 1,664  | 
|                                                           |  |              |       |        |  |                    |       |  |  |   |        | 
|                                                           |  |              | 4,797 |        |  |                    | 5,227 |  |  |   | 12,335 | 
|                                                           |  |              |       |        |  |                    |       |  |  |   |        | 



|   |                                             
|-- | --------------------------------------------
|7. | Accounts Payable and Accrued
    Liabilities

|                                                     |  |              |        |        |  |                    |        |  |  |   |         | 
|---------------------------------------------------- |  | ------------ | ------ | ------ |  | ------------------ | ------ |  |  | - | ------- | 
|                                                     |  |              |        |        |  | Pre-reorganization
|                                                     |  |              |        |        |  |                   
|                                                     |  | December 31, |        | May 1, |  | December 31,      
|                                                     |  | 2003         |        | 2003   |  | 2002              
|                                                     |  |              |        |        |  |                   
|Accounts payable  trade                             |  | $            | 46,548 |        |  | $                  | 35,793 |  |  | $ | 22,345  | 
|Accounts payable  property, plant and
    equipment |  |              | 16,420 |        |  |                    | 8,513  |  |  |   | 5,858   | 
|Accounts payable  related companies                 |  |              |       |        |  |                    |       |  |  |   | 23      | 
|Accrued interest                                     |  |              |       |        |  |                    |       |  |  |   | 64,055  | 
|Wages and benefits                                   |  |              | 22,636 |        |  |                    | 13,123 |  |  |   | 11,355  | 
|Other current liabilities                            |  |              | 6,030  |        |  |                    | 7,597  |  |  |   | 17,903  | 
|                                                     |  |              |        |        |  |                    |        |  |  |   |         | 
|                                                     |  |              | 91,634 |        |  |                    | 65,026 |  |  |   | 121,539 | 
|                                                     |  |              |        |        |  |                    |        |  |  |   |         | 

13



---



##### 



MICROCELL TELECOMMUNICATIONS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|   |               
|-- | --------------
|8. | Long-Term Debt

|                                   |                                                                                                                |              |         |        |  |                    |         |   |  |   |           |         | 
|---------------------------------- | -------------------------------------------------------------------------------------------------------------- | ------------ | ------- | ------ |  | ------------------ | ------- | - |  | - | --------- | ------- | 
|                                   |                                                                                                                |              |         |        |  | Pre-reorganization
|                                   |                                                                                                                |              |         |        |  |                   
|                                   |                                                                                                                | December 31, |         | May 1, |  | December 31,      
|                                   |                                                                                                                | 2003         |         | 2003   |  | 2002              
|                                   |                                                                                                                |              |         |        |  |                   
|Tranche B Debt                     |                                                                                                                | $            | 271,769 |        |  | $                  | 300,000 |   |  | $ |          |        
|Tranche C Debt                     |                                                                                                                |              | 52,693  |        |  |                    | 50,000  |   |  |   |          |        
|Long-term debt Pre-reorganization: |                                                                                                                |              |         |        |  |                    |         |   |  |   |           |        
|                                   | Senior Secured Term Loans                                                                                      |              |         |       |  |                    |         |  |  |   |           | 590,048 | 
|                                   | Series B Senior Discount Notes due 2006,
    interest payable semi-annually beginning June 1, 2002             |              |         |       |  |                    |         |  |  |   |           | 659,394 | 
|                                   | Series A and B Senior Discount Notes due
    2007, interest payable semi-annually beginning April 15,
    2003 |              |         |       |  |                    |         |  |  |   |           | 429,443 | 
|                                   | Series B Senior Discount Notes due 2009,
    interest payable semi-annually beginning December 1, 2004         |              |         |       |  |                    |         |  |  |   |           | 357,638 | 
|                                   | Other                                                                                                          |              |         |       |  |                    |         |  |  |   |           | 3,655   | 
|                                   |                                                                                                                |              |         |        |  |                    |         |   |  |   |           |        
|                                   |                                                                                                                |              | 324,462 |        |  |                    | 350,000 |   |  |   | 2,040,178 |        
|Less current portion of principal  |                                                                                                                |              | (9,298  | )      |  |                    | (10,000 | ) |  |   | (7,500    | )      
|                                   |                                                                                                                |              |         |        |  |                    |         |   |  |   |           |        
|                                   |                                                                                                                |              | 315,164 |        |  |                    | 340,000 |   |  |   | 2,032,678 |        
|                                   |                                                                                                                |              |         |        |  |                    |         |   |  |   |           |        

The minimum contractual payments of
Tranche B Debt and Tranche C Debt for the next five
years are as follows: $9.3 million in 2004;
$9.3 million in 2005; $13.9 million in 2006;
$13.9 million in 2007; and $225.5 million in 2008.

The financing arrangements of the Company, as at
December 31, 2003, consisted of the following credit
agreements:



| |                   
| | ------------------
| | Tranche A Facility

The Company has access to a revolving bank credit
facility [the Tranche A Facility] of
$25 million, which bears interest at the prime rate plus
2.5%, base rate plus 2.5% or bankers acceptance rate plus
3.5%. Pursuant to the terms of the credit agreement of the
Tranche A Facility, the Company is entitled to raise up to
an additional $50 million in revolving bank credit
facility. The Tranche A Facility is payable in April 2006.
A commitment fee computed at the rate of 1.0% per annum on
the aggregate undrawn amount of the Tranche A Facility is
payable on a quarterly basis. The Tranche A Facility is
collateralized by a first lien on all of the Companys
assets. As at December 31, 2003 and May 1, 2003, no
amounts were drawn on this facility.



| |               
| | --------------
| | Tranche B Debt

The Tranche B Debt, a term loan in the
amount of $300 million, comprising a Canadian dollar series
in the amount of $104.8 million and a U.S. dollar
series with a principal amount equivalent to Canadian
$195.2 million [US$134.3 million]. The Tranche B
Debt bears interest at the prime rate plus 3.0%, base rate plus
3.0% or bankers acceptance rate plus 4.0%. The
Tranche B Debt is payable in quarterly installments, which
started in June 2003 and will mature in December 2008. The
Tranche B Debt is collateralized by a second lien on all of
the Companys assets. Reimbursements of Tranche B Debt
are as follows: 2.5% of the principal amount was reimbursed in
2003; 3.33% will be reimbursed in 2004; 3.33% in

14



---



##### 



MICROCELL TELECOMMUNICATIONS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

2005; 5% in 2006; 5% in 2007; and 80.84% in 2008.
As at December 31, 2003, the effective interest rate on
Tranche B Debt was 6.5%.

The Company entered into swap transactions with a
preferred shareholder, who is also a lender, to manage its
exposure to foreign exchange rate fluctuations on part of the
U.S. dollar denominated portion of the Tranche B Debt;
the Company swapped, in November 2003, $50 million
[US$35.5 million] of the principal of the Tranche B
Debt at a rate of 1.4072 and $50 million
[US$36.7 million] of the principal of the Tranche B
Debt at a rate of 1.3634. The swap transactions have a duration
of three months. These swap transactions, which have not been
designated as hedging instruments, are presented at their fair
value as derivative instruments on the balance sheet and changes
in fair value are recognized within foreign exchange gain (loss).



| |               
| | --------------
| | Tranche C Debt

The Tranche C Debt, a term loan in the
amount of $50 million, is payable in April 2013. The
Tranche C Debt bears interest at the rate of 8.0% payable
semi-annually at the Companys discretion: [i] in
cash; or [ii] accruing and compounding such interest
semi-annually until paid. As at December 31, 2003,
$2.7 million of such accreted interest has been capitalized
to the Tranche C Debt. The Tranche C Debt is
collateralized by a third lien on all of the Companys
assets.



| |          
| | ---------
| | Covenants

Under the above credit agreements, the Company is
committed to respect certain covenants, including restrictions
on the ability to incur certain indebtedness, pay dividends,
make certain other payments, create liens, sell assets and
engage in mergers.

The Company must also maintain certain financial
covenants and ratios under the credit agreements of the
Tranche A Facility and Tranche B Debt, including
minimum EBITDA [as defined in the credit agreements], number of
subscribers, average retail revenue per subscriber per month,
liquidity and maximum capital expenditures.



| |                       
| | ----------------------
| | Excess Cash Flow Sweep

The Articles of the Company, and the credit
agreements governing the Tranche B Debt and Tranche C
Debt, require the Company to make the following payments to the
Tranche B Debt and Tranche C Debt lenders and to the
holders of First and Second Preferred Shares [or Units if
issued]: [i] the net sale proceeds of material asset sales
[sale of more than $2 million]; [ii] 75% of the amount
calculated each fiscal year equal to excess cash flow [as this
term is defined in the Articles of the Company and in the credit
agreements]; and [iii] 75% of the amount of net proceeds
from equity offerings [including proceeds from the exercise of
Warrants]. Each payment on account of material asset sales and
net proceeds from equity offerings has to be made within five
business days following receipt of the proceeds thereof, and
each payment hereunder on account of excess cash flow has to be
made on or before March 31 of each fiscal year, commencing
on March 31, 2004, with respect to the excess cash flow [if
any] for the previous fiscal year.

Subject to the maintenance of a minimum cash
balance of $45 million as at each year-end [prior to the
Companys 25% share of such years excess cash flow],
such amounts are to be applied in the order of priority set
forth below when First and Second Preferred Shares are issued:
[i] repayment of the Tranche B Debt, up to 25% of the
principal amount thereof; [ii] payment of interest on the
Tranche C Debt; [iii] payment of dividends on the
First Preferred Shares; [iv] until May 1, 2008, on a
pro rata basis, repayment of the principal amount of the
Tranche C Debt, up to 25% of the principal amount thereof,
and redemption of up to 75% of the number of First Preferred
Shares originally issued; [v] payment of

15



---



##### 



MICROCELL TELECOMMUNICATIONS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

dividends on the Second Preferred Shares;
[vi] until May 1, 2008, redemption of up to 75% of the
number of Second Preferred Shares originally issued;
[vii] after May 1, 2008, on a pro rata basis,
repayment of remaining principal amount of the Tranche C
Debt and redemption of First Preferred Shares originally issued;
and [viii] after May 1, 2008, redemption of the
remaining Second Preferred Shares. If First and Second Units are
issued, the order of priority set forth above is substantially
similar, with the exception that the repayment of First and
Second Units is limited to 25% until May 1, 2008.

As of December 31, 2003, the Company
reimbursed $0.4 million to the Tranche B Debt, under
the excess cash flow sweep rules, following the sale of its
equity investment in Saraide Inc.



| |                                        
| | ---------------------------------------
| | Long-term Debt 
    Pre-reorganization

Prior to the financial reorganization, as at
December 31, 2002, the long-term debt, all of which was in
default, consisted of the following:



| |                          
| | -------------------------
| | Senior Secured Term Loans



| |          
| | ---------
| | Tranche A

Term Loan of $151.2 million, bearing
interest at the prime rate plus 1% or Bankers Acceptance
rate plus 2%, payable in quarterly installments starting in June
2002 and maturing in December 2005.



| |          
| | ---------
| | Tranche B

Term Loan of US$50.9 million, bearing
interest at the U.S. base rate plus 2% or the
U.S. LIBOR rate plus 3%, payable in quarterly installments
starting in June 2002 and maturing in March 2006.



| |          
| | ---------
| | Tranche C

Term Loan of $18.8 million, bearing interest
at the prime rate plus 1% or Eurocanadian plus 2%, payable in
quarterly installments starting in June 2002 and maturing in
December 2005.



| |          
| | ---------
| | Tranche D

Term Loan of $34.2 million, bearing interest
at the prime rate plus 1% or Eurocanadian plus 2%, payable in
quarterly installments starting in September 2002 and maturing
in December 2005.



| |          
| | ---------
| | Tranche E

Term Loan of US$137.6 million, bearing
interest at the U.S. base rate plus 2.25% or the
U.S. LIBOR rate plus 3.25%, payable in quarterly
installments starting in June 2002 and maturing in March 2006.



| |          
| | ---------
| | Tranche F

Term Loan of US$62.9 million, bearing
interest at the U.S. base rate plus 2.5% or the
U.S. LIBOR rate plus 3.5%, payable in quarterly
installments starting in March 2003 and maturing in February
2007.

As of December 31, 2002, the full amounts
were drawn on all Tranches of the Senior Secured Term Loans.

The Senior Secured Loans were collateralized by
debentures of $1,100,000,000, issued under trust deeds. The
debentures were collateralized by a first ranking security
interest in all property and assets of these companies.

16



---



##### 



MICROCELL TELECOMMUNICATIONS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                                            
| | -------------------------------------------
| | Series B Senior Discount Notes due
    2006

The unsecured Senior Discount Notes due 2006
consist of 417,973 Units, each Unit consisting of US$1,000 at
maturity, 14% Series B Senior Discount Notes due on
June 1, 2006 and four initial warrants each to
purchase 2.1899 Class B Non-Voting Shares issued for
gross proceeds of $273.3 million [US$200 million].



| |                                                         
| | --------------------------------------------------------
| | Series A and Series B Senior
    Discount Notes due 2007

The unsecured Senior Discount Notes due 2007
consist of $429.4 million, 11 1/8% Series A and B
Senior Discount Notes due on October 15, 2007, issued for
gross proceeds of $250 million.



| |                                            
| | -------------------------------------------
| | Series B Senior Discount Notes due
    2009

The unsecured Senior Discount Notes due 2009
consist of US$270 million, 12% Series B Senior
Discount Notes due on June 1, 2009, issued for gross
proceeds of $221.2 million [US$150.5 million].



|   |              
|-- | -------------
|9. | Share Capital



| |           
| | ----------
| | Authorized

An unlimited number of Class A Shares;

An unlimited number of Class B Shares;

An unlimited number of First Preferred Shares,
issuable as First Preferred Voting Shares, First Preferred
Non-Voting Shares, First Preferred Voting 2 Shares and
First Preferred Non-Voting 2 Shares; and

An unlimited number of Second Preferred Shares
issuable as Second Preferred Voting Shares, Second Preferred
Non-Voting Shares, Second Preferred Voting 2 Shares and
Second Preferred Non-Voting 2 Shares.



| |               
| | --------------
| | Class A Shares



| |                                          
| | -----------------------------------------
| | Dividends and Rights upon
    Liquidation

Holders of Class A Shares are entitled to
receive dividends, and the remaining assets of the Company on
the winding-up, liquidation or dissolution of the Company, pari
passu with the holders of Class B Shares, on a per share
basis.



| |                
| | ---------------
| | Exchange Rights

Each Class A Share may, at the option of the
holders, be exchanged at any time into one Class B Share.



| |               
| | --------------
| | Class B Shares



| |                                          
| | -----------------------------------------
| | Dividends and Rights upon
    Liquidation

Holders of Class B Shares are entitled to
receive dividends, and the remaining assets of the Company on
the winding-up, liquidation or dissolution of the Company, pari
passu with the holders of Class A Shares, on a per share
basis.

17



---



##### 



MICROCELL TELECOMMUNICATIONS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                
| | ---------------
| | Exchange Rights

The Class B Shares are exchangeable, at the
option of the holders, into Class A Shares on a
share-for-share basis, in the following circumstances:
[i] any time upon provision by a holder of Class B
Shares of a residency declaration to the Companys transfer
agent certifying that the holder is a Canadian; [ii] upon a
bid being made for the Class A Shares where no equivalent
bid is made for the Class B Shares, for the purposes of
allowing the Class B Shares to tender to an exclusionary
bid; and [iii] automatically upon the repeal or relaxation
of the Canadian rules governing the Companys ownership and
control, but only to the extent of such repeal or relaxation and
non-Canadian ownership and control of the Company and its
subsidiaries not otherwise being restricted by law.



| |                                                                                                                  
| | -----------------------------------------------------------------------------------------------------------------
| | First and Second Preferred Shares,
    excluding First and Second Preferred 2 Shares [the
    Preferred Shares]



| |                        
| | -----------------------
| | Rights upon Liquidation

Holders of First Preferred Shares are entitled to
receive, on the winding-up, liquidation or dissolution of the
Company and in priority to any payment or distribution in
respect of shares of any other class, an amount per share equal
to the PS Redemption Price [as described below] plus any
declared but unpaid dividends.

Holders of Second Preferred Shares are entitled
to receive, on the winding-up, liquidation or dissolution of the
Company and in priority to any payment or distribution in
respect of shares of any other class, other than the First
Preferred Shares, an amount per share equal to the Preferred
Share Redemption Price [as described below] plus any declared
but unpaid dividends.



| |                        
| | -----------------------
| | Non-Cumulative Dividend

The holders of Preferred Shares are entitled to a
fixed, non-cumulative preferential dividend at the rate of
9% per annum, from time to time and payable semi-annually
in arrears in cash.



| |         
| | --------
| | Maturity

The Preferred Shares shall be mandatorily
redeemed on May 1, 2013.



| |                 
| | ----------------
| | Redemption Price

The redemption price of each Preferred Share [the
PS Redemption Price] is initially the issue price
therefor, increased at the beginning of each semi-annual period
commencing on November 1, 2003 by [i] an amount equal
to the dividend accrued during such period; less [ii] the
amount of any cash dividend that has been declared and paid in
respect of such semi-annual period. As at December 31,
2003, the PS Redemption Price is estimated to be
$15.91 per share. In the event of any redemption or
mandatory conversion of Preferred Shares other than as at the
end of a semi-annual period, the PS Redemption Price is to be
adjusted by adding the accrued dividend on a pro rata basis with
reference to the number of days from the beginning of the then
current semi-annual period to the date of such redemption or
conversion, less the amount of any cash dividend that has been
declared and paid in respect of such period.



| |           
| | ----------
| | Redemption

The Preferred Shares are redeemable as follows:
[i] in whole or in part at any time at the option of the
Company at the then current PS Redemption Price, payable in
cash, provided however that holders of Preferred Shares may
exercise any conversion rights prior to any such redemption;
[ii] at maturity,

18



---



##### 



MICROCELL TELECOMMUNICATIONS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

[a] mandatorily at a price per share equal
to the then current PS Redemption Price payable in cash or
[b] at the Companys option, if the Class A
Shares and the Class B Shares continue to be listed and
posted for trading on a recognized exchange, in consideration of
the issuance of a number of Class A Shares or Class B
Shares [as the case may be] equal to the PS Redemption Price
divided by the average share price of such shares;
[iii] mandatorily prior to maturity at the then current PS
Redemption Price to the extent that the Company has funds
available for such purpose [determined by reference to certain
thresholds established in the Articles]; and [iv] at any
time prior to maturity, in whole or in part, at the option of
the Company upon payment of the then current PS Redemption Price
by issuing Units composed of a note and a Preferred Voting
2 Share or Preferred Non-Voting 2 Share.



| |                            
| | ---------------------------
| | Intra Class Exchange Rights

The First Preferred Non-Voting Shares are
exchangeable, at the option of the holders, into First Preferred
Voting Shares on a share-for-share basis, and the Second
Preferred Non-Voting Shares are exchangeable, at the option of
the holders, into Second Preferred Voting Shares on a
share-for-share basis, in the following circumstances:
[i] at any time upon provision by a holder of Preferred
Non-Voting Shares of a residency declaration to the
Companys transfer agent certifying that the holder is a
Canadian; [ii] upon a bid being made for the Preferred
Voting Shares where no equivalent bid is made for the Preferred
Non-Voting Shares for the purposes of allowing the Preferred
Non-Voting Shares to tender to an exclusionary bid;
[iii] automatically upon the repeal or relaxation of the
Canadian rules restricting the Companys ownership and
control, but only to the extent of such repeal or relaxation and
non-Canadian ownership and control of the Company and its
subsidiaries not otherwise being restricted by law. The First
Preferred Voting Shares are exchangeable, at the option of the
holders, into First Preferred Non-Voting Shares on a
share-for-share basis. The Second Preferred Voting Shares are
exchangeable, at the option of the holders, into Second
Preferred Non-Voting Shares on a share-for-share basis.



| |                    
| | -------------------
| | Conversion Features

The Preferred Shares have the following
conversion features: [i] at any time, the Preferred Voting
Shares and the Preferred Non-Voting Shares are convertible, at
the option of the holders into Class A Shares and
Class B Shares, respectively, on a share-for-share basis;
[ii] if at any time prior to May 1, 2008, the Company
shall complete an offering of Class A Shares or
Class B Shares for gross proceeds of not less than
$150 million and at a per share price equal to or greater
than 200% of the then current PS Redemption Price and the
proceeds thereof are used as provided in the Articles, the
Preferred Voting Shares and the Preferred Non-Voting Shares that
remain outstanding after the application of such proceeds will
be converted, at the option of the Company, into Class A
Shares and Class B Shares, respectively, on a
share-for-share basis; and [iii] if at any time on or after
May 1, 2008, on the 25th day [or if such day is not a
trading day, then on the next following trading day] following
the release by the Company of its quarterly or annual financial
statements, as the case may be, the Preferred Voting Shares and
the Preferred Non-Voting Shares are in-the-money [namely that
the PS Redemption Price is less than the average share price of
the Class A Shares and Class B Shares], they will be
converted automatically into Class A Shares and
Class B Shares respectively on a share-for-share basis.

