**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, D.C.20549**

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**FORM 10-K**

| **(Mark One)**                                                                                                                                                                                                                                            | ** **                                                                                            |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------|
| x                                                                                                                                                                                                                                                         | **ANNUAL REPORT PURSUANT TO SECTION 13 OR  15 OF THE  SECURITIES EXCHANGE ACT OF 1934**     |
| **For the fiscal year  ended: September 30, 2005**                                                                                                                                                                                                   |
| **Or**                                                                                                                                                                                                                                                    |
| o                                                                                                                                                                                                                                                         | **TRANSITION REPORT PURSUANT TO SECTION 13 OR  15 OF THE  SECURITIES EXCHANGE ACT OF 1934** |
| **For  the transition period from                    to                 ** |

**CommissionFile Numbers 333-32064**

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**iPCS, INC.**

(Exact Name of Registrant as Specified in Its Charter)

| **Delaware**                                                                                                                 | ** **                                                              | **36-4350876**                         |
|------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------|----------------------------------------|
| (State  or Other Jurisdiction of  Incorporation or Organization)                                                             |                                                                    | (I.R.S.  Employer  Identification No.) |
|                                                                                                                         | **1901 North Roselle Road  Schaumburg, Illinois 60195  (847) 885-2833** | ** **                             |
| (Address, Including Zip Code, and Telephone Number, Including Area  Code,  of Registrant’s Principal Executive Offices) |
| **Securities registered pursuant to Section 12(b) of  the Act:**                                                   |
| None                                                                                                                         |
| **Securities registered pursuant to Section 12(g) of  the Act:**                                                   |
| None                                                                                                                         |

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Indicate by check mark ifthe registrant is a well-known seasoned issuer, as defined in Rule 405 ofthe Securities Act.  Yes o  No x

Indicate by check mark ifthe registrant is not required to file reports pursuant to Section 13 or Section 15(d) ofthe Act.  Yes o  No x

Indicate by check markwhether the registrant (1) has filed all reports required to be filed by Section 13or 15(d) of the Securities Exchange Act of 1934 during the preceding 12months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements forthe past 90 days.  Yes x  No o

Indicate by check mark ifdisclosure of delinquent filers pursuant to Item 405 of Regulation S-K isnot contained herein, and will not be contained, to the best of registrant’sknowledge, in definitive proxy or information statements incorporated byreference in Part III of this Form 10-K or any amendment tothis Form 10-K.  x

Indicate by check markwhether the registrant is an accelerated filer (as defined in Rule 12b-2of the Act). Yes o  No x

Indicate by check mark whetherthe registrant is a shell company (as defined in Rule 12b-2 of theAct).  Yes o  No x

The aggregate market valueof the voting and non-voting common equity held by non-affiliatescomputed by reference to the per share closing price on the Pink Sheets LLC asof March 31, 2005 (the last business day of the registrant’s most recentlycompleted second fiscal quarter) was approximately $130.1 million. For purposesof this computation, affiliates of the registrant include the registrant’sexecutive officers and directors as of March 31, 2005.

Indicate by check markwhether the registrant has filed all documents and reports required to be filedby Section 12, 13 or 15(d) of the Securities Exchange Act of 1934subsequent to the distribution of securities under a plan confirmed by a court.  Yes x  No o

As of December 16,2005, there were 16,654,935 shares of common stock, $0.01 par value pershare, outstanding.

**Documents Incorporated by Reference**

None

 

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**TABLE OF CONTENTS**

| PART I                                                                                                                | 3  |
|----------------------------------------------------------------------------------------------------------------------------|----|
| ITEM 1.  BUSINESS                                                                                                          | 3  |
| ITEM  1A. RISK FACTORS                                                                                                     | 34 |
| ITEM 1B. UNRESOLVED STAFF COMMENTS                                                                                         | 46 |
| **ITEM  2. PROPERTIES**                                                                                                    | 46 |
| ITEM  3. LEGAL PROCEEDINGS                                                                                                 | 46 |
| ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY  HOLDERS                                                               | 47 |
| PART II                                                                                                               | 48 |
| ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED  STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES | 48 |
| ITEM 6. SELECTED FINANCIAL DATA                                                                                            | 48 |
| ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF  FINANCIAL CONDITION AND RESULTS OF OPERATIONS                        | 51 |
| ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES  ABOUT MARKET RISK                                                       | 72 |
| ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                                                        | 72 |
| ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS  ON ACCOUNTING AND FINANCIAL DISCLOSURE                              | 72 |
| ITEM 9A. CONTROLS AND PROCEDURES                                                                                           | 72 |
| ITEM  9B. OTHER INFORMATION                                                                                                | 72 |
| PART III                                                                                                              | 73 |
| ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE  REGISTRANT                                                               | 73 |
| ITEM 11. EXECUTIVE COMPENSATION                                                                                            | 77 |
| ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL  OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS                   | 84 |
| ITEM 13. CERTAIN RELATIONSHIPS AND RELATED  TRANSACTIONS                                                                   | 87 |
| ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES                                                                            | 89 |
| PART IV                                                                                                               | 90 |
| ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES                                                                           | 90 |
| SIGNATURES                                                                                                                 | 91 |

 

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**THIS ANNUAL REPORT CONTAINS FORWARD-LOOKINGSTATEMENTS**

This annual reportcontains statements about future events and expectations that are “forward-lookingstatements.” These statements relate to future events or our future financialperformance, and involve known and unknown risks, uncertainties and otherfactors that may cause our actual results, levels of activity, performance orachievements to be materially different from any future results, levels ofactivity, performance or achievements expressed or implied by these forward-lookingstatements. In some cases, you can identify forward-looking statements byterminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,”“believes,” “estimates,” “predicts,” “potential,” or the negative use of theseterms or other comparable terminology. Any statement in this report that is nota statement of historical fact may be deemed to be a forward-lookingstatement. These forward-looking statements include:

·       statementsregarding our anticipated revenues, expense levels, liquidity and capitalresources and operating losses; and

·       statementsregarding expectations or projections about markets in our territory.

Although we believethat the expectations reflected in such forward-looking statements arereasonable, we can give no assurance that such expectations will prove to becorrect. Important factors with respect to any such forward-lookingstatements, including certain risks and uncertainties that could cause actualresults to differ materially from our expectations, include, but are notlimited to:

·       ourdependence on our affiliation with Sprint;

·       theimpact and outcome of our litigation against Sprint, Nextel and Sprint PCS, aswell as the impact and outcome of the other litigation involving Sprint, SprintPCS, various other PCS Affiliates of Sprint, and Nextel Partners;

·       theability of Sprint PCS to alter the terms of our affiliation agreements with it,including fees paid or charged to us and other program requirements;

·       ourdependence on back office services, such as billing and customer care, providedby Sprint PCS;

·       potentialfluctuations in our operating results;

·       changesor advances in technology in general, or specifically related to Sprint and itsaffiliates;

·       competitionin the industry and markets in which we operate;

·       ourability to attract and retain skilled personnel;

·       ourpotential need for additional capital or the need for refinancing any existingindebtedness;

·       ourpotential inability to expand our services and related products in the event ofsubstantial increases in demand for these services and related products;

·       changesin government regulation;

·       futureacquisitions;

·       thecompetitiveness and impact of Sprint PCS’s pricing plans and PCS products andservices on us;

·       oursubscriber credit quality;

·       thepotential for us to experience a continued high rate of subscriber turnover;

·       inaccuraciesin our financial information provided to us by Sprint PCS;

·       ourrates of penetration in the wireless industry and in our territories;

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·       oursignificant level of indebtedness;

·       adequacyof bad debt and other reserves;

·       ouranticipated future losses;

·       oursubscriber purchasing patterns;

·       subscribersatisfaction with our network and operations;

·       availabilityof an adequate supply of subscriber equipment to Sprint PCS and to usspecifically;

·       risksrelated to future growth and expansion, including subscriber growth;

·       generaleconomic and business conditions; and

·       effectsof mergers and consolidations within the wireless telecommunications industry,particularly business combinations involving Sprint Nextel or affiliates ofSprint Nextel, and unexpected announcements or developments from others in thewireless telecommunications industry.

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**PART I**

**ITEM 1.   BUSINESS**

As used in this annual report on Form 10-K,unless the context otherwise requires: (i) “Sprint PCS” refers to theaffiliated entities of Sprint Nextel Corporation that are party to ouraffiliation agreements; (ii) “Sprint” refers to Sprint Nextel Corporationand its affiliates; (iii) a “PCS Affiliate of Sprint” is an entity whosesole or predominant business is operating (directly or through one or moresubsidiaries) a personal communications service business pursuant toaffiliation agreements with Sprint Spectrum L.P. and/or its affiliates or theirsuccessors; (iv) “Sprint PCS products and services” refers to digitalwireless personal communications services, including wireless voice and dataservices, and related retail products, including handsets, in any case, offeredunder the Sprint brand name; and (v) “our subscribers” refers to SprintPCS subscribers who reside in our territory, excluding reseller subscribers.

Statements in this annual report on Form 10-Kregarding Sprint or Sprint PCS are derived from information contained in ouraffiliation agreements with Sprint PCS, periodic reports and other documentsfiled by Sprint with the SEC or press releases issued by Sprint or Sprint PCS.

Market data and other statistical information usedthroughout this annual report on Form 10-K are based on independentindustry publications, government publications, reports by market researchfirms and other published independent sources, as well as information providedto us by Sprint PCS. Some data is also based on our good faith estimates, whichestimates are derived from our review of internal surveys and independentsources, including information provided to us by Sprint, the U.S. Census Bureauand Kagan World Media. Although we believe these sources are reliable, we havenot independently verified the information.

This annual report on Form 10-Kcontains trademarks, service marks and trade names of companies andorganizations other than us. Other than with respect to Sprint PCS, our use ordisplay of other parties’ trade names, trademarks or products is not intendedto and does not imply a relationship with, or endorsement or sponsorship of usby, the trade name or trademark owners.

**General**

We are a holdingcompany that operates as a PCS Affiliate of Sprint through the following whollyowned subsidiaries:

·       iPCSWireless, Inc.

·       HorizonPersonal Communications, Inc.

·       BrightPersonal Communications Services, LLC

Each of these subsidiaries is a party to separateaffiliation agreements with Sprint PCS. Sprint operates a 100% digital personalcommunications service, or PCS, wireless network with licenses to provide voiceand data service to the entire United States population using a singlefrequency band and a single technology. As a PCS Affiliate of Sprint, we sellSprint PCS products and services through distribution outlets located in ourterritory, which outlets are comprised of our own retail stores, exclusiveco-branded dealers, major national distributors, including RadioShack and BestBuy, and local third-party distributors. We also own and are responsiblefor building, operating and managing the portion of the Sprint PCS wirelessnetwork located in our territory. Our portion of the Sprint PCS wireless networkuses the same technology as Sprint PCS to transmit wireless calls, called codedivision multiple access or CDMA, and is designed to offer a seamlessconnection with the Sprint PCS wireless network. As we do not own any licenses thatare used in our portion of the Sprint PCS network, our operations and revenuesare substantially dependent on the continuation of our affiliation with SprintPCS. Additionally, our affiliation 

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agreements with Sprint PCSgive Sprint PCS a substantial amount of control over factors that significantlyaffect the conduct of our business.

At September 30,2005, our licensed territory included 80 markets, known as basic trading areas,including markets located in Illinois, Michigan, Pennsylvania, Indiana, Iowa, Ohioand Tennessee. Based on the 2000 population counts compiled by the U.S. CensusBureau adjusted by estimated growth rates from third party proprietarydemographic databases, at September 30, 2005, our licensed territory had atotal population of approximately 15.0 million residents, of which ourportion of the Sprint PCS network covered approximately 11.3 million residents.At September 30, 2005, we had approximately 476,400 subscribers. Based oncovered population and total subscribers, we are the second largest PCSAffiliate of Sprint and, upon the closing of the announced merger of Sprint andAlamosa Holdings, Inc., we will be the largest.

**History of Our Business**

iPCS, Inc. was formedin March 2000 as a holding company for iPCS Wireless. iPCS Wireless, asthe successor to Illinois PCS, LLC, became a PCS Affiliate of Sprintin 1999. Immediately prior to our merger with Horizon PCS, Inc. (discussedbelow), our licensed territory included 40 markets located in Illinois,Michigan, Iowa and eastern Nebraska.

*Our Acquisition byAirGate PCS, Inc.*

On November 30, 2001,we were acquired by AirGate PCS, Inc., another PCS Affiliate of Sprint. Wewere designated as an unrestricted subsidiary of AirGate and both companiesoperated as separate business entities. On October 17, 2003, AirGateirrevocably transferred its ownership of iPCS, Inc. to a trust, thebeneficial owners of which trust were AirGate’s stockholders at the date oftransfer. AirGate retained no ownership interest in the trust or in us. Uponour emergence from bankruptcy (discussed below), our common stock held by thetrust was cancelled and the trust terminated by its terms.

*Our Reorganization*

On February 23, 2003, while we were owned byAirGate, we filed for bankruptcy under Chapter 11 of the Bankruptcy Code. Thedecision to file was based on a combination of factors, including weakness inthe wireless telecommunications industry and the economy generally. Inaddition, we had experienced a decline in liquidity and cash flow, making itdifficult for us to comply with our debt service obligations. We believe thatactions taken by Sprint PCS—specifically, decreasing our roaming rate andimposing new and higher fees on us—were the primary reason for the decline inour liquidity. Accordingly, in connection with our bankruptcy filing, we fileda complaint against Sprint and Sprint PCS alleging that Sprint PCS breached itsaffiliation agreements with us.

During our bankruptcy we operated our business andmanaged our assets as debtors-in-possession, subject to the supervision of thebankruptcy court, without obtaining debtor-in-possession financing. This reliefprovided us the time necessary to reorganize our business, which includedslowing subscriber growth to reduce our acquisition costs, increasing our focuson prime subscribers and aligning our operations through cost reductions tocompete in our marketplace and to improve our financial results.

The following werethe principal components of our plan of reorganization:

·       Thecancellation of our existing common stock.

·       Theissuance of 10.0 million shares of common stock, of which 9.0 millionshares were to be issued to our general unsecured creditors and 1.0 millionwere reserved for issuance to certain members of our management, directors andother employees through our 2004 Long-Term Incentive Plan.

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·       Theformation of a wholly owned special purpose entity to issue $165.0 millionof senior notes, the proceeds of which were held in escrow pending theeffective date of our plan of reorganization.

·       Thesettlement of all claims by and between us and Sprint (including the claimsmade in our litigation against Sprint) which resulted in our write-off of allprepetition claims, as set forth in the settlement agreement and mutualrelease.

·       Thepayment to Sprint, in cash, of approximately $5.1 million in full and completesatisfaction of our obligation to cure defaults under our affiliationagreements with Sprint PCS.

·       Theassumption of all contracts and leases that had not been previously rejected,including the assumption of our affiliation agreements with Sprint (as revisedto provide us a number of benefits).

·       Theappointment of Timothy M. Yager as our president and chief executive officerand director.

·       Theappointment of four new directors to our board of directors to be designated bythe committee of unsecured creditors pursuant to which Timothy C. Babich, JamesJ. Gaffney and Kevin M. Roe were appointed as of the effective date andEugene I. Davis was appointed in August 2004.

·       Ourrelease of any and all claims against: (i) all of our officers, directorsand employees, in each case, as of the date of the commencement of the hearingon the disclosure statement; (ii) our creditors’ committee and all of itsmembers, in their respective capacities as such; (iii) trustee under theindenture for our existing senior discount notes, in its capacity as such; (iv) thelenders under our senior secured credit facility, in their capacities as such; (v) theagent for the lenders under our senior secured credit facility, in its capacityas such; (vi) the holders of the new notes offered hereby, in theircapacity as such; and (vii) with respect to each of the above namedpersons, such person’s present affiliates, principals, employees, agents,officers, directors, financial advisors, attorneys and other professionals, intheir capacities as such.

On July 9, 2004, thebankruptcy court confirmed our plan of reorganization and the plan ofreorganization became effective on July 20, 2004. On the effective date wepaid a portion of the net proceeds from the senior notes issued in connectionwith our emergence to repay in full in cash our obligations to each of thelenders under our then existing senior secured credit facility and topermanently retire the loans thereunder. The remaining net proceeds from thesenior notes was used to satisfy all other secured claims, administrative andother priority claims and unsecured convenience claims and to pay fees andexpenses related to the reorganization, as well as for general corporate purposes.Additionally, all of our subordinated claims were discharged and all of ourthen existing capital stock was cancelled. As a result of the consummation ofour reorganization, our senior secured credit facility was repaid in full incash and terminated, and our senior discount notes were cancelled and theholders received shares of our common stock.

*Our Merger withHorizon PCS, Inc.*

On July 1, 2005, wecompleted a merger with Horizon PCS, Inc., another PCS Affiliate ofSprint, in which Horizon PCS, Inc. merged with and into iPCS, Inc.with iPCS, Inc. as the surviving corporation. Horizon PersonalCommunications, Inc. and Bright Personal Communications Services, LLC(collectively, “Horizon PCS”), former wholly owned subsidiaries of Horizon PCS, Inc.,are now our wholly owned subsidiaries. Horizon PCS’s territory—which is nowpart of our territory—consisted of 40 markets located in portions of ninecontiguous states. The markets are located between Sprint’s Chicago, New Yorkand Knoxville markets and connect or are adjacent to 12 major Sprint markets.Based on the 2000 population counts compiled by the U.S. Census Bureau andadjusted by estimated growth rates from third party proprietary demographicdatabases, at June 30, 2005—the last date for which such information wasreported prior to our merger—Horizon PCS’s licensed territory had a totalpopulation of approximately 

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7.2 millionresidents, of which its wireless network covered approximately 5.4 millionresidents. At June 30, 2005, Horizon PCS had approximately 188,000subscribers in all its markets.

**Our Relationship With Sprint**

Sprint directly operates its PCS network in majormarkets throughout the United States and has entered into independentaffiliation agreements with various companies such as us under which each hasbecome a PCS Affiliate of Sprint and has agreed to construct and manage PCSnetworks designed to operate seamlessly with the Sprint PCS network in smallermetropolitan areas and along major highways. Sprint PCS, together with the PCSAffiliates of Sprint, operates PCS systems in over 300 metropolitanmarkets, including the 100 largest U.S. metropolitan areas. Sprint PCS’sservice, including third party affiliates like us, reaches approximately250 million people.

Pursuant to our affiliation agreements with SprintPCS, we agreed to offer PCS services using Sprint’s spectrum under the Sprintbrand name on a wireless network built and operated at our own expense. Anetwork build-out consists of installing radio base stations, switches andother PCS transmission equipment and software in order to operate a wirelessnetwork in accordance with the requirements of our affiliation agreements withSprint PCS. We also agreed to provide network coverage to a minimum percentageof the population in our territory within specified time periods. Based on theinformation we have provided to Sprint PCS as of March 26, 2004, we havecompleted the required build-out of our network in iPCS Wireless’sterritory, including those aspects of the build-out that were not required tobe completed until a future date, and we are in compliance with all applicablebuild-out requirements. We believe we have completed the required buildout ofour network in Horizon PCS’s territory as well. The build-out of our territoryhas significantly extended Sprint PCS’s wireless coverage in the regions of theUnited States in which we operate.

We believe that ourstrategic relationship with Sprint PCS provides significant competitiveadvantages. In particular, we believe that our affiliation agreements withSprint PCS allow us to offer high quality, nationally branded wireless voiceand data services for lower cost and lower capital requirements than wouldotherwise be possible. For example, we benefit from our relationship with SprintPCS in the following ways:

·       ***Strong brand recognition andnationwide advertising.  ***We believe that we benefit fromSprint’s national and regional television, radio, print, outdoor and otheradvertising campaigns.

·       ***National retailer sales.***   Nationalretailers with existing distribution relationships with Sprint PCS marketSprint PCS products and services under the highly recognizable Sprint andSprint PCS brand names in their stores in our territory.

·       ***Sprint PCS network.  ***Oursubscribers can immediately access PCS systems in over 300 major metropolitanmarkets, including the 100 largest U.S. metropolitan areas.

·       ***Advanced technology.  ***Webelieve that the CDMA technology used by Sprint PCS offers advantages incapacity and voice quality, as well as access to advanced features, such asSprint PCS’s suite of PCS Vision products.

·       ***Handset availability and pricing.  ***SprintPCS’s purchasing leverage allows us to acquire the latest innovative handsetsmore quickly and at a lower cost than we could without our affiliation withSprint PCS.

·       ***National reseller agreements.  ***Wereceive additional revenue as a result of Sprint PCS’s relationships withwireless resellers, referred to by Sprint as mobile virtual network operators(“MVNOs”), such as Virgin Mobile, when subscribers of those resellers use ourportion of the Sprint PCS network.

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**OurLitigation Against Sprint and the Forbearance Agreement**

On December 15, 2004, Sprint Corporation andNextel Communications, Inc. announced that they had signed a mergeragreement pursuant to which they would merge and combine their operations. Shortlyafter announcing the merger, Sprint also announced that it would pursuediscussions with the PCS Affiliates of Sprint—including us—directed toward amodification of their affiliation agreements to address the implications of itsmerger with Nextel. Although the parties engaged in discussions with respect tosuch a modification, no agreement has been reached.

When it became evident to us that Sprint intended toclose its merger with Nextel prior to reaching agreement with us on necessarymodifications to our affiliation agreements, we filed two complaints againstSprint. On July 15, 2005, we caused our wholly owned subsidiary,iPCS Wireless, to file a complaint against Sprint and Sprint PCS in theCircuit Court of Cook County, Illinois, and on July 22, 2005, we causedour wholly owned subsidiaries, Horizon Personal Communications and BrightPersonal Communications Services, to file a complaint against Sprint, SprintPCS and Nextel in the Court of Chancery of the State of Delaware, New CastleCounty. The complaints are substantially similar and allege, among otherthings, that following the consummation of the merger between Sprint andNextel, Sprint will breach its exclusivity obligations to us under ourmanagement agreements. Our complaints seek, among other things, a temporaryrestraining order, a preliminary injunction and a permanent injunctionenjoining Sprint and those acting in concert with it from engaging in certainconduct following the closing of their merger that would violate ouraffiliation agreements with Sprint PCS. In addition to our complaints, a numberof other PCS Affiliates of Sprint also filed complaints against Sprint, SprintPCS and Nextel, including AirGate PCS (a wholly owned subsidiary of AlamosaHoldings, Inc.), UbiquiTel, Inc., U.S. Unwired, Inc., Gulf CoastWireless, Inc. and Enterprise Communications Partnership.

On July 18, 2005, in Cook County Circuit Court weobtained a temporary restraining order prohibiting Sprint from sharing ourconfidential information with Nextel in violation of iPCS Wireless’s managementagreement and we continued our hearing to hear further testimony on our requestfor additional injunctive relief.

However, on July 28, 2005, prior to reconveningin Cook County Circuit Court, we entered into a Forbearance Agreement withSprint. The Forbearance Agreement sets forth our agreement that we will notseek a temporary restraining order or a preliminary injunction against Sprintso long as Sprint operates the Nextel business in our territory subject to thelimitations set forth in the agreement. The Forbearance Agreement contemplatesthat the parties will proceed as quickly as possible to a full trial on themerits of our complaint seeking a permanent injunction against Sprint.

On August 12, 2005, Sprint and Nextel closedtheir merger. In July and August 2005 Sprint acquired three PCSAffiliates of Sprint, two of whom—U.S. Unwired and Gulf Coast Wireless—had alsofiled suit against Sprint. As a result of Sprint’s acquisition of these PCSAffiliates of Sprint, their lawsuits were discontinued. In November 2005,Sprint announced that it has signed a definitive agreement to acquire AlamosaHoldings. As a result, the complaint filed by AirGate PCS, a wholly ownedsubsidiary of Alamosa Holdings, has been stayed pending the closing of Sprint’sacquisition of Alamosa Holdings. In December 2005, Sprint announced that it hassigned a definitive agreement to acquire Enterprise Communications.

On December 1, 2005, we announced that the trialrelating to the complaint filed by our wholly owned subsidiary, iPCS Wireless,in Cook County Circuit Court has been continued from December 5, 2005 to February 6,2006.

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On December 12, 2005, we announced that the trialrelating to the complaint filed by our wholly owned subsidiaries, HorizonPersonal Communications and Bright Personal Communications Services, againstSprint and Nextel in the Delaware Court of Chancery has been consolidated withthe trial relating to the complaint filed by UbiquiTel against Sprint andNextel in that same court. The consolidated trial is scheduled to begin onJanuary 9, 2006, in the Delaware Court of Chancery.

In connection with the consolidation of the trials inDelaware, Sprint agreed to extend the Forbearance Agreement in the territoriesmanaged by Horizon Personal Communications and Bright Personal CommunicationsServices until the date that any decision after trial is rendered by theDelaware Court of Chancery in connection with the merits of the complaint, withcertain limited exceptions that would require approval by the Delaware Court ofChancery. The Forbearance Agreement is scheduled to expire on January 1, 2006in the territory managed by iPCS Wireless.

See important risks related to the Sprint/Nextelmerger and our litigation in Item 1B. Risk Factors—“The merger between Sprintand Nextel and the outcome of our litigation relating thereto may have anadverse effect on us in ways that would be beyond our control.”

**Markets**

We believe weoperate in attractive markets with the following favorable roaming and travelcharacteristics:

·       Ourterritory is located near or around several large U.S. urban centers, includingChicago, Illinois; New York, New York; Philadelphia, Pennsylvania; Pittsburgh,Pennsylvania; Detroit, Michigan; Columbus, Ohio; Des Moines, Iowa;Indianapolis, Indiana; Knoxville, Tennessee; Omaha, Nebraska; and St. Louis,Missouri.

·       Ourterritory includes significant distances of major and secondary highwayscomprising the principal travel corridors between these large urban centers. Asa result of our extensive network coverage of these highways in our territory,we have consistently received significant roaming revenue from wirelesssubscribers using our portion of the Sprint PCS network.

·       Ourmarkets include nearly 60 colleges and universities with a total enrollment ofapproximately 333,000 students. We believe that colleges and universities inour markets result in additional subscribers and increased roaming revenue fromwireless subscribers using our portion of the Sprint PCS network.

These market characteristics historically have led toa favorable ratio of Sprint PCS subscribers from outside our territory andsubscribers of other wireless service providers using our portion of the SprintPCS network as compared to our subscribers using wireless communicationsnetworks outside our territory.

At September 30, 2005, we had approximately476,400 subscribers in all our markets.

The following tables listthe location, basic trading area number, megahertz of spectrum licensed andestimated total population for each of the basic trading areas that comprisethe territory covered under our affiliation agreements with Sprint PCS as of September 30,2005. The first table relates to the territory covered under iPCS Wireless’saffiliation agreements with Sprint PCS, while the second table relates to theterritory covered under Horizon PCS’s affiliation agreements with Sprint PCS. Thenumber of estimated covered population for each state does not represent thenumber of our subscribers in such state, nor does it represent the number ofsubscribers that we expect to be based in such state.

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*iPCS Wireless, Inc.*

| **Location(1)**               | ** ** | ** ** | ** ** | **Basic   Trading   Area No.(2)** | ** ** | **MHz of   spectrum** | ** ** | **Estimated   Total   Population(3)** | ** ** | **Estimated   Covered   Population(4)** | ** ** |
|-------------------------------|------------|------------|------------|----------------------------------------|------------|----------------------------|------------|---------------------------------------|------------|-----------------------------------------|------------|
| ILLINOIS                      |       |       |       |                                   |       |                       |       |                                  |       |                                    |       |   |   |   |   |   |   |
| Bloomington                   |       |       | 46         |                                   |       |                       | 10         |                                  |       |                                    | 241,752    |   |   |   |   |   |   |
| Champaign-Urbana              |       |       | 71         |                                   |       |                       | 20         |                                  |       |                                    | 231,281    |   |   |   |   |   |   |
| Clinton-Sterling(5)           |       |       | 86         |                                   |       |                       | 30         |                                  |       |                                    | 148,141    |   |   |   |   |   |   |
| Danville(5)                   |       |       | 103        |                                   |       |                       | 20         |                                  |       |                                    | 110,012    |   |   |   |   |   |   |
| Davenport-Moline(5)           |       |       | 105        |                                   |       |                       | 30         |                                  |       |                                    | 429,145    |   |   |   |   |   |   |
| Decatur-Effingham             |       |       | 109        |                                   |       |                       | 10         |                                  |       |                                    | 249,052    |   |   |   |   |   |   |
| Galesburg                     |       |       | 161        |                                   |       |                       | 10         |                                  |       |                                    | 74,506     |   |   |   |   |   |   |
| Jacksonville                  |       |       | 213        |                                   |       |                       | 10         |                                  |       |                                    | 70,023     |   |   |   |   |   |   |
| Kankakee                      |       |       | 225        |                                   |       |                       | 20         |                                  |       |                                    | 136,106    |   |   |   |   |   |   |
| La Salle-Peru-Ottawa-Streator |       |       | 243        |                                   |       |                       | 20         |                                  |       |                                    | 153,319    |   |   |   |   |   |   |
| Mattoon                       |       |       | 286        |                                   |       |                       | 10         |                                  |       |                                    | 64,763     |   |   |   |   |   |   |
| Mount Vernon-Centralia        |       |       | 308        |                                   |       |                       | 30         |                                  |       |                                    | 123,023    |   |   |   |   |   |   |
| Peoria                        |       |       | 344        |                                   |       |                       | 10         |                                  |       |                                    | 462,289    |   |   |   |   |   |   |
| St. Louis (Partial)(5)        |       |       | 394        |                                   |       |                       | 30         |                                  |       |                                    | 49,120     |   |   |   |   |   |   |
| Springfield                   |       |       | 426        |                                   |       |                       | 10         |                                  |       |                                    | 268,645    |   |   |   |   |   |   |
| Total                         |       |       |       |                                   |       |                       |       |                                  |       |                                    | 2,811,177  |   |   |   | 2,443,094 |   |   |
| INDIANA                       |       |       |       |                                   |       |                       |       |                                  |       |                                    |       |   |   |   |   |   |   |
| Terre Haute  (Partial)(5)     |       |       | 442        |                                   |       |                       | 30         |                                  |       |                                    | 2,998      |   |   |   |   |   |   |
| Total                         |       |       |       |                                   |       |                       |       |                                  |       |                                    | 2,998      |   |   |   | 673 |   |   |
| IOWA                          |       |       |       |                                   |       |                       |       |                                  |       |                                    |       |   |   |   |   |   |   |
| Burlington(5)                 |       |       | 61         |                                   |       |                       | 30         |                                  |       |                                    | 136,015    |   |   |   |   |   |   |
| Cedar Rapids                  |       |       | 70         |                                   |       |                       | 30         |                                  |       |                                    | 292,398    |   |   |   |   |   |   |
| Des Moines (Partial)          |       |       | 111        |                                   |       |                       | 30         |                                  |       |                                    | 218,327    |   |   |   |   |   |   |
| Dubuque(5)                    |       |       | 118        |                                   |       |                       | 30         |                                  |       |                                    | 179,892    |   |   |   |   |   |   |
| Fort Dodge                    |       |       | 150        |                                   |       |                       | 30         |                                  |       |                                    | 127,814    |   |   |   |   |   |   |
| Iowa City                     |       |       | 205        |                                   |       |                       | 30         |                                  |       |                                    | 133,253    |   |   |   |   |   |   |
| Marshalltown                  |       |       | 283        |                                   |       |                       | 30         |                                  |       |                                    | 57,452     |   |   |   |   |   |   |
| Mason City                    |       |       | 285        |                                   |       |                       | 30         |                                  |       |                                    | 116,057    |   |   |   |   |   |   |
| Ottumwa                       |       |       | 337        |                                   |       |                       | 30         |                                  |       |                                    | 123,752    |   |   |   |   |   |   |
| Waterloo-Cedar Falls          |       |       | 462        |                                   |       |                       | 20         |                                  |       |                                    | 266,283    |   |   |   |   |   |   |
| Total                         |       |       |       |                                   |       |                       |       |                                  |       |                                    | 1,651,243  |   |   |   | 1,107,615 |   |   |
| MICHIGAN                      |       |       |       |                                   |       |                       |       |                                  |       |                                    |       |   |   |   |   |   |   |
| Battle Creek  (Partial)       |       |       | 33         |                                   |       |                       | 30         |                                  |       |                                    | 57,599     |   |   |   |   |   |   |
| Grand Rapids                  |       |       | 169        |                                   |       |                       | 30         |                                  |       |                                    | 1,107,042  |   |   |   |   |   |   |
| Lansing (Partial)             |       |       | 241        |                                   |       |                       | 30         |                                  |       |                                    | 62,505     |   |   |   |   |   |   |
| Mount Pleasant                |       |       | 307        |                                   |       |                       | 30         |                                  |       |                                    | 139,440    |   |   |   |   |   |   |
| Muskegon                      |       |       | 310        |                                   |       |                       | 30         |                                  |       |                                    | 227,225    |   |   |   |   |   |   |
| Petoskey                      |       |       | 345        |                                   |       |                       | 30         |                                  |       |                                    | 110,820    |   |   |   |   |   |   |
| Saginaw-Bay City              |       |       | 390        |                                   |       |                       | 30         |                                  |       |                                    | 629,109    |   |   |   |   |   |   |
| Sault Ste. Marie              |       |       | 409        |                                   |       |                       | 30         |                                  |       |                                    | 57,605     |   |   |   |   |   |   |
| Traverse City                 |       |       | 446        |                                   |       |                       | 30         |                                  |       |                                    | 250,514    |   |   |   |   |   |   |
| Total                         |       |       |       |                                   |       |                       |       |                                  |       |                                    | 2,641,859  |   |   |   | 2,081,427 |   |   |

9

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| NEBRASKA             |   |   |   |   |   |   |   |   |   |   |      |   |   |   |      |   |   |
|----------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|-----------|--------|--------|--------|-----------|--------|--------|
| Grand Island-Kearney |   |   | 167    |   |   |   | 30     |   |   |   | 150,414   |   |   |   |      |   |   |
| Hastings             |   |   | 185    |   |   |   | 30     |   |   |   | 73,405    |   |   |   |      |   |   |
| Lincoln (Partial)    |   |   | 256    |   |   |   | 30     |   |   |   | 96,653    |   |   |   |      |   |   |
| Norfolk              |   |   | 323    |   |   |   | 30     |   |   |   | 111,967   |   |   |   |      |   |   |
| Omaha (Partial)(5)   |   |   | 332    |   |   |   | 30     |   |   |   | 235,440   |   |   |   |      |   |   |
| Total                |   |   |   |   |   |   |   |   |   |   | 667,879   |   |   |   | 332,448   |   |   |
| TOTAL                |   |   |   |   |   |   |   |   |   |   | 7,775,156 |   |   |   | 5,965,257 |   |   |

----

*Footnotes followthe following table.*

*HorizonPersonal Communications, Inc.Bright Personal Communications Services, LLC*

| **Location(1)**                   | ** ** | ** ** | ** ** | **Basic   Trading   Area No.(2)** | ** ** | **MHz of   Spectrum** | ** ** | **Estimated   Total   Population(3)** | ** ** | **Estimated   Covered   Population(4)** | ** ** |
|-----------------------------------|------------|------------|------------|----------------------------------------|------------|----------------------------|------------|---------------------------------------|------------|-----------------------------------------|------------|
| INDIANA                           |       |       |       |                                   |       |                       |       |                                  |       |                                    |       |   |   |   |   |   |   |
| Elkhart(5)                        |       |       | 126        |                                   |       |                       | 10         |                                  |       |                                    | 273,472    |   |   |   |   |   |   |
| Fort Wayne(5)                     |       |       | 155        |                                   |       |                       | 10         |                                  |       |                                    | 721,907    |   |   |   |   |   |   |
| Kokomo-Logansport                 |       |       | 233        |                                   |       |                       | 30         |                                  |       |                                    | 192,738    |   |   |   |   |   |   |
| Marion                            |       |       | 280        |                                   |       |                       | 30         |                                  |       |                                    | 108,372    |   |   |   |   |   |   |
| Michigan City-La Porte  (Partial) |       |       | 294        |                                   |       |                       | 10         |                                  |       |                                    | 70,239     |   |   |   |   |   |   |
| South Bend-Mishawaka              |       |       | 424        |                                   |       |                       | 10         |                                  |       |                                    | 365,156    |   |   |   |   |   |   |
| Total                             |       |       |       |                                   |       |                       |       |                                  |       |                                    | 1,731,884  |   |   |   | 1,595,465 |   |   |
| MARYLAND                          |       |       |       |                                   |       |                       |       |                                  |       |                                    |       |   |   |   |   |   |   |
| Cumberland(5)                     |       |       | 100        |                                   |       |                       | 30         |                                  |       |                                    | 163,833    |   |   |   |   |   |   |
| Total                             |       |       |       |                                   |       |                       |       |                                  |       |                                    | 163,833    |   |   |   | 74,564 |   |   |
| MICHIGAN                          |       |       |       |                                   |       |                       |       |                                  |       |                                    |       |   |   |   |   |   |   |
| Battle Creek  (Partial)           |       |       | 33         |                                   |       |                       | 30         |                                  |       |                                    | 11,290     |   |   |   |   |   |   |
| Benton Harbor (Partial)           |       |       | 39         |                                   |       |                       | 10         |                                  |       |                                    | 45,397     |   |   |   |   |   |   |
| Kalamazoo (Partial)               |       |       | 223        |                                   |       |                       | 30         |                                  |       |                                    | 20,107     |   |   |   |   |   |   |
| Total                             |       |       |       |                                   |       |                       |       |                                  |       |                                    | 76,794     |   |   |   | 70,752 |   |   |
| NEW JERSEY                        |       |       |       |                                   |       |                       |       |                                  |       |                                    |       |   |   |   |   |   |   |
| New York  (Partial)(5)            |       |       | 321        |                                   |       |                       | 30         |                                  |       |                                    | 197,559    |   |   |   |   |   |   |
| Total                             |       |       |       |                                   |       |                       |       |                                  |       |                                    | 197,559    |   |   |   | 142,867 |   |   |
| NEW YORK                          |       |       |       |                                   |       |                       |       |                                  |       |                                    |       |   |   |   |   |   |   |
| Jamestown-Warren-Dunkirk(5)       |       |       | 215        |                                   |       |                       | 30         |                                  |       |                                    | 183,318    |   |   |   |   |   |   |
| Olean-Bradford(5)                 |       |       | 330        |                                   |       |                       | 30         |                                  |       |                                    | 238,615    |   |   |   |   |   |   |
| Total                             |       |       |       |                                   |       |                       |       |                                  |       |                                    | 421,933    |   |   |   | 239,997 |   |   |
| OHIO                              |       |       |       |                                   |       |                       |       |                                  |       |                                    |       |   |   |   |   |   |   |
| Ashtabula                         |       |       | 21         |                                   |       |                       | 10         |                                  |       |                                    | 102,559    |   |   |   |   |   |   |
| Athens                            |       |       | 23         |                                   |       |                       | 20         |                                  |       |                                    | 130,996    |   |   |   |   |   |   |
|                                   |            |            |            |                                        |            |                            |            |                                       |            |                                         |            |  |  |  |  |  |  |  |  |  |  |  |  |  |

10

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| Canton-New Philadelphia  (Partial)    |   |   | 65     |   |   |   | 10     |   |   |   | 36,631    |   |   |   |      |   |   |
|---------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|-----------|--------|--------|--------|-----------|--------|--------|
| Chillicothe                           |   |   | 80     |   |   |   | 20     |   |   |   | 101,820   |   |   |   |      |   |   |
| Cincinnati (Partial)(5)               |   |   | 81     |   |   |   | 10     |   |   |   | 129,414   |   |   |   |      |   |   |
| Dayton-Springfield  (Partial)         |   |   | 106    |   |   |   | 10     |   |   |   | 40,945    |   |   |   |      |   |   |
| Findlay-Tiffin                        |   |   | 143    |   |   |   | 30     |   |   |   | 153,136   |   |   |   |      |   |   |
| Huntington-Ashland  (Partial)         |   |   | 197    |   |   |   | 20     |   |   |   | 31,033    |   |   |   |      |   |   |
| Lima                                  |   |   | 255    |   |   |   | 30     |   |   |   | 251,063   |   |   |   |      |   |   |
| Portsmouth(5)                         |   |   | 359    |   |   |   | 20     |   |   |   | 93,113    |   |   |   |      |   |   |
| Toledo (Partial)                      |   |   | 444    |   |   |   | 30     |   |   |   | 60,637    |   |   |   |      |   |   |
| Zanesville-Cambridge                  |   |   | 487    |   |   |   | 20     |   |   |   | 188,985   |   |   |   |      |   |   |
| Total                                 |   |   |   |   |   |   |   |   |   |   | 1,320,332 |   |   |   | 800,460   |   |   |
| PENNSYLVANIA                          |   |   |   |   |   |   |   |   |   |   |      |   |   |   |      |   |   |
| Allentown-Bethlehem-Easton  (Partial) |   |   | 10     |   |   |   | 30     |   |   |   | 58,715    |   |   |   |      |   |   |
| Du Bois-Clearfield                    |   |   | 117    |   |   |   | 30     |   |   |   | 129,609   |   |   |   |      |   |   |
| Erie                                  |   |   | 131    |   |   |   | 10     |   |   |   | 280,790   |   |   |   |      |   |   |
| Meadville                             |   |   | 287    |   |   |   | 10     |   |   |   | 90,411    |   |   |   |      |   |   |
| Oil City-Franklin                     |   |   | 328    |   |   |   | 30     |   |   |   | 103,863   |   |   |   |      |   |   |
| Pottsville                            |   |   | 360    |   |   |   | 30     |   |   |   | 149,276   |   |   |   |      |   |   |
| Scranton-Wilkes-Barre-Hazleton        |   |   | 412    |   |   |   | 30     |   |   |   | 671,469   |   |   |   |      |   |   |
| Sharon                                |   |   | 416    |   |   |   | 10     |   |   |   | 138,425   |   |   |   |      |   |   |
| State College                         |   |   | 429    |   |   |   | 30     |   |   |   | 136,444   |   |   |   |      |   |   |
| Stroudsburg                           |   |   | 435    |   |   |   | 30     |   |   |   | 147,685   |   |   |   |      |   |   |
| Sunbury-Shamokin                      |   |   | 437    |   |   |   | 30     |   |   |   | 192,015   |   |   |   |      |   |   |
| Williamsport                          |   |   | 475    |   |   |   | 30     |   |   |   | 164,484   |   |   |   |      |   |   |
| Total                                 |   |   |   |   |   |   |   |   |   |   | 2,263,186 |   |   |   | 1,743,388 |   |   |
| TENNESSEE                             |   |   |   |   |   |   |   |   |   |   |      |   |   |   |      |   |   |
| Kingsport-Johnson  City-Bristol(5)    |   |   | 229    |   |   |   | 20     |   |   |   | 714,038   |   |   |   |      |   |   |
| Knoxville (Partial)                   |   |   | 232    |   |   |   | 10     |   |   |   | 112,883   |   |   |   |      |   |   |
| Total                                 |   |   |   |   |   |   |   |   |   |   | 826,921   |   |   |   | 599,504   |   |   |
| WEST VIRGINIA                         |   |   |   |   |   |   |   |   |   |   |      |   |   |   |      |   |   |
| Parkersburg-Marietta(5)               |   |   | 342    |   |   |   | 20     |   |   |   | 181,824   |   |   |   |      |   |   |
| Total                                 |   |   |   |   |   |   |   |   |   |   | 181,824   |   |   |   | 113,447   |   |   |
| TOTAL                                 |   |   |   |   |   |   |   |   |   |   | 7,184,266 |   |   |   | 5,380,444 |   |   |

----

(1)          In connection with themodification of Horizon PCS’s affiliation agreements with Sprint PCS in March 2005,Sprint PCS agreed to remove the Logan, West Virginia market and the Williamson,West Virginia/Pikeville, Kentucky market from Horizon PCS’s service territory.

(2)          Basic Trading Area No. refersto the Basic Trading Area number assigned to that market by the FCC for thepurposes of issuing licenses for wireless services.

(3)          Estimated TotalPopulation is based on estimates of 2000 population counts compiled by the U.S.Census Bureau adjusted by population growth rates from third party proprietarydemographic databases, and represents the total population in our licensed areawithin these markets.

(4)          Estimated Covered Populationis based on our actual network coverage (neg 103db) measured by third partyproprietary mapping software using the 2000 population counts compiled by theU.S. 

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Census Bureau adjusted bypopulation growth rates from third party proprietary demographic databases.

(5)          Forpurposes of this table, Estimated Total Population and Estimated CoveredPopulation include all persons in the Basic Trading Area, including thosepersons who live in neighboring states.

**Network Operations**

Theeffective operation of our network requires:

·       publicswitched and long distance interconnection;

·       theimplementation of roaming arrangements; and

·       thedevelopment of network monitoring systems.

Our network connects to the public switched telephonenetwork to facilitate the origination and termination of traffic between thewireless network and both local exchange and long distance carriers. Throughour arrangements with Sprint PCS and Sprint PCS’s arrangements with otherwireless service providers, our subscribers have roaming capabilities oncertain other PCS networks utilizing similar CDMA technology. We monitor ournetwork during normal business hours. For after-hours monitoring, the PCSNetwork Operating Centers of Sprint PCS provide 24-hour, seven-day-a-weekmonitoring of the Sprint PCS network in our territory and real-timenotification to our designated personnel.

As of September 30,2005, the portion of the Sprint PCS network in our territory included 1,488base stations and five switching centers.

**Products and Services**

We offer wireless voice and data products and servicesthroughout our territory under the Sprint brand name. Our services aretypically designed to align with the service offerings of Sprint PCS and tointegrate with the Sprint PCS network. The PCS service packages we currentlyoffer include the following:

***100% digital wireless network.******  ***We are part ofSprint’s 100% digital PCS wireless network. Sprint PCS has licenses to provideservice to the entire U.S. population, including Puerto Rico and the U.S.Virgin Islands, using a single frequency band and a single technology. SprintPCS, together with third party affiliates like us, operates PCS systems in over300 metropolitan markets, including the 100 largest U.S. metropolitan areas.Sprint PCS’s service, including third party affiliates, reaches approximately250 million people. Sprint PCS provides service through a combination of:

·       operatingits own digital network in major U.S. metropolitan areas using CDMA digitalspread-spectrum wireless technology;

·       affiliatingwith other companies, such as us, that use CDMA, mainly in and around smallerU.S. metropolitan areas;

·       roamingon other providers’ digital networks that use CDMA; and

·       roamingon other providers’ analog cellular networks using multi-mode and multi-bandhandsets.

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***Third generationservices (PCS Vision).******  ***We, along withSprint PCS, launched the initial stages of third generation (3G) capability inour territory in the third quarter of 2002. This capability allows moreefficient utilization of our network when voice calls are made using 3G-enabledhandsets, which are handsets with increased capacity. It also enables theprovision of enhanced data services. The service, marketed as “PCS Vision,”allows our subscribers to use their PCS Vision-enabled devices to checke-mail, take and receive pictures, play games with full-color graphics andpolyphonic sounds and browse the Internet wirelessly with speeds of up to 144kilobytes per second with average throughput speeds in the range of 50-70kilobytes per second.******In addition, in 2004Sprint announced its plan to deploy a new wireless high-speed data network—calledEvolution Data Optimized (“EV-DO”)—across its network. With average downloadspeeds of 400-700 kilobytes per second and peak rates of up to 2 megabitsper second, EV-DO, marketed as “Power Vision,” is expected to accelerate mobiledevice data usage. Sprint has deployed EV-DO in 141  metropolitan marketsas of early November, 2005, and expects the service to be accessible to about150 million people in over 220 metropolitan markets by early 2006. Althoughwe are not required to deploy EV-DO across our territory, we have deployedEV-DO in Grand Rapids, Michigan and are evaluating the deployment of EV-DO inadditional markets in our territory and the timing of any such additionaldeployment.

**Roaming**

***Sprint PCS roaming.******  ***Sprint PCSroaming includes both inbound roaming, when Sprint PCS wireless subscribersbased outside of our territory use our network, and outbound roaming, when oursubscribers use the Sprint PCS network outside of our territory. We have areciprocal per minute fee with Sprint PCS for inbound and outbound Sprint PCSroaming. Effective as of April 1, 2004, which date was the effective dateof the amendments to our affiliation agreements with Sprint PCS, the reciprocalrate is $0.058 per minute through December 31, 2006. Thereafter, the ratewill be calculated based upon a predetermined formula specified in ouraffiliation agreements with Sprint PCS. Immediately prior to the amendments toour affiliation agreements with Sprint PCS, the reciprocal rate was $0.041 perminute. Our ratio of inbound to outbound roaming with Sprint PCS for the yearended September 30, 2005 was approximately 1.5 to 1 and is expected todecline over time as the number of our subscribers increases. Sprint PCSroaming revenue is not subject to the 8% affiliation fee that Sprint PCS retainson revenues billed to subscribers based in our territory.

In addition to the reciprocal per minute fee for theSprint PCS roaming discussed above, we also recognize roaming revenue andexpense related to data usage from PCS Vision services when wireless subscribersare using such services outside of their home territory. We recognize revenuewhen a wireless subscriber based outside of our territory uses PCS Vision dataservices in our territory and we recognize expense when our subscribers usesuch services on the Sprint PCS network outside of our territory. This roamingactivity is settled on a per kilobyte (“Kb”) basis. For 2003 the reciprocalrate was approximately $0.0013 per Kb. Effective as of April 1, 2004, thereciprocal  rate is $0.0020 per Kb throughDecember 31, 2006. Thereafter, the rate will be calculated based upon apredetermined formula specified in our affiliation agreements with Sprint PCS.

***Non-Sprint PCS roaming.******  ***Non-Sprint PCSroaming includes both inbound non-Sprint PCS roaming, when non-Sprint PCSsubscribers use our network, and outbound non-Sprint PCS roaming, when oursubscribers use a non-Sprint PCS network. Pursuant to roaming agreementsbetween Sprint PCS and other wireless service providers, when another wirelessservice provider’s subscriber uses our portion of the Sprint PCS network, weearn inbound non-Sprint PCS roaming revenue. These wireless service providersmust pay fees for their subscribers’ use of our portion of the Sprint PCSnetwork, and as part of our collected revenues, we are entitled to 92% of thesefees. Currently, pursuant to our services agreements with Sprint PCS, Sprintbills these wireless service providers for these roaming fees and passes ourportion of the fees to us. When another wireless service provider providesservice to one of our subscribers, we pay outbound non-Sprint PCS roaming fees.Sprint PCS then bills our subscribers for use of that provider’s 

13

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network at ratesspecified in their contract and pays us 100% of this outbound non-Sprint PCSroaming revenue collected from that subscriber on a monthly basis. We bear thecollection risk for all service.

***Reseller agreements.******  ***We alsorecognize revenue from subscribers of various wholesale resellers of personalcommunications service when those subscribers use our portion of the Sprint PCSnetwork. These reseller agreements are negotiated and entered into by SprintPCS, and we receive a per minute rate for each minute that the subscribers ofthese resellers use our portion of the Sprint PCS network. These subscribersmay be based within or outside our territory. As described below in thediscussion of our management agreements with Sprint PCS, through December 31,2006, we are required to participate in all resale arrangements that meetcertain pricing minimums and, thereafter, even if we choose not to continue, wehave certain continuing obligations with respect to existing resellers.

**Marketing Strategy**

Our marketingstrategy is to complement Sprint’s national marketing strategies withtechniques tailored to each of the specific markets in our territory.

***Use of Sprint’sbrand.***   We feature exclusively andprominently the nationally recognized Sprint brand name in our marketing andsales efforts. From the subscribers’ point of view we are Sprint in our marketsand, they use our portion of the Sprint PCS network and the rest of the SprintPCS network as a unified network.

***Advertising andpromotions.***   Sprint promotes its productsthrough the use of national as well as regional television, radio, print,outdoor and other advertising campaigns. In addition to Sprint’s nationaladvertising campaigns, we advertise and promote Sprint PCS products and serviceson a local level in our markets at our cost. We have the right to use anypromotional or advertising materials developed by Sprint and only have to paythe incremental cost of using those materials, such as the cost of local radioand television advertisement placements, and material costs and incrementalprinting costs. We also benefit from any advertising or promotion of Sprint PCSproducts and services by third party retailers in our territory, such asRadioShack and Best Buy. We must pay the cost of specialized Sprint printadvertising by third party retailers. Sprint also runs numerous promotionalcampaigns which provide subscribers with benefits such as additional featuresat the same rate or free minutes or kilobytes of use for limited time periods.We offer some of these promotional campaigns to potential subscribers in ourterritory.

***Sales force withlocal presence.******  ***We have established local salesforces to execute our marketing strategy through our company-owned retailstores, local distributors, direct business-to-business contacts and otherchannels.

**Sales and Distribution**

Our sales anddistribution plan is designed to mirror Sprint’s multiple channel sales anddistribution plan and to enhance it through the development of localdistribution channels. Key elements of our sales and distribution plan consistof the following:

***·****** ***SprintPCS retail stores.***  ***Asof September 30, 2005, we operated 33 Sprint PCS stores at variouslocations within our territory. These stores provide us with a local presenceand visibility in certain markets within our territory. Following the SprintPCS model, these stores are designed to facilitate retail sales, subscriberactivation, bill collection and customer service.

***·****** ***ExclusiveCo-Branded Dealers.***  ***Weenter into agreements with exclusive agents that operate Sprint PCS storesin our territory to further expand our distribution channels. These “brandedstores” function similarly to our company-owned stores but are operatedby a third party. These third parties purchase equipment from us, resell it tothe consumer and receive compensation from us in the form of commissions. As ofSeptember 30, 2005, we had 59 of these branded stores and kiosks operatingin our territory.

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***·****** ***Nationalthird party retail stores.***  ***Sprint PCS has national distributionagreements with various national retailers for the sale of Sprint PCS productsand services. These national agreements cover retailers’ stores in our marketsand include RadioShack, Best Buy, Costco, Staples, OfficeMax, Office Depot, andWal-Mart. As of September 30, 2005, these retailers had approximately 450locations in our territory.

***·****** ***Localthird party distributors.***  ***We contract directly with local third partydistributors in our territory. These retailers are typically local businessesthat have a presence in our markets. Local third party distributors purchasehandsets and other PCS retail equipment from us and market Sprint PCS serviceson our behalf. We are responsible for managing this distribution channel and asof September 30, 2005, these local third party distributors hadapproximately 125 locations within our licensed territory. We compensate localthird party distributors through commissions for subscriber activations.

***·****** ***Electroniccommerce.***  ***Sprintmaintains an Internet site, www.sprint.com, which contains information onSprint wireless products and services. A visitor to the Sprint internet sitecan order and pay for a handset and select a rate plan. Sprint PCS wirelesssubscribers visiting the site can review the status of their account, includingthe number of minutes used in the current billing cycle. We recognize therevenues generated by wireless subscribers in our territory who purchase SprintPCS products and services over the Sprint internet site.

***Distribution mix.******  ***Theapproximate percentage of our gross subscriber additions that originated fromeach of our distribution channels for the year ended September 30, 2005and the periods ended September 30, 2004 and July 1, 2004 is asfollows:

| ** **                                                               | ** ** | **Year Ended  September 30,  2005** | ** ** | **Period Ended  September 30,  2004** | ** ** | **Period Ended  July 1,  2004** | ** ** |
|--------------------------------------------------------------------------|------------|-----------------------------------------------|------------|-------------------------------------------------|------------|-------------------------------------------|------------|
| Sprint retail  stores                                                    |       |                                          | 39         |                                            |       |                                      | 30         |   |   |   | 30 |   |   |
| National third  party retail stores                                      |       |                                          | 19         |                                            |       |                                      | 23         |   |   |   | 32 |   |   |
| Local third party  distributors (including exclusive co-branded dealers) |       |                                          | 24         |                                            |       |                                      | 28         |   |   |   | 20 |   |   |
| Other                                                                    |       |                                          | 18         |                                            |       |                                      | 19         |   |   |   | 18 |   |   |
|                                                                     |       |                                          | 100        | %                                               |       |                                      | 100        | % |   |   | 100 | % |   |

 

**Technology**

***General.******  ***Beginning in1993, the FCC allocated the 1900 MHz frequency block of the radio spectrum forwireless personal communications services. Wireless personal communicationsservices differ from original analog cellular telephone service principally inthat wireless personal communications services networks operate at a higherfrequency and employ advanced digital technology. Analog-based networkssend signals in which the transmitted signal resembles the input signal, thecaller’s voice. Digital networks convert voice or data signals into a stream ofdigits that permit a single radio channel to carry multiple simultaneoustransmissions. Digital networks also achieve greater frequency reuse thananalog networks, resulting in greater capacity than analog networks. Thisenhanced capacity, along with enhancements in digital protocols, allows digital-basedwireless technologies, whether using wireless personal communications servicesor cellular frequencies, to offer new and enhanced services, including greatercall privacy and more robust data transmission, such as facsimile, electronicmail and connecting notebook computers with computer/data networks.