Upon conversion of any Preferred Voting Shares or
Preferred Non-Voting Shares into Class A Shares or
Class B Shares, the holders of such Preferred Voting Shares
or Preferred Non-Voting Shares will have no right to receive any
payment in cash on account of the PS Redemption Price.



| |                         
| | ------------------------
| | Anti-layering Provisions

The Articles of the Company provide that, so long
as there remain outstanding First Preferred Shares [or First
Units, if issued] representing in the aggregate an initial issue
price in excess of $75 million, or

19



---



##### 



MICROCELL TELECOMMUNICATIONS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Second Preferred Shares [or Second Units, if
issued] representing in the aggregate an initial issue price in
excess of $50 million, the approval: [i] by written
resolution signed by the holders of a majority of the aggregate
number [or principal amount, as the case may be] of First
Preferred Shares [or First Units, if issued] and, as the case
may be, Second Preferred Shares [or Second Units if issued] then
outstanding or [ii] by a majority of the holders of First
Preferred Shares [or First Units, if issued] and, as the case
may be, Second Preferred Shares [or Second Units if issued] then
outstanding represented in person or by proxy at a meeting of
such holders called for such purpose, will be required before
the Company and its subsidiaries either [X] issue any
shares ranking prior to or pari passu with the First Preferred
Shares [or First Units, if issued] and, as the case may be,
Second Preferred Shares [or Second Units if issued] or
[Y] incur funded debt [other than permitted debt under the
Companys credit facilities, First Units and Second Units],
as a result of which the aggregate consolidated funded debt
thereof would be in excess of 4.0 times consolidated annual
EBITDA [as defined in the credit agreements], calculated on a
pro forma basis based upon the four consecutive quarters ended
as at the fiscal quarter-end immediately prior to the date of
the resolution of the Board of the Company approving such
issuance or incurrence, as the case may be.



| |                       
| | ----------------------
| | Excess Cash Flow Sweep

The Preferred Shares are subject to the excess
cash flow sweep described in note 8 of these financial
statements.



| |                                                                   
| | ------------------------------------------------------------------
| | First and Second Preferred 2 Shares
    [the Preferred 2 Shares]



| |                        
| | -----------------------
| | Rights upon Liquidation

Holders of First Preferred 2 Shares are
entitled to receive, on the winding-up, liquidation or
dissolution of the Company and in priority to any payment or
distribution in respect of shares of any other class, an amount
per share equal to the Preferred 2 Shares Redemption Price
[the PS2 Redemption Price, as described below]
plus any declared but unpaid dividends. Holders of Second
Preferred 2 Shares are entitled to receive, on the
winding-up, liquidation or dissolution of the Company and in
priority to any payment or distribution in respect of shares of
any other class, other than the First Preferred 2 Shares,
an amount per share equal to the PS2 Redemption Price [as
described below] plus any declared but unpaid dividends.



| |          
| | ---------
| | Dividends

The holders of Preferred 2 Shares are not
entitled to receive any dividends in respect thereof.



| |           
| | ----------
| | Redemption

The Preferred 2 Shares will be automatically
redeemed at the PS2 Redemption Price [as described below] upon
the repayment, redemption or conversion of the First and Second
Units, as the case may be, of which they form part. The PS2
Redemption Price is equal to $0.0001 per Preferred
2 Share.



| |                                         
| | ----------------------------------------
| | First and Second Units [the
    Units]

The Units are hybrid instruments designed to
duplicate the economic interest and other features [including as
to voting entitlements] attaching to the Preferred Shares. Each
Unit is composed of a note, which provides the holder of the
Unit with an economic interest similar to that of a holder of
Preferred Share, together with a First Preferred Voting
2 Share or First Preferred Non-Voting 2 Share [in the
case of First Units] or with a Second Preferred Voting
2 Share or Second Preferred Non-Voting 2 Share [in

20



---



##### 



MICROCELL TELECOMMUNICATIONS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

the case of Second Units]. The First Units are
senior in right of payment to the Second Units. As at
December 31, 2003, no Units were issued.



| |       
| | ------
| | Issued



| |                        
| | -----------------------
| | Number of shares issued

|                                |  |           |          |            |  |           |            |            |  |         |         |         |  |  |           |   |  |  |        |  |  |  |           | 
|------------------------------- |  | --------- | -------- | ---------- |  | --------- | ---------- | ---------- |  | ------- | ------- | ------- |  |  | --------- | - |  |  | ------ |  |  |  | --------- | 
|                                |  | First     |          | First      |  | Second    |            | Second     |  |         |         |        
|                                |  | Preferred |          | Preferred  |  | Preferred |            | Preferred  |  |         |         |        
|                                |  | Voting    |          | Non-Voting |  | Voting    |            | Non-Voting |  | Class A |         | Class B
|                                |  | Shares    |          | Shares     |  | Shares    |            | Shares     |  | Shares  |         | Shares 
|                                |  |           |          |            |  |           |            |            |  |         |         |        
|Balance as at [May 1, 2003]     |  |           | 544,828  |            |  |           | 11,221,839 |            |  |         | 106,400 |         |  |  | 7,093,972 |   |  |  | 30,000 |  |  |  | 3,601,145 | 
|Converted                       |  |           | (292,532 | )          |  |           | 193,365    |            |  |         | (91,618 | )       |  |  | (114,444  | ) |  |  | 38     |  |  |  | 305,191   | 
|                                |  |           |          |            |  |           |            |            |  |         |         |         |  |  |           |   |  |  |        |  |  |  |           | 
|Balance as at December 31, 2003 |  |           | 252,296  |            |  |           | 11,415,204 |            |  |         | 14,782  |         |  |  | 6,979,528 |   |  |  | 30,038 |  |  |  | 3,906,336 | 
|                                |  |           |          |            |  |           |            |            |  |         |         |         |  |  |           |   |  |  |        |  |  |  |           | 



| |                                
| | -------------------------------
| | Carrying value of shares issued

|                                |  |           |        |            |  |           |         |            |  |         |        |         |  |          |         |   |  |  |     |   |  |  |        |  |  |  |         | 
|------------------------------- |  | --------- | ------ | ---------- |  | --------- | ------- | ---------- |  | ------- | ------ | ------- |  | -------- | ------- | - |  |  | --- | - |  |  | ------ |  |  |  | ------- | 
|                                |  | First     |        | First      |  | Second    |         | Second     |  |         |        |         |  |         
|                                |  | Preferred |        | Preferred  |  | Preferred |         | Preferred  |  |         |        |         |  | Total   
|                                |  | Voting    |        | Non-Voting |  | Voting    |         | Non-Voting |  | Class A |        | Class B |  | Value of
|                                |  | Shares    |        | Shares     |  | Shares    |         | Shares     |  | Shares  |        | Shares  |  | Shares  
|                                |  |           |        |            |  |           |         |            |  |         |        |         |  |         
|                                |  | $         |        | $          |  | $         |         | $          |  | $       |        | $       |  | $       
|Balance as at May 1, 2003       |  |           | 8,172  |            |  |           | 168,328 |            |  |         | 1,596  |         |  |          | 106,410 |   |  |  | 302 |   |  |  | 36,241 |  |  |  | 321,049 | 
|Converted                       |  |           | (4,510 | )          |  |           | 2,978   |            |  |         | (1,412 | )       |  |          | (1,755  | ) |  |  | (2  | ) |  |  | 4,701  |  |  |  |        | 
|Accretion on redemption price   |  |           | 352    |            |  |           | 10,311  |            |  |         | 51     |         |  |          | 6,391   |   |  |  |    |   |  |  |       |  |  |  | 17,105  | 
|                                |  |           |        |            |  |           |         |            |  |         |        |         |  |          |         |   |  |  |     |   |  |  |        |  |  |  |         | 
|Balance as at December 31, 2003 |  |           | 4,014  |            |  |           | 181,617 |            |  |         | 235    |         |  |          | 111,046 |   |  |  | 300 |   |  |  | 40,942 |  |  |  | 338,154 | 
|                                |  |           |        |            |  |           |         |            |  |         |        |         |  |          |         |   |  |  |     |   |  |  |        |  |  |  |         | 

Prior to the financial reorganization, authorized
and issued share capital were as follow:



| |                                    
| | -----------------------------------
| | Authorized 
    Pre-reorganization

Unlimited number of Common Shares, each of which
may, at any time, at the holders option, be converted into
one Class B Non-Voting Share or into one Class A
Non-Voting Share, if necessary, to comply with the restrictions
on non-Canadian ownership and control.

Unlimited number of participating Class A
Non-Voting Shares, each of which may, at any time, at the
holders option, be converted into one Class B
Non-Voting Share or into one Common Share, to the extent that
the Company does not cease to comply with the restrictions on
non-Canadian ownership and control as a result.

Unlimited number of participating Class B
Non-Voting Shares.

Unlimited number of Non-Voting First Preferred
Shares issuable in one or more series.

21



---



##### 



MICROCELL TELECOMMUNICATIONS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                                
| | -------------------------------
| | Issued 
    Pre-reorganization

|                                |  |               |            |                   |  |                   |        |       |  |        |           |   |  |   |         |  |  |  |             |  |  |  |         |  |  |  |           | 
|------------------------------- |  | ------------- | ---------- | ----------------- |  | ----------------- | ------ | ----- |  | ------ | --------- | - |  | - | ------- |  |  |  | ----------- |  |  |  | ------- |  |  |  | --------- | 
|                                |  |               |            |                   |  |                   |        |       |  |       
|                                |  |               |            | Class A           |  | Class B           |        |      
|                                |  | Common Shares |            | Non-Voting Shares |  | Non-Voting Shares |        |      
|                                |  |               |            |                   |  |                   |        | Total
|                                |  | Number        |            | $                 |  | Number            |        | $     |  | Number |           | $ |  | $
|                                |  |               |            |                   |  |                   |        |       |  |        |           |   |  |  
|Balance as of December 31, 2001 |  |               | 27,631,537 |                   |  |                   | 73,888 |       |  |        | 9,590,000 |   |  |   | 394,477 |  |  |  | 202,951,539 |  |  |  | 699,006 |  |  |  | 1,167,371 | 
|Issued                          |  |               |           |                   |  |                   |       |       |  |        |          |   |  |   |        |  |  |  |            |  |  |  |        |  |  |  |          | 
|Converted                       |  |               |           |                   |  |                   |       |       |  |        |          |   |  |   |        |  |  |  |            |  |  |  |        |  |  |  |          | 
|Exercise of warrants            |  |               |           |                   |  |                   |       |       |  |        |          |   |  |   |        |  |  |  | 43,372      |  |  |  | 307     |  |  |  | 307       | 
|                                |  |               |            |                   |  |                   |        |       |  |        |           |   |  |   |         |  |  |  |             |  |  |  |         |  |  |  |           | 
|Balance as of December 31, 2002 |  |               | 27,631,537 |                   |  |                   | 73,888 |       |  |        | 9,590,000 |   |  |   | 394,477 |  |  |  | 202,994,911 |  |  |  | 699,313 |  |  |  | 1,167,678 | 
|                                |  |               |            |                   |  |                   |        |       |  |        |           |   |  |   |         |  |  |  |             |  |  |  |         |  |  |  |           | 



| |         
| | --------
| | Warrants

|                                                  |  |             |        |       |  |                    |        |  |  |  |       | 
|------------------------------------------------- |  | ----------- | ------ | ----- |  | ------------------ | ------ |  |  |  | ----- | 
|                                                  |  |             |        |       |  | Pre-reorganization
|                                                  |  |             |        |       |  |                   
|                                                  |  | December 31 |        | May 1 |  | December 31       
|                                                  |  | 2003        |        | 2003  |  | 2002              
|                                                  |  |             |        |       |  |                   
|                                                  |  | $           |        | $     |  | $                 
|3,998,302 Warrants 2005, exercise price of $19.91 |  |             | 4,598  |       |  |                    | 4,598  |  |  |  |      | 
|6,663,943 Warrants 2008, exercise price of $20.69 |  |             | 13,328 |       |  |                    | 13,328 |  |  |  |      | 
|115,700 initial warrants                          |  |             |       |       |  |                    |       |  |  |  | 1,770 | 
|                                                  |  |             |        |       |  |                    |        |  |  |  |       | 
|                                                  |  |             | 17,926 |       |  |                    | 17,926 |  |  |  | 1,770 | 
|                                                  |  |             |        |       |  |                    |        |  |  |  |       | 

In connection with the Plan, the Company issued
on May 1, 2003 two series of warrants entitling holders
thereof, at any time, to purchase one Class A Share or
Class B Share as the case may be, for each warrant at the
exercise price until their maturity on May 1, 2005 and
May 1, 2008, respectively.

The initial warrants were each exercisable for
2,899 Class B non-voting shares at an exercise price of
US$0.01 per share.



| |                             
| | ----------------------------
| | Employee Stock Purchase Plan

The Company has a stock purchase plan for its
employees under which participants can contribute up to 10% of
their salary. The Company makes a contribution in shares for the
benefit of the participant equal to one-third the number of
shares purchased with the participants contribution during
the year [up to 5% of the participants salary]. The
Companys contribution is executed only if, on June 30
of the following year, the participant is still an employee of
the Company and still holds the shares purchased with their
contributions during the year. The Company may choose to make
its contribution in treasury shares or to deposit with the
administrative agent of the plan a sufficient amount of money to
enable the administrative agent of the plan to purchase the
appropriate number of shares in the market. The total number of
treasury Class A Shares and Class B Shares that can be
issued by the Company in order to make its contribution pursuant
to this plan shall not exceed 250,000 shares. As at
December 31, 2003, no shares were issued under this stock
purchase plan.



| |                  
| | -----------------
| | Stock Option Plan

A new stock option plan was implemented on
May 1, 2003. The new stock option plan, as amended on
November 20, 2003, authorizes the issuance of up to 3,000
Class A Shares and 2,006,818 Class B Shares. The Board
may amend, supersede or terminate the stock option plan.

22



---



##### 



MICROCELL TELECOMMUNICATIONS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The stock option plan is administered by the
Board, which has sole discretion to designate the recipients of
options and to determine the number of Class A Shares or
Class B Shares of the Company covered by each of such
options, the date of grants and the subscription price of each
option. Each option allows its holder to acquire one
Class A Share or one Class B Share, as the case may
be, at its exercise price following the vesting period. Options
granted under the stock option plan have the terms and
conditions, including exercise price, vesting and expiration, as
established by the Board, from time to time, provided that the
pricing of options is in accordance with the requirements of the
Toronto Stock Exchange and is not less than the market prices
for the Class A Shares and Class B Shares at the time
of the grant of options.

During the eight-month period ended
December 31, 2003, the Company granted
1,781,359 options and 48,400 options were forfeited.
As a result, 1,732,959 options were outstanding as of
December 31, 2003. 50%, 25% and 25% will vest and become
exercisable on the second, third and fourth anniversaries of the
grant. Accelerated vesting will be applicable after the first
anniversary date of the grant in the event that the market price
of the shares reaches a certain level.

|                                |  |              |           |                    |  |              |           |              |  |  |           |   |  |  |           |  
|------------------------------- |  | ------------ | --------- | ------------------ |  | ------------ | --------- | ------------ |  |  | --------- | - |  |  | --------- | -
|                                |  |              |           |                   
|                                |  |              |           | Pre-reorganization
|                                |  |              |           |                   
|                                |  | Eight        |           | Four               |  |             
|                                |  | Months       |           | Months             |  |             
|                                |  | Ended        |           | Ended              |  | Year Ended   |           | Year Ended  
|                                |  | December 31, |           | April 30,          |  | December 31, |           | December 31,
|Weighted-Average Assumptions    |  | 2003         |           | 2003               |  | 2002         |           | 2001        
|                                |  |              |           |                    |  |              |           |             
|Risk-free interest rate         |  |              | 3.0       | %                  |  |              | 3.0       | %            |  |  | 3.0       | % |  |  | 3.0       | %
|Expected dividend yield         |  |              | 0         | %                  |  |              | 0         | %            |  |  | 0         | % |  |  | 0         | %
|Expected share price volatility |  |              | 64.6      | %                  |  |              | 107.9     | %            |  |  | 107.9     | % |  |  | 89.8      | %
|Expected life                   |  |              | 5.0 years |                    |  |              | 5.5 years |              |  |  | 5.5 years |   |  |  | 5.5 years |  

For the purposes of pro forma disclosures, the
estimated fair value of the options at the grant date is
amortized to expense over the options vesting periods.

All the outstanding options granted under the
prior stock option plan were cancelled upon the implementation
of the Companys financial reorganization on May 1,
2003.

23



---



##### 



MICROCELL TELECOMMUNICATIONS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                                                       
| | ------------------------------------------------------
| | Pro forma disclosure regarding stock options
    plan:

|                                                                                                                                                                                               |  |              |         |                    |  |              |        |              |  |  |          |   |  |  |          |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | ------- | ------------------ |  | ------------ | ------ | ------------ |  |  | -------- | - |  |  | -------- | -
|                                                                                                                                                                                               |  |              |         |                   
|                                                                                                                                                                                               |  |              |         | Pre-reorganization
|                                                                                                                                                                                               |  |              |         |                   
|                                                                                                                                                                                               |  | Eight        |         | Four               |  |             
|                                                                                                                                                                                               |  | Months       |         | Months             |  |             
|                                                                                                                                                                                               |  | Ended        |         | Ended              |  | Year Ended   |        | Year Ended  
|                                                                                                                                                                                               |  | December 31, |         | April 30,          |  | December 31, |        | December 31,
|                                                                                                                                                                                               |  | 2003         |         | 2003               |  | 2002         |        | 2001        
|                                                                                                                                                                                               |  |              |         |                    |  |              |        |             
|                                                                                                                                                                                               |  | $            |         | $                  |  | $            |        | $           
|Net income (loss) for basic earnings (loss) per
    share calculation                                                                                                                          |  |              | (12,146 | )                  |  |              | 45,517 |              |  |  | (570,501 | ) |  |  | (498,485 | )
|Stock-based employee compensation costs that
    would have been included in the determination of net income if
    the fair value based method had been applied to all awards as
    reported |  |              | (1,327  | )                  |  |              | (1,577 | )            |  |  | (2,228   | ) |  |  | (6,155   | )
|                                                                                                                                                                                               |  |              |         |                    |  |              |        |              |  |  |          |   |  |  |          |  
|Pro forma net income (loss) as if the fair value
    based method had been applied to all awards                                                                                               |  |              | (13,473 | )                  |  |              | 43,940 |              |  |  | (572,729 | ) |  |  | (504,640 | )
|                                                                                                                                                                                               |  |              |         |                    |  |              |        |              |  |  |          |   |  |  |          |  
|Basic and diluted earnings (loss) per share as if
    the fair value based method had been applied to all awards                                                                               |  |              | (3.57   | )                  |  |              | 0.18   |              |  |  | (2.38    | ) |  |  | (4.62    | )
|                                                                                                                                                                                               |  |              |         |                    |  |              |        |              |  |  |          |   |  |  |          |  

The following table summarizes information about
stock options outstanding, none of which were exercisable, as of
December 31, 2003:

|                         |  |                     |           |                  |  |                  |            |  |  |  |       | 
|------------------------ |  | ------------------- | --------- | ---------------- |  | ---------------- | ---------- |  |  |  | ----- | 
|                         |  |                    
|                         |  | Options Outstanding
|                         |  |                    
|                         |  | Number              |           |                 
|                         |  | Outstanding as at   |           | Weighted-average |  | Weighted-average
|Range of Exercise Prices |  | December 31, 2003   |           | Remaining Life   |  | Exercise Price  
|                         |  |                     |           |                  |  |                 
|$10.50 to $11.25         |  |                     | 1,648,544 |                  |  |                  | 4.48 years |  |  |  | 10.51 | 
|$17.75 to $18.74         |  |                     | 84,415    |                  |  |                  | 4.20 years |  |  |  | 18.51 | 
|                         |  |                     |           |                  |  |                  |            |  |  |  |       | 
|$10.50 to $18.74         |  |                     | 1,732,959 |                  |  |                  | 4.46 years |  |  |  | 10.90 | 
|                         |  |                     |           |                  |  |                  |            |  |  |  |       | 

24



---



##### 



MICROCELL TELECOMMUNICATIONS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

10.     Supplementary
Consolidated Statement of Net Income
(Loss) Information

|                                         |  |              |        |             |  |                    |        |              |  |   |         |  |  |   |         | 
|---------------------------------------- |  | ------------ | ------ | ----------- |  | ------------------ | ------ | ------------ |  | - | ------- |  |  | - | ------- | 
|                                         |  | Eight Months |        | Four Months |  | Pre-reorganization |        |             
|                                         |  | Ended        |        | Ended       |  | Year Ended         |        | Year Ended  
|                                         |  | December 31, |        | April 30,   |  | December 31,       |        | December 31,
|                                         |  | 2003         |        | 2003        |  | 2002               |        | 2001        
|                                         |  |              |        |             |  |                    |        |             
|Depreciation and amortization            |  |              |        |             |  |                    |        |              |  |   |         |  |  |   |         | 
|Property, plant and equipment            |  | $            | 38,970 |             |  | $                  | 59,121 |              |  | $ | 240,384 |  |  | $ | 176,712 | 
|Intangible assets                        |  |              | 7,383  |             |  |                    |       |              |  |   | 223,399 |  |  |   |        | 
|Other non-current assets                 |  |              | 418    |             |  |                    | 267    |              |  |   | 2,032   |  |  |   | 1,278   | 
|                                         |  |              |        |             |  |                    |        |              |  |   |         |  |  |   |         | 
|                                         |  |              | 46,771 |             |  |                    | 59,388 |              |  |   | 465,815 |  |  |   | 177,990 | 
|                                         |  |              |        |             |  |                    |        |              |  |   |         |  |  |   |         | 
|Interest expenses                        |  |              |        |             |  |                    |        |              |  |   |         |  |  |   |         | 
|Interest on long-term debt               |  |              | 14,705 |             |  |                    | 70,174 |              |  |   | 208,389 |  |  |   | 202,429 | 
|Other interest                           |  |              | 112    |             |  |                    | 434    |              |  |   | 7,867   |  |  |   | 13,459  | 
|Amortization of deferred financing costs |  |              |       |             |  |                    |       |              |  |   | 10,573  |  |  |   | 8,349   | 
|                                         |  |              |        |             |  |                    |        |              |  |   |         |  |  |   |         | 
|                                         |  |              | 14,817 |             |  |                    | 70,608 |              |  |   | 226,829 |  |  |   | 224,237 | 
|                                         |  |              |        |             |  |                    |        |              |  |   |         |  |  |   |         | 
|Other information                        |  |              |        |             |  |                    |        |              |  |   |         |  |  |   |         | 
|Bad debt expense                         |  |              | 2,853  |             |  |                    | 4,153  |              |  |   | 32,306  |  |  |   | 16,148  | 
|Advertising costs                        |  |              | 31,823 |             |  |                    | 8,290  |              |  |   | 37,341  |  |  |   | 33,293  | 

Intangible assets amortization for the next
two years is expected to be approximately $8.6 million per
year. Costs of products and costs of services are exclusive of
depreciation and amortization, which are shown separately.



| |                    
| | -------------------
| | Post-reorganization



| |                                                                       
| | ----------------------------------------------------------------------
| | Gain (Loss) on Investments, Marketable
    Securities and Other Assets

During the eight-month period ended
December 31, 2003, the Company received proceeds of
$2.4 million following the sale of its equity investment in
Saraide Inc., which was previously written down to a value of
nil. The entire amount was recorded as a gain on investments.



| |                   
| | ------------------
| | Pre-reorganization



| |                     
| | --------------------
| | Impairment of Assets

In 2002, the Company wrote down the value of its
MCS Licenses to nil and an impairment charge of
$223.4 million was recorded and included with depreciation
and amortization of intangible assets. A related deferred income
tax recovery of $72.9 million was also recorded. Also
included with depreciation and amortization of property, plant
and equipment in 2002 was an impairment charge of
$37.3 million as a result of write-downs related to the
network and to application software.

In light of the decline in market conditions for
high-technology companies, the Company reduced the value of
certain of its investments to their net estimated realizable
value. Accordingly, write-downs of $11.8 million were
recorded in 2002 and $28.0 million in 2001.



| |                      
| | ---------------------
| | Restructuring Charges

In 2002, the Company laid off approximately
350 employees [approximately 200 in 2001] to adjust its
work force to the requirements of its operating plan. The
restructuring charges of $7.5 million recorded in 2002
[$5.2 million in 2001] relate primarily to severance
payments to the employees laid off.