Wireless digitalsignal transmission is accomplished through the use of various forms offrequency management technology or “air interface protocols.” The FCC has notmandated a universal air interface protocol for digital wireless personalcommunications services networks. Digital wireless personal 

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communicationsnetworks operate under one of three principal air interface protocols: CDMA,time division multiple access (“TDMA”) or global systems for mobilecommunications (“GSM”). TDMA and GSM communications are both time divisionmultiple access networks but are incompatible with each other. CDMA isincompatible with both GSM and TDMA networks. Accordingly, a subscriber of anetwork that utilizes CDMA technology is unable to use a CDMA handset whentraveling in an area not served by CDMA-based wireless personal communicationsservices operators unless he or she is carrying a dual-band/dual-mode handsetthat permits use of the analog cellular network in that area. The same issuewould apply to users of TDMA or GSM networks. All of the wireless personalcommunications services operators now have dual-mode or tri-mode handsetsavailable to their subscribers. Because digital networks do not cover all areasin the country, these handsets will remain necessary for segments of thesubscriber base.

***Benefits of CDMA technology.******  ***The Sprint PCSnetwork and the networks of PCS Affiliates of Sprint all use digital CDMAtechnology, which is a digital spread-spectrum wireless technology thatallows a large number of users to access a single frequency band by assigning acode to all speech bits, sending a scrambled transmission of the encoded speechover the air and reassembling the speech into its original format. We believethat CDMA provides important network performance benefits such as:

·       *Greater capacity.*   We believe, based on studies by CDMAmanufacturers and our experience since its inception, that CDMA networks canprovide network capacity that is approximately seven to ten times greater thanthat of analog technology and approximately three times greater than TDMA andGSM digital networks;

·       *Privacy and security.  *CDMA technology combines aconstantly changing coding scheme with a low power signal to enhance callsecurity and privacy;

·       *Soft hand-off.*   CDMA networks transfer calls throughoutthe CDMA network using a technique referred to as a soft hand-off, whichconnects a mobile subscriber’s call with a new base station while maintaining aconnection with the base station currently in use. CDMA networks monitor thequality of the transmission received by multiple base stations simultaneouslyto select a better transmission path and to ensure that the network does notdisconnect the call in one cell unless replaced by a stronger signal fromanother base station. Analog, TDMA and GSM networks use a “hard hand-off” anddisconnect the call from the current base station as it connects with a new onewithout any simultaneous connection to both base stations;

·       *Simplified frequency planning.  *Frequencyplanning is the process used to analyze and test alternative patterns offrequency used within a wireless network to minimize interference and maximizecapacity. Unlike TDMA-and GSM-based networks, CDMA-based networks can reuse thesame subset of allocated frequencies in every cell, substantially reducing theneed for costly frequency reuse patterning and constant frequency planmanagement;

·       *Longer battery life.  *Due to theirgreater efficiency in power consumption, CDMA handsets can provide longerstandby time and more talk time availability when used in the digital mode thanhandsets using alternative digital or analog technologies; and

·       *Efficient migration path.  *We believe that CDMAtechnology has an efficient and incremental migration path to next generationvoice and data services. Unlike technologies that require essentially areplacement investment to upgrade, CDMA upgrades, such as 1xRTT (which is thename for the first phase of CDMA’s evolution to 3G) and EV-DO, can be completedincrementally.

**Competition**

Competition in the wireless telecommunicationsindustry is intense. We compete with a number of wireless service providers inour markets. We believe that in our territory our primary competition is 

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with national andregional wireless service providers such as ALLTEL, Centennial, CingularWireless, U.S. Cellular, Nextel, Nextel Partners, T-Mobile and VerizonWireless. Although we continue to compete with Nextel and Nextel Partners,Nextel and Sprint have merged and Sprint has announced that it will purchasethe shares of Nextel Partners that it does not already own, making NextelPartners a wholly owned subsidiary of Sprint.

We also face competition from resellers, which providewireless services to customers but do not hold FCC licenses or own facilities.Instead, the resellers buy blocks of wireless telephone numbers and capacityfrom a licensed carrier and resell services through their own distributionnetwork to the public. 

In addition, we compete in our territory withproviders of existing communications technologies, such as paging, specializedmobile radio service dispatch and conventional landline telephone companies, aswell as cable operators and, increasingly, internet companies. Potential usersof wireless personal communications services networks may find theircommunications needs satisfied by other current and developing technologies.One- or two-way paging or beeper services that feature voice messagingand data display as well as tone-only service may be adequate for potentialcustomers who do not need to speak to the caller. Additionally,telecommunications companies and cable operators are starting to roll-out arange of new devices and services that combine wireless, landline and internetaccess. For example, Verizon recently launched an internet-linked phone andSprint and various cable companies have announced a partnership that mayutilize cell phones designed to connect wirelessly to broadband internetconnections using wireless fidelity (“Wi-Fi”) technology. As these newtechnologies develop, the level of competition that we face becomes more difficultto anticipate and, therefore, compete against. Moreover, because some of thecompetitors have pre-existing relationships with potential customers (e.g.,existing cable providers), they may have some advantages over us (e.g., onebill for all services bundled together).

In the future, we expect to face increased competitionfrom entities providing similar services using other communicationstechnologies, including satellite based telecommunications and wireless cablenetworks. While some of these technologies and services are currentlyoperational, others are being developed or may be developed in the future.

Many of our competitors have significantly greaterfinancial and technical resources and larger subscriber bases than we do. Inaddition, some of our competitors may be able to offer regional coverage inareas not served by the Sprint PCS network, or, because of their callingvolumes or relationships with other wireless providers, may be able to offerregional roaming rates that are lower than those that we offer. Wirelesspersonal communications service operators will likely compete with us inproviding some or all of the services available through our portion of theSprint PCS network and may provide services that we do not. Additionally, weexpect that existing cellular providers will continue to upgrade their networksto provide digital wireless communication services competitive with Sprint.Currently, there are five national wireless providers who are generally allpresent in major markets across the country. In January 2003, the FCC rule imposinglimits on the amount of spectrum that can be held by one provider in a specificmarket was lifted, which has facilitated the consolidation of some nationalproviders.

The FCC’s mandate that wireless carriers provide forwireless local number portability (WLNP) went into effect on November 24,2003. WLNP allows subscribers to keep their wireless phone numbers whenswitching to a different service provider, which could make it easier forcompeting providers to market their services to our existing users. WLNP makessubscriber churn more likely, and we may be required to increase subsidies forproduct upgrades and/or reduce pricing to match competitors’ initiatives in aneffort to retain subscribers or replace those who switch to other carriers.

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Over the past several years, the FCC has auctioned,and may continue to auction, large amounts of wireless spectrum that could beused to compete with PCS services from Sprint. Based upon increasedcompetition, we anticipate that market prices for two-way wireless servicesgenerally will decline in the future. We will compete to attract and retainsubscribers principally on the basis of:

·       the strength of the Sprintbrand name, services and features;

·       Sprint PCS’s network;

·       our network coverage andreliability; and

·       the benefits of CDMAtechnology.

Our ability to compete successfully will also depend,in part, on our ability to anticipate and respond to various competitivefactors affecting the industry, including:

·       new services andtechnologies that may be introduced;

·       changes in consumerpreferences;

·       demographic trends;

·       economic conditions; and

·       discountpricing strategies by competitors.

**Employees**

Asof September 30, 2005, we employed 462 employees. Our employees are notrepresented by any labor union. We believe that we have a good relationshipwith our employees.

**Affiliation Agreements with Sprint PCS**

Each Sprint PCS Affiliate enters into the followingfour major affiliation agreements with Sprint PCS:

·       a management agreement;

·       a services agreement; and

·       two trademark and servicemark license agreements with different Sprint entities.

Ouraffiliation agreements with Sprint PCS consist of three sets of the foregoingagreements, one set between Sprint PCS and each of iPCS Wireless, Inc.,Horizon Personal Communications, Inc. and Bright Personal CommunicationsServices, LLC. Except as described herein, the material terms of each set ofaffiliation agreements with Sprint PCS are substantially the same.

Underour affiliation agreements with Sprint PCS, we have the exclusive right toprovide wireless mobility communications services using the 1900 MHz frequencyrange under the Sprint brand name in our territory. Sprint PCS holds thespectrum licenses. The affiliation agreements with Sprint PCS require us tointerface with the Sprint PCS network by building our network to operate on the10, 20 or 30 MHz wireless personal communications services frequencies licensedto Sprint in the 1900 MHz range.

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Thefollowing is a description of the material terms and provisions of ouraffiliation agreements with Sprint PCS.

***The managementagreements.  ***Under the management agreementswith Sprint PCS, we have agreed to:

·       own, construct and manage awireless personal communications services network in our territory incompliance with FCC license requirements and other technical requirementscontained in the management agreements;

·       distribute Sprint PCSproducts and services;

·       use Sprint PCS’s and ourown distribution channels in our territory;

·       conduct advertising andpromotion activities in our territory; and

·       manage that portion of thewireless subscriber base assigned to our territory.

Sprint PCS has the right to monitor our wirelesspersonal communications services network operations and the right to access ourportion of the wireless network of Sprint PCS, including the right to test andmonitor any of our facilities and equipment.

·       *Exclusivity.  *We are designated asthe only person or entity that is a manager or operator for Sprint PCS inour territory. Sprint PCS is prohibited from owning, operating, building ormanaging another wireless mobility communications network using the 1900 MHzfrequency range in our territory while our management agreements are in placeand no event has occurred that would permit such agreements to terminate.Sprint PCS is permitted to make national sales to companies in the coveredterritory and to permit resale of the Sprint PCS products and services in theterritory. Our complaints against Sprint allege, among other things, that themerger between Sprint and Nextel and the operation of the combined companiesafter the merger results in a breach of the exclusivity provisions of ouraffiliation agreements with Sprint PCS.

·       *Network build-out.  *The management agreements specifythe terms of the Sprint PCS affiliation, including the required networkbuild-out plan. We have agreed to cover a specified percentage of thepopulation within each of the markets that comprise our territory by specified dates.Sprint PCS has notified us that, based on the information we have provided toSprint PCS, as of March 26, 2004, iPCS Wireless has completed the requiredbuild-out of its network, including those aspects of the build-out thatwere not required to be completed until a future date, and we are in compliancewith all applicable build-out requirements in iPCS Wireless’s territory. Webelieve that Horizon PCS is in compliance with all applicable build-outrequirements for its networks. If Sprint PCS decides to expand ourterritory, Sprint PCS must provide us with written notice of the proposedexpansion and we have 90 days to determine whether we will build-outthe proposed area. If we do not exercise this right, then Sprint PCS may build-outthe coverage itself, or it may allow another Sprint PCS Affiliate or anotherthird party to do so on terms and conditions that are no more favorable thanthose that were offered to and rejected by us. Sprint PCS has the right, in newcoverage that it constructs, or that is constructed by another Sprint PCSAffiliate or another third party, to manage the network or hire another SprintPCS Affiliate to manage the network in the new coverage. We may choose to build-outadditional coverage in our territory that is not required by Sprint PCS;provided, however, that we may not elect to build-out additional coveragefor areas with respect to which we previously declined to build.

·       *Products and services.  *The management agreementsidentify the products and services that we are required to offer in ourterritory. These services include, but are not limited to, PCS consumer andbusiness products and services from Sprint PCS available as of the date of theagreement, or as modified by Sprint PCS. Sprint PCS will use commerciallyreasonable efforts to provide adequate quantities of any equipment necessaryfor us to offer, sell, promote and support the Sprint PCS 

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productsand services. We are allowed to sell wireless products and services that arenot Sprint PCS products and services if the offer of those additional productsand services does not violate our obligations under our affiliation agreementswith Sprint PCS, cause distribution channel conflicts, materially impede thedevelopment of the Sprint PCS network, cause consumer confusion with Sprint’sPCS products and services or violate the trademark license agreements. We mustprovide Sprint PCS with notice that we intend to offer such products orservices and Sprint PCS may object if it believes that such products orservices are confusingly similar to Sprint PCS products or services, or ifSprint PCS plans to introduce such products or services as Sprint PCS productsor services within the following six months. We may also cross-sellservices such as specified types of long distance service, Internet access,handsets and prepaid phone cards with Sprint and other Sprint PCSAffiliates. If we decide to use third parties to provide these services, wemust give Sprint PCS an opportunity to provide the services on the sameterms and conditions. We cannot offer traditional telephone services based onwireless technology specifically designed for the competitive local exchangemarket in areas where Sprint owns the local telephone company unless we namethe Sprint-owned local telephone company as the exclusive distributor orSprint PCS approves the terms and conditions.

·       *National sales programs.  *We arerequired to participate in the Sprint PCS wireless sales programs for sales toSprint PCS’s corporate accounts and will pay the expenses and receive thecompensation from Sprint PCS relative to sales to customers of those accountslocated in our territory. We are also required to use Sprint’s long distanceservice for calls made from within designated portions of our territory toareas outside those designated portions and to connect our network to thenational platforms Sprint PCS uses to provide services under the managementagreements and services agreements. Sprint PCS will purchase such long distanceservice from Sprint Corporation on our behalf at a price and terms at least asfavorable to Sprint PCS as the best prices and terms Sprint Corporation offersto any similarly situated wholesaler. However, we may purchase private linecapacity for call routing directly from Sprint Corporation, if we can obtainmore favorable terms, and Sprint Corporation has agreed to provide us with suchcapacity at the best price offered to similarly situated third parties. Underthe management agreements, we are prohibited from reselling long distanceservice to other carriers; however, we may (1) transport long distancecalls for customers, (2) transport long distance calls for resellers whensuch resale is subject to FCC mandate or when Sprint chooses to make suchresale available, or (3) transport long distance calls for purposes ofroaming.

·       *Service pricing.  *We are required tooffer PCS subscriber pricing plans from Sprint PCS designated for regional ornational offerings, including “Fair & Flexible” plans, “Free &Clear” plans and “PCS Vision” plans. We are permitted to establish our ownlocal price plans for PCS products and services offered only in our territory,subject to Sprint PCS’s approval.

·       *Roaming and fees.  *We are entitled toreceive a weekly fee from Sprint PCS equal to 92% of net “billed revenues”related to subscriber activity less applicable write-offs, net of depositsapplied and net of recoveries. Sprint PCS determines the write-offs for anygiven time period. Outbound non-Sprint PCS roaming billed to subscribers basedin our territory, proceeds from the sales of handsets and accessories, amountscollected with respect to taxes and surcharges for enhanced 911 and WLNP anduniversal service fund charges are not considered “billed revenues.” Billedrevenues generally include all other subscriber account activity for Sprint PCSproducts and services in our territory, which includes such activities billedto, attributed to or otherwise reflected in subscribers’ accounts. We generallyare entitled to 100% of the proceeds from customers for equipment andaccessories sold and 81.36% of fees for enhanced 911 attributable tosubscribers based in our markets, less applicable write-offs. We also areentitled to 100% of the universal service funds from the Universal ServiceAdministrative Company associated with subscribers in our markets.

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Many Sprint PCS wirelesssubscribers purchase bundled pricing plans that allow roaming anywhere on theSprint PCS network without incremental PCS roaming charges. However, we willearn Sprint PCS roaming revenue for every minute that a Sprint PCSwireless subscriber from outside our territory enters our territory and usesour services, which is offset against amounts we owe as expenses for everyminute that our subscribers use services outside our territory. The analogroaming rate for use on a non-Sprint PCS provider’s network is set under SprintPCS’s third party roaming agreements. The reciprocal roaming rate for voicesubscribers who roam into the other party’s or another Sprint PCS Affiliate’snetwork is fixed through December 31, 2006 at $0.058 per minute, plus theactual long distance charges incurred. Beginning on January 1, 2007, thereciprocal roaming rate will change annually to equal 90% of Sprint PCS’sretail yield for voice usage from the prior year. Sprint PCS’s retail yield forvoice usage is defined as Sprint PCS’s average revenue per user for voiceservices divided by the average minutes of use per user. With respect tocertain of our markets in western and eastern Pennsylvania, we receive thebenefit of a special reciprocal rate for voice subscribers of $0.10 per minute.This special rate will terminate, with respect to each of these two sets ofmarkets, on the earlier of December 31, 2011 or the first day of thecalendar month which follows the first calendar quarter during which we achievea subscriber penetration rate of at least 7% of our covered populations.

In addition to thereciprocal per minute fee for the Sprint PCS roaming discussed above, we alsorecognize roaming revenue and expense related to data usage from PCS Visionservices, known as “3G data,” when wireless subscribers are using such servicesoutside of their home territory. We recognize revenue when a wirelesssubscriber based outside of its markets uses PCS Vision data services on ournetwork and we recognize expense when our subscribers use such services on theSprint PCS network or network of another Sprint PCS Affiliate outside of ourmarkets. The reciprocal rate for this service is $0.0020 per kilobyte throughDecember 31, 2006. Beginning on January 1, 2007, the rate for thisservice will change annually to equal 90% of Sprint PCS’s retail yield for 3Gdata usage from the prior calendar year; provided that such amount will not beless than our network costs (including a reasonable return using our weightedaverage cost of capital applied against our net investment in our service areanetwork) to provide such services. Sprint PCS’s retail yield for 3G data usageis defined as Sprint PCS’s average revenue per user for 3G data usage dividedby the average kilobytes of use per user.

·       *Vendor purchase agreements.  *We mayparticipate in discounted volume-based pricing on wireless-relatedproducts and warranties Sprint PCS receives from its vendors. Sprint PCS willuse commercially reasonable efforts to obtain for us the same prices as SprintPCS receives from its vendors.

·       *Advertising and promotions.  *SprintPCS uses national television, radio, print, outdoor and other advertisingcampaigns to promote its products. We benefit from the national advertising. Inaddition to Sprint PCS’s national advertising campaigns, we advertise andpromote Sprint PCS products and services on a local level in our markets at ourcost. We have the right to use any promotion or advertising materials developedby Sprint PCS and only have to pay the incremental cost of using those materials,such as the cost of local radio and television advertisement placements andincremental printing costs. Sprint PCS also runs numerous promotional campaignsthat provide subscribers with benefits such as additional features at the samerate or free minutes of use for limited time periods. We generally offers thesepromotional campaigns to potential subscribers in our territory.

·       *Resale of products and services.  *SprintPCS may choose to offer a resale product under which third party resellers, orMVNOs, will resell Sprint PCS products and services under brand names otherthan “Sprint PCS.” The management agreements provide that we willparticipate in all resale arrangements between Sprint PCS and resellers thatare entered into, renewed or extended by 

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Sprint PCS prior to December 31,2006, provided the terms and conditions of such resale arrangement meet certainminimum pricing floors set forth in our management agreements. With respect toresale arrangements entered into prior to April 1, 2004, we will be paidthe reciprocal roaming rate for voice and data usage of the Sprint PCS networkin our territory by customers of such resellers, which rates are fixed until December 31,2006 at $0.058 per minute and $0.0020 per kilobyte, respectively. With respectto all resale arrangements entered into, renewed or extended by Sprint PCSbetween April 1, 2004 and December 31, 2006, we will receive theamount of fees collected by Sprint PCS from such resellers on a pass-throughbasis as payment for the use of the Sprint PCS network in our territory bycustomers of such resellers. We may elect to discontinue participation in anyresale arrangement on the later to occur of (1) December 31, 2006,and (2) expiration of the then remaining term of such resale arrangement,giving effect to any renewals or extensions occurring prior to December 31,2006. For purposes of determining renewals and extensions of resalearrangements, if an arrangement does not expressly state an initial term, thenthe arrangement will be deemed to have a five-year initial term, and if an arrangementstates an initial term in excess of ten years, then the arrangement shall bedeemed to have a ten-year initial term. We have begun discussions with Sprintregarding the terms and conditions under which we would continue to participatein reseller arrangements entered into, renewed or extended by Sprint afterDecember 31, 2006; provided, however, that we have certain continuingobligations with respect to existing resellers.

·       *Program requirements.  *We must comply with the SprintPCS program requirements for technical standards, customer service standards,roaming coverage and national and regional distribution and national accountsprograms. Some of the technical standards relate to network up-time, droppedcalls, blocked call attempts and call origination and termination failures. Themanagement agreements provide that Sprint PCS can change the programrequirements at its discretion and we must implement such changes within acommercially reasonable period of time; provided, however, that we can declineto implement certain changes that we determine will meet certain parameters. Wecan decline to implement a “capital” program requirement change, defined aschange that would require us to make a capital expenditure that is greater than5% of our capital budget, if such change would either (i) have a negativenet present value applying a five-year discounted cash flow model or (ii) causeour combined peak negative cash flow to be an amount greater then 3% of our “enterprisevalue” (defined as the combined book value of our outstanding debt and equityless cash) when considered individually, or an amount greater than 5% of ourenterprise value when combined with all other program requirement changeswithin the prior twelve months. Additionally, we can decline to implement a “non-capital”program requirement change, defined as a change that would not require us tomake a capital expenditure in excess of 5% of our capital budget, if suchchange would either (i) cause our combined peak negative cash flow to be anamount greater than 3% of our “enterprise value” when considered individually,or an amount greater than 5% of our enterprise value when combined with allother program requirement changes within the prior twelve months or (ii) causea decrease in our forecasted five-year discounted cash flow of more than 3% ona combined net present value basis when considered individually, or more than5% on a combined net present value basis when combined with all other programrequirement changes within the prior twelve months. Notwithstanding theforegoing, we are required to implement certain program requirement changes,regardless of whether we determine that such changes will exceed any of theabove referenced parameters. We must implement a capital program requirementchange if the capital requirement associated with such change is necessary tocomply with the network performance standards required under our managementagreement. Additionally, we must implement any program requirement change ifthe change relates to a pricing plan or a roaming program and Sprint PCSreasonably determines that the change must be implemented immediately torespond to competitive market forces. Finally, Sprint PCS may require us toimplement any 

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programrequirement change if Sprint PCS compensates us the amount necessary to preventus from exceeding all of the applicable above-referenced parameters.

·       *Non-competition.  *We may not offer Sprint PCS productsand services outside our territory without the prior written approval of SprintPCS. Within our territory, we may offer, market or promote telecommunicationsproducts and services only under the Sprint PCS brand, our own brands, brandsof our related parties or other products and services approved under ourrespective management agreements, except that no brand of a significantcompetitor of Sprint PCS or its related parties may be used for those productsand services. To the extent we have obtained or will obtain licenses to providewireless personal communications services outside our territory, we may not usethe spectrum to offer Sprint PCS products and services without prior writtenconsent from Sprint PCS. Additionally, if subscribers in our markets travel toother geographic areas, we must route those subscribers’ incoming and outgoingcalls according to Sprint PCS’s roaming and inter-service arearequirements, without regard to any wireless networks that we or our respectiveaffiliates operate.

·       *Inability to use non-Sprint brand.  *We may not market,promote, advertise, distribute, lease or sell any of the Sprint PCS productsand services on a non-branded, “private label” basis or under any brand,trademark or trade name other than the Sprint PCS brands, except for sales toresellers or as otherwise permitted under the trademark and service marklicense agreements.

·       *Transfer of the PCS network.  *In conjunction with thesale of its wireless PCS network, Sprint PCS can sell, transfer or assign itswireless PCS network and its FCC licenses to a third party if the third partyagrees to be bound by the terms of the management agreements and the servicesagreements.

·       *Change in control.  *Sprint PCS has the right towithhold its consent to any transaction pursuant to which the “ultimate parent”of iPCS Wireless,  Horizon Personal Communications,  or BrightPersonal Communications Services, changes, but this consent cannot beunreasonably withheld.

·       *Rights of first refusal.  *Sprint PCS has rights offirst refusal, without stockholder approval, to buy iPCS Wireless’s and BrightPersonal Communications Services’s assets upon a proposed sale of all orsubstantially all of their respective assets used in the operation of theirrespective networks.

·       *Term.  *The initial term of iPCS’ management agreementcommenced on January 22, 1999 and the initial terms of Horizon PersonalCommunications’s and Bright Personal Communication Services’s managementagreements commenced on June 8, 1998 and October 13, 1999,respectively, and each continues for a period of 20 years. Followingexpiration of the initial term, the management agreements will automaticallyrenew for three successive 10-year renewal periods (for a maximum of50 years including the initial term), unless at least two years prior tothe commencement of any renewal period either party notifies the other partythat it does not wish to renew the applicable management agreement.

·       *Termination of management agreements.**  *Each managementagreement can be terminated as a result of the following events:

·        termination of Sprint PCS’sspectrum licenses in the applicable company’s territory;

·        an uncured breach underour management agreement;

·        our management agreementnot complying with any applicable law in any material respect; or

·        the termination of any ofour trademark and service mark license agreements.

Thetermination or non-renewal of the management agreement triggers some of ourrights and some rights of Sprint PCS. The right of either party to require theother party to purchase or sell the operating assets is discussed below.

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If we have the right to terminate a managementagreement because of an event of termination caused by Sprint PCS, generally wemay:

·       in the case of theagreement with iPCS Wireless, require Sprint PCS to purchase all of itsoperating assets used in connection with its network for an amount equal to atleast 88% of its “entire business value” (as defined below); provided, however,in BTAs where Sprint PCS owns 10 MHz of spectrum or less, if Sprint PCSacquires additional spectrum, in the entirety of those BTAs in iPCS Wireless’territory such that Sprint PCS is the licensee of 20 MHz or more of PCSspectrum in iPCS Wireless’ territory, then the amount must be equal to at least80% of iPCS Wireless’ “entire business value”;

·       in the case of theagreements with each of Horizon Personal Communications, Inc. and BrightPersonal Communications Services, LLC., require Sprint PCS to purchase eithersubsidiaries’ operating assets used in connection with its network for anamount equal to at least 80% of such subsidiary’s “entire business value”;

·       in all areas in itsterritory where Sprint PCS was the licensee for 20 MHz or more of the spectrumon the date the applicable management agreement was executed, require SprintPCS to assign to us, subject to governmental approval, up to 10 MHz of licensedspectrum for an amount equal to the greater of either (i) the originalcost to Sprint PCS of the license plus any microwave relocation costs paid bySprint PCS and (ii) 9% of the applicable subsidiary’s “entire businessvalue”; or

·       choose not to terminate themanagement agreement and sue Sprint PCS for damages or submit the matter toarbitration.

If Sprint PCS has the right to terminate a managementagreement because of an event of termination caused by us, generally Sprint PCSmay:

·       require us, withoutstockholder approval, to sell the operating assets of the applicable subsidiaryto Sprint PCS for an amount equal to 72% of the “entire business value” of theapplicable subsidiary;

·       require us to purchase,subject to governmental approval, up to 10 MHz of licensed spectrum in ourterritory for an amount equal to the greater of either (i) the originalcost to Sprint PCS of the license plus any microwave relocation costs paid bySprint PCS and (ii) 10% of the “entire business value” of the applicablesubsidiary;

·       take any action as SprintPCS deems necessary to cure the breach of the management agreement, includingassuming responsibility for, and operating, the network of the applicable subsidiary;or

·       choosenot to terminate the management agreement and sue us for damages or submit thematter to arbitration.

·       *Non-renewalof management agreements.  *If Sprint PCS gives us timely noticethat it does not intend to renew a management agreement, we may:

·        require Sprint PCS topurchase all of the operating assets used in connection with the network of theapplicable subsidiary for an amount equal to 80% of the applicable subsidiary’s“entire business value”; or

·        in all areas in suchsubsidiary’s territory where Sprint PCS was the licensee for 20 MHz or more ofthe spectrum on the date the applicable management agreement was executed,require Sprint PCS to assign to such subsidiary, subject to governmentalapproval, up to 10 MHz of licensed spectrum for an amount equal to the greaterof either (i) the original cost to Sprint PCS of the license plus anymicrowave relocation costs paid by Sprint PCS and (ii) 10% of suchsubsidiary’s “entire business value.”

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Ifwe give Sprint PCS timely notice of non-renewal, or we and Sprint PCS both givenotice of non-renewal, or a management agreement expires with neither partygiving a written notice of non-renewal, or if a management agreement canbe terminated for failure to comply with legal requirements or regulatoryconsiderations, Sprint PCS may, subject to certain limitations:

·       purchase all of theapplicable subsidiary’s operating assets, without stockholder approval, for anamount equal to 80% of its “entire business value”; or

·       requiresuch subsidiary to purchase, subject to governmental approval, up to 10 MHz oflicensed spectrum in such subsidiary’s territory for an amount equal to thegreater of either (i) the original cost to Sprint PCS of the license plusany microwave relocation costs paid by Sprint PCS and (ii) 10% of suchsubsidiary’s “entire business value.”

·       *Determinationof entire business value.  *If the “entire business value” of anoperating subsidiary is to be determined, Sprint PCS and iPCS will each selectone independent appraiser and the two appraisers will select a third appraiser.The three appraisers will determine the subsidiary’s “entire business value” ona going concern basis using the following principles:

·        the “entire business value”is based on the price a willing buyer would pay a willing seller for the entireongoing business;

·        the then-current customarymeans of valuing a wireless telecommunications business will be used;

·        the business is conductedunder the Sprint PCS brands and such company’s affiliation agreements with SprintPCS;

·        such company is deemed toown the spectrum and frequencies presently owned by Sprint PCS that are used bysuch company under such company’s affiliation agreements with Sprint PCS; and

·        thevaluation will not include any value for businesses not directly related to theSprint PCS products and services, and those businesses will not be included inthe sale.

·       *Insurance.  *Weare required to obtain and maintain with financially reputable insurers who arelicensed to do business in all jurisdictions where any work is performed undersuch company’s management agreements, and who are reasonably acceptable toSprint PCS, workers’ compensation insurance, commercial general liabilityinsurance, business automobile insurance, umbrella excess liability insuranceand “all risk” property insurance.

·       *Indemnification.  *Wehave agreed to indemnify Sprint PCS and its directors, officers, employees andagents and related parties of Sprint PCS and their directors, officers,employees and agents against any and all claims against any of the foregoingarising from our violation of any law, a breach by us of any representation,warranty or covenant contained in its management agreement or any otheragreement between us and Sprint PCS, our ownership of the operating assets orthe actions or the failure to act of anyone employed or hired by us in theperformance of any work under the management agreement, except that we will notbe obligated to indemnify Sprint PCS for any claims arising solely from thenegligence or willful misconduct of Sprint PCS. Sprint PCS has agreed toindemnify us and our directors, officers, employees and agents against allclaims against any of the foregoing arising from Sprint PCS’s violation of anylaw, from Sprint PCS’s breach of any representation, warranty or covenantcontained in our management agreements or any other agreement between us andSprint PCS, and, solely with respect to the former Horizon PCS subsidiaries,from the actions or the failure to act of anyone who is employed by Sprint PCSin the performance of any work under the management agreements between Sprintand such subsidiary, except Sprint PCS will not be obligated to indemnify suchsubsidiary for any claims arising solely from such subsidiary’s negligence orwillful misconduct.

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·       *Disputeresolution.  *If the parties cannot resolve any dispute betweenthemselves, then our management agreements provide that the parties willcontinue to operate under our affiliation agreements with Sprint PCS and thateither party may file suit in a court of competent jurisdiction or commence anarbitration proceeding. Absent our express agreement with Sprint PCS to submitan issue or dispute to arbitration, neither party can be compelled to submit adispute to arbitration.

·       *Mostfavored nation clause.  *We generally have the right to amendour management agreements or services agreements to obtain the most favorableterms provided under a management agreement or services agreement betweenSprint PCS and another Sprint PCS affiliate of similar size (defined as havingat least three million covered persons) if, prior to December 31, 2006,Sprint PCS amends the terms of any of those agreements of another Sprint PCSaffiliate of similar size in a manner that is more favorable than the terms ofour agreements. This right is only effective, however, if we agree to acceptall of the terms and conditions set forth in the other agreements agreed toafter the date this right became effective; provided, however, that no specificchanges will be made to such our agreements if such changes were made to theother Sprint PCS Affiliates’ agreements (1) solely because the affiliateowns spectrum on which its network operates (unless such Sprint PCS Affiliateacquired the spectrum from Sprint PCS after the date this right becameeffective), (2) such changes were compelled by a law or regulationinapplicable to us, (3) such changes were due solely to a change in abuild-out plan or (4) such changes relate to unique terms or conditions.

***The services agreements.***   Theservices agreements outline various back office services provided by Sprint PCSand available to us for an additional fee.

The “SprintCCPU services” are support services provided by Sprint relating to billing,customer care, collections, network operations control center monitoring, nationalplatform, information technology, interconnectivity, voice mail, directoryassistance, operator services and roaming clearinghouse services. We haveagreed to continue to purchase the Sprint CCPU service from Sprint PCS through December 31,2006 at a monthly rate per subscriber of $7.00 until December 31, 2005 and$6.75 from January 1, 2006 until December 31, 2006. Beginning in2007, the monthly rate for the next three years for Sprint CCPU service will bereset to a mutually acceptable amount based on the amount necessary to recoverSprint PCS’s reasonable costs for providing Sprint CCPU service; provided,however that the monthly rate will not exceed $8.50 per subscriber. We havebegun discussions with Sprint regarding the terms and conditions under which wewould continue to purchase these services from Sprint after December 31,2006, if at all. If we cannot agree with Sprint PCS on a new rate for anyfuture three-year period beyond 2006, we have the option to continue topurchase the Sprint CCPU service and have an arbitrator determine the new rateor self-provision or procure those services elsewhere, subject to certainrights and procedures relating to our ability to transition only customer careand collection services beginning in 2008.

The “SprintCPGA services” are services provided by Sprint relating to subscriberactivation, credit verification, handset logistics and handset carrying andobsolescence costs. The cost for Sprint CPGA service is included as a part ofthe total costs that we use to calculate the non-GAAP financial measure that weuse called “CPGA.”  We have agreed tocontinue to purchase the Sprint CPGA service from Sprint PCS through December 31,2006 at a monthly rate of $23.00 per gross subscriber addition in the servicearea managed by iPCS Wireless’s area, and $22.00 per gross subscriber additionin the services areas of Horizon Personal Communications and Bright PersonalCommunications Services. Beginning in 2007, the monthly rate for the next threeyears for Sprint CPGA service will be reset to a mutually acceptable amountbased on the amount necessary to recover Sprint PCS’s reasonable costs forproviding Sprint CPGA service. We have begun discussions with Sprint regardingthe terms and conditions under which we would continue to purchase theseservices from Sprint after December 31, 2006, if at all. If we cannotagree with Sprint on a new rate for any future three-year period beyond 2006,we have the option to continue to purchase the Sprint CPGA service and have anarbitrator determine the new rate or self-provision or procure those serviceselsewhere.

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SprintPCS may contract with third parties to provide expertise and services identicalor similar to those to be made available or provided to us. We have agreed notto use the services performed by Sprint PCS in connection with any otherbusiness or outside our markets. Sprint PCS must give us nine months’ notice ifit discontinues a significant service, including customer service, billing orcollections. If we wish to continue to receive that service, Sprint PCS willuse commercially reasonable efforts to help us provide the service ourselves orfind another vendor to provide the service and to facilitate any transition.

Wemay elect to outsource all (but not less than all) of our customer careservices, which consist primarily of call center support, by providing noticeto Sprint PCS during the six-month period beginning on January 1,2006 and ending on June 30, 2006, together with payment of a $3.0 millionelection fee. After making the election, Sprint PCS will continue to provideservices to us, other than the customer care services that have beenoutsourced, and the services agreement shall be amended to provide that thefees such company pays to Sprint PCS for the Sprint CCPU service and the SprintCPGA service will be the then-current cost to Sprint PCS of suchservices; provided, however, that the fee for the Sprint CPGA service through December 31,2006, shall be $15.00 multiplied by the number of gross customer additions inour territory.

We, on the one hand, and Sprint PCS, on the otherhand, have agreed to indemnify each other as well as affiliates, officers,directors and employees of the other against any and all claims arising fromviolations by the indemnifying party of law or the services agreement exceptfor any liabilities resulting from the negligence or willful misconduct of theperson seeking to be indemnified or its representatives. Our servicesagreements also provide that no party will be liable to the other party forspecial, indirect, incidental, exemplary, consequential or punitive damages, orloss of profits arising from the relationship of the parties or the conduct ofbusiness under, or breach of, such services agreement except as may otherwisebe required by the indemnification provisions. Our services agreementsautomatically terminate upon termination of the associated managementagreement, and neither party may terminate the services agreement for anyreason other than the termination of the associated management agreement.

***The trademark and service mark license agreements.***   Wehave a non-transferable license to use, at no additional cost to us, the Sprintand Sprint PCS brand names and several other U.S. trademarks and service markson Sprint PCS products and services. We believe that the Sprint and Sprint PCSbrand names and symbols enjoy a high degree of recognition, providing suchcompanies an immediate benefit in the marketplace. The use of the licensedmarks by us is subject to adherence to quality standards determined by Sprintand use of the licensed marks in a manner that would not reflect adversely onthe image of quality symbolized by the licensed marks. We have agreed topromptly notify Sprint and Sprint PCS of any infringement of any of thelicensed marks within our territory of which we become aware and to provideassistance to Sprint and Sprint PCS in connection with Sprint’s enforcement ofits rights. We have agreed with Sprint and Sprint PCS that we and Sprint willeach indemnify the other for losses incurred in connection with a materialbreach of the trademark license agreements. In addition, we have agreed toindemnify Sprint and Sprint PCS from any loss suffered by reason of athird party claim arising from our use of the licensed marks or marketing,promotion, advertisement, distribution, lease or sale of any Sprint PCSproducts and services other than losses arising solely out of such our use ofthe licensed marks in compliance with the contractual guidelines.

Sprint and Sprint PCS can terminate our trademark andservice mark license agreements if we file for bankruptcy or materially breachsuch agreements or if the associated management agreement is terminated. We canterminate our trademark and service mark license agreements upon Sprint’s orSprint PCS’s abandonment of the licensed marks or if Sprint or Sprint PCSfiles for bankruptcy or the associated management agreement is terminated.Sprint can assign its interests in the licensed marks to a third party if thatthird party agrees to be bound by the terms of the company’s trademark andservice mark license agreements.

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**REGULATORY ENVIRONMENT**

**Regulationof the Wireless Telecommunications Industry**

The FCC can have a substantial impact upon entitiesthat manage wireless personal communications service networks and/or providewireless personal communications services because the FCC regulates thelicensing, construction, operation, acquisition and interconnectionarrangements of wireless telecommunications networks in the United States.Except as discussed below, Sprint, not us, holds the FCC licenses for thewireless services that we provide in our service territory. Therefore, most FCCregulations affecting the combined business apply directly to Sprint, but arebinding on us indirectly through contractual obligations.

The FCC haspromulgated a series of rules, regulations and policies to, among other things:

·       grantor deny licenses for wireless personal communications service frequencies;

·       grantor deny wireless personal communications service license renewals;

·       rule onassignments and/or transfers of control of wireless personal communicationsservice licenses;

·       governthe interconnection of wireless personal communications service networks withother wireless and wireline service providers;

·       establishaccess and universal service funding provisions;

·       establishservice requirements such as enhanced 911, service, telecommunications relayservice for the deaf (TRS) and hearing aid compatibility (HAC) functionality;

·       participatein number “pooling” programs and maintain detailed records of numbers usedsubject to audit;

·       allocatespectrum for PCS and other wireless services and establish procedures,including auction procedures, for awarding licenses to utilize spectrum forprovision of wireless services;

·       offernumber portability to subscribers;

·       imposefines and forfeitures for violations of any of the FCC’s rules;

·       imposeper-subscriber regulatory user fees on wireless telecommunications operations

·       regulatethe construction of towers and the placement of antennae on new or existingstructures;

·       regulatethe technical standards of wireless personal communications services networks;and

·       governcertain aspects of the relationships between carriers and subscribers, such asthe use of personal information and number portability.

Through rules thatbecame fully effective on January 1, 2003, the FCC eliminated its spectrumcap for Commercial Mobile Radio Service, or CMRS, which includes broadbandwireless personal communications services, cellular and SMR. The cap previouslyhad limited CMRS providers to 55 MHz in any geographic area. The FCC alsoeliminated its rule that prohibited a party from owning interests in bothcellular networks in the same Metropolitan Statistical Areas (“MSAs”), thoughit retained the cross- interest prohibition for less populous RuralService Areas (“RSAs”). The FCC’s new rules blur the “bright line” rule previouslyprovided by the spectrum caps, however, and require a case-by-case analysis todetermine whether a proposed CMRS spectrum combination will not have an anticompetitiveeffect. Our merger with Horizon PCS did not implicate the FCC’s revisedspectrum aggregation policy.

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**Transfersand Assignments of Wireless Personal Communications Services Licenses**

Although we use Sprint PCS’slicenses to provide wireless service as a PCS Affiliate of Sprint, followingthe consummation of our merger with Horizon PCS, we own one FCC license for PCSservices for the Chillicothe, Ohio market, and a related FCC license formicrowave radio backhaul/control facilities. The FCC must give prior approvalto the assignment of, or transfers involving, substantial changes in ownershipor control of a wireless personal communications service license. The FCCgranted its approval for the transfer of control of the Horizon PCS licenses onMay 12, 2005. This grant of approval is now final and non-appealable, andon July 6, 2005 we notified the FCC that the merger was consummated as of July 1,2005.

**Conditionsof Wireless Personal Communications Services Licenses**

Wireless personal communications service licenses aregranted for ten-year terms conditioned upon timely compliance with the FCC’sbuild-out requirements. Pursuant to the FCC’s build-out requirements, all 30MHz broadband wireless personal communications service licensees must constructfacilities that offer coverage to one-third of the population in their licensedareas within five years and to two-thirds of the population in such areaswithin ten years, and all 10 MHz broadband wireless personal communicationsservices licensees must construct facilities that offer coverage to at leastone-quarter of the population in their licensed areas within five years or makea showing of “substantial service” within that five-year period.

If the build-out requirements are not met, wireless personalcommunications service licenses could be forfeited. The FCC also requireslicensees to maintain control over their licenses, which means that Sprint mustmaintain a sufficient degree of supervisory power over our activities involvingSprint’s spectrum. Our affiliation agreements with Sprint PCS reflect anarrangement that the parties believe meet the FCC requirements for licenseecontrol of licensed spectrum.

If the FCC were todetermine that any of our respective affiliation agreements with Sprint PCSneed to be modified to increase the level of licensee control, the respectiveagreements may be modified to cure any purported deficiency regarding licenseecontrol of the licensed spectrum. However, the business arrangement between therespective parties may have to be restructured. The FCC could also imposemonetary penalties on Sprint, and possibly revoke one or more of the Sprintlicenses.

**WirelessPersonal Communications Services License Renewal**

Wireless personalcommunications service licensees can renew their licenses for additionalten-year terms. Wireless personal communications service renewal applicationsare not subject to auctions. However, under the FCC’s rules, third parties mayoppose renewal applications and/or file competing applications. If one or morecompeting applications are filed, a renewal application will be subject to acomparative renewal hearing. The FCC’s rules afford wireless personalcommunications services renewal applicants involved in comparative renewalhearings with a “renewal expectancy.” The renewal expectancy is the mostimportant comparative factor in a comparative renewal hearing and is applicableif the wireless personal communications service renewal applicant has:

·       provided“substantial service” during its license term; and

·       substantiallycomplied with all applicable laws and FCC rules and policies.

The FCC’s rules define “substantial service” inthis context as service that is sound, favorable and substantially above thelevel of mediocre service that might minimally warrant renewal. The FCC’srenewal expectancy and procedures make it likely that Sprint will retain thewireless personal communications service licenses that we manage for theforeseeable future.

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**Interconnection**

The FCC has the authority to order interconnectionbetween CMRS providers and incumbent local exchange carriers. The FCC hasordered local exchange carriers to provide reciprocal compensation to CMRS providersfor the termination of traffic. Interconnection agreements are negotiated on astatewide basis and are subject to state approval.

The FCC rules andrulings, as well as state proceedings, and a review by courts of such rules andrulings directly impact the nature and cost of the facilities necessary forinterconnection of the PCS networks of Sprint with local, national andinternational telecommunications networks. They also determine the nature andamount of revenues that Sprint can receive for terminating calls originating onthe networks of local exchange and other telecommunications carriers.

**Other FCC Requirements**

CMRS providers, including Sprint, are required topermit manual roaming on their networks. With manual roaming, any user whosemobile phone is technically capable of connecting with a carrier’s network mustbe able to make a call by providing a credit card number or making some otherarrangement for payment. Since October 2000, the FCC has been consideringchanges in its rules that may terminate the manual roaming requirement andmay impose automatic roaming obligations, under which users with capableequipment would be permitted to originate or terminate calls without takingaction other than turning on the mobile phone.  In August 2005, the FCC issued a *Memorandum Opinion and Order and Notice of Proposed Rulemaking (WTDocket Nos. 00-193 and 05-265)* to examine whether itscurrent rules regarding roaming requirements applicable to CMRS licensees(*i.e.*, cellular, broadband PCS andcovered SMR) should be modified given the current state of the CMRS market. Pursuantto this rulemaking, the FCC may proceed with the proposal to simply eliminatethe current manual registration roaming requirement and not adopt an automaticroaming requirement, thus essentially leaving the future of roaming to “marketforces”.

FCC rules require that local exchange and mostCMRS providers allow subscribers to change service providers without changingtelephone numbers, which, for wireless service providers, is referred to aswireless local number portability, or WLNP. FCC regulations requiring that mostCMRS providers implement WLNP in the 100 largest metropolitan areas in theUnited States went into effect on November 24, 2003, and FCC regulationsrequiring that CMRS providers implement WLNP outside the 100 largestmetropolitan areas in the United States went into effect on May 24, 2004.FCC regulations require most CMRS providers to be able to deliver calls fromtheir networks to ported numbers anywhere in the country and contribute to theLocal Number Portability Fund. Implementation of WLNP has required wirelesspersonal communications service providers like Sprint (and indirectly, itsaffiliates) to purchase more expensive switches and switch upgrades. However,it has also enabled existing cellular subscribers to change to wirelesspersonal communications services without losing their existing wirelesstelephone numbers, which has made it easier for wireless personalcommunications service providers to market their services to existing cellularusers.

FCC rules require broadband personalcommunications services and other CMRS providers to implement enhancedemergency 911 capabilities that provide the location of wireless 911 callers to“Public Safety Answering Points.” The FCC has approved a plan proposed andamended by Sprint under which Sprint began selling specially equipped telephonehandsets in 2001, with a rollout of such handsets that continued until June 30,2003, when all new handsets activated nationwide were to be specially equipped.Sprint’s plan requires that by December 31, 2005, 95% of Sprint wirelesssubscriber handsets in service must be equipped for the Sprint wirelessenhanced 911 service. Moreover, Sprint completed its PCS network upgrade tosupport enhanced 911 service by December 31, 2002 and began providing aspecified level of enhanced 911 service by June 30, 2002.

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In August 2004, theFCC adopted new regulations that require all telecommunications carriers toreport outages to the FCC in order to maintain and improve the reliability andsecurity of telecommunications networks.

**CommunicationsAssistance for Law Enforcement**

The Communications Assistance for Law Enforcement Act(“CALEA”), enacted in 1994, requires wireless personal communications serviceand other telecommunications service providers to ensure that their facilities,equipment and services are able to comply with authorized electronicsurveillance by federal, state and local law enforcement personnel. Wirelesspersonal communications service providers were generally required to complywith the current industry CALEA capability standard, known as J-STD-025,by June 30, 2000, for the electronic interception of voice communications,and with certain additional standards by September 30, 2001. Wirelesspersonal communications service providers are also required to implement “packet-mode”electronic interception capabilities. Wireless communications serviceproviders, including Sprint (on behalf of itself and the PCS Affiliates ofSprint, including us), filed for an extension of time to implement thepacket-mode interception capabilities until November 19, 2003. The FCCextended the compliance date to January 30, 2004 in the absence of an FBIprogram to develop agreed upon carrier deployment dates. On January 30,2004, Sprint (on behalf of itself and the PCS Affiliates of Sprint) fileda request for further extension to deploy packet-mode interceptioncapabilities. On June 21, 2004, the Department of Justice opposed therequest for additional time. In December 2004, Sprint deployed packet-modeCALEA electronic capabilities in its wireless IP network compliant withindustry standards, therefore negating the request for extension of time as itapplies to Sprint’s packet-mode ReadyLinkÔservice. Sprint’s request for extension of time with respect to otherpacket-mode services remains pending. Most wireless personal communicationsservice providers are ineligible for federal reimbursement for the software andhardware upgrades necessary to comply with the CALEA capability and capabilityrequirements. In addition, the FCC is considering petitions from numerousparties to establish and implement technical compliance standards pursuant toCALEA requirements. In sum, CALEA capability and capability requirements arelikely to impose some additional switching and network costs upon Sprint andthe PCS Affiliates of Sprint and other wireless entities.

The USA Patriot Act of2001 included certain provisions that enable law enforcement agencies and otherbranches of the government to more easily acquire records and informationregarding certain uses of communications facilities from telecommunicationscarriers, including PCS carriers.

**Federal Tower/Antenna Regulations**

Sprint and the PCSAffiliates of Sprint must bear the expense of compliance with FCC and FederalAviation Administration (FAA) regulations regarding the siting, painting,lighting and construction of transmitter towers and the mounting of antennae onnew or existing structures. In addition, FCC environmental regulations maycause some of our base station locations to become subject to the additionalexpense of regulation under the National Environmental Policy Act (“NEPA”) andthe National Historic Preservation Act (“NHPA”). The FCC is required toimplement these acts by requiring service providers to meet land use and radioemissions standards. In particular, the construction of a new tower, buildingor other structure to be used as an antenna structure requires the owner ofsuch structure to (1) perform an environmental assessment to ensure thatthe structure will not have a substantial effect on the environment, and willcomply with NEPA protections concerning wildlife preserves, Indian religioussites, endangered species habitats, flood plains, historic districts, etc.; (2) obtainState Historic Preservation Officer (“SHPO”) approval of the structure, orverify that it qualifies for an exemption from this requirement under theNational Programmatic Agreement governing antenna siting; (3) perform ananalysis to ensure that facilities using the structure will not violate the FCC’srestrictions concerning the health effects of radio frequency radiation; and (4) determineif the structure will affect the radiation 

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patternof nearby AM broadcast stations. Moreover, the mounting of an antenna on a newor existing structure requires the licensee to make the above determinations,with respect to its antenna. Finally, if the construction of an antennastructure or mounting of an antenna involves the acquisition of land orconstruction of a fuel storage tank at the antenna site (e.g., for use by aback up power generator), then the owner/licensee may have to take certainsteps to ensure its compliance with the Comprehensive Environmental Response,Compensation and Liability Act  (“CERCLA”).

**Reviewof Universal Service Requirements**

The FCC and certain states have established “universalservice” programs to ensure that affordable, quality telecommunicationsservices are available to all Americans. Sprint is required to contribute tothe federal universal service program as well as existing state programs. TheFCC has determined that Sprint’s “contribution” to the federal universalservice program is a variable percentage of “end-user telecommunicationsrevenues.” Although many states have or are likely to adopt a similarassessment methodology, the states are free to calculate telecommunicationsservice provider contributions in any manner they choose as long as the processis not inconsistent with the FCC’s rules. At the present time, it is notpossible to predict the extent of the Sprint total federal and state universalservice assessments or its ability to recover from the universal service fund.However, some wireless entities are seeking state commission designation as “eligibletelecommunications carriers,” enabling them to receive federal and stateuniversal service support.

The House CommerceCommittee has released a discussion draft of the *UniversalService Reform Act of 2005*, announcing that it encourages interestedparties to provide comments by December 23, 2005.******TheUniversal Service Reform Act would increase contributions to the UniversalService Fund by assessing them on the intrastate, interstate, and internationalrevenues of: 1) Any entity that pays into the USF under the current system(e.g., long distance providers); 2) Any provider of a service that usestelephone numbers, Internet Protocol (IP) addresses or their functionalequivalents to provide or enable real time voice communications and in whichthe voice component is the primary function (e.g., cable telephony and Voiceover Internet Protocol (VoIP) providers); and 3) Any provider that offers anetwork connection for a fee to the public (e.g., digital subscriber line(DSL), cable modem, WiMax, and broadband over power line (BPL) providers. Currently,wireless telecommunications providers pay their universal service contributionbased only on the interstate portion of their revenues, but the UniversalService Reform Act (if enacted) could broaden the USF contribution base toinclude all wireless revenues.

**Partitioning/Disaggregation/SpectrumLeasing**

FCC rules allow broadband wireless personalcommunications services licensees to partition their market areas and/or to disaggregatetheir assigned spectrum and to transfer partial market areas or spectrumassignments to eligible third parties. These rules may enable us topurchase wireless personal communications service spectrum from Sprint andother wireless personal communications services licensees as a supplement oralternative to the existing management arrangements.

FCC rules also allowservice providers to enter into flexible spectrum leasing arrangements withlicensees in a wide variety of wireless radio services, including wirelesspersonal communications services. These “secondary market” rules areintended to promote increased facilities-based competition in wireless servicesand may provide us with another means of obtaining access to wireless personalcommunications service spectrum as a supplement or alternative to the existingmanagement arrangements.

**Wireless Facilities Siting**

States and localities arenot permitted to regulate the placement of wireless facilities so as to “prohibit”the provision of wireless services or to “discriminate” among providers ofthose services. In 

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addition,so long as a wireless network complies with the FCC’s rules, states andlocalities are prohibited from using radio frequency health effects as a basisto regulate the placement, construction or operation of wireless facilities.These rules are designed to make it possible for Sprint and the PCSAffiliates of Sprint and other wireless entities to acquire necessary towersites in the face of local zoning opposition and delays. However, states mayrequire wireless providers to demonstrate that they comply with FCC regulationsconcerning the health effects of radio frequency radiation. In addition, stateand local safety and aesthetic regulations/zoning ordinances apply to wirelessproviders, to the extent that such regulations are not found by a court toprohibit the provision of wireless services or discriminate among wirelessproviders. Moreover, wireless providers must seek State Historic Preservation Officeapproval of tower or antenna siting actions as described above; and wirelessproviders must also make filings necessary to register to do business in eachstate in which they intend to operate.

**Equal Access**

Wireless providers are notrequired to provide long-distance carriers with equal access to wirelesssubscribers for the provision of toll services. This enables iPCS and Sprint togenerate additional revenues by reselling the toll services of Sprint and otherinterexchange carriers from whom we can obtain favorable volume discounts.However, the FCC is authorized to require unblocked access to toll serviceproviders subject to certain conditions.

**OtherState Regulation of Wireless Service**

With the rapid growth and penetration of wirelessservices has come a commensurate surge of interest on the part of some statelegislatures and state public utility commissions in regulating our industry.State regulation has imposed limitations on customer billing, termination ofservice arrangements, advertising, filing of “informational” tariffs,certification of operation, service coverage and quality, drivers’ use ofhandsets, provision of emergency 911 service and many other areas. Weanticipate that this trend will continue. It will require us to devoteresources to working with the states to respond to their concerns whileminimizing any new regulation that could increase our costs of doing business.

Section 332 of the Communications Act preemptsstates from regulating the rates and entry of CMRS providers. However, statesmay petition the FCC to regulate the rates and entry of those providers and theFCC may grant that petition if the state demonstrates that:

·       marketconditions fail to protect subscribers from unjust and unreasonable rates orrates that are unjustly or unreasonably discriminatory; or

·       suchmarket conditions exist and commercial mobile radio service is a replacementfor a substantial portion of the landline telephone service within the state.

To date, the FCC has granted no such petition.

Section 332 of the Communications Act does notprohibit a state from regulating the other “terms and conditions” of commercialmobile services, including consumer billing information and practices, billingdisputes and other consumer protection matters. Several states have invokedthis language to impose, or propose, various consumer-related regulationson the wireless industry such as rules governing customer contracts andadvertising. In some instances, state public service commissions still requireCMRS providers to register, and to notify the commissions in the event of achange in ownership or discontinuance of service. Prior notification tocustomers may also be required. States also may impose their own universalservice support regimes on wireless and other telecommunications carriers,similar to the requirements that have been established by the FCC.