25



---



##### 



MICROCELL TELECOMMUNICATIONS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                              
| | -----------------------------
| | Gain on Financial Instruments

During 2002, the Company terminated
cross-currency swaps, interest rate swaps and hedging agreements
related to the old long-term debt. These terminations generated
net proceeds of $21.5 million, net deferred gain of
$3.1 million and gain on financial instruments of
$5.5 million. The net gain on financial instruments in 2002
also includes the amortization of the deferred gains of
$1.4 million and the amortization of the deferred losses
generated by the termination of the interest rate swaps of
$0.3 million.



| |                                                                                               
| | ----------------------------------------------------------------------------------------------
| | Write-down of Deferred Financing Costs and
    Deferred Gain and Loss on Financial Instruments

In 2002, the Company wrote down
$18.9 million of deferred financing costs,
$17.7 million of deferred loss on financial instruments and
$19.7 million of deferred gain on financial instruments for
a net total of $16.9 million, all of which related to the
Companys long-term debt, which was in default as at
December 31, 2002.

26



---



##### 



MICROCELL TELECOMMUNICATIONS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|    |                          
|--- | -------------------------
|11. | Earnings (Loss) Per Share

The reconciliation of the numerator and
denominator for the calculation of earnings (loss) per
share is as follows:

|                                                                        |  |              |         |                    |  |              |         |              |  |   |          |   |  |   |          |  
|----------------------------------------------------------------------- |  | ------------ | ------- | ------------------ |  | ------------ | ------- | ------------ |  | - | -------- | - |  | - | -------- | -
|                                                                        |  |              |         |                   
|                                                                        |  |              |         | Pre-reorganization
|                                                                        |  |              |         |                   
|                                                                        |  | Eight Months |         | Four Months        |  |             
|                                                                        |  | Ended        |         | Ended              |  | Year Ended   |         | Year Ended  
|                                                                        |  | December 31, |         | April 30,          |  | December 31, |         | December 31,
|                                                                        |  | 2003         |         | 2003               |  | 2002         |         | 2001        
|                                                                        |  |              |         |                    |  |              |         |             
|Numerator:                                                              |  |              |         |                    |  |              |         |              |  |   |          |   |  |   |          |  
|Net income (loss) for diluted earnings
    (loss) per share calculation |  | $            | 4,959   |                    |  | $            | 45,517  |              |  | $ | (570,501 | ) |  | $ | (498,485 | )
|Accretion on redemption price of First and Second
    Preferred Shares  |  |              | (17,105 | )                  |  |              |        |              |  |   |         |   |  |   |         |  
|                                                                        |  |              |         |                    |  |              |         |              |  |   |          |   |  |   |          |  
|Net income (loss) for basic earnings
    (loss) per share calculation   |  |              | (12,146 | )                  |  |              | 45,517  |              |  |   | (570,501 | ) |  |   | (498,485 | )
|                                                                        |  |              |         |                    |  |              |         |              |  |   |          |   |  |   |          |  
|                                                                        |  |              | Number  |                    |  |              | Number  |              |  |   | Number   |   |  |   | Number   |  
|                                                                        |  |              |         |                    |  |              |         |              |  |   |          |   |  |   |          |  
|Denominator: (in thousands)                                             |  |              |         |                    |  |              |         |              |  |   |          |   |  |   |          |  
|Weighted-average number of shares outstanding                           |  |              | 3,774   |                    |  |              | 240,217 |              |  |   | 240,204  |   |  |   | 108,915  |  
|Shares issuable pursuant to the exercise of
    initial warrants        |  |              |        |                    |  |              | 253     |              |  |   | 253      |   |  |   | 297      |  
|                                                                        |  |              |         |                    |  |              |         |              |  |   |          |   |  |   |          |  
|Number of shares for basic earnings
    (loss) per share calculation    |  |              | 3,774   |                    |  |              | 240,470 |              |  |   | 240,457  |   |  |   | 109,212  |  
|Additional shares for diluted loss per share
    calculation            |  |              |        |                    |  |              |        |              |  |   |         |   |  |   | 3,312    |  
|Shares issuable pursuant to the conversion of
    Preferred Shares      |  |              | 18,662  |                    |  |              |        |              |  |   |         |   |  |   |         |  
|Shares issuable pursuant to the exercise of stock
    options           |  |              | 463     |                    |  |              |        |              |  |   |         |   |  |   |         |  
|                                                                        |  |              |         |                    |  |              |         |              |  |   |          |   |  |   |          |  
|Number of shares for diluted earnings
    (loss) per share calculation  |  |              | 22,899  |                    |  |              | 240,470 |              |  |   | 240,457  |   |  |   | 112,524  |  
|                                                                        |  |              |         |                    |  |              |         |              |  |   |          |   |  |   |          |  
|Basic and diluted earnings (loss) per
    share (in dollars)            |  |              | (3.22   | )                  |  |              | 0.19    |              |  |   | (2.37    | ) |  |   | (4.56    | )

Basic and diluted earnings (loss) per share
are identical, as the effect of dilutive securities is
antidilutive.

12.     Related Party
Transactions

Since May 1, 2003, certain holders of the
long-term debt and the derivative instruments are also
shareholders of the Company.

During the pre-reorganization period, the Company
has entered into transactions with shareholders, companies under
common control, joint ventures and equity-accounted companies.
These transactions are undertaken in the normal course of
operations and are measured at the exchange amount, which is the
amount of consideration established and agreed to by the related
parties. Amounts due from or to related parties are payable or
receivable in cash on demand. These transactions consist
primarily of the purchase or sale by the Company of engineering,
telecommunications, development and management services or

27



---



##### 



MICROCELL TELECOMMUNICATIONS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

equipment. The effect on the consolidated
financial statements, excluding amounts related to long-term
debt and derivative instruments, is as follows:

|                                                                            |  |              |   |                    |  |              |     |              |  |   |       |  |  |   |       | 
|--------------------------------------------------------------------------- |  | ------------ | - | ------------------ |  | ------------ | --- | ------------ |  | - | ----- |  |  | - | ----- | 
|                                                                            |  |              |   |                   
|                                                                            |  |              |   | Pre-reorganization
|                                                                            |  |              |   |                   
|                                                                            |  | Eight Months |   | Four Months        |  |             
|                                                                            |  | Ended        |   | Ended              |  | Year Ended   |     | Year Ended  
|                                                                            |  | December 31, |   | April 30,          |  | December 31, |     | December 31,
|                                                                            |  | 2003         |   | 2003               |  | 2002         |     | 2001        
|                                                                            |  |              |   |                    |  |              |     |             
|Costs capitalized to property, plant and
    equipment and deferred charges |  | $            |  |                    |  | $            |    |              |  | $ |      |  |  | $ | 5,165 | 
|Cost of products and services                                               |  |              |  |                    |  |              |    |              |  |   | 3,007 |  |  |   | 6,965 | 
|General and administrative services                                         |  |              |  |                    |  |              | 103 |              |  |   | 304   |  |  |   | 562   | 
|Selling and marketing                                                       |  |              |  |                    |  |              |    |              |  |   |      |  |  |   | 225   | 
|Equipment sales and service revenues                                        |  |              |  |                    |  |              |    |              |  |   | 4,698 |  |  |   | 5,470 | 
|Equipment purchases                                                         |  |              |  |                    |  |              |    |              |  |   | 224   |  |  |   | 192   | 

13.     Income
Taxes

Significant components of the income tax benefit
(expense) consist of the following:

|                                                                              |  |              |      |                    |  |              |        |              |  |   |         |   |  |   |         |  
|----------------------------------------------------------------------------- |  | ------------ | ---- | ------------------ |  | ------------ | ------ | ------------ |  | - | ------- | - |  | - | ------- | -
|                                                                              |  |              |      |                   
|                                                                              |  |              |      | Pre-reorganization
|                                                                              |  |              |      |                   
|                                                                              |  | Eight Months |      | Four Months        |  |             
|                                                                              |  | Ended        |      | Ended              |  | Year Ended   |        | Year Ended  
|                                                                              |  | December 31, |      | April 30,          |  | December 31, |        | December 31,
|                                                                              |  | 2003         |      | 2003               |  | 2002         |        | 2001        
|                                                                              |  |              |      |                    |  |              |        |             
|Current income tax benefit (expense) before the
    following:                |  | $            | (587 | )                  |  | $            | (6,180 | )            |  | $ | (80,484 | ) |  | $ | (40,101 | )
|Tax benefit of previously unrecognized losses and
    temporary differences   |  |              |     |                    |  |              | 4,384  |              |  |   | 78,860  |   |  |   | 37,857  |  
|                                                                              |  |              |      |                    |  |              |        |              |  |   |         |   |  |   |         |  
|Current income tax benefit (expense)                                          |  |              | (587 | )                  |  |              | (1,796 | )            |  |   | (1,624  | ) |  |   | (2,244  | )
|Deferred income tax recovery related to reversal
    of temporary differences |  |              |     |                    |  |              |       |              |  |   | 73,519  |   |  |   | 3,966   |  
|                                                                              |  |              |      |                    |  |              |        |              |  |   |         |   |  |   |         |  
|Income tax benefit (expense)                                                  |  |              | (587 | )                  |  |              | (1,796 | )            |  |   | 71,895  |   |  |   | 1,722   |  
|                                                                              |  |              |      |                    |  |              |        |              |  |   |         |   |  |   |         |  

28



---



##### 



MICROCELL TELECOMMUNICATIONS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

The reconciliation of income tax computed at the
statutory income tax rates to the income tax benefit (expense)
is as follows:

|                                                                                                                          |  |              |        |                    |  |              |         |              |  |   |          |   |  |   |          |  
|------------------------------------------------------------------------------------------------------------------------- |  | ------------ | ------ | ------------------ |  | ------------ | ------- | ------------ |  | - | -------- | - |  | - | -------- | -
|                                                                                                                          |  |              |        |                   
|                                                                                                                          |  |              |        | Pre-reorganization
|                                                                                                                          |  |              |        |                   
|                                                                                                                          |  | Eight Months |        | Four Months        |  |             
|                                                                                                                          |  | Ended        |        | Ended              |  | Year Ended   |         | Year Ended  
|                                                                                                                          |  | December 31, |        | April 30,          |  | December 31, |         | December 31,
|                                                                                                                          |  | 2003         |        | 2003               |  | 2002         |         | 2001        
|                                                                                                                          |  |              |        |                    |  |              |         |             
|Income tax benefit (expense) based on the
    combined statutory income tax rate of 33% [32% in 2002 and 33%
    in 2001] |  | $            | (1,830 | )                  |  | $            | (15,613 | )            |  | $ | 205,567  |   |  | $ | 165,068  |  
|Non-taxable portion of capital items                                                                                      |  |              | 2,825  |                    |  |              | 16,519  |              |  |   | (3,665   | ) |  |   | (14,596  | )
|Unrecognized tax expense (benefit) of losses and
    temporary differences                                                |  |              | (913   | )                  |  |              | (5,264  | )            |  |   | (210,063 | ) |  |   | (187,376 | )
|Tax benefit of previously unrecognized losses and
    temporary differences                                               |  |              |       |                    |  |              | 4,384   |              |  |   | 78,860   |   |  |   | 37,857   |  
|Large corporations tax                                                                                                    |  |              | (587   | )                  |  |              | (1,796  | )            |  |   | (1,624   | ) |  |   | (2,244   | )
|Other                                                                                                                     |  |              | (82    | )                  |  |              | (26     | )            |  |   | 2,820    |   |  |   | 3,013    |  
|                                                                                                                          |  |              |        |                    |  |              |         |              |  |   |          |   |  |   |          |  
|Income tax benefit (expense)                                                                                              |  |              | (587   | )                  |  |              | (1,796  | )            |  |   | 71,895   |   |  |   | 1,722    |  
|                                                                                                                          |  |              |        |                    |  |              |         |              |  |   |          |   |  |   |          |  

Significant components of the Companys
deferred tax assets and liabilities as of December 31, 2003
are as follows:

|                                                                                       |  |              |          |        |  |                    |          |   |  |   |          |  
|-------------------------------------------------------------------------------------- |  | ------------ | -------- | ------ |  | ------------------ | -------- | - |  | - | -------- | -
|                                                                                       |  |              |          |        |  | Pre-reorganization
|                                                                                       |  |              |          |        |  |                   
|                                                                                       |  | December 31, |          | May 1, |  | December 31,      
|                                                                                       |  | 2003         |          | 2003   |  | 2002              
|                                                                                       |  |              |          |        |  |                   
|Deferred income tax liabilities:                                                       |  |              |          |        |  |                    |          |   |  |   |          |  
|Deferred gains and other                                                               |  | $            | 2,779    |        |  | $                  | 517      |   |  | $ | 873      |  
|                                                                                       |  |              |          |        |  |                    |          |   |  |   |          |  
|Total deferred income tax liabilities                                                  |  |              | 2,779    |        |  |                    | 517      |   |  |   | 873      |  
|                                                                                       |  |              |          |        |  |                    |          |   |  |   |          |  
|Deferred income tax assets:                                                            |  |              |          |        |  |                    |          |   |  |   |          |  
|Tax values of marketable securities and
    investments in excess of accounting values |  |              | 416      |        |  |                    | 416      |   |  |   | 4,568    |  
|Operating losses carried forward                                                       |  |              | 542,552  |        |  |                    | 612,370  |   |  |   | 481,105  |  
|Tax values of capital assets in excess of
    accounting values                        |  |              | 55,849   |        |  |                    | 40,553   |   |  |   | 162,806  |  
|Provisions and other temporary differences                                             |  |              | 23,906   |        |  |                    | 25,651   |   |  |   | 83,576   |  
|                                                                                       |  |              |          |        |  |                    |          |   |  |   |          |  
|Total deferred income tax assets                                                       |  |              | 622,723  |        |  |                    | 678,990  |   |  |   | 732,055  |  
|Valuation allowance                                                                    |  |              | (619,944 | )      |  |                    | (678,473 | ) |  |   | (731,182 | )
|                                                                                       |  |              |          |        |  |                    |          |   |  |   |          |  
|Net deferred income tax assets                                                         |  |              | 2,779    |        |  |                    | 517      |   |  |   | 873      |  
|                                                                                       |  |              |          |        |  |                    |          |   |  |   |          |  
|Net deferred income tax                                                                |  |              |         |        |  |                    |         |   |  |   |         |  
|                                                                                       |  |              |          |        |  |                    |          |   |  |   |          |  

Approximately $1.8 billion of the operating
losses carried forward and $200 million of temporary
differences existed at the date of the Companys financial
reorganization as described in note 1. The tax benefits related
to these operating losses carried forward and temporary
differences were not included in the assets as part of the fresh
start accounting, as a valuation allowance of approximately
$678 million was provided. Accordingly, if and when it is
more likely than not that the tax benefits of these unrecognized
losses carried forward and temporary differences will be
realized, they will be applied to reduce

29



---



##### 



MICROCELL TELECOMMUNICATIONS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

unamortized intangible assets to nil. During the
period of eight months ended December 31, 2003, no amount
of tax benefits related to these losses and temporary
differences was realized.

As at December 31, 2003, the Company had net
operating losses carried forward for income tax purposes
totalling $1.6 billion, which expire as follows: 2004,
$217.8 million; 2005, $57.9 million; 2006,
$283.7 million; 2007, $282.6 million; 2008,
$322.0 million; 2009, $480.1 million. The Company had
also approximately $234.5 million of deductible temporary
differences.

In addition, the use of tax losses carried
forward will generally be restricted in future years to profits
from those businesses carried on prior to the restructuring plan.

14.     Supplementary
Information on Consolidated Statement of Cash Flows

|                                                         |  |              |         |                    |  |              |         |              |  |   |        |   |  |   |         |  
|-------------------------------------------------------- |  | ------------ | ------- | ------------------ |  | ------------ | ------- | ------------ |  | - | ------ | - |  | - | ------- | -
|                                                         |  |              |         |                   
|                                                         |  |              |         | Pre-reorganization
|                                                         |  |              |         |                   
|                                                         |  | Eight Months |         | Four Months        |  |             
|                                                         |  | Ended        |         | Ended              |  | Year Ended   |         | Year Ended  
|                                                         |  | December 31, |         | April 30,          |  | December 31, |         | December 31,
|                                                         |  | 2003         |         | 2003               |  | 2002         |         | 2001        
|                                                         |  |              |         |                    |  |              |         |             
|Receivables                                              |  | $            | (12,244 | )                  |  | $            | (2,689  | )            |  | $ | 13,783 |   |  | $ | (18,947 | )
|Inventories                                              |  |              | (5,728  | )                  |  |              | (4,035  | )            |  |   | 370    |   |  |   | 17,545  |  
|Prepaid license fees, rental sites and other
    prepaid |  |              | 7,193   |                    |  |              | (14,188 | )            |  |   | (1,235 | ) |  |   | (980    | )
|Deferred charges                                         |  |              | (3,557  | )                  |  |              | 9,481   |              |  |   | (5,477 | ) |  |   | (7,727  | )
|Other current assets                                     |  |              | (3,282  | )                  |  |              | (34,250 | )            |  |   | 6,754  |   |  |   | 13,116  |  
|Accounts payable and accrued liabilities                 |  |              | 27,113  |                    |  |              | 75,712  |              |  |   | 16,385 |   |  |   | (61,289 | )
|Deferred revenues                                        |  |              | 8,121   |                    |  |              | (3,366  | )            |  |   | (542   | ) |  |   | 5,979   |  
|                                                         |  |              |         |                    |  |              |         |              |  |   |        |   |  |   |         |  
|Net change in operating assets and liabilities           |  |              | 17,616  |                    |  |              | 26,665  |              |  |   | 30,038 |   |  |   | (52,303 | )
|                                                         |  |              |         |                    |  |              |         |              |  |   |        |   |  |   |         |  

15.     Commitments
and Contingencies



| |                 
| | ----------------
| | Operating Leases

The aggregate minimum annual payments under
operating leases related to sites, switch rooms, offices and
stores are as follows:

|                   |  |   |         | 
|------------------ |  | - | ------- | 
|                   |  | $
|                   |  |  
|2004               |  |   | 34,148  | 
|2005               |  |   | 29,774  | 
|2006               |  |   | 21,399  | 
|2007               |  |   | 17,528  | 
|2008               |  |   | 14,653  | 
|Subsequent to 2008 |  |   | 41,384  | 
|                   |  |   |         | 
|                   |  |   | 158,886 | 
|                   |  |   |         | 

Rental expenses for the eight months ended
December 31, 2003 and for the four months ended
April 30, 2003 amounted to $19.0 million and
$9.7 million respectively [$29.7 million for 2002 and
$29.5 million for 2001].

30



---



##### 



MICROCELL TELECOMMUNICATIONS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Under its site leases, the Company is generally
committed to returning each site to its original state. The
associated exit costs are expected to be insignificant because
the Company estimates that most of its lease sites will be
renewed at their expiry. Consequently, no provision has been
recorded for asset retirement obligations and the associated
exit costs will be provided for when such liabilities arise.



| |                  
| | -----------------
| | Letters of Credit

As at December 31, 2003, the Company had
outstanding letters of credit for an aggregate amount of
$0.4 million [$1.3 million as at May 1, 2003].



| |                 
| | ----------------
| | Supply Agreement

Under a supply agreement, the Company is
committed until 2006 to acquire certain of its core wireless
network equipment and call server products from a major
supplier. Under this agreement, the Company has no unconditional
purchase commitments.



| |            
| | -----------
| | PCS License

On April 15, 1996, the Company was informed
of the conditions attached to its PCS license, which had an
initial term of five years. On March 29, 2001, Industry
Canada renewed the Companys PCS license for a second
five-year term, commencing on April 1, 2001. On
December 12, 2003, Industry Canada issued Canada Gazette
Notice DGRB-006-03 announcing that the license terms of existing
cellular and PCS licensees, including the Company, will be
extended to March 31, 2011. Industry Canada also announced
that it will make certain changes to the cellular and PCS
license conditions, including granting licensees the power to
divide and transfer their licenses, by both spectrum amount and
geographic area.

Other License conditions detailed in Gazette
Notice DGRB-006-03 that apply to the Company include:



| |                                                                                                                                                                                                                                                                                                                                                                                                               
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | [i] to comply with applicable spectrum
    aggregation limits;                                                                                                                                                                                                                                                                                                                                                
|
| | [ii] to comply with the Canadian ownership
    and control provisions;                                                                                                                                                                                                                                                                                                                                        
|
| | [iii] to ensure that radio stations are
    installed and operated in compliance with applicable regulations
    from Health Canada [electromagnetic field exposure] and
    Transport Canada [air navigation], and only after meaningful
    consultations have taken place with applicable local land use
    authorities;                                                                                  
|
| | [iv] to invest a minimum of 2% of adjusted
    gross revenues resulting from operations in the spectrum, over
    the term of the License, in eligible research and development
    activities. As at December 31, 2003, 2% of the
    Companys adjusted gross revenues represented a cumulative
    amount of $26.7 million. Up to December 31, 2003, the
    Company has spent approximately $15.9 million;
|
| | [v] to provide for and maintain lawful
    interception activities as authorized by law; and                                                                                                                                                                                                                                                                                                                  
|
| | [vi] to offer PCS resale to other PCS
    licensees on a non-discriminatory basis.                                                                                                                                                                                                                                                                                                                            



| |             
| | ------------
| | MCS Licenses

In November 2003, Inukshuk announced the creation
of a new venture with two partners. The new company plans to
build a MCS network to offer high speed Internet, IP-based voice
and local networking services using broadband wireless access
technology. Each partner owns one-third of the new company,
which will operate as an independent entity. The first phase
will allow partners to validate technological and commercial
acceptance to develop a detailed business plan. The first
commercial service launches are

31



---



##### 



MICROCELL TELECOMMUNICATIONS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

planned for early 2004. Inukshuk will contribute
the use of 60 MHz of its MCS Licenses, but no monetary
investment. Contributions to the venture will be made in two
phases and the second phase is subject to certain conditions.

As of December 31, 2003, the venture was at
an early stage of activities and had no significant impact on
the Companys financial statements.



| |            
| | -----------
| | Litigations

On April 10, 2002, ASP Wireless Net Inc., or
ASP, a former service provider of Solutions, filed a notice of
arbitration pursuant to an agreement that ASP had with
Solutions. ASP claims in the notice of arbitration that
Solutions has breached its agreements with ASP and ASP therefore
suffered damages in the amount of $18.5 million, which ASP
is claiming from the Company. The breach alleged by ASP relates
to Microcells failure to provide ASP access to
Microcells PCS network. The Company considers ASPs
claim frivolous and unfounded in fact and in law and intends to
vigorously contest it.

Furthermore, the Company is involved from time to
time in other legal and regulatory proceedings incidental to its
business. The Company does not believe that such proceedings
will have, individually or in the aggregate, a materially
adverse effect on the Company.



|    |                      
|--- | ---------------------
|16. | Financial Instruments



| |                             
| | ----------------------------
| | Concentration of Credit Risk

The Company has a limited concentration of credit
risk due to the composition of its customer base, which includes
a large number of individuals and businesses. The Company
evaluates the credit-worthiness of customers in order to limit
the amount of credit extended where appropriate and establishes
an allowance for doubtful accounts receivable sufficient to
cover probable and reasonably estimated losses. Cash and cash
equivalents and short-term investments are contracted with a
limited number of financial institutions. However, risk of
losses is managed by the Company through a policy of dealing
only with large, creditworthy financial institutions.



| |                   
| | ------------------
| | Interest Rate Risk

The Company has exposure to interest rate risk
for both fixed interest rate and floating interest rate
instruments. Fluctuations in interest rates will have an effect
on the valuation and the collection or repayment of these
instruments.



| |                           
| | --------------------------
| | Foreign Exchange Rate Risk

The Company is subject to foreign exchange rate
fluctuations as a portion of its assets and liabilities are
unhedged and denominated in currencies other than Canadian
dollars.



| |           
| | ----------
| | Fair Value

Fair value estimates are made as of a specific
point in time, using available information about the financial
instruments. These estimates are subjective in nature and often
cannot be determined with precision.

The fair value of cash and cash equivalents,
short-term investments, receivables, accounts payable and
accrued liabilities approximate their carrying value due to the
short-term maturity of these instruments.

The fair value of the Tranche B Debt and Tranche
C Debt is determined based on an amount quoted on the
over-the-counter market at the balance sheet date. The fair
value of the derivative instruments is

32



---



##### 



MICROCELL TELECOMMUNICATIONS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

determined based on market rates prevailing at
the balance sheet date obtained from the Companys
financial institutions for similar derivative instruments.

Fair values of the Companys financial
instruments, as at December 31, 2003, where the fair values
differ from the carrying amounts on the financial statements,
are as follows:

|               |  |          |         |                |  |  |         | 
|-------------- |  | -------- | ------- | -------------- |  |  | ------- | 
|               |  | Carrying |         | Estimated Fair
|               |  | Value    |         | Value         
|               |  |          |         |               
|               |  | $        |         | $             
|Tranche B Debt |  |          | 271,769 |                |  |  | 266,334 | 
|Tranche C Debt |  |          | 52,693  |                |  |  | 41,100  | 



|    |                      
|--- | ---------------------
|17. | Segmented Information

In the preceding years, the Company carried out
its operations through three strategic business segments: PCS,
wireless Internet and investments. As a result of the
restructuring process, the Company realigned its cash flows to
concentrate on the PCS activities. Consequently, the Company has
determined that it operates in one segment since January 1,
2003, as the wireless internet and investments operations were
no longer significant.



|    |                                                                  
|--- | -----------------------------------------------------------------
|18. | Accounting Principles Generally Accepted in
    the United States

These financial statements were prepared in
accordance with Canadian GAAP. The following summary sets out
the material adjustments to the Companys financial
statements, which would be required to conform to U.S. GAAP.



| |                                                                                     
| | ------------------------------------------------------------------------------------
| | Reconciliation of Consolidated Net Income
    (Loss) and Comprehensive Income (Loss)

|                                          |  |                                                                                     |       |              |   |                    |        |              |           |              |          |   |         |   |          |   |         |  
|----------------------------------------- |  | ----------------------------------------------------------------------------------- | ----- | ------------ | - | ------------------ | ------ | ------------ | --------- | ------------ | -------- | - | ------- | - | -------- | - | ------- | -
|                                          |  |                                                                                     |       |              |   |                   
|                                          |  |                                                                                     |       |              |   | Pre-Reorganization
|                                          |  |                                                                                     |       |              |   |                   
|                                          |  |                                                                                     |       | Eight Months |   | Four Months        |        |             
|                                          |  |                                                                                     |       | Ended        |   | Ended              |        | Year Ended   |           | Year Ended  
|                                          |  |                                                                                     |       | December 31, |   | April 30,          |        | December 31, |           | December 31,
|                                          |  |                                                                                     |       | 2003         |   | 2003               |        | 2002         |           | 2001        
|                                          |  |                                                                                     |       |              |   |                    |        |              |           |             
|                                          |  |                                                                                     |       | $            |   | $                  |        | $            |           | $           
|Net income (loss) under Canadian
    GAAP |  |                                                                                     | 4,959 |              |   |                    | 45,517 |              |           |              | (570,501 | ) |         |   | (498,485 | )
|[a]                                       |  | Reversal of amortization of Intangible assets                                       |       |              |  |                    |        |              |          |              |          |   |        |   |          |   | 139     |  
|[b]                                       |  | Share of net income (net loss) in investees                                         |       |              |  |                    |        |              | (500      | )            |          |   | 4,772   |   |          |   | (22,079 | )
|[d]                                       |  | Development costs                                                                   |       |              |  |                    |        |              |          |              |          |   | 6,108   |   |          |   | (3,502  | )
|[e]                                       |  | Stock compensation                                                                  |       |              |  |                    |        |              |          |              |          |   | 478     |   |          |   | (478    | )
|[g]                                       |  | Reorganization items                                                                |       |              |  |                    |        |              | 1,253,660 |              |          |   |        |   |          |   |        |  
|[d]                                       |  | Amortization of net deferred gain on financial
    instruments                      |       |              |  |                    |        |              |          |              |          |   | (1,110  | ) |          |   |        |  
|[d]                                       |  | Amortization of other comprehensive income
    related to financial instruments     |       |              |  |                    |        |              |          |              |          |   | 1,110   |   |          |   |        |  
|[i]                                       |  | Changes in fair market value of a fair value hedge                                  |       |              |  |                    |        |              |          |              |          |   |        |   |          |   | 1,367   |  
|[i]                                       |  | Cumulative effect as of January 1, 2001
    resulting from the adoption of SFAS 133 |       |              |  |                    |        |              |          |              |          |   |        |   |          |   | (900    | )
|[h]                                       |  | Effect of legislated tax rate changes on deferred
    tax liabilities               |       |              |  |                    |        |              |          |              |          |   |        |   |          |   | 25,771  |  
|[a]                                       |  | Impairment of intangible assets                                                     |       |              |  |                    |        |              |          |              |          |   | (25,771 | ) |          |   |        |  
|                                          |  |                                                                                     |       |              |   |                    |        |              |           |              |          |   |         |   |          |   |         |  

33



---



##### 



MICROCELL TELECOMMUNICATIONS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

|    |  |                                                                                                     |  |              |       |                    |  |              |           |              |  |  |          |   |  |  |          |  
|--- |  | --------------------------------------------------------------------------------------------------- |  | ------------ | ----- | ------------------ |  | ------------ | --------- | ------------ |  |  | -------- | - |  |  | -------- | -
|    |  |                                                                                                     |  |              |       |                   
|    |  |                                                                                                     |  |              |       | Pre-Reorganization
|    |  |                                                                                                     |  |              |       |                   
|    |  |                                                                                                     |  | Eight Months |       | Four Months        |  |             
|    |  |                                                                                                     |  | Ended        |       | Ended              |  | Year Ended   |           | Year Ended  
|    |  |                                                                                                     |  | December 31, |       | April 30,          |  | December 31, |           | December 31,
|    |  |                                                                                                     |  | 2003         |       | 2003               |  | 2002         |           | 2001        
|    |  |                                                                                                     |  |              |       |                    |  |              |           |             
|    |  |                                                                                                     |  | $            |       | $                  |  | $            |           | $           
|    |  | Net income (loss) under U.S.
    GAAP                                                               |  |              | 4,959 |                    |  |              | 1,298,677 |              |  |  | (584,914 | ) |  |  | (498,167 | )
|[c] |  | Unrealized gain (loss) in value of
    marketable securities                                        |  |              |      |                    |  |              | (145      | )            |  |  | (177     | ) |  |  | 322      |  
|[i] |  | Changes in fair market value of cash flow hedges                                                    |  |              |      |                    |  |              |          |              |  |  | 367      |   |  |  | (1,364   | )
|[d] |  | Reversal of cumulative income taxes related to
    changes in fair market value of cash flow hedges |  |              |      |                    |  |              |          |              |  |  | 1,036    |   |  |  |         |  
|[d] |  | Amortization of other comprehensive income
    related to financial instruments                     |  |              |      |                    |  |              |          |              |  |  | (1,110   | ) |  |  |         |  
|[i] |  | Write off of other comprehensive income related
    to financial instruments                        |  |              |      |                    |  |              |          |              |  |  | (1,968   | ) |  |  |         |  
|[i] |  | Cumulative effect as of January 1, 2001,
    resulting from the adoption of SFAS 133                |  |              |      |                    |  |              |          |              |  |  |         |   |  |  | 3,939    |  
|    |  |                                                                                                     |  |              |       |                    |  |              |           |              |  |  |          |   |  |  |          |  
|    |  | Comprehensive income (loss) under U.S.
    GAAP                                                     |  |              | 4,959 |                    |  |              | 1,298,532 |              |  |  | (586,766 | ) |  |  | (495,270 | )
|    |  |                                                                                                     |  |              |       |                    |  |              |           |              |  |  |          |   |  |  |          |  
|    |  | Basic and diluted earnings (loss) per
    share under U.S. GAAP[dollars]                            |  |              | (3.22 | )                  |  |              | 5.40      |              |  |  | (2.43    | ) |  |  | (4.56    | )



| |                                                      
| | -----------------------------------------------------
| | Reconciliation of Consolidated Cash Flow
    Captions

There are no significant differences between
Canadian GAAP and U.S. GAAP, which affect the captions of the
cash flow statements.



| |                                                          
| | ---------------------------------------------------------
| | Reconciliation of Consolidated Balance
    Sheet Captions

|               |  |                                                    |         |                   |          |             |        |                   |          |      |         |                    |          |             |   |      |          |   |   |  |            |   |           |  |         |   |        |  |            |   |           | 
|-------------- |  | -------------------------------------------------- | ------- | ----------------- | -------- | ----------- | ------ | ----------------- | -------- | ---- | ------- | ------------------ | -------- | ----------- | - | ---- | -------- | - | - |  | ---------- | - | --------- |  | ------- | - | ------ |  | ---------- | - | --------- | 
|               |  |                                                    |         |                   |          |             |        |                   |          |      |         |                   
|               |  |                                                    |         |                   |          |             |        |                   |          |      |         | Pre-Reorganization
|               |  |                                                    |         |                   |          |             |        |                   |          |      |         |                   
|               |  |                                                    |         |                   |          | May 1,      |        |                  
|               |  |                                                    |         | December 31, 2003 |          | 2003        |        | December 31, 2002
|               |  |                                                    |         |                   |          |             |        |                  
|               |  |                                                    |         | Canadian          |          |             |        | U.S.              |          | U.S. |         | Canadian           |          |             |   | U.S.
|               |  |                                                    |         | GAAP              |          | Adjustments |        | GAAP              |          | GAAP |         | GAAP               |          | Adjustments |   | GAAP
|               |  |                                                    |         |                   |          |             |        |                   |          |      |         |                    |          |             |   |     
|               |  |                                                    |         | $                 |          | $           |        | $                 |          | $    |         | $                  |          | $           |   | $   
|Debit (credit) |  |                                                    |         |                   |          |             |        |                   |          |      |         |                    |          |             |   |      |          |   |   |  |            |   |           |  |         |   |        | 
|[c]            |  | Marketable securities                              |         |                   |         |             |        |                   |         |      |         |                    |         |             |   |      |         |   |   |  | 164        |   |           |  | 145     |   |        |  | 309        |  
|[a]            |  | Intangible assets                                  |         |                   | 233,819  |             |        |                   |         |      |         |                    | 233,819  |             |   |      | 241,202  |   |   |  | 2,727      |   |           |  | (2,727  | ) |        |  |           |  
|[b]            |  | Long-term investments and other non current assets |         |                   | 4,797    |             |        |                   |         |      |         |                    | 4,797    |             |   |      |         |   |   |  | 12,335     |   |           |  | 1,276   |   |        |  | 13,611     |  
|[f]            |  | Preferred shares                                   |         |                   |         |             |        |                   | (296,912 | )    |         |                    | (296,912 | )           |   |      | (284,506 | ) |   |  |           |   |           |  |        |   |        |  |           |  
|[f][k]         |  | Share capital                                      |         |                   | (338,154 | )           |        |                   | 309,058  |      |         |                    | (29,096  | )           |   |      | (36,543  | ) |   |  | (1,167,678 | ) |           |  | (60,723 | ) |        |  | (1,228,401 | )
|[f]            |  |                                                    | Deficit |                   |          |             | 12,146 |                   |          |      | (12,146 | )                  |          |             |  |      |          |   |  |  |            |   | 2,466,674 |  |         |   | 62,174 |  |            |   | 2,528,848 | 
|[c]            |  | Accumulated other comprehensive income             |         |                   |         |             |        |                   |         |      |         |                    |         |             |   |      |         |   |   |  |           |   |           |  | (145    | ) |        |  | (145       | )

34



---



##### 



MICROCELL TELECOMMUNICATIONS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                                                                     
| | --------------------------------------------------------------------
| | [a]             Amortization
    and Impairment of Intangible Assets

The PCS license, which included certain
development costs, and other costs associated with obtaining the
PCS license from Industry Canada were deferred under Canadian
GAAP. Under U.S. GAAP, such development costs are expensed
as incurred. This difference created a reversal of amortization
of intangible assets of $0.1 million in 2001. During 2002,
the Company wrote down the value of the MCS Licenses to nil.
Prior to this write-down, the carrying values of these licenses
were $249.2 million and $223.4 million under
U.S. GAAP and Canadian GAAP respectively, representing a
difference of $25.8 million.



| |                                                                          
| | -------------------------------------------------------------------------
| | [b]             Investment
    in Entity Subject to Significant Influence

Under Canadian GAAP, the investor should continue
to record its portion of investee losses unless the investor
would be unlikely to share in losses of the investee. Under
U.S. GAAP, in situations where an investor is not required
to advance additional funds to the investee and where previous
losses have reduced the common and the preferred stock
investment account to zero, the Company should continue to
report its share of equity method losses in its statement of
operations to the extent of and as an adjustment to the loans to
the investee.

In addition, under Canadian GAAP, the share of
net income in an investee that is a private investment company
is calculated based on its realized gains or losses. Under
U.S. GAAP, the share of net income in such investees is
calculated based on both realized and unrealized gains or losses.



| |                                          
| | -----------------------------------------
| | [c]             Marketable
    Securities

Under Canadian GAAP, the marketable securities
are recorded as explained in note 2. Under U.S. GAAP,
the marketable securities are classified as available for sale,
and any changes to the market value, net of income taxes, are
recorded in other comprehensive income (loss). Fair value of
marketable securities was $0.3 million as at
December 31, 2002.



| |                                                      
| | -----------------------------------------------------
| | [d]             Deferred
    Charges and Other Assets

Under Canadian GAAP, certain development costs
are deferred and amortized. Under U.S. GAAP, such costs
would be expensed as incurred.

Under Canadian GAAP, a deferred gain or loss is
recorded upon either the de-designation of a derivative
financial instrument as a hedge or upon the early termination of
a derivative financial instrument qualifying as a hedge. This
deferred gain or loss represents the appreciation or
depreciation of the fair market value of the derivative
financial instrument from its inception until the date of the
de-designation or early termination. The deferred gain or loss
is then amortized over the remaining life of the originally
hedged item. Under US GAAP, the appreciation or depreciation of
the fair market value of the derivative financial instrument
from its inception until the date of its de-designation or early
termination is accumulated in other comprehensive income. The
accumulated balance is then amortized to net income
(loss) over the remaining life of the originally hedged
item.



| |                               
| | ------------------------------
| | [e]     Stock
    Compensation

Under Canadian GAAP, certain costs related to
bonuses in connection with stock compensation awards granted
at-the-money with a minimum guaranteed performance, are not
accounted for until the bonus is likely to be paid out and the
amount can be quantified. Under U.S. GAAP, such costs are
accounted for on a combined basis with the recognition of
compensation cost over the service period equal to the bonus
element. As at December 31, 2002, all such stock
compensation awards granted in the past have been cancelled.

35



---



##### 



MICROCELL TELECOMMUNICATIONS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                                                        
| | -------------------------------------------------------
| | Additional Disclosure Regarding Stock
    Options Plan:

|                                                                                                                                                                                                        |  |              |         |                    |  |              |           |              |  |  |          |   |  |  |          |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------ | ------- | ------------------ |  | ------------ | --------- | ------------ |  |  | -------- | - |  |  | -------- | -
|                                                                                                                                                                                                        |  |              |         |                   
|                                                                                                                                                                                                        |  |              |         | Pre-reorganization
|                                                                                                                                                                                                        |  |              |         |                   
|                                                                                                                                                                                                        |  | Eight Months |         | Four Months        |  |             
|                                                                                                                                                                                                        |  | Ended        |         | Ended              |  | Year Ended   |           | Year Ended  
|                                                                                                                                                                                                        |  | December 31, |         | April 30,          |  | December 31, |           | December 31,
|                                                                                                                                                                                                        |  | 2003         |         | 2003               |  | 2002         |           | 2001        
|                                                                                                                                                                                                        |  |              |         |                    |  |              |           |             
|                                                                                                                                                                                                        |  | $            |         | $                  |  | $            |           | $           
|Net income (loss) under U.S. GAAP as reported                                                                                                                                                           |  |              | 4,959   |                    |  |              | 1,298,677 |              |  |  | (584,914 | ) |  |  | (498,167 | )
|Accretion on redemption price of First and Second
    Preferred Shares                                                                                                                                  |  |              | (17,105 | )                  |  |              |          |              |  |  |         |   |  |  |         |  
|                                                                                                                                                                                                        |  |              |         |                    |  |              |           |              |  |  |          |   |  |  |          |  
|Net loss applicable to Class A and
    Class B shares [for the eight months ended
    December 31, 2003 only]                                                                                           |  |              | (12,146 | )                  |  |              | 1,298,677 |              |  |  | (584,914 | ) |  |  | (498,167 | )
|Stock-based employee compensation costs that
    would have been included in the determination of net income if
    the fair value based method had been applied to all awards as
    reported [note 9] |  |              | (1,327  | )                  |  |              | (1,577    | )            |  |  | (2,228   | ) |  |  | (6,155   | )
|                                                                                                                                                                                                        |  |              |         |                    |  |              |           |              |  |  |          |   |  |  |          |  
|Pro forma net income (loss) under US GAAP as
    if the fair value based method had been applied to all awards                                                                                          |  |              | (13,473 | )                  |  |              | 1,297,100 |              |  |  | (587,142 | ) |  |  | (504,322 | )
|                                                                                                                                                                                                        |  |              |         |                    |  |              |           |              |  |  |          |   |  |  |          |  
|Basic and diluted earnings (loss) per share
    under US GAAP as reported                                                                                                                               |  |              | (3.22   | )                  |  |              | 5.40      |              |  |  | (2.43    | ) |  |  | (4.56    | )
|Pro forma basic and diluted earnings
    (loss) per share under US GAAP as if the fair value method
    had been applied to all awards                                                                  |  |              | (3.57   | )                  |  |              | 5.39      |              |  |  | (2.44    | ) |  |  | (4.62    | )



| |                                                                     
| | --------------------------------------------------------------------
| | [f]     Classification
    of Financial Instrument as Debt or Equity

The preferred shares contain conversion features
which result in the Companys obligation to redeem such
shares being conditional. Therefore, under US GAAP, these shares
are outside the scope of 
 SFAS 150. In such a case, redeemable preferred shares subject
to mandatory redemption requirements that are outside the
control of the issuer are excluded from shareholders
equity (deficiency) and presented separately in the
issuers balance sheet between liabilities and
shareholders equity (deficiency). The related accretions
are presented as a charge to retained earnings or, in the
absence of retained earnings, by charges against share capital.



| |                                 
| | --------------------------------
| | [g]     Reorganization
    Items

Under U.S. GAAP, the forgiveness of debt and the
effects of the adjustments on the reported amounts of individual
assets and liabilities resulting from the adoption of fresh
start accounting should be reflected in the predecessor
entitys final statement of operations. Under Canadian
GAAP, such adjustments are reflected as capital transactions.
The reorganization items in the amount of $1.254 billion
were comprised of $1.366 billion of forgiveness of debt and
$112.5 million of adjustments resulting from the
application of fresh-start accounting.

36



---



##### 



MICROCELL TELECOMMUNICATIONS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                                     
| | ------------------------------------
| | [h]     Deferred Tax
    Liabilities

Under Canadian GAAP, the impact of changes in
income tax rates on the measurement of deferred tax assets and
liabilities are recorded when the changes in tax rates have been
substantively enacted. Under U.S. GAAP, changes in income
tax rates are recorded when the change in tax rates has been
legislated. Under Canadian GAAP, the estimated deferred tax
liabilities related to the MCS Licenses acquired during 2001, in
the amount of $72.9 million, resulting from the difference
between the carrying value and the tax basis of the asset
acquired, was capitalized to the MCS Licenses. This amount was
determined using substantially enacted tax rates at the date of
acquisition. Using legislated tax rates at the date of
acquisition, the tax liability and related increase in the
carrying value of the asset was $98.7 million under
US GAAP. During 2001, the change in rates was legislated,
which resulted in a decrease in the deferred tax liability and a
credit to income of $25.8 million under U.S. GAAP.



| |                                   
| | ----------------------------------
| | [i]     Derivative
    Instruments

The Financial Accounting Standards Board has
issued SFAS 133, Accounting for Derivative Instruments and
Hedging Activities, as amended by Statements 137 and 138.
The Company adopted 
 SFAS 133 effective January 1, 2001. The Statements require
the Company to recognize all derivatives on the balance sheet at
fair value. Derivatives that are not hedges must be adjusted to
fair value through income. If the derivative is a hedge,
depending on the nature of the hedge, changes in the effective
portion of the fair value of derivatives are either offset
against the change in fair value of assets, liabilities, or firm
commitments through earnings, or recognized in other
comprehensive income (loss) until the hedged item is
recognized in earnings. The ineffective portion of a
derivatives change in fair value is recognized in earnings.

The adoption of SFAS 133, as amended by
Statements 137 and 138, resulted in the cumulative effect as of
January 1, 2001, of an accounting change of $0.9 million
being recognized as an expense in the statement of net loss and
as a credit of $3.9 million in other comprehensive loss.
For 2001, the adoption of SFAS 133 resulted in $1.4 million
being recognized as income in the statement of net loss and in a
charge of $1.4 million in other comprehensive income. As of
December 31, 2002, all such derivative instruments have
been terminated.