To the extent Sprint andthe PCS Affiliates of Sprint provide fixed wireless loop service, we may besubject to additional state regulation. These standards and rulings haveprevented states from delaying the 

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entry ofwireless personal communications services and other wireless carriers intotheir jurisdictions via certification and similar requirements, and fromdelaying or inhibiting aggressive or flexible wireless price competition afterentry.

**Interference Temperature**

In November 2003, theFCC launched an inquiry aimed at establishing a new paradigm for thedetermination of interference to wireless services. Currently, interferencemeasurements are based on transmitter operations. The proposed “interferencetemperature” would take into account interactions between transmitters andreceivers, as well as all other elements of the radio frequency environment.One goal of this proceeding is to create opportunities for other transmitters,whether licensed or unlicensed, to operate in bands that are now exclusivelyreserved for licensees, such as the personal communications service frequenciesused by Sprint. It is too early in this proceeding to determine what effect, ifany, this inquiry by the FCC will have on the combined business.

**ITEM 1A.   RISK FACTORS**

**RisksRelated to Our Business, Strategy and Operations**

***Our substantial leverage could adversely affect ourability to incur additional indebtedness if needed and could negatively affect ourability to service our debt.***

Weare highly leveraged. As of September 30, 2005, our total outstandingdebt, including capital lease obligations but excluding the markup of theHorizon PCS debt to fair value, was approximately $290.4 million. As of thatdate, such indebtedness represented approximately 52% of our totalcapitalization. The indentures that govern our 111¤2% senior notesand our 113¤8%senior notes permit us and our subsidiaries to incur additional indebtednesssubject to certain limitations. The incurrence of additional indebtedness couldfurther exacerbate the risks associated with our leverage. If we incuradditional indebtedness that ranks equally with the senior notes, the holdersof that debt will be entitled to share ratably with the holders of the seniornotes in any proceeds distributed in connection with any insolvency,liquidation, reorganization, dissolution or other winding-up of us.

Our substantial indebtedness could adversely affectour financial health by, among other things:

·       increasing ourvulnerability to adverse economic conditions;

·       limiting our ability toobtain any additional financing we may need to operate, develop and expand ourbusiness;

·       limiting our flexibility inplanning for, or reacting to, changes in our business and the industry in whichwe operate;

·       requiring us to dedicate asubstantial portion of any cash flow from our operating activities to serviceour debt, which reduces the funds available for operations and future businessopportunities; and

·       potentially making us morehighly leveraged than our competitors, which could decrease our ability tocompete in our industry.

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The ability to make payments on our debt will dependupon our future operating performance, which is subject to general economic andcompetitive conditions, the outcome of our litigation with Sprint,  and to financial, business and other factors,many of which we cannot control. If the cash flow from our operating activitiesis insufficient, we may take actions, such as delaying or reducing capitalexpenditures, attempting to restructure or refinance our debt, selling assetsor operations or seeking additional equity capital. Any or all of these actionsmay not be sufficient to allow us to service our debt obligations. Further, wemay be unable to take any of these actions on satisfactory terms in a timelymanner or at all. We may need to refinance all or a portion of our indebtednesson or before maturity. We may not be able to refinance any of out indebtednesson commercially reasonable terms or at all. The indentures that govern thesenior notes limit our ability to take several of these actions. Our failure togenerate sufficient funds to pay our debts or to successfully undertake any ofthese actions could, among other things, result in our bankruptcy.

***Wemay fail to realize the anticipated benefits of our merger with Horizon PCS.***

We closed our merger with Horizon PCS on July 1,2005. The success of our merger with Horizon PCS will depend, in part, on ourability to realize the anticipated growth opportunities, economies of scale andother benefits from combining the business of iPCS with the business of HorizonPCS. To realize the anticipated benefits of this combination, our managementteam must develop strategies and implement a business plan that will:

·       effectively manage thenetworks and markets of iPCS and Horizon PCS;

·       effectively manage cash foruse in financing future growth and working capital needs;

·       effectively manage themarketing and sales of the services;

·       successfully retain andattract key employees, including management, during a period of transition andin light of the competitive employment market; and

·       maintain adequate focus onexisting businesses and operations while working to integrate the twocompanies.

The diversion of our management’s attention fromongoing operations and any difficulties encountered in the transition and integrationprocess could have a material adverse effect on our financial condition andresults of operations. If we do not realize economies of scale and otheranticipated benefits as a result of the merger,  our operations and results may suffer. Thereis no assurance that combining our business with that of Horizon PCS, even ifachieved in an efficient, effective and timely manner, will result in combinedresults of operations and financial conditions superior to what we could haveachieved independently.

***We incurred significant costs associated with ourmerger with Horizon PCS and will continue to incur additional costs associatedwith the merger.***

We incurred significant direct transaction costsassociated with our merger with Horizon PCS, which were included as a part ofthe total purchase price for accounting purposes. We will continue to payseverance expenses in connection with the termination of the employment ofcertain employees of Horizon PCS, and other costs associated with integratingthe two companies. We may incur additional charges in subsequent quartersassociated with the merger.

***We emerged from bankruptcy in 2004 and we have ahistory of net losses. We may incur additional losses in the future, and our operatingresults could fluctuate significantly on a quarterly and annual basis.***

Weemerged from bankruptcy in July 2004 and Horizon PCS emerged frombankruptcy in October 2004. Prior to our emergence from bankruptcy and theimplementation of fresh-start accounting, 

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we had a net accumulated deficiency of$393.5 million and Horizon PCS had a net accumulated deficiency of$685.9 million. Our future operating profitability and cash flows fromoperating activities will depend upon many factors, including, among others,the outcome of our litigation against Sprint, our ability to market Sprint PCSproducts and services, achieve projected market penetration and managesubscriber turnover rates. If we do not achieve and maintain operatingprofitability and positive cash flows from operating activities, we may beunable to make interest or principal payments on the senior notes. Ourinability to satisfy our obligations may result in our restructuring orbankruptcy.

In addition, our future operating results and cashflows will be subject to quarterly and annual fluctuations due to many factors,some of which are outside our control. These factors include increased costs wemay incur in connection with the further development, expansion and upgrade ofour wireless network and fluctuations in the demands for our services. We maynot achieve or sustain profitability. To the extent our quarterly or annualresults of operations fluctuate significantly, we will be unable to pay amountsdue under the senior notes. Our inability to satisfy our obligations may resultin our restructuring or bankruptcy.

***It isour strategy to continue our subscriber growth, which may negatively affect ournear term profitability.***

We intend to continue to grow our subscriber base byexpanding our sales distribution channels, particularly the number of exclusiveco-branded dealers and company-owned retail stores, and by increasing oursales and marketing activities in order to maximize revenues from our thirdgeneration network and advanced product offerings. If we seek to accelerate oursubscriber growth, we will incur significant up-front subscriber acquisitionexpenses, which initially will result in reduced levels of cash flows fromoperating activities as compared to our most recent prior periods. In addition,to the extent our subscriber growth includes a higher percentage of sub-primecredit subscribers, our churn and bad debt expense may increase, which wouldimpair our ability to maintain and increase our revenues and cause adeterioration in our operating margin.

***Our financial condition and results of operations arenot comparable to the financial condition and results of operations reflectedin our historical financial statements.***

As a result of our emergence from bankruptcy, we areoperating our business with a new capital structure, and are subject to fresh-startaccounting prescribed by generally accepted accounting principles. Inaccordance with fresh-start accounting, assets and liabilities wererecorded at fair value, with the enterprise value that was determined inconnection with the reorganization. Accordingly, iPCS’s financial condition andresults of operations for the periods subsequent to July 1, 2004 are notcomparable to the financial condition or results of operations for the periodsas of and prior to July 2, 2004 reflected in our historical consolidatedfinancial statements included elsewhere in this report.

***If we receive lower revenues or incur more fees thanwe anticipate for PCS roaming from Sprint PCS, our results of operations may benegatively affected.***

We are paid a fee from Sprint PCS for every minute andkilobyte that Sprint PCS’s subscribers not based in our territory use theSprint PCS network in our territory. Similarly, we pay a fee to Sprint forevery minute and kilobyte that our subscribers use the Sprint PCS networkoutside our territory. The per-minute and per-kilobyte rates that we receivefrom Sprint PCS and that we pay to Sprint PCS are the same and are fixed untilthe end of December 2006. Thereafter, the rate will change, based on anagreed-upon formula that may have an adverse effect on us. In addition, SprintPCS subscribers based in our territory may spend more time outside ourterritory than we anticipate, and wireless subscribers from outside ourterritory may spend less time in our territory or may use our services lessthan we anticipate. Our ratio of inbound to outbound roaming with Sprint PCSwas approximately 1.5 to 1 for the year ended September 30, 2005. Weexpect this ratio to decline over time as our subscriber base continues togrow, 

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resulting in us receivingless Sprint PCS roaming revenue and/or having to pay more in Sprint PCS roamingfees than we collect in Sprint PCS roaming revenue which will negatively affectour operating results.

***Roaming revenue from subscribers of wireless communicationsproviders other than Sprint PCS and other PCS Affiliates of Sprint may declinein the future which may negatively affect our operating results.***

We derive a significant amount of roaming revenue fromwireless communications providers other than Sprint PCS and other PCSAffiliates of Sprint for permitting their subscribers to roam on the Sprint PCSnetwork in our territory. For the year ended September 30, 2005,approximately 7% of our roaming revenue was attributable to revenue derivedfrom these other wireless communications providers. We do not have agreementsdirectly with these wireless providers. Instead, we rely on roamingarrangements that Sprint PCS has negotiated and entered into. Sprint PCS maynegotiate and enter into roaming arrangements with other wirelesscommunications providers at rates that are lower than current rates, resultingin a decrease in our roaming revenue. If the rates offered by Sprint PCS arenot attractive, these other wireless communications providers may decide tobuild out their own networks in our territory and compete with us directly orenter into roaming arrangements with our competitors who already have networksin our territory, resulting in a decrease in our roaming revenue. Roamingrevenue from subscribers of wireless communications providers other than SprintPCS and PCS Affiliates of Sprint may decline as a result of decreased roamingtraffic in our territory if our quality of service does not continue to meetdesignated technical and quality standards or if we are unable to controlfraudulent use.

***Our roaming arrangements may not be competitive withother wireless communications providers, which may restrict our ability toattract and retain subscribers which may negatively affect our operatingresults.***

Wedo not have agreements directly with other wireless service providers forroaming coverage outside our territory for Sprint PCS subscribers based in ourterritory. Instead, we rely on roaming arrangements that Sprint PCS hasnegotiated with other wireless communications providers for coverage in theseareas. Some risks related to these arrangements are as follows:

·       the arrangements may notbenefit us in the same manner that they benefit Sprint PCS;

·       the quality of the serviceprovided by another provider during a roaming call may not approximate thequality of the service provided by Sprint PCS;

·       the price of a roaming callmay not be competitive with prices charged by other wireless companies forroaming calls;

·       subscribers must end a callin progress and initiate a new call when leaving the Sprint PCS network andentering another wireless network;

·       Sprint PCS subscribersbased in our territory may not be able to use advanced PCS features from SprintPCS, such as PCS Vision, while roaming;

·       Sprint PCS or the carriersproviding the service may not be able to provide accurate billing informationon a timely basis; and

·       if Sprint PCS subscribersbased in our territory do not have a similar wireless experience as when theyare on the Sprint PCS network, we may lose current subscribers and Sprint PCSproducts and services may be less attractive to potential new subscribers.

If we are unable to attract and retain subscribers forany reason, our ability to maintain and increase revenues will be impaired andour operating margin will deteriorate.

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***If we lose the right to install our equipment onwireless towers or are unable to renew expiring leases for wireless towers onfavorable terms or at all, our business and results of operations could beadversely impacted.***

Virtually all of our base stations are installed onleased tower facilities that may be shared with one or more other wirelesscommunications providers. In addition, a large portion of these leased towersites are owned by a limited number of tower companies. If a master agreement with one of these tower companieswere to terminate, or if one of these tower companies were unable to supportthe use of its tower sites by us, we would have to find new sites or may berequired to rebuild the affected portion of the Sprint PCS network in ourterritory. In addition, the concentration of our tower leases with a limitednumber of tower companies could adversely affect our results of operations andfinancial condition if any of our operating subsidiaries is unable to renew itsexpiring leases with these tower companies either on favorable terms or at all.If any of the tower leasing companies with whom we do business shouldexperience severe financial difficulties, or file for bankruptcy protection,our ability to use our towers could be adversely affected. That, in turn, wouldadversely affect our revenues and financial condition if a material number oftowers were involved.

***We depend on other telecommunications companies forsome services that, if delayed or interrupted, could delay our expectedincreases in subscribers and revenues.***

We depend on other telecommunications companies toprovide facilities and transport to interconnect portions of our network and toconnect our network with the landline telephone system. Without these services,we could not offer Sprint PCS services to our subscribers in some areas. Fromtime to time, we have experienced delays in obtaining facilities and transportfrom some of these companies, and in obtaining local telephone numbers for useby our subscribers, which are sometimes in short supply, and we may continue toexperience delays and interruptions in our network operations and our businessmay suffer. Delays or interruptions could also result in a breach of ouraffiliation agreements with Sprint PCS, subjecting these agreements topotential termination by Sprint PCS.

***Alternative technologies and current uncertainties inthe wireless and overall communications market may make the technology we useobsolete or reduce demand for PCS products and services.***

Thewireless telecommunications industry is experiencing significant and rapidtechnological change, as evidenced by the continued pace of upgrades inexisting digital wireless systems, evolving industry standards, ongoingimprovements in the capacity and quality of digital technology, shorterdevelopment cycles for new products and enhancements and changes in end-userrequirements and preferences. We rely on Sprint to keep pace with thesetechnological changes. If Sprint is unable to keep pace with thesetechnological changes or other changes in the wireless communications market,the technology used in our network or our business strategy may become obsolete.Other carriers are in the process of upgrading their networks to 3G technologiessuch as EV-DO, Universal Mobile Telecommunications System (UMTS) or High-SpeedDownlink Packet Access (HSDPA). We have upgraded our network to CDMA 1xRTT,which is the name for the first phase of CDMA’s evolution to 3G, and, as of September 30,2005, are offering PCS Vision services in markets representing approximately99.6% of the covered population in our territory. Sprint PCS has begun todeploy EV-DO technology in portions of its service area and expects its EV-DO service,marketed as “Power Vision,” to be accessible to about 150 million people inearly 2006. Although we are not required to deploy EV-DO across our network, wedeployed EV-DO in Grand Rapids, Michigan and may similarly elect to deployEV-DO technology in additional portions of our service area, which wouldsignificantly increase our capital expenditures. If we fail to implementsignificant technological changes, we may also lose subscribers and our abilityto maintain and increase revenues will be impaired.

The convergence of wireless, landline telephoneservice, cable television and Internet access is also creating uncertainties inthe overall communications market.  Theproliferation of Wi-Fi  and the potentialapplication of WiMAX create additional uncertainty about how customers willcommunicate wirelessly in 

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the future. Futurewireless applications on current or future portions of the wireless spectrummay also reduce demand for the wireless products and services we offer forSprint.  In addition, Sprint hasinterests in developing technologies and delivery channels, such as itsrecently announced joint venture with certain cable companies, includingComcast, Time Warner and Cablevision, that may have a material adverse effecton our business.

***The loss of the officers and skilled employees uponwhom we depend to operate our business could adversely affect our operatingresults.***

Our business is managed by a small number of executiveofficers on whom we depend to operate our business. We believe that our futuresuccess will depend in part on our continued ability to retain these executiveofficers and to attract and retain other highly qualified technical andmanagement personnel. Notwithstanding our employment agreements with certain ofour executives, we may not be successful in retaining key personnel or inattracting and retaining other highly qualified technical and managementpersonnel. Moreover, our past inability to meet our obligations that resultedin our bankruptcy filing, or the perception that we may not be able to meet ourobligations following the reorganization, could adversely affect our ability toretain or attract high-quality personnel. The loss of the officers and skilledemployees upon whom we depend to operate our business could adversely affectoperating results.

***Failure to achieve and maintain effective internalcontrols could have a material adverse effect on our business and operatingresults.***

We are in the process of documenting and testing ourinternal control procedures in order to satisfy the requirements of Section 404of the Sarbanes-Oxley Act, which requires annual management assessmentsof the effectiveness of internal control over financial reporting and a reportby our independent registered public accounting firm addressing theseassessments. During the course of our testing, we may identify deficiencieswhich we may not be able to remediate in time to meet the deadline imposed bythe Sarbanes-Oxley Act for compliance with the requirements of Section 404.If we fail to achieve and maintain the adequacy of our internal control, assuch standards are modified, supplemented or amended from time to time, we maynot be able to ensure that we can conclude on an ongoing basis that we haveeffective internal control over financial reporting in accordance with Section 404of the Sarbanes-Oxley Act. Moreover, effective internal control is necessaryfor us to produce reliable financial reports and is important to preventfinancial fraud. If we cannot provide reliable financial reports or preventfraud, our business and operating results could be harmed and investors couldlose confidence in our reported financial information.

**Risks Related to Our Relationship with Sprint PCS**

***Our ability to conduct our business would be severelyrestricted if Sprint PCS terminates our affiliation agreements.***

Our relationship with Sprint PCS is governed by ouraffiliation agreements with it. We do not own any licenses that are used in ourportion of the Sprint PCS network and our business depends on the continuedeffectiveness of these affiliation agreements with Sprint PCS. Sprint PCS maybe able to terminate our affiliation agreements with it if we materially breachthe terms of the agreements. These terms include operational and networkrequirements that are extremely technical and detailed and apply to each retailstore, cell site and switch site. Many of these operational and networkrequirements can be changed by Sprint PCS, in certain cases, with littlenotice. As a result, we may not always be in compliance with all requirementsof our affiliation agreements with Sprint PCS. Sprint PCS conducts periodicaudits of compliance with various aspects of its program guidelines andidentifies issues it believes need to be addressed. We may need to incursubstantial costs to remedy any noncompliance. If we are not in compliance withour affiliation agreements, such failure could limit our ability to obtain anyadditional financing that we may need in order to remedy such noncompliance.Additionally, our substantial 

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indebtedness and ourrecent emergence from bankruptcy could further limit our ability to obtainadditional financing. If we cannot obtain additional financing, we may beunable to remedy such noncompliance, thereby resulting in a material breach ofour affiliation agreements which could lead to their termination by Sprint PCS.If Sprint PCS terminates or fails to renew our affiliation agreements or failsto perform its obligations under those agreements, our ability to conductbusiness would be severely restricted.

***If we materially breach our affiliation agreementswith Sprint PCS, Sprint PCS may have the right to purchase our operating assetsat a discount to market value.***

Our affiliation agreements with Sprint PCS requirethat we provide network coverage to a minimum network coverage area withinspecified time frames and that we meet and maintain Sprint PCS’ technical andcustomer service requirements. A failure to meet Sprint PCS’s technical orcustomer service requirements contained in the affiliation agreements, amongother things, would constitute a material breach of the agreements, which couldlead to their termination by Sprint PCS. We may amend our affiliationagreements with Sprint PCS in the future to expand our network coverage. Ouraffiliation agreements with Sprint PCS provide that upon the occurrence of anevent of termination caused by our breach of such agreements, Sprint PCS hasthe right to, among other things, purchase our operating assets withoutstockholder approval and for a price equal to 72% of our “entire businessvalue,” which is our appraised value determined using certain principles set forthin our affiliation agreements with Sprint PCS and based on the price a willingbuyer would pay a willing seller for our entire business as a going concern.See “Business—Our Affiliation Agreements with Sprint PCS” for a description ofhow we calculate our entire business value.

***Sprint PCS may make decisions that could reduce ourrevenues, increase our expenses and/or our capital expenditure requirements andmake our affiliate relationships with Sprint PCS  less advantageous than expected.***

Under our affiliation agreements with Sprint PCS,Sprint PCS has a substantial amount of control over factors that significantlyaffect the conduct of our business. We are required to offer PCS subscriberpricing plans from Sprint PCS designated for regional or national offerings,including “Fair & Flexible” plans, “Free & Clear” plans and “PCSVision” plans. Sprint PCS prices subscriber pricing plans based on its ownobjectives and could set price levels or change other characteristics of itsplans in a way that may not be economically advantageous for our business,which would result in decreased revenues and/or increased expenses. Inaddition, subject to certain limitations set forth in our affiliationagreements with Sprint PCS, Sprint PCS may alter its network and technicalrequirements or request that we build out additional areas within ourterritory, which could result in increased operating expenses, additionalequipment and build-out costs or in Sprint PCS building out that area itself orassigning it to another PCS Affiliate of Sprint.Certain provisions of ouraffiliation agreements with Sprint PCS may diminish our value and restrict thesale of our business.

Under specific circumstances and without stockholderapproval, Sprint PCS may purchase our operating assets or capital stock at adiscount. In addition, Sprint PCS has the right to withhold its consent to anytransaction in which the “ultimate parent” of any of our operating subsidiariesthat is the party to the affiliation agreements with Sprint PCS, changes. Wemust obtain the consent of Sprint PCS prior to any assignment by us of ouraffiliation agreements with it. Sprint PCS also has a right of first refusal ifwe decide to sell our operating assets to a third party. We are also subject toa number of restrictions on the transfer of our business, including aprohibition on the sale of our operating assets to competitors of Sprint PCS.These restrictions and the other restrictions contained in our affiliationagreements with Sprint PCS restrict our ability to sell our business, mayreduce the value a buyer would be willing to pay for our business, and mayreduce our “entire business value,” which is our appraised value determinedusing principles set forth in our affiliation agreements with Sprint PCS and basedon the price a willing buyer would pay a willing seller for our entire businessas a going concern.

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***Problemswith Sprint PCS’s internal support systems could lead to customerdissatisfaction or increase our costs.***

We rely on Sprint PCS’s internal support systems,including customer care, billing and back office support. Sprint PCS hasentered into business process outsourcing agreements with third parties toprovide these services. Sprint PCS may not be able to successfully add systemcapacity, its internal support systems may not be adequate and the thirdparties that Sprint PCS has contracted with may not perform their obligations.Problems with Sprint PCS’ internal support systems could cause:

·       delays or problems in ouroperations or services;

·       delays or difficulty ingaining access to subscriber and financial information;

·       a loss of subscribers; and

·       an increase in the costs ofcustomer care, billing and back-office services.

Should Sprint PCS fail to deliver timely and accurateinformation, this may lead to adverse short-term decisions and inaccurateassumptions in our business plan. It could also adversely affect our cashflows, because Sprint PCS collects our receivables and remits to us a netamount that is based on the financial information it produces for us.

***Our costs for internal support systems may increase ifSprint PCS terminates all or part of our service agreeements with it.***

The costs for the services provided by Sprint PCSunder our affiliation agreements with Sprint PCS relative to billing, customercare and other back-office functions for the year ended September 30, 2005were approximately $27.2 million. Because we incur the majority of thesecosts on a per-subscriber basis, which, under our affiliation agreements withSprint PCS, is fixed until the end of December 2006 and after which willbe reset by Sprint based on the amount necessary to recover its costs toprovide the services, we expect the aggregate cost for such services toincrease as the number of our subscribers increases. We have begun discussionswith Sprint regarding the terms and conditions under which we would continue topurchase these back-office and support services from Sprint after December 31,2006, if at all. If we cannot agree with Sprint PCS on a new rate for anyfuture three-year period beyond 2006, we have the option to continue topurchase such services and have an arbitrator determine the new rate orself-provision or procure those services elsewhere. Sprint PCS has the right toterminate any service provided under such agreements upon nine months’ priorwritten notice, but if we desire to continue receiving such service, Sprint PCShas agreed that it will assist us in developing that function internally orlocating a third party vendor that will provide that service. Although SprintPCS has agreed that if it terminates the services, it will reimburse us forexpenses we incur in transitioning to any service internally or to a thirdparty, if Sprint PCS terminates a service for which we have not developed orare unable to develop a cost-effective alternative, our operating costs mayincrease beyond our expectations and our operations may be interrupted orrestricted. We do not currently have a contingency plan if Sprint PCSterminates a service we currently receive from it or if we cannot reachagreement with Sprint on new rates.

***If Sprint PCS doesnot maintain control over its licensed spectrum, our affiliation agreementswith Sprint PCS may be terminated which will negatively affect our operatingresults.***

SprintPCS, not us, holds the licenses necessary to provide wireless services in ourterritory. The FCC requires that licensees like Sprint PCS maintain control oftheir licensed systems and not delegate control to third party operators ormanagers without the FCC’s consent. Our affiliation agreements with Sprint PCSreflect an arrangement that the parties believe meets the FCC requirements forlicensee control of licensed spectrum. However, if the FCC were to determinethat any of our affiliation agreements with Sprint PCS need to be modified toincrease the level of licensee control, we have agreed with Sprint PCS to useour best efforts to modify the agreements to comply with applicable law. If wecannot agree with Sprint PCS to modify the agreements, those agreements may beterminated. If the agreements are terminated, we would no longer be a part ofthe Sprint PCS network and we would not be able to conduct our business.

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***The FCC may fail to renew the Sprint PCS wirelesslicenses under certain circumstances, which would prevent us from providingwireless services.***

Sprint PCS wireless licenses are subject torenewal and revocation by the FCC. Certain of Sprint PCS wireless licenses inour territory will expire in 2007, but we expect will be renewed for additionalten-year terms. The FCC has adopted specific standards that apply to wirelesspersonal communications services license renewals. Any failure by Sprint PCS orus to comply with these standards could result in the non-renewal of the SprintPCS licenses for our territory. Additionally, if Sprint PCS does notdemonstrate to the FCC that Sprint PCS has met the construction requirementsfor each of its wireless personal communications services licenses, it can losethose licenses. If Sprint PCS loses its licenses in our territory for any ofthese reasons, we and our subsidiaries would not be able to provide wirelessservices without obtaining rights to other licenses. If Sprint PCS loses itslicenses in another territory, Sprint PCS or the applicable PCS Affiliate ofSprint would not be able to provide wireless services without obtaining rightsto other licenses and our ability to offer nationwide calling plans would bediminished and potentially more costly.

***Parts of our territory have limited licensed spectrum,which may adversely affect the quality of our service.***

Inthe majority of our markets, Sprint PCS has licenses covering 20 MHz or 30 MHzof spectrum. However, Sprint PCS has licenses covering only 10 MHz in parts ofour territory which represent approximately 3.8 million in totalpopulation out of a total population of over 15.0 million residents in ourterritory. In the future, as our subscriber base increases in those areas, thislimited licensed spectrum may not be able to accommodate increases in callvolume or changes or upgrades in technology and may lead to increased droppedcalls and may limit our ability to offer enhanced services. We may also have toincrease our capital expenditures and/or operating expenses in an attempt tocompensate for this lack of licensed spectrum.

***Werely on Sprint PCS  for a substantialamount of our financial information. If that information is not accurate, ourability to accurately report our financial data could be adversely affected,and the investment community could lose confidence in us.***

Underour affiliation agreements, Sprint performs our billing, customer care andcollections, PCS network systems support, inventory logistics, long distancetransport and national third party sales support. The data provided by Sprintrelated to these functions they perform for us is the primary source for ourservice revenue and for a significant portion of our cost of service androaming, and selling and marketing expenses included in our statement ofoperations. We use this data to record our financial results and prepare ourfinancial statements. If Sprint fails to deliver timely and accurateinformation, this may lead us to make adverse decisions and inaccurateassumptions for future business plans and could also negatively affect our cashflows as Sprint collects our receivables and remits a net amount to us that isbased on the financial information it provides. In addition, delays andinaccuracies which are material could adversely affect the effectiveness of ourdisclosure controls and procedures and if we later identify material errors inthat data provided to us, we may be required to restate our financialstatements. If that occurs as to us or any other PCS Affiliate of Sprint,investors and securities analysts may lose confidence in us.

***If Sprintdoes not succeed, our business may not succeed.***

IfSprint has a significant disruption to its business plan or PCS network, failsto operate its business in an efficient manner or suffers a weakening of itsbrand name, our operations and profitability would likely be negativelyimpacted. If Sprint should have significant financial problems, includingbankruptcy, our business would suffer material adverse consequences, whichcould include termination or revision of our affiliation agreements with SprintPCS.

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***Themerger between Sprint and Nextel and the outcome of our litigation relatingthereto may have an adverse effect on us in ways that would be beyond ourcontrol.***

Wehave filed two complaints against Sprint alleging, among other things, thatfollowing the consummation of the merger between Sprint and Nextel, Sprint willbreach its exclusivity obligations to us under our management agreements. Ourcomplaints seek, among other things, a temporary restraining order, apreliminary injunction and a permanent injunction enjoining Sprint and thoseacting in concert with it from engaging in certain conduct following theclosing of their merger that would violate our affiliation agreements withSprint PCS. We cannot predict the outcome of our litigation against Sprint. Ifwe do not prevail, Sprint may operate the legacy Nextel business in ourterritory in a manner that has an adverse effect on our business andoperations, including by engaging in conduct expressly prohibited by theForbearance Agreement, examples of which are set forth below. If we do notprevail, our stock price may be adversely affected.

We agreed not toseek a temporary restraining order or a preliminary injunction against Sprintso long as Sprint operates the Nextel business in our territory subject to thelimitations set forth in the Forbearance Agreement. Notwithstanding theForbearance Agreement, Sprint’s ownership and operation of the Nextel businessin our territory has, among other things, caused customer confusion in ourterritory. The Forbearance Agreement is scheduled to expire on January 1,2006 in the territory managed by iPCS Wireless, and after the date that anydecision after trial is rendered in the Delaware Court of Chancery in theterritories managed by Horizon Personal Communications and Bright PersonalCommunications Services. We do not know how Sprint will operate the Nextelbusiness in our territory after expiration of the Forbearance Agreement. Uponexpiration, Sprint may operate the legacy Nextel business in a manner that mayhave a material adverse effect on us. For example, Sprint may:

·  share our confidential information withpersons at Sprint outside of the group responsible for managing Sprint’srelationship with the PCS Affiliates of Sprint;

·  engage in conduct designed to induce andfacilitate existing customers of Sprint PCS in our territory to transitiontheir service to Nextel (e.g., direct marketing, local advertising and waiverof early termination fees);

·  sell dual-mode handsets in our territory thatare pre-programmed to travel on the legacy Nextel network as opposed to theportion of the Sprint PCS network in our territory;

·  change the branding on legacy Nextel stores inour territory;

·  co-brand legacy Nextel products and services asSprint in national third party retailers in our territory.

We do not know whether we will ultimately reachagreement on mutually satisfactory terms for revised affiliation agreements. Itis likely that any such revised affiliation agreements would result in usmaking significant payments to lease or acquire assets relating to the legacyNextel network in our territory, to purchase legacy Nextel subscribers in ourterritory and/or to commit to a further build-out and expansion of our networkbeyond what is required under our existing affiliation agreements with Sprint PCS.There is no assurance that we will have adequate funds on hand or the abilityto borrow such funds in order to acquire the network assets or subscribers orto otherwise modify our network. In addition, any borrowing would increase ourexisting substantial leverage.

As of December 16, 2005, Sprint has acquired, orannounced that it has agreed to acquire, five PCS Affiliates of Sprint,four of whom had also filed suit against Sprint relating to the merger ofSprint and Nextel. Giving effect to these acquisitions, there will be fiveremaining PCS Affiliates of Sprint. As a result of these acquisitions, Sprintmay not devote as much of its personnel and resources to the remaining PCS Affiliatesof Sprint, which may have a material adverse effect on our operations.

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***If other PCS Affiliates of Sprint have financialdifficulties, the PCS network of Sprint could be disrupted which may negativelyaffect our operating results.***

The Sprint PCS network is a combination of networks.The large metropolitan areas are operated by Sprint, and the areas in betweenthem are operated by PCS Affiliates of Sprint, all of which are independentcompanies like us. We believe that most, if not all, of these companies haveincurred substantial debt to finance the large cost of building out theirnetworks. If other PCS Affiliates of Sprint experience financial difficulties,the Sprint PCS network could be disrupted in the territories of those PCSAffiliates of Sprint. Material disruptions in the Sprint PCS network could havea material adverse effect on our ability to attract and retain subscribers. Ifthe affiliation agreements of those PCS Affiliates of Sprint, are like ours,Sprint PCS would have the right to step in and operate the affected territory.However, this right could be delayed or hindered by legal proceedings,including any bankruptcy proceeding related to the affected PCS Affiliates ofSprint. Like us, another PCS Affiliate of Sprint recently emerged frombankruptcy and others have experienced financial difficulties.

**Risks Related to the Wireless TelecommunicationsIndustry**

***We may experience a high rate of subscriber turnover,which would adversely affect our financial performance.***

The wireless telecommunications industry in general,and Sprint PCS and the PCS Affiliates of Sprint in particular, including us,have experienced a high rate of subscriber turnover, commonly known as churn.We believe this higher churn rate has resulted from Sprint PCS’s programs formarketing its services to sub-prime credit subscribers and Sprint PCS’ focus onadding subscribers from the consumer segment of the industry, rather than thebusiness segment. Significant competition in our industry and general economicconditions may cause our future churn rate to be higher than our historicalrate. Factors that may contribute to higher churn include:

·       inability or unwillingnessof subscribers to pay, resulting in involuntary deactivations, which accountedfor approximately 42% of our subscriber deactivations for the year ended September 30,2005;

·       subscriber mix and creditclass, particularly sub-prime credit subscribers, which accounted forapproximately 24% of our subscriber base as of September 30, 2005;

·       attractiveness of ourcompetitors’ products, services and pricing, coupled with the wireless localnumber portability (“WLNP”) requirement enabling subscribers to keep theirtelephone numbers and thereby, making turnover easier;

·       network performance andcoverage relative to our competitors;

·       customer service;

·       failure by Sprint or us tooffer competitive rates, service offerings, handset pricing and customerretention benefits to existing customers;

·       any increased prices forservices in the future;

·       customer confusion as aresult of the Sprint-Nextel merger; and

·       any future changes by us inthe products and services we offer or in the terms under which we offer ourproducts or services, especially to sub-prime credit subscribers.

Ahigh rate of subscriber turnover could adversely affect our competitiveposition, liquidity, financial position, results of operations and our costsof, or losses incurred in, obtaining new subscribers, especially because wesubsidize most of the costs of initial purchases of handsets by subscribers.

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***Regulation by government agencies and taxingauthorities may increase our costs of providing service or require us to changeour services.***

Ouroperations and those of Sprint PCS are subject to varying degrees of regulationby the FCC, the Federal Trade Commission, the Federal Aviation Administration,the Environmental Protection Agency, the Occupational Safety and HealthAdministration, and state and local regulatory agencies and legislative bodies.Adverse decisions or regulations of these regulatory bodies could negativelyimpact our operations and those of Sprint PCS thereby increasing our costs ofdoing business. For example, changes in tax laws or the interpretation ofexisting tax laws by state and local authorities could subject us to increasedincome, sales, gross receipts or other tax costs or require us to alter thestructure of our current relationship with Sprint PCS.

***Concerns over health risks and safety posed by the useof wireless handsets may reduce consumer demand for our services.***

Media reports have suggested that radio frequencyemissions from wireless handsets may:

·       be linked to various healthproblems resulting from continued or excessive use, including cancer;

·       interfere with variouselectronic medical devices, including hearing aids and pacemakers; and

·       cause explosions if usedwhile fueling an automobile.

Widespreadconcerns over radio frequency emissions may expose us to potential litigation,discourage the use of wireless handsets or result in additional regulationimposing restrictions or increasing requirements on the location and operationof cell sites or the use or design of wireless handsets. Any resulting decreasein demand for these services or increase in the cost of complying withadditional regulations could impair our ability to profitably operate ourbusiness. Such concerns may result in the loss of subscribers, which may impairour ability to maintain and increase revenues and lower our operating margin.In addition, we may need to dedicate a larger portion of any cash flow from ouroperating activities to comply with such additional regulations.

Dueto safety concerns, some state and local legislatures have passed or areconsidering legislation restricting the use of wireless telephones whiledriving automobiles. Concerns over safety risks and the effect of futurelegislation, if adopted in the areas we serve, could limit our ability tomarket and sell our wireless services. In addition, it may discourage use ofour wireless devices and decrease our revenues from subscribers who now usetheir wireless telephones while driving. Further, litigation relating toaccidents, deaths or serious bodily injuries allegedly incurred as a result ofwireless telephone use while driving could result in damage awards, adversepublicity and further governmental regulation.

***Market saturation could limit or decrease our rate ofnew subscriber additions and increase costs to keep our current subscribers.***

Intensecompetition in the wireless telecommunications industry could cause prices forwireless products and services to continue to decline. If prices drop, our rateof net subscriber additions will take on greater significance in improving ourfinancial condition and results of operations. However, as our and ourcompetitors’ penetration rates in our markets increase over time, our rate ofadding net subscribers could decrease further. If this decrease were to happen,it could materially adversely affect our liquidity, financial condition andresults of operations. In addition, we may incur additional costs throughequipment upgrades and other retention costs to keep our current subscribersfrom switching to our competitors.

***Significant competition in the wirelesstelecommunications industry may result in our competitors offering new servicesor lower prices, which could prevent us from operating profitably and may causeprices for our services to continue to decline in the future.***

Competitionin the wireless telecommunications industry is intense. Competition has caused,and we anticipate that competition will continue to cause, the market pricesfor two-way wireless products and services to decline. Our ability to competewill depend, in part, on our ability to anticipate and respond to 

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various competitive factors affecting the wirelesstelecommunications industry. If prices for our services continue to decline, itcould adversely affect our ability to increase revenue, which would have amaterial adverse effect on our financial condition, our results of operations.In addition, the viability of our business depends upon, among other things,our ability to compete with other wireless providers on reliability, quality ofservice, availability of voice and data features and customer care. Inaddition, the pricing of our services may be affected by competition, includingthe entry of new service providers into our markets. Furthermore, there hasbeen a recent trend in the wireless telecommunications industry towardconsolidation of wireless service providers, which we expect to lead to largercompetitors over time.

Ourdependence on Sprint PCS to develop competitive products and services and therequirement that we obtain Sprint PCS’ consent to sell non-Sprint approvedequipment may limit our ability to keep pace with our competitors on theintroduction of new products, services and equipment. Some of our competitorsare larger than us, possess greater resources and more extensive coverageareas, and may market other services, such as landline telephone service, cabletelevision and Internet access, along with their wireless communicationsservices. In addition, we may be at a competitive disadvantage because we maybe more highly leveraged than some of our competitors.

***We are a consumer business and an economic downturn inthe United States involving significantly lowered consumer spending couldnegatively affect our results of operations.***

Our primary subscriber base is composed of individualconsumers, and in the event of an economic downturn in the United States inwhich spending by individual consumers drops significantly, our business may benegatively affected.

**ITEM 1B.  UNRESOLVEDSTAFF COMMENTS**

Not applicable.

**ITEM 2.     PROPERTIES**

Our corporate headquarters is located in Schaumburg,Illinois. We lease office space for our headquarters and other parts of ouroperations, primarily for our retail stores, base stations and switching centers,in a number of locations. As of September 30, 2005, we leased 33 retailstores and five switching centers. As of September 30, 2005, we alsoleased space on 1,484 wireless towers owned by third parties. During the year endedSeptember 30, 2005, we completed the sale of 92 of our owned wireless towersto TCP Communications, LLC and Global Tower, LLC. Accordingly,as of September 30, 2005, we own four wireless towers. We believe that ourfacilities are adequate for our current operations and that additional leasedspace can be obtained if needed on commercially reasonable terms.

**ITEM 3.     LEGALPROCEEDINGS**

On February 23,2003, iPCS, Inc. and its wholly owned subsidiaries iPCS Wireless, Inc.and iPCS Equipment, Inc. filed a Chapter 11 bankruptcy petitionin the United States Bankruptcy Court for the Northern District of Georgia forthe purpose of effecting a court-administered reorganization. Its plan ofreorganization was confirmed by the Bankruptcy Court on July 9, 2004 anddeclared effective on July 20, 2004. iPCS’s bankruptcy case remained openat September 30, 2005, pending resolution of outstanding claims and disputesrelating to state property taxes.

Priorto our merger with Horizon PCS, Inc., on August 15, 2003, HorizonPCS, Inc. and its wholly owned subsidiaries, Horizon PersonalCommunications, Inc. and Bright Personal Communications Services, LLC,filed a Chapter 11 bankruptcy petition in the United States BankruptcyCourt for the purpose of effecting a court-administered reorganization. Itsplan of reorganization was confirmed by the Bankruptcy Court onSeptember 21, 2004 and declared effective on October 1, 2004. As ofSeptember 30, 2005, the Horizon PCS bankruptcy case remained open pendingthe resolution of an outstanding state franchise tax claim.

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On July 15,2005, we caused our wholly owned subsidiary, iPCS Wireless, Inc., to filea complaint against Sprint and Sprint PCS in the Circuit Court of Cook County,Illinois, and on July 22, 2005, we caused our wholly owned subsidiaries,Horizon Personal Communications, Inc. and Bright Personal CommunicationsServices, LLC, to file a complaint against Sprint, Sprint PCS and Nextelin the Court of Chancery of the State of Delaware, New Castle County. Thecomplaints are substantially similar and allege, among other things, thatfollowing the consummation of the merger between Sprint and Nextel, Sprint willbreach its exclusivity obligations to us under our management agreement. Ourcomplaints seek, among other things, a temporary restraining order, apreliminary injunction and a permanent injunction enjoining Sprint and thoseacting in concert with it from engaging in certain conduct post-closing inviolation of its management agreement. Our trials against Sprint seeking apermanent injunction are scheduled to commence on January 9, 2006, in theDelaware Court of Chancery, and on February 6, 2006 in Cook County CircuitCourt. See “Our Litigation Against Sprint and the Forbearance Agreement” in Item 1.

In addition to the foregoing, from time to time, weare involved in various legal proceedings relating to claims arising in theordinary course of business and in connection with our bankruptcy petition. Weare not currently a party to any such legal proceedings, the adverse outcome towhich, individually or in the aggregate, is expected to have a material adverseeffect on our business, financial condition or results of operations.

**ITEM 4.     SUBMISSIONOF MATTERS TO A VOTE OF SECURITY HOLDERS**

None.

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**PART II**

**ITEM5.   MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS ANDISSUER PURCHASES OF EQUITY SECURITIES**

*Market Information.**  *Shares of our common stock began trading on the PinkSheets LLC on August 3, 2004 under the symbol “IPCX.” Prior to that date,there was no public market for our common stock. On April 29, 2005 weannounced that our common stock also began trading on the OTC Bulletin Board. Asof December 16, 2005, there were in excess of 340 beneficial owners of ourcommon stock. On December 16, 2005, the last reported sale price of ourcommon stock was $46.00.

The following table sets forth on a per share basisthe high and low bid prices for our common stock for the quarters (or portionthereof) indicated as reported by the Pink Sheets LLC:

| ** **                                                               |
|--------------------------------------------------------------------------|
| ** **                                                               | ** ** | **High** | ** ** | **Low** | ** ** |
| **Fiscal Year Ended September 30, 2005**                            |   |   |   |   |   |
| Fourth Quarter Ended  September 30, 2005                            |   | $ | 45.10  |   | $ | 32.60  |   |
| Third Quarter Ended  June 30, 2005                                  |   | $ | 35.15  |   | $ | 30.45  |   |
| Second Quarter Ended  March 31, 2005                                |   | $ | 33.00  |   | $ | 29.00  |   |
| First Quarter Ended  December 31, 2004                              |   | $ | 30.25  |   | $ | 18.25  |   |
| **Fiscal Year Ended September 30, 2004**                            |   |   |   |   |   |
| Fourth Quarter Ended September 30, 2004 (beginning  August 3, 2004) |   | $ | 19.00  |   | $ | 15.50  |   |

 

*Dividend Policy.**  *We have not previously paiddividends. Our future decisions concerning the payment of dividends will dependon our results of operations, financial condition and capital expenditure plansand will be subject to limitations under the indentures governing our seniornotes, as well as such other factors that our board of directors, in its solediscretion, may consider relevant.

*Securities Authorized forIssuance Under Equity Compensation Plans.*   See our disclosure set forth below in Item 12.Security ownership of certain beneficial owners and management relatedstockholder matters.

**ITEM 6.   SELECTED FINANCIAL DATA**

Wederived the following balance sheet data as of September 30, 2005 and 2004and statement of operations data for the years ended September 30, 2005and 2003, and for the periods ended September 30, 2004 and July 1,2004 from our audited consolidated financial statements, included elsewhere inthis report. We derived the following balance sheet data as of September 30,2003, 2002, and 2001 and the statement of operations for the year ended September 30,2002 and for the nine months ended September 30, 2001 from our auditedconsolidated financial statements, which are not included in this report.

In accordance with the American Institute of CertifiedPublic Accountants Statement of Position 90-7, “Financial Reporting byEntities in Reorganization under the Bankruptcy Code”, we adopted fresh-startaccounting as of July 1, 2004, and our emergence from Chapter 11 resultedin a new reporting entity. Results for the periods as of and prior to July 1,2004 have been designated as results of the “Predecessor Company” and resultsfor the periods subsequent to July 1, 2004 have been designated as resultsof the “Successor Company.” Under fresh-start accounting, our reorganizationequity value was allocated to the assets and liabilities based on theirrespective fair values and was in conformity with SFAS No. 141 “BusinessCombinations”. As a result of the implementation of fresh-start accounting, ourfinancial statements after July 1, 2004 are not comparable to ourfinancial statements for prior periods. Results as of and for the year ended September 30,2005 include results for Horizon PCS from the date of acquisition (July 1,2005) and, accordingly, are not comparable to prior periods.

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The financial information presented in the tablesbelow are from our audited financial statements. It is important that you alsoread “Management’s Discussion and Analysis of Financial Condition and Resultsof Operations” and our audited consolidated financial statements and, in eachcase, any related notes thereto included elsewhere in this report.

|                                                                                         | ** ** | **Successor Company**                                                     | ** **         | **Predecessor Company**                    | ** ** |                                      |
|----------------------------------------------------------------------------------------------|------------|--------------------------------------------------------------------------------|--------------------|-------------------------------------------------|------------|-------------------------------------------|
| ** **                                                                                   | ** ** | **Year Ended  September 30,  2005**                                  | ** **         | **Period Ended  September 30,  2004** | ** ** | **Period Ended  July 1,  2004** | ** ** | **Year Ended  September 30,  2003** | ** ** | **Year Ended  September 30,  2002** | ** ** | **Nine Months  Ended  September 30,  2001** | ** ** |
| ** **                                                                                   | ** ** | **(Dollars in thousands except per share data)** | ** **         |
| **Statement of Operations Data:**                                                            |       |                                                                           |               |                                            |       |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Revenues:                                                                                    |       |                                                                           |               |                                            |       |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Service revenue                                                                              |       |                                                                           | $                  | 189,177                                    |       |                                      |   | $ | 37,909  |   |   |   | $ | 107,097  |   |   |   | $ | 145,249  |   |   |   | $ | 116,187  |   |   |   | $ | 47,180  |   |   |
| Roaming revenue                                                                              |       |                                                                           | 82,959             |                                            |       |                                      | 15,829 |   |   |   | 34,525 |   |   |   | 44,220 |   |   |   | 47,303 |   |   |   | 25,309 |   |   |
| Equipment and  other revenue                                                            |       |                                                                           | 7,911              |                                            |       |                                      | 1,644 |   |   |   | 4,240 |   |   |   | 4,824 |   |   |   | 6,931 |   |   |   | 5,023 |   |   |
| Total revenues                                                                               |       |                                                                           | 280,047            |                                            |       |                                      | 55,382 |   |   |   | 145,862 |   |   |   | 194,293 |   |   |   | 170,421 |   |   |   | 77,512 |   |   |
| Operating expenses:                                                                          |       |                                                                           |               |                                            |       |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cost of service  and roaming (exclusive of depreciation, as shown separately below)     |       |                                                                           | (153,224           | )                                               |       |                                      | (29,082 | ) |   |   | (83,230 | ) |   |   | (130,065 | ) |   |   | (128,512 | ) |   |   | (60,496 | ) |   |
| Cost of equipment                                                                            |       |                                                                           | (27,260            | )                                               |       |                                      | (5,584 | ) |   |   | (12,801 | ) |   |   | (11,797 | ) |   |   | (20,484 | ) |   |   | (14,275 | ) |   |
| Selling and  marketing                                                                       |       |                                                                           | (44,893            | )                                               |       |                                      | (7,996 | ) |   |   | (20,976 | ) |   |   | (27,343 | ) |   |   | (44,727 | ) |   |   | (24,862 | ) |   |
| General and  administrative expenses(a)                                                      |       |                                                                           | (11,354            | )                                               |       |                                      | (1,705 | ) |   |   | (3,550 | ) |   |   | (5,546 | ) |   |   | (24,930 | ) |   |   | (8,635 | ) |   |
| Reorganization  income (expense)(b)                                                          |       |                                                                           | —             |                                            |       |                                      | — |   |   |   | 60,797 |   |   |   | (31,093 | ) |   |   | — |   |   |   | — |   |   |
| Stock-based  compensation expense                                                            |       |                                                                           | (1,200             | )                                               |       |                                      | (22 | ) |   |   | — |   |   |   | — |   |   |   | (3,985 | ) |   |   | (1,530 | ) |   |
| Depreciation                                                                                 |       |                                                                           | (53,700            | )                                               |       |                                      | (8,790 | ) |   |   | (28,596 | ) |   |   | (37,274 | ) |   |   | (33,687 | ) |   |   | (13,922 | ) |   |
| Amortization of  intangible assets                                                           |       |                                                                           | (18,126            | )                                               |       |                                      | (3,051 | ) |   |   | — |   |   |   | (3,274 | ) |   |   | (3,915 | ) |   |   | (1,463 | ) |   |
| Gain (loss) on  disposal of property and equipment                                           |       |                                                                           | (141               | )                                               |       |                                      | 4 |   |   |   | (13 | ) |   |   | (474 | ) |   |   | (6,318 | ) |   |   | 467 |   |   |
| Impairment of  goodwill(c)                                                                   |       |                                                                           | —             |                                            |       |                                      | — |   |   |   | — |   |   |   | — |   |   |   | (8,060 | ) |   |   | — |   |   |
| Impairment of  property and equipment(c)                                                     |       |                                                                           | —             |                                            |       |                                      | — |   |   |   | — |   |   |   | — |   |   |   | (29,382 | ) |   |   | — |   |   |
| Impairment of  intangible assets(c)                                                          |       |                                                                           | —             |                                            |       |                                      | — |   |   |   | — |   |   |   | — |   |   |   | (23,626 | ) |   |   | — |   |   |
| Total operating  expenses                                                                    |       |                                                                           | (309,898           | )                                               |       |                                      | (56,226 | ) |   |   | (88,369 | ) |   |   | (246,866 | ) |   |   | (327,626 | ) |   |   | (124,716 | ) |   |
| Operating income  (loss)                                                                     |       |                                                                           | (29,851            | )                                               |       |                                      | (844 | ) |   |   | 57,493 |   |   |   | (52,573 | ) |   |   | (157,205 | ) |   |   | (47,204 | ) |   |
| Interest income                                                                              |       |                                                                           | 1,782              |                                            |       |                                      | 289 |   |   |   | 263 |   |   |   | 70 |   |   |   | 604 |   |   |   | 3,537 |   |   |
| Interest expense                                                                             |       |                                                                           | (22,926            | )                                               |       |                                      | (5,425 | ) |   |   | (10,142 | ) |   |   | (20,301 | ) |   |   | (26,154 | ) |   |   | (16,995 | ) |   |
| Cancellation of  debt(d)                                                                     |       |                                                                           | —             |                                            |       |                                      | — |   |   |   | 131,956 |   |   |   | — |   |   |   | — |   |   |   | — |   |   |
| Other income  (expense), net                                                                 |       |                                                                           | 57                 |                                            |       |                                      | 4 |   |   |   | 7 |   |   |   | (63 | ) |   |   | 56 |   |   |   | 3 |   |   |
| Income (loss)  before income taxes and cumulative effect of a change in accounting principle |       |                                                                           | (50,938            | )                                               |       |                                      | (5,976 | ) |   |   | 179,577 |   |   |   | (72,867 | ) |   |   | (182,699 | ) |   |   | (60,659 | ) |   |
| (Provision for)  benefit from income taxes                                                   |       |                                                                           | —   |                                            |       |                                      | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |
| Income (loss)  before cumulative effect of a change in accounting principle                  |       |                                                                           | (50,938            | )                                               |       |                                      | (5,976 | ) |   |   | 179,577 |   |   |   | (72,867 | ) |   |   | (182,699 | ) |   |   | (60,659 | ) |   |
| Cumulative effect  of a change in accounting principle, net of taxes(e)                      |       |                                                                           | —             |                                            |       |                                      | — |   |   |   | — |   |   |   | — |   |   |   | 4,335 |   |   |   | — |   |   |
| Net income (loss)                                                                            |       |                                                                           | $                  | (50,938                                    | )          |                                      |   | $ | (5,976  | ) |   |   | $ | 179,577  |   |   |   | $ | (72,867  | ) |   |   | $ | (178,364  | ) |   |   | $ | (60,659  | ) |   |
| **Other Data:**                                                                              |       |                                                                           |               |                                            |       |                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic and diluted  loss per share of common stock(f)                                         |       |                                                                           | $                  | (4.60                                      | )          |                                      |   | $ | (0.65  | ) |   |   | n/a |   |   |   | n/a |   |   |   | n/a |   |   |   | n/a |   |   |
|                                                                                              |            |                                                                                |                    |                                                 |            |                                           |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

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| ** **                                   | ** ** | **Successor Company**             | ** **   | **Predecessor Company**           | ** ** |
|----------------------------------------------|------------|----------------------------------------|--------------|----------------------------------------|------------|
| ** **                                   | ** ** | **As of September 30,** | ** **   | **As of September 30,** | ** ** |
| ** **                                   | ** ** | **2005**                               | ** **   | **2004**                               | ** ** | **2003** | ** ** | **2002** | ** ** | **2001** | ** ** |
| ** **                                   | ** ** | **(Dollars in thousands)**   | ** **   |
| **Balance  Sheet Data:**                     |       |                                   |         |                                   |       |   |   |   |   |   |   |
| Cash and cash  equivalents                   |       | $                                      | 98,107  |                                   | $          | 57,760  |   | $ | 17,654  |   | $ | 27,588  |   | $ | 54,579  |   |
| Property and  equipment, net                 |       | 153,504                                |         | 134,931                                |       | 170,620 |   | 200,735 |   | 198,161 |   |
| Total assets                                 |       | 673,990                                |         | 312,308                                |       | 221,574 |   | 280,695 |   | 328,756 |   |
| Total current  liabilities                   |       | 89,235                                 |         | 53,797                                 |       | 157,961 |   | 370,183 |   | 40,684 |   |
| Total liabilities  not subject to compromise |       | —                                 |         | —                                 |       | 171,674 |   | — |   | — |   |
| Liabilities  subject to compromise(g)        |       | —                                 |         | —                                 |       | 229,477 |   | — |   | — |   |
| Total liabilities                            |       | 403,908                                |         | 223,262                                |       | — |   | 387,405 |   | 261,087 |   |
| Redeemable  preferred stock(h)               |       | —                                 |         | —                                 |       | — |   | — |   | 121,548 |   |
| Stockholder’s equity  (deficiency)(i)   |       | 270,082                                |         | 89,046                                 |       | (179,577 | ) | (106,710 | ) | (53,879 | ) |
|                                              |            |                                        |              |                                        |            |  |  |  |  |  |  |  |  |  |  |  |

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(a)           General andadministrative expenses for the nine months ended September 30, 2001 andthe year ended September 30, 2002 included approximately $2.4 millionand $18.4 million, respectively, of expenses related to AirGate’sacquisition of us.

(b)          Reorganization income(expense) relate to costs and adjustments that relate to our Chapter 11 filingand the related fresh start accounting adjustments to revalue our assets andliabilities to their fair value. Other costs included in reorganization expenseinclude professional fees, adjustments to carrying value of debt, employeeseverance payments, employee retention payments and lease termination accruals.See our notes to our consolidated financial statements included elsewhere inthis report for further information.

(c)           In 2002, we recorded animpairment charge of approximately $8.1 million as a result of our annualimpairment testing of goodwill as required by SFAS No. 142 “Goodwill andOther Intangibles”. In addition, we recorded impairment charges ofapproximately $53.0 million under SFAS No. 144 “Accounting for theImpairment or Disposal of Long-Lived Assets” which consisted of approximately$23.6 million of intangible assets and $29.4 million of property andequipment.

(d)          As of the effective dateof our plan of reorganization, we recognized income of approximately$132.0 million on the cancellation of debt related to the discharge ofcertain of our liabilities subject to compromise as required under our plan ofreorganization.

(e)           In connection withAirGate’s acquisition of us, we changed our method of recognizing interestexpense on our then existing senior discount notes effective as of October 1,2001. The cumulative effect of this change in accounting for the periodsthrough September 30, 2001, was a reduction in the carrying value of thesenior discount notes by approximately $4.3 million along with acorresponding decrease in our net loss.

(f)             Basic and dilutedloss per share for the Successor Company are calculated by dividing the netloss available to common stockholders by the weighted average number of sharesof our common stock. Pursuant to our plan of reorganization, 8.6 millionshares were distributed to our unsecured creditors on the effective date andthe remaining 0.4 million shares held in reserve were distributed in 2005upon resolution of disputed claims. The full nine million shares were used inthe calculation of weighted average shares for the years ended September 30,2005 and the period ended September 30, 2004. The calculation was made inaccordance with SFAS No. 128, “Earnings Per Share”. The basic and dilutedloss per share are the same because the inclusion of the incremental potentialshares from any assumed exercise of stock options is antidilutive. Per shareinformation is not presented for the Predecessor Company as it is notmeaningful.

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(g)           Amount includesapproximately $206.7 million related to our then existing senior discountnotes and other amounts owed to Sprint and other creditors.

(h)          In connection withAirGate’s acquisition of us, all shares of preferred stock were converted intocommon shares.

(i)             Aspart of our plan of reorganization, our previously issued common stock wascancelled and new equity was issued to our general unsecured creditors insatisfaction and retirement of their claims.

**ITEM 7.**                MANAGEMENT’SDISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONAND RESULTS OF OPERATIONS

The following is ananalysis of our results of operations, liquidity and capital resources andshould be read in conjunction with the Consolidated Financial Statements andnotes related thereto included in this Form 10-K. To the extent thatthe following Management’s Discussion and Analysis contains statements whichare not of a historical nature, such statements are forward-looking statementswhich involve risks and uncertainties. These risks include, but are not limitedto the risk and uncertainties listed in the section entitled “This AnnualReport Contains Forward-Looking Statements” and other factors discussedelsewhere herein and in our other filings with the SEC.

**Definitions of Operating Metrics**

In this “Management’sDiscussion and Analysis of Financial Condition and Results of Operations”section, we provide certain financial measures that are calculated inaccordance with accounting principles generally accepted in the United States (“GAAP”)and as adjusted to GAAP (“non-GAAP”) to assess our financial performance. Inaddition, we use certain non-financial terms that are not measures of financialperformance under GAAP. Terms such as net subscriber additions and churn areterms used in the wireless telecommunications industry. The non-GAAP financialmeasures of average revenue per user (“ARPU”) and cost per gross addition (“CPGA”)reflect standard measures of performance commonly used in the wirelesstelecommunications industry. The non-financial terms and the non-GAAP measuresreflect wireless telecommunications industry conventions and are commonly usedby the investment community for comparability purposes. The non-GAAP financialmeasures included in this “Management’s Discussion and Analysis of FinancialCondition and Results of Operations” are reconciled below in “Reconciliation ofNon-GAAP Financial Measures” and, together with the non-financial terms, aresummarized as follows:

·       Netsubscriber additions for the period represented is calculated as the gross newsubscribers acquired in the period less the number of subscribers deactivatedplus the net subscribers  transferred inor out of our markets during the period.

·       Averagemonthly churn is a measure of the rate at which subscribers based in ourterritory deactivate service on a voluntary or involuntary basis. We calculateaverage monthly churn based on the number of subscribers deactivated during theperiod (net of transfers out of our territory and those who deactivated within30 days of activation) as a percentage of our average monthly subscriberbase during the period divided by the number of months during the period.

·       ARPU,or average revenue per user, is a measure of the average monthly servicerevenue earned from subscribers based in our territory. This measure iscalculated by dividing subscriber revenues in our consolidated statement ofoperations by the number of our average monthly subscribers during the perioddivided by the number of months in the period.

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·  CPGA, or cost per gross addition, is a measureof the average cost we incur to add a new subscriber in our territory. Thesecosts include handset subsidies on new subscriber activations, commissions,rebates and other selling and marketing costs. We calculate CPGA by dividing(a) the sum of cost of products sold and selling and marketing expensesassociated with transactions with new subscribers during the measurementperiod, less product sales revenues associated with transactions with newsubscribers during the measurement period, by (b) the total number ofsubscribers activated in our territory during the period.

·  Licensed population represents the number ofresidents (usually expressed in millions) in the markets in our territory forwhich we have an exclusive right to provide wireless mobility communicationsservices under the Sprint brand name. The number of residents located in ourterritory does not represent the number of wireless subscribers that we serveor expect to serve in our territory.

·  Covered population represents the number ofresidents (usually expressed in millions) covered by our portion of thewireless network of Sprint. The number of residents covered by our network doesnot represent the number of wireless subscribers that we serve or expect toserve in our territory.

In this “Management’s Discussion and Analysis ofFinancial Condition and Results of Operations,” unless the context indicatesotherwise, all references to “subscribers” or “customers’ and other operatingmetrics mean subscribers or customers excluding subscribers of resellers, orMVNOs, that use our network and resell wireless service under private brands.

**Overview**

As a PCS Affiliate of Sprint, we have the exclusiveright to provide digital wireless personal communications services, or PCS,under the Sprint brand name in 80 markets including markets in Illinois,Michigan, Pennsylvania, Indiana, Iowa, Ohio and Tennessee. The territoryincludes key markets such as Grand Rapids (MI), Fort Wayne (IN), theTri-Cities region of Tennessee (Johnson City, Kingsport and Bristol), Scranton(PA), Saginaw-Bay City (MI), and the Quad Cities region of Illinois andIowa (Bettendorf and Davenport, IA, and Moline and Rock Island, IL). We own andare responsible for building, operating and managing the portion of the 100%digital, 100% PCS wireless network of Sprint PCS located in our territory. Weoffer national calling plans designed by Sprint PCS as well as local planstailored to our markets. Our portion of the PCS network of Sprint PCS isdesigned to offer a seamless connection with the wireless network of SprintPCS. We market Sprint PCS products and services through a number ofdistribution outlets located in our territory, including our company-ownedretail stores, exclusive co-branded dealers, major national retailers and localthird party distributors. Based on the 2000 population counts compiled by theU.S. Census Bureau adjusted by estimated growth rates from third partyproprietary demographic databases, as of September 30, 2005, our licensedterritory had a total population of approximately 15.0 million residents,of which our wireless network covered approximately 11.3 millionresidents. At September 30, 2005, we had approximately 476,400 subscribers.We are headquartered in Schaumburg, Illinois.

We recognize revenues from our subscribers for theprovision of wireless telecommunications services, proceeds from the sale ofhandsets and accessories through channels controlled by us and fees from SprintPCS and other wireless service providers and resellers when their subscribersroam onto our network. Sprint PCS retains 8% of all service revenue collectedfrom our subscribers (not including product sales or roaming charges billed toour subscribers) and 8% of all fees collected from other wireless serviceproviders and resellers when their subscribers roam onto our network. We reportthe amount retained by Sprint PCS as an operating expense. In addition, SprintPCS bills our subscribers for taxes, handset insurance and Universal ServiceFund charges which we do not record. Sprint PCS collects these amounts from thesubscribers and remits them to the appropriate entity.

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As part of our affiliationagreements with Sprint PCS, we have contracted with Sprint to provide to usback-office services such as subscriber activation, handset logistics, billing,customer care and network monitoring services through December 31, 2006. Weelected to obtain these services from Sprint to take advantage of its economiesof scale, to accelerate our build-out and market launches and to lower our capitalrequirements. The cost for these services is primarily on a per subscriber orper transaction basis and is recorded as an operating expense. We have begundiscussions with Sprint regarding the terms and conditions under which we wouldcontinue to purchase these services from Sprint after December 31, 2006,if at all.

*Reorganization*

On February 23, 2003, while we were wholly ownedby AirGate, we filed for bankruptcy under Chapter 11 of the Bankruptcy Code. Thedecision to file was based on a combination of factors, including weakness inthe wireless telecommunications industry and the economy generally. Inaddition, we had experienced a decline in liquidity and cash flow, making itdifficult for us to comply with our debt service obligations. We believe thatactions taken by Sprint—specifically, decreasing our roaming rate and imposingnew and higher fees on us—were the primary reason for the decline in ourliquidity. Accordingly, in connection with our bankruptcy filing, we filed acomplaint against Sprint and Sprint PCS alleging that Sprint breached itsaffiliation agreements with us.

Duringour bankruptcy we operated our business and managed our assets asdebtors-in-possession, subject to the supervision of the bankruptcy court,without obtaining debtor-in-possession financing. This relief provided us thetime necessary to reorganize our business, which included slowing subscribergrowth to reduce our acquisition costs, increasing our focus on prime subscribersand aligning our operations through cost reductions to compete in ourmarketplace and to improve our financial results.

On July 9, 2004, the bankruptcy court confirmedour plan of reorganization and the plan of reorganization became effective on July 20,2004. On the effective date we paid a portion of the net proceeds from thesenior notes issued in connection with our emergence to satisfy in full in cashour obligations to each of the lenders under our then existing senior securedcredit facility and to permanently retire the loans thereunder. The remainingnet proceeds from the senior notes was used to satisfy all other securedclaims, administrative and other priority claims and unsecured convenienceclaims and to pay fees and expenses related to the reorganization, as well asfor general corporate purposes. Additionally, all of our subordinated claimswere discharged and all of our then existing capital stock was cancelled. As aresult of the consummation of our reorganization, our senior secured creditfacility has been repaid in full in cash and terminated, and our seniordiscount notes have been cancelled and the holders have received shares of ourcommon stock.

*Merger with Horizon PCS, Inc.*

On July 1, 2005, we completed our tax-free stockfor stock merger transaction with Horizon PCS, Inc., in which Horizon PCS, Inc.merged with and into iPCS, Inc. with iPCS, Inc. as the survivingcorporation. Horizon PCS, Inc. was a PCS Affiliate of Sprint whoseterritory covered 40 markets in nine contiguous states. Based on coveredpopulation and total subscribers, we are now the second largest PCS Affiliateof Sprint and, upon the closing of the announced merger of Sprint and AlamosaHoldings, Inc., we will be the largest. In addition, the transaction almostdoubled the size of our operations, thereby providing future synergies in anumber of operating and administrative areas. The transaction was accounted forunder the purchase method and the results of Horizon PCS, Inc. areincluded in our consolidated results of operations from the date ofacquisition.

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*Relationship with Sprint*

Ourrelationship with Sprint is the most significant relationship we have. Theterms of our relationship are set forth in our affiliation agreements withSprint PCS. Pursuant to these affiliation agreements, we agreed to offer PCSservices using Sprint’s spectrum under the Sprint brand name on a wirelessnetwork built and operated at our own expense. We believe that our strategicrelationship with Sprint PCS provides significant competitive advantages. Inparticular, we believe that our affiliation agreements with Sprint PCS allow usto offer high quality, nationally branded wireless voice and data services forlower cost and lower capital requirements than would otherwise be possible.

Sprint’smerger with Nextel has thrust our relationship with Sprint into a state of uncertainty,the resolution of which may have a materially adverse effect on our business. OnDecember 15, 2004, Sprint announced that it had signed a merger agreementwith Nextel pursuant to which they would merge and combine their operations. Shortlyafter announcing the merger, Sprint also announced that it would pursuediscussions with the PCS Affiliates of Sprint—including us—directed toward amodification of their affiliation agreements to address the implications of itsmerger with Nextel. Although the parties engaged in discussions with respect tosuch a modification, no agreement has been reached. As discussed in Item 1. Business—“OurLitigation Against Sprint and the Forbearance Agreement” above, we have filedlawsuits against Sprint, Sprint PCS and Nextel.

We do not know how Sprint intends to operate thelegacy Nextel network in iPCS  Wireless’s territory after expiration ofthe Forbearance Agreement on January 1, 2006 and in Horizon PCS’sterritory after the date that any decision after trial is rendered by theDelaware Court of Chancery. Sprint may elect to operate the legacy Nextelbusiness in a manner that may have a material adverse effect on us. We do notknow whether we will ultimately reach agreement with Sprint on mutually satisfactoryterms for revised affiliation agreements. If we are able to modify ouraffiliation agreements with Sprint, it is likely that any such revisedaffiliation agreements would materially change our business and operations. Wedo not know the outcome of our pending litigation against Sprint. If we do not prevail,Sprint may engage in conduct that has a material adverse effect on our businessand operations. We intend to continue to enforce our rights to the fullestextent, but there is no assurance that we will prevail.

**Consolidated Results of Operations**

Inaccordance Statement of Position 90-7, “Financial Reporting by Entitiesin Reorganization under the Bankruptcy Code” the results of operations and theliquidity and financial condition of the Successor Company have not beencombined with those of the Predecessor Company in this Management’s Discussionand Analysis. The period ended September 30, 2004 refers to thethree-month period beginning on July 2, 2004. The period ended July 1,2004 refers to the nine-month period beginning on October 1, 2003.

Resultsof operations for any period less than one year are not necessarily indicativeof results of operations for a full year. In addition, results for the yearended September 30, 2005 include results for Horizon PCS from the date ofacquisition (July 1, 2005) and accordingly are not comparable to theresults of operations for any prior period.

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Management uses severalkey performance metrics to analyze the operations of our business. Below is atable setting forth the metrics that we use for the relevant time periods:

| ** **                | ** ** | **Successor Company**                                                               | ** ** | **Predecessor Company**                                                               | ** ** |
|---------------------------|------------|------------------------------------------------------------------------------------------|------------|--------------------------------------------------------------------------------------------|------------|
| ** **                | ** ** | **As of and For the  Year Ended  September 30, 2005** | ** ** | **As of and For the  Period Ended  September 30, 2004** | ** ** | **As of and For the  Period Ended  July 1, 2004** | ** ** | **As of and For the  Year Ended  September 30, 2003** | ** ** |
| Total Subscribers         |       |                                                                                     | 476,400    |                                                                                       |       |   | 240,500 |   |   |   | 233,000 |   |   |   | 220,100 |   |   |
| Net Subscriber  Additions |       |                                                                                     | 47,900     |                                                                                       |       |   | 7,500 |   |   |   | 12,900 |   |   |   | 4,400 |   |   |
| Churn.                    |       |                                                                                     | 2.6        | %                                                                                          |       |   | 2.9 | % |   |   | 2.7 | % |   |   | 3.4 | % |   |
| ARPU.                     |       |                                                                                     | $          | 51.27                                                                                      |       |   |   | $ | 53.43 |   |   |   | $ | 53.04 |   |   |   | $ | 53.36 |   |   |
| CPGA.                     |       |                                                                                     | $          | 377                                                                                        |       |   |   | $ | 368 |   |   |   | $ | 378 |   |   |   | $ | 345 |   |   |

 

***Net Subscriber Additions.******  ***OnJuly 1, 2005, we acquired Horizon PCS which provided personalcommunication services to approximately 188,000 subscribers as of June 30,2005. The other increases in net subscriber additions from 2003 to 2005 can beattributed to the increase in our distribution outlets, primarily from ourretail stores and exclusive co-branded dealers in our territory, and to ourincreased sales and promotional efforts to attract new subscribers.

After our Chapter 11bankruptcy filing in February 2003, we closed stores and cancelleddistribution agreements with local agents in order to limit new activations asa means to conserve cash. Throughout 2004, we began slowly ramping up ourgrowth in new subscriber additions.

***Churn.******  ***Theimprovement in churn for the year ended September 30, 2005 over 2004resulted primarily from improvements in network quality, the increasedcompetitiveness of our rate plans and handsets, and increased take rates offamily plans and overage protection plans (such as Fair and Flexible plans). Inaddition, approximately 85% of our subscribers were under contract at September 30,2005, compared to approximately 75% at September 30, 2004.

Churnfor the year ended September 30, 2003 was 3.4%. The higher churn rate in2003 was due to a higher percentage of sub-prime customers we were adding priorto our Chapter 11 bankruptcy filing in February 2003.

***Average Revenue Per User.******  ***The reductionin ARPU reflected a reduction in minutes over plan revenue, the elimination ofaccrued activation fees as part of fresh start accounting, and the July 2005merger with Horizon PCS, whose subscribers historically had a lower ARPU. Forthe year ended September 30, 2005, our average monthly minutes over planrevenue per user was $4.01. For the periods ended September 30, 2004 and July 1,2004, average monthly minutes over plan revenue per user was $6.08 and $6.10,respectively. Average monthly data revenue, however, has increased to $5.66 forthe year ended September 30, 2005 compared to $4.38 and $2.86,respectively, for periods ended September 30, 2004 and July 1, 2004. Weexpect this trend of increasing data revenue will help offset continued decreasesin minutes over plan revenue.

ARPUwas $53.36 for the year ended September 30, 2003. For the year ended September 30,2003, our average monthly minutes over plan revenue per user was $8.71 and ouraverage monthly data revenue was $1.17.

***Cost Per Gross Addition.******  ***The increasedCPGA for the fiscal year ended September 30, 2005 over the periods endedSeptember 30, 2004 and July 1, 2004 was due to higher costsassociated with increasing our distribution and growing our subscriber base. Thesecosts include promotional expenses, commissions and equipment subsidies andrebate expenses. At September 30, 2005, we operated 33 retail stores,including 13 stores in Horizon PCS’s territory, and managed 59 co-brandeddealers, including 13 dealers in Horizon PCS’s territory. At both September 30,2004 and at July 1, 2004, we operated 12 retail stores.  At September 30, 2004 and at July 1,2004, we managed seven and four exclusive co-branded dealers, respectively.

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For the year ended September 30, 2003, CPGA was$345. The increased CPGA for the periods ended September 30, 2004 and July 1,2004 relative to the fiscal year ended September 30, 2003 was due tohigher costs we incurred as we started to ramp up our growth of new subscriberadditions, including promotional expenses, commissions and equipment subsidiesand rebate expenses.

***Reconciliationof Non-GAAP Financial Measures (All Revenues and Expenses in Thousands)***

We utilize certainfinancial measures that are not calculated in accordance with GAAP to assessour financial performance. A non-GAAP financial measure is defined as anumerical measure of financial performance that (a) excludes amounts, oris subject to adjustments that have the effect of excluding amounts, that areincluded in the comparable measure calculated and presented in accordance withGAAP in the statement of income or statement of cash flows; or (b) includesamounts, or is subject to adjustments that have the effect of includingamounts, that are excluded from the comparable measure so calculated andpresented. The non-GAAP financial measures discussed in “—Results of Operations”are ARPU and CPGA. A description of each of these non-GAAP financial measuresis provided in “—Definition of Operating Metrics.” The following tablesreconcile the non-GAAP financial measures with our consolidated financialstatements presented in accordance with GAAP, excluding subscriber data.

| ** **           | ** ** | **Successor Company**                                          | ** ** |
|----------------------|------------|---------------------------------------------------------------------|------------|
| ** **           | ** ** | **For the Year Ended  September 30, 2005** | ** ** | **For the Period Ended  September 30, 2004** | ** ** |
| ***ARPU***           |       |                                                                |       |   |   |   |   |   |   |
| Service revenue      |       |                                                                | $          | 189,177 |   |   |   | $ | 37,909 |   |   |
| Average  subscribers |       |                                                                | 307,495    |   |   |   | 236,505 |   |   |
| ARPU                 |       |                                                                | $          | 51.27 |   |   |   | $ | 53.43 |   |   |

 

| ** **           | ** ** | **Predecessor Company**                                    | ** ** |
|----------------------|------------|-----------------------------------------------------------------|------------|
| ** **           | ** ** | **For the Period Ended  July 1, 2004** | ** ** | **For the Year Ended  September 30, 2003** | ** ** |
| ***ARPU***           |       |                                                            |       |   |   |   |   |   |   |
| Service revenue      |       |                                                            | $          | 107,097 |   |   |   | $ | 145,249 |   |   |
| Average  subscribers |       |                                                            | 224,334    |   |   |   | 226,859 |   |   |
| ARPU                 |       |                                                            | $          | 53.04 |   |   |   | $ | 53.36 |   |   |

 

ARPU, which is utilized bymost wireless companies to determine recurring monthly revenue on a persubscriber basis, is used by analysts and investors to compare relativesubscriber revenue across the wireless industry. We use ARPU to assist inevaluating past selling performance and the success of specific rate planpromotions. We also use ARPU as a basis to forecast future service revenues.

| ** **                                                      | ** ** | **Successor Company**                                          | ** ** |
|-----------------------------------------------------------------|------------|---------------------------------------------------------------------|------------|
| ** **                                                      | ** ** | **For the Year Ended  September 30, 2005** | ** ** | **For the Period Ended  September 30, 2004** | ** ** |
| ***CPGA***                                                      |       |                                                                |       |   |   |   |   |   |   |
| Selling and Marketing:                                          |       |                                                                | $          | 44,893 |   |   |   | $ | 7,996 |   |   |
| plus: Activation costs included in cost of service  and roaming |       |                                                                | (552       | ) |   |   | (471 | ) |   |
| plus: Equipment costs, net of cost of upgrades                  |       |                                                                | 21,140     |   |   |   | 4,828 |   |   |
| less: Equipment revenue, net of upgrade revenue                 |       |                                                                | (5,841     | ) |   |   | (1,193 | ) |   |
| CPGA costs                                                      |       |                                                                | $          | 59,640 |   |   |   | $ | 11,160 |   |   |
| Gross adds                                                      |       |                                                                | 158,225    |   |   |   | 30,307 |   |   |
| CPGA                                                            |       |                                                                | $          | 377 |   |   |   | $ | 368 |   |   |

 

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| ** **                                                      | ** ** | **Predecessor Company**                                    | ** ** |
|-----------------------------------------------------------------|------------|-----------------------------------------------------------------|------------|
| ** **                                                      | ** ** | **For the Period Ended  July 1, 2004** | ** ** | **For the Year Ended  September 30, 2003** | ** ** |
| ***CPGA***                                                      |       |                                                            |       |   |   |   |   |   |   |
| Selling and  Marketing:                                         |       |                                                            | $          | 20,976  |   |   |   | $ | 27,343  |   |   |
| plus: Activation costs included in cost of service  and roaming |       |                                                            | 1,070      |   |   |   | 1,530 |   |   |
| plus: Costs of products sold, net of cost of  upgrades          |       |                                                            | 9,669      |   |   |   | 10,500 |   |   |
| less: Products sales revenues, net of upgrade  revenue          |       |                                                            | (3,179     | ) |   |   | (3,610 | ) |   |
| CPGA costs                                                      |       |                                                            | $          | 28,536  |   |   |   | $ | 35,763  |   |   |
| Gross adds                                                      |       |                                                            | 75,395     |   |   |   | 103,592 |   |   |
| CPGA                                                            |       |                                                            | $          | 378  |   |   |   | $ | 345  |   |   |

 

CPGA is utilized by most wireless companies todetermine their cost to acquire a new subscriber. CPGA is used by analysts andinvestors to compare us to other wireless companies. We use CPGA to evaluatepast selling performance, the success of specific promotions and as a basis todetermine the amount of time we must retain a new subscriber before we recoverthis cost. In addition, we use CPGA as a basis for budgeting.

***Revenues.***

Thefollowing table sets forth a breakdown of revenues by type:

| ** **                                                                          | ** ** | **Successor Company**                         | ** ** | **Predecessor Company**                                  | ** ** |                                                    |
|-------------------------------------------------------------------------------------|------------|----------------------------------------------------|------------|---------------------------------------------------------------|------------|---------------------------------------------------------|
| ** **                                                                          | ** ** | **For Year  Ended  September 30,  2005** | ** ** | **For the Period  Ended  September 30,  2004** | ** ** | **For the Period  Ended  July 1,  2004** | ** ** | **For the Year  Ended  September 30,  2003** | ** ** |   |
| Service revenue                                                                     |       |                                               | $          | 189,177                                                  |       |                                                    |   | $ | 37,909  |   |   |   | $ | 107,097  |   |   |   | $ | 145,249  |   |   |
| Roaming revenue  from subscribers of Sprint PCS and other PCS Affiliates  of Sprint |       |                                               | 73,096     |                                                          |       |                                                    | 14,385 |   |   |   | 29,748 |   |   |   | 35,764 |   |   |
| Roaming revenue  from other wireless carriers                                       |       |                                               | 5,493      |                                                          |       |                                                    | 1,231 |   |   |   | 4,645 |   |   |   | 8,456 |   |   |
| Reseller revenue                                                                    |       |                                               | 4,370      |                                                          |       |                                                    | 213 |   |   |   | 132 |   |   |   | — |   |   |
| Equipment revenue                                                                   |       |                                               | 7,692      |                                                          |       |                                                    | 1,483 |   |   |   | 3,805 |   |   |   | 4,369 |   |   |
| Other revenue                                                                       |       |                                               | 219        |                                                          |       |                                                    | 161 |   |   |   | 435 |   |   |   | 455 |   |   |
| Total revenues                                                                      |       |                                               | $          | 280,047                                                  |       |                                                    |   | $ | 55,382  |   |   |   | $ | 145,862  |   |   |   | $ | 194,293  |   |   |

 

***Servicerevenue.***   Servicerevenue is comprised of the monthly recurring charges for voice and data usageand the monthly non-recurring charges for voice and data minutes over plan,long distance, travel and roaming usage charges, other feature revenues andlate payment fee and early cancellation fee revenues. Deductions for billingadjustments and promotional credits are recorded as a reduction to servicerevenue. Increases in service revenue from 2003 to 2005 reflect a larger numberof subscribers on our network as a result of a focus on increased subscribergrowth after we emerged from bankruptcy coupled with the subscribers acquiredwith the merger with Horizon PCS offset with a decrease in ARPU.

***Roaming revenue from subscribersof Sprint PCS and other PCS Affiliates of Sprint.*  **Wereceive revenue on a per minute basis for voice traffic and per kilobyte basisfor data traffic when subscribers of Sprint PCS and other PCS Affiliatesof Sprint use our network. In addition, we receive toll revenue for any longdistance calls made by these subscribers while roaming on our network. Thereciprocal roaming rate arrangement we have with Sprint PCS for inbound andoutbound roaming was $0.058 

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per minute for voice charges effective January 1,2003, and dropped to $0.041 per minute effective January 1, 2004.Effective April 1, 2004, this rate returned to $0.058 per minute. Thisrate is effective through December 31, 2006. For data traffic, this ratewas $0.0013 per kilobyte in 2003 and $0.0020 in 2004. The 2004 rate is alsoeffective through December 31, 2006. These rates will be reset effective January 1,2007.

The increase in roaming revenue from subscribers ofSprint PCS and other PCS Affiliates of Sprint was due to an increase in roamingminutes and increased kilobyte traffic per subscriber. As we have seen in ourown subscriber usage, we also experienced increased growth in kilobyte datausage from subscribers of Sprint PCS and other PCS Affiliates of Sprint. Roamingminutes and kilobytes from subscribers of Sprint PCS and other PCSAffiliates of Sprint for the year ended September 30, 2005 were 1.0 billionand 3.3 billion, respectively, compared to 206 million and 516 millionand 466 million and 940 million for the periods ended September 30,2004, and July 1, 2004 respectively. For the year ended September 30,2003, roaming minutes and kilobytes from subscribers of Sprint PCS and other PCSAffiliates of Sprint were 459 million and 486 million, respectively.

***Roaming revenuefrom other wireless carriers.*****  **Wereceive roaming revenue from wireless carriers other than Sprint and other PCSAffiliates of Sprint when subscribers of such other wireless carriers roam inour territory. We do not have agreements with these other wireless carriers. Instead,we rely on roaming arrangements Sprint PCS has negotiated with them. We arepaid on a per minute basis for voice traffic pursuant to these agreements.Roaming revenue from other wireless carriers has decreased from 2003 to 2005 asa result of both lower minutes and lower per minute rates Sprint PCS hasnegotiated. Roaming minutes for the year ended September 30, 2005, the periodended September 30, 2004, the period ended July 1, 2004 and the yearended September 30, 2003 were 45.5 million, 10.9 million, 32.3 millionand 56.1 million, respectively. For these same periods, the per minuterates were $0.12, $0.11, $0.14, and $0.15, respectively.

***Reseller revenue.*  **ThroughSprint PCS we allow resellers, or MVNOs, such as Virgin Mobile, to use ournetwork. Per these arrangements, we are paid on a per minute basis. Theincrease in reseller revenue is due to increases in both reseller subscribersin our territory and an increase in the number of agreements signed by SprintPCS with resellers. At September 30, 2005, we had 147,800 resellersubscribers, of  which approximately101,000 reseller subscribers were acquired in the Horizon PCS merger on July 1,2005. At September 30, 2004 and July 1, 2004, we had approximately10,000 and 4,000 reseller subscribers, respectively.

***Equipment revenue.*  **Equipmentrevenue is derived from the sale of handsets and accessories to new customersand current customers who upgrade their handsets from our retail and localdistribution channels, net of sales incentives, rebates and an allowance forreturns. Our handset return policy allows customers to return their handsetsfor a full refund within 14 days after the date of purchase. When handsetsare returned to us, we may be able to reissue the handsets to customers atlittle additional cost to us; however, when we cannot reissue the handsets,used handsets are returned to Sprint PCS for refurbishing. Through February 1,2005, we received a credit from Sprint PCS which was less than what weoriginally paid for the handset. Subsequent to February 1, 2005, we receivean allocation of refurbished handsets that we can purchase from Sprint PCS at areduced price. The increase in equipment revenue is due to an increase insubscriber growth which can be partially attributed to the increase in ourdistribution outlets, primarily from our retail stores and exclusive co-brandeddealers in our territory, and to our increased sales and promotional efforts toattract new subscribers.

***Otherrevenue.*  **Other revenue consists mostly of towerleasing revenue. The decrease in other revenue is the result of our sales ofour towers during 2005. Because we no longer owned the towers, this revenuestream from other wireless carriers who leased space on our towers waseliminated.

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***For the Year Ended September 30, 2005 and thePeriods Ended September 30, 2004 and July 1, 2004***

***Cost of Service andRoaming.*****  **Cost ofservice and roaming includes network operations expense, roaming expenserelating to when our subscribers roam either on other Sprint PCS networks orother wireless carriers’ networks, back-office customer services provided bySprint PCS, the provision for doubtful accounts, long distance expense and the8% affiliation fee due to Sprint PCS for collected revenues. Network operationsexpenses include salaries and benefits for network personnel, cell site rent,utilities and maintenance expenses, fees relating to the connection of our cellsites to our switches and other transport and facility expenses. Roamingexpense is our cost of our subscribers using Sprint PCS and other wirelesscarriers’ networks. Roaming expense on the Sprint PCS network is at thereciprocal rates as described above under “—Roaming revenue from subscribers ofSprint PCS and other PCS Affiliates of Sprint.” Roaming expense when oursubscribers use other wireless carriers networks is at rates as determined bythe roaming agreements signed by Sprint PCS with these other wirelesscarriers. For the year ended September 30, 2005 and the periods ended September 30,2004 and July 1, 2004, cost of service and roaming was $153.2 million,$29.1 million, and $83.2 million, respectively. The increase in 2005reflected our larger number of subscribers served, the increased size of ournetwork, increases in roaming expense and an increase in collected revenue,upon which our 8% affiliation fee is calculated.

At September 30, 2005, our network consisted of1,488 cell sites, including 786 in the acquired Horizon PCS territories, andfive switches, including three switches in the acquired Horizon PCSterritories. At September 30, 2004 and July 1, 2004, our networkconsisted of 669 and 662 cell sites, respectively. As of September 30,2004 and July 1, 2004, we had two switches in operation.

***Cost of Equipment.******  ***Cost ofequipment includes the cost of handsets and accessories sold or upgraded fromour retail and local distribution channels. Cost of equipment for the yearended September 30, 2005 was $27.3 million. Cost of equipment for theperiods ended September 30, 2004 and July 1, 2004, was$5.6 million and $12.8 million, respectively. The increase for theyear ended September 30, 2005 primarily resulted from both the increasedsubscriber activations and subscribers upgraded as our points of distribution inthe retail and local distribution channels increased.

***Selling andMarketing.******  ***Selling and marketing expense includesthe costs to operate our retail stores, advertising and promotional expenses,commissions and equipment subsidies and rebate expenses relating to newsubscriber additions from national third parties and other Sprint controlledchannels. Selling and marketing expense for the year ended September 30,2005 was $44.9 million. Selling and marketing expense for the periodsended September 30, 2004 and July 1, 2004 was $8.0 million and$21.0 million, respectively. The increase in 2005 reflected our continuingeffort to increase our subscriber base across our entire territory. During theyear, we added new retail stores, exclusive co-branded dealers and additionalsales personnel responsible for managing indirect channels. We alsosignificantly increased our advertising and promotional expenses to attract andsign new subscribers.

***General andAdministrative.******  ***General and administrativeexpenses include administrative salaries and benefits, legal fees, insuranceexpense and other professional expenses.  For the year ended September 30, 2005,general and administrative expenses were $11.4 million. For the periodsended September 30, 2004 and July 1, 2004, general and administrativeexpenses were $1.7 million and $3.6 million, respectively. Theincrease in 2005 reflected the larger administrative infrastructure necessaryto manage the larger operations and increased costs related to being an SECreporting company. We also incurred approximately $0.3 million in integrationexpenses related to the Horizon PCS merger during the year ended September 30,2005. In addition, we incurred approximately $1.1 million in legal costsrelated to our litigation with Sprint.

***ReorganizationIncome (Expense).******  ***Reorganization income or expenseconsists of those items incurred as a direct result of our Chapter 11filing as well as the effects of fresh-start accounting adopted on July 1,

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2004. There was no reorganizationincome or expense for the year ended September 30, 2005 or the periodended September 30, 2004. Reorganization income for the period ended July 1,2004 totaled $60.8 million.

***Stock-basedcompensation expense.******  ***For the year ended September 30,2005, we recorded $1.2 million of stock-based compensation expense. Inconnection with the closing of our merger with Horizon PCS, four formerdirectors resigned from our board of directors. Effective with their resignation,we amended each of these directors’ stock option award agreements to extend thetermination date of these director’s options from 90 days to 210 dayspost-resignation. As a result of these amendments, we recorded additionalstock-based compensation expense of approximately $0.6 million during theyear ended September 30, 2005. In addition, we recorded $1.6 millionof deferred compensation recorded as a result of the merger for the unvestedHorizon options that were converted into options to purchase iPCS shares. Forthe year ended September 30, 2005, we recorded $0.5 million ofstock-based compensation expense relating to this deferred compensation. Theremaining stock-based compensation expense in the year ended September 30,2005 was related to restricted stock grants to employees under our long-termincentive plan. For the period ended September 30, 2004, we recorded$22,000 of stock-based compensation expense related to the restricted stockgrants to employees. There was no stock-based compensation expense for theperiod ended July 1, 2004.

***Depreciation and Amortization.******  ***For the yearended September 30, 2005, the period ended September 30, 2004, andthe period ended July 1, 2004, depreciation and amortization expensetotaled $71.8 million, $11.8 million, and $28.6 million,respectively. Of these amounts, amortization of intangibles totaled $18.1 million,$3.1 million, and $0.0 million for these same periods, respectively. Duringthe year ended September 30, 2005, we recorded accelerated depreciation of$13.6 million on our Michigan network assets after we signed an agreementwith Nortel to replace our current Lucent network with Nortel equipment,thereby reducing the estimated economic useful lives of this Lucent equipment. Inaddition, Horizon PCS signed a similar agreement with Nortel to replacetheir existing Motorola equipment, and as a result, we recorded accelerateddepreciation totaling $2.8 million for these Motorola assets from the dateof the merger through September 30, 2005.

Amortizationof intangibles increased in the year ended September 30, 2005 as 2005included a full year of amortization expense related to the intangiblesrecorded as a result of fresh-start accounting and amortization expense from July 1,2005 through September 30, 2005 related to the intangibles recorded as aresult of our merger with Horizon PCS.

***Interest Income.******  ***For the yearended September 30, 2005, the period ended September 30, 2004, andthe period ended July 1, 2004, interest income totaled $1.8 million,$0.3 million, and $0.3 million, respectively. The increase in 2005over the prior periods in 2004 was due to higher cash balances from the netproceeds of the $165.0 million 111¤2**%**senior notes offering coupled with cash balances of $19.9 millionacquired in the merger with Horizon PCS.

***Interest Expense.******  ***For the yearended September 30, 2005, interest expense was $22.9 million. Thisprimarily consisted of interest on our 111¤2% senior notesand 113¤8%senior notes. For the period ended September 30, 2004 and the period endedJuly 1, 2004, interest expense was $5.4 million and$10.1 million, respectively. For the periods ended September 30, 2004and July 1, 2004, we recorded interest expense on the outstanding balanceof our senior credit facility that was paid off in full as part of our plan ofreorganization and on the 111¤2%senior notes that were issued in April 2004.

***Cancellation of Debt******  ***For the periodended July 1, 2004, we recorded income of $132.0 million for thecancellation of debt that resulted from the discharge of our unsecured creditorclaims in exchange for equity in the reorganized company upon our emergencefrom bankruptcy.

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***Net Income (Loss).******  ******For the year endedSeptember 30, 2005, our net loss was $50.9 million. Net loss for theperiod ended September 30, 2004 was $6.0 million. For the periodended July 1, 2004, we recorded net income of $179.6 million as aresult of $60.8 million of reorganization income and $132.0 millionof cancellation of debt income as mentioned above.***

***For the Period Ended September 30, 2004, the Period EndedJuly 1, 2004 and the Year Ended September 30, 2003***

***Cost of Service and Roaming.***   Forthe periods ended September 30, 2004 and July 1, 2004, and the yearended September 30, 2003, cost of service and roaming was $29.1 million,$83.2 million, and $130.1 million, respectively. We decommissioned one ofour switches and completed a least-cost routing analysis and redesign of ourtransport and facility infrastructure in June 2004. These two initiativeswill result in savings that will reduce our comparable network operating costsby approximately $3.0 million in future years.

At September 30, 2004 and July 1, 2004, ournetwork consisted of 669 and 662 cell sites, respectively. As of July 1,2004 and September 30, 2004, we had two switches in operation. For theyear ended September 30, 2003, our network consisted of 646 cell sites andthree switches.

***Cost of equipment.***   Costof equipment for the periods ended September 30, 2004 and July 1, 2004, was$5.6 million and $12.8 million, respectively. Cost of equipment for the yearended September 30, 2003 was $11.8 million. In 2004, we incurred additionalcosts for equipment as we implemented an upgrade policy for our currentcustomers to help to reduce churn.

***Selling andMarketing.******  ***Selling and marketing expense forperiods ended September 30, 2004 and July 1, 2004 was$8.0 million and $21.0 million respectively. Selling and marketingexpense for the year ended September 30, 2003 was $27.3 million.Subsequent to our Chapter 11 filing in February 2003, as a means toconserve cash, we limited the amount of advertising costs we incurred toacquire new customers. In 2004, we increased our advertising expense as we slowlyreturned to a subscriber growth mode.

***General andAdministrative.******  ***For the periods ended September 30,2004 and July 1, 2004, general and administrative expenses were$1.7 million and $3.6 million, respectively. For the year ended September 30,2003, general and administrative expenses were $5.5 million. For the yearended September 30,2003 general and administrative expenses also includedfees totaling $1.1 million for services provided by AirGate ServiceCompany. By September 30, 2003, we had cancelled all services provided byAirGate Service Company and had hired additional personnel to handle theseresponsibilities.

***Reorganization Income (Expense).******  ***Reorganizationincome for the period ended July 1, 2004 totaled $60.8 million.Reorganization income or expense consists of those items incurred as a directresult of our Chapter 11 filing as well as the effects of fresh-startaccounting adopted on July 1, 2004. Included in reorganization income forthe period ended July 1, 2004 were the following:

·       $2.3 millionof expense for the write-off of the unamortized financing fees related to thesenior credit facility paid in full as part of the approved Plan ofReorganization,

·       $2.6 millionof compensation expense related to the grant of stock and stock unit awards tothe Chief Restructuring Officer in compensation for his successful completionof the reorganization,

·       $1.4 millionof costs related to the disposal of assets and lease rejection damages,

·       $12.8 millionof professional fee and other expenses related to the reorganization, and

·       $79.9 millionof restructuring income which was the result of fresh-start accountingand the revaluation of our assets and liabilities to their fair value.

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For the year ended September 30, 2003,reorganization expense totaled $31.1 million. Included in this total was$15.2 million to adjust the senior discount notes to their estimated claimvalue and $5.5 million for the write-off of remaining deferred financingcosts related to the senior discount notes. In addition for the year ended September 30,2003, $8.4 million of professional fees related to the reorganization wasrecorded and $2.0 million was recorded for lease rejection damages,severance and property write-offs.

***Stock-based CompensationExpense.******  ***For the period ended September 30,2004, we recorded $22,000 of non-cash stock compensation expense related to therestricted stock grants to employees as part of the one million shares reservedfor employees and directors under the long-term incentive plan as part of ourplan of reorganization. There was no stock-based compensation expense for theperiod ended July 1, 2004 or the year ended September 30, 2003.

***Depreciation andAmortization.******  ***For the periods ended September 30,2004 and July 1, 2004, and the year ended September 30, 2003,depreciation and amortization expense totaled $11.8 million,$28.6 million, and $40.5 million, respectively. Of these amounts,amortization of intangibles totaled $3.1 million, $0.0 million, and$3.3 million for these same periods, respectively. At September 30,2003, the remaining value of our intangible assets was fully amortized. As aresult of fresh-start accounting applicable for the period ended July 1,2004, all our assets were revalued and we recorded $81.9 million of newintangibles that are being amortized over their remaining lives.

***Interest Income.******  ***For theperiods ended September 30, 2004 and July 1, 2004 and the year ended September 30,2003, interest income totaled $0.3 million, $0.3 million, and$0.1 million, respectively.

***Interest Expense.******  ***For theperiods ended September 30, 2004 and July 1, 2004, interest expensewas $5.4 million and $10.1 million, respectively. For the year ended September 30,2003, interest expense was $20.3 million. Interest expense in 2003included interest on our senior credit facility and interest on senior discountnotes through our Chapter 11 filing in February 2003. For the periodsended September 30, 2004 and July 1, 2004, we recorded interestexpense on the $165.0 million of senior notes that were issued inApril 2004 and on our outstanding balance of our senior credit facilitythat was paid off in full as part of our plan of reorganization.

***Cancellation ofDebt***   For the period ended July 1, 2004,we recorded income of $132.0 million for the cancellation of debt thatresulted from the discharge of our unsecured creditor claims in exchange forequity in the reorganized company upon our emergence from bankruptcy.

***Net Income (Loss).******  ***Net loss forthe period ended September 30, 2004 was $6.0 million. For the periodended July 1, 2004, we recorded net income of $179.6 million as aresult of $60.8 million of reorganization income and $132.0 millionof cancellation of debt income as mentioned above. For the year ended September 30,2003, our net loss was $72.9 million.

**Liquidity and Capital Resources**

As of September 30, 2005, we had $114.8 millionin cash and cash equivalents and investments compared to $57.8 million asof September 30, 2004. This higher amount included cash and investments ofapproximately $43.1 million acquired in the merger with Horizon PCS on July 1,2005. As of September 30, 2005, we had two outstanding senior noteobligations: (1) our 111¤2% senior noteswith a face amount of $165.0 million and (2) our 113¤8% senior noteswith a face amount $125.0 million. As described below, principal paymentsbegin in 2012 and our annual interest payments under the indentures totalapproximately $33.2 million. As of September 30, 2005, we had $0.4 millionin capital lease obligations and no secured or unsecured bank or creditfacility.

Subject to our ability tomanage subscriber growth and achieve operating efficiencies, cash, cashequivalents and investments, combined with cash flows from operations, areexpected to be sufficient to 

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fund anyoperating losses and working capital and to meet capital expenditure needs anddebt service requirements for the foreseeable future.

***Significant Sources of Cash***

We generated $12.9 million in operating cashflows for the year ended September 30, 2005 compared to $2.4 millionand $18.9 million, respectively, in operating cash flow for the periodsended September 30, 2004 and July 1, 2004. The net cash flowsgenerated from operating activities for the year ended September 30, 2005were due to lower net operating losses after adjustments for non-cash items,offset by unfavorable working capital adjustments  from accounts receivable and receivable fromSprint. The cash flows generated from operating activities for the period endedSeptember 30, 2004 were due to lower net losses offset with an unfavorablechange in working capital. For the period ended July 1, 2004, the net cashflows generated from operating activities were due to favorable changes inworking capital coupled with a lower net loss excluding cancellation of debtincome and non-cash reorganization expenses.

We received approximately $16.4 million during theyear ended September 30, 2005 from the sale of 92 cell sites to twoparties.  As of December 16, 2005,we own four towers we acquired through the Horizon PCS merger which weexpect to sell in the year ended September 30, 2006. During the year ended September 30,2005, we also received approximately $1.0 million from the sale of usedequipment which was removed from our markets pursuant to replacement agreementssigned with Nortel Networks as described below in “—Contractual Obligations.”

For the year ended September 30, 2005, wereceived a total of $9.5 million in proceeds from the exercise of optionsrepresenting approximately 449,000 shares and in addition, through our mergerwith Horizon PCS, we acquired its outstanding cash and cash equivalents net oftransaction costs, of approximately $19.9 million.

For the period ended July 1,2004, cash flows from financing activities totaled $162.4 million.Proceeds from the senior notes offering in April, 2004 totaled$165.0 million. Offsetting this were issuance costs related to these notesof $1.5 million and $1.1 million of additional principal paymentsmade to our senior secured lenders under the cash collateral order.

***Significant Uses of Cash***

Cash flows from investing activities for the yearended September 30, 2005 totaled $19.9 million. Capital expenditurestotaled $17.4 million and included $10.7 million for the replacementof the Lucent network equipment in our Michigan markets, $3.6 million fornew cell site construction, $0.5 million for switch and cell site capacityequipment, $1.4 million for new store and store improvements and$0.9 million for computer equipment and other administrative-relatedcapital expenditures.

Cash flows used for investing activities for theperiod ended September 30, 2004 totaled $3.2 million and includedcapital expenditures of $0.6 million for new cell site construction,$1.8 million for 1xRTT capacity and upgrade equipment, $0.9 millionfor switch and cell site capacity equipment and $0.1 million for computerand IT related capital purchases. Offsetting the $3.4 million of capitalexpenditures was $0.2 million of receipts from the sale of assets. For theperiod ended July 1, 2004, cash flows used for investing activitiestotaled $8.5 million and included $4.1 million in switch capitalexpenditures mainly for the purchase and installation of equipment at theDavenport, Iowa switch location. This additional equipment was necessary to addcapacity in order to accommodate the movement of cell traffic away from ourGridley, Illinois switch which we decommissioned in June 2004. We alsoincurred $2.3 million of capital expenditures to upgrade and add capacityto portions of our network to 1xRTT and we incurred $2.1 million ofcapital expenditures to add fifteen additional cell sites to our network.

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Principal payments on ourlong-term debt, other than capital leases, are not due until 2012.  For the year ended September 30, 2005, wemade interest payments on our senior notes of approximately $26.1 million.This represents a full year of interest payments on our 111¤2%senior notes of approximately $19.0 million and one semi-annual interestpayment of $7.1 million on our 113¤8%senior notes, which we acquired on July 1, 2005 as a result of our mergerwith Horizon PCS. The interest rates on our senior notes are fixed andtherefore the amount of our interest payments would not be impacted by a changein the overall interest rate environment.

***Trends, Risks and Uncertainties That May AffectOperating Results, Liquidity and Capital Resources***

We have identifiedthe following important trends and factors (as well as risks and uncertaintiesassociated with such items) that could impact our future financial performance. This section should be read inconjunction with the “Risk Related to our Business, Strategy and Operations”section found in Item 1A. Risk Factors of this annual report on Form 10-K.

·       *Continuingfocus on subscriber additions.*   We haveseen improvements in our net subscriber additions during the last year as wehave increased our distribution and marketing efforts, including the opening ofnew retail stores and exclusive co-branded dealers. To the extent that we seekto accelerate our subscriber additions, we will incur significant upfrontsubscriber acquisition expenses (including the customer handset subsidy,commissions and promotional expenses) that initially will result in increasedlosses and reduced levels of cash flows from operating activities.Alternatively, we may not be able to sustain our planned growth in subscribersor obtain sufficient revenue to achieve and sustain profitability. If we arenot able to achieve our planned subscriber growth, it will lengthen the amountof time it will take for us to reach a sufficient number of subscribers toachieve positive free cash flow, which in turn will have a negative effect oncapital resources.

·       *Improving churn.*   In the yearended September 30, 2005, we experienced a decrease in churn as we focusedon improvements in network quality, increased competitiveness of ourrate plans and handsets and increased take rates of family plans and overageprotection plans (like Fair & Flexible), which we believe result inlower churn. In addition, churn for the overall wireless industry improved in 2005. Wemay experience a higher churn rate in the future. In addition, to the extentour subscriber growth includes a higher percentage of sub-prime creditsubscribers, our churn and bad debt expense may increase. If churn increasesover the long-term, we would lose the cash flows attributable to thesesubscribers and have greater than projected losses.

·       *Declining voice revenue per subscriber.*   In the yearended September 30, 2005, our ARPU declined in part as a result ofdeclining voice revenue per subscriber, including declining minutes over planrevenue. The wireless industry is very competitive and continued pressure inpricing is expected in the future as a result of, among other things, increasedfocus on family plans and overage protection plans. Although we expect thatfamily plans and overage protection plans will improve churn, these plans tendto lower voice revenue on a per subscriber basis. Although the data portion ofARPU is expected to continue to increase, declining voice ARPU resulting inlower overall ARPU would make it more difficult to obtain sufficient revenue toachieve or sustain profitability.

·       *Higher subscriber acquisition costs.*   Wemay continue to experience higher costs to acquire subscribers. As we continueto increase our distribution, we will increase the fixed costs in our sales andmarketing organization. In addition, we may increase our marketing expenses inan effort to attract and acquire new subscribers. Also, more aggressivepromotional efforts may lead to higher handset subsidies. With a higher CPGA,subscribers must remain our subscribers for a longer period of time at a stableARPU for us to recover those acquisition costs.

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·       *Higher operating costs.*   In the yearended September 30, 2005, our operating costs increased significantly dueto our larger number of subscribers served, the increased size of ournetwork, increases in roaming expense and an increase in collected revenue,upon which our 8% affiliation fee is calculated. If our subscriber basecontinues to increase, our operating costs will continue to increase.  In addition, we may incur significantwireless handset subsidy costs for existing subscribers who upgrade to a newhandset. As our subscriber base matures and technological innovations occur,more existing subscribers may begin to upgrade to new wireless handsets forwhich we subsidize the cost to the subscriber. We also expect to continue toincur costs related to our litigation with Sprint. At the same time, a large portion of ourongoing network and general and administrative expenses are fixed. We believethat we need to add more subscribers to recognize increased economies of scalein our business. If we are unable to add more subscribers to our network,achieve the desired synergies of the merger with Horizon PCS or continue toimprove the efficiencies in our operating costs, results will be negativelyeffected.

·       *Roaming revenue.*   Asubstantial portion of our revenue is derived from roaming revenue from SprintPCS and other PCS affiliates of Sprint. The increase in roaming revenue during2005 was due to an increase in roaming minutes and increased kilobyte traffic. Effectiveon April 1, 2004, our roaming rate paid to us by Sprint PCS was set at$0.058 per minute of use and is fixed through December 31, 2006. Thereafter,the rate will change, based on an agreed-upon formula that may have an adverseeffect on us. In addition, if we receive fewer roaming minutes or kilobytetraffic on our network, our results of operations will be negatively affected.

·       *Increasingcapital expenditures.*   As we continue to add capacity andcoverage to our wireless network, we will incur significant capitalexpenditures. We have recently replaced our equipment in a number of ourmarkets with Nortel equipment pursuant to two letter agreements with Nortel. Wemay expand the replacement activity into our remaining markets which wouldresult in additional expenditures. In addition, changes and upgrades intechnology, like EV-DO, may require additional expenditures. Sprint PCS hasbegun to deploy EV-DO technology in portions of its service area and expects tocover 150 million people by early 2006. To date, we have deployed EV-DOtechnology in a small portion of our service area. We may elect to deploy EV-DOtechnology in additional portions of our service area which may significantlyincrease our capital expenditures and operating expenses. We have not yetdetermined when, and to what extent, we may further deploy EV-DO. Unforeseenchanges in technology and changes in our plans to upgrade or expand our networkmay require us to spend more money than we expected and have a negative effecton our cash flow.

·       *OngoingSprint Relationship and Litigation.*   We rely on Sprint for anumber of important functions, including but not limited to, customer service,billing, long-distance transport services, national network operations,support, inventory logistics support, national advertising, product development,and financial information. Failure of Sprint to provide these and otherservices on a timely and cost efficient manner would negatively impact ourresults of operations. Sprint PCS may also make decisions that could reduce ourrevenues, increase our expenses and/or our capital expenditure requirements andmake our affiliate relationships with Sprint less advantageous than expected. Inaddition, we filed complaints against Sprint alleging that, among other things,Sprint will breach the exclusivity provisions of our management agreements. Anadverse outcome to our proceedings may have a negative effect on our results ofoperations.

·       *Capital Markets Availability.*   We may not be able toaccess the credit or equity markets for additional capital if the liquiditydiscussed above is not sufficient for the cash needs of our business. Wecontinually evaluate options for additional sources of capital to supplementour liquidity position and maintain maximum financial flexibility. If the needfor additional capital arises due to our actual results differing significantlyfrom our business plan or for any other reason, we may be unable to raiseadditional capital.

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***Commitments and Contingencies***

The costs for the services provided by Sprint PCSunder our service agreements with Sprint PCS relative to billing, customer careand other back-office functions for the year ended September 30, 2005, theperiods ended September 30, 2004 and July 1, 2004 were approximately$27.2 million, $5.3 million, and $12.9 million, respectively.  Because we incur the majority of these costson a per subscriber basis, which is fixed until the end of December 2006and after which will be adjusted by Sprint PCS based on a formula related toSprint PCS’s costs to provide the services, we expect the aggregate cost forsuch services to increase as the number of our subscribers increases after December 2006.Sprint PCS may terminate any service provided under such agreements upon ninemonths’ prior written notice, but if we would like to continue receiving suchservice, Sprint PCS has agreed that it will assist us in developing thatfunction internally or locating a third-party vendor that will providethat service. Although Sprint PCS has agreed in such an event to reimburse usfor expenses we incur in transitioning to any service internally or to a third-party,if Sprint PCS terminates a service for which we have not developed or areunable to develop a cost-effective alternative, our operating costs mayincrease beyond our expectations and our operations may be interrupted orrestricted. We do not currently have a contingency plan if Sprint PCSterminates a service we currently receive from it.

Variable interest rates may increase substantially. AtSeptember 30, 2005 we have only fixed rate indebtedness under our existingcapital leases and the senior notes. To the extent that we incur any floatingrate financing in the future, we would be exposed to interest rate risk on suchindebtedness.

As discussed in Item 1. Business under the caption “OurLitigation Against Sprint and the Forbearance Agreement” we have two lawsuitspending against Sprint. Our trials against Sprint seeking a permanentinjunction are scheduled to commence on January 9, 2006, in the DelawareCourt of Chancery, and on February 6, 2006, in Cook County Circuit Court.