37



---



##### 



MICROCELL TELECOMMUNICATIONS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                                                                       
| | ----------------------------------------------------------------------
| | [j]     Additional
    Disclosure under U.S. GAAP and SEC Requirements

|                                                                     |  |              |        |                    |  |              |        |              |  |  |         |   |  |  |        |  
|-------------------------------------------------------------------- |  | ------------ | ------ | ------------------ |  | ------------ | ------ | ------------ |  |  | ------- | - |  |  | ------ | -
|                                                                     |  |              |        |                   
|                                                                     |  |              |        | Pre-reorganization
|                                                                     |  |              |        |                   
|                                                                     |  | Eight Months |        | Four Months        |  |             
|                                                                     |  | Ended        |        | Ended              |  | Year Ended   |        | Year Ended  
|                                                                     |  | December 31, |        | April 30,          |  | December 31, |        | December 31,
|                                                                     |  | 2003         |        | 2003               |  | 2002         |        | 2001        
|                                                                     |  |              |        |                    |  |              |        |             
|                                                                     |  | $            |        | $                  |  | $            |        | $           
|Provision for restructuring charges                                  |  |              |        |                    |  |              |        |              |  |  |         |   |  |  |        |  
|Balance, beginning of period                                         |  |              | 162    |                    |  |              | 1,036  |              |  |  | 2,314   |   |  |  |       |  
|Addition: severance expenses                                         |  |              |       |                    |  |              |       |              |  |  | 7,494   |   |  |  | 5,226  |  
|Deduction: severance payments and adjustments                        |  |              | (162   | )                  |  |              | (874   | )            |  |  | (8,772  | ) |  |  | (2,912 | )
|                                                                     |  |              |        |                    |  |              |        |              |  |  |         |   |  |  |        |  
|Balance, end of period                                               |  |              |       |                    |  |              | 162    |              |  |  | 1,036   |   |  |  | 2,314  |  
|                                                                     |  |              |        |                    |  |              |        |              |  |  |         |   |  |  |        |  
|Allowance for doubtful accounts                                      |  |              |        |                    |  |              |        |              |  |  |         |   |  |  |        |  
|Balance, beginning of period                                         |  |              | 11,844 |                    |  |              | 14,885 |              |  |  | 10,717  |   |  |  | 4,116  |  
|Addition: bad debt expenses                                          |  |              | 2,853  |                    |  |              | 4,153  |              |  |  | 32,306  |   |  |  | 16,148 |  
|Deduction: uncollectible accounts written off,
    net of recoveries |  |              | (8,070 | )                  |  |              | (7,194 | )            |  |  | (28,138 | ) |  |  | (9,547 | )
|                                                                     |  |              |        |                    |  |              |        |              |  |  |         |   |  |  |        |  
|Balance, end of period                                               |  |              | 6,627  |                    |  |              | 11,844 |              |  |  | 14,885  |   |  |  | 10,717 |  
|                                                                     |  |              |        |                    |  |              |        |              |  |  |         |   |  |  |        |  

[k]     Option
to Purchase Class A Non Voting Shares

In 1996, an amount of $60.7 million was
expensed with a corresponding increase in share capital under
U.S. GAAP representing stock options recorded using
APB 25.

19.     Comparative
Figures

Some of the comparative figures have been
reclassified to conform to the presentation adopted in the
current year.

20.     Subsequent
Events

(1) On March 17, 2004, the Company
obtained financing of an aggregate principal amount equivalent
to $450 million for its wholly owned subsidiary, Solutions,
from a syndicate of lenders. The proceeds were used mainly to
refinance the Companys previous senior secured credit
facilities (see note 8). The amended facilities consist of
a six-year $50 million first lien revolving credit
facility, and of a seven-year first lien term loan and of a
seven-and-a-half-year second lien term loan, each in an
aggregate principal amount equivalent to $200 million. The
revolving credit facility is denominated in Canadian dollars,
and both term loans are denominated in U.S. dollars. Pricing is
LIBOR plus 4% for the revolving credit facility and the first
lien term loan and LIBOR plus 7% for the second lien term loan.
The loan pricing for the second lien term loan includes a LIBOR
floor of 2%. The credit facilities are secured by a pledge on
substantially all of the Companys assets.

(2) In March 2004, the Company has entered
into swap transactions to manage its exposure to foreign
exchange rate fluctuations on the new U.S.-dollar-denominated
first and second lien term loan described above. The Company
swapped the total principal of both term loans in the amount of
$400 million [US$299.9 million] at a rate of 1.3340. The
Company also swapped the floating interest rate of Libor plus 4%
on the first lien term loan, payable in US dollars, to a
floating interest rate of Libor plus 5.085%, payable in Canadian
dollars. The Company also swapped the floating interest rate of
Libor plus 7% on the second lien term loan, payable in
US dollars, to a floating interest rate of Libor plus
8.485%,

38



---



##### 



MICROCELL TELECOMMUNICATIONS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

payable in Canadian dollars. The maturity of the
swap transactions corresponds to the maturity of both term
loans. These swap transactions are presented at their fair value
as derivative instruments on the balance sheet and changes in
fair value are recognized in income as foreign exchange gains or
losses.

The Companys swap agreements include a
recouponing provision which allowed both parties to enter into
an amendment of the economic variables when the fair market
value of the swaps exceed a threshold of $16 million, in
such manner that the market value is reduced to an amount no
greater than $16 million. As of September 30, 2004, an
amendment occurred between the parties to revise the limit of
$16 million to $24.8 million. Consequently, the
economic variables were amended to reduce the market value of
the swaps from $34.4 million payable by the Company to
$24.7 million, generating a payment by the Company to the
counterparties of $9.7 million on October 3, 2004.
Under this amendment, the floating interest rates of the
Companys swap agreements relating to its Term Loan A and
Term Loan B were reduced to LIBOR plus 4.616% and LIBOR plus
8.006% respectively.

(3) Pursuant to a final prospectus dated
March 24, 2004, the Company distributed to the holders of
its class A restricted voting shares, class B non-voting shares,
First Preferred Voting Shares, First Preferred Non-Voting
Shares, Second Preferred Voting Shares and Second Preferred
Non-Voting Shares, rights to subscribe for an aggregate of
4,519,636 class B non-voting shares. Each five rights entitled
the holder thereof to purchase one class B non-voting share at a
subscription price of $22 per share. In connection with the
rights offering, the Company entered into a standby purchase
agreement with COM Canada, LLC [COM] pursuant to
which it has agreed to purchase, at the rights subscription
price, all class B non-voting shares not otherwise purchased
pursuant to the rights offering. In addition, to the extent COM
purchased less than $50 million of such shares, it
committed to purchase, at the subscription price, additional
class B non-voting shares having an aggregate subscription price
equal to the deficiency.

The closing of the rights offering occurred on
April 30, 2004. The rights offering resulted in the
issuance by Microcell of 4,519,636 class B non-voting shares.
COM purchased concurrently, at a price of $22.00 per share,
2,272,727 class B non-voting shares. Furthermore, the Company
granted COM, 3,977,272 warrants to acquire, at a price of $22.00
per share, additional class B non-voting shares for exercise at
a later date. The net proceeds from the rights offering and
private placement to COM amounted to approximately $147 million
[net of approximately $2 million of issuance fees] and have
been used by Microcell to redeem 75,233 outstanding preferred
shares, at a price of $16.39 per share, for a total of
$1.2 million. The remaining balance of $145.8 million will
be used to fund capital expenditures and for general corporate
purposes.

As a result, the Companys share capital as
at May 3, 2004, was composed of the following: 235,961
class A restricted voting shares; 29,079,353 class B non-voting
shares; 3,998,302 Warrants 2005; 6,663,943 Warrants 2008; and,
3,977,272 new warrants issued to COM. In accordance with the
warrant indentures governing the Warrants 2005 and the Warrants
2008, the number of shares issuable upon the exercise of the
Warrants 2005 and the Warrants 2008 has been adjusted from 1.0
to 1.02 Class A Share or Class B Shares, as the case
may be, for each warrant. This adjustment was made as a result
of the Companys rights offering.

(4) On March 19, 2004, the Company
received a comment letter from the SEC in connection with its
review of the Companys registration statement filed on
March 3, 2004 for the registration of its Class A
Shares and Class B Shares issuable upon exercise of the
Warrants 2005 and the Warrants 2008. The Company responded to
the SECs March letter and filed an amended registration
statement on June 29, 2004. The Company received a letter
to its response on August 9, 2004. The Company responded to
the SECs August letter and filed an amended registration
statement on October 22, 2004. The Company received a
letter to its response on November 5, 2004. The SEC staff,
among other things, has questioned whether the Companys
Fido brand name has an indefinite useful life and consequently
whether it should be subject to periodic amortization. The
Company believes that such brand name should be

39



---



##### 



MICROCELL TELECOMMUNICATIONS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

considered to have an indefinite life. However,
were periodic amortization to be applied, assuming
hypothetically a useful life of ten years, this would reduce net
income by $1.9 million, increase loss per share by $0.50 but
have no effect on cash flows for the eight months ended
December 31, 2003, and shareholders equity would
decrease by $1.9 million as of December 31, 2003. The
hypothetical amortization period of ten years is presented for
illustrative purposes only.

The SEC staff, amongst other things, has also
asked the Company for additional information regarding certain
of the Companys accounting policies regarding revenue
recognition and measurement and related costs, including the
recognition of both revenues and related costs associated with
the sale of handsets and prepaid airtime vouchers to the
Companys third party retailers. As described in
note 2, sales of products such as handsets and their
related costs are recognized when goods are delivered, wireless
service is activated and collection is reasonably assured. For
prepaid airtime vouchers, the revenue is measured at the amount
paid by the subscribers and is recorded when services are
provided to the subscriber and related commissions paid to third
party dealers are classified within cost of product. The Company
believes these accounting policies are appropriate based on
risks assumed by the Company until the handset is activated or
prepaid airtime vouchers are sold and used by the Companys
ultimate customers. Alternatively, other parties, including the
SEC, could assess that the sale of handset and associated costs
be recognized upon the delivery of the handset to third party
retailers or to be deferred and amortized over the expected life
of the customer. For the prepaid airtime vouchers,
alternatively, other parties, including the SEC, could assess
that the commissions to the third party dealers be considered as
a discount and be classified as a reduction of service revenues.
As at December 31, 2003, the balance sheet includes
deferred revenues and deferred costs of $2.6 million and
$8.7 million respectively in connection with handsets at
the dealers location not yet activated by the ultimate
customers. Commissions paid to third party retailers for the
prepaid airtime vouchers totaled $8.3 million,
$4.7 million, $12.8 million and $14.9 million for
the eight-month period ended December 31, 2003, the
four-month period ended April 30, 2003 and the years ended
December 31, 2002 and 2001 respectively.

During the first quarter of 2004, the Company
introduced a new retention program, the Fido
Rewards, which allows its postpaid customers to accumulate
FidoDollars based on their spending. Each FidoDollar
allows its holder to obtain a discount of $1 on the suggested
retail price of a future purchase of a handset. Since this
handset will generate future service revenues after its
acquisition, the Company will account for the cost of this
reward program, consisting primarily of the subsidy on the
handset, when such FidoDollars are redeemed. At that date, the
Company will recognize as equipment revenue the amount received
from its customers, net of applicable FidoDollars, as well as
the cost of the related handset. The Company accrues for its
estimated obligation as awards are earned by its customers which
are registered with the program. The SEC staff has also asked
for additional information regarding this new program. The
Company believes that the accounting treatment for this program
is appropriate since the FidoDollars can be used only to acquire
handsets that will allow the Company to continue to generate
service revenues following the exercise of such rewards.
Alternatively, other parties, including the SEC, could assess
that such rewards be accounted for in reduction of service
revenues and that the total amount of fidodollars be recognized
when such fidodollars are earned by the customer instead of when
such FidoDollars are used.

Following its acquisition by Rogers Wireless
Inc,, the Company decided not to register the warrants with the
SEC, therefore, the Company intends to withdraw its F-1 filing.

(5) On April 21, 2004, UBS Wireless
Services, Inc., an Ontario corporation that manufactures and
operates wireless products and services, filed a lawsuit against
Microcell, Solutions, Inukshuk and Allstream in the Ontario
Superior Court of Justice. In its statement of claim, UBS
claims, among other things, for damages in the amount of
$160 million from each of Microcell, Solutions and Inukshuk
for breach of contract, breach of confidence and breach of
fiduciary duty and punitive damages. UBS also claims from
Inukshuk, as an alternative to the damages claims, an order for
specific performance of a

40



---



##### 



MICROCELL TELECOMMUNICATIONS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

conditional agreement between Inukshuk and UBS
with respect to the use of 38 MHz of Inukshuks spectrum by
UBS. UBS also claims certain other equitable relief, including
disgorgement of profits that UBS alleges would otherwise
unjustly enrich Inukshuk, Solutions and Microcell. The action is
at a very early stage with no statement of defence yet
delivered. Based on information currently available, management
considers that the companies have substantive defences to the
action brought by UBS and intend to vigorously defend the action.

(6) On August 9, 2004, a proceeding
under the Class Actions Act (Saskatchewan) has been brought
against Microcell and other providers of wireless
telecommunications services in Canada. The proceeding involves
allegations of deceit, misrepresentation and false advertising
by wireless telecommunications service providers with respect to
the monthly system access fees being charged to customers. The
plaintiffs seek unquantified damages from the defendant wireless
telecommunications service providers, plus costs and
pre-judgment and post-judgment interest. Microcell believes it
has good defences to the allegations made by the plaintiffs.
Further, the proceeding has not been certified as a class action
and it is too early to determine whether the proceeding will
qualify for certification as a class action.

(7) On September 19, 2004, the special
committee of Microcells board of directors met to review
the terms of the offers submitted by Rogers Wireless Inc.
(Rogers) to purchase all Microcells
Class A Shares for $35.00 per share, Class B Shares
for $35.00 per share, Warrants 2005 for $15.79 per warrant and
Warrants 2008 for $15.01 per warrant, and the terms of a
proposed support agreement. Following Microcells special
committees review of the relevant considerations and based
upon the advice received from its legal and financial advisors
and the opinions of its financial advisors to its board of
directors to the effect that, as at such date and subject to the
matters stated in such opinions, the consideration to be
received by holders of shares under the share offers was fair,
from a financial point of view, to such holders,
Microcells special committee unanimously concluded that
the share offers were fair to the holders of shares and in the
best interests of Microcell and determined to unanimously
recommend that Microcells board of directors recommend
that holders of shares accept the share offers.

On September 19, 2004, Microcells
board of directors met immediately following the meeting of its
special committee and confirmed and ratified the special
committees recommendation. At such meeting,
Microcells board of directors approved the entering into
of a support agreement in connection therewith. Microcell
entered into a support agreement late on September 19, 2004
in respect of the Rogers offers. In accordance with the support
agreement, Microcells board of directors also resolved on
such date to waive the application of certain provisions of the
shareholder rights plan to allow Rogers to proceed with the
Rogers offers without any dilutive effects.

On September 20, 2004, Microcell and Rogers
jointly announced the execution of the support agreement with
respect to the Rogers offers and on November 8, 2004,
Rogers announced that the terms and conditions of its offers for
the securities of Microcell have been satisfied with the
necessary number of securities having been successfully tendered
and regulatory approvals secured to complete the acquisition. As
a result of the successful tender offers, Rogers has taken up
and accepted for payment approximately 181,721 Class A
Shares, 28,389,649 Class B Shares, 3,296,652 Warrants 2005
and 5,405,387 Warrants 2008, being all of the securities of
Microcell validly tendered to the offers and not withdrawn prior
to the 5:00 p.m. November 5, 2004 expiry time. The tendered
securities represent approximately 96% of the outstanding
Class A Shares, 92% of the outstanding Class B Shares,
82% of the outstanding Warrants 2005 and 81% of the outstanding
Warrants 2008.

The change in control described in note 7
constitutes an event of default under the Companys credit
agreements. On November 4, 2004, the administrative agent,
on behalf of the Companys secured lenders, has waived the
event of default arising from the change in control until the
earlier of (1) 90 days after the completion of the
acquisition of Microcell by Rogers, and (2) March 1, 2005.
However, the Company gave notice of prepayment of its
outstanding debt and related derivative financial instrument
positions and

41



---



##### 



MICROCELL TELECOMMUNICATIONS INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

such prepayment occurred on November 16,
2004. On this date the Company repaid its long-term debt in the
amount of $362.1 million and the derivative instruments
were terminated generating a payment of $64.6 million to
the counterparty. These payments were financed with cash on hand
and an advance of $220 million from Rogers. A call premium
fee, in the amount of approximately $5.4 million was also
paid by the Company with respect to the prepayment of its Term
loan B debt. Finally, deferred financing costs in the amount of
approximately $11.9 million were written off by the Company.

As a result of this acquisition by Rogers, all
the members of Microcells board of directors and certain
senior officers of Microcell, including the President and Chief
Executive Officer [the CEO] and the Chief Financial
Officer [the CFO], have resigned on November 9,
2004. On the same day, Microcell announced the composition of
its new board of directors and the nomination of the new CEO and
the new CFO of Microcell.

In conjunction with its strategic review process,
Microcell has incurred both financial and legal fees. The
Company has engaged two financial advisors to determine the best
way to maximize value for all security holders. Based on Rogers
offers, the final financial advisor fees amounted approximately
to $13.7 million of which $2.1 million have already
been paid. Furthermore, approximately $12.8 million of
legal and other general expenses related to this process were
incurred. Finally, the consequential impact of the offers on
Microcells share price led to an accelerated vesting of
shares under the Companys stock option plan, resulting in
an acceleration of a compensation expense of $7.8 million
that the Company would have otherwise recognized over the
remaining initial vesting period. On November 9, 2004, all
of the 1,319,306 outstanding stock options were exercised.

On November 19, 2004, as provided for in the
agreement governing the venture described in note 1, the Company
gave notice of its intent to purchase the share of the venture
currently owned by one of the other two partners in the venture.
Should the third partner make the same offer to the selling
partner, the Company would acquire 50% of the selling
partners share for which the Company estimates the cost to
be between approximately $4 million to $5 million.
Following the upcoming change in the ownership of the venture
and the anticipated beginning of Phase 2 for the deployment of a
MCS network in Canada, the Company will reassess the accounting
of its investment in the venture. Up to September 30, 2004,
this investment was accounted for using the equity method.

42



---



##### 



MICROCELL TELECOMMUNICATIONS INC.

INTERIM CONSOLIDATED BALANCE SHEETS

[Unaudited]


|                                                                  |  |                   |           |              |  |  |         |  
|----------------------------------------------------------------- |  | ----------------- | --------- | ------------ |  |  | ------- | -
|                                                                  |  |                  
|                                                                  |  | As at            
|                                                                  |  |                  
|                                                                  |  | September 30,     |           | December 31,
|                                                                  |  | 2004              |           | 2003        
|                                                                  |  | $                 |           | $           
|                                                                  |  |                   |           |             
|                                                                  |  |                   |           | [Note 1]    
|                                                                  |  |                  
|                                                                  |  | (In thousands of 
|                                                                  |  | Canadian dollars)
|ASSETS[note
    5]                                               
|Current assets                                                    |  |                   |           |              |  |  |         |  
|Cash and cash equivalents                                         |  |                   | 110,977   |              |  |  | 43,094  |  
|Short-term investments                                            |  |                   | 22,804    |              |  |  | 60,927  |  
|Receivables                                                       |  |                   | 91,430    |              |  |  | 76,796  |  
|Inventories                                                       |  |                   | 51,038    |              |  |  | 27,593  |  
|Prepaid license fees, rental sites and other
    prepaid expenses |  |                   | 31,998    |              |  |  | 26,850  |  
|Deferred charges                                                  |  |                   | 21,280    |              |  |  | 10,601  |  
|Other current assets                                              |  |                   | 4,679     |              |  |  | 6,188   |  
|                                                                  |  |                   |           |              |  |  |         |  
|Total current assets                                              |  |                   | 334,206   |              |  |  | 252,049 |  
|Property, plant and equipment                                     |  |                   | 462,161   |              |  |  | 318,041 |  
|Intangible assets                                                 |  |                   | 226,885   |              |  |  | 233,819 |  
|Deferred charges and other non-current assets                     |  |                   | 33,147    |              |  |  | 653     |  
|Long-term investments                                             |  |                   | 4,146     |              |  |  | 4,144   |  
|                                                                  |  |                   |           |              |  |  |         |  
|                                                                  |  |                   | 1,060,545 |              |  |  | 808,706 |  
|                                                                  |  |                   |           |              |  |  |         |  
|LIABILITIES AND SHAREHOLDERS
    EQUITY                         
|Current liabilities                                               |  |                   |           |              |  |  |         |  
|Accounts payable and accrued liabilities                          |  |                   | 127,982   |              |  |  | 91,634  |  
|Deferred revenues                                                 |  |                   | 47,450    |              |  |  | 42,328  |  
|Derivative instruments [note 5]                                   |  |                   | 9,677     |              |  |  | 6,348   |  
|Current portion of long-term debt [note 5]                        |  |                   | 12,000    |              |  |  | 9,298   |  
|                                                                  |  |                   |           |              |  |  |         |  
|Total current liabilities                                         |  |                   | 197,109   |              |  |  | 149,608 |  
|Long-term debt [note 5]                                           |  |                   | 360,616   |              |  |  | 315,164 |  
|Derivative instruments [note 5]                                   |  |                   | 24,740    |              |  |  |        |  
|                                                                  |  |                   |           |              |  |  |         |  
|                                                                  |  |                   | 582,465   |              |  |  | 464,772 |  
|                                                                  |  |                   |           |              |  |  |         |  
|Shareholders equity                                              |  |                   |           |              |  |  |         |  
|Share capital [note 6]                                            |  |                   | 486,245   |              |  |  | 338,154 |  
|Warrants [note 6]                                                 |  |                   | 29,202    |              |  |  | 17,926  |  
|Contributed surplus [note 2]                                      |  |                   | 4,288     |              |  |  |        |  
|Deficit                                                           |  |                   | (41,655   | )            |  |  | (12,146 | )
|                                                                  |  |                   |           |              |  |  |         |  
|                                                                  |  |                   | 478,080   |              |  |  | 343,934 |  
|                                                                  |  |                   | 1,060,545 |              |  |  | 808,706 |  
|                                                                  |  |                   |           |              |  |  |         |  
|Contingencies [note 8]                                            |  |                   |           |              |  |  |         |  
|Commitment [note 1]                                               |  |                   |           |              |  |  |         |  

See accompanying notes.

43



---



##### 



MICROCELL TELECOMMUNICATIONS INC.