**Contractual Obligations**

We areobligated to make future payments under various contracts we have entered into,including amounts pursuant to the senior notes, capital leases andnon-cancelable operating lease agreements for office space, cell sites,vehicles and office equipment. Future minimum contractual cash obligations forthe next five years and in the aggregate at September 30, 2005, are asfollows (dollars in thousands):

| ** **                 | ** ** | ** ** | ** **    | **Payments Due by Period**   | ** ** |
|----------------------------|------------|------------|---------------|---------------------------------------------|------------|
| ** **                 | ** ** | ** ** | ** **    | **Year Ended September 30,** | ** ** |
| ** **                 | ** ** | **Total**  | ** **    | **2006**                                    | ** ** | **2007** | ** ** | **2008** | ** ** | **2009** | ** ** | **2010** | ** ** | **Thereafter** | ** ** |
| Long-term debt             |       | $          | 290,000  |                                        | $          | —  |   | $ | —  |   | $ | —  |   | $ | —  |   | $ | —  |   | $ | 290,000  |   |
| Cash interest              |       | 232,304    |          | 33,194                                      |       | 33,194 |   | 33,194 |   | 33,194 |   | 33,194 |   | 66,334 |   |
| Operating  leases(1)       |       | 103,121    |          | 28,284                                      |       | 21,428 |   | 19,368 |   | 18,271 |   | 11,175 |   | 4,595 |   |
| Capital lease  obligations |       | 805        |          | 68                                          |       | 63 |   | 66 |   | 69 |   | 71 |   | 468 |   |
| Purchase  obligations      |       | 8,350      |          | 8,350                                       |       | — |   | — |   | — |   | — |   | — |   |
| Total                      |       | $          | 634,580  |                                        | $          | 69,896  |   | $ | 54,685  |   | $ | 52,628  |   | $ | 51,534  |   | $ | 44,440  |   | $ | 361,397  |   |

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(1)          Does not include payments due under renewals to theoriginal lease terms.

Both of our senior notescontain covenants which restrict our ability to incur additional indebtedness,merge, pay dividends, dispose of our assets, and certain other matters asdefined in the indentures. In addition, the senior notes:

·       rank*pari passu* in right of paymentwith all our existing and future unsecured senior indebtedness;

·       rank senior in right ofpayment to all our future subordinated indebtedness; and

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·       areunconditionally guaranteed by our domestic unrestricted subsidiaries, includingiPCS Wireless, Inc., iPCS Equipment, Inc., Horizon PersonalCommunications, Inc. and Bright Personal Communication Services, LLC andany new domestic restricted subsidiaries of ours.

However,the senior notes are subordinated to all our secured indebtedness to the extentof the assets securing such indebtedness, and to any indebtedness of oursubsidiaries that do not guarantee the new senior notes.

Upon a change of control as defined in the indentures,we will be required to make an offer to purchase the senior notes at a priceequal to 101% of the aggregate principal amount of senior notes repurchasedplus accrued and unpaid interest and liquidated damages, if any, to the date ofpurchase.

*11**1**¤**2% SeniorNotes:*   Interest on our 111¤2% seniornotes  is payable semi-annually inarrears on May 1 and November 1, commencing on November 1, 2004to the holders of record on the immediately preceding April 15 and October 15.At any time prior to May 1, 2007, we may redeem up to 35% of the aggregateprincipal amount of the 111¤2%senior notes at a redemption price of 111.50% of the principal amount thereof,plus accrued and unpaid interest, and liquidated damages (as defined in theindenture), if applicable, to the redemption date with the net cash proceeds ofa sale of our equity interests or a contribution to our common equity capital;provided that:

·       at least 65% of aggregateprincipal amount of senior notes originally issued remains outstandingimmediately after the redemption; and

·       theredemption occurs within 90 days of the date of the closing of such saleof equity interests or contribution.

Exceptpursuant to the preceding paragraph, the senior notes will not be redeemable atour option prior to May 1, 2008.

On or after May 1,2008, we may redeem all or a part of the senior notes issued under theindenture upon not less than 30 nor more than 60 days’ notice, at theredemption prices (expressed as percentages of principal amount) set forthbelow plus accrued and unpaid interest and liquidated damages, if any, on thesenior notes redeemed, to the applicable redemption date, if redeemed duringthe twelve-month period beginning on May 1 of the years indicatedbelow, subject to the rights of holders of senior notes on the relevant recorddate to receive interest on the relevant interest payment date:

| **Year**            | ** ** | ** ** | ** ** | **Percentage** | ** ** |
|---------------------|------------|------------|------------|----------------|------------|
| 2008                |       |       | 105.750    | %              |       |
| 2009                |       |       | 102.875    | %              |       |
| 2010 and thereafter |       |       | 100.000    | %              |       |

 

*11**3**¤**8% SeniorNotes:*   Interest on our 113¤8% senior notesis payable semi-annually in arrears on July 15 and January 15,commencing on January 15, 2005 to the holders of record on the immediatelypreceding July 1 and January 1. At any time prior to July 15,2007, we may redeem up to 35% of the aggregate principal amount of the 113¤8%senior notes at a redemption price of 111.375% of the principal amount thereof,plus accrued and unpaid interest, and liquidated damages (as defined in theindenture), if applicable, to the redemption date with the net cash proceeds ofa sale of our equity interests or a contribution to our common equity capital;provided that:

·       at least 65% of aggregateprincipal amount of senior notes originally issued remains outstandingimmediately after the redemption; and

·       the redemption occurswithin 90 days of the date of the closing of such sale of equity interestsor contribution.

Exceptpursuant to the preceding paragraph, the senior notes will not be redeemable atour option prior to July 15, 2008.

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On orafter July 15, 2008, we may redeem all or a part of the senior notesissued under the indenture upon not less than 30 nor more than 60 days’notice, at the redemption prices (expressed as percentages of principal amount)set forth below plus accrued and unpaid interest and liquidated damages, ifany, on the senior notes redeemed, to the applicable redemption date, ifredeemed during the twelve-month period beginning on May 1 of theyears indicated below, subject to the rights of holders of senior notes on therelevant record date to receive interest on the relevant interest payment date:

| **Year**            | ** ** | ** ** | ** ** | **Percentage** | ** ** |
|---------------------|------------|------------|------------|----------------|------------|
| 2008                |       |       | 105.688    | %              |       |
| 2009                |       |       | 102.844    | %              |       |
| 2010 and thereafter |       |       | 100.000    | %              |       |

 

***Off-Balance Sheet Arrangements***

Other than the operatinglease commitments included above, we have no off-balance sheet arrangementsthat would have a current or future effect on the financial condition, changesin financial condition, revenues, expenses, results of operations, liquidity,capital expenditures or capital resources.

***Nortel Networks Equipment Agreements***

On November 22, 2004, we signed a letter ofagreement with Nortel Networks to replace the Lucent network equipment thendeployed in our Michigan markets with Nortel equipment including one switch,232 base stations, various additional capacity growth and network equipment.Under the terms of the agreement, we agreed to purchase equipment totaling$15.2 million and will receive special pricing on future purchases throughDecember 31, 2007. Through September 30, 2005, we have purchasedapproximately $9.6 million of equipment under this agreement. Subsequentto September 30, 2005, we have purchased an additional $4.0 millionof equipment under this agreement.

In addition, in January 2005Horizon PCS signed a $14.0 million letter of agreement with Nortel Networks toreplace the Motorola network equipment then deployed in its Fort Wayne,Indiana, Chillicothe, Ohio, and Johnson City, Tennessee markets with Nortelequipment including 390 base stations, various additional capacity growth andnetwork equipment. We assumed this agreement as a result of our merger withHorizon PCS. Under the terms of the agreement, we are obligated to purchaseequipment, software and services totaling $14.0 million and will receivespecial pricing on future purchases through June 30, 2007. Through September 30,2005, we have purchased approximately $11.3 million of equipment underthis agreement. Subsequent to September 30, 2005, we have purchased anadditional $1.7 million of equipment under this agreement. The letteragreement also provides us with the ability, if exercised by April 1,2007, to purchase additional Nortel equipment, for $14.2 million, whichwould similarly replace our existing Motorola equipment in our Pennsylvania andNew York markets. We are still evaluating if we will exercise this option.

***Seasonality***

Our business is subject toseasonality because the wireless telecommunications industry historically hasbeen dependent on fourth calendar quarter results. Among other things, the industryrelies on moderately higher subscriber additions and handset sales in thefourth calendar quarter as compared to the other three calendar quarters. Anumber of factors contribute to this trend, including: the use of retaildistribution, which is heavily dependent upon the year-end holiday shoppingseason; the timing of new product and service announcements and introductions;competitive pricing pressures; and aggressive marketing and promotions. Theincreased level of activity requires a greater use of available financialresources during this period.

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***Inflation***

We believe that inflation has not had a significantimpact in the past and is not likely to have a significant impact in theforeseeable future on our results of operations.

**Critical AccountingPolicies**

Our financial statements areprepared in conformity with accounting principles generally accepted inthe United States and require us to select appropriate accountingpolicies.  The assumptions and judgmentswe use in applying our accounting policies have a significant impact on ourreported amounts of assets, liabilities, revenue and expenses.  While we believe that the assumptions andjudgments used in our estimates are reasonable, actual results may differ fromthese estimates under different assumptions or conditions.

We have identified the most critical accountingpolicies upon which our financial status depends.  The critical policies were determined byconsidering accounting policies that involve the most complex or subjectivedecisions or assessments. We also have other policies considered key accountingpolicies; however, these policies do not meet the definition of criticalaccounting policies because they do not generally require us to make estimatesor judgments that are complex or subjective.

***Revenuerecognition.  ***We recognize revenues when persuasiveevidence of an arrangement exists, services have been rendered, the price tothe buyer is fixed or determinable, and collectibility is reasonably assured.We recognize service revenue from our subscribers as they use the service.Likewise, we recognize roaming revenue from Sprint and other PCS Affiliate ofSprint customers as they use their service on our network. 

Due to the numerous bill cycle cutoffs throughout themonth, we are required to estimate the unbilled but earned service revenue fromthe bill cutoff date to the end of the reporting period. Both these estimatesare based on the number of days in a month from each bill cycle cutoff date tothe end of the reporting period assuming our customers use their serviceequally each day throughout the month.

A change in usage that would have changed the unbilledrevenue by 10% for the year ended September 30, 2005 would have changedservice and roaming revenues by approximately $0.1 million and $0.5 million,respectively.

***Allowance fordoubtful accounts.******  ***We establish an allowance fordoubtful accounts to cover probable losses. In determining this allowance, weuse estimates based on historical write-off and collection experience,historical trends of the aging of our accounts receivable, and changes in thepercentage of our customers based on their credit classification of prime orsubprime, as determined by various credit scoring matrices.

Write-offs and collections can both be affected bychanges in the general economic and business climate which can be difficult topredict. In addition, Sprint PCS handles all of our collection activity for usand gives us little visibility into changes in the collection process orregular reporting from third-party collection activity.

At September 30, 2005, if each of our reservepercentages by aging category had been underreserved or overreserved by 1%, ourallowance for doubtful accounts would have been understated or overstated byapproximately $0.2 million.

***Long-lived assetrecovery.******  ***Long-lived assets, excludingintangibles, consists of property and equipment. We record depreciation on astraight-line basis based on our estimates of the useful economic life of theseassets. For property and equipment, changes in technology or in our intendeduse of these assets could cause the estimated life or the value of these assetsto be reduced. In addition, changes in general industry conditions could causethe value of certain of these assets to be reduced. Under SFAS 

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No. 144, wheneverevents or conditions change such that the carrying amount may not berecoverable, the asset values must be reviewed for impairment. This impairmentanalysis is performed by comparing the carrying value of a group of assets tofuture net cash flows. This analysis requires a significant amount of judgmentin determining growth rates for the company, future economic conditions, andfuture requirements of technological upgrades and advances.

Besides impairment analysis, estimates of estimateduseful life can change rapidly with changes in technology or changes inequipment vendors, as we did in 2005. Because of our decision to change ournetwork equipment in Michigan from Lucent to Nortel, we accelerated the liveson these assets from an average of 7 years to approximately 5 years, and as aresult of the shortening of these assets’ useful lives, we recorded additionaldepreciation of approximately $13.6 million for the year ended September 30,2005.

***Intangible Assets.******  ***Intangibleassets, including goodwill, for us are the result of fresh-start accountingwhere our assets and liabilities were revalued to their fair value and as a resultof our merger with Horizon PCS. Our definite life intangible assetsconsist of our right to provide service under the Sprint PCS affiliationagreements and our customer base. The value assigned to each of these assetswas done with the help of an outside appraisal and was done utilizingappraisals, commonly used discounted cash flow valuation methods and selectedprice earnings multiples of publicly-traded companies similar to ours.

A significant amount of judgment is involved in theestimates used with some of these valuation methods, including projectedrevenue growth, market and industry growth rates, competition, and workingcapital and capital expenditure requirements. In addition, intangibles aresubject to certain judgments when completing impairment analysis under SFAS No. 142.SFAS No. 142 requires annual tests for impairment of goodwill andintangible assets that have indefinite useful lives and interim tests when anevent has occurred that more likely than not has reduced the fair value of theassets. Goodwill and our indefinite life intangible assets were recorded withour merger with Horizon PCS, and conditions did not warrant an impairmenttest as of September 30, 2005.

We record amortization expense of our definite lifeassets on a straight-line basis over the estimated remaining economic usefullife of these assets. If we were to increase the estimated economic useful lifeof these assets by 10%, our amortization expense for the year ended September 30,2005 would have decreased by approximately $1.5 million. If we were todecrease the estimated economic useful life of these assets by 10%, ouramortization expense for the year ended September 30, 2005 would have increasedby approximately $2.1 million.

***Income taxes.******  ***As part of theprocess of preparing our consolidated financial statements we are required toestimate our taxes in each of the jurisdictions of our operations. This processinvolves management estimating the actual current tax expense together withassessing temporary differences resulting from differing treatment of items fortax and accounting purposes. These differences result in deferred tax assetsand liabilities, which are included within the consolidated balance sheets. Wemust then assess the likelihood that the deferred tax assets will be recoveredfrom future taxable income and to the extent recovery is not likely, we mustestablish a valuation allowance. Future taxable income depends on the abilityto generate income in excess of allowable deductions. To the extent weestablish a valuation allowance or increase this allowance in a period, anexpense is recorded within the tax provision in the consolidated statement ofoperations.

Significant managementjudgment is required in determining our provision for income taxes, ourdeferred tax assets and liabilities and any valuation allowance recordedagainst net deferred tax assets. In the event that actual results differ fromthese estimates or we adjust these estimates in future periods, we may need toestablish an additional valuation allowance that could materially impact ourfinancial condition and results of operations.

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**Implementationof Fresh-Start Accounting**

Pursuant to American Institute of Certified PublicAccountants, or “AICPA,” Statement of Position 90-7 “FinancialReporting by Entities in Reorganization under the Bankruptcy Code,” or “SOP 90-7,”the accounting for the effects of the reorganization occurs once the Plan ofReorganization is confirmed by the Bankruptcy Court and there are no remainingcontingencies material to completing the implementation of the plan. There wereno material conditions precedent to the effectiveness of the plan ofreorganization existing as of the July 9, 2004 confirmation date. Forfinancial reporting purposes, we applied fresh-start accounting as of July 1,2004 because the results of operations for the eight days through July 9,2004 did not have a material impact on the reorganized company’s financialposition, results of operations and cash flows. The fresh-startaccounting principles pursuant to SOP 90-7 provide, among other things,for us to determine the value to be assigned to the assets of reorganized iPCS, Inc.as of the confirmation date, assuming no significant contingencies precedent toemergence.

Under fresh-startaccounting, our reorganization equity value was allocated to our assets andliabilities based on their respective fair values in conformity with thepurchase method of accounting for business combinations. As a result of theimplementation of fresh-start accounting, our financial statements after theeffective date are not comparable to our financial statements for priorperiods.

**Recent Accounting Pronouncements**

In December 2004, the FASB issued SFAS No. 123(Revised 2004) “Share-Based Payment” (“SFAS No. 123R”) thataddresses the accounting for share-based payment transactions in which aCompany receives employee services in exchange for (a) equity instrumentsof the Company or (b) liabilities that are based on the fair value of theCompany’s equity instruments or that may be settled by the issuance of suchequity instruments. SFAS No. 123R addresses all forms of share-basedpayment awards, including shares issued under employee stock purchase plans,stock options, restricted stock and stock appreciation rights. SFAS No. 123Reliminates the ability to account for share-based compensationtransactions using APB Opinion No. 25, “Accounting for Stock Issuedto Employees”, that was provided in Statement 123 as originallyissued. Under SFAS No. 123R companies are required to record compensationexpense for all share based payment award transactions measured at fair value.This statement is effective for fiscal years beginning after June 15,2005.

Companies may adopt SFAS No. 123R in one of twoways:  modified  prospective and modified retrospective. As ofthe adoption date, under the modified prospective method, compensation cost isrecognized for 1) all share-based compensation arrangements granted after theadoption date and 2) all remaining unvested share-based compensationarrangements granted prior to the adoption date. The modified retrospectivemethod includes the same share-based compensation arrangements under themodified prospective method, but also allows companies to restate based on theamounts previously recognized under SFAS No. 123 for purposes of pro formadisclosures for either all prior periods presented or prior interim periods ofadoption. We plan to adopt SFAS No. 123R using the modified prospectivemethod.

We currently account forshare-based compensation arrangements to employees using APB Opinion No. 25,“Accounting for Stock Issued to Employees,” and related interpretations toaccount for its employee and director stock options. Compensation expense isdetermined as the excess of the fair value of the Company’s common stock atdate of grant over the exercise price. Accordingly, the adoption of SFAS No. 123Rwill increase the Company’s operating expenses by approximately $2.9 million,$2.2 million, $1.4 million and $0.1 million for the years ended September 30,2006, 2007, 2008 and 2009, respectively, for unvested options as of September 30,2005. The full impact of adoption of SFAS No. 123R cannot reasonably beestimated at this time because it will depend on future grant awards along withthe valuation model used and the related assumptions in determining the valueof these awards. However, if 

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we hadadopted SFAS No. 123R in prior periods, the impact of the adoption wouldhave approximated that disclosed in the pro forma net loss per share in Note 2of the Notes to the Consolidated Financial Statements.

**ITEM 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURESABOUT MARKET RISK**

We do not engage incommodity futures trading activities and do not enter into derivative financialinstrument transactions for trading or other speculative purposes. We also donot engage in transactions in foreign currencies that could expose us to marketrisk.

**ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARYDATA**

Our financial statementsrequired by this item are submitted as a separate section of this annual reporton Form 10-K. See “Index to Consolidated Financial Statements,”commencing on page F-1 hereof.

**ITEM 9.   CHANGES IN AND DISAGREEMENTS WITHACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE**

None

**ITEM 9A.   CONTROLS AND PROCEDURES**

(a)   Evaluationof Disclosure Controls and Procedures. Each of our Chief Executive Officer andChief Financial Officer has evaluated the effectiveness of our disclosurecontrols and procedures (as such term is defined in Rules 13a-14(c) and15d-14(c) under the Exchange Act) as of the end of the periodcovered by this annual report. Based on such evaluation, such officers haveconcluded that, as of the end of the period covered by this annual report, ourdisclosure controls and procedures are effective in alerting them on a timelybasis to material information relating to us (including our consolidatedsubsidiaries) required to be included in our reports filed or submitted underthe Exchange Act.

(b)   Changes inInternal Controls over Financial Reporting. There have not been any changes inour internal control over financial reporting (as such term is defined in Rules 13a-15(f) and15d-15(f) under the Exchange Act) during the quarter ended September 30,2005 that have materially affected, or are reasonably likely to materiallyaffect, our internal control over financial reporting.

We place reliance onSprint PCS to adequately design its internal controls with respect to theprocesses established to provide financial information and other information tous and the other PCS Affiliates of Sprint. To address this issue, Sprintengages an independent registered public accounting firm to perform a periodicevaluation of these controls and to provide a “Report on Controls Placed inOperation and Tests of Operating Effectiveness for Affiliates” under guidanceprovided in Statement of Auditing Standards No. 70. This report isprovided bi-annually to us.

**ITEM 9B.   OTHER INFORMATION**

None.

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**PART III**

**ITEM 10.   DIRECTORS AND EXECUTIVE OFFICERS OF THEREGISTRANT**

**Directors and Executive Officers**

Thefollowing table presents information with respect to our directors andexecutive officers:

| **Name**                      | ** ** | ** ** | ** ** | **Age**                                               | ** ** | **Position** |
|-------------------------------|------------|------------|------------|-------------------------------------------------------|------------|--------------|
| Timothy M. Yager              |       | 36         |       | Director, President and  Chief Executive Officer      |
| Timothy C. Babich             |       | 29         |       | Director                                              |
| Timothy G. Biltz              |       | 47         |       | Director                                              |
| Jeffrey W. Jones              |       | 43         |       | Director                                              |
| Robert A. Katz                |       | 38         |       | Chairman of the Board                                 |
| Ryan L. Langdon               |       | 33         |       | Director                                              |
| Kevin M. Roe                  |       | 38         |       | Director                                              |
| Stebbins B. Chandor, Jr. |       | 45         |       | Executive Vice President  and Chief Financial Officer |
| Alan G. Morse                 |       | 47         |       | Chief Operating Officer                               |
| John (Sonny) J. Peterman      |       | 44         |       | Senior Vice President of  Sales                       |
| Edmund L.  Quatmann, Jr. |       | 35         |       | Vice President, General  Counsel and Secretary        |
| Patricia M. Greteman          |       | 44         |       | Vice President and  Controller                        |
| Craig A. Kinley               |       | 36         |       | Vice President of Engineering and Network Operations  |

 

*Timothy M. Yager*has been a Director and our President and Chief Executive Officer since theeffective date of our plan of reorganization and was our Chief RestructuringOfficer since January 2003. Mr. Yager was previously President, ChiefExecutive Officer and Manager of Illinois PCS, LLC (the predecessor of iPCSWireless, Inc.) from January 1999 until July 2000 and had beenPresident, Chief Executive Officer and Director of iPCS, Inc. since itsformation in March 2000 until November 30, 2001, the closing date ofour acquisition by AirGate PCS, Inc. iPCS filed a voluntary petition inbankruptcy court pursuant to Chapter 11 of the Bankruptcy Code on February 23,2003. From December 2001 until December 2002, he was a director ofAirGate PCS, Inc. From January 1995 to January 1999, he was theSenior Vice President of Geneseo Communications, Inc., an independenttelephone company in Illinois. During this time, he was also the ChiefOperating Officer, General Manager and later the President of GenSoft Systems, Inc.,a subsidiary of Geneseo Communications, Inc. that designs software toprovide information and billing services to the telecommunications industry. Hewas a member of the Board of Directors of Cambridge Telcom from April 1997to November 2001.

*Timothy C. Babich*has been a Director since the effective date of our plan of reorganization. Mr. Babichhas over five years of experience in the telecom, media and technologyinvesting industry. Since March 2001, Mr. Babich has served as anemployee of Silver Point Capital, L.P., a private investment partnership. From May 2000until March 2001, he was an analyst at The Beacon Group.

*Timothy G. Biltz*has been a Director since the consummation of our merger with Horizon PCS on July 1,2005. He served as a director of Horizon PCS from the consummation of itsreorganization in October 2004 until the merger. Mr. Biltz was theChief Operating Officer of SpectraSite Holdings, Inc. (predecessor toSpectraSite, Inc.) from August 1999 to August 2005, and alsoserved as a director of SpectraSite from June 2004 to August 2005,when SpectraSite closed its merger with American Tower Corporation. Prior tojoining SpectraSite, Mr. Biltz spent 10 years at Vanguard Cellular Systems, Inc.,most recently as Executive Vice President and Chief Operating Officer. He joinedVanguard in 1989 as Vice President of Marketing and Operations and wasExecutive Vice President and President of U.S. Wireless Operations from November 1996until May 1998 when he became Chief Operating Officer. SpectraSiteHoldings, Inc. filed for Chapter 11 protection under the United Statesbankruptcy laws on November 15, 2002.

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*Jeffrey W. Jones*has been a Director since the consummation of our merger with Horizon PCS on July 1,2005. He served as a director of Horizon PCS from the consummation of itsreorganization in October 2004 until the merger. Mr. Jones currentlyserves as Senior Vice President and Chief Financial Officer of Vail Resorts, Inc.He joined Vail Resorts, Inc. in September 2003, as Senior VicePresident and Chief Financial Officer of Vail Resorts Development Company andserved in that capacity until November 18, 2003. From June 1999 to September 2003,Mr. Jones served as Executive Vice President and Chief Financial Officerof Clark Retail Enterprises, Inc. in Chicago, Illinois, a privately heldmulti-unit convenience, food and gasoline retailer. From June 1998 to June1999, Mr. Jones was Chief Financial Officer and Treasurer of LidsCorporation in Boston, Massachusetts, a specialty retailer. Lids Corporationfiled for Chapter 11 protection under the United States bankruptcy laws onJanuary 4, 2001 (nineteen months after Mr. Jones left Lids Corporation). From1994 to 1998, Mr. Jones held the positions of Vice President andController and then Vice President of Finance, Real Estate and Administrationfor Clark Refining and Marketing, Inc. (now known as Premcor, Inc.)in St. Louis, Missouri. Prior to 1994, Mr. Jones worked in severalcorporate positions, including Controller, Treasurer and VicePresident-Controller, at Dairy Mart Convenience Stores, Inc., a publiclytraded company. Clark Retail Group and Clark Retail Enterprises, Inc.filed for Chapter 11 protection under the United States bankruptcy laws on October 14,2002. Mr. Jones is a member of the American Institute of Certified PublicAccountants.

*Robert A. Katz* hasbeen the Chairman of the Board since the consummation of our merger withHorizon PCS on July 1, 2005. He served as a director of Horizon PCS from September 2004until the merger. Mr. Katz has been associated with Apollo Management,L.P., an affiliate of Apollo Investment Fund IV, L.P., in various capacitiessince 1990. Mr. Katz is also a director of Vail Resorts, Inc. andUnited Agri Products, Inc. Mr. Katz previously served on theboard of directors of Horizon PCS from September 2000 until August 15,2003 the date on which Horizon PCS filed for Chapter 11 protection underthe United States bankruptcy laws.

*Ryan L. Langdon*has been a Director since June 30, 2005. Mr. Langdon is a SeniorManaging Director of Newport Global Advisors. Prior to September 2005, Mr. Langdonwas a Managing Director and Portfolio Manager of Distressed Debt for the HighYield Group of AIG Global Investment Corp. (a Subsidiary of AmericanInternational Group) (“AIGGIC”), where he had been employed since February 2002,initially as an analyst in the telecommunications sector. Prior to joiningAIGGIC, Mr. Langdon was a high yield telecommunications and cable analystwith ABN AMRO from June 1999 to February 2002, and prior to thatwas an analyst with Pacholder Associates from October 1995 to June 1999.Mr. Langdon was a director of IWO Holdings Inc. from February 2005until its acquisition by Sprint in October 2005.

*Kevin M. Roe* hasbeen a Director since the effective date of our plan of reorganization. In January 2003,Mr. Roe founded Roe Equity Research, LLC, an independent sell-side equityresearch firm focusing on the U.S. wireless and wireline telecommunicationsservices sector. Mr. Roe has also served as the President of Roe EquityResearch, LLC since its inception. From May 1995 to March 2002, Mr. Roeserved as Senior Equity Research Analyst and Head of US TelecommunicationServices equity research team of ABN AMRO Inc., most recently serving as aManaging Director. From July 1993 until May 1995, Mr. Roe servedin the Telecommunications Services equity research team ofPaineWebber, Inc. 

*Stebbins B. Chandor, Jr.*has been our Executive Vice President and Chief Financial Officer since March 2004.Prior to hiring our Chief Operating Officer, Mr. Chandor was alsoresponsible for the Company’s operations. Previously, he was Senior VicePresident, Chief Financial Officer of iPCS, Inc. (and itspredecessor) from March 2000 until November 30, 2001, the closing dateof our acquisition by AirGate PCS, Inc. iPCS filed a voluntarypetition in bankruptcy court pursuant to Chapter 11 of the Bankruptcy Code on February 23,2003. From August 1995 to March 2000, he was Senior Vice Presidentand Chief Financial Officer for Metro One Telecommunications, Inc., apublicly traded provider of enhanced directory assistance and informationservices to the wireless telecommunications industry. From 

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June 1985 to August 1995,Mr. Chandor served in various corporate finance capacities with BASecurities, Inc., a wholly owned subsidiary of BankAmerica Corporation,and affiliated or predecessor firms including Bank of America and ContinentalBank N.A.

*Alan G. Morse*hasbeen our Chief Operating Officer since the consummation of our merger withHorizon PCS on July 1, 2005. He served as Chief Operating Officer ofHorizon PCS from March 1, 2002 until the consummation of the merger. Previously,Mr. Morse was chief operating officer of TelePacific Communications, Inc.,an integrated telecommunications provider operating in California and Nevadafrom 2000 to 2001. From 1996 to 2000, he was area vice president for Sprint PCSwhere he managed the build-out, launch and operation of Sprint PCS businessesin Cleveland, Cincinnati, Columbus, Indianapolis, and Pittsburgh. He has heldmanagement positions with Nextel Communications Inc. and Cellular One of Ohioand Michigan. Mr. Morse was chief operating officer of Horizon PCS at thedate Horizon PCS filed for Chapter 11 protection under the United Statesbankruptcy laws.

*John (Sonny) J. Peterman*has been our Senior Vice President of Sales since August 2004. From June 2004until August 2004, Mr. Peterman was the Vice President for BusinessDevelopment for ClearLinx Network Corporation, a wireless networking company.From November 1998 until June 2004, he was Vice President of theMidwest Region of American Tower Corporation, a publicly held owner andoperator of broadcast and wireless communications sites. Prior to November 1998,Mr. Peterman was Vice President of Sales and Distribution with 360Communications (formerly Sprint Cellular) and from 1989 to 1996 he managed mostof Sprint Cellular’s wireless operations in Ohio.

*Edmund L. Quatmann, Jr.*has been our General Counsel since November 30, 2004 and our Secretarysince December 13, 2004. On December 1, 2005, Mr. Quatmann wasalso named Vice President. Prior to joining us, Mr. Quatmann was in theCorporate and Securities Group of the law firm of Mayer, Brown, Rowe &Maw LLP in Chicago, Illinois from October 1998 until November 2004.From September 1996 until October 1998, Mr. Quatmann was in theBusiness/Transactional group of the law firm of Bryan Cave LLP in St. Louis,Missouri*.*

*Patricia M. Greteman*has been our Vice President and Controller since June 2003 and previouslywas Controller of Illinois PCS, LLC (the predecessor of iPCS Wireless, Inc.)from May 1999 until July 2000 and held the same position with iPCS, Inc.from its formation in March 2000 until November 30, 2001, the closingdate of our acquisition by AirGate, at which time her title changed to Directorof Accounting for iPCS, Inc. From May 1993 to April 1999, sheserved as the Controller of ACC of Kentucky, LLC, a cellular carrier covering aterritory with over one million total residents. From November 1991 to April 1992,Ms. Greteman served as the Controller of Arch Mineral Corporation’sCatenary Coal Company. From August 1989 to October 1991, she servedas the Assistant Controller of Arch of Kentucky.

*CraigA. Kinley* has been our Vice President of Engineering andNetwork Operations since June 2003 and previously was Senior Director ofEngineering and Network Operations with AirGate PCS, Inc. from September 1999until June 2003 with responsibility during the latter portion of hisservice for iPCS’s territory. From April 1998 to June 1999, he was aProject Manager with Compass Telecom Services LLC and served as a consultant toAirGate PCS, Inc. From April 1997 to February 1998, he was aRegional Coordinator with Sprint Spectrum L.P.

**Committees of the Board of Directors**

Our board ofdirectors has established three standing committees:

·       AuditCommittee;

·       CompensationCommittee; and

·       Nominatingand Corporate Governance Committee.

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***Audit Committee.******  ***Our auditcommittee is required to be comprised of not fewer than three directors electedby a majority of our board. Our audit committee oversees our accounting andfinancial reporting processes, as well as the audits of our financialstatements, including retaining and discharging our independent registeredpublic accounting firm. Our audit committee is comprised of Messrs. Jones(Chairman), Biltz and Roe.

Our board of directors has determined that Mr. Jones,the chairman of our audit committee, is an “audit committee financial expert,”as defined by the SEC’s rules, and that Mr. Jones is “independent,” asthat term is used in Item 7(d)(3)(iv) of Schedule 14A under theSecurities Exchange Act of 1934.

***CompensationCommittee.  ***Our compensation committee is requiredto be comprised of not fewer than three directors elected by a majority of ourboard. Our compensation committee oversees the administration of our benefitplans, including the iPCS incentive plan and the Horizon PCS incentive plan,reviews and administers all compensation arrangements for executive officersand establishes and reviews general policies relating to the compensation andbenefits of our officers and employees. Our compensation committee is comprisedof Messrs. Langdon (Chairman), Babich and Katz.

***Nominating and Corporate Governance Committee.  ***Ournominating and corporate governance committee is required to be comprised ofnot fewer than three directors elected by a majority of our board. Ournominating and corporate governance committee’s responsibilities includeidentifying and recommending to the board appropriate director nomineecandidates and providing oversight with respect to corporate governancematters. Our nominating and corporate governance committee is comprised of Messrs. Roe(Chairman), Jones and Langdon.

**Section 16(a) BeneficialOwnership Reporting Compliance.**

We are not subject to Section 16(a) ofthe Exchange Act.

**Code of Ethics.**

Our board of directors has adopted a Code of Ethicswhich is applicable to our principal executive officer, principal financialofficer, and principal accounting officer or controller (or persons performingsimilar functions). Our board of directors has also adopted a Standard ofBusiness Conduct that is applicable to all of our directors, officers andemployees.

Both of these documentsare available in the “Investor Relations” section of our Internet website,available at www.ipcswirelessinc.com. We will provide to any person, withoutcharge, upon request, a copy of our Code of Ethics. Requests for a copy shouldbe directed in writing to iPCS, Inc. at 1901 N. Roselle Road, Suite 500,Schaumburg, Illinois, 60195, Attention: General Counsel.

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**ITEM 11.**   EXECUTIVECOMPENSATION

The following table setsforth a summary of the annual, long-term and all other compensation for ourPresident and Chief Executive Officer and our other four executive officersduring the fiscal years ended September 30, 2005, 2004 and 2003. Thesefive persons are referred to collectively as the “Named Executive Officers.”For purposes of this disclosure, the compensation for the periods endedSeptember 30, 2004 and July 1, 2004 are reflected as for the yearended September 30, 2004.

**SummaryCompensation Table**

| ** **                                 | ** ** | ** ** | ** ** | **Annual Compensation** | ** ** | **Long-Term  Compensation** | ** ** | **All Other  Compensation** | ** ** |
|--------------------------------------------|------------|------------|------------|------------------------------|------------|-----------------------------|------------|----------------------------------|------------|
| **Name and Principal  Position** | ** ** | ** ** | ** ** | **Fiscal  Year**             | ** ** | **Salary**                  | ** ** | **Bonus(6)**                     | ** ** | **Other Annual  Compensation** | ** ** | **Securities  Underlying  Options (#)** | ** ** | **(10)** | ** ** |
| Timothy M.  Yager(1)                       |       |       | 2005       |                         |       | $                           | 350,000    |                             | $          | 260,400 |   |   | — |   |   |   | — |   |   |   | $ | 12,702 |   |   |
| Director,  President and                   |       |       | 2004       |                         |       | 59,231                      |       | 210,000                          |       |   | — |   |   |   | 250,000 |   |   |   | 1,088,315 | (11) |   |
|    Chief Executive  Officer      |       |       | 2003       |                         |       | —                      |       | —                           |       |   | — |   |   |   | — |   |   |   | 723,333 | (12) |   |
| Stebbins B. Chandor, Jr.(2)           |       |       | 2005       |                         |       | 250,000                     |       | 205,000                          |       |   | — |   |   |   | — |   |   |   | 7,242 |   |   |
| Executive Vice  President                  |       |       | 2004       |                         |       | 201,942                     |       | 125,000                          |       |   | — |   |   |   | 137,500 |   |   |   | 3,963 |   |   |
|    and Chief Financial  Officer  |       |       | 2003       |                         |       | —                      |       | —                           |       |   | — |   |   |   | — |   |   |   | — |   |   |
| John (Sonny) J. Peterman(3)                |       |       | 2005       |                         |       | 195,000                     |       | 96,720                           |       |   | $ | 9,000 | (7) |   |   | — |   |   |   | 211 |   |   |
| Senior Vice  President of                  |       |       | 2004       |                         |       | 14,250                      |       | —                           |       |   | 750 | (7) |   |   | 50,000 |   |   |   | 18 |   |   |
|    Sales                         |       |       | 2003       |                         |       | —                      |       | —                           |       |   | — |   |   |   | — |   |   |   | — |   |   |
| Craig A. Kinley(4)                         |       |       | 2005       |                         |       | 159,675                     |       | 140,912                          |       |   | 7,574 | (8) |   |   | — |   |   |   | 8,239 |   |   |
| Vice President of  Engineering             |       |       | 2004       |                         |       | 128,220                     |       | 102,800                          |       |   | 19,854 | (9) |   |   | 40,000 |   |   |   | 4,763 |   |   |
|    and Network  Operations       |       |       | 2003       |                         |       | —                      |       | 32,000                           |       |   | — |   |   |   | — |   |   |   | — |   |   |
| Edmund L. Quatmann, Jr.(5)            |       |       | 2005       |                         |       | 152,733                     |       | 128,533                          |       |   | — |   |   |   | 45,000 |   |   |   | 171 |   |   |
| Vice President,  General                   |       |       | 2004       |                         |       | —                      |       | —                           |       |   | — |   |   |   | — |   |   |   | — |   |   |
|    Counsel and  Secretary        |       |       | 2003       |                         |       | —                      |       | —                           |       |   | — |   |   |   | — |   |   |   | — |   |   |
|                                            |            |            |            |                              |            |                             |            |                                  |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

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(1)          Mr. Yager enteredinto an agreement with us to act as our Chief Restructuring Officer on January 27,2003. Mr. Yager became our President and Chief Executive Officer followingthe consummation of our reorganization.

(2)          Mr. Chandor washired on a part-time basis in October 2003 and was hired on a full-timebasis as Executive Vice President Operations and Chief Financial Officer in March 2004.

(3)          Mr. Petermancommenced employment with us in August 2004.

(4)          Mr. Kinleycommenced employment with us in October 2003.

(5)          Mr. Quatmanncommenced employment with us in November 2004.

(6)          The amounts disclosed inthe Bonus column were all awarded under our incentive bonus program. Inaddition, Messrs. Chandor and Quatmann received a special bonus of $50,000each in 2005, and Mr. Kinley received (i) retention bonus payments inthe aggregate amount of $50,000 in 2005 and $50,000 in 2004 pursuant to theretention bonus plan for certain key employees implemented during ourbankruptcy with the approval of the bankruptcy court and (ii) a specialbonus in 2005 in the amount of $18,000 for successful completion of the Nortelswap in our Michigan markets.

(7)          Consists of a monthlycar allowance of $750.

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(8)          Consists of a monthlycar allowance totaling $2,250 and quarterly cost of living adjustment (COLA)payments totaling $5,324.

(9)          Consists of a monthly car allowance totaling$9,000 and quarterly COLA payments totaling $10,854.

(10)   Except as noted in Notes 11 and12, the amounts disclosed in the All Other Compensation column consist ofcompany matching contributions under our 401(k) plan and company-paid termlife insurance premiums as follows:  Mr. Yager:401(k) matching contributions: $12,432 in 2005 and $1,068 in 2004;company-paid life insurance premiums: $270 in 2005 and $45 in 2004. Mr. Chandor:401(k) matching contributions: $6,972 in 2005 and $3,828 in 2004;company-paid life insurance premiums: $270 in 2005 and $135 in 2004. Mr. Peterman:company-paid life insurance premiums: $211 in 2005 and $18 in 2004.Mr. Kinley: 401(k) matching contributions: $8,086 in 2005 and $4,624in 2004; company-paid life insurance: $153 in 2005 and $139 in 2004. Mr. Quatmann:$171 in company-paid life insurance in 2005.

(11)   In addition to amounts referredto in Note 10, includes $615,000 paid to Mr. Yager for his services asChief Restructuring Officer, and a $472,202 success fee.

(12)   Inaddition to amounts referred to in Note 10, includes $133,333 of consultingpayments paid to Mr. Yager under the consulting provisions of hisemployment agreement with us and $590,000 for his services as ChiefRestructuring Officer.

**Option/SAR Grants in Last Fiscal Year**

| ** **                    | ** ** | **Individual Grants** | ** ** | **Grant Date Value**                                                | ** ** |
|-------------------------------|------------|----------------------------|------------|-------------------------------------------------------------------------------|------------|
| **Name**                      | ** ** | ** **                 | ** ** | **Number of  Securities  Underlying  Options/SARs  Granted (#)(1)** | ** ** | **Percent  of Total  Options/SARs  Granted to  Employees in  Fiscal Year** | ** ** | **Exercise  or Base  Price ($/Sh)** | ** ** | **Expiration Date** | ** ** | **Grant Date  Present Value  ($)(2)** | ** ** |
| Edmund L.  Quatmann, Jr. |       |                       | 45,000     |                                                                          |       |   | 66 | % |   |   | $ | 25.60 |   |   |   | 11/30/2014 |   |   |   | $ | 618,300 |   |   |
|                               |            |                            |            |                                                                               |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

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(1)          All options granted inthe last fiscal year vest quarterly over the four year period commencing on thegrant date.

(2)          Calculatedusing Black-Scholes option price model. For assumptions used for thesecalculations, see the notes to our Consolidated Financial Statements foundelsewhere in this report.

**AggregatedOption/SAR Exercises in Last Fiscal Year and Fiscal Year End Option/SAR Values**

| ** **                     | ** ** | **Shares  Acquired on  Exercise** | ** ** | **Value** | ** ** | **Number of  Securities Underlying  Unexercised Options/  SARs at  Fiscal Year End** | ** ** | **Value of  Unexercised  In-the-Money  Options/SARs  at Fiscal Year End ($)** | ** ** |
|--------------------------------|------------|----------------------------------------|------------|-----------|------------|--------------------------------------------------------------------------------------------------------------------|------------|--------------------------------------------------------------------------------------------------------|------------|
| **Name**                       | ** ** | ** **                             | ** ** | **(#)**   | ** ** | **Realized ($)**                                                                                              | ** ** | **Exercisable/Unexercisable**                                                                          | ** ** | **Exercisable/Unexercisable** | ** ** |
| Timothy M. Yager               |       |                                   | —     |      |       |                                                                                                               | —     |                                                                                                   |       |   | 78,125/171,875 |   |   | $ | 2,447,656 /  $5,384,844 |   |
| Stebbins B.  Chandor, Jr. |       |                                   | 20,000     |      |       |                                                                                                               | $          | 494,600                                                                                                |       |   |   | 22,970/94,531 |   |   | $719,651 /  $2,961,664 |   |
| John (Sonny) J. Peterman       |       |                                   | 3,000      |      |       |                                                                                                               | $          | 69,720                                                                                                 |       |   |   | 12,625/34,375 |   |   | $285,325 /  $776,875 |   |
| Craig A. Kinley                |       |                                   | —     |      |       |                                                                                                               | —     |                                                                                                   |       |   | 12,500/27,500 |   |   | $391,625 /  $861,575 |   |
| Edmund L.  Quatmann, Jr.  |       |                                   | 8,400      |      |       |                                                                                                               | $          | 139,776                                                                                                |       |   |   | 2,850/33,750 |   |   | $45,600 / $540,000 |   |
|                                |            |                                        |            |           |            |                                                                                                                    |            |                                                                                                        |            |  |  |  |  |  |  |  |  |  |  |

 

 

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***Compensation of Directors***

For the annual termbeginning on July 1, 2005, all of our directors, other than Mr. Yager,received compensation for serving on our Board of Directors and committees ofthe Board as follows:

·       Anannual retainer of $35,000;

·       Astock option to purchase 7,500 shares of our common stock at the per shareexercise price equal to the fair market value of the stock on the date ofgrant, which was $35.00, and vesting quarterly over one year;

·       Forthe chairman of the Board, an additional annual retainer of $10,000;

·       Forthe chairman of the audit committee of the Board, an additional annual retainerof $10,000;

·       Forthe chairman of other committees of the Board, an additional annual retainer of$5,000;

·       Aper meeting fee of $1,500 for each in person Board meeting attended and $750for each telephonic Board meeting participated in;

·       Formembers of the compensation committee of the Board and the nominating andcorporate governance committee of the Board, a per meeting fee of $1,000 for eachin person committee meeting attended and $500 for each telephonic committeemeeting participated in;

·       Formembers of the audit committee of the Board, a per meeting fee of $1,000 foreach audit committee meeting attended (in person or telephonic); and

·       Reimbursementfor out-of-pocket expenses incurred in attending Board and committee meetings.

Directors servingprior to July 1, 2005, other than Mr. Yager, received compensationfor serving on our Board of Directors and committees of the Board as follows:

·       Anannual retainer of $18,000;

·       Astock option to purchase 7,500 shares of our common stock at the per shareexercise price equal to the fair market value of the stock on the date ofgrant, which was $10.27, and vesting quarterly over one year;

·       Forthe chairman of the Board, an additional annual retainer of $22,000 and a stockoption to purchase an additional 10,500 shares of our common stock at the pershare exercise price equal to the fair market value of the stock on the date ofgrant, which was $18.90, and vesting quarterly over one year;

·       Forthe chairman of the audit committee of the Board, an additional annual retainerof $12,000 and a stock option to purchase an additional 2,500 shares of ourcommon stock at the per share exercise price equal to the fair market value ofthe stock on the date of grant, which was $18.90, and vesting quarterly overone year;

·       Forthe chairman of the other committees of the Board, an additional annualretainer of $6,000;

·       Aper meeting fee of $1,500 for each in person Board meeting attended and $750for each telephonic Board meeting participated in;

·       Aper meeting fee of $1,000 for each in person committee meeting attended and$500 for each telephonic committee meeting participated in; and

·       Reimbursement for out-of-pocketexpenses incurred in attending and participating in Board and committeemeetings.

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***Employment Contracts***

Wehave entered into employment agreements with each of the following NamedExecutive Officers as well as our Chief Operating Officer:

| Timothy M. Yager               | President and Chief Executive Officer                |
|--------------------------------|------------------------------------------------------|
| Stebbins B.  Chandor, Jr. | Executive Vice President and Chief Financial Officer |
| Alan G. Morse                  | Chief Operating Officer                              |
| John (Sonny) J.  Peterman      | Senior Vice President of Sales                       |
| Craig A. Kinley                | Vice President of Engineering and Network Operations |
| Edmund L.  Quatmann, Jr.  | Vice President, General Counsel and Secretary        |

 

We entered into employment agreements with each of Messrs. Yager,Chandor and Kinley as of July 20, 2004. We entered into an employmentagreement with Mr. Peterman as of August 24, 2004, Mr. Quatmannas of November 30, 2004, and Mr. Morse as of August 5, 2005. Weuse a standard employment agreement and, therefore, our employment agreementswith each of the foregoing employees is substantially the same. Below is a summaryof the terms of our standard employment agreement that also sets forth theterms that are unique to each employee:

·       3-year term that isautomatically renewable for successive one-year periods absent 90 days advancenotice by either party (except Mr. Morse’s term is thirty (30) months).

·       Initial minimum annual basesalary ($350,000 for Mr. Yager, $250,000 for Messrs. Chandor andMorse, $195,000 for Mr. Peterman, $190,000 for Mr. Quatmann and$132,000 for Mr. Kinley).

·       Pursuant to the iPCSincentive plan, a stock option to purchase the following number of shares ofour common stock at the exercise price indicated (250,000 shares at $10.27 for Mr. Yager,137,500 shares at $10.27 for Mr. Chandor, 22,750 shares at $40.50 forMr. Morse, 50,000 shares at $19.00 for Mr. Peterman, 40,000 shares at$10.27 for Mr. Kinley and 45,000 shares at $25.60 for Mr. Quatmann). Inconsideration for facilitating our emergence from bankruptcy, Mr. Yageralso received a total of 250,000 stock and stock unit awards that were fullyvested at the date of grant.

·       Employee is eligible for anannual incentive bonus (60% of annual base salary for Mr. Yager, 50% for Mr. Chandor,and 40% for Messrs. Morse, Peterman, Kinley, and Quatmann) and is entitledto benefits, such as retirement, health and other fringe benefits which areprovided to other executive employees, reimbursement of business expenses,limited reimbursement of legal and financial planning expenses (Mr. Yageronly) and other perquisites as may be approved by the Board from time to time.

·       Employment may beterminated by employee or us at any time and for any reason. If employment isterminated, employee is entitled to payment of accrued but unpaid salary,vacation pay, unreimbursed business expenses and other items earned and owed toemployee by us.

·       If employment is terminatedas a result of death or disability, employee or employee’s estate (in the eventof his death) will be paid employee’s salary through the first anniversary ofthe date of death or termination for disability, will receive a lump sumpayment of employee’s target incentive bonus and employee’s outstanding equityawards will fully vest.

·       If employment is terminatedby us for reasons other than cause, or if employee terminates employmentfollowing a material breach by us of the employment agreement (which breach isnot cured within 30 days), or within 60 days after we relocate ourbusiness outside of the Chicago metropolitan area, employee will be entitled tocontinuing payments of employee’s salary through the first anniversary ofemployee’s termination, continuation of health benefits for employee andemployee’s dependents for the same period, a lump sum payment of employee’starget incentive bonus and one year of additional vesting of employee’s stockoptions.

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·       Allseverance payments pursuant to the employment agreement terminate in the eventthe employee violates the confidentiality, non-competition or non-solicitationprovisions of the employment agreement.

·       Theemployment agreement provides that if, during the one year period following achange in control (as defined in the iPCS 2004 Long-Term Incentive Plan,discussed below), employee’s employment is terminated by us for reasons otherthan for cause or if employee terminates for good reason, employee will beentitled to a lump sum payment equal to a specified number of months ofemployee’s salary (36 months for Mr. Yager, 18 months for Messrs. Chandorand Morse, and 12 months for each of Messrs. Peterman, Kinley andQuatmann), a lump sum payment equal to one time employee’s target incentivebonus for the year in which the termination occurs, continuation of employee’sand employee’s dependents’ health benefits at the employee rate for a specifiedperiod of time (36 months for Mr. Yager, 18 months for Mr. Morse, and12 months for each of Messrs. Chandor, Peterman, Kinley and Quatmann)following employee’s termination (if employee properly elects to receive suchhealth benefits), immediate vesting of employee’s outstanding equity-basedawards and an amount equal to employee’s target incentive bonus that would havebeen payable for the fiscal year in which the termination occurs assuming allperformance targets had been satisfied, pro-rated through employee’stermination date.

·       Inthe event that, in connection with a change in control, any payments orbenefits to which employee is entitled to from us constitute excess goldenparachute payments under applicable IRS rules, employee will receive a paymentfrom us in an amount which is sufficient to pay the parachute excise tax thatemployee will have to pay on those parachute payments. In addition, we will payemployee an amount sufficient to pay the income tax, related employment taxes,and any additional excise taxes that employee will have to pay related to ourreimbursement to employee of the parachute excise tax.

·       Employeemust keep all of our confidential information secret and, while he is employedby us and for a period of 12 months after employee’s termination ofemployment, employee will not compete with us in the wirelesstelecommunications services business in any of the basic trading areas in whichwe have been granted the right to carry on the wireless telecommunicationsbusiness, employee will not solicit our customers for a competitive businessand employee will not solicit our employees.

On January 27, 2003,we entered into a restructuring management services agreement with YMSManagement, L.L.C., to manage our day-to-day operations. YMS is owned by Mr. Yager.On that same date, Mr. Yager had been appointed chief restructuringofficer to oversee our restructuring. In connection with his appointment aschief restructuring officer, we and Mr. Yager agreed to terminate theprovisions of his employment agreement which he had entered into with us priorto our acquisition by AirGate PCS, Inc. which provided for consultingservices to us and payments thereunder to Mr. Yager. The restructuringmanagement services agreement provided for weekly payments of $15,000, pluscertain expenses. The agreement also provided that upon confirmation of a planof reorganization or a sale of us, Mr. Yager was entitled to a fixed feeequal to $500,000 less 50% of the aggregate weekly payments under therestructuring management services agreement, beginning on July 1, 2004through the effective date of the plan or the effective date of a sale. If asale of us resulted in proceeds in excess of $190 million, Mr. Yagerwas entitled to a fee equal to the lesser of 1.25% of such proceeds or$3.5 million. In addition, upon the closing of any equity investment inus, Mr. Yager was entitled to a fee equal to 2% of the amount invested. Inconnection with the consummation of the reorganization, we paid Mr. Yagera “success fee” of approximately $472,000 under this agreement and theagreement was terminated.

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***Termination of Employment and Change-in-ControlArrangements***

*iPCS 2004 Long-TermIncentive Plan*

Under the iPCS incentive plan, we may grant stockoptions, stock appreciation rights, full value awards and cash-based incentiveawards to our employees, consultants and directors. The total number of sharesof our common stock that we may award under the plan is 1,250,000 shares. Thenumber of shares and the price at which shares of stock may be purchased may beadjusted under certain circumstances, such as in the event of a corporaterestructuring. Up to 625,000 shares may be issued in conjunction with awards otherthan options and stock appreciation rights, or SARs. No one individual may begranted options or SARs covering more than 500,000 shares in any one calendaryear. No one individual may receive stock unit awards, intended to beperformance-based compensation, covering more than 300,000 shares in anyone calendar year. No one individual may receive a cash incentive award,intended to be performance-based compensation, in excess of $200,000 permonth for any performance period.

The compensation committee of our Board administersthe iPCS incentive plan. The iPCS incentive plan essentially gives thecompensation committee sole discretion and authority to select those persons towhom awards will be made, to designate the number of shares covered by each award,to establish vesting schedules and terms of each award, to specify all otherterms of awards, and to interpret the plan.

Stock appreciation rights may be granted in connectionwith options, or may be granted as free-standing awards. Exercise of an optionwill result in the corresponding surrender of the attached stock appreciationright. At a minimum, the exercise price of an incentive stock option must be atleast equal to the fair market value of a share of common stock on the date onwhich the option is granted.

Options and stock appreciation rights will beexercisable in accordance with the terms set by the compensation committee whengranted and will expire on the date determined by the compensation committee.All options and stock appreciation rights must expire no later than ten yearsafter they are granted under our plan. If a stock appreciation right is issuedin connection with an option, the stock appreciation right will expire when therelated option expires. Special rules and limitations apply to stockoptions which are intended to be incentive stock options.

Under the iPCS incentive plan, our compensationcommittee may grant common stock or stock units to participants. During theperiod that a stock award or stock unit award is subject to restrictions orlimitations, the participants may receive dividend rights, relating to theunderlying shares.

The compensation committee may award participants cashincentive awards which entitle the participant to receive payment in cash orshares at the end of a performance period to the extent provided under theaward. Our compensation committee establishes the performance measures andperiods with respect to such awards.

Subject to thespecific terms of any outstanding award, in the event of our change in control,all options and SARs which are held at the time of the change in control willbecome immediately vested and exercisable and all full value stock awards(which includes awards of restricted stock) and cash incentive awards shall befully earned and vested. The term “change in control” is defined in the iPCSincentive plan, generally, as the occurrence of any of the following events:

·       thedirect or indirect sale, other disposition (other than by way of merger orconsolidation) of all or substantially all of the assets of iPCS to any personother than a “permitted holder”;

·       theadoption of a plan relating to the liquidation or dissolution of iPCS;

·       theconsummation of any transaction the result of which is that any person, otherthan a permitted holder, becomes the beneficial owner, directly or indirectly,of more than 50% of the voting stock of iPCS; or

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·       thefirst day on which a majority of the members of the Board of Directors are notcontinuing directors (as defined in the plan).

A “permitted holder” isdefined as The Blackstone Group, The TCW Group and American International Group, Inc.and their respective affiliates (other than their respective portfoliocompanies).

*Horizon PCS 2004Stock Incentive Plan*

As a result of our merger with Horizon PCS, we assumedthe Horizon PCS 2004 Stock Incentive Plan. As of the consummation of themerger, only nonqualified stock options had been granted under the Horizon PCSincentive plan. In connection with the merger, certain of these outstandingoptions became vested and all of the outstanding options were converted intooptions to acquire an aggregate of 598,962 shares of our stock at an exerciseprice of $23.00 pursuant to the merger agreement. Under the Horizon PCSincentive plan, we may grant stock options, stock appreciation rights, fullvalue awards and cash-based incentive awards to our employees, consultants anddirectors. The total number of shares of our common stock that may be deliveredto participants under the Horizon PCS incentive plan is 762,227 shares. Thenumber of shares and the price at which shares of stock may be acquired may beadjusted under certain circumstances, such as in the event of a corporaterestructuring. No one individual may be granted options or SARs covering morethan 386,250 shares in any one calendar year.