INTERIM CONSOLIDATED STATEMENTS OF

NET INCOME (LOSS) AND RETAINED EARNINGS
(DEFICIT)


[Unaudited]


|                                                                                                             |  |                                    |         |                    |  |                      |         |   |  |  |            |  
|------------------------------------------------------------------------------------------------------------ |  | ---------------------------------- | ------- | ------------------ |  | -------------------- | ------- | - |  |  | ---------- | -
|                                                                                                             |  | Nine Months                        |         | Five Months        |  | Four Months         
|                                                                                                             |  | Ended                              |         | Ended              |  | Ended               
|                                                                                                             |  | September 30, 2004                 |         | September 30, 2003 |  | April 30, 2003      
|                                                                                                             |  | $                                  |         | $                  |  | $                   
|                                                                                                             |  |                                    |         |                    |  |                     
|                                                                                                             |  |                                    |         |                    |  | [Pre-reorganization]
|                                                                                                             |  |                                   
|                                                                                                             |  | [In thousands of Canadian dollars,
|                                                                                                             |  | except for per share data]        
|Revenues                                                                                                     |  |                                    |         |                    |  |                      |         |   |  |  |            |  
|Services                                                                                                     |  |                                    | 445,935 |                    |  |                      | 222,866 |   |  |  | 170,196    |  
|Products                                                                                                     |  |                                    | 36,168  |                    |  |                      | 18,793  |   |  |  | 7,498      |  
|                                                                                                             |  |                                    |         |                    |  |                      |         |   |  |  |            |  
|                                                                                                             |  |                                    | 482,103 |                    |  |                      | 241,659 |   |  |  | 177,694    |  
|                                                                                                             |  |                                    |         |                    |  |                      |         |   |  |  |            |  
|Costs and expenses                                                                                           |  |                                    |         |                    |  |                      |         |   |  |  |            |  
|Cost of services                                                                                             |  |                                    | 153,332 |                    |  |                      | 75,073  |   |  |  | 59,079     |  
|Cost of products                                                                                             |  |                                    | 83,041  |                    |  |                      | 44,346  |   |  |  | 23,416     |  
|Selling and marketing                                                                                        |  |                                    | 87,822  |                    |  |                      | 38,600  |   |  |  | 24,585     |  
|General and administrative                                                                                   |  |                                    | 67,522  |                    |  |                      | 33,950  |   |  |  | 32,058     |  
|Special charges [notes 2 and 7]                                                                              |  |                                    | 9,668   |                    |  |                      |        |   |  |  |           |  
|Depreciation and amortization                                                                                |  |                                    | 61,072  |                    |  |                      | 28,780  |   |  |  | 59,388     |  
|                                                                                                             |  |                                    |         |                    |  |                      |         |   |  |  |            |  
|                                                                                                             |  |                                    | 462,457 |                    |  |                      | 220,749 |   |  |  | 198,526    |  
|                                                                                                             |  |                                    |         |                    |  |                      |         |   |  |  |            |  
|Operating income (loss)                                                                                      |  |                                    | 19,646  |                    |  |                      | 20,910  |   |  |  | (20,832    | )
|Interest income                                                                                              |  |                                    | 1,486   |                    |  |                      | 1,670   |   |  |  | 1,888      |  
|Interest expense                                                                                             |  |                                    | (23,782 | )                  |  |                      | (9,702  | ) |  |  | (70,608    | )
|Foreign exchange gain (loss)                                                                                 |  |                                    | (15,757 | )                  |  |                      | 12,196  |   |  |  | 136,553    |  
|Gain on investments, marketable securities and
    other assets                                              |  |                                    | 57      |                    |  |                      | 73      |   |  |  | 312        |  
|Share of net loss in investees
    [note 1]                                                                  |  |                                    | (1,690  | )                  |  |                      |        |   |  |  |           |  
|                                                                                                             |  |                                    |         |                    |  |                      |         |   |  |  |            |  
|Income (loss) before income taxes                                                                            |  |                                    | (20,040 | )                  |  |                      | 25,147  |   |  |  | 47,313     |  
|Income tax expense                                                                                           |  |                                    | (2,958  | )                  |  |                      | (8,940  | ) |  |  | (1,796     | )
|                                                                                                             |  |                                    |         |                    |  |                      |         |   |  |  |            |  
|Net income (loss)                                                                                            |  |                                    | (22,998 | )                  |  |                      | 16,207  |   |  |  | 45,517     |  
|Accretion on redemption price 
    preferred shares [note 6]                                                |  |                                    | (5,184  | )                  |  |                      | (10,590 | ) |  |  |           |  
|                                                                                                             |  |                                    |         |                    |  |                      |         |   |  |  |            |  
|Net income (loss) applicable to
    Class A and Class B shares[for the post-reorganization periods
    only] |  |                                    | (28,182 | )                  |  |                      | 5,617   |   |  |  | 45,517     |  
|Deficit, beginning of period, as previously
    reported                                                     |  |                                    | (12,146 | )                  |  |                      |        |   |  |  | (2,466,674 | )
|Cumulative effect of a change in an accounting
    policy [note 2]                                           |  |                                    | (1,327  | )                  |  |                      |        |   |  |  |           |  
|                                                                                                             |  |                                    |         |                    |  |                      |         |   |  |  |            |  
|Retained earnings (deficit), end of
    period                                                               |  |                                    | (41,655 | )                  |  |                      | 5,617   |   |  |  | (2,421,157 | )
|                                                                                                             |  |                                    |         |                    |  |                      |         |   |  |  |            |  
|Basic earnings (loss) per share[note 4]                                                                      |  |                                    | (1.44   | )                  |  |                      | 1.51    |   |  |  | 0.19       |  
|Diluted earnings (loss) per share[note 4]                                                                    |  |                                    | (1.44   | )                  |  |                      | 0.71    |   |  |  | 0.19       |  
|                                                                                                             |  |                                    |         |                    |  |                      |         |   |  |  |            |  

See accompanying notes.

44



---



##### 



MICROCELL TELECOMMUNICATIONS INC.

INTERIM CONSOLIDATED STATEMENTS OF CASH
FLOWS

[Unaudited]


|                                                                                        |  |                                    |          |                    |  |                      |         |   |  |  |          |  
|--------------------------------------------------------------------------------------- |  | ---------------------------------- | -------- | ------------------ |  | -------------------- | ------- | - |  |  | -------- | -
|                                                                                        |  | Nine Months                        |          | Five Months        |  | Four Months         
|                                                                                        |  | Ended                              |          | Ended              |  | Ended               
|                                                                                        |  | September 30, 2004                 |          | September 30, 2003 |  | April 30, 2003      
|                                                                                        |  | $                                  |          | $                  |  | $                   
|                                                                                        |  |                                    |          |                    |  |                     
|                                                                                        |  |                                    |          |                    |  | [Pre-reorganization]
|                                                                                        |  |                                   
|                                                                                        |  | (In thousands of Canadian dollars)
|OPERATING ACTIVITIES                                                                    |  |                                    |          |                    |  |                      |         |   |  |  |          |  
|Net income (loss)                                                                       |  |                                    | (22,998  | )                  |  |                      | 16,207  |   |  |  | 45,517   |  
|Adjustments to reconcile net income
    (loss) to cash provided by operating activities |  |                                    |          |                    |  |                      |         |   |  |  |          |  
|Depreciation and amortization                                                           |  |                                    | 61,072   |                    |  |                      | 28,780  |   |  |  | 59,388   |  
|Deferred charges                                                                        |  |                                    | (20,764  | )                  |  |                      |        |   |  |  |         |  
|Accreted interest on long-term debt                                                     |  |                                    | 693      |                    |  |                      | 1,667   |   |  |  | 13,425   |  
|Stock option expense                                                                    |  |                                    | 5,652    |                    |  |                      |        |   |  |  |         |  
|Foreign exchange loss (gain)                                                            |  |                                    | 16,066   |                    |  |                      | (12,243 | ) |  |  | (130,166 | )
|Gain on investments, marketable securities and
    other assets                         |  |                                    |         |                    |  |                      |        |   |  |  | (312     | )
|Share of net loss in investees                                                          |  |                                    | 1,690    |                    |  |                      |        |   |  |  |         |  
|                                                                                        |  |                                    |          |                    |  |                      |         |   |  |  |          |  
|                                                                                        |  |                                    | 41,411   |                    |  |                      | 34,411  |   |  |  | (12,148  | )
|Changes in operating assets and liabilities                                             |  |                                    | (11,490  | )                  |  |                      | 26,383  |   |  |  | 26,665   |  
|                                                                                        |  |                                    |          |                    |  |                      |         |   |  |  |          |  
|Cash provided by (used in) operating
    activities                                     |  |                                    | 29,921   |                    |  |                      | 60,794  |   |  |  | 14,517   |  
|                                                                                        |  |                                    |          |                    |  |                      |         |   |  |  |          |  
|INVESTING ACTIVITIES                                                                    |  |                                    |          |                    |  |                      |         |   |  |  |          |  
|Decrease (increase) in short-term
    investments and marketable securities             |  |                                    | 38,123   |                    |  |                      | 9,912   |   |  |  | 73,680   |  
|Additions to property, plant and equipment                                              |  |                                    | (198,159 | )                  |  |                      | (30,648 | ) |  |  | (5,500   | )
|Proceeds from sale of long-term investments                                             |  |                                    | (2       | )                  |  |                      |        |   |  |  | 2,089    |  
|                                                                                        |  |                                    |          |                    |  |                      |         |   |  |  |          |  
|Cash provided by (used in) investing
    activities                                     |  |                                    | (160,038 | )                  |  |                      | (20,736 | ) |  |  | 70,269   |  
|                                                                                        |  |                                    |          |                    |  |                      |         |   |  |  |          |  
|FINANCING ACTIVITIES                                                                    |  |                                    |          |                    |  |                      |         |   |  |  |          |  
|Issuance of share capital and warrants                                                  |  |                                    | 154,161  |                    |  |                      |        |   |  |  |         |  
|Share issuance costs                                                                    |  |                                    | (1,436   | )                  |  |                      |        |   |  |  |         |  
|Redemption of preferred shares                                                          |  |                                    | (1,233   | )                  |  |                      |        |   |  |  |         |  
|Increase in long-term debt                                                              |  |                                    | 400,000  |                    |  |                      |        |   |  |  |         |  
|Repayment of long-term debt                                                             |  |                                    | (336,285 | )                  |  |                      | (4,786  | ) |  |  |         |  
|Termination of derivative instruments                                                   |  |                                    | (4,250   | )                  |  |                      |        |   |  |  |         |  
|Deferred financing costs                                                                |  |                                    | (12,957  | )                  |  |                      |        |   |  |  |         |  
|                                                                                        |  |                                    |          |                    |  |                      |         |   |  |  |          |  
|Cash provided by (used in) financing
    activities                                     |  |                                    | 198,000  |                    |  |                      | (4,786  | ) |  |  |         |  
|                                                                                        |  |                                    |          |                    |  |                      |         |   |  |  |          |  
|Increase (decrease) in cash and cash
    equivalents for the period                     |  |                                    | 67,883   |                    |  |                      | 35,272  |   |  |  | 84,786   |  
|Cash and cash equivalents, beginning of period                                          |  |                                    | 43,094   |                    |  |                      | 111,765 |   |  |  | 26,979   |  
|                                                                                        |  |                                    |          |                    |  |                      |         |   |  |  |          |  
|Cash and cash equivalents, end of
    period                                            |  |                                    | 110,977  |                    |  |                      | 147,037 |   |  |  | 111,765  |  
|                                                                                        |  |                                    |          |                    |  |                      |         |   |  |  |          |  
|Additional Information                                                                  |  |                                    |          |                    |  |                      |         |   |  |  |          |  
|Interest paid                                                                           |  |                                    | 22,802   |                    |  |                      | 8,035   |   |  |  | 13       |  
|Income taxes paid                                                                       |  |                                    | 1,085    |                    |  |                      | 684     |   |  |  | 639      |  
|                                                                                        |  |                                    |          |                    |  |                      |         |   |  |  |          |  

See accompanying notes.

[All tabular amounts are in thousands of Canadian
dollars unless otherwise indicated.]

45



---



##### 



MICROCELL TELECOMMUNICATIONS INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL
STATEMENTS [UNAUDITED]

September 30, 2004




|   |                                                                                
|-- | -------------------------------------------------------------------------------
|1. | Description of Business, Financial
    Reorganization and Basis of Presentation



| |                        
| | -----------------------
| | Description of Business

Microcell Telecommunications Inc.
[Microcell] is incorporated under the Canada
Business Corporations Act[CBCA] and is a
provider of wireless telecommunications services in Canada. As
at September 30, 2004, Microcell conducted its wireless
communications business through two wholly-owned subsidiaries
[Microcell, collectively with its subsidiaries, the
Company], which were: Microcell Solutions Inc.
[Solutions] and Inukshuk Internet Inc.
[Inukshuk].

Solutions operates a Global System for Mobile
Communication [GSM] network across Canada and
markets Personal Communications Services [PCS] and
General Packet Radio Service [GPRS] under the Fido
brand name pursuant to a 30MHz PCS license [the PCS
License] issued by the Minister of Industry (Canada)
[Industry Canada]. The Company also provides
wireless high-speed Internet access in selected locations under
the brand name iFidoTM.

Inukshuk was awarded Multipoint Communication
Systems [MCS] licenses [the MCS
Licenses] to deploy a high-speed Internet Protocol-based
data network using MCS technology in Canada. Inukshuk entered
into a venture with two partners to build an MCS network in
order to offer high-speed Internet, IP-based voice and local
networking services to selected markets across Canada.
Inukshuks commitments to the venture are to transfer its
MCS Licenses to the venture, to permit the utilization of its
MCS Licenses by the venture pending Industry Canadas
approval of the transfer and to make cash contributions of up to
$6.0 million. Up to September 30, 2004, this venture
was accounted for using the equity accounting method.
Accordingly, amounts of $0.8 million and $1.7 million
have been recognized during the three- and nine-month periods
ended September 30, 2004, respectively, as the
Companys share of loss in this venture. On
November 19, 2004, as provided for in the venture
agreement, the Company gave notice of its intent to purchase the
share of the venture currently owned by one of the other two
partners in the venture. Should the third partner make the same
offer to the selling partner, the Company would acquire 50% of
the selling partners share for which the Company estimates
the cost to be between approximately $4 million to
$5 million. Following the upcoming change in the ownership
of the venture and the anticipated beginning of Phase 2 for the
deployment of a MCS network in Canada, the Company will reassess
the accounting of its investment in the venture.

The Company continues to experience
growth-related capital requirements arising from the need to
fund network capacity improvements, ongoing maintenance and the
cost of acquiring new PCS customers. In addition, in the event
that our actual results vary from our projections or if the
assumptions underlying our projections were to change, we may
need additional funds. Sources of funding for our further
financing requirements may include additional bank financing,
vendor financing, public offerings or private placements of
equity or debt securities, capital contributions from
shareholders and disposition of assets. There can be no
assurance that additional financing will be available to us or,
if available, that we will be able to obtain it on a timely
basis and on terms acceptable to us and within the limitations
contained in our credit facilities. Microcells ability to
generate positive net income and cash flows in the future is
dependent upon various factors, including the level of market
acceptance of its services, the degree of competition
encountered by the Company, the cost of acquiring new customers,
the cost to maintain and retain existing customers, technology
risks, general economic conditions and regulatory requirements.



| |                         
| | ------------------------
| | Financial Reorganization

On May 1, 2003, the predecessor company of
Microcell [Old Microcell] and certain subsidiaries
of Old Microcell emerged from a restructuring plan under the
Companies Creditors Arrangement Act

46



---



##### 



MICROCELL TELECOMMUNICATIONS INC.


NOTES TO INTERIM CONSOLIDATED FINANCIAL
STATEMENTS [UNAUDITED]  (Continued)

[CCAA] and the CBCA. As a result, at
that date, the Company has accounted for its financial
reorganization by using the principles of fresh start
accounting. Accordingly, all assets and liabilities were
comprehensively revalued at estimated fair values and
Microcells deficit of $2.4 billion was eliminated and
long-term debt obligations decreased by approximately
$1.6 billion. Microcell determined that its enterprise
value was $689 million, of which $350 million was
allocated to the long-term debt and $339 million to the
equity. This enterprise value was determined based on several
traditional valuation methodologies, utilizing projections
developed by management, including discounted cash flow analysis
and comparable company trading analysis.

A comprehensive revaluation of the assets and
liabilities of the Company has been done based on this
enterprise value. This resulted in a reduction of the current
assets of $36.8 million [mainly consisting of the deferred
charges incurred during the recapitalization process], the
property, plant and equipment of $289.7 million, the
long-term investments of $3.7 million and the accrued
liabilities of $131.5 million. The Company also assigned a
value, calculated at managements best estimate of fair
value, to the Companys intangible assets, which are the
PCS License at $188 million, determined using the
replacement cost based on comparable transactions, the Fido
brand name at $28.5 million, determined using the
replacement cost method, and the customer list at
$24.7 million, determined using the discounted future cash
flow method.



| |                      
| | ---------------------
| | Basis of Presentation

The accompanying unaudited interim consolidated
financial statements of Microcell have been prepared in
accordance with accounting principles generally accepted in
Canada [Canadian GAAP] for interim financial
information. Accordingly, they do not include all of the
information and footnotes required by Canadian GAAP for annual
financial statements. In the opinion of management, all
adjustments [consisting of normal recurring accruals] considered
necessary for a fair presentation have been included. The
consolidated balance sheet as of December 31, 2003 in these
unaudited interim consolidated financial statements has been
derived from the audited consolidated financial statements at
that date, but does not include all of the information and
footnotes required by Canadian GAAP for annual financial
statements.

Operating results for interim periods are not
necessarily indicative of the results that may be expected for
the full year. Specifically, during the fourth quarter, the
Companys operations are subject to certain seasonal
factors associated with subscriber acquisition during the
holiday period, which historically is the largest acquisition
period of the year for the wireless industry. As a result,
operating and net income during this period will be affected by
the cost of acquiring a proportionately higher number of
subscribers compared with each of the other three quarters of
the year.

These unaudited interim consolidated financial
statements should be read in conjunction with Microcells
audited consolidated financial statements and footnotes for the
year ended December 31, 2003. The accounting policies and
methods followed in the preparation of these unaudited interim
consolidated financial statements are the same as those used in
the audited financial statements for the year ended
December 31, 2003, except for the change related to
stock-based compensation and asset retirement obligations as
described in note 2. The Company also introduced new
customer retention programs during the period as described in
note 3.

Comparative financial information for the
four-month period ended April 30, 2003 has been presented
pursuant to regulatory requirements. In reviewing this
comparative financial information, readers are reminded that it
does not reflect the effects of the financial reorganization and
the application of fresh start accounting.

On March 19, 2004, the Company received a
comment letter from the U.S. Securities and Exchange
Commission [SEC] in connection with its review of
the Companys registration statement filed on

47



---



##### 



MICROCELL TELECOMMUNICATIONS INC.


NOTES TO INTERIM CONSOLIDATED FINANCIAL
STATEMENTS [UNAUDITED]  (Continued)

March 3, 2004 for the registration of its
Class A Restricted Voting Shares [Class A
Shares] and Class B Non-Voting Shares
[Class B Shares] issuable upon exercise of the
Warrants 2005 and the Warrants 2008. The Company responded to
the SECs March letter and filed an amended registration
statement on June 29, 2004. The Company received a letter
to its response on August 9, 2004 and responded to the SEC
on October 22, 2004. The Company received a letter to its
response on November 5, 2004. SEC staff, among other
things, has questioned whether the Companys Fido brand
name has an indefinite useful life and, consequently, whether it
should be subject to periodic amortization. The Company believes
such brand name should be considered to have an indefinite life.
However, were such periodic amortization to be applied, assuming
hypothetically a useful life of ten years, this would decrease
the Companys net income by $0.7 million and decrease
basic and diluted earnings per share by $0.02 for the
three-month period ended September 30, 2004 and increase
the Companys net loss by $2.1 million and increase
basic and diluted loss per share by $0.11 for the nine-month
period ended September 30, 2004. There would have been no
effect on cash flows for the three- and nine-month periods ended
September 30, 2004. In addition, opening deficit would be
increased by $1.9 million.

The SEC staff, among other things, has also asked
the Company for additional information regarding certain of the
Companys accounting policies regarding revenue recognition
and measurement and related costs, including the recognition of
both revenues and related costs associated with the sale of
handsets and prepaid airtime vouchers to the Companys
third party retailers. Sales of products such as handsets and
their related costs are recognized when goods are delivered,
wireless service is activated and collection is reasonably
assured. For prepaid airtime vouchers, the revenue is measured
at the amount paid by the subscribers and is recorded when
services are provided to the subscriber and related commissions
paid to third party dealers are classified within cost of
product. The Company believes these accounting policies are
appropriate based on risks assumed by the Company until the
handset is activated or prepaid airtime vouchers are sold and
used by the Companys ultimate customers. Alternatively,
other parties, including the SEC, could assess that the sale of
handset and associated costs be recognized upon the delivery of
the handset to third party retailers or to be deferred and
amortized over the expected life of the customer. For the
prepaid airtime vouchers, alternatively, other parties,
including the SEC, could assess that the commissions to the
third party dealers be considered as a discount and be
classified as a reduction of service revenues. As at
September 30, 2004, the balance sheet includes deferred
revenues and deferred costs of $6.9 million and
$9.8 million respectively in connection with handsets at
the dealers location not yet activated by the ultimate
customers. Commissions paid to third party retailers for the
prepaid airtime vouchers totaled $5.6 million,
$5.6 million and $4.7 million for the nine-month
periods ended September 30, 2004, the five-month period
ended September 30, 2003 and the four-month period ended
April 30, 2003, respectively.

The SEC staff has also asked for additional
information regarding the FidoDollars program described in
note 3. The Company believes that the accounting treatment
for this program is appropriate since the FidoDollars can be
used only to acquire handsets that will allow the Company to
continue to generate service revenues following the exercise of
such rewards. Alternatively, other parties, including the SEC,
could assess that such rewards be accounted for in reduction of
service revenues and that the total amount of FidoDollars be
recognized when such FidoDollars are earned by the customer
instead of when such FidoDollars are used.

Following its acquisition by Rogers Wireless Inc,
the Company decided not to register the warrants with the SEC
and, therefore, the Company intends to withdraw its F-1 filing.

48



---



##### 



MICROCELL TELECOMMUNICATIONS INC.


NOTES TO INTERIM CONSOLIDATED FINANCIAL
STATEMENTS [UNAUDITED]  (Continued)



|   |                              
|-- | -----------------------------
|2. | Change in Accounting Policies



| |                         
| | ------------------------
| | Stock-Based Compensation

Effective January 1, 2004, the Company
adopted the standard set forth in Section 3870 of the
Canadian Institute of Chartered Accountants [CICA]
Handbook, Stock-based compensation and other stock-based
payments. This section has been amended to require the
expensing of certain stock-based compensation awards using the
fair value-based method for fiscal years beginning on or after
January 1, 2004. Under the amended rules, the Company is
required to expense, over the vesting period, the fair value of
the options at the date of the grant. As permitted by this
amendment, the Company applied this change retroactively,
without restatement, for options granted since May 1, 2003.
Consequently, the opening deficit as at January 1, 2004 was
adjusted to reflect an expense of $1.3 million relating to
options granted since May 1, 2003.