The compensation committee of our Board administersthe Horizon PCS incentive plan. The Horizon PCS incentive plan essentiallygives the compensation committee sole discretion and authority to select thosepersons to whom awards will be made, to designate the number of shares coveredby each award, to establish vesting schedules and terms of each award, tospecify all other terms of awards, and to interpret the Horizon PCS incentiveplan.

Stock appreciation rights may be granted in connectionwith options, or may be granted as free-standing awards. Exercise of an optionwill result in the corresponding surrender of the attached stock appreciationright. At a minimum, the exercise price of an incentive stock option must be atleast equal to the fair market value of a share of common stock on the date onwhich the option is granted.

Options and stock appreciation rights will beexercisable in accordance with the terms set by the compensation committee whengranted and will expire on the date determined by the compensation committee.All options and stock appreciation rights must expire no later than ten yearsafter they are granted under the Horizon PCS incentive plan. If a stockappreciation right is issued in connection with an option, the stockappreciation right will expire when the related option expires. Special rules andlimitations apply to stock options which are intended to be incentive stockoptions.

Under the Horizon PCS incentive plan, our compensationcommittee may grant common stock or stock units to participants. During theperiod that a stock award or stock unit award is subject to restrictions orlimitations, the participants may receive dividend rights, relating to theunderlying shares.

The compensation committee may award participants cashincentive awards which entitle the participant to receive payment in cash orshares at the end of a performance period to the extent provided under theaward. Our compensation committee establishes the performance measures andperiods with respect to such awards.

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Subject to thespecific terms of any outstanding award, in the event of a change in control ofus, all options and SARs which are held at the time of the change in controlmay, at the discretion of the compensation committee, become immediately vestedand exercisable and all stock awards and cash incentive awards shall be fullyearned and vested. Giving effect to our merger with Horizon PCS, the term “changein control” is defined in the Horizon PCS incentive plan, generally, as theoccurrence of any of the following events:

·       Theconsummation of a reorganization, merger, statutory share exchange orconsolidation or similar corporate transaction, or a sale or other dispositionof all or substantially all of our assets, or our acquisition of assets orstock of another entity that results in a change in our ownership or control;

·       theadoption of a plan relating to our liquidation or dissolution; or

·       the consummation of anytransaction the result of which is that any person becomes the beneficialowner, directly or indirectly, of more than 50% of our voting stock.

***Compensation Committee Interlocks and InsiderParticipation***

There are no compensationcommittee interlocks (i.e., none of our executive officers serves as a memberof the board of directors or the compensation committee of another entity thathas an executive officer serving as a member of our Board or the compensationcommittee of our Board).

**ITEM 12.**         SECURITYOWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERMATTERS

**Equity Compensation Plan Information**

Thefollowing table presents information with respect to our equity compensationplan as of September 30, 2005:

| **Plan  Category**                                             | ** ** | ** ** | ** ** | **(a)  Number of securities  to be issued upon  exercise of   outstanding options,  warrants and rights** | ** ** | **(b)  Weighted-average  exercise price of   outstanding  options, warrants  and rights** | ** ** | **(c)  Number of securities  remaining available  for future issuance  under equity  compensation plans  (excluding securities  reflected in   column (a)** | ** ** |
|----------------------------------------------------------------|------------|------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------------------------------------------------------------------------------------------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|
| Equity  compensation plans approved by security holders(1)     |       |       | 599,225    |                                                                                                                                                        |       |                                                                                                               | $14.90     |                                                                                                                                                                                                               |       |   | 338,456 |   |   |
| Equity  compensation plans not approved by security holders(2) |       |       | 238,559    |                                                                                                                                                        |       |                                                                                                               | 23.00      |                                                                                                                                                                                                               |       |   | 163,265 |   |   |
| Total                                                          |       |       | 837,784    |                                                                                                                                                        |       |                                                                                                               | $17.20     |                                                                                                                                                                                                               |       |   | 501,721 |   |   |

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(1)          Consists of the iPCSincentive plan that was implemented pursuant to iPCS’s plan of reorganizationand approved by the security holders on June 30, 2005.

(2)   Consists of the Horizon PCS incentive plan that was implementedpursuant to Horizon PCS’s plan of reorganization.

**Security Ownership of Certain Beneficial Owners andManagement**

Thefollowing table presents information regarding the beneficial ownership of ourcommon stock as of December 16, 2005 with respect to: (i) each personwho, to our knowledge, is the beneficial owner of 5% or more of our outstandingcommon stock; (ii) each of our directors; (iii) our President andChief 

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Executive Officer; (iv) each of the other NamedExecutive Officers; and (v) all executive officers and directors as agroup.

| ** **                                                             | ** ** | **Shares of Common Stock  Beneficially Owned(2)** | ** ** |
|------------------------------------------------------------------------|------------|-----------------------------------------------------------------------|------------|
| **Name and  Address(1)**                                          | ** ** | ** **                                                            | ** ** | **Number of Shares** | ** ** | **Percentage of Class** | ** ** |
| Silver Point  Capital, L.P.(3)                                         |       |                                                                  | 2,880,818  |   |   |   | 17.3 | % |   |
| AIG Global  Investment Corp.(4)                                        |       |                                                                  | 2,680,470  |   |   |   | 16.1 |   |   |
| Apollo Management  IV, L.P.(5)                                         |       |                                                                  | 2,656,351  |   |   |   | 15.9 |   |   |
| Timothy M.  Yager(6)                                              |       |                                                                  | 222,295    |   |   |   | 1.3 |   |   |
| Timothy C.  Babich(7)                                             |       |                                                                  | —     |   |   |   | * |   |   |
| Timothy G.  Biltz(8)                                              |       |                                                                  | 10,274     |   |   |   | * |   |   |
| Jeffrey W.  Jones(9)                                              |       |                                                                  | 10,274     |   |   |   | * |   |   |
| Robert A.  Katz(10)                                               |       |                                                                  | 10,274     |   |   |   | * |   |   |
| Ryan L.  Langdon(11)                                              |       |                                                                  | 3,750      |   |   |   | * |   |   |
| Kevin M.  Roe(12)                                                 |       |                                                                  | 5,625      |   |   |   | * |   |   |
| Stebbins B.  Chandor, Jr.(13)                                |       |                                                                  | 31,564     |   |   |   | * |   |   |
| John  (Sonny) J. Peterman(14)                                     |       |                                                                  | 15,750     |   |   |   | * |   |   |
| Craig A.  Kinley(15)                                              |       |                                                                  | 15,000     |   |   |   | * |   |   |
| Edmund L.  Quatmann, Jr.(16)                                      |       |                                                                  | 5,662      |   |   |   | * |   |   |
| All executive officers  and directors as a group (13 persons)(17) |       |                                                                  | 375,312    |   |   |   | 2.2 |   |   |
|                                                                        |            |                                                                       |            |  |  |  |  |  |  |  |  |

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*                    Less than 1%.

(1)          Except as otherwiseindicated below, the address for each director and executive officer is 1901North Roselle Road, Suite 500, Schaumburg, Illinois 60195.

(2)          Beneficial ownership isdetermined in accordance with Rule 13d-3 promulgated under theExchange Act. A person is deemed to be the beneficial owner of any shares ofcommon stock if such person has or shares the right to vote or dispose of suchcommon stock, or has the right to acquire beneficial ownership at any time within60 days of the date of the table.

(3)          Includes11,250 shares of common stock issuable upon the exercise of stock optionsexercisable within 60 days and issued to SPCP Group, L.L.C. Silver PointCapital, L.P. investment manages the funds held by Silver Point CapitalOffshore Fund, Ltd., Silver Point Capital Fund, L.P. and SPCPGroup, L.L.C. (collectively, the “Silver Point Funds”). By virtue of itsstatus as investment manager, Silver Point Capital, L.P. may be deemed tobe the beneficial owner of the shares of common stock held by the Silver PointFunds. Mr. Edward Mule and Mr. Robert O’Shea are Partners of SilverPoint Capital, L.P. and have voting and investment power with respect tothe shares of common stock held by the Silver Point Funds and may be deemed tobe the beneficial owners of the shares of the common stock held by the SilverPoint Funds. Each of Messrs. Mule and O’Shea disclaims beneficialownership of the shares of common stock held by the Silver Point Funds, exceptto the extent of any pecuniary interest. The address for Silver PointCapital, L.P. is 2 Greenwich Plaza, Greenwich,Connecticut 06830. Mr. Babich, one of our directors, is an employeeof Silver Point Capital, L.P.

(4)          AIG Global InvestmentCorp. (a subsidiary of American International Group, Inc.) is theinvestment adviser of AIG Annuity Insurance Company, AIG Life InsuranceCompany, AIG Retirement Services, Inc., SunAmerica Life Insurance Companyand The Variable Annuity Life Insurance Company and is the investmentsub-adviser of VALIC Company II Strategic Bond Fund, SunAmerica Income Funds—SunAmericaHigh Yield Bond Fund, SunAmerica Income Funds—SunAmerica Strategic Bond Fund,and VALIC Company II High Yield Bond Fund. AIG SunAmerica Asset 

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Management Corp. is theinvestment adviser of SunAmerica Series Trust—High Yield Bond Portfolio.As the investment adviser and investment sub-adviser of the aforementionedentities, AIG Global Investment Corp. and AIG SunAmerica Asset Management Corp.have investment discretion over securities held by these entities. The GlobalInvestment Committee of AIG Global Investment Corp., each member of which isdescribed in Part II of the AIG Global Investment Corp.’s form ADV lastfiled with the SEC as of July 18, 2005, has the power to vote and disposeof the securities owned by the aforementioned entities. The address for AIGGlobal Investment Corp. is 70 Pine Street, New York, New York, 10270. AIGGlobal Investment Corp., the members of its Global Investment Committee, AIGSunAmerica Asset Management Corp., and American International Group, Inc.disclaim beneficial ownership of these securities.

(5)          Apollo Management IV,L.P. manages the funds held by Apollo Investment Fund IV, L.P. and ApolloOverseas Partners IV, L.P. (collectively, the “Apollo Funds”). The managinggeneral partner of the Apollo Funds is Apollo Advisors IV, L.P., a Delawarelimited partnership, the general partner of which is Apollo CapitalManagement IV, Inc., a Delaware corporation. The directors andprincipal executive officers of Apollo Capital Management IV, Inc.are Messrs. Leon D. Black and John J. Hannan. Each of Messrs. Blackand Hannan disclaims beneficial ownership of the shares of common stock ownedby the Apollo Funds. The address for the Apollo Funds is 9 West 57th Street,43rd Floor New York, NY 10019. Mr. Katz, one of our directors, isassociated with Apollo Management, L.P., an affiliate of the Apollo Funds.

(6)          Includes93,750 shares of common stock issuable upon the exercise of stock optionsexercisable within 60 days.

(7)          Mr. Babich is anemployee with Silver Point Capital, L.P. Mr. Babich disclaims beneficialownership of the securities held by Silver Point Capital, L.P.

(8)          Consists of10,274 shares of common stock issuable upon the exercise of stock optionsexercisable within 60 days.

(9)          Consists of10,274 shares of common stock issuable upon the exercise of stock optionsexercisable within 60 days.

(10)   Consists of 10,274 sharesof common stock issuable upon the exercise of stock options exercisable within60 days. Mr. Katz is associated with the Apollo Funds. Mr. Katzdisclaims beneficial ownership of the securities held by the Apollo Funds.

(11)   Consists of 3,750 sharesof common stock issuable upon the exercise of stock options exercisable within60 days.

(12)   Consists of 5,625 sharesof common stock issuable upon the exercise of stock options exercisable within60 days.

(13)   Consists of 31,564 sharesof common stock issuable upon the exercise of stock options exercisable within60 days.

(14)   Consists of 15,750 sharesof common stock issuable upon the exercise of stock options exercisable within60 days.

(15)   Consists of 15,000 sharesof common stock issuable upon the exercise of stock options exercisable within60 days.

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(16)   Consists of 5,662 sharesof common stock issuable upon the exercise of stock options exercisable within60 days.

(17)   Informationprovided is for the individuals who were our executive officers and directorson December 16, 2005, and includes 246,767 shares issuable upon theexercise of stock options that are exercisable within 60 days.

**ITEM 13.**         CERTAINRELATIONSHIPS AND RELATED TRANSACTIONS

**NotesRegistration Rights Agreements**

In connection with the offerings of our 111¤2%unregistered senior notes and our 113¤8%unregistered senior notes in April, 2004 and July 2004, respectively, weand our guarantor subsidiaries entered into registration rights agreements withthe initial purchasers thereof. Pursuant to these registration rightsagreements, we filed exchange offer registration statements with the SECpursuant to which we issued registered notes for the unregistered notestendered prior to the expiration of the exchange offers. AIG Global InvestmentCorp. advised us that its affiliates held approximately $47.3 million ofour 111¤2%senior notes as of December 27, 2004—the date we consummated the exchangeoffer for the 111¤2%senior notes.

**CommonStock Registration Rights Agreement**

As required by our plan of reorganization, we enteredinto a registration rights agreement with the following holders of our commonstock who may have been deemed to be our affiliates as of the consummation ofour plan of reorganization: certain affiliates of AIGGIC and Silver Point, andthe Timothy M. Yager 2001 Trust. In connection with our merger with HorizonPCS, the registration rights agreement was amended to include our sharesacquired upon consummation of the merger by certain affiliates of the ApolloFunds and Silver Point and to modify other terms. The following is a summary ofthe material terms of the registration rights agreement, as amended.

Pursuant to the common stock registration rightsagreement, we agreed to prepare and file shelf registration statements coveringthe resale of our common stock held by our affiliated holders. The initialshelf registration statement was declared effective on November 24, 2004. Wealso agreed to maintain an effective shelf registration statement coveringshares issued to affiliates of the Apollo Funds and Silver Point following theconsummation of the merger, which was declared effective on August 12, 2005. Subjectto our suspension right discussed below, we agreed to use our commerciallyreasonable efforts to maintain the effectiveness of both shelf registrationstatements continuously until the earliest to occur of (1) November 24, 2006and (2) such date as all of the shares of common stock included on the shelfregistration statements may be sold or transferred without registration on suchregistration statement. iPCS has the right (exercisable on not more than oneoccasion in any 12 month period) to postpone or suspend the filing oreffectiveness of the shelf registration statements (but not for a periodexceeding 30 days in the aggregate in any 12 month period) if we determine thatsuch registration and offering would reasonably be expected to interfere withcertain significant transactions or events, or would require public disclosureof any such transaction or event prior to the time such disclosure mightotherwise be required and we postpone or suspend both registration statements.

At any time after the expiration of the effectivenessof the shelf registration statements, any of the parties to the registrationrights agreement (other than the Timothy M. Yager 2001 Trust) may make arequest for registration of their common stock having a minimum value of $15million. All holders of common stock will be entitled to participate in anysuch demand registration on a pro rata basis. Each of AIGGIC, Silver Point andthe Apollo Funds and their respective transferees shall be entitled to requestone demand registration with an additional registration which may be requestedby any of the three holders subsequent to the demand by that holder for itsallocated registration. No more than two requests for a demand registrationshall be permitted in any 12 month period, and iPCS will not be required to 

87

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effect a demandregistration until a period of 180 days shall have elapsed from the date onwhich the distribution of common stock under any previous demand registrationhas been completed.

We have the right to postpone a demand registration ifwe are advised that such demand registration would adversely affect any otherpublic offering of our securities (other than in connection with employeebenefit and similar plans) for which we had previously commenced preparations,or if such demand registration would reasonably be expected to interfere withcertain significant transactions or events, or require public disclosure ofsuch a transaction or event prior to the time such disclosure might otherwisebe required. With respect to any underwritten demand registration, iPCS shallhave the right, in consultation with the selling holders, to select anyinvestment banker and manager or co-managers to administer the offering.

Additionally, the holders of common stock who areparty to the registration rights agreement shall be entitled to piggyback ontoany registration by us of our common stock (other than on Form S 4 or S 8) forour own account or for the account of any other holders. We will have priorityin any registration we have initiated for our own account. Any cutback requiredwith respect to the holders shall be done on a pro rata basis.

In connection with any underwritten registration ofour common stock, we will agree, as will each holder, not to sell any of ourequity securities during such period as the managing underwriter may request(not to exceed 90 days from the date of the final prospectus).

We will pay all customary costs and expensesassociated with each registration, including for each registration statementprepared, the reasonable fees and expenses of one counsel for the holders.Holders of our common stock will pay underwriting discounts, commissions andapplicable transfer taxes, if any, on any shares sold by them.

Our obligation under the registration rights agreementto register common stock for sale under the Securities Act shall terminate onthe earliest to occur of the date on which all shares of common stock held bythe holders party to such agreement (1) have been distributed to the publicpursuant to an offering registered under the Securities Act, (2) have been soldto the public through a broker, dealer or market maker in compliance with Rule144 under the Securities Act, (3) may be sold or transferred pursuant to Rule144(k) under the Securities Act without restrictions or (4) cease to beoutstanding.

Each holder of commonstock who is a party to the registration rights agreement may assign its rightsunder the registration rights agreement to a third party in connection with atransfer of such holder’s common stock to such third party, provided that wereceive prompt notice of such transfer and such third party becomes a party tothe registration rights agreement.

**Relationship with Stockholders**

We are insured by an insurance company affiliated withAIGGIC, the beneficial owner of approximately 16.1% of our common stock as ofDecember 16, 2005. The annual premium for such coverage, approximately $0.4million, was paid to our broker in July 2005. We believe that the cost of insuranceis comparable to the cost of insurance which could have been obtained intransactions with unaffiliated entities.

Following the effectivedate of our plan of reorganization, Silver Point, the beneficial owner ofapproximately 17.2% of our common stock as of December 16, 2005, purchasedthree pre-petition claims against us from creditors in our bankruptcy. Theaggregate amount of the claims purchased by Silver Point was approximately $0.6million. Consistent with other pre-petition claims against us, we have settledthese claims with Silver Point through the issuance to it of 26,105 shares ofcommon stock during the year ended September 30, 2005.

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**ITEM 14.**         PRINCIPALACCOUNTING FEES AND SERVICES

The following table presents fees billed to us byDeloitte & Touche LLP for the year ended September 30, 2005 and the periodsended September 30, 2004 and July 1, 2004. For purposes of this disclosure, the fees billed for the periods endedSeptember 30, 2004 and July 1, 2004 are reflected as for the year endedSeptember 30, 2004:

| **Year Ended September 30** | ** ** | ** **              | ** ** | **2005** | ** ** | **2004** | ** ** |
|--------------------------------------------|------------|-------------------------|------------|----------|------------|----------|------------|
| ** **                                 | ** ** | **(In thousands)** | ** ** |
| Audit Fees                                 |       | $                       | 820        |     | $          | 629      |       |
| Audit-Related  Fees                        |       | 258                     |       | 66       |       |
| Tax Fees                                   |       | 122                     |       | 77       |       |
| All Other Fees                             |       | —                  |       | —   |       |
| Total                                      |       | $                       | 1,200      |     | $          | 772      |       |

 

***Audit Fees.***   These fees relate to reviews ofthe consolidated financial statements and for other attest services primarilyrelated to financial accounting consultations, comfort letters and consentsrelated to registration statements.

***Audit Related Fees.***   These fees primarily relate toaudits of employee benefit plans and accounting consultation for contemplatedtransactions, including due diligence.

***Tax Fees.***   These fees relate to taxcompliance, tax advice and tax planning.

***All Other Fees.***   There were no other feesfor the years ended September 30, 2005 and 2004.

Our audit committee is responsible for appointing ourindependent registered public accounting firm and approving the terms of theindependent registered public accounting firm’s services. Our audit committeecharter provides that the audit committee must review and pre-approve all auditand non-audit services to be provided by the independent registered publicaccounting firm. Normally, pre-approval would be provided at regularlyscheduled meetings of our audit committee or by way of an unanimous writtenconsent. However, the authority to grant specific pre-approval betweenmeetings, as necessary, may be delegated to one or more designated members ofour audit committee whose decisions will be presented to the full auditcommittee at its next regularly scheduled meeting.

Following our emergence from bankruptcy, our auditcommittee was constituted by our board of directors at its meeting on August25, 2004. Prior to that date, our board of directors served as our auditcommittee. During the years ended September 30, 2005 and 2004, all servicesperformed by our independent registered public accounting firm werepre-approved by our audit committee or, prior to August 25, 2004, werepre-approved by our board of directors or the bankruptcy court.

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**PART IV**

**ITEM 15.**         EXHIBITS,FINANCIAL STATEMENT SCHEDULES

(a)           The following documentsare filed as part of this annual report on Form 10-K:

1.     FinancialStatements

Report ofIndependent Registered Public Accounting Firm; Consolidated Balance Sheets asof September 30, 2005 and 2004 (Successor Company); ConsolidatedStatements of Operations for the year ended September 30, 2005, the periodfrom July 2, 2004 through September 30, 2004 (Successor Company), theperiod from October 1, 2003 through July 1, 2004 and the year ended September 30,2003 (Predecessor Company); Consolidated Statements of Cash Flows for the yearended September 30, 2005, the period from July 2, 2004 through September 30,2004 (Successor Company), the period from October 1, 2003 through July 1,2004 and the year ended September 30, 2003 (Predecessor Company);Consolidated Statements of Equity (Deficiency) for the year ended September 30,2005, the period from July 2, 2004 through September 30, 2004(Successor Company), the period from October 1, 2003 through July 1,2004 and the year ended September 30, 2003 (Predecessor Company); andNotes to Consolidated Financial Statements.

2.     FinancialStatement Schedules. None

3.     See the Exhibit Indexfollowing the financial statements.

(b)          See the Exhibit Indexfollowing the financial statements.

(c)           FinancialStatement Schedules. None

**SupplementalInformation to be Furnished With Reports Filed Pursuant to Section 15(d) ofthe Act by Registrants Which Have Not Registered Securities Pursuant to Section 12of the Act**

We have not senteither of the following to our security holders with respect to the year ended September 30,2005:

(1)   Any annualreport covering our last fiscal year; or

(2)   Any proxystatement, form of proxy or other proxy soliciting material with respect to anyannual or other meeting of security holders.

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**SIGNATURES**

Pursuantto the requirements of Section 13 or 15(d) of the Securities ExchangeAct of 1934, the registrant has duly caused this report to be signed on itsbehalf by the undersigned, thereunto duly authorized.

|        | iPCS, Inc. |
|--------|-----------------|
|   | By:             | /s/ TIMOTHY M. YAGER |
|   |            | Timothy M. Yager |
|   |            | *President and Chief Executive  Officer* |
|   |            | Date: December 22, 2005 |

 

Pursuantto the requirements of the Securities Exchange Act of 1934, this report hasbeen signed below by the following persons on behalf of the registrant and inthe capacities and on the dates indicated.

| **Name**                                | ** ** | **Title**                       | ** ** | **Date**               |
|-----------------------------------------|------------|---------------------------------|------------|------------------------|
|                                    |       | Director, President and  Chief  |       |                   |
| /s/ TIMOTHY M. YAGER               |       | Executive Officer               |       | December 22, 2005 |
| Timothy M. Yager                        |       | (Principal  Executive Officer)  |       |                   |
| /s/ TIMOTHY C. BABICH                   |       | Director                        |       | December 22, 2005 |
| Timothy C. Babich                       |       |                            |       |                   |
| /s/ TIMOTHY G. BILTZ               |       | Director                        |       | December 22, 2005 |
| Timothy G. Biltz                        |       |                            |       |                   |
| /s/ JEFFREY W. JONES               |       | Director                        |       | December 22, 2005 |
| Jeffrey W. Jones                        |       |                            |       |                   |
| /s/ ROBERT A. KATZ                 |       | Director                        |       | December 22, 2005 |
| Robert A. Katz                          |       |                            |       |                   |
| /s/ RYAN L. LANGDON                |       | Director                        |       | December 22, 2005 |
| Ryan L. Langdon                         |       |                            |       |                   |
| /s/ KEVIN M. ROE                   |       | Director                        |       | December 22, 2005 |
| Kevin M. Roe                            |       |                            |       |                   |
|                                    |       | Executive Vice President  and   |       |                   |
| /s/ STEBBINS B. CHANDOR, JR.  |       | Chief Financial  Officer        |       | December 22, 2005 |
| Stebbins B.  Chandor, Jr.          |       | (Principal  Financial Officer)  |       |                   |
| /s/ PATRICIA M. GRETEMAN           |       | Vice President and  Controller  |       | December 22, 2005 |
| Patricia M.  Greteman                   |       | (Principal  Accounting Officer) |       |                   |

 

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**iPCS, INC. AND SUBSIDIARIES**

**INDEXTO CONSOLIDATED FINANCIAL STATEMENTS**

|                                                                                                                                                                                                                                                                                                                       | ** ** | **Page** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------|------------|
| Report of Independent Registered Public Accounting  Firm                                                                                                                                                                                                                                                              |       | F-2      |       |
| Consolidated  Balance Sheets as of September 30, 2005 and 2004 (Successor Company)                                                                                                                                                                                                                               |       | F-3      |       |
| Consolidated Statements of Operations for the year  ended September 30, 2005, the period from July 2, 2004 through  September 30, 2004 (Successor Company), the period from October 1,  2003 through July 1, 2004 and the year ended September 30, 2003  (Predecessor Company)          |       | F-4      |       |
| Consolidated Statements of Cash Flows for the year  ended September 30, 2005, the period from July 2, 2004 through  September 30, 2004 (Successor Company), the period from October 1,  2003 through July 1, 2004 and the year ended September 30, 2003  (Predecessor Company)          |       | F-5      |       |
| Consolidated Statements of Equity (Deficiency) for the  year ended September 30, 2005, the period from July 2, 2004 through  September 30, 2004 (Successor Company), the period from October 1,  2003 through July 1, 2004 and the year ended September 30, 2003  (Predecessor Company) |       | F-6      |       |
| Notes to Consolidated Financial Statements                                                                                                                                                                                                                                                                            |       | F-7      |       |

 

F-1

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**REPORT OF INDEPENDENT REGISTEREDPUBLIC ACCOUNTING FIRM**

To the Board of Directorsand Stockholders ofiPCS, Inc. and subsidiariesSchaumburg, Illinois

We have audited the accompanying consolidated balancesheets of iPCS, Inc. and subsidiaries (the “Company”) as of September 30,2005 and 2004 (Successor Company consolidated balance sheets), and the relatedconsolidated statements of operations, stockholders’ equity (deficiency) and ofcash flows for the year ended September 30, 2005 and the period from July 2,2004 through September 30, 2004 (Successor Company operations), the periodfrom October 1, 2003 through July 1, 2004, and the year ended September 30,2003 (Predecessor Company operations). These financial statements are theresponsibility of the Company’s management. Our responsibility is to express anopinion on these financial statements based on our audits.

We conducted our audits in accordance with thestandards of the Public Company Accounting Oversight Board (United States).Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of materialmisstatement. The Company is not required to have, nor were we engaged toperform, an audit of its internal control over financial reporting. Our auditsincluded consideration of internal control over financial reporting as a basisfor designing audit procedures that are appropriate in the circumstances, butnot for the purpose of expressing an opinion on the effectiveness of the Company’sinternal control over financial reporting. Accordingly, we express no suchopinion. An audit also includes examining, on a test basis, evidence supportingthe amounts and disclosures in the financial statements, assessing theaccounting principles used and significant estimates made by management, aswell as evaluating the overall financial statement presentation. We believethat our audits provide a reasonable basis for our opinion.

As discussed in Notes 1 and 4 to the consolidatedfinancial statements, on July 9, 2004, the Bankruptcy Court entered anorder confirming the Plan of Reorganization which became effective after theclose of business on July 20, 2004. Accordingly, the accompanyingfinancial statements have been prepared in conformity with AICPA Statement ofPosition 90-7, “Financial Reporting for Entities in ReorganizationUnder the Bankruptcy Code,” for the Successor Company as a new entity withassets, liabilities, and a capital structure having carrying values notcomparable with prior periods as described in Note 4.

In our opinion, theSuccessor Company consolidated financial statements present fairly, in allmaterial respects, the financial position of iPCS, Inc. and subsidiariesat September 30, 2005 and 2004, and the results of their operations andtheir cash flows for the year ended September 30, 2005 and for the periodfrom July 2, 2004 through September 30, 2004, in conformity withaccounting principles generally accepted in the United States of America.Further, in our opinion, the Predecessor Company consolidated financialstatements referred to above present fairly, in all material respects, theresults of their operations and their cash flows for the period from October 1,2003 through July 1, 2004, and the year ended September 30, 2003, inconformity with accounting principles generally accepted in the United Statesof America.

/s/ DELOITTE & TOUCHE LLP

Davenport, Iowa

December 21, 2005

F-2

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**iPCS, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(Dollars in thousands, except share and per share amounts)**

| ** **                                                                                                                                   | ** ** | **Successor Company**   | ** ** |
|----------------------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------|------------|
| ** **                                                                                                                                   | ** ** | **September 30,  2005** | ** ** | **September 30,  2004** | ** ** |
| **Assets**                                                                                                                                   |       |                         |       |   |   |   |   |   |   |
| Current Assets:                                                                                                                              |       |                         |       |   |   |   |   |   |   |
| Cash and cash  equivalents                                                                                                                   |       |                         | $          | 98,107 |   |   |   | $ | 57,760 |   |   |
| Investments                                                                                                                                  |       |                         | 16,700     |   |   |   | — |   |   |
| Accounts  receivable, net                                                                                                                    |       |                         | 25,601     |   |   |   | 14,772 |   |   |
| Receivable from  Sprint (Note 5)                                                                                                             |       |                         | 30,837     |   |   |   | 13,264 |   |   |
| Inventories, net  (Note 5)                                                                                                                   |       |                         | 3,179      |   |   |   | 1,310 |   |   |
| Prepaid expenses                                                                                                                             |       |                         | 5,717      |   |   |   | 3,127 |   |   |
| Other current  assets                                                                                                                        |       |                         | 4,092      |   |   |   | 21 |   |   |
| Total current assets                                                                                                                         |       |                         | 184,233    |   |   |   | 90,254 |   |   |
| Property and  equipment, net (Note 6)                                                                                                        |       |                         | 153,504    |   |   |   | 134,931 |   |   |
| Financing costs  (Note 8)                                                                                                               |       |                         | 9,590      |   |   |   | 6,497 |   |   |
| Customer  activation costs                                                                                                                   |       |                         | 1,003      |   |   |   | 451 |   |   |
| Intangible  assets, net (Note 7)                                                                                                             |       |                         | 178,800    |   |   |   | 78,861 |   |   |
| Goodwill (Note 7)                                                                                                                            |       |                         | 146,391    |   |   |   | — |   |   |
| Other assets                                                                                                                                 |       |                         | 469        |   |   |   | 1,314 |   |   |
| Total assets                                                                                                                                 |       |                         | $          | 673,990 |   |   |   | $ | 312,308 |   |   |
| **Liabilities  and Stockholders’ Equity**                                                                                               |       |                         |       |   |   |   |   |   |   |
| Current liabilities:                                                                                                                         |       |                         |       |   |   |   |   |   |   |
| Accounts payable                                                                                                                             |       |                         | $          | 4,322 |   |   |   | $ | 2,742 |   |   |
| Accrued expenses                                                                                                                             |       |                         | 33,275     |   |   |   | 20,880 |   |   |
| Payable to Sprint  (Note 5)                                                                                                                  |       |                         | 41,135     |   |   |   | 24,404 |   |   |
| Deferred revenue                                                                                                                             |       |                         | 10,486     |   |   |   | 5,764 |   |   |
| Current  maturities of long-term debt and capital lease obligations  (Note 8)                                                           |       |                         | 17         |   |   |   | 7 |   |   |
| Total current liabilities                                                                                                                    |       |                         | 89,235     |   |   |   | 53,797 |   |   |
| Customer  activation fee revenue                                                                                                             |       |                         | 1,003      |   |   |   | 451 |   |   |
| Other long-term  liabilities                                                                                                                 |       |                         | 9,112      |   |   |   | 3,614 |   |   |
| Long-term  debt and capital lease obligations, excluding current maturities  (Note 8)                                                   |       |                         | 304,558    |   |   |   | 165,400 |   |   |
| Total liabilities                                                                                                                            |       |                         | 403,908    |   |   |   | 223,262 |   |   |
| Commitments and  contingencies (Note 16)                                                                                                     |       |                         | —     |   |   |   | — |   |   |
| Stockholders’  Equity:                                                                                                                  |       |                         |       |   |   |   |   |   |   |
| Preferred stock, par value $.01 per share;  25,000,000 shares authorized; none issued                                                        |       |                         | —     |   |   |   | — |   |   |
| Common stock, par  value $.01 per share; 75,000,000 shares authorized, 16,635,482 and 8,744,164  shares issued and outstanding, respectively |       |                         | 166        |   |   |   | 87 |   |   |
| Additional paid-in-capital                                                                                                                   |       |                         | 328,202    |   |   |   | 95,275 |   |   |
| Unearned  compensation                                                                                                                       |       |                         | (1,372     | ) |   |   | (340 | ) |   |
| Accumulated  deficiency                                                                                                                      |       |                         | (56,914    | ) |   |   | (5,976 | ) |   |
| Total  stockholders’ equity                                                                                                             |       |                         | 270,082    |   |   |   | 89,046 |   |   |
| Total liabilities and  stockholders’ equity                                                                                             |       |                         | $          | 673,990 |   |   |   | $ | 312,308 |   |   |

 

See Notes to consolidated financial statements.

F-3

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**iPCS, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTSOF OPERATIONS(Dollars in thousands, except share data)**

| ** **                                                                                                                                                                                                                                                                                                                                                  | ** ** | **Successor Company**                                          | ** ** | **Predecessor Company**                                                                      | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------|------------|
| ** **                                                                                                                                                                                                                                                                                                                                                  | ** ** | **For the Year Ended  September 30, 2005** | ** ** | **For the Period  from  July 2, 2004  through  September 30, 2004** | ** ** | **For the Period  from  October 1, 2003  through  July 1, 2004** | ** ** | **For the Year Ended  September 30, 2003** | ** ** |
| **Revenues:**                                                                                                                                                                                                                                                                                                                                               |       |                                                                |       |                                                                                              |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Service revenue                                                                                                                                                                                                                                                                                                                                             |       |                                                                | $          | 189,177                                                                                           |       |   |   | $ | 37,909 |   |   |   | $ | 107,097 |   |   |   | $ | 145,249 |   |   |
| Roaming revenue                                                                                                                                                                                                                                                                                                                                             |       |                                                                | 82,959     |                                                                                              |       |   | 15,829 |   |   |   | 34,525 |   |   |   | 44,220 |   |   |
| Equipment and other                                                                                                                                                                                                                                                                                                                                         |       |                                                                | 7,911      |                                                                                              |       |   | 1,644 |   |   |   | 4,240 |   |   |   | 4,824 |   |   |
| Total revenues                                                                                                                                                                                                                                                                                                                                              |       |                                                                | 280,047    |                                                                                              |       |   | 55,382 |   |   |   | 145,862 |   |   |   | 194,293 |   |   |
| **Operating Expenses:**                                                                                                                                                                                                                                                                                                                                     |       |                                                                |       |                                                                                              |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Cost of service and roaming (exclusive of  depreciation, as shown separately below)                                                                                                                                                                                                                                                                         |       |                                                                | (153,224   | )                                                                                                 |       |   | (29,082 | ) |   |   | (83,230 | ) |   |   | (130,065 | ) |   |
| Cost of equipment                                                                                                                                                                                                                                                                                                                                           |       |                                                                | (27,260    | )                                                                                                 |       |   | (5,584 | ) |   |   | (12,801 | ) |   |   | (11,797 | ) |   |
| Selling and marketing                                                                                                                                                                                                                                                                                                                                       |       |                                                                | (44,893    | )                                                                                                 |       |   | (7,996 | ) |   |   | (20,976 | ) |   |   | (27,343 | ) |   |
| General and administrative                                                                                                                                                                                                                                                                                                                                  |       |                                                                | (11,354    | )                                                                                                 |       |   | (1,705 | ) |   |   | (3,550 | ) |   |   | (5,546 | ) |   |
| Reorganization income (expense) (Note 4)                                                                                                                                                                                                                                                                                                               |       |                                                                | —     |                                                                                              |       |   | — |   |   |   | 60,797 |   |   |   | (31,093 | ) |   |
| Stock-based compensation expense (In 2005, $63  related to cost of service and roaming, $1,054 related to general and  administrative and $83 related to selling and marketing. For successor  company operations, in 2004, $8 related to cost of service and roaming, $9  related to general and administrative and $5 related to selling and  marketing). |       |                                                                | (1,200     | )                                                                                                 |       |   | (22 | ) |   |   | — |   |   |   | — |   |   |
| Depreciation (Note 6)                                                                                                                                                                                                                                                                                                                                       |       |                                                                | (53,700    | )                                                                                                 |       |   | (8,790 | ) |   |   | (28,596 | ) |   |   | (37,274 | ) |   |
| Amortization of intangible assets (Note 7)                                                                                                                                                                                                                                                                                                             |       |                                                                | (18,126    | )                                                                                                 |       |   | (3,051 | ) |   |   | — |   |   |   | (3,274 | ) |   |
| Gain (loss) on disposal of property and equipment                                                                                                                                                                                                                                                                                                           |       |                                                                | (141       | )                                                                                                 |       |   | 4 |   |   |   | (13 | ) |   |   | (474 | ) |   |
| Total operating expenses                                                                                                                                                                                                                                                                                                                                    |       |                                                                | (309,898   | )                                                                                                 |       |   | (56,226 | ) |   |   | (88,369 | ) |   |   | (246,866 | ) |   |
| **Operating  income (loss)**                                                                                                                                                                                                                                                                                                                                |       |                                                                | (29,851    | )                                                                                                 |       |   | (844 | ) |   |   | 57,493 |   |   |   | (52,573 | ) |   |
| Interest income                                                                                                                                                                                                                                                                                                                                             |       |                                                                | 1,782      |                                                                                              |       |   | 289 |   |   |   | 263 |   |   |   | 70 |   |   |
| Interest expense                                                                                                                                                                                                                                                                                                                                            |       |                                                                | (22,926    | )                                                                                                 |       |   | (5,425 | ) |   |   | (10,142 | ) |   |   | (20,301 | ) |   |
| Cancellation of  debt (Note 4)                                                                                                                                                                                                                                                                                                                              |       |                                                                | —     |                                                                                              |       |   | — |   |   |   | 131,956 |   |   |   | — |   |   |
| Other income (expense),  net                                                                                                                                                                                                                                                                                                                                |       |                                                                | 57         |                                                                                              |       |   | 4 |   |   |   | 7 |   |   |   | (63 | ) |   |
| **Income  (loss) before (provision for) benefit from income taxes**                                                                                                                                                                                                                                                                                         |       |                                                                | (50,938    | )                                                                                                 |       |   | (5,976 | ) |   |   | 179,577 |   |   |   | (72,867 | ) |   |
| (Provision for)  benefit from income taxes                                                                                                                                                                                                                                                                                                             |       |                                                                | —     |                                                                                              |       |   | — |   |   |   | — |   |   |   | — |   |   |
| **Net  income (loss)**                                                                                                                                                                                                                                                                                                                                      |       |                                                                | $          | (50,938                                                                                           | )          |   |   | $ | (5,976 | ) |   |   | $ | 179,577 |   |   |   | $ | (72,867 | ) |   |
| Basic and diluted  loss per share of common stock                                                                                                                                                                                                                                                                                                           |       |                                                                |       |                                                                                              |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Loss available to common stockholders                                                                                                                                                                                                                                                                                                                  |       |                                                                | $          | (4.60                                                                                             | )          |   |   | $ | (0.65 | ) |   |   | n/a |   |   |   | n/a |   |   |
| Weighted average  common shares outstanding                                                                                                                                                                                                                                                                                                                 |       |                                                                | 11,073,435 |                                                                                              |       |   | 9,257,582 |   |   |   | n/a |   |   |   | n/a |   |   |

 

See Notes to consolidated financial statements.

F-4

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**iPCS, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTSOF CASH FLOWS(In thousands)**

| ** **                                                                                                              | ** ** | **Successor Company**                                      | ** ** | **Predecessor Company**                                                                      | ** ** |
|-------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------|------------|
| ** **                                                                                                              | ** ** | **For the Year  Ended  September 30, 2005** | ** ** | **For the Period  from  July 2, 2004  through  September 30, 2004** | ** ** | **For the Period  from**

**October 1, 2003  through  July 1, 2004** | ** ** | **For the Year  Ended  September 30, 2003** | ** ** |
| **Cash Flows from Operating  Activities:**                                                                              |       |                                                            |       |                                                                                              |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Net income (loss)                                                                                                       |       |                                                            | $          | (50,938                                                                                           | )          |   |   | $ | (5,976 | ) |   |   | $ | 179,577 |   |   |   | $ | (72,867 | ) |   |
| Adjustments to reconcile  net income (loss) to net cash flows from operating activities:                                |       |                                                            |       |                                                                                              |       |   |   |   |   |   |   |   |   |   |   |   |   |
| (Gain) loss on disposal of property and equipment                                                                       |       |                                                            | 141        |                                                                                              |       |   | (4 | ) |   |   | 13 |   |   |   | 474 |   |   |
| Depreciation and amortization of intangible assets                                                                      |       |                                                            | 71,826     |                                                                                              |       |   | 11,841 |   |   |   | 28,596 |   |   |   | 40,548 |   |   |
| Non-cash interest expense                                                                                               |       |                                                            | 504        |                                                                                              |       |   | 208 |   |   |   | 455 |   |   |   | 774 |   |   |
| Interest expense associated with accretion of  discount                                                                 |       |                                                            | —     |                                                                                              |       |   | — |   |   |   | — |   |   |   | 11,590 |   |   |
| Cancellation of debt                                                                                                    |       |                                                            | —     |                                                                                              |       |   | — |   |   |   | (131,956 | ) |   |   | — |   |   |
| Non-cash reorganization income (expense)                                                                                |       |                                                            | —     |                                                                                              |       |   | — |   |   |   | (68,276 | ) |   |   | 22,222 |   |   |
| Stock-based compensation expense                                                                                        |       |                                                            | 1,200      |                                                                                              |       |   | 22 |   |   |   | — |   |   |   | — |   |   |
| Provision for doubtful accounts                                                                                         |       |                                                            | 2,139      |                                                                                              |       |   | 489 |   |   |   | 246 |   |   |   | 3,187 |   |   |
| Purchases of investments                                                                                                |       |                                                            | (2,650     | )                                                                                                 |       |   | — |   |   |   | — |   |   |   | — |   |   |
| Sales of investments                                                                                                    |       |                                                            | 2,750      |                                                                                              |       |   | — |   |   |   | — |   |   |   | — |   |   |
| Changes  in assets and liabilities:                                                                                     |       |                                                            |       |                                                                                              |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Accounts receivable                                                                                                     |       |                                                            | (1,373     | )                                                                                                 |       |   | (385 | ) |   |   | 459 |   |   |   | (4,858 | ) |   |
| Receivable from Sprint                                                                                                  |       |                                                            | (9,935     | )                                                                                                 |       |   | (2,531 | ) |   |   | (4,251 | ) |   |   | 10,114 |   |   |
| Inventories, net                                                                                                        |       |                                                            | (1,314     | )                                                                                                 |       |   | (266 | ) |   |   | (444 | ) |   |   | 1,997 |   |   |
| Prepaid expenses, other current and long term assets                                                                    |       |                                                            | (150       | )                                                                                                 |       |   | 476 |   |   |   | 1,254 |   |   |   | (912 | ) |   |
| Accounts payable, accrued expenses and other long  term liabilities                                                     |       |                                                            | (5,715     | )                                                                                                 |       |   | 766 |   |   |   | 4,587 |   |   |   | 15,961 |   |   |
| Payable to Sprint                                                                                                       |       |                                                            | 5,375      |                                                                                              |       |   | (2,959 | ) |   |   | 9,639 |   |   |   | (21,350 | ) |   |
| Deferred revenue                                                                                                        |       |                                                            | 1,039      |                                                                                              |       |   | 764 |   |   |   | (999 | ) |   |   | (1,203 | ) |   |
| Net cash flows from operating activities                                                                                |       |                                                            | 12,899     |                                                                                              |       |   | 2,445 |   |   |   | 18,900 |   |   |   | 5,677 |   |   |
| **Cash Flows from Investing  Activities:**                                                                              |       |                                                            |       |                                                                                              |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash acquired in acquisition, net of transaction  costs                                                                 |       |                                                            | 19,935     |                                                                                              |       |   | — |   |   |   | — |   |   |   | — |   |   |
| Purchases of property and equipment                                                                                     |       |                                                            | (17,440    | )                                                                                                 |       |   | (3,402 | ) |   |   | (8,634 | ) |   |   | (13,395 | ) |   |
| Proceeds from disposition of fixed assets                                                                               |       |                                                            | 17,370     |                                                                                              |       |   | 153 |   |   |   | 86 |   |   |   | 77 |   |   |
| Net cash flows from investing activities                                                                                |       |                                                            | 19,865     |                                                                                              |       |   | (3,249 | ) |   |   | (8,548 | ) |   |   | (13,318 | ) |   |
| **Cash Flows from Financing  Activities:**                                                                              |       |                                                            |       |                                                                                              |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Proceeds from senior notes offering                                                                                     |       |                                                            | —     |                                                                                              |       |   | — |   |   |   | 165,000 |   |   |   | — |   |   |
| Proceeds from the exercise of stock options                                                                             |       |                                                            | 9,536      |                                                                                              |       |   | — |   |   |   | — |   |   |   | — |   |   |
| Stock purchases and retirements                                                                                         |       |                                                            | (1,626     | )                                                                                                 |       |   | — |   |   |   | — |   |   |   | — |   |   |
| Repayments under senior credit facilities                                                                               |       |                                                            | —     |                                                                                              |       |   | (126,570 | ) |   |   | (1,141 | ) |   |   | (2,289 | ) |   |
| Payments on capital lease obligations                                                                                   |       |                                                            | (21        | )                                                                                                 |       |   | — |   |   |   | (3 | ) |   |   | (4 | ) |   |
| Debt financing costs                                                                                                    |       |                                                            | (306       | )                                                                                                 |       |   | (5,269 | ) |   |   | (1,459 | ) |   |   | — |   |   |
| Net cash flows from financing activities                                                                                |       |                                                            | 7,583      |                                                                                              |       |   | (131,839 | ) |   |   | 162,397 |   |   |   | (2,293 | ) |   |
| Net increase (decrease) in cash and cash equivalents                                                                    |       |                                                            | 40,347     |                                                                                              |       |   | (132,643 | ) |   |   | 172,749 |   |   |   | (9,934 | ) |   |
| **Cash and  cash equivalents at beginning of period**                                                                   |       |                                                            | 57,760     |                                                                                              |       |   | 190,403 |   |   |   | 17,654 |   |   |   | 27,588 |   |   |
| **Cash and  cash equivalents at end of period**                                                                         |       |                                                            | $          | 98,107                                                                                            |       |   |   | $ | 57,760 |   |   |   | $ | 190,403 |   |   |   | $ | 17,654 |   |   |
| **Supplemental  disclosure of cash flow information—cash paid for interest**                                       |       |                                                            | $          | 26,137                                                                                            |       |   |   | $ | 467 |   |   |   | $ | 8,362 |   |   |   | $ | 7,109 |   |   |
| **Supplemental disclosure for non-cash  investing activities:**                                                         |       |                                                            |       |                                                                                              |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Capitalized interest                                                                                                    |       |                                                            | $          | 191                                                                                               |       |   |   | $ | — |   |   |   | $ | — |   |   |   | $ | 208 |   |   |
| Capital lease obligations incurred for the  acquisition of property and equipment                                       |       |                                                            | —     |                                                                                              |       |   | — |   |   |   | — |   |   |   | (154 | ) |   |
| Accounts payable and accrued expenses incurred for  the acquisition of property, equipment and construction in progress |       |                                                            | 5,301      |                                                                                              |       |   | 248 |   |   |   | 279 |   |   |   | 2,072 |   |   |
| Asset retirement obligations capitalized                                                                                |       |                                                            | —     |                                                                                              |       |   | — |   |   |   | — |   |   |   | 365 |   |   |
| Acquisition of  business through issuance of common stock, net of cash acquired and  transaction costs (Note 3)         |       |                                                            | 210,872    |                                                                                              |       |   | — |   |   |   | — |   |   |   | — |   |   |

 

See Notes to consolidated financial statements.

F-5

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**iPCS, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTSOF EQUITY (DEFICIENCY)(Dollars in thousands, except share data)**

| ** **                                                           | ** ** | **Common Stock** | ** ** | **Additional** | ** ** | **Unearned**        | ** ** | **Accumulated**  | ** ** |
|----------------------------------------------------------------------|------------|-----------------------|------------|----------------|------------|---------------------|------------|------------------|------------|
| ** **                                                           | ** ** | **Shares**            | ** ** | **Amount**     | ** ** | **Paid-in-Capital** | ** ** | **Compensation** | ** ** | **Deficiency** | ** ** |
| **Predecessor  Company**

**Balance  at September 30, 2002**    |       | 1,000                 |       |           | $          | —              |       |             |       | $ | 192,850 |   |   |   | $ | — |   |   |   | $ | (299,560 | ) |   |
| Net loss                                                             |       |                  |       |           |       |                |       |             |       |   |   |   |   |   |   |   | (72,867 | ) |   |
| **Balance at September 30, 2003**                               |       | 1,000                 |       |           | —     |                |       |             | 192,850    |   |   |   | — |   |   |   | (372,427 | ) |   |
| Net income                                                           |       | —                |       |           | —     |                |       |             | —     |   |   |   | — |   |   |   | 179,577 |   |   |
| Elimination of  Predecessor Company’s stockholder’s equity |       | (1,000                | )          |           | —     |                |       |             | (192,850   | ) |   |   | — |   |   |   | 192,850 |   |   |
| Issuance of  Successor Company common stock                          |       | 8,724,998             |       |           | 87         |                |       |             | 94,913     |   |   |   | — |   |   |   | — |   |   |
| **Balance at July 1, 2004**                                     |       | 8,724,998             |       |           | 87         |                |       |             | 94,913     |   |   |   | — |   |   |   | — |   |   |
| **Successor  Company**                                               |       |                  |       |           |       |                |       |             |       |   |   |   |   |   |   |   |   |   |   |
| Net loss                                                             |       | —                |       |           | —     |                |       |             | —     |   |   |   | — |   |   |   | (5,976 | ) |   |
| Grant of  restricted stock                                           |       | 19,166                |       |           | —     |                |       |             | 362        |   |   |   | (362 | ) |   |   | — |   |   |
| Amortization of  unearned compensation                               |       | —                |       |           | —     |                |       |             | —     |   |   |   | 22 |   |   |   | — |   |   |
| **Balance at September 30, 2004**                               |       | 8,744,164             |       |           | 87         |                |       |             | 95,275     |   |   |   | (340 | ) |   |   | (5,976 | ) |   |
| Net loss                                                             |       | —                |       |           | —     |                |       |             | —     |   |   |   | — |   |   |   | (50,938 | ) |   |
| Issuance of  common stock in settlement of claims                    |       | 400,002               |       |           | 4          |                |       |             | (4         | ) |   |   | — |   |   |   | — |   |   |
| Net shares issued  for stock unit award                         |       | 78,545                |       |           | 1          |                |       |             | (1,627     | ) |   |   | — |   |   |   | — |   |   |
| Grant of  restricted stock                                           |       | 1,667                 |       |           | —     |                |       |             | 58         |   |   |   | (58 | ) |   |   | — |   |   |
| Forfeiture of  restricted stock                                      |       | (1,084                | )          |           | —     |                |       |             | (20        | ) |   |   | 20 |   |   |   | — |   |   |
| Exercise of stock  options                                           |       | 449,428               |       |           | 4          |                |       |             | 9,531      |   |   |   | — |   |   |   | — |   |   |
| Modification of  stock options                                       |       | —                |       |           | —     |                |       |             | 577        |   |   |   | — |   |   |   | — |   |   |
| Shares issued in  connection with merger                             |       | 6,962,760             |       |           | 70         |                |       |             | 224,412    |   |   |   | (1,618 | ) |   |   | — |   |   |
| Amortization of  unearned compensation                               |       | —                |       |           | —     |                |       |             | —     |   |   |   | 624 |   |   |   | — |   |   |
| **Balance  at September 30, 2005**                              |       | 16,635,482            |       |           | $          | 166                 |       |             |       | $ | 328,202 |   |   |   | $ | (1,372 | ) |   |   | $ | (56,914 | ) |   |

 

See Notes to consolidated financial statements.

F-6

----

**iPCS, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATEDFINANCIAL STATEMENTS**

**(1)**   Businessand Basis of Presentation

iPCS, Inc. (the “Company” or “iPCS”) is a holdingcompany that operates as a PCS Affiliate of Sprint through three wholly ownedsubsidiaries: iPCS Wireless, Inc., Horizon Personal Communications, Inc.and Bright Personal Communications Services, LLC. Each of these subsidiaries isa party to a separate affiliation agreement with Sprint PCS, the operator of a100% digital personal communications service (“PCS”) wireless network withlicenses to provide voice and data service to the entire United Statespopulation using a single frequency band and a single technology.

iPCS, Inc. was formed in March 2000 as aholding company for iPCS Wireless. iPCS Wireless, as the successor to IllinoisPCS, LLC, became a PCS affiliate of Sprint in 1999. Through this affiliationagreement, as amended, iPCS has the exclusive right to market and provideSprint PCS products and services in 40 markets in Illinois, Michigan, Iowa, andeastern Nebraska.

On November 30, 2001, the Company was acquired byAirGate PCS, Inc. (“AirGate”), another PCS Affiliate of Sprint. iPCS wasdesignated as an unrestricted subsidiary of AirGate and both companies operatedas separate business entities. On February 23, 2003, the Company and itssubsidiaries filed for Chapter 11 bankruptcy protection. In accordance with theAmerican Institute of Certified Public Accountants Statement of Position 90-7,“Financial Reporting by Entities in Reorganization under the Bankruptcy Code,”the Company adopted fresh-start accounting as of July 1, 2004, andthe Company’s emergence from Chapter 11 resulted in a new reporting entity. Theperiods as of and prior to July 1, 2004 have been designated “PredecessorCompany” and the periods subsequent to July 1, 2004 have been designatedas “Successor Company.” Under fresh-start accounting, the reorganizationequity value of the company was allocated to the assets and liabilities basedon their respective fair values and was in conformity with SFAS No. 141 “BusinessCombinations.” As a result of the implementation of fresh-startaccounting, the financial statements of the Company after the effective dateare not comparable to the Company’s financial statements for prior periods.

On October 17, 2003, AirGate irrevocablytransferred its ownership of iPCS to a trust, the beneficial owners of whichtrust were AirGate’s stockholders at the date of transfer. AirGate retained noownership interest in the trust or the Company. Upon our emergence frombankruptcy (see Note 4), iPCS’s common stock held by the trust was cancelledand the trust terminated by its terms.

On July 1, 2005, iPCS completed a merger withHorizon PCS, Inc. (“Horizon PCS”), another PCS Affiliate of Sprint, inwhich Horizon PCS merged with and into iPCS, Inc., with iPCS, Inc. asthe surviving corporation (see Note 3). Through its two affiliation agreementswith Sprint PCS, two wholly owned subsidiaries of Horizon PCS have theexclusive right to market and provide Sprint PCS products and services in 40markets in Ohio, Indiana, Tennessee, Michigan, New York, New Jersey, Maryland,Pennsylvania, and West Virginia.

The PCS market ischaracterized by significant risks as a result of rapid changes in technologyand increasing competition. The Company’s continuing operations are dependentupon Sprint’s ability to perform its obligations under the affiliationagreements. In addition, the Company must be able to attract and maintain asufficient customer base and achieve satisfactory growth while successfullymanaging operations to generate enough cash from operations to meet futureobligations. Changes in technology, increased competition, or the inability toobtain required financing or achieve break-even operating cash flow, amongother factors, could have an adverse effect on the Company’s financial positionand results of operations.

F-7

----

**(2)**   Summaryof Significant Accounting Policies

*(a) Principles ofConsolidation*

The accompanying financial statements include theaccounts of the Company and its subsidiaries, iPCS Wireless, Inc., iPCSEquipment, Inc., Horizon Personal Communications, Inc. and BrightPersonal Communications Services, LLC. All significant intercompany balancesand transactions have been eliminated in consolidation.

*(b) Cash and cashequivalents*

Cashand cash equivalents include cash on hand, demand deposits and money marketfunds with original maturities of three months or less.

*(c) Investments*

Investmentsinclude marketable debt securities with original purchase maturities greaterthan three months. The Company classifies these investments as tradingsecurities because the securities are bought and held principally for thepurpose of selling them in the near term. Trading securities are recorded atfair value.

*(d) Allowance forDoubtful Accounts*

Estimatesare used in determining the allowance for doubtful accounts and are based onhistorical write-off experience and the uncollectibility of accounts receivableby aging category, as well as current information regarding the credit qualityof the Company’s customers. Using this information, the Company estimatesallowances for uncollectibility relative to the aging categories. Bad debtexpense as a percentage of service revenues for the year ended September 30,2005, the period ended September 30, 2004, the period ended July 1,2004, and the year ended September 30, 2003 was 1.1%, 1.3%, 0.2%, and2.2%, respectively. The allowance for doubtful accounts as of September 30,2005 and 2004 was $3.7 million and $1.2 million, respectively.

*(e) Inventory*

Inventoryconsists of wireless handsets and related accessories held for resale.Inventories are carried at the lower of cost or market using the first-in,first-out method. Cost is based on prices paid to Sprint. Market is determinedusing replacement cost which is consistent with industry practices. The Companymaintains a reserve for obsolete or excess handset inventory for models thatremain in inventory after 30 days of being discontinued by Sprint PCS. Thereserve for obsolescence at September 30, 2005 and 2004 was $0.3 millionand $0.1 million, respectively.

*(f) Property andequipment, net*

Propertyand equipment are stated at realizable value, less accumulated depreciation andamortization. Depreciation is provided using the straight-line method over theestimated useful lives of the assets. Useful lives for assets used by theCompany are as follows:

| ** **                                | ** ** | **Useful Life** | ** ** |
|-------------------------------------------|------------|----------------------|------------|
| Network assets  and towers                |       | 5-15 years      |       |
| Computer  equipment                       |       | 3 years         |       |
| Furniture, fixtures and  office equipment |       | 3-5 years       |       |

 

Leasehold improvements areamortized over the shorter of the remaining term of the lease or the estimateduseful life of the improvement. Construction in progress includes expendituresfor the purchase 

F-8

----

ofcapital equipment, design services, and construction services and testing ofthe Company’s network. The Company capitalizes interest on its construction inprogress activities. There was no interest capitalized in the period ended July 1,2004 or the period ended September 30, 2004. Interest capitalized for theyears ended September 30, 2005 and September 30, 2003 totaled$0.2 million for each year. When the network assets are placed in service,the Company transfers the assets from construction in progress to networkassets and depreciates those assets over their estimated useful life.

*(g) Financing Costs*

Costsincurred in connection with the senior credit facility and senior discountnotes were deferred and amortized into interest expense over the term of therespective financing using the straight-line and effective interest method,respectively. In conjunction with the Company’s filing for bankruptcyprotection in February 2003 (see Note 4), the Company charged toreorganization expense the remaining unamortized amount of the deferred financingcosts related to the senior discount notes. The remaining unamortized amount ofthe deferred financing costs related to the senior credit facility was chargedto reorganization expense as the balance of the senior credit facility was paidoff in full as part of the Company’s plan of reorganization (see Note 4). Costsincurred in connection with the 111¤2% senior notesand the 113¤8%senior notes were deferred and are amortized to interest expense over the eightyear term of each senior note issuance using the straight-line method.

*(h) Goodwill andIntangible Assets*

Goodwilland intangible assets have been recorded in accordance with fresh-startaccounting as a result of the Company’s reorganization and also as a result ofits merger with Horizon PCS. Identifiable intangibles consist of the Sprintaffiliation agreements, the subscriber base at the time of the reorganizationand merger and an FCC license for a small market in Ohio owned by HorizonPersonal Communications, Inc. The intangible assets relating to the Sprintaffiliation agreements are being amortized straight-line over the remaininglife of the agreements. The subscriber base intangible assets are beingamortized over the estimated life of the subscribers or approximately thirtymonths. The FCC license has an indefinite life and is not being amortized.

*(i) Impairment ofLong-lived Assets*

TheCompany accounts for long-lived assets in accordance with the provisions ofStatement of Financial Accounting Standards (“SFAS”) No. 144, “Accountingfor the Impairment or Disposal of Long-Lived Assets” and SFAS No. 142, “Goodwilland Other Intangible Assets.” SFAS No. 144 requires that long-lived assetsand certain identifiable intangibles be reviewed for impairment whenever eventsor changes in circumstances indicate that the carrying amount of an asset maynot be recoverable. Recoverability of assets to be held and used is measured bya comparison of the carrying amount of an asset to future net cash flowsexpected to be generated by the asset. If such assets are considered to beimpaired, the impairment to be recognized is measured by the amount by whichthe carrying amount of the assets exceeds the fair value of the assets. Assetsto be disposed of are reported at the lower of the carrying amount or fairvalue less costs to sell. SFAS No. 142 requires annual tests forimpairment of goodwill and intangible assets that have indefinite useful livesand interim tests when an event has occurred that more likely than not hasreduced the fair value of the assets.

*(j) Income Taxes*

As part of the process ofpreparing the Company’s consolidated financial statements, the Company isrequired to estimate its taxes in each of the jurisdictions of operation. Thisprocess involves management estimating the actual current tax expense togetherwith assessing temporary differences resulting from differing treatment ofitems for tax and accounting purposes. These differences result in deferred taxassets 

F-9

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andliabilities, which are included within the consolidated balance sheets. TheCompany must then assess the likelihood that the deferred tax assets will berecovered from future taxable income and to the extent realization is not morelikely than not, the Company must establish a valuation allowance. Futuretaxable income depends on the ability to generate income in excess of allowabledeductions. To the extent the Company establishes a valuation allowance orincreases this allowance in a period, an expense is recorded within the taxprovision in the consolidated statement of operations. Significant managementjudgment is required in determining the Company’s provision for income taxes,its deferred tax assets and liabilities and any valuation allowance recordedagainst net deferred tax assets.

*(k) RevenueRecognition*

The Company recognizes revenues when persuasiveevidence of an arrangement exists, services have been rendered, the price tothe buyer is fixed or determinable, and collectibility is reasonably assured.Effective July 1, 2003, the Company adopted Emerging Issues Task Force (“EITF”)Issue No. 00-21, “Accounting for Revenue Arrangements with MultipleDeliverables.” The EITF guidance addresses accounting for arrangements thatinvolve multiple revenue-generating activities. In applying thisguidance, separate contracts with the same party, entered into at or near thesame time, are presumed to be a bundled transaction. The Company adopted thisguidance prospectively from July 1, 2003. Prior to the adoption of EITF 00-21,under the provisions of SAB No. 101, the Company accounted for the sale ofhandsets and the subsequent service to the customer as a single unit ofaccounting because the wireless service provided by the Company is essential tothe functionality of the customers’ handsets. Accordingly, the Company deferredall activation fee revenue and its associated costs and amortized theserevenues and costs over the average life of its customers, which is estimatedto be 30 months. Under EITF 00-21, the Company is not required toconsider whether customers can use their handsets without the wireless serviceprovided to them. Because the Company meets the criteria stipulated in EITF 00-21,the adoption of EITF 00-21 requires the Company to account for the saleof the handset as a separate unit of accounting from the subsequent service tothe customer. With the adoption of EITF 00-21, the Company now recognizesactivation fee revenue generated from its retail stores as equipment revenue.In addition, the Company recognizes the portion of the activation fee costsrelated to the handsets sold in its retail stores. Subsequent to July 1,2003, the Company has continued to apply the provisions of SAB No. 101 anddefer and amortize activation fee revenue and costs generated by subscribersoutside its retail stores.

The Company recognizes service revenue from itscustomers as they use the service. The Company provides a reduction of recordedrevenue for billing adjustments, estimated uncollectible late payment fees andearly cancellation fees.

Roaming revenue includes roaming revenue when SprintPCS customers and customers of other PCS Affiliates of Sprint use the Company’snetwork, roaming revenue when non-Sprint PCS customers use the Company’snetwork, and reseller revenue. Roaming revenue is recorded based on a perminute charge for voice services and a per kilobyte charge for data services.

Equipment revenue, net of any rebates or discounts,includes the proceeds from sales of handsets and accessory sales sold throughchannels directly controlled by the Company. Handset sales are recorded net ofan allowance for sales returns. The allowance is estimated based on Sprint PCS’shandset return policy that allows customers to return handsets for a fullrefund within 14 days of purchase. When handsets are returned, the Company maybe able to resell the handsets to other customers at little additional cost. However,when handsets are returned to Sprint PCS for refurbishing, the Company isallocated a certain number of replacement refurbished phones which it canpurchase at a reduced price. As mentioned above, from July 1, 2003,equipment revenue also includes an allocation of the activation fee revenue aspart of revenue arrangements with multiple deliverables.

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The Company participates in the Sprint PCS nationaland regional distribution programs in which national retailers, such as RadioShack and Best Buy, sell Sprint PCS products and services. In order tofacilitate the sale of Sprint PCS products and services, national retailerspurchase wireless handsets from Sprint PCS for resale and receive compensationfrom Sprint PCS for products and services sold. For industry competitivereasons, Sprint PCS subsidizes the price of these handsets by selling thehandsets at a price below cost. Under the Sprint PCS agreements, when anational retailer sells a handset purchased from Sprint PCS to a subscriber inthe Company’s territory, the Company is obligated to reimburse Sprint PCS forthe handset subsidy that Sprint PCS originally incurred. The national retailerssell Sprint PCS wireless services under the Sprint PCS brands and marks. TheCompany does not receive any revenues from the sale of wireless handsets bynational retailers. The Company classifies these Sprint PCS wireless handsetsubsidy charges as a selling and marketing expense for a wireless handset saleto a new customer and classifies these subsidies as a cost of service for awireless handset upgrade to an existing customer.

Sprint PCS retains 8% ofcollected service revenues from Sprint PCS customers based in the Company’smarkets and from non-Sprint PCS customers who roam onto the Company’s network.The amount retained by Sprint PCS is recorded as cost of service and roaming.Revenues generated from the sale of handsets and accessories and from roamingservices provided to Sprint PCS’s customers and customers of other PCSAffiliates of Sprint who are not based in the Company’s markets are not subjectto the 8% affiliation fee for Sprint PCS.

*(l) AdvertisingCosts*

The Company expensesadvertising costs when the advertisement occurs. Advertising expense totaled$13.7 million for the year ended September 30, 2005, $2.4 million forthe period ended September 30, 2004, $5.0 million for the periodended July 1, 2004 and $5.0 million for the year ended September 30,2003.

*(m) ReorganizationItems*

Reorganization itemsrelate to income recorded and expenses incurred as a direct result of theCompany’s bankruptcy and reorganization (see Note 4) and include professionalfees, adjustments to carrying value of debt, employee severance payments,employee retention payments, lease termination accruals, fresh-startaccounting adjustments, and other items. Reorganization items are separatelyidentified on the Consolidated Statements of Operations.

*(n) Loss Per Share*

Basic and diluted loss pershare for the Successor Company are calculated by dividing the net lossavailable to common stockholders by the weighted average number of shares ofcommon stock of iPCS, Inc. Pursuant to the Company’s Plan ofReorganization, 8.6 million shares were distributed to its unsecuredcreditors on the effective date and the remaining 0.4 million shares heldin reserve were distributed upon resolution of disputed claims in the yearended September 30, 2005. The full nine million shares were used in thecalculation of weighted average shares for both the year ended September 30,2005 and the period ended September 30, 2004. The calculation was made inaccordance with SFAS No. 128, “Earnings Per Share.” The basic and dilutedloss per share are the same because the inclusion of the incremental potentialcommon shares from any assumed exercise of stock options is antidilutive.Potential common shares excluded from the loss per share computations as of September 30,2005 and 2004 were 837,784 and 575,500 stock options, respectively. Per shareinformation is not presented for the Predecessor Company as it is notmeaningful.

F-11

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*(o) Stock-BasedCompensation*

The Company applies APB Opinion No. 25, “Accountingfor Stock Issued to Employees,” and related interpretations to account for itsemployee and director stock options. Stock-based compensation expense isdetermined as the excess of the fair value of the Company’s common stock atdate of grant over the exercise price.

If stock-basedcompensation expense for the stock option grants had been determined on fairvalue at the grant date consistent with the requirements of SFAS No. 123,the Company’s net loss applicable to common stockholders and net loss per sharewould have been the pro forma amounts below:

| ** **                                                                  | ** ** | **Year Ended  September 30, 2005** | ** ** | **Period Ended  September 30, 2004** | ** ** |
|-----------------------------------------------------------------------------|------------|---------------------------------------------------|------------|-----------------------------------------------------|------------|
| Net loss applicable to  common stockholders (in thousands):                 |       |                                              |       |                                                |       |   |   |   |   |
| As reported                                                                 |       |                                              | $          | (50,938                                        | )          |   |   | $ | (5,976  | ) |   |
| Add recorded stock-based compensation expense                               |       |                                              | 528        |                                                |       |   | — |   |   |
| Less stock-based compensation expense in accordance  with SFAS No. 123 |       |                                              | (1,992     | )                                                   |       |   | (313 | ) |   |
| Pro forma                                                                   |       |                                              | $          | (52,402                                        | )          |   |   | $ | (6,289  | ) |   |
| Basic and diluted loss  per common share:                                   |       |                                              |       |                                                |       |   |   |   |   |
| As reported                                                                 |       |                                              | $          | (4.60                                          | )          |   |   | $ | (0.65  | ) |   |
| Pro forma                                                                   |       |                                              | $          | (4.73                                          | )          |   |   | $ | (0.68  | ) |   |

 

TheCompany’s calculation of fair value of the options was made using the Black-Scholesmodel with the following assumptions:

| ** **               | ** ** | **Year Ended  September 30, 2005** | ** ** | **Period Ended  September 30, 2004** | ** ** |
|--------------------------|------------|---------------------------------------------------|------------|-----------------------------------------------------|------------|
| Risk free  interest rate |       | 3.52% to 4.24%                                    |       |                                                | 3.2        | % |   |
| Volatility               |       | 36.2% to 83.7%                                    |       |                                                | 73.3       | % |   |
| Dividend yield           |       | 0.0%                                              |       |                                                | 0.0        | % |   |
| Expected life in years   |       | 1 to 4                                            |       |                                                | 4          |   |   |

 

Forthe year ended September 30, 2003, and for the period from October 1,2003 through July 1, 2004, the number of AirGate options granted toemployees of the Company and the pro forma stock-based compensation expensecalculated in accordance with SFAS No. 123 were deemed immaterial.

*(p) Use ofEstimates*

Management of the Company has made a number ofestimates and assumptions relating to the reporting of assets and liabilitiesand the disclosure of contingent liabilities at the dates of the consolidatedbalance sheets and revenues and expenses during the reporting periods toprepare these consolidated financial statements in conformity with accountingprinciples generally accepted in the United States of America. Actual resultscould differ from those estimates.

The mostsignificant of such estimates include:

·       Allowancefor doubtful accounts;

·       Impairmentand useful lives of long-lived assets; and

·       Accounting for incometaxes.

F-12

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*(q) Concentrationof Risk*

The Company relies on Sprint PCS to provide certainback-office functions such as billing and customer care, activation of newsubscribers, handset logistics and technology development. Should Sprint PCS beunable to provide these services, the Company could be negatively impacted (seeNote 5).

The Company’s cell sites are located on towers leasedfrom a limited number of tower companies, with one company owning approximately25%****ofthe Company’s leased towers.

The Company maintains cash and cash equivalents inaccounts with financial institutions in excess of the amount insured by theFederal Deposit Insurance Corporation. Management does not believe there issignificant credit risk associated with deposits in excess of federally insuredamounts.

Concentrations of creditrisk with respect to accounts receivable are limited due to a large customerbase. Initial credit evaluations of customers’ financial condition areperformed and security deposits are obtained for customers with a higher creditrisk. The Company maintains an allowance for doubtful accounts for potentialcredit losses.

*(r) New AccountingPronouncements*

In December 2004, the FASB issued SFAS No. 123(Revised 2004) “Share-Based Payment” (“SFAS No. 123R”) thataddresses the accounting for share-based payment transactions in which aCompany receives employee services in exchange for (a) equity instrumentsof the Company or (b) liabilities that are based on the fair value of theCompany’s equity instruments or that may be settled by the issuance of suchequity instruments. SFAS No. 123R addresses all forms of share-basedpayment awards, including shares issued under employee stock purchase plans,stock options, restricted stock and stock appreciation rights. SFAS No. 123Reliminates the ability to account for share-based compensationtransactions using APB Opinion No. 25, “Accounting for Stock Issued toEmployees”, that was provided in Statement 123 as originally issued. Under SFASNo. 123R companies are required to record compensation expense for allshare based payment award transactions measured at fair value. This statementis effective for fiscal years starting after June 15, 2005. The Companywill adopt SFAS No. 123R on October 1, 2005.

Companies may adopt SFAS No. 123Rin one of two ways: modified prospective and modified retrospective. As of theadoption date, under the modified prospective method, compensation cost isrecognized for 1) all share-based compensation arrangements granted after theadoption date and 2) all remaining unvested share-based compensationarrangements granted prior to the adoption date. The modified retrospectivemethod includes the same share-based compensation arrangements under themodified prospective method, but also allows companies to restate based on theamounts previously recognized under SFAS No. 123 for purposes of pro formadisclosures for either all prior periods presented or prior interim periods ofadoption. The Company plans to adopt SFAS No. 123R using the modifiedprospective method. The adoption of SFAS No. 123R will increase theCompany’s operating expenses by approximately $2.9 million, $2.2 million $1.4million and $0.1 million for the years ending September 30, 2006, 2007,2008 and 2009, respectively, for unvested options as of September 30, 2005.The full impact of adoption of SFAS No. 123R cannot reasonably beestimated at this time because it will depend on future grant awards along withthe valuation model used and the related assumptions in determining the valueof these awards. However, if the Company had adopted SFAS No. 123R inprior periods, the impact of the adoption would have approximated thatdisclosed in the pro forma net loss per share as described above in (o) *Stock-Based Compensation*.

**(3)**   Merger with HorizonPCS, Inc.

On July 1, 2005, (the “Effective Date”) theCompany completed its tax-free stock for stock merger transaction with HorizonPCS in which Horizon PCS merged with and into iPCS, Inc. with iPCS, Inc.as 

F-13

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the surviving corporation.Horizon PCS was a PCS Affiliate of Sprint whose territory included 40 marketsin nine contiguous states. Based on covered population and the number ofsubscribers, the merger resulted in the Company being the second largest Sprintaffiliate. In addition, the transaction almost doubled the size of the Company’soperations, thereby providing future synergies in a number of operating andadministrative areas. The transaction was accounted for under the purchasemethod and the results of Horizon PCS are included in these consolidatedfinancial statements from the Effective Date.

Thetotal purchase price of $230.8 million was calculated as follows: (in thousandsexcept share and per share data).

| Number of Horizon  PCS’s shares of common stock outstanding                                                                                                      |   | 9,013,317 |          |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------|---------------|
| Exchange ratio                                                                                                                                                        |   | 0.7725    |          |
| Number of shares  issued to Horizon PCS’s stockholders                                                                                                           |   | 6,962,760 |          |
| Average price of  iPCS’s common stock for the period five days prior to and through the five  days after the March 17, 2005 date of the merger announcement |   | $         | 31.07    |   |
| Fair value of  iPCS’s common shares issued                                                                                                                       |   | $         | 216,361  |   |
| Fair value of  vested Horizon PCS’s stock options converted to options to purchase iPCS  shares                                                             |   | 4,341     |          |
| Fair value of  unvested Horizon PCS’s stock options converted to options to purchase iPCS  shares                                                                |   | 3,780     |          |
| Transaction costs                                                                                                                                                     |   | 6,325     |          |
| Purchase price                                                                                                                                                        |   | $         | 230,807  |   |

 

Thefair value of the vested and unvested stock options was calculated usingBlack-Scholes using the following assumptions:

| Risk free  interest rate |   | 2.2% to 3.6%   |   |
|--------------------------|--------|----------------|--------|
| Volatility               |   | 29.9% to 85.1% |   |
| Dividend yield           |   | 0.0%           |   |
| Expected life in months  |   | 1 to 27        |   |

 

The intrinsic value allocated to the unvested optionswas approximately $1.6 million and was recorded to deferred compensation.

Thetotal purchase price of $230.8 million has been preliminarily allocated to thenet tangible and intangible assets acquired and liabilities assumed as follows:

| Current assets                  |   | $        | 65,615   |   |
|---------------------------------|--------|----------|---------------|--------|
| Tangible  noncurrent assets     |   | 74,544   |          |
| Identifiable  intangible assets |   | 121,500  |          |
| Goodwill                        |   | 146,391  |          |
| Current  liabilities assumed    |   | (35,135  | )             |
| Long term liabilities  assumed  |   | (4,039   | )             |
| Long-term  debt assumed         |   | (139,687 | )             |
| Unearned  compensation          |   | 1,618    |          |
|                            |   | $        | 230,807  |   |

 

Changes to the values allocated to the assets andliabilities of Horizon PCS are not expected to be material.

F-14

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Theunaudited pro forma condensed consolidated statements of operations for theyears ended September 30, 2005 and September 30, 2004, set forthbelow, present the results of operations as if the merger had occurred on October 1,2004 and October 1, 2003 and are not necessarily indicative of futureresults or actual results that would have been achieved had the acquisitionoccurred as of the beginning of such period. iPCS and Horizon PCS each adoptedfresh-start accounting as of July 1, 2004 and October 1, 2004,respectively, after the completion of their reorganizations under Chapter 11 ofthe Bankruptcy Code. The unaudited pro forma condensed consolidated statementsof operations for the year ended September 30, 2004, also gives effect toboth companies as if each had adopted fresh-start accounting as of thebeginning of their fiscal year.

| ** **                                        | ** ** | **For the Year Ended  September 30, 2005** | ** ** | **For the Year Ended  September 30, 2004** | ** ** |
|---------------------------------------------------|------------|---------------------------------------------------------------------|------------|---------------------------------------------------------------------|------------|
| ** **                                        | ** ** | ** **                                                          | ** ** | **(a)**                                                             | ** ** |
| Total revenues                                    |       |                                                                | $          | 413,133                                                        |       |   |   | $ | 410,126  |   |   |
| Net loss                                          |       |                                                                | (92,521    | )                                                                   |       |   | (82,538 | ) |   |
| Basic and diluted  loss per share of common stock |       |                                                                | $          | (5.68                                                          | )          |   |   | $ | (5.08  | ) |   |
| Weighted average shares  outstanding              |       |                                                                | 16,281,218 |                                                                |       |   | 16,231,926 |   |   |

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(a)           Forthe year ended September 30, 2004 Horizon PCS’s operations included theoperations of its NTELOS markets in Virginia and West Virginia through June 15,2004. Under an asset purchase agreement, Sprint PCS purchased Horizon PCS’seconomic interest in these markets, including approximately 92,500 subscribers,for approximately $33.0 million. With the sale of these interests, Horizon PCSrecorded a gain of approximately $42.1 million which is included in the proforma net loss for the year ended September 30, 2004.

**(4)**   Plan ofReorganization

On February 23, 2003, while the Company was awholly owned unrestricted subsidiary of AirGate PCS, the Company filed aChapter 11 bankruptcy petition in the United States Bankruptcy Court for theNorthern District of Georgia. The decision to file was based on a combinationof factors, including weakness in the wireless telecommunications industry andthe economy generally. In addition, the Company had experienced a decline inliquidity and cash flow, making it difficult to service its debt obligations. TheCompany believed actions taken by Sprint, decreasing the roaming rate andimposing new and higher fees were the primary reasons for the decline in itsliquidity. Accordingly, in connection with the bankruptcy filing, the Companyfiled a complaint against Sprint Corporation and Sprint PCS alleging thatSprint PCS had breached its affiliation aggements with the Company. The Companycontinued to operate as a debtor-in-possession, which allowed the Company touse cash collateral and post-petition collections of receivables in accordancewith a budget.

The BankruptcyCourt confirmed the Company’s Joint Plan of Reorganization on July 9, 2004and it was declared effective on July 20, 2004. The significant terms ofthe Plan were as follows:

·       Thecancellation of the Company’s existing common stock.

·       Thedischarge of all of the Company’s subordinated claims.

·       Theissuance of 10.0 million shares of common stock, of which 9.0 millionshares were to be issued to the Company’s general unsecured creditors and 1.0million were reserved for issuance to certain members of management, directorsand other employees through the Company’s 2004 Long-Term Incentive Plan.

·       Theformation of a wholly owned special purpose entity to issue $165.0 millionof senior notes, the proceeds of which were held in escrow pending theeffective date of the Company’s plan of reorganization. The net proceeds wereused to pay off in full the balance outstanding under the 

F-15

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Company’s senior creditfacility. The remaining net proceeds were used by the Company to satisfy allother secured claims, administrative, priority claims, and unsecuredconvenience claims, and will be used in the future for general corporatepurposes.

·       Thesettlement of all claims by and between the Company and Sprint (including theclaims made in the Company’s litigation against Sprint) which resulted in thewrite-off of all prepetition claims, as set forth in the settlement agreementand mutual release.

·       Thepayment to Sprint, in cash, of approximately $5.1 million in full and completesatisfaction of the Company’s obligation to cure defaults under its affiliationagreements with Sprint PCS.

·       Theassumption of all contracts and leases that had not been previously rejected,including the assumption of our affiliation agreements with Sprint (as revisedto provide the Company a number of benefits).

·       Theappointment of Timothy M. Yager as the Company’s president and chief executiveofficer and director.

·       Theappointment of four new directors to the Company’s board of directors to bedesignated by the committee of unsecured creditors pursuant to which Timothy C.Babich, James J. Gaffney and Kevin M. Roe were appointed as of the effectivedate and Eugene I. Davis was appointed in August 2004.

·       TheCompany’s release of any and all claims against: (i) all of the Company’sofficers, directors and employees, in each case, as of the date of thecommencement of the hearing on the disclosure statement; (ii) the Company’screditors’ committee and all of its members, in their respective capacities assuch; (iii) trustee under the indenture for the Company’s existing seniordiscount notes, in its capacity as such; (iv) the lenders under theCompany’s senior secured credit facility, in their capacities as such; (v) theagent for the lenders under the Company’s senior secured credit facility, inits capacity as such; (vi) the holders of the new notes offered hereby, intheir capacity as such; and (vii) with respect to each of the above namedpersons, such person’s present affiliates, principals, employees, agents,officers, directors, financial advisors, attorneys and other professionals, intheir capacities as such.

The Company’s emergence from Chapter 11 proceedingsresulted in a new reporting entity with the adoption of fresh-startaccounting in accordance with the SOP 90-7. Pursuant to SOP 90-7,the accounting for the effects of the reorganization occurred as of theconfirmation date because there were no remaining conditions precedent to theeffectiveness of the plan as of the July 9, 2004 confirmation date. Foraccounting purposes, the Company applied fresh-start accounting as of July 1,2004, because the results of operations for the eight days through July 9,2004 did not have a material impact on the reorganized company’s financialposition, results of operations and cash flows. The estimated reorganizationequity value of the Company of $95.0 million, which served as the basisfor the plan approved by the Bankruptcy Court, was used to determine the valueallocated to the assets and liabilities of the Successor Company in proportionto their fair values and is in conformity with SFAS No. 141 “BusinessCombinations.” The reorganization equity value was determined utilizingappraisals, commonly used discounted cash flow valuation methods and selectedprice earnings multiples of publicly-traded companies similar to theCompany to determine the relative fair values of the Company’s assets andliabilities. Factors taken into consideration included projected revenuegrowth, market and industry growth rates, competition and general economicconditions, working capital and capital expenditure requirements.

As a result of the Company’s reorganization andapplication of fresh-start accounting, in the period ended July 1,2004, the Company recognized income of approximately $132.0 million on thecancellation of debt and recorded charges of approximately $79.9 millionrelated to the revaluation of the Company’s assets and liabilities.

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Thetable below shows our unaudited consolidated balance sheet that reflectsreorganization and fresh-start accounting adjustments that the Companyrecorded as of July 1, 2004 (in thousands):

| ** **                                                                  | ** ** | **Pre Reorganization  Balance** | ** ** | **Reorganization and  Fresh-Start  Adjustments** | ** ** | **Reference** | ** ** | **Post  Reorganization  Balance** | ** ** |
|-----------------------------------------------------------------------------|------------|--------------------------------------|------------|-------------------------------------------------------|------------|---------------|------------|-----------------------------------|------------|
| Cash and cash  equivalents                                                  |       |                                 | $          | 18,771                                                |       |          |       | $                                 | 171,632    |   |   | (1) |   |   | $ | 190,403 |   |   |
| Restricted cash                                                             |       |                                 | 168,417    |                                                  |       |          | (168,417   | )                                 |       | (1) |   |   | — |   |   |
| Accounts  receivable, net                                                   |       |                                 | 14,848     |                                                  |       |          | 28         |                              |       | (2) |   |   | 14,876 |   |   |
| Receivable from  Sprint                                                     |       |                                 | 10,733     |                                                  |       |          | —     |                              |       |   |   |   | 10,733 |   |   |
| Inventories, net                                                            |       |                                 | 1,044      |                                                  |       |          | —     |                              |       |   |   |   | 1,044 |   |   |
| Prepaid expenses                                                            |       |                                 | 7,241      |                                                  |       |          | (3,231     | )                                 |       | (1) |   |   | 4,010 |   |   |
| Other current  assets                                                       |       |                                 | 186        |                                                  |       |          | —     |                              |       |   |   |   | 186 |   |   |
| Total current assets                                                        |       |                                 | 221,240    |                                                  |       |          | 12         |                              |       |   |   |   | 221,252 |   |   |
| Property and  equipment, net                                                |       |                                 | 149,427    |                                                  |       |          | (8,716     | )                                 |       | (2)(7) |   |   | 140,711 |   |   |
| Financing costs                                                             |       |                                 | 3,741      |                                                  |       |          | 2,645      |                              |       | (3) |   |   | 6,386 |   |   |
| Customer  activation costs                                                  |       |                                 | 1,627      |                                                  |       |          | (1,627     | )                                 |       | (2) |   |   | — |   |   |
| Intangible  assets, net                                                     |       |                                 | —     |                                                  |       |          | 78,477     |                              |       | (2)(7) |   |   | 78,477 |   |   |
| Other assets                                                                |       |                                 | 987        |                                                  |       |          | 359        |                              |       | (4) |   |   | 1,346 |   |   |
| Total assets                                                                |       |                                 | $          | 377,022                                               |       |          |       | $                                 | 71,150     |   |   |   |   |   | $ | 448,172 |   |   |
| Accounts payable                                                            |       |                                 | $          | 2,350                                                 |       |          |       | 1,370                             |       |   | (4) |   |   | $ | 3,720 |   |   |
| Accrued expenses                                                            |       |                                 | 12,301     |                                                  |       |          | 8,839      |                              |       | (3)(4)(7) |   |   | 21,140 |   |   |
| Payable to Sprint                                                           |       |                                 | 27,365     |                                                  |       |          | —     |                              |       |   |   |   | 27,365 |   |   |
| Deferred revenue                                                            |       |                                 | 5,451      |                                                  |       |          | —     |                              |       |   |   |   | 5,451 |   |   |
| Current  maturities of long-term debt and capital lease obligations         |       |                                 | 126,576    |                                                  |       |          | —     |                              |       |   |   |   | 126,576 |   |   |
| Total current liabilities                                                   |       |                                 | 174,043    |                                                  |       |          | 10,209     |                              |       |   |   |   | 184,252 |   |   |
| Customer  activation fee revenue                                            |       |                                 | 2,734      |                                                  |       |          | (2,734     | )                                 |       | (2) |   |   | — |   |   |
| Other long term liabilities                                                 |       |                                 | 8,659      |                                                  |       |          | (5,140     | )                                 |       | (2) |   |   | 3,519 |   |   |
| Long-term  debt and capital lease obligations, excluding current maturities |       |                                 | 165,401    |                                                  |       |          | —     |                              |       |   |   |   | 165,401 |   |   |
| Total liabilities  not subject to compromise                                |       |                                 | 350,837    |                                                  |       |          | 2,335      |                              |       |   |   |   | 353,172 |   |   |
| Liabilities  subject to compromise                                          |       |                                 | 226,831    |                                                  |       |          | (226,831   | )                                 |       | (5) |   |   | — |   |   |
| Common stock                                                                |       |                                 | —     |                                                  |       |          | 87         |                              |       | (5) |   |   | 87 |   |   |
| Additional paid-in-capital                                                  |       |                                 | 192,850    |                                                  |       |          | (97,937    | )                                 |       | (5) |   |   | 94,913 |   |   |
| Accumulated  deficiency                                                     |       |                                 | (393,496   | )                                                     |       |          | 393,496    |                              |       | (6) |   |   | — |   |   |
| Total  stockholders’ equity (deficiency)                               |       |                                 | (200,646   | )                                                     |       |          | 295,646    |                              |       |   |   |   | 95,000 |   |   |
| Total liabilities and  stockholders’ equity                            |       |                                 | $          | 377,022                                               |       |          |       | $                                 | 71,150     |   |   |   |   |   | $ | 448,172 |   |   |

----

(1)          Reflects the merger ofiPCS Escrow Holding Company, with and into iPCS, Inc, and proceeds from thesenior notes offering plus prepaid interest held in escrow released andtransferred to operating cash.

(2)          Reflects adjustments toaccounts receivable, property and equipment, customer activation fee costs,intangible assets, customer activation fee revenue, and other long-term liabilitiesto fair value.

(3)          Reflects the write-offof unamortized financing costs of $2.3 million related to the seniorcredit facility that was paid in full under the Plan of Reorganization and theaccrual of deferred financing fees of $4.9 million relating to the newsenior notes.

(4)          Reflects the accrual ofadditional restructuring expenses relating to success fees for financialadvisors, other professional fees, and estimated amounts payable for disputedclaims.

F-17

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(5)          Reflects the dischargeof liabilities subject to compromise. Per the terms of the plan ofreorganization, claims other than to Sprint were settled either with cash orwith the issuance of stock in the new company. The income from cancellation ofdebt of $132.0 million for the period ended July 1, 2004 representsthe difference between the carrying value of the Class 4 General UnsecuredClaims of $224.4 million and the value of new common stock issued to the Class 4creditors plus the 50% write-off of the carrying value of the Class 5Unsecured Convenience Class Claims. As part of the separate agreement withSprint, its pre-petition claim was discharged in its entirety.

(6)          Reflects the eliminationof the accumulated deficiency under fresh-start accounting.

(7)          Reflectsthe final fresh-start valuation adjustments recorded with the resolution of theremaining outstanding claims in June 2005, which included a $0.4 millionincrease in property and equipment, a $3.0 million decrease in accrued expensesand a $3.4 million decrease to intangibles.

**ReorganizationIncome (Expense)**

Thefollowing items are included in reorganization income (expense) in thestatements of operations for the period from October 1, 2003 through July 1,2004 and the year ended September 30, 2003 (in thousands):

| ** **                                                                                                    | ** ** | **Predecessor Company**                                                                           | ** ** |
|---------------------------------------------------------------------------------------------------------------|------------|--------------------------------------------------------------------------------------------------------|------------|
| ** **                                                                                                    | ** ** | **For the period from  October 1, 2003  through July 1, 2004** | ** ** | **For the year ended  September 30, 2003** | ** ** |
| Fresh-start  accounting adjustments                                                                           |       |                                                                                                   | $          | 79,901 |   |   |   | $ | — |   |   |
| Compensation  expense related to the grant of stock and stock unit awards to the Chief  Restructuring Officer |       |                                                                                                   | (2,568     | ) |   |   | — |   |   |
| Professional fees  and other costs related to the reorganization                                         |       |                                                                                                   | (12,796    | ) |   |   | (8,409 | ) |   |
| Costs relating to  the closing of stores and rejecting leases                                                 |       |                                                                                                   | (1,435     | ) |   |   | (2,033 | ) |   |
| Write off of debt  financing costs on senior credit facility                                                  |       |                                                                                                   | (2,305     | ) |   |   | — |   |   |
| Write off of  unamortized discounts and debt financing costs on senior discount notes                         |       |                                                                                                   | —     |   |   |   | (20,651 | ) |   |
|                                                                                                          |       |                                                                                                   | $          | 60,797 |   |   |   | $ | (31,093 | ) |   |

 

Thefresh-start accounting adjustments represent the recording of intangibleassets of $78.9 million, the write-down of property and equipment of$8.7 million, and other fair value adjustments of $7.7 million.

**(5)**   Sprint Agreements

Under the Sprint affiliation agreements, Sprint PCSprovides the Company significant support services such as customer service,billing, long distance transport services, national network operations support,inventory logistics support, use of the Sprint and Sprint PCS brand name,national advertising, national distribution and product development.Additionally, the Company derives substantial roaming revenue when wirelesscustomers of  Sprint PCS and other PCSAffiliates of Sprint incur minutes of use in the Company’s territories andincurs expense to Sprint PCS and to other PCS Affiliates of Sprint when theCompany’s customers incur minutes of use in Sprint’s and other PCS Affiliatesof Sprint’s territories. The expense is recorded in the cost of service androaming and in the selling and marketing detail lines within the statement ofoperations. Cost of service and roaming transactions with Sprint PCS includethe 8% affiliation fee, long distance, roaming expenses, billing support andcustomer care support. Cost of equipment relates to inventory sold by theCompany that was purchased from Sprint PCS under the Sprint affiliationagreements. Selling and marketing transactions relate to subsidized costs onwireless handsets and commissions under Sprint PCS’s national distributionprogram.

F-18

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For the year endedSeptember 30, 2005, the period from July 2, 2004 throughSeptember 30, 2004, the period from October 1, 2003 throughJuly 1, 2004, and the year ended September 30, 2003, 97%, 97%, 97%and 98%, respectively, of the Company’s revenue was derived from data providedby Sprint PCS. Of the Company’s cost of service and roaming, 69%, 68%, 65% and62% for the year ended September 30, 2005, for the period fromJuly 2, 2004 through September 30, 2004, the period fromOctober 1, 2003 through July 1, 2004, and the year endedSeptember 30, 2003, respectively, was derived from data provided bySprint. The Company reviews all charges from Sprint PCS and disputes certain ofthese charges in cases where the Company does not receive enough supportingdetail to validate the charges or it does not believe Sprint PCS can charge theCompany for certain expenses under the terms of the Sprint affiliationagreements. At September 30, 2005 and 2004,  the Company had $0.2 million and$0.1 million, respectively, in disputed charges.

Amountsrelating to the Sprint affiliation agreements for the year ended September 30,2005, the period from July 2, 2004 through September 30, 2004, the periodfrom October 1, 2003 through July 1, 2004, and the year endedSeptember 30, 2003, are as follows (in thousands):

| ** **                                                      | ** ** | **Successor Company**                                      | ** ** | **Predecessor Company**                                                                      | ** ** |
|-----------------------------------------------------------------|------------|-----------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------|------------|
| ** **                                                      | ** ** | **For the Year Ended  September 30,  2005** | ** ** | **For the Period  from July 2, 2004  through  September 30,  2004** | ** ** | **For the Period  from  October 1, 2003  through  July 1,  2004** | ** ** | **For the Year  Ended  September 30,  2003** | ** ** |
| Amounts included in the  Consolidated Statements of Operations: |       |                                                            |       |                                                                                              |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Service revenue                                                 |       |                                                            | $          | 189,177                                                                                      |       |   |   | $ | 37,909  |   |   |   | $ | 107,097  |   |   |   | $ | 145,249  |   |   |
| Roaming revenue                                                 |       |                                                            | $          | 82,959                                                                                       |       |   |   | $ | 15,829  |   |   |   | $ | 34,525  |   |   |   | $ | 44,220  |   |   |
| Cost of service and  roaming:                                   |       |                                                            |       |                                                                                              |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Roaming                                                         |       |                                                            | $          | 52,019                                                                                       |       |   |   | $ | 9,645  |   |   |   | $ | 22,932  |   |   |   | $ | 30,672  |   |   |
| Customer service                                                |       |                                                            | 27,187     |                                                                                              |       |   | 5,294 |   |   |   | 12,897 |   |   |   | 18,897 |   |   |
| Affiliation fees                                                |       |                                                            | 15,136     |                                                                                              |       |   | 3,018 |   |   |   | 8,685 |   |   |   | 10,993 |   |   |
| Long distance                                                   |       |                                                            | 7,912      |                                                                                              |       |   | 1,465 |   |   |   | 5,946 |   |   |   | 8,185 |   |   |
| Other                                                           |       |                                                            | 3,312      |                                                                                              |       |   | 436 |   |   |   | 3,326 |   |   |   | 12,138 |   |   |
| Total cost of  service and roaming                              |       |                                                            | $          | 105,566                                                                                      |       |   |   | $ | 19,858  |   |   |   | $ | 53,786  |   |   |   | $ | 80,885  |   |   |
| Cost of equipment                                               |       |                                                            | $          | 27,260                                                                                       |       |   |   | $ | 5,584  |   |   |   | $ | 12,801  |   |   |   | $ | 11,797  |   |   |
| Selling and  marketing                                          |       |                                                            | $          | 12,589                                                                                       |       |   |   | $ | 2,393  |   |   |   | $ | 8,792  |   |   |   | $ | 9,234  |   |   |
| Cancellation of payable  to Sprint                              |       |                                                            | $          | —                                                                                       |       |   |   | $ | —  |   |   |   | $ | 11,026  |   |   |   | $ | —  |   |   |

 

| ** **                                            | ** ** | **Successor Company**   | ** ** |
|-------------------------------------------------------|------------|------------------------------|------------|
| ** **                                            | ** ** | **September 30,  2005** | ** ** | **September 30,  2004** | ** ** |
| Amounts included in the  Consolidated Balance Sheets: |       |                         |       |   |   |   |   |   |   |
| Receivable from Sprint                                |       |                         | $          | 30,837  |   |   |   | $ | 13,264  |   |   |
| Inventories, net                                      |       |                         | 3,179      |   |   |   | 1,310 |   |   |
| Payable to Sprint                                     |       |                         | 41,135     |   |   |   | 24,404 |   |   |
|                                                       |            |                              |            |  |  |  |  |  |  |  |  |

 

**Amendments toSprint Agreement**

On March 26, 2004, the Company executed asettlement agreement and mutual release with Sprint, the official committee ofthe unsecured creditors of the Company, and Toronto Dominion, as administrativeagent for the Company’s then existing senior credit facility. The settlementand release was signed to avoid the expense inherent with litigation and toresolve all the disputes among the parties, 

F-19

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including those of theCompany, filed against Sprint (see Note 4). The settlement and mutual releaseagreement was executed with Addendum VIII to the Sprint affiliation agreementswith iPCS Wireless, Inc.

Addendum VIII became effective on April 1, 2004and provides the Company with a number of benefits including a reduced fixedfee for various back office services and an increased roaming rate. The fee forCCPU charges per average subscriber per month is $7.25 for April 1, 2004through December 31, 2004, $7.00 for 2005, and $6.75 for 2006. Chargesincluded in this CCPU fee include billing, customer care, national platform andfeature charges and other back office services. Under Addendum VIII, Sprint PCScharges the Company $23.00 for each new activation (CPGA Fee). This fee isfixed through December 31, 2006. Beginning January 1, 2007, the feesfor CCPU and. CPGA will be adjusted based on an agreed upon formula. AddendumVIII also established a fixed reciprocal roaming rate through December 31,2006 of $0.058 per minute for voice and 2G data minutes, and $0.0020 perkilobyte for 3G data, in each case, for all Sprint PCS subscribers andsubscribers of resellers of Sprint PCS service as of the date of Addendum VIII.Beginning in January 2007, the Sprint PCS reciprocal roaming rate forvoice and 2G and 3G data will change based on an agreed upon formula.

Horizon PCS signed a similar addendum to its Sprintaffiliation agreements on March 16, 2005. The simplified pricing ratestructure is the same as for iPCS Wireless, Inc. with the exception of twoitems. For the Horizon PCS markets, the CPGA fee is $22.00 for each newactivation, and with respect to several of its markets in western Pennsylvaniaand eastern Pennsylvania, Horizon PCS receives the benefit of a specialreciprocal roaming rate of $0.10 per minute. Under this addendum, this special$0.10 rate will terminate, with respect to each of these two sets of markets,on the earlier of December 31, 2011, or the first day of the calendarmonth which follows the first calendar quarter during which these marketsachieve a subscriber penetration rate of at least 7% of its covered population.

Each addendum provides the Company with protectiverights to decline to implement certain future program requirement changes thatSprint PCS proposes that would adversely affect the Company’s business. Theamendments also grant the Company, through December 2006, the right toamend the Sprint PCS agreements to obtain the most favorable term providedunder affiliation agreements with another PCS affiliate of Sprint of similarsize; provided that the Company must agree to accept all of the terms andconditions set forth in such other agreement. The Company also has a right offirst refusal to build out new coverage within the Company’s territory. If theCompany does not exercise this right, then Sprint PCS may build out the newcoverage, or may allow another PCS affiliate of Sprint PCS to do so, in whichcase Sprint PCS has the right to manage the new coverage. The Company also wasgranted the exclusive option until September 30, 2005, to add the MackinacIsland, Michigan market consisting of two basic trading areas (“BTAs”) with atotal population of approximately 168,000 to its territory. The Companyexercised this option on June 15, 2004.

On July 28, 2004, theCompany amended the Sprint affiliation agreement with iPCS Wireless, Inc.by entering into Addendum IX to its Sprint affiliation agreement. This addendumacknowledged the Company’s exercise of the Mackinac Michigan BTA option andupdated the service area BTAs to reflect the new additional territory.

F-20

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**(6)   Property and Equipment**

Propertyand equipment consists of the following at September 30, 2005 and 2004 (inthousands):

| ** **                                      | ** ** | **Successor Company**   | ** ** |
|-------------------------------------------------|------------|------------------------------|------------|
| ** **                                      | ** ** | **September 30,  2005** | ** ** | **September 30,  2004** | ** ** |
| Network assets                                  |       |                         | $          | 177,200  |   |   |   | $ | 134,552  |   |   |
| Computer  equipment                             |       |                         | 1,603      |   |   |   | 874 |   |   |
| Furniture,  fixtures and office equipment       |       |                         | 5,105      |   |   |   | 2,935 |   |   |
| Vehicles                                        |       |                         | 396        |   |   |   | 530 |   |   |
| Construction in  progress                       |       |                         | 10,105     |   |   |   | 4,830 |   |   |
| Total property  and equipment                   |       |                         | 194,409    |   |   |   | 143,721 |   |   |
| Less accumulated  depreciation and amortization |       |                         | (40,905    | ) |   |   | (8,790 | ) |   |
| Total property and  equipment, net              |       |                         | $          | 153,504  |   |   |   | $ | 134,931  |   |   |

 

Thefollowing is a summary of property and equipment under capital leases includedin the accompanying consolidated balance sheets as follows (in thousands):

| ** **                                      | ** ** | **Successor Company**   | ** ** |
|-------------------------------------------------|------------|------------------------------|------------|
| ** **                                      | ** ** | **September 30,  2005** | ** ** | **September 30,  2004** | ** ** |
| Network assets                                  |       |                         | $          | 340  |   |   |   | $ | 340  |   |   |
| Furniture,  fixtures and office equipment       |       |                         | 73         |   |   |   | — |   |   |
| Less accumulated  depreciation and amortization |       |                         | (38        | ) |   |   | (7 | ) |   |
| Net                                             |       |                         | $          | 375  |   |   |   | $ | 333  |   |   |

 

On July 1, 2004, as a result of ourreorganization and in accordance with fresh-start accounting under SOP 90-7,we wrote down our property and equipment to their estimated fair values and recordedcharges totaling $8.7 million to reorganization expense.

TheCompany’s decision to replace the Lucent equipment in its Michigan markets withNortel equipment, and to replace the Motorola equipment in its Indiana, Ohioand Tennessee markets with Nortel equipment (see Note 15), resulted inaccelerated depreciation due to the retirement of assets before the end oftheir estimated useful life. For the year ended September 30, 2005, theCompany recorded $16.4 million of accelerated depreciation for these replacementprojects.

**(7)   Goodwill and Intangible Assets**

On July 1, 2004, as a result of ourreorganization and in accordance with fresh-start accounting under SOP 90-7,we revalued our assets to their estimated fair values. With the implementationof fresh-start accounting, the Company recorded intangible assets of$19.8 million relating to the fair value of the customer base and$62.1 million relating to the fair value of the right to provide serviceunder the Sprint affiliation agreements. The resolution of the remainingoutstanding unsecured claims in June 2005 resulted in a decrease to thecustomer base and the right to provide service under the Sprint affilationagreements of $0.8 million, and $2.6 million, respectively.

In connection with the merger with Horizon PCS (seeNote 3), the Company allocated portions of the purchase price to identifiableintangible assets consisting of the right to provide service under the Sprintaffiliation agreements, the acquired customer base, and an FCC license for a smallmarket in Ohio. The amount allocated to the right to provide service under theSprint affiliation agreements, the customer base and the FCC license was $67.0million, $53.0 million, and $1.5 million, respectively. In addition, the excessof the purchase price over the fair value of the net assets acquired, includingthese identifiable intangible 

F-21

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assets, which totaled$146.4 million was recorded as goodwill. The goodwill is not deductible forincome taxes.

Theamortization expense for the year ended September 30, 2005, the periodended September 30, 2004, the period ended July 1, 2004, and the yearended September 30, 2003 was $18.1 million, $3.1 million,$0.0 million, and $3.3 million, respectively. The weighted averageamortization period, gross carrying amount, accumulated amortization and netcarrying amount of intangible assets at September 30, 2005 and September 30,2004 are as follows (in thousands):

| ** **                                                        | ** ** | **Successor Company**                      | ** ** |
|-------------------------------------------------------------------|------------|-------------------------------------------------|------------|
| ** **                                                        | ** ** | **September 30, 2005**                | ** ** |
| ** **                                                        | ** ** | **Weighted Average  Amortization  Period** | ** ** | **Gross  Carrying  Amount** | ** ** | **Accumulated  Amortization** | ** ** | **Net  Carrying  Value** | ** ** |
| **Non-amortized  intangible asset:**                              |       |                                            |       |   |   |   |   |   |   |   |   |   |   |
| FCC license                                                       |       |                                            |       |   |   | $ | 1,500  |   |   | $ | —  |   |   | $ | 1,500  |   |
| **Amortized  intangible assets:**                                 |       |                                            |       |   |   |   |   |   |   |   |   |   |   |
| Right to provide  service under the Sprint affiliation agreements |       |                                            | 167 months |   |   | 126,521 |   |   | (6,399 | ) |   | 120,122 |   |
| Customer base                                                     |       |                                            | 30 months  |   |   | 71,956 |   |   | (14,778 | ) |   | 57,178 |   |
|                                                              |       |                                            | 117 months |   |   | $ | 199,977  |   |   | $ | (21,177  | ) |   | $ | 178,800  |   |

 

| ** **                                                        | ** ** | **Successor Company**                      | ** ** |
|-------------------------------------------------------------------|------------|-------------------------------------------------|------------|
| ** **                                                        | ** ** | **September 30, 2004**                | ** ** |
| ** **                                                        | ** ** | **Weighted Average  Amortization  Period** | ** ** | **Gross  Carrying  Amount** | ** ** | **Accumulated  Amortization** | ** ** | **Net  Carrying  Value** | ** ** |
| **Amortized  intangible assets:**                                 |       |                                            |       |   |   |   |   |   |   |   |   |   |   |
| Right to provide  service under the Sprint affiliation agreements |       |                                            | 174 months |   |   | $ | 62,127  |   |   | $ | (1,072  | ) |   | $ | 61,055  |   |
| Customer base                                                     |       |                                            | 30 months  |   |   | 19,785 |   |   | (1,979 | ) |   | 17,806 |   |
|                                                              |       |                                            | 139 months |   |   | $ | 81,912  |   |   | $ | (3,051  | ) |   | $ | 78,861  |   |

 

Aggregateamortization expense relative to intangible assets for the periods shown belowwill be as follows:

| Year ended  September 30, |   |   |          |
|--------------------------------|--------|--------|---------------|
| 2006                           |   | $      | 37,958   |   |
| 2007                           |   | 32,271 |          |
| 2008                           |   | 14,476 |          |
| 2009                           |   | 9,176  |          |
| 2010                           |   | 9,176  |          |
| Thereafter                     |   | 74,243 |          |
| Total                          |   | $      | 177,300  |   |

 

F-22

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**(8)   Long-TermDebt and Capital Lease Obligations**

Long-termdebt consists of the following at September 30, 2005 and 2004 (inthousands):

| ** **                                                                  | ** ** | **Successor Company**   | ** ** |
|-----------------------------------------------------------------------------|------------|------------------------------|------------|
| ** **                                                                  | ** ** | **September 30,  2005** | ** ** | **September 30,  2004** | ** ** |
| Senior notes 111¤2%  $165 million due 2012                             |       |                         | $          | 165,000  |   |   |   | $ | 165,000  |   |   |
| Senior notes 113¤8%  $125 million due 2012                             |       |                         | 125,000    |   |   |   | — |   |   |
| Unamortized fair  value adjustment for 113¤8% senior  notes            |       |                         | 14,169     |   |   |   | — |   |   |
| Capital lease  obligations                                                  |       |                         | 406        |   |   |   | 407 |   |   |
| Total long-term  debt and capital lease obligations                         |       |                         | 304,575    |   |   |   | 165,407 |   |   |
| Less: current  maturities                                                   |       |                         | (17        | ) |   |   | (7 | ) |   |
| Long-term debt and  capital lease obligations, excluding current maturities |       |                         | $          | 304,558  |   |   |   | $ | 165,400  |   |   |

 

At September 30,2005, future minimum capital lease payments are as follows (in thousands):

| **Year**                                                 | ** ** | ** ** | ** ** | **Capital Lease  Obligations** | ** ** |
|----------------------------------------------------------|------------|------------|------------|-------------------------------------|------------|
| 2006                                                     |       |       | $          | 68                             |       |   |
| 2007                                                     |       |       | 63         |                                |       |
| 2008                                                     |       |       | 66         |                                |       |
| 2009                                                     |       |       | 69         |                                |       |
| 2010                                                     |       |       | 71         |                                |       |
| Thereafter                                               |       |       | 468        |                                |       |
| Total minimum  payments                                  |       |       | 805        |                                |       |
| Less: amount  representing interest                      |       |       | (399       | )                                   |       |
| Present value of  minimum payments                       |       |       | 406        |                                |       |
| Less: current  maturities                                |       |       | (17        | )                                   |       |
| Capital lease  obligations, excluding current maturities |       |       | $          | 389                            |       |   |

 

***Senior Credit Facility***

On July 12, 2000, the Company entered into anamended and restated credit facility with Toronto Dominion (Texas), Inc.and GE Capital Corporation for a $140.0 million senior credit facility (“seniorcredit facility”). The senior credit facility contained certain financialratios and other financial conditions and was collateralized by all of theCompany’s assets and assignment of the Sprint affilation agreements.

The senior credit facility was amended on November 1,2002, reducing the availability of the senior credit facility by$10.0 million to $130.0 million. In exchange, iPCS’s liquiditycovenant was waived, as well as the minimum subscriber covenant at December 31,2002.

Prior to the Company’s bankruptcy filing, it was indefault of certain of the covenants and the lenders accelerated the debt. Underthe terms of the credit facility, while in default, the interest rateapplicable was to be the prime base rate plus an additional two percent. Aspart of an amended cash collateral order approved by the bankruptcy court, thesenior lenders agreed to charge interest at the prime base rate only. As partof the Company’s reorganization, as of the effective date, the senior lenderswere paid in full and the remaining $2.3 million of unamortized financingcosts were written off to reorganization expense (see Note 4).