For the nine-month period ended
September 30, 2004, an amount of $2.1 million,
respectively, is included within general and administrative
expenses, reflecting the recurring cost associated with the
normal vesting of employee stock options. As a result of the
appreciation in Microcells share price, resulting
primarily from public takeover offers detailed in note 7,
and in accordance with accelerated vesting rules of the
Companys stock option plan, $3.6 million of special
charges were recognized during the nine-month period ended
September 30, 2004. Accordingly, an amount of
$7.0 million was credited to the contributed surplus. Also,
as of September 30, 2004, an amount of $2.7 million of
contributed surplus was transferred to Class B shares
pursuant to the exercise of stock options. The Company used the
Black Scholes option pricing model to determine the fair value
of the options with the following weighted-average assumptions:
risk-free interest rate of 3%, share price volatility of 64%, no
dividend yield and expected life of five years. Prior to
January 1, 2004, no compensation expense was recognized
when options were issued to employees or directors. The
Companys pro forma information, as if the fair value-based
method had been applied, is as follows for periods prior to
January 1, 2004:

|                                                                                                                                                                                               |  |                    |       |                      |  |  |        |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------ | ----- | -------------------- |  |  | ------ | -
|                                                                                                                                                                                               |  | Five Months        |       | Four Months         
|                                                                                                                                                                                               |  | Ended              |       | Ended               
|                                                                                                                                                                                               |  | September 30, 2003 |       | April 30, 2003      
|                                                                                                                                                                                               |  | $                  |       | $                   
|                                                                                                                                                                                               |  |                    |       |                     
|                                                                                                                                                                                               |  |                    |       | [Pre-reorganization]
|Net income (loss) as reported                                                                                                                                                                  |  |                    | 5,617 |                      |  |  | 45,517 |  
|Stock-based employee compensation costs that
    would have been included in the determination of net income if
    the fair value based method had been applied to all awards as
    reported |  |                    | (701  | )                    |  |  | (1,577 | )
|                                                                                                                                                                                               |  |                    |       |                      |  |  |        |  
|Pro forma net income as if the fair value based
    method had been applied to all awards                                                                                                      |  |                    | 4,916 |                      |  |  | 43,940 |  
|                                                                                                                                                                                               |  |                    |       |                      |  |  |        |  
|Basic earnings (loss) per share as reported (in
    dollars)                                                                                                                                   |  |                    | 1.51  |                      |  |  | 0.19   |  
|Stock-based employee compensation costs impact
    (in dollars)                                                                                                                                |  |                    | (0.19 | )                    |  |  | (0.01  | )
|                                                                                                                                                                                               |  |                    |       |                      |  |  |        |  
|Pro forma basic earnings (loss) per share as if
    the fair value method had been applied to all awards (in dollars)                                                                          |  |                    | 1.32  |                      |  |  | 0.18   |  
|                                                                                                                                                                                               |  |                    |       |                      |  |  |        |  
|Diluted earnings (loss) per share as reported (in
    dollars)                                                                                                                                 |  |                    | 0.71  |                      |  |  | 0.19   |  
|Stock-based employee compensation costs impact
    (in dollars)                                                                                                                                |  |                    | (0.03 | )                    |  |  | (0.01  | )
|                                                                                                                                                                                               |  |                    |       |                      |  |  |        |  
|Pro forma diluted earnings (loss) per share as if
    the fair value method had been applied to all awards (in dollars)                                                                        |  |                    | 0.68  |                      |  |  | 0.18   |  
|                                                                                                                                                                                               |  |                    |       |                      |  |  |        |  

49



---



##### 



MICROCELL TELECOMMUNICATIONS INC.


NOTES TO INTERIM CONSOLIDATED FINANCIAL
STATEMENTS [UNAUDITED]  (Continued)

Basic and diluted losses per share are identical,
except for the five-month period ended September 30, 2003,
as the effect of diluted items are antidilutive.



| |                             
| | ----------------------------
| | Asset Retirement Obligations

Effective January 1, 2004, the Company
adopted the standard set forth in Section 3110 of the
Canadian Institute of Chartered Accountants Handbook entitled
Asset Retirement Obligations, which harmonizes Canadian
GAAP with U.S. Financial Accounting Standards Boards
Statement No. 143, Accounting for Asset Retirement
Obligations. The standard provides guidance for the
recognition, measurement and disclosure of liabilities for asset
retirement obligations and the associated retirement costs. The
asset retirement cost is capitalized as part of the related
asset and is amortized into earnings over time.

Under its site leases, the Company is generally
committed to returning each site to its original state. In order
to calculate a provision for asset retirement obligations, the
Company used the following significant assumptions: the Company
expects that most of its lease sites will be renewed at their
expiry; the Company expects that approximately 1% of its sites
per year will have to be changed based on operational needs or
vocation changes and as a result, the Company will have to
return these sites to their original state; remediation costs
that are indicative of what third party vendors would charge the
Company to remediate the sites; expected inflation rates that
are consistent with historical inflation rates; and
credit-adjusted risk-free rates that approximate the
Companys incremental borrowing rates. As a result, a
liability of $1 million has been accounted for by the
Company as at January 1, 2004. The Company has not adjusted
its opening deficit because the amount is not material and was
compensated by charges made under the prior accounting policy
which was to expense such costs as incurred. When a liability is
initially recorded, the cost is capitalized by increasing the
carrying amount of the related long-lived asset. Over time, the
liability is increased each period to reflect an interest
element considered in its initial measurement at fair value and
reduced as related payments are made. Furthermore, the
capitalized cost is amortized over the useful life of the
related asset. The Company will continue to evaluate on a
periodic basis whether the estimated asset retirement
obligations and related financial statement amounts continue to
be reasonably stated.



|   |                            
|-- | ---------------------------
|3. | Customer Retention Programs

During the first quarter of 2004, the Company
introduced two specific customer retention programs. Firstly,
the Company allowed its postpaid customers to enter into a
24-month agreement for airtime services and, in exchange, the
Company granted additional discounts or credits for the purchase
of handsets. Since the related handset is bundled with airtime,
the Company considers this arrangement as a revenue arrangement
with multiple deliverables. Accordingly, the arrangement
consideration is allocated among the separate units of
accounting based on their relative fair values. However, because
the handset is provided in the arrangement and the customer has
no obligation to the Company if airtime service is not provided,
the amount allocated to the handset is limited to the amount
initially received. The direct incremental cost related to this
retention program, consisting of the incremental loss on the
sale of the handset, is deferred and amortized in the cost of
products over the term of the agreement. As of
September 30, 2004, $20.7 million is included within
deferred charges and other non-current assets in this regard.

Secondly, the Company launched Fido
Rewards, which allows its postpaid customers to accumulate
FidoDollars based on their spending. Each FidoDollar
allows its holder to obtain a discount of $1 on the suggested
retail price of a future purchase of a handset. Since this
handset will generate future service revenues after its
acquisition, the Company will account for the cost of this
reward program, consisting primarily of the subsidy on the
handset, when such FidoDollars are redeemed. At that date, the
Company will recognize as equipment revenue the amount received
from its customers, net of applicable FidoDollars, as well as
the cost of the related handset. The Company accrues for its
estimated obligation

50



---



##### 



MICROCELL TELECOMMUNICATIONS INC.


NOTES TO INTERIM CONSOLIDATED FINANCIAL
STATEMENTS [UNAUDITED]  (Continued)

as awards are earned by its customers which are
registered with the program. As at September 30, 2004,
8.1 million FidoDollars were issued to approximately
599,000 registered customers and 1.0 million of FidoDollars
were redeemed. As a result, an amount of $7.1 million is
included in the Companys balance sheet within deferred
charges and accounts payable and accrued liabilities. If all of
the Companys customers were registered in this program,
deferred charges and accounts payable and accrued liabilities as
at September 30, 2004 would be increased by
$7.9 million. [See note 1]



|   |                          
|-- | -------------------------
|4. | Earnings (Loss) Per Share

The reconciliation of the numerator and
denominator for the calculation of earnings (loss) per share is
as follows:

|                                                                        |  |                    |         |                    |  |                      |         |   |  |  |         | 
|----------------------------------------------------------------------- |  | ------------------ | ------- | ------------------ |  | -------------------- | ------- | - |  |  | ------- | 
|                                                                        |  | Nine Months        |         | Five Months        |  | Four Months         
|                                                                        |  | Ended              |         | Ended              |  | Ended               
|                                                                        |  | September 30, 2004 |         | September 30, 2003 |  | April 30, 2003      
|                                                                        |  | $                  |         | $                  |  | $                   
|                                                                        |  |                    |         |                    |  |                     
|                                                                        |  |                    |         |                    |  | [Pre-reorganization]
|Net income (loss) for diluted earnings (loss) per
    share calculation |  |                    | (22,998 | )                  |  |                      | 16,207  |   |  |  | 45,517  | 
|Accretion on redemption price of First and Second
    Preferred Shares  |  |                    | (5,184  | )                  |  |                      | (10,590 | ) |  |  |        | 
|                                                                        |  |                    |         |                    |  |                      |         |   |  |  |         | 
|Net income (loss) for basic earnings (loss) per
    share calculation   |  |                    | (28,182 | )                  |  |                      | 5,617   |   |  |  | 45,517  | 
|                                                                        |  |                    |         |                    |  |                      |         |   |  |  |         | 
|Denominator [in thousands]:                                             |  |                    |         |                    |  |                      |         |   |  |  |         | 
|Weighted-average number of Class A and
    Class B Shares outstanding   |  |                    | 19,568  |                    |  |                      | 3,728   |   |  |  | 240,217 | 
|Shares issuable pursuant to the exercise of
    initial warrants        |  |                    |        |                    |  |                      |        |   |  |  | 253     | 
|                                                                        |  |                    |         |                    |  |                      |         |   |  |  |         | 
|Number of shares for basic earnings (loss) per
    share calculation    |  |                    | 19,568  |                    |  |                      | 3,728   |   |  |  | 240,470 | 
|Shares issuable pursuant to conversion of
    preferred shares          |  |                    |        |                    |  |                      | 18,828  |   |  |  |        | 
|Shares issuable pursuant to exercise of stock
    options               |  |                    | 751     |                    |  |                      | 332     |   |  |  |        | 
|Shares issuable pursuant to exercise of warrants                        |  |                    | 3,917   |                    |  |                      |        |   |  |  |        | 
|                                                                        |  |                    |         |                    |  |                      |         |   |  |  |         | 
|Number of shares for diluted earnings (loss) per
    share calculation  |  |                    | 24,236  |                    |  |                      | 22,888  |   |  |  | 240,470 | 
|                                                                        |  |                    |         |                    |  |                      |         |   |  |  |         | 
|Basic earnings (loss) per share [in
    dollars]                        |  |                    | (1.44   | )                  |  |                      | 1.51    |   |  |  | 0.19    | 
|Diluted earnings (loss) per share [in
    dollars]                      |  |                    | (1.44   | )                  |  |                      | 0.71    |   |  |  | 0.19    | 
|                                                                        |  |                    |         |                    |  |                      |         |   |  |  |         | 

Except for the periods of three months ended
September 30, 2004 and five months ended September 30,
2003, basic and diluted earnings (loss) per share are identical,
as the effect of potential dilutive securities is antidilutive.

51



---



##### 



MICROCELL TELECOMMUNICATIONS INC.


NOTES TO INTERIM CONSOLIDATED FINANCIAL
STATEMENTS [UNAUDITED]  (Continued)



|   |               
|-- | --------------
|5. | Long-Term Debt

|                                   |  |               |         |              |  |  |         |  
|---------------------------------- |  | ------------- | ------- | ------------ |  |  | ------- | -
|                                   |  | September 30, |         | December 31,
|                                   |  | 2004          |         | 2003        
|                                   |  | $             |         | $           
|                                   |  |               |         |             
|Tranche B Debt                     |  |               |        |              |  |  | 271,769 |  
|Tranche C Debt                     |  |               |        |              |  |  | 52,693  |  
|Term Loan A                        |  |               | 184,416 |              |  |  |        |  
|Term Loan B                        |  |               | 188,200 |              |  |  |        |  
|                                   |  |               |         |              |  |  |         |  
|                                   |  |               | 372,616 |              |  |  | 324,462 |  
|Less: current portion of principal |  |               | (12,000 | )            |  |  | (9,298  | )
|                                   |  |               |         |              |  |  |         |  
|                                   |  |               | 360,616 |              |  |  | 315,164 |  
|                                   |  |               |         |              |  |  |         |  

The minimum contractual payments of term
loan A debt [Term Loan A] and term
loan B debt [Term Loan B] for the next
five years are as follows: $3.0 million for the rest of
2004; $12.0 million in 2005; $12.0 million in 2006;
$12.0 million in 2007; $12.0 million in 2008 and
$41.5 million for the first nine months of 2009.

On March 17, 2004, the Company entered into
amended and restated credit agreements with a syndicate of
lenders, certain of which were also shareholders of the Company.
The proceeds have been used mainly to refinance borrowings under
the previous senior secured credit facilities in the amount of
$330.3 million and to terminate previous swap transactions
in the amount of $4.3 million.

In conjunction with the amended and restated
credit agreements, the Company paid, during the first nine
months of 2004, $13.0 million of financing costs, which are
being deferred and amortized over the term of the loans. As of
September 30, 2004, the financing arrangements of the
Company consisted of the following credit agreements:



| |                   
| | ------------------
| | Revolving Facility

The Company has access to a first lien revolving
credit facility [the Revolving Facility] of
$50 million, which bears interest at CDOR or LIBOR plus
4.0% and is payable in March 2010. A commitment fee computed at
the rate of 0.5% per annum on the aggregate undrawn amount
of the Revolving Facility is payable on a quarterly basis. The
Revolving Facility is secured by a pledge of a first lien on
substantially all of the Companys assets. As at
September 30, 2004, no amounts were drawn on this facility.
However, any credit exposure under the swap transactions
described below is deducted from the amount otherwise available
to be borrowed under the Revolving Facility. An amount of
$16 million was agreed upon to be the initial swap exposure
of the Companys swap counterparty. As of
September 30, 2004, an amendment occurred between the
parties to revise the limit of $16 million to
$24.8 million.



| |            
| | -----------
| | Term Loan A

The Term Loan A debt consists of a first
lien term loan with a principal amount equivalent to
$200 million [US$149.9 million]. It bears interest at
LIBOR plus 4% and is payable in quarterly installments, which
commenced in June 2004 and will mature in March 2011. As of
September 30, 2004, 2.5% of the principal amount was
repaid. The Term Loan A is collateralized by a pledge on
substantially all of the Companys assets. As at
September 30, 2004, the effective interest rate on Term
Loan A was 6.66%.

52



---



##### 



MICROCELL TELECOMMUNICATIONS INC.


NOTES TO INTERIM CONSOLIDATED FINANCIAL
STATEMENTS [UNAUDITED]  (Continued)



| |            
| | -----------
| | Term Loan B

The Term Loan B debt consists of a second
lien term loan with a principal amount equivalent to
$200 million [US$149.9 million]. It bears interest at
LIBOR plus 7%, with a LIBOR floor at 2%, and is payable in
quarterly installments, which commenced in June 2004 and will
mature in September 2011. As of September 30, 2004, 0.5% of
the principal amount was repaid. The Term Loan B is
collateralized by a pledge on substantially all of the
Companys assets. As at September 30, 2004, the
effective interest rate on Term Loan B was 10.06%.



| |                                          
| | -----------------------------------------
| | Additional Debt and Swap
    Transactions

Pursuant to the terms of the credit agreements
governing the Companys credit facilities, the Company is
entitled to raise up to an additional $25 million under the
Revolving Facility or Term Loan A, and up to an additional
$50 million under Term Loan B.

The Company has entered into swap transactions to
manage its exposure to foreign exchange rate fluctuations on the
U.S.-dollar-denominated Term Loan A and Term Loan B.
The Company swapped, in March 2004, the total principal of Term
Loan A and Term Loan B in the amount of
$400 million [US$299.9 million] at a rate of $1.3340
for US$1.00. The Company also swapped the floating interest rate
of LIBOR plus 4% on Term Loan A, payable in US dollars, to
a floating interest rate of LIBOR plus 5.085%, payable in
Canadian dollars. The Company also swapped the floating interest
rate of LIBOR plus 7% on Term Loan B, payable in US
dollars, to a floating interest rate of LIBOR plus 8.485%,
payable in Canadian dollars. These swap agreements included a
recouponing provision which allows both parties to enter into an
amendment of the economic variables when the fair market value
of the swaps exceed a threshold of $16 million, in such
manner that the market value is reduced to an amount no greater
than $16 million. As of September 30, 2004, an
amendment occurred between the parties to revise the limit of
$16 million to $24.8 million. Consequently, the
economic variables were amended to reduce the market value of
the swaps from $34.4 million payable by the Company to
$24.7 million, generating a payment by the Company to the
counterparties of $9.7 million on October 3, 2004.
Under this amendment, the floating interest rates of the
Companys swap agreements relating to its Term Loan A
and Term Loan B were reduced to LIBOR plus 4.616% and LIBOR
plus 8.006% respectively. The maturity of the swap transactions
corresponds to the maturity of both term loans. These swap
transactions are presented at their fair value as derivative
instruments on the balance sheet and changes in fair value are
recognized in income as foreign exchange gains or losses.



| |                                        
| | ---------------------------------------
| | Covenants and Mandatory
    Prepayments

Under the credit agreements governing the
Revolving Facility, Term Loan A and Term Loan B, the
Company is committed to respect certain covenants, including
restrictions on the ability to incur indebtedness, pay
dividends, make various payments, create liens, sell assets and
engage in mergers. The Company must also maintain certain
financial covenants and ratios under its credit agreements,
including levels of operating income excluding a number of
specific items, levels of debt, liquidity levels and maximum
levels of capital expenditures.

The credit agreements governing Term Loan A
and Term Loan B require the Company to make, subject to
certain conditions, prepayments to Term Loan A and Term
Loan B lenders with respect to [i] net proceeds
received by the Company from the sale of assets, [ii] the excess
cash flow generated by the Company during any fiscal year, and
[iii] the net proceeds received by the Company from the issuance
of equity securities.

The credit agreements also provide that if an
event of default occurs, then the loans outstanding become,
under certain circumstances, due and payable in whole. A change
of control of the Company

53



---



##### 



MICROCELL TELECOMMUNICATIONS INC.


NOTES TO INTERIM CONSOLIDATED FINANCIAL
STATEMENTS [UNAUDITED]  (Continued)

would constitute an event of default under the
Companys credit agreements and the Rogers offers
[described in note 7], if consummated, will result in a
change of control of the Company. The credit agreement governing
the Term Loan B debt provides that any prepayment of such
debt shall be accompanied by a call premium fee, calculated on
the amount of such prepayment, of [i] 3%, if the prepayment is
made prior to March 17, 2005; [ii] 2%, if the prepayment is
made prior to March 17, 2006; and, [iii] 1%, if the
prepayment is made prior to March 17, 2007.

The change in control described in note 7
constitutes an event of default under the Companys credit
agreements. On November 4, 2004, the administrative agent,
on behalf of the Companys secured lenders, has waived the
event of default arising from the change in control until the
earlier of (1) 90 days after the completion of the
acquisition of Microcell by Rogers, and (2) March 1, 2005.
However, the Company gave notice of prepayment of its
outstanding debt and related derivative financial instrument
positions and such prepayment occurred on November 16,
2004. On this date the Company repaid its long-term debt in the
amount of $362.1 million and the derivative instruments
were terminated generating a payment of $64.6 million to
the counterparty. These payments were financed with cash on hand
and an advance of $220 million from Rogers. A call premium
fee, in the amount of approximately $5.4 million was also
paid by the Company with respect to the prepayment of its Term
loan B debt. Finally, deferred financing costs in the amount of
approximately $11.9 million were written off by the Company.



|   |              
|-- | -------------
|6. | Share Capital

Number of shares issued [in units]

|                                     |  |           |          |                 |  |           |             |            |  |         |         |         |  |  |            |   |  |  |         |  |  |  |            | 
|------------------------------------ |  | --------- | -------- | --------------- |  | --------- | ----------- | ---------- |  | ------- | ------- | ------- |  |  | ---------- | - |  |  | ------- |  |  |  | ---------- | 
|                                     |  | First     |          |                 |  | Second    |             | Second     |  |         |         |        
|                                     |  | Preferred |          | First Preferred |  | Preferred |             | Preferred  |  |         |         |        
|                                     |  | Voting    |          | Non-Voting      |  | Voting    |             | Non-Voting |  | Class A |         | Class B
|                                     |  | Shares    |          | Shares          |  | Shares    |             | Shares     |  | Shares  |         | Shares 
|                                     |  |           |          |                 |  |           |             |            |  |         |         |        
|Balance as at
    December 31, 2003  |  |           | 252,296  |                 |  |           | 11,415,204  |            |  |         | 14,782  |         |  |  | 6,979,528  |   |  |  | 30,038  |  |  |  | 3,906,336  | 
|Issued                               |  |           |         |                 |  |           |            |            |  |         |        |         |  |  |           |   |  |  |        |  |  |  | 6,792,363  | 
|Exercise of stock options            |  |           |         |                 |  |           |            |            |  |         |        |         |  |  |           |   |  |  |        |  |  |  | 449,673    | 
|Redeemed                             |  |           | (1,450   | )               |  |           | (40,688     | )          |  |         |        |         |  |  | (33,095    | ) |  |  |        |  |  |  |           | 
|Converted                            |  |           | (250,846 | )               |  |           | (11,374,516 | )          |  |         | (14,782 | )       |  |  | (6,946,433 | ) |  |  | 168,641 |  |  |  | 18,417,936 | 
|                                     |  |           |          |                 |  |           |             |            |  |         |         |         |  |  |            |   |  |  |         |  |  |  |            | 
|Balance as at
    September 30, 2004 |  |           |         |                 |  |           |            |            |  |         |        |         |  |  |           |   |  |  | 198,679 |  |  |  | 29,566,308 | 
|                                     |  |           |          |                 |  |           |             |            |  |         |         |         |  |  |            |   |  |  |         |  |  |  |            | 

54



---



##### 



MICROCELL TELECOMMUNICATIONS INC.


NOTES TO INTERIM CONSOLIDATED FINANCIAL
STATEMENTS [UNAUDITED]  (Continued)



| |                                    
| | -----------------------------------
| | Carrying Value of Shares
    Issued

|                                     |  |           |        |            |  |           |          |            |  |         |      |         |  |          |          |   |  |  |       |  |  |  |         |  |  |  |         |  
|------------------------------------ |  | --------- | ------ | ---------- |  | --------- | -------- | ---------- |  | ------- | ---- | ------- |  | -------- | -------- | - |  |  | ----- |  |  |  | ------- |  |  |  | ------- | -
|                                     |  | First     |        | First      |  | Second    |          | Second     |  |         |      |         |  |         
|                                     |  | Preferred |        | Preferred  |  | Preferred |          | Preferred  |  |         |      |         |  | Total   
|                                     |  | Voting    |        | Non-Voting |  | Voting    |          | Non-Voting |  | Class A |      | Class B |  | Value of
|                                     |  | Shares    |        | Shares     |  | Shares    |          | Shares     |  | Shares  |      | Shares  |  | Shares  
|                                     |  | $         |        | $          |  | $         |          | $          |  | $       |      | $       |  | $       
|                                     |  |           |        |            |  |           |          |            |  |         |      |         |  |         
|Balance as at
    December 31, 2003  |  |           | 4,014  |            |  |           | 181,617  |            |  |         | 235  |         |  |          | 111,046  |   |  |  | 300   |  |  |  | 40,942  |  |  |  | 338,154 |  
|Issued                               |  |           |       |            |  |           |         |            |  |         |     |         |  |          |         |   |  |  |      |  |  |  | 136,719 |  |  |  | 136,719 |  
|Exercise of stock options            |  |           |       |            |  |           |         |            |  |         |     |         |  |          |         |   |  |  |      |  |  |  | 4,729   |  |  |  | 4,729   |  
|Transfer from contributed surplus    |  |           |       |            |  |           |         |            |  |         |     |         |  |          |         |   |  |  |      |  |  |  | 2,692   |  |  |  | 2,692   |  
|Redeemed                             |  |           | (24    | )          |  |           | (667     | )          |  |         |     |         |  |          | (542     | ) |  |  |      |  |  |  |        |  |  |  | (1,233  | )
|Converted                            |  |           | (4,071 | )          |  |           | (184,235 | )          |  |         | (240 | )       |  |          | (112,317 | ) |  |  | 2,764 |  |  |  | 298,099 |  |  |  |        |  
|Accretion on redemption price        |  |           | 81     |            |  |           | 3,285    |            |  |         | 5    |         |  |          | 1,813    |   |  |  |      |  |  |  |        |  |  |  | 5,184   |  
|                                     |  |           |        |            |  |           |          |            |  |         |      |         |  |          |          |   |  |  |       |  |  |  |         |  |  |  |         |  
|Balance as at
    September 30, 2004 |  |           |       |            |  |           |         |            |  |         |     |         |  |          |         |   |  |  | 3,064 |  |  |  | 483,181 |  |  |  | 486,245 |  
|                                     |  |           |        |            |  |           |          |            |  |         |      |         |  |          |          |   |  |  |       |  |  |  |         |  |  |  |         |  



| |         
| | --------
| | Warrants

|                                                  |  |               |        |              |  |  |        | 
|------------------------------------------------- |  | ------------- | ------ | ------------ |  |  | ------ | 
|                                                  |  | September 30, |        | December 31,
|                                                  |  | 2004          |        | 2003        
|                                                  |  | $             |        | $           
|                                                  |  |               |        |             
|3,998,302 Warrants 2005, exercise price of $19.91 |  |               | 4,598  |              |  |  | 4,598  | 
|6,663,943 Warrants 2008, exercise price of $20.69 |  |               | 13,328 |              |  |  | 13,328 | 
|3,977,272 Warrants, exercise price of $22.00      |  |               | 11,276 |              |  |  |       | 
|                                                  |  |               |        |              |  |  |        | 
|                                                  |  |               | 29,202 |              |  |  | 17,926 | 
|                                                  |  |               |        |              |  |  |        | 

Pursuant to a final prospectus dated
March 24, 2004, the Company distributed to the holders of
its Class A Shares, Class B Shares, First Preferred
Voting Shares, First Preferred Non-Voting Shares, Second
Preferred Voting Shares and Second Preferred Non-Voting Shares,
rights to subscribe for an aggregate of 4,519,636 Class B
Shares. Each five rights entitled the holder thereof to purchase
one Class B Share at a subscription price of $22 per
share. In connection with the rights offering, the Company
entered into a standby purchase agreement with COM Canada, LLC
[COM] pursuant to which it agreed to purchase, at a
price of $22.00, all Class B Shares not otherwise purchased
under the rights offering. In addition, to the extent COM
purchased less than $50 million of such shares, it
committed to purchase, at a price of $22.00, additional
Class B Shares having an aggregate subscription price equal
to the deficiency.

The closing of the rights offering occurred on
April 30, 2004. The rights offering resulted in the
issuance by Microcell of 4,519,636 Class B Shares. On
May 3, 2004, COM purchased, at a price of $22.00 per
share, 2,272,727 Class B Shares. Furthermore, Microcell
issued to COM 3,977,272 warrants to acquire, at a price of
$22.00 per share, additional Class B Shares. The net
proceeds from the rights offering and private placement to COM
amounted to approximately $148 million [net of
approximately $1.4 million of issuance fees] and have been
used by Microcell to redeem as of May 1, 2004, 1,450 First
Preferred Voting Shares, 40,688 First Preferred Non-Voting
Shares and 33,095 Second Preferred Non-Voting Shares
outstanding as at April 30, 2004 at a price of
$16.39 per share, for a total of $1.2 million. The
remaining balance of $146.8 million is being used to fund
capital expenditures and for general corporate purposes. The
Company has estimated the fair value of warrants issued to COM
to be

55



---



##### 



MICROCELL TELECOMMUNICATIONS INC.


NOTES TO INTERIM CONSOLIDATED FINANCIAL
STATEMENTS [UNAUDITED]  (Continued)

$11.3 million and this amount has been
applied as a reduction of the value attributed to the
Class B Shares.

In accordance with the warrant indentures
governing the Warrants 2005 and the Warrants 2008, the number of
shares issuable upon the exercise of the Warrants 2005 and the
Warrants 2008 were adjusted from 1.0 to 1.02 Class A Share
or Class B Shares, as the case may be, for each warrant.
This adjustment has been made as a result of the Companys
rights offering.



| |                  
| | -----------------
| | Stock Option Plan

Changes in options outstanding are as follows:

|                                     |  |                    |           |                |  |   |       | 
|------------------------------------ |  | ------------------ | --------- | -------------- |  | - | ----- | 
|                                     |  |                   
|                                     |  | Nine Months Ended 
|                                     |  | September 30, 2004
|                                     |  |                   
|                                     |  |                    |           | Weighted-     
|                                     |  | Number of          |           | Average       
|                                     |  | Options [In        |           | Exercise Price
|                                     |  | Units]             |           | [In Dollars]  
|                                     |  |                    |           |               
|Outstanding as at December 31, 2003  |  |                    | 1,732,959 |                |  | $ | 10.90 | 
|Exercised                            |  |                    | (449,673  | )              |  | $ | 10.52 | 
|Granted                              |  |                    | 127,958   |                |  | $ | 24.36 | 
|Forfeited                            |  |                    | (71,052   | )              |  | $ | 12.05 | 
|                                     |  |                    |           |                |  |   |       | 
|Outstanding as at September 30, 2004 |  |                    | 1,340,192 |                |  | $ | 12.25 | 
|                                     |  |                    |           |                |  |   |       | 
|Exercisable as at September 30, 2004 |  |                    | 698,503   |                |  | $ | 10.87 | 
|                                     |  |                    |           |                |  |   |       | 

In May 2004, an amendment to the Companys
stock option plan, to increase the number of Class B Shares
that may be issued pursuant to options granted under the Option
Plan by 682,236 (from 2,006,818 to 2,689,054) was approved by
Microcells shareholders.



|   |                
|-- | ---------------
|7. | Special Charges

On May 17, 2004, TELUS Corporation
[TELUS] launched unsolicited offers to purchase
Microcells Class A Shares for $29.00 per share,
Class B Shares for $29.00 per share, Warrants 2005 for
$9.67 per warrant and Warrants 2008 for $8.89 per
warrant. On May 20, 2004, Microcell announced that, after
careful review and analysis of the TELUS offers performed with
the assistance of its legal and financial advisors,
Microcells board of directors recommended that holders of
these securities not tender into the TELUS offers. Further to
the TELUS offers, Microcells board of directors initiated
a full strategic review in order to determine the best way to
maximize value for all holders of securities. The special
committee of the board of directors, created to consider,
evaluate and negotiate alternatives to the TELUS offers,
directed the financial advisors to contact TELUS and a number of
other parties, in order to evaluate all strategic and financial
alternatives available. Among the parties so contacted was
Rogers Communications Inc., Rogers Wireless Communications Inc.
and Rogers Wireless Inc. [collectively, Rogers]. On
June 22, 2004, TELUS announced that it would extend the
TELUS offers until July 22, 2004. The TELUS offers were
further extended on July 22, 2004, on August 20, 2004
and, after the announcement of the Rogers offers (described
below) on September 20, 2004. On October 12, 2004,
TELUS announced that it would not extend its offer to purchase
all of the issued and outstanding publicly traded shares and
warrants of Microcell and, as a result, the TELUS offers expired
on that day.

On September 19, 2004, the special committee
of Microcells board of directors met to review the terms
of the offers submitted by Rogers, to purchase all
Microcells Class A Shares for $35.00 per share,
Class B Shares for $35.00 per share, Warrants 2005 for
$15.79 per warrant and Warrants 2008 for $15.01 per
warrant, and the terms of a proposed support agreement.
Following Microcells special

56



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##### 



MICROCELL TELECOMMUNICATIONS INC.


NOTES TO INTERIM CONSOLIDATED FINANCIAL
STATEMENTS [UNAUDITED]  (Continued)

committees review of the relevant
considerations and based upon the advice received from the legal
and financial advisors and the opinions of its financial
advisors to the effect that, as at such date and subject to the
matters stated in such opinions, the consideration to be
received by holders of shares under the share offers was fair,
from a financial point of view, to such holders,
Microcells special committee unanimously concluded that
the share offers were fair to the holders of shares and in the
best interests of Microcell and determined to unanimously make a
favourable recommendation to Microcells board of directors
to recommend that holders of shares accept the share offers and
tender their shares into the Rogers offers.

On September 19, 2004, Microcells
board of directors met immediately following the meeting of its
special committee and approved the special committees
recommendation. Microcell entered into a support agreement late
on September 19, 2004 in respect of the Rogers offers. In
accordance with the support agreement, Microcells board of
directors also resolved on such date to waive the application of
certain provisions of the shareholder rights plan to allow
Rogers to proceed with the Rogers offers without any dilutive
effects.

On September 20, 2004, Microcell and Rogers
jointly announced the execution of the support agreement with
respect to the Rogers offers and on November 8, 2004,
Rogers announced that the terms and conditions of its offers for
the securities of Microcell have been satisfied with the
necessary number of securities having been successfully tendered
and regulatory approvals secured to complete the acquisition. As
a result of the successful tender offers, Rogers Wireless has
taken up and accepted for payment approximately 181,721
Class A Shares, 28,389,649 Class B Shares, 3,296,652
Warrants 2005 and 5,405,387 Warrants 2008, being all of the
securities of Microcell validly tendered to the offers and not
withdrawn prior to the 5:00 p.m. November 5, 2004
expiry time. The tendered securities represent approximately 96%
of the outstanding Class A Shares, 92% of the outstanding
Class B Shares, 82% of the outstanding Warrants 2005 and
81% of the outstanding Warrants 2008.

In conjunction with its strategic review process,
Microcell is incurring both financial and legal fees. The
Company engaged two financial advisors to determine the best way
to maximize value for all security holders. One of the two
financial advisors has affiliates which are shareholders,
lenders or agent of the Companys lenders. Engagement
letters entered into with these advisors provide for advisory
services to be rendered with minimum fees amounting to
$6.5 million. Such fees will be recognized over the
estimated period for which the services are rendered. If a
transaction occurs, a transaction fee will be payable that will
be calculated as a percentage of the consideration paid to
acquire Microcells equity which may represent a
significantly higher amount based on the value of the
transaction. As of September 30, 2004, an expense amounting
to $4.6 million was recognized with respect to these
agreements. Furthermore, the consequential impact of the offers
on Microcells share price led to an accelerated vesting of
shares under the Companys stock option plan, resulting in
an acceleration of a compensation expense of $3.6 million
that the Company would have otherwise recognized over the
remaining initial vesting period [see note 2]. Finally,
$1.5 million of legal and other general expenses related to
this process were recognized as of September 30, 2004. The
Company expects that total expenses related to this process will
amount to approximately $25 million. As a result of the
acquisitions of Microcell by Rogers, the final financial advisor
fees amounted approximately to $13.7 million of which
$2.1 million have already been paid. Furthermore,
approximately $12.8 million of legal and other general
expenses related to this process were incurred. Finally, the
consequential impact of the offers on Microcells share
price led to an accelerated vesting of shares under the
Companys stock option plan, resulting in an acceleration
of a compensation expense of $7.8 million that the Company
would have otherwise recognized over the remaining initial
vesting period. On November 9, 2004, all the 1,319,306
outstanding stock options were exercised.

As a result of the acquisition of Microcell by
Rogers, all the members of Microcells board of directors
and certain senior officers of Microcell, including the
President and Chief Executive Officer [the CEO] and
the Chief Financial Officer [the CFO], have resigned
on November 9, 2004. On the same

57



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##### 



MICROCELL TELECOMMUNICATIONS INC.


NOTES TO INTERIM CONSOLIDATED FINANCIAL
STATEMENTS [UNAUDITED]  (Continued)

day, Microcell announced the composition of its
new board of directors and the nomination of the new CEO and the
new CFO of Microcell.



|   |              
|-- | -------------
|8. | Contingencies

On April 21, 2004, Unique Broadband Wireless
Services, Inc. [UBS], an Ontario corporation that
manufactures and operates wireless products and services, filed
a lawsuit against Microcell, Solutions, Inukshuk and Allstream
Corp. in the Ontario Superior Court of Justice. In its statement
of claim, UBS claims, among other things, for damages in the
amount of $160 million from each Microcell, Solutions and
Inukshuk for breach of contract, breach of confidence and breach
of fiduciary duty and punitive damages. UBS also claims from
Inukshuk, as an alternative to the damages claims, an order for
specific performance of a conditional agreement between Inukshuk
and UBS with respect to the use of 38 MHz of
Inukshuks spectrum by UBS. UBS also claims certain other
equitable relief, including disgorgement of profits that UBS
alleges would otherwise unjustly enrich Inukshuk, Solutions and
Microcell. The action is at a very early stage with no statement
of defense yet delivered. Based on information currently
available, management considers that the companies have
substantive defenses to the action brought by UBS and intend to
vigorously defend the action.

On August 9, 2004, a proceeding under the
Class Actions Act (Saskatchewan) was brought against
Microcell and other providers of wireless telecommunications
services in Canada. The proceeding involves allegations of
deceit, misrepresentation and false advertising by wireless
telecommunications service providers with respect to the monthly
system access fees being charged to customers. The plaintiffs
seek unquantified damages from the defendant wireless
telecommunications service providers, plus costs and
pre-judgment and post-judgment interest. Microcell believes it
has good defences to the allegations made by the plaintiffs.
Further, the proceeding has not been certified as a class action
and it is too early to determine whether the proceeding will
qualify for certification as a class action.



|   |                    
|-- | -------------------
|9. | Comparative Figures

Certain of the comparative figures have been
reclassified to conform to the presentation adopted in the
current year.



|    |                                                                  
|--- | -----------------------------------------------------------------
|10. | Accounting Principles Generally Accepted in
    the United States

The unaudited interim financial statements as at
and for the nine months ended September 30, 2004 were
prepared in accordance with Canadian GAAP. The following summary
sets out the material adjustments to the Companys reported
net income (loss), for the nine-month periods ended
September 30, 2004, the five months ended
September 30, 2003 and the four months ended April 30,
2003, which would be made in order to conform with
U.S. GAAP and the accounting principles and practices
required by the SEC.

58



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##### 



MICROCELL TELECOMMUNICATIONS INC.


NOTES TO INTERIM CONSOLIDATED FINANCIAL
STATEMENTS [UNAUDITED]  (Continued)



| |                                                                                               
| | ----------------------------------------------------------------------------------------------
| | Reconciliation of Unaudited Consolidated
    Net Income (Loss) and Comprehensive Income (Loss)

|                                                          |                                                                |               |         |               |   |                    |        |        |   |  |           |           | 
|--------------------------------------------------------- | -------------------------------------------------------------- | ------------- | ------- | ------------- | - | ------------------ | ------ | ------ | - |  | --------- | --------- | 
|                                                          |                                                                | Nine Months   |         | Five Months   |   | Pre-reorganization
|                                                          |                                                                | Ended         |         | Ended         |   | Four Months       
|                                                          |                                                                | September 30, |         | September 30, |   | Ended April 30,   
|                                                          |                                                                | 2004          |         | 2003          |   | 2003              
|                                                          |                                                                |               |         |               |   |                   
|                                                          |                                                                | $             |         | $             |   | $                 
|Net income (loss) under Canadian
    GAAP                 |                                                                |               | (22,998 | )             |   |                    | 16,207 |        |   |  | 45,517    |          
|[a] Share of net loss in investees                        |                                                                |               |        |               |   |                    |       |        |   |  | (500      | )        
|[b] Reorganization items                                  |                                                                |               |        |               |   |                    |       |        |   |  | 1,253,660 |          
|                                                          |                                                                |               |         |               |   |                    |        |        |   |  |           |          
|                                                          | Net income (loss) under
    U.S. GAAP                          |               |         | (22,998       | ) |                    |        | 16,207 |   |  |           | 1,298,677 | 
|[c] Unrealized loss in value of marketable
    securities |                                                                |               |        |               |   |                    |       |        |   |  | (145      | )        
|                                                          |                                                                |               |         |               |   |                    |        |        |   |  |           |          
|                                                          | Comprehensive income (loss) under
    U.S. GAAP                |               |         | (22,998       | ) |                    |        | 16,207 |   |  |           | 1,298,532 | 
|                                                          |                                                                |               |         |               |   |                    |        |        |   |  |           |          
|                                                          | Basic earnings (loss) per share under
    U.S. GAAP[dollars]   |               |         | (1.44         | ) |                    |        | (1.51  | ) |  |           | 5.39      | 
|                                                          |                                                                |               |         |               |   |                    |        |        |   |  |           |          
|                                                          | Diluted earnings (loss) per share under
    U.S. GAAP[dollars] |               |         | (1.44         | ) |                    |        | 0.71   |   |  |           | 5.39      | 
|                                                          |                                                                |               |         |               |   |                    |        |        |   |  |           |          



| |                                                                
| | ---------------------------------------------------------------
| | Reconciliation of Unaudited Consolidated
    Cash Flow Captions

There are no significant differences between
Canadian GAAP and U.S. GAAP, which affect the captions of
the cash flow statements.



| |                                                                    
| | -------------------------------------------------------------------
| | Reconciliation of Unaudited Consolidated
    Balance Sheet Captions

|                        |  |                    |          |                   |  |      |         |          |  |             |          |      |  |  |          |   |  |  |          |   |  |  |          |  
|----------------------- |  | ------------------ | -------- | ----------------- |  | ---- | ------- | -------- |  | ----------- | -------- | ---- |  |  | -------- | - |  |  | -------- | - |  |  | -------- | -
|                        |  |                    |          |                  
|                        |  | September 30, 2004 |          | December 31, 2003
|                        |  |                    |          |                  
|                        |  | Canadian           |          |                   |  | U.S. |         | Canadian |  |             |          | U.S.
|                        |  | GAAP               |          | Adjustments       |  | GAAP |         | GAAP     |  | Adjustments |          | GAAP
|                        |  |                    |          |                   |  |      |         |          |  |             |          |     
|                        |  | $                  |          | $                 |  | $    |         | $        |  | $           |          | $   
|[d] Contributed surplus |  |                    | (4,288   | )                 |  |      | 1,327   |          |  |             | (2,961   | )    |  |  |         |   |  |  |         |   |  |  |         |  
|[e] Preferred shares    |  |                    |         |                   |  |      |        |          |  |             |         |      |  |  |         |   |  |  | (296,912 | ) |  |  | (296,912 | )
|[e] Share capital       |  |                    | (486,245 | )                 |  |      | 17,330  |          |  |             | (468,915 | )    |  |  | (338,154 | ) |  |  | 309,058  |   |  |  | 29,096   |  
|[d][e] Deficit          |  |                    | 41,655   |                   |  |      | (18,657 | )        |  |             | 22,998   |      |  |  | 12,146   |   |  |  | (12,146  | ) |  |  |         |  



| |                                                              
| | -------------------------------------------------------------
| | [a] Investment in Entity Subject to
    Significant Influence

Under Canadian GAAP, the investor should continue
to record its portion of investee losses unless the investor
would be unlikely to share in losses of the investee. Under
U.S. GAAP, in situations where an investor is not required
to advance additional funds to the investee and where previous
losses have reduced the common and the preferred stock
investment account to zero, the Company should continue to
report its share of equity method losses in its statement of
operations to the extent of and as an adjustment to the loans to
the investee.

In addition, under Canadian GAAP, the share of
net income in an investee that is a private investment company
is calculated based on its realized gains or losses. Under
U.S. GAAP, the share of net income in such investees is
calculated based on both realized and unrealized gains or losses.



| |                         
| | ------------------------
| | [b] Reorganization Items

Under U.S. GAAP, the forgiveness of debt and
the effects of the adjustments on the reported amounts of
individual assets and liabilities resulting from the adoption of
fresh start accounting should be

59



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##### 



MICROCELL TELECOMMUNICATIONS INC.


NOTES TO INTERIM CONSOLIDATED FINANCIAL
STATEMENTS [UNAUDITED]  (Continued)

reflected in the predecessor entitys final
statement of operations. Under Canadian GAAP, such adjustments
are reflected as capital transactions. The reorganization items
in the amount of $1.254 billion were comprised of
$1.366 billion of forgiveness of debt and
$112.5 million of adjustments resulting from the
application of fresh-start accounting.



| |                          
| | -------------------------
| | [c] Marketable Securities

Under Canadian GAAP, the marketable securities
are recorded as explained in note 2 to the annual
consolidated financial statements. Under U.S. GAAP, the
marketable securities are classified as available for sale, and
any changes to the market value, net of income taxes, are
recorded in other comprehensive income (loss).



| |                       
| | ----------------------
| | [d] Stock Compensation

Effective January 1, 2004, under Canadian
GAAP, the Company adopted the standard set forth in
Section 3870 of the CICA Handbook, as described in
Note 2 to the unaudited interim consolidated financial
statements as at and for the nine months ended
September 30, 2004 included elsewhere in this document.
Under U.S. GAAP, since the Company has selected the
modified prospective method as permitted by SFAS 148, the
adjustment to opening deficit in the amount of $1.3 million
under Canadian GAAP would not be recorded under U.S. GAAP.



| |                                                                 
| | ----------------------------------------------------------------
| | [e] Classification of Financial
    Instrument as Debt or Equity

The preferred shares contain conversion features
which result in the Companys obligation to redeem such
shares being conditional. Therefore, under US GAAP, these shares
are outside the scope of SFAS 150. In such a case,
redeemable preferred shares subject to mandatory redemption
requirements that are outside the control of the issuer are
excluded from shareholders equity (deficiency)
and presented separately in the issuers balance sheet
between liabilities and shareholders equity (deficiency).
The related accretions of $17.3 million as of
September 30, 2004 are presented as a charge to retained
earnings or, in the absence of retained earnings, by charges
against share capital.

60