F-23

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***Senior DiscountNotes***

On July 12, 2000, theCompany issued 300,000 units consisting of $300.0 million 14% seniordiscount notes due July 15, 2010 (the “Notes”) and warrants to purchase2,982,699 shares of common stock at an exercise price of $5.50 per share. TheNotes were issued at a substantial discount such that the Company receivedgross proceeds from the issuance of the units of approximately$152.3 million. The Company amortized the discount on the Notes asinterest expense over the period from date of issuance to the maturity dateutilizing the effective interest method. For the year ended September 30,2003, the Company recorded approximately $4.5 million of interest expenserelated to the amortization of the discount. The Company allocated approximately$24.9 million to the fair value of the warrants, as determined by usingthe Black-Scholes model, and recorded a discount on the Notes. For theyear ended September 30, 2003, the Company recorded approximately$0.8 million of interest expense related to the amortization of the valueof the warrants. Upon the merger with AirGate, AirGate assumed the warrantspreviously issued by the Company. During 2003, the Company adjusted theliability for the senior discount notes to the allowable claim amount under theindenture governing these Notes. This adjustment included the write-off of thediscount associated with the Notes along with the related deferred financingcosts. These adjustments totaling $20.7 million are included inreorganization expense for the year ended September 30, 2003 (seeNote 4). Subsequent to the date of the Company’s bankruptcy filing, theCompany no longer recorded interest expense related to the Notes.

The Notes were a generalunsecured obligation, subordinated in right of payment to all senior debt,including all obligations under the senior credit facility. On the effectivedate of the Company reorganization, the note holders’ unsecured claim wassatisfied with the Company’s issuance of new common stock and the former noteholders became the principal stock holders of the Company.

***$165.0 Million 11***1¤2%Senior Notes

On April 21, 2004,iPCS Escrow Holding Company and iPCS Escrow Company were formed. iPCS EscrowHolding Company was a wholly owned direct subsidiary of iPCS, Inc. iPCSEscrow Company was a wholly owned direct subsidiary of iPCS Escrow HoldingCompany and was not part of the bankruptcy estate of iPCS Inc. iPCS EscrowCompany was a special purpose vehicle and was created solely to issue$165.0 million of senior notes.

On April 22,2004, the senior notes offering was priced at 111¤2% coupon rateand the offering proceeds of $165.0 million closed into escrow on April 30,2004. In addition, the Company funded interest of 123 days ofapproximately $6.5 million into the escrow account. On July 20, 2004,the effective date of the Company’s reorganization, iPCS Escrow Holding Companymerged with and into iPCS, Inc. and the notes became general unsecuredobligations of iPCS, Inc. The indenture for the 111¤2% senior notescontain covenants which restrict the Company’s ability to incur additionalindebtedness, merge, pay dividends, dispose of its assets, and certain othermatters as defined in the indenture. In addition, the 111¤2% seniornotes:

·       rank*pari passu* in right of paymentwith all existing and future unsecured senior indebtedness of the Company

·       ranksenior in right of payment to all future subordinated indebtedness of theCompany; and

·       areunconditionally guaranteed by the the Company’s domestic unrestrictedsubsidiaries, including iPCS Wireless, Inc., iPCS Equipment, Inc.,Horizon Personal Communications, Inc. and Bright Personal CommunicationsServices, LLC and any new domestic restricted subsidiaries of the Company.

However,the 111¤2%senior notes are subordinated to all secured indebtedness of the Company to theextent of the assets securing such indebtedness, and to any indebtedness ofsubsidiaries of the Company that do not guarantee the 111¤2 % seniornotes.

F-24

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Interest is payablesemi-annually in arrears on May 1 and November 1, commencing on November 1,2004 to the holders of record on the immediately preceding April 15 and October 15.At any time prior to May 1, 2007, the Company may redeem up to 35% of theaggregate principal amount of the 111¤2% senior notesat a redemption price of 111.50% of the principal amount thereof, plus accruedand unpaid interest, and liquidated damages (as defined in the indenture), ifapplicable, to the redemption date with the net cash proceeds of a sale ofequity interests of the Company or a contribution to the Company’s commonequity capital; provided that:

·       atleast 65% of aggregate principal amount of senior notes originally issuedremains outstanding immediately after the redemption; and

·       theredemption occurs within 45 days of the date of the closing of such saleof equity interests or contribution.

Upon achange of control as defined in the indenture, the Company will be required tomake an offer to purchase the 111¤2% senior notesat a price equal to 101% of the aggregated principal amount of the 111¤2%senior notes repurchased plus accrued and unpaid interest and liquidateddamages, if any, to the date of purchase.

***$125.0 Million 11***3¤8%Senior Notes

In connection with the merger with Horizon PCS (seeNote 3), iPCS, Inc. assumed the obligations for the $125.0 million of 113¤8%senior notes previously issued by Horizon PCS as part of Horizon PCS’s plan ofreorganization. The allocation of the purchase price resulted in an increase ofthe value of the 113¤8%senior notes of approximately $14.7 million, which is recorded as long-termdebt in the Consolidated Balance Sheets. This amount will be amortized over theremaining life of the senior notes as a reduction to interest expense. For theyear ended September 30, 2005, the reduction to interest expense wasapproximately $0.5 million. This amortization will not increase the principalamount due to the senior note holders or reduce the amount of interest owed tothe senior note holders. 

The indenture forthe 113¤8%senior notes contain covenants which restrict the Company’s ability to incuradditional indebtedness, merge, pay dividends, dispose of its assets, andcertain other matters as defined in the indenture. In addition, the 113¤8%senior notes:

·       rank*pari passu* in right of paymentwith all existing and future unsecured senior indebtedness of the Company

·       ranksenior in right of payment to all future subordinated indebtedness of theCompany; and

·       areunconditionally guaranteed by the Company’s domestic unrestricted subsidiaries,including iPCS Wireless, Inc., iPCS Equipment, Inc., Horizon PersonalCommunications, Inc. and Bright Personal Communications Services, LLC andany new domestic restricted subsidiaries of the Company.

However, the 113¤8% senior notesare subordinated to all secured indebtedness of the Company to the extent ofthe assets securing such indebtedness, and to any indebtedness of subsidiariesof the Company that do not guarantee the 113¤8% seniornotes.

F-25

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Interest is payablesemi-annually in arrears on July 15 and January 15, commencing on July 15,2005 to the holders of record on the immediately preceding July 1 and January 1.At any time prior to July 15, 2007, the Company may redeem up to 35% ofthe aggregate principal amount of the 113¤8% senior notesat a redemption price of 111.375% of the principal amount thereof, plus accruedand unpaid interest, and liquidated damages (as defined in the indenture), ifapplicable, to the redemption date with the net cash proceeds of a sale ofequity interests of the Company or a contribution to the Company’s commonequity capital; provided that:

·       atleast 65% of aggregate principal amount of 113¤8% notesoriginally issued remains outstanding immediately after the redemption; and

·       theredemption occurs within 90 days of the date of the closing of such saleof equity interests or contribution.

Upon a change of control as defined in the indenture,the Company will be required to make an offer to purchase the 113¤8%senior notes at a price equal to 101% of the aggregated principal amount of the113¤8%senior notes repurchased plus accrued and unpaid interest and liquidateddamages, if any, to the date of purchase.

AtSeptember 30, 2005, the Company was not in compliance with the indenturesgoverning its 113¤8%senior notes and its 111⁄2% senior notes because cash proceeds from the 113¤8%senior notes were invested in short-term AAA rated auction rate certificates — whichare not permitted investments under the indentures — thereby causing an eventof default which existed as of September 30, 2005.  The investments were sold on October 26, 2005and the event of default did not continue beyond such date.

**(9)   FairValue of Financial Instruments**

Fairvalue estimates and assumptions and methods used to estimate the fair value ofthe Company’s financial instruments are made in accordance with therequirements of SFAS No. 107, “Disclosure about Fair Value of FinancialInstruments.” The Company has used available information to derive itsestimates. However, because these estimates are made as of a specific point intime, they are not necessarily indicative of amounts the Company could realizecurrently. The use of different assumptions or estimating methods may have amaterial effect on the estimated fair value amounts (in thousands):

| ** **                                | ** ** | **Successor Company**       | ** **   |
|-------------------------------------------|------------|----------------------------------|--------------|
| ** **                                | ** ** | **September 30, 2005** | ** **   | **September 30, 2004** | ** ** |
| ** **                                | ** ** | **Carrying  amount**             | ** **   | **Estimated  fair value** | ** ** | **Carrying  amount** | ** ** | **Estimated  fair value** | ** ** |
| Cash and cash  equivalents(a)             |       | $                                | 98,107  |   | $ | 98,107  |   | $ | 57,760  |   | $ | 57,760  |   |
| Investments(a)                            |       | 16,700                           |         | 16,700 |   | — |   | — |   |
| Accounts  receivable, net(a)              |       | 25,601                           |         | 25,601 |   | 14,772 |   | 14,772 |   |
| Receivable from  Sprint(a)                |       | 30,837                           |         | 30,837 |   | 13,264 |   | 13,264 |   |
| Accounts  payable(a)                      |       | 4,322                            |         | 4,322 |   | 2,742 |   | 2,742 |   |
| Accrued  expenses(a)                      |       | 33,275                           |         | 33,275 |   | 20,880 |   | 20,880 |   |
| Payable to  Sprint(a)                     |       | 41,135                           |         | 41,135 |   | 24,404 |   | 24,404 |   |
| 111¤2%  $165 million senior notes(b) |       | 165,000                          |         | 187,688 |   | 165,000 |   | 173,250 |   |
| 113¤8%  $125 million senior notes(b) |       | 125,000                          |         | 143,125 |   | — |   | — |   |
|                                           |            |                                  |              |  |  |  |  |  |  |  |  |  |  |

----

(a)           The carrying amounts ofcash and cash equivalents, investments, accounts receivable, receivable fromSprint, accounts payable, accrued expenses and payable to Sprint are areasonable estimate of their fair value due to the short-term nature of theinstruments.

(b)          Thefair value of the senior notes are based on quoted market prices.

F-26

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**(10)   Income Taxes**

Theincome tax (expense) benefit for the period differed from the amounts computedby applying the statutory U.S. Federal income tax rate of 35% as set forthbelow:

| ** **                                                         | ** ** | **Successor Company**                                  | ** ** | **Predecessor Company**                                                                  | ** ** |
|--------------------------------------------------------------------|------------|-------------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------|------------|
| ** **                                                         | ** ** | **For the Year  Ended  September 30,  2005** | ** ** | **For the Period  from July 2,  2004  through  September 30,  2004** | ** ** | **For the Period  from October 1,  2003  through July 1,  2004** | ** ** | **For the Year  Ended  September 30,  2003** | ** ** |
| U.S. Federal  statutory rate                                       |       |                                                        | 35.00      | %                                                                                             |       |   | 35.00 | % |   |   | 35.00 | % |   |   | 35.00 | % |   |
| State income  taxes, net of federal tax  benefit                   |       |                                                        | 5.00       |                                                                                          |       |   | 5.00 |   |   |   | 5.00 |   |   |   | 5.00 |   |   |
| Nondeductible  interest associated with senior discount notes |       |                                                        | —     |                                                                                          |       |   | — |   |   |   | (2.25 | ) |   |   | (2.66 | ) |   |
| Other permanent  nondeductible items                               |       |                                                        | (0.06      | )                                                                                             |       |   | (0.07 | ) |   |   | — |   |   |   | — |   |   |
| Change in  valuation allowance for deferred tax assets             |       |                                                        | (39.94     | )                                                                                             |       |   | (39.93 | ) |   |   | (37.75 | ) |   |   | (37.34 | ) |   |
| Effective tax rate                                                 |       |                                                        | 0.00       | %                                                                                             |       |   | 0.00 | % |   |   | 0.00 | % |   |   | 0.00 | % |   |

 

Thetax effects of significant temporary differences that give rise to significantportions of the deferred tax assets and deferred tax liabilities are as follows(in thousands):

| ** **                                 | ** ** | **Successor Company**   | ** ** |
|--------------------------------------------|------------|------------------------------|------------|
| ** **                                 | ** ** | **September 30,  2005** | ** ** | **September 30,  2004** | ** ** |
| Deferred tax assets:                       |       |                         |       |   |   |   |   |   |   |
| Accrued  liabilities                       |       |                         | $          | 2,979  |   |   |   | $ | 896  |   |   |
| Deferred  transaction costs                |       |                         | —     |   |   |   | 14 |   |   |
| Compensation  expense                      |       |                         | 1,192      |   |   |   | 1,662 |   |   |
| Net operating  loss carryforwards          |       |                         | 185,714    |   |   |   | 86,894 |   |   |
| Allowance for bad  debts                   |       |                         | 606        |   |   |   | — |   |   |
| Other                                      |       |                         | 9,945      |   |   |   | 200 |   |   |
| Total gross  deferred tax assets           |       |                         | 200,436    |   |   |   | 89,666 |   |   |
| Less valuation  allowance                  |       |                         | (144,333   | ) |   |   | (56,868 | ) |   |
| Deferred tax  assets                       |       |                         | 56,103     |   |   |   | 32,798 |   |   |
| Allowance for bad  debts                   |       |                         | —     |   |   |   | 517 |   |   |
| Property,  equipment and intangible assets |       |                         | 56,022     |   |   |   | 32,242 |   |   |
| Other                                      |       |                         | 81         |   |   |   | 39 |   |   |
| Deferred tax  liabilities                  |       |                         | 56,103     |   |   |   | 32,798 |   |   |
| Net deferred tax assets                    |       |                         | $          | —  |   |   |   | $ | —  |   |   |

 

In assessing the realizability of deferred tax assets,management considers whether it is more likely than not that some portion orall of the deferred tax assets will not be realized. The ultimate realizationof deferred tax assets is dependent upon the generation of future taxableincome during the periods in which those temporary differences becomedeductible. No benefit for federal income taxes has been recorded for the yearended September 30, 2005, the period ended September 30, 2004, theperiod ended July 1, 2004 and for the year ended September 30, 2003,as the net deferred tax asset generated, primarily from temporary differencesrelated to the net operating loss, was offset by a full valuation allowancebecause it is not considered more likely than not that these benefits will berealized due to the Company’s losses since inception. The change in thevaluation allowance for the year ended September 30, 2005 is due to theacquisition of Horizon PCS’s net operating losses which was offset by a fullvaluation allowance.

F-27

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For the year ended September 30, 2004, theCompany realized approximately $67.2 million cancellation of debt, or “COD,”income for income tax purposes as a result of the implementation of the plan ofreorganization. The difference between the tax COD income of $67.2 millionand the book COD income of $132.0 million is a result of the applicationof the Internal Revenue Code provisions related to high yield debt obligations.Because the Company was a debtor in a bankruptcy case at the time it realizedthe COD income, it will not be required to include such COD income in itstaxable income for federal income tax purposes. Instead, the Company will berequired to reduce certain of its tax attributes by the amount of COD income soexcluded.

An “ownershipchange” (as defined in Internal Revenue Code Section 382 (“Section 382”))occurred on November 30, 2001, in connection with the merger with AirGateand occurred with respect to the Company’s stock issued under the plan ofreorganization. An ownership change generally occurs if certain persons orgroups increase their aggregate ownership percentage in a corporation’s stockby more than 50 percentage points in the shorter of any three-year periodor the period beginning the day after the day of the last ownership change. Section 382will limit the Company’s future ability to utilize any remaining net operatinglosses generated before the ownership change and certain subsequentlyrecognized “built-in” losses and deductions, if any, existing as of the date ofthe ownership change. The Company’s ability to utilize new net operating lossesarising after the ownership change will not be affected. At September 30,2005, the Company has net operating loss carryforwards for federal income taxpurposes of approximately $476.0 million including approximately $211.0 millionrelated to Horizon PCS’s net operating losses as of the date of acquisitionwhich are available to offset future taxable income through 2025. Theutilization of approximately $223.0 of such net operating loss carryforwardsare limited as a result of the ownership change in connection with the plan ofreorganization. The amount of this annual limitation is approximately $4.5million. The net operating loss carryforwards of Horizon PCS as of the date ofthe acquisition totaling approximately $211.0 million are subject to twoseparate IRC Section 382 limitations, one as a result of Horizon PCS’sownership change on October 1, 2004 (emergence from bankruptcy) and thesecond based on Horizon PCS’s merger with the Company. Net operating losscarryovers of approximately $189.0 million related to the first ownershipchange are limited to approximately $7.0 million per year. The remaining$22.0 million of pre-acquisition net operating losses increase the annuallimitation to $14.0 million per year until such losses are utilized, afterwhich the annual limitation decreases back to $7.0 million per year. Netoperating loss carryforwards of approximately $42.0 million areunrestricted in their utilization. Benefits realized from preconfirmation netoperating losses will first reduce intangible assets and then be reported as adirect addition to paid-in-capital and any future realization of the valuationallowance established at the date of the Company’s merger with Horizon PCSwill first be utilized to reduce goodwill and intangible assets to zero andthen will be utilized to reduce income tax expense.

**(11)   Employee Benefits**

TheCompany has established a 401(k) plan (the “Plan”) in which substantiallyall employees may participate. The Plan allows eligible employees to contributeup to 50% of their eligible compensation up to the maximum amount allowed by lawand provides that the Company will make matching contributions of 100% up to 4%of an employee’s eligible compensation. In addition, the Company may makediscretionary contributions to the Plan. In connection with the merger withHorizon PCS (see Note 3), the Company assumed Horizon PCS’s 401(k) Plan (“HorizonPCS’s Plan”). The Horizon PCS Plan allows eligible employees to contribute upto 15% of their eligible compensation up to the maximum amount allowed by lawand provides that the Company will make matching contributions of 100% up to 3%of an employee’s contribution. Company contributions to the Plan and theHorizon PCS Plan were approximately $298,000 for the year ended September 30,2005. Company contributions to the Plan were approximately $57,000, $194,000,and $178,000 for the period ended September 30, 2004, the period ended July 1,2004, and the year ended September 30, 2003, respectively.

F-28

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**(12)   Stock-BasedCompensation**

On July 15, 2004, the Company’s board ofdirectors approved the 2004 long-term incentive plan, as provided under theplan of reorganization (see Note 4). Under the 2004 long-term incentiveplan, the Company may grant to employees, directors and consultants of theCompany incentive and non-qualified stock options, stock appreciation rights(SARs), restricted and unrestricted stock awards and cash incentive awards. Themaximum number of shares of stock that may be awarded to participants wasinitially one million. Up to 500,000 shares may be issued in conjunction withawards other than options and SARs. On May 5, 2005, the Board of Directorsof the Company approved an amendment to the plan and on June 30, 2005, atthe annual meeting, the stockholders approved the plan, as amended. Theamendment provides for the reservation of an additional 250,000 shares of theCompany’s common stock that may be issued under the plan.

During the year ended September 30, 2005, theCompany awarded 45,000 and 22,750 options to management at option prices of$25.60 and $40.50, respectively,and granted 45,000 options to directors at anoption price of $35.00. In addition, 1,667 shares of restricted shares weregranted at a price of $35.00. During the period ended September 30, 2004,the Company awarded 250,000 stock and stock unit awards to Mr. Yager, theCompany’s former chief restructuring officer; 467,500 and 50,000 stock optionsto management at prices of $10.27 and $19.00, respectively; and 37,500 and20,500 options to members of the board of directors at prices of $10.27 and$18.90, respectively. Also 19,166 restricted shares were granted at a price of$18.90. The options to management and directors vest quarterly over four yearsand one year, respectively. The stock and stock unit awards were granted to Mr. Yageras consideration for facilitating the Company’s emergence from bankruptcy,therefore, the related compensation expense of approximately $2.6 millionfor these stock unit awards was included in reorganization expense of thePredecessor Company (see Note 4). There was no compensation expenserecorded for the options as the grant price was equal to fair market value onthe grant date.

In connection with the merger with Horizon PCS (seeNote 3), the Company assumed Horizon PCS’s long-term incentive plan. The planauthorizes the Company to issue up to 762,227 shares of common stock, of which598,962 options to purchase shares were issued in connection with the mergerwith Horizon PCS. The stock options issued under this plan have ten year termsand vest equally in six month increments over three years from the date ofgrant. 

Thefollowing is a summary of options activity under the Company’s long-termincentive plans:

| ** **                                         | ** ** | **Number of  Options** | ** ** | **Weighted-Average  Exercise Price** | ** ** |
|----------------------------------------------------|------------|-----------------------------|------------|-------------------------------------------|------------|
| Options  outstanding as of July 2, 2004       |       |                        | —     |                                      |       |   | $ | —  |   |   |
| Granted                                            |       |                        | 575,500    |                                      |       |   | 11.34 |   |   |
| Exercised                                          |       |                        | —     |                                      |       |   | — |   |   |
| Forfeited                                          |       |                        | —     |                                      |       |   | — |   |   |
| Options  outstanding as of September 30, 2004 |       |                        | 575,500    |                                      |       |   | $ | 11.34  |   |   |
| Granted                                            |       |                        | 112,750    |                                      |       |   | $ | 32.36  |   |   |
| Converted in  merger (see Note 3)                  |       |                        | 598,962    |                                      |       |   | 23.00 |   |   |
| Exercised                                          |       |                        | (449,428   | )                                         |       |   | 21.22 |   |   |
| Forfeited                                          |       |                        | —     |                                      |       |   | — |   |   |
| Options outstanding as  of September 30, 2005 |       |                        | 837,784    |                                      |       |   | $ | 17.20  |   |   |

 

F-29

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Thefollowing is a summary of options outstanding and exercisable at September 30,2005:

| ** **                                  | ** ** | **Options Outstanding** | ** ** | **Options Exercisable** | ** ** |
|---------------------------------------------|------------|------------------------------|------------|------------------------------|------------|
| **Range of Exercise Prices** | ** ** | ** **                   | ** ** | **Number  Outstanding**      | ** ** | **Weighted  Average  Remaining Contractual  Life (in years)** | ** ** | **Weighted  Average  Exercise  Price** | ** ** | **Number  Exercisable** | ** ** | **Weighted  Average  Exercise Price** | ** ** |
| $10.27                                      |       |                         | 447,875    |                         |       |   | 8.80 |   |   |   | $ | 10.27  |   |   |   | 126,469 |   |   |   | $ | 10.27  |   |   |
| $18.90-$19.00                               |       |                         | 47,000     |                         |       |   | 8.90 |   |   |   | 19.00 |   |   |   | 12,625 |   |   |   | 19.00 |   |   |
| $23.00-$25.60                               |       |                         | 275,159    |                         |       |   | 6.83 |   |   |   | 23.35 |   |   |   | 42,446 |   |   |   | 23.17 |   |   |
| $35.00-$40.50                               |       |                         | 67,750     |                         |       |   | 9.81 |   |   |   | 36.85 |   |   |   | 12,672 |   |   |   | 35.62 |   |   |
|                                        |       |                         | 837,784    |                         |       |   | 8.24 |   |   |   | 17.20 |   |   |   | 194,212 |   |   |   | $ | 15.31  |   |   |
|                                             |            |                              |            |                              |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

In connection with the closing of the Company’s mergerwith Horizon PCS (see Note 3), four former directors resigned from the Company’sboard of directors. Effective with their resignation, the Company amended eachof these director’s stock option award agreements to extend the terminationdate of these director’s options from 90 days to 210 days post-resignation. Asa result of these amendments, the Company recorded additional stock-basedcompensation expense of approximately $0.6 million during the year ended September 30,2005. The amount of the stock-based compensation expense was calculated usingthe intrinsic value method.

Aspart of the Company’s reorganization (see Note 4), the Company awarded Mr. Yager,the Company’s former chief restructuring officer and current chief executiveofficer, 250,000 stock and stock unit awards as consideration for facilitatingthe Company’s emergence from bankruptcy. Per the terms of this award agreement,Mr. Yager was allowed to surrender unit awards to the Company as paymentfor his withholding obligations. During the period ended September 30,2004, Mr. Yager received 125,000 unit awards of the 250,000 unit awardsgranted to him. During the year ended September 30, 2005, Mr. Yagerreceived approximately 79,000 unit awards of the remaining 125,000 unit awardsnot yet received and Mr. Yager surrendered approximately 46,000 unitawards as payment for his tax withholding obligations of approximately $1.6million.

**(13)   Related Party Transactions**

*(a)*AirGateService Company

Afterthe merger with AirGate in November 2001, AirGate Service Company, Inc.(“ServiceCo”) was formed in April 2002 to provide management services toboth AirGate and the Company. ServiceCo was a wholly owned restricted,subsidiary of AirGate. ServiceCo expenses were allocated between AirGate andthe Company based on the percentage of subscribers each contributed to thetotal number of subscribers. 

On January 27, 2003, the Company hired TimothyYager, its CEO prior to the merger with AirGate, as chief restructuringofficer. In order to facilitate the transition of management services fromServiceCo to the Company, an amendment to the ServiceCo agreement was signed onFebruary 21, 2003. This amendment allowed the Company to cancel ServiceCoservices with 30 days’ notice. The Company began canceling services as of March 31,2003, and by September 30, 2003, all services provided by ServiceCo hadbeen cancelled. For the year ended September 30, 2003 the Company incurrednet expenses of $3.0 million to ServiceCo.

*(b) YMS Services*

At the request of the senior lenders and the majorityholders of the senior discount notes, on January 27, 2003, the Companysigned a restructuring management services agreement with YMS Management,L.L.C. to perform restructuring management services for the Company and toappoint a Chief Restructuring Officer (“CRO”). The Company appointed TimothyYager as CRO at the time the agreement was signed. Under terms of thisagreement, YMS received a weekly fee of $15,000, 

F-30

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reimbursement ofreasonable administrative expenses plus a success fee, as defined in theagreement. During the year ended September 30, 2003, the Company incurredexpenses of $0.6 million to YMS Management, L.L.C. During the period endedJuly 1, 2004, the Company incurred expenses of $1.1 million,including a $0.5 million success fee for the Company’s successfulemergence from bankruptcy.

Management believes the terms and conditions of eachof the transactions described above are comparable to those that could havebeen obtained in transactions with unrelated parties.

**(14)   TowerSales**

On September 4,2004, the Company signed an agreement with TCP Communications, LLC (“TCP”)whereby the Company agreed to sell up to 92 of its owned towers to TCP. Thetowers were priced individually and, after the sale, the Company leases spaceon the towers sold to TCP at rates and terms consistent with that of theCompany’s other tower leases. The transaction was subject to exclusion oftowers by TCP based on its due diligence and other customer closing conditions.On April 27, 2005, TCP notified the Company that it had elected to exclude16 towers based on its due diligence and other customary closing conditions. OnNovember 9, 2004, December 29, 2004, and June 14, 2005, theCompany sold 51, 17 and 8 towers, respectively, to TCP for proceeds, net ofbroker’s fees, totaling approximately $13.6 million. Because the cost basis ofthese towers was adjusted to fair value as part of fresh-start accounting, nogain or loss on the sales was recorded.

On May 25, 2005, the Company signed an agreementwith Global Tower, LLC, whereby the Company agreed to sell its remaining 16owned towers to Global Tower. The towers were priced individually and, afterthe sale, the Company leases space on the towers sold to Global Tower at marketrates and terms consistent with that of the Company’s other tower leases. On June 29,2005 and August 12, 2005, the Company sold 10 and 6 towers, respectively,to Global Tower for proceeds totaling approximately $2.8 million. Becausethe cost basis of these towers was adjusted to fair value as part offresh-start accounting, no gain or loss on the sales was recorded. 

**(15)   Commitments and Contingencies**

*(a) Commitments*

On November 22,2004, the Company signed a letter of agreement with Nortel Networks to replacethe Company’s Lucent network equipment deployed in its Michigan markets withNortel equipment, including one switch, 232 base stations and variousadditional capacity and network equipment. Under the terms of the agreement,the Company has agreed to purchase equipment totaling $15.2 million and willreceive special pricing on future purchases through December 31, 2007. Asof September 30, 2005, the Company had purchased approximately $9.6million of equipment under this agreement. 

In addition, in January 2005, Horizon PCS signeda $14.0 million letter of agreement with Nortel Networks to replace theMotorola network equipment currently deployed in its Fort Wayne, Indiana,Chillicothe, Ohio, and Johnson City, Tennessee markets with Nortel equipmentincluding 390 base stations, various additional capacity growth and networkequipment. Under the terms of the agreement, the Company has agreed to purchaseequipment totaling $13.0 million and will receive special pricing onfuture purchases through June 30, 2007. Through September 30, 2005,the Company had purchased approximately $11.3 million of equipment underthis agreement. The letter agreement also provides the Company with theability, if exercised by April 1, 2007, to purchase additional Nortelequipment for $14.2 million, which would similarly replace the Company’sMotorola equipment in its Pennsylvania and New York markets. At September 30,2005, the Company had not exercised this option.

F-31

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*(b) OperatingLeases*

TheCompany is obligated under non-cancelable operating lease agreements foroffices, stores, network operating space and cell sites. At September 30,2005, the future minimum annual lease payments under these agreements are asfollows (in thousands):

| **September 30,** | ** ** | ** ** | ** **    | ** ** | ** ** |
|------------------------|------------|------------|---------------|------------|------------|
| 2006                   |       | $          | 28,284   |       |
| 2007                   |       | 21,428     |          |
| 2008                   |       | 19,368     |          |
| 2009                   |       | 18,271     |          |
| 2010                   |       | 11,175     |          |
| Thereafter             |       | 4,595      |          |
| Total                  |       | $          | 103,121  |       |

 

Rentexpense was approximately $18.3 million, $3.2 million, $8.8 millionand $11.9 million , respectively, for the year ended September 30,2005, for the period ended September 30, 2004, for the period ended July 1,2004, and for the year ended September 30, 2003.

*(c) Litigation*

On December 15, 2004,Sprint Corporation and Nextel Communications, Inc. announced that they hadsigned a merger agreement pursuant to which they would merge and combine theiroperations. Shortly after announcing the merger, Sprint also announcedthat it would pursue discussions with the PCS Affiliates of Sprint –including the Company – directed toward a modification of their affiliationagreements to address the implications of its merger with Nextel.  Although the parties engaged in discussionswith respect to such a modification, no agreement has been reached.

On July 15, 2005, iPCS Wireless, Inc., awholly owned subsidiary of iPCS, Inc., filed a complaint against Sprintand Sprint PCS in the Circuit Court of Cook County, Illinois. On July 22,2005, Horizon Personal Communications, Inc. and Bright PersonalCommunications Services, LLC, wholly owned subsidiaries of iPCS, Inc.,filed a complaint against Sprint and Sprint PCS and Nextel Communications, Inc.in the Court of Chancery of the State of Delaware, New Castle County. Thecomplaints are substantially similar and allege, among other things, thatfollowing the consummation of the merger between Sprint and Nextel, Sprint willbreach its exclusivity obligations under its affilation agreements, as amended,with the Company (see Note 5). The Company sought, among other things, atemporary restraining order, a preliminary injunction and a permanentinjunction enjoining Sprint and those acting in concert with it from engagingin certain conduct post-closing that would violate the Company’s affiliationagreements.

On July 18, 2005, in CookCounty Circuit Court the Company obtained a temporary restraining orderprohibiting Sprint from sharing its confidential information with Nextel inviolation of iPCS Wireless’s management agreement and the Company continued thehearing to hear further testimony on its request for additional injunctiverelief.

On July 28, 2005, iPCS, Inc. and certain ofits wholly owned subsidiaries entered into a Forbearance Agreement (the “Agreement”)with Sprint relating to the complaints filed against Sprint. The Agreement setsforth the Company’s agreement that the Company’s subsidiaries would not seek atemporary restraining order or a preliminary injunction against Sprint so longas Sprint operates the Nextel business subject to the limitations set forth inthe Agreement. The Agreement contemplates that the parties will proceed asquickly as possible to a full trial on the merits of the complaint seeking apermanent injunction against Sprint.

F-32

----

Inaddition to the foregoing, from time to time, the Company is involved invarious legal proceedings relating to claims arising in the ordinary course ofbusiness. and in connection with the Company’s bankruptcy petition. The Companyis not currently a party to any such legal proceedings, the outcome of which,individually or in the aggregate, is expected to have a material adverse effecton the Company’s business, financial condition or results of operations. 

**(16)   ConsolidatingFinancial Information**

The 111¤2%senior notes and the 113¤8%senior notes are fully, unconditionally and joint and severally guaranteed bythe Company’s domestic unrestricted subsidiaries, including iPCS Wireless, Inc.,iPCS Equipment, Inc., Horizon Personal Communications, Inc., andBright Personal Communications Services, LLC, which are wholly ownedsubsidiaries of iPCS, Inc. The following consolidating financialinformation as of September 30, 2005 and 2004 and for the year ended September 30,2005, for the period from July 2, 2004 through September 30, 2004,for the period from October 1, 2003 through July 1, 2004, and for theyear ended September 30, 2003 is presented for iPCS, Inc., iPCSWireless, Inc., iPCS Equipment, Inc., Horizon Personal Communications, Inc.,and Bright Personal Communications Services, LLC (in thousands):

**CondensedConsolidating BalanceSheetAs of September 30, 2005(Successor Company)**

| ** **                                                         | ** ** | **iPCS Inc.** | ** **    | **iPCS  Wireless** | ** ** | **iPCS  Equipment** | ** ** | **Horizon Per Com** | ** ** | **Bright**   | ** ** | **Eliminations** | ** ** | **iPCS  Consolidated** | ** **    |
|--------------------------------------------------------------------|------------|--------------------|---------------|--------------------|------------|---------------------|------------|-------------------------------|------------|--------------|------------|------------------|------------|------------------------|---------------|
| Cash and cash  equivalents                                         |       | $                  | —   |               | $          | 75,805         |       |                          | $          | —  |       |             |       | $                      | 22,112   |   |   | $ | 190  |   |   | $ | —  |   |   |   | $ | 98,107  |   |   |
| Other current  assets                                              |       | 150,398            |          | 41,314             |       |                | 24,967     |                          |       |         | 49,848     |             |       | 23,720                 |          |   | (204,121 | ) |   |   | 86,126 |   |   |
| Total current  assets                                              |       | 150,398            |          | 117,119            |       |                | 24,967     |                          |       |         | 71,960     |             |       | 23,910                 |          |   | (204,121 | ) |   |   | 184,233 |   |   |
| Property and  equipment, net                                       |       | —             |          | 72,503             |       |                | 15,256     |                          |       |         | 48,476     |             |       | 17,363                 |          |   | (94 | ) |   |   | 153,504 |   |   |
| Intangible  assets, net                                            |       | —             |          | 63,868             |       |                | —     |                          |       |         | 195,056    |             |       | 66,267                 |          |   | — |   |   |   | 325,191 |   |   |
| Other noncurrent  assets                                           |       | 5,912              |          | 1,033              |       |                | —     |                          |       |         | 3,172      |             |       | 945                    |          |   | — |   |   |   | 11,062 |   |   |
| Investment in  subsidiaries                                        |       | 288,666            |          | —             |       |                | —     |                          |       |         | —     |             |       | —                 |          |   | (288,666 | ) |   |   | — |   |   |
| Total assets                                                       |       | $                  | 444,976  |               | $          | 254,523        |       |                          | $          | 40,223  |       |             |       | $                      | 318,664  |   |   | $ | 108,485  |   |   | $ | (492,881  | ) |   |   | $ | 673,990  |   |   |
| Current  liabilities                                               |       | $                  | 9,894    |               | $          | 220,007        |       |                          | $          | 29      |       |             |       | $                      | 42,372   |   |   | $ | 21,148  |   |   | $ | (204,215  | ) |   |   | $ | 89,235  |   |   |
| Long-term  debt                                                    |       | 165,000            |          | 389                |       |                | —     |                          |       |         | 106,381    |             |       | 32,788                 |          |   | — |   |   |   | 304,558 |   |   |
| Other long-term  liabilities                                       |       | —             |          | 2,970              |       |                | —     |                          |       |         | 6,946      |             |       | 199                    |          |   | — |   |   |   | 10,115 |   |   |
| Total liabilities                                                  |       | 174,894            |          | 223,366            |       |                | 29         |                          |       |         | 155,699    |             |       | 54,135                 |          |   | (204,215 | ) |   |   | 403,908 |   |   |
| Stockholders’  equity (deficiency)                            |       | 270,082            |          | 31,157             |       |                | 40,194     |                          |       |         | 162,965    |             |       | 54,350                 |          |   | (288,666 | ) |   |   | 270,082 |   |   |
| Total liabilities and  stockholders’ equity (deficiency) |       | $                  | 444,976  |               | $          | 254,523        |       |                          | $          | 40,223  |       |             |       | $                      | 318,664  |   |   | $ | 108,485  |   |   | $ | (492.881  | ) |   |   | $ | 673,990  |   |   |

 

F-33

----

**Condensed Consolidating Statement of OperationsFor the Year Ended September 30, 2005(Successor Company)**

| ** **                                         | ** ** | **iPCS Inc.** | ** **    | **iPCS  Wireless** | ** ** | **iPCS  Equipment** | ** ** | **Horizon Per Com** | ** ** | **Bright**  | ** ** | **Eliminations** | ** ** | **iPCS  Consolidated** | ** **    |
|----------------------------------------------------|------------|--------------------|---------------|--------------------|------------|---------------------|------------|-------------------------------|------------|-------------|------------|------------------|------------|------------------------|---------------|
| Total revenues                                     |       | $                  | —   |               | $          | 232,760        |       |                          | $          | 6,239  |       |             |       | $                      | 31,209   |   |   | $ | 16,079  |   |   | $ | (6,240  | ) |   |   | $ | 280,047  |   |   |
| Cost of  revenues                                  |       | —             |          | (154,048           | )          |                | (938       | )                             |       |        | (22,317    | )                |       | (9,416                 | )             |   | 6,235 |   |   |   | (180,484 | ) |   |
| Selling and  marketing                             |       | —             |          | (37,231            | )          |                | —     |                          |       |        | (5,217     | )                |       | (2,445                 | )             |   | — |   |   |   | (44,893 | ) |   |
| General and administrative                         |       | (986               | )             | (8,598             | )          |                | —     |                          |       |        | (2,469     | )                |       | (501                   | )             |   | — |   |   |   | (12,554 | ) |   |
| Depreciation  and  amortization                    |       | —             |          | (52,105            | )          |                | (5,595     | )                             |       |        | (10,423    | )                |       | (3,703                 | )             |   | — |   |   |   | (71,826 | ) |   |
| Gain (loss) on  disposal of property and equipment |       | —             |          | (160               | )          |                | (2         | )                             |       |        | 1          |             |       | —                 |          |   | 20 |   |   |   | (141 | ) |   |
| Total operating expenses                           |       | (986               | )             | (252,142           | )          |                | (6,535     | )                             |       |        | (40,425    | )                |       | (16,065                | )             |   | 6,255 |   |   |   | (309,898 | ) |   |
| Other, net                                         |       | (19,866            | )             | (1,161             | )          |                | 2,611      |                          |       |        | (2,002     | )                |       | (669                   | )             |   | — |   |   |   | (21,087 | ) |   |
| Loss in  subsidiaries                              |       | (30,101            | )             | —             |       |                | —     |                          |       |        | —     |             |       | —                 |          |   | 30,101 |   |   |   | — |   |   |
| Net income  (loss)                                 |       | $                  | (50,953  | )                  | $          | (20,543        | )          |                          | $          | 2,315  |       |             |       | $                      | (11,218  | ) |   | $ | (655  | ) |   | $ | 30,116  |   |   |   | $ | (50,938  | ) |   |

 

**CondensedConsolidating Statement of Cash FlowsFor the Year Ended September 30, 2005(Successor Company)**

| ** **                                        | ** ** | **iPCS Inc.** | ** ** | **iPCS  Wireless** | ** ** | **iPCS  Equipment** | ** ** | **Horizon  Per Com** | ** ** | **Bright** | ** ** | **Eliminations** | ** ** | **iPCS  Consolidated** | ** ** |
|---------------------------------------------------|------------|--------------------|------------|--------------------|------------|---------------------|------------|---------------------------|------------|------------|------------|------------------|------------|------------------------|------------|
| Operating  activities                             |       |               | $          | 1,549         |       |                | $          | 14,972               |       |       | $          | (493        | )          |                   | $          | (2,679  | ) | $ | (465  | ) |   | $ | 15  |   |   |   | $ | 12,899  |   |   |
| Investing  activities                             |       |               | —     |               |       | (6,073              | )          |                      | 493        |       |       | 24,805           |       | 655                    |       |   | (15 | ) |   |   | 19,865 |   |   |
| Financing  activities                             |       |               | (1,549     | )                  |       | 9,146               |       |                      | —     |       |       | (14              | )          | —                 |       |   | — |   |   |   | 7,583 |   |   |
| Increase in cash  and cash equivalents       |       |               | —     |               |       | 18,045              |       |                      | —     |       |       | 22,112           |       | 190                    |       |   | — |   |   |   | 40,347 |   |   |
| Cash and cash  equivalents at beginning of period |       |               | —     |               |       | 57,760              |       |                      | —     |       |       | —           |       | —                 |       |   | — |   |   |   | 57,760 |   |   |
| Cash and cash  equivalents at end of period       |       |               | $          | —        |       |                | $          | 75,805               |       |       | $          | —      |       |                   | $          | 22,112  |   | $ | 190  |   |   | $ | —  |   |   |   | $ | 98,107  |   |   |

 

 

F-34

----

**CondensedConsolidating Balance SheetAs of September 30, 2004(Successor Company)**

| ** **                                                    | ** ** | **iPCS Inc.** | ** **    | **iPCS  Wireless** | ** ** | **iPCS  Equipment** | ** ** | **Eliminations** | ** ** | **iPCS  Consolidated** | ** ** |
|---------------------------------------------------------------|------------|--------------------|---------------|--------------------|------------|---------------------|------------|------------------|------------|------------------------|------------|
| Cash and cash  equivalents                                    |       | $                  | —   |               | $          | 57,760         |       |             | $          | —            |       |   |   | $ | —  |   |   |   | $ | 57,760  |   |   |
| Other current  assets                                         |       | 166,126            |          | 32,276             |       |                | 16,387     |             |       |                   | (182,295   | ) |   |   | 32,494 |   |   |
| Total current  assets                                         |       | 166,126            |          | 90,036             |       |                | 16,387     |             |       |                   | (182,295   | ) |   |   | 90,254 |   |   |
| Property and  equipment, net                                  |       | —             |          | 113,394            |       |                | 21,647     |             |       |                   | (110       | ) |   |   | 134,931 |   |   |
| Intangible  assets, net                                       |       | —             |          | 78,861             |       |                | —     |             |       |                   | —     |   |   |   | 78,861 |   |   |
| Other noncurrent  assets                                      |       | 6,497              |          | 1,765              |       |                | —     |             |       |                   | —     |   |   |   | 8,262 |   |   |
| Investment in  subsidiaries                                   |       | 89,578             |          | —             |       |                | —     |             |       |                   | (89,578    | ) |   |   | — |   |   |
| Total assets                                                  |       | $                  | 262,201  |               | $          | 284,056        |       |             | $          | 38,034            |       |   |   | $ | (271,983  | ) |   |   | $ | 312,308  |   |   |
| Current  liabilities                                          |       | $                  | 8,155    |               | $          | 227,892        |       |             | $          | 155               |       |   |   | $ | (182,405  | ) |   |   | $ | 53,797  |   |   |
| Long-term  debt                                               |       | 165,000            |          | 400                |       |                | —     |             |       |                   | —     |   |   |   | 165,400 |   |   |
| Other long-term  liabilities                                  |       | —             |          | 4,065              |       |                | —     |             |       |                   | —     |   |   |   | 4,065 |   |   |
| Total liabilities                                             |       | 173,155            |          | 232,357            |       |                | 155        |             |       |                   | (182,405   | ) |   |   | 223,262 |   |   |
| Stockholders’  equity (deficiency)                       |       | 89,046             |          | 51,699             |       |                | 37,879     |             |       |                   | (89,578    | ) |   |   | 89,046 |   |   |
| Total liabilities and  stockholders’ equity (deficiency) |       | $                  | 262,201  |               | $          | 284,056        |       |             | $          | 38,034            |       |   |   | $ | (271,983  | ) |   |   | $ | 312,308  |   |   |

 

**CondensedConsolidating Statement of OperationsFor the Period From July 2, 2004 through September 30, 2004(Successor Company)**

| ** **                                  | ** ** | **iPCS Inc.** | ** ** | **iPCS  Wireless** | ** ** | **iPCS  Equipment** | ** ** | **Eliminations** | ** ** | **iPCS  Consolidated** | ** ** |
|---------------------------------------------|------------|--------------------|------------|--------------------|------------|---------------------|------------|------------------|------------|------------------------|------------|
| Total revenues                              |       |               | $          | —        |       |                | $          | 55,382      |       |                   | $          | 2,063  |   |   |   | $ | (2,063  | ) |   |   | $ | 55,382  |   |   |
| Cost of revenues                            |       |               | —     |               |       | (35,953             | )          |             | (772       | )                      |       |   | 2,059 |   |   |   | (34,666 | ) |   |
| Selling and marketing                       |       |               | —     |               |       | (7,996              | )          |             | —     |                   |       |   | — |   |   |   | (7,996 | ) |   |
| General and  administrative                 |       |               | (145       | )                  |       | (1,582              | )          |             | —     |                   |       |   | — |   |   |   | (1,727 | ) |   |
| Depreciation and  amortization              |       |               | —     |               |       | (10,478             | )          |             | (1,363     | )                      |       |   | — |   |   |   | (11,841 | ) |   |
| Loss on disposal  of property and equipment |       |               | —     |               |       | —              |       |             | —     |                   |       |   | 4 |   |   |   | 4 |   |   |
| Total operating expenses                    |       |               | (145       | )                  |       | (56,009             | )          |             | (2,135     | )                      |       |   | 2,063 |   |   |   | (56,226 | ) |   |
| Other, net                                  |       |               | (4,952     | )                  |       | (732                | )          |             | 552        |                   |       |   |   |   |   |   | (5,132 | ) |   |
| Loss in  subsidiaries                       |       |               | (879       | )                  |       | —              |       |             |       |                   |       |   | 879 |   |   |   | — |   |   |
| Net income (loss)                           |       |               | $          | (5,976        | )          |                | $          | (1,359      | )          |                   | $          | 480  |   |   |   | $ | 879  |   |   |   | $ | (5,976  | ) |   |

 

F-35

----

**CondensedConsolidating Statement of OperationsFor the Period October 1, 2003 through July 1, 2004(Predecessor Company)**

| ** **                                              | ** ** | **iPCS Inc.** | ** **    | **iPCS  Wireless** | ** ** | **iPCS  Equipment** | ** ** | **Eliminations** | ** ** | **iPCS  Consolidated** | ** ** |
|---------------------------------------------------------|------------|--------------------|---------------|--------------------|------------|---------------------|------------|------------------|------------|------------------------|------------|
| Total revenues                                          |       | $                  | —   |               | $          | 145,862        |       |             | $          | 5,582             |       |   |   | $ | (5,582  | ) |   |   | $ | 145,862  |   |   |
| Cost of revenues                                        |       | —             |          | (99,436            | )          |                | (2,166     | )                |       |                   | 5,571      |   |   |   | (96,031 | ) |   |
| Selling and  marketing                                  |       |               |          | (20,976            | )          |                | —     |             |       |                   | —     |   |   |   | (20,976 | ) |   |
| General and  administrative                             |       | (104               | )             | (3,445             | )          |                | (1         | )                |       |                   | —     |   |   |   | (3,550 | ) |   |
| Depreciation and  amortization                          |       | —             |          | (25,085            | )          |                | (3,511     | )                |       |                   | —     |   |   |   | (28,596 | ) |   |
| Gain (loss) on  disposal of property and equipment |       | —             |          | (22                | )          |                | (11        | )                |       |                   | 20         |   |   |   | (13 | ) |   |
| Reorganization  income                                  |       | —             |          | 60,797             |       |                | —     |             |       |                   | —     |   |   |   | 60,797 |   |   |
| Total operating expenses                                |       | (104               | )             | (88,167            | )          |                | (5,689     | )                |       |                   | 5,591      |   |   |   | (88,369 | ) |   |
| Cancellation of  debt                                   |       | —             |          | 131,956            |       |                | —     |             |       |                   | —     |   |   |   | 131,956 |   |   |
| Other, net                                              |       | 18,406             |          | (26,243            | )          |                | (2,035     | )                |       |                   | —     |   |   |   | (9,872 | ) |   |
| Loss in  subsidiaries                                   |       | 161,266            |          | —             |       |                | —     |             |       |                   | (161,266   | ) |   |   | — |   |   |
| Net income (loss)                                       |       | $                  | 179,568  |               | $          | 163,408        |       |             | $          | (2,142            | )          |   |   | $ | (161,257  | ) |   |   | $ | 179,577  |   |   |

 

**CondensedConsolidating Statement of Cash FlowsFor the Period From July 2, 2004 through September 30, 2004(Successor Company)**

| ** **                                             | ** ** | **iPCS Inc.** | ** ** | **iPCS  Wireless** | ** ** | **iPCS  Equipment** | ** ** | **Eliminations** | ** ** | **iPCS  Consolidated** | ** ** |
|--------------------------------------------------------|------------|--------------------|------------|--------------------|------------|---------------------|------------|------------------|------------|------------------------|------------|
| Operating  activities                                  |       |               | $          | (459          | )          |                | $          | 1,255       |       |                   | $          | 1,649  |   |   |   | $ | —  |   |   |   | $ | 2,445  |   |   |
| Investing  activities                                  |       |               | —     |               |       | (1,940              | )          |             | (1,309     | )                      |       |   | — |   |   |   | (3,249 | ) |   |
| Financing  activities                                  |       |               | 459        |               |       | (131,844            | )          |             | (454       | )                      |       |   | — |   |   |   | (131,839 | ) |   |
| Decrease in cash  and cash equivalents                 |       |               | —     |               |       | (132,529            | )          |             | (114       | )                      |       |   | — |   |   |   | (132,643 | ) |   |
| Cash and cash equivalents  at beginning of period |       |               | —     |               |       | 190,289             |       |             | 114        |                   |       |   | — |   |   |   | 190,403 |   |   |
| Cash and cash  equivalents at end of period            |       |               | $          | —        |       |                | $          | 57,760      |       |                   | $          | —  |   |   |   | $ | —  |   |   |   | $ | 57,760  |   |   |

 

F-36

----

**Condensed Consolidating Statement of Cash FlowsFor the Period October 1, 2003 through July 1, 2004(Predecessor Company)**

| ** **                                             | ** ** | **iPCS Inc.** | ** **     | **iPCS  Wireless** | ** ** | **iPCS  Equipment** | ** ** | **Eliminations** | ** ** | **iPCS  Consolidated** | ** ** |
|--------------------------------------------------------|------------|--------------------|----------------|--------------------|------------|---------------------|------------|------------------|------------|------------------------|------------|
| Operating activities                                   |       | $                  | (149,900  | )                  | $          | 167,197        |       |             | $          | 1,595             |       |   |   | $ | 8  |   |   |   | $ | 18,900  |   |   |
| Investing activities                                   |       | —             |           | (4,834             | )          |                | (3,706     | )                |       |                   | (8         | ) |   |   | (8,548 | ) |   |
| Financing activities                                   |       | 149,900            |           | 9,758              |       |                | 2,739      |             |       |                   | —     |   |   |   | 162,397 |   |   |
| Increase in cash and  cash equivalents                 |       | —             |           | 172,121            |       |                | 628        |             |       |                   | —     |   |   |   | 172,749 |   |   |
| Cash and cash  equivalents at beginning of period |       | —             |           | 18,168             |       |                | (514       | )                |       |                   | —     |   |   |   | 17,654 |   |   |
| Cash and cash equivalents at end of period        |       | $                  | —    |               | $          | 190,289        |       |             | $          | 114               |       |   |   | $ | —  |   |   |   | $ | 190,403  |   |   |

 

**Condensed Consolidating Statement of OperationsFor the Year Ended September 30, 2003(Predecessor Company)**

| ** **                                  | ** ** | **iPCS Inc.** | ** **    | **iPCS  Wireless** | ** ** | **iPCS  Equipment** | ** ** | **Eliminations** | ** ** | **iPCS  Consolidated** | ** ** |
|---------------------------------------------|------------|--------------------|---------------|--------------------|------------|---------------------|------------|------------------|------------|------------------------|------------|
| Total revenues                              |       | $                  | —   |               | $          | 194,293        |       |             | $          | 8,857             |       |   |   | $ | (8,857  | ) |   |   | $ | 194,293  |   |   |
| Cost of revenues                            |       | —             |          | (146,310           | )          |                | (4,854     | )                |       |                   | 9,302      |   |   |   | (141,862 | ) |   |
| Selling and marketing                       |       | —             |          | (27,343            | )          |                | —     |             |       |                   | —     |   |   |   | (27,343 | ) |   |
| General and  administrative                 |       | (648               | )             | (4,898             | )          |                | —     |             |       |                   | —     |   |   |   | (5,546 | ) |   |
| Depreciation and  amortization              |       | —             |          | (35,990            | )          |                | (4,558     | )                |       |                   | —     |   |   |   | (40,548 | ) |   |
| Loss on disposal of  property and equipment |       | —             |          | (9                 | )          |                | —     |             |       |                   | (465       | ) |   |   | (474 | ) |   |
| Reorganization expense                      |       | (21,837            | )             | (9,245             | )          |                | (11        | )                |       |                   | —     |   |   |   | (31,093 | ) |   |
| Total operating expenses                    |       | (22,485            | )             | (223,795           | )          |                | (9,423     | )                |       |                   | 8,837      |   |   |   | (246,866 | ) |   |
| Other, net                                  |       | 17,053             |          | (28,941            | )          |                | (8,406     | )                |       |                   | —     |   |   |   | (20,294 | ) |   |
| Loss in subsidiaries                        |       | (67,415            | )             | —             |       |                | —     |             |       |                   | 67,415     |   |   |   | — |   |   |
| Net income (loss)                           |       | $                  | (72,847  | )                  | $          | (58,443        | )          |             | $          | (8,972            | )          |   |   | $ | 67,395  |   |   |   | $ | (72,867  | ) |   |

 

**CondensedConsolidating Statement of Cash FlowsFor the Year Ended September 30, 2003(Predecessor Company)**

| ** **                                           | ** ** | **iPCS Inc.** | ** **   | **iPCS  Wireless** | ** ** | **iPCS  Equipment** | ** ** | **Eliminations** | ** ** | **iPCS  Consolidated** | ** ** |
|------------------------------------------------------|------------|--------------------|--------------|--------------------|------------|---------------------|------------|------------------|------------|------------------------|------------|
| Operating  activities                                |       | $                  | 26,888  |               | $          | (17,250        | )          |             | $          | (4,406            | )          |   |   | $ | 445  |   |   |   | $ | 5,677  |   |   |
| Investing  activities                                |       | —             |         | (18,361            | )          |                | 5,023      |             |       |                   | 20         |   |   |   | (13,318 | ) |   |
| Financing  activities                                |       | (27,199            | )            | 27,497             |       |                | (2,126     | )                |       |                   | (465       | ) |   |   | (2,293 | ) |   |
| Decrease in cash  and cash equivalents               |       | (311               | )            | (8,114             | )          |                | (1,509     | )                |       |                   | —     |   |   |   | (9,934 | ) |   |
| Cash and cash  equivalents at beginning of year |       | 311                |         | 26,282             |       |                | 995        |             |       |                   | —     |   |   |   | 27,588 |   |   |
| Cash and cash equivalents at end of year             |       | $                  | —  |               | $          | 18,168         |       |             | $          | (514              | )          |   |   | $ | —  |   |   |   | $ | 17,654  |   |   |

 

F-37

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**(17)   Valuation and Qualifying Accounts(in thousands):**

| ** **                                                                                                | ** ** | **Beginning  of Period** | ** ** | **Acquired Reserves** | ** ** | **Costs and  Expenses** | ** ** | **Other(a)** | ** **   | **Write-Offs** | ** ** | **Balance at  End of Period** | ** ** |
|-----------------------------------------------------------------------------------------------------------|------------|-------------------------------|------------|----------------------------|------------|------------------------------|------------|--------------|--------------|----------------|------------|----------------------------------------------|------------|
| **Successor Company:**                                                                                    |       |                          |       |                       |       |                         |       |         |         |           |       |                                         |       |   |   |   |   |   |   |   |   |   |   |
| For the Year ended  September 30, 2005 Allowance for doubtful accounts                               |       |                          | $          | 1,217                 |       |                         |       | $            | 1,388   |           |       |                                         | $          | 2,157  |   |   | $ | 6,932  |   |   | $ | (8,041  | ) |   |   | $ | 3,653  |   |   |
| For the Period  from July 2, 2004 through September 30, 2004 Allowance for doubtful  accounts   |       |                          | $          | —                |       |                         |       | $            | —  |           |       |                                         | $          | 489  |   |   | $ | 1,273  |   |   | $ | (545  | ) |   |   | $ | 1,217  |   |   |
| **Predecessor  Company:**                                                                                 |       |                          |       |                       |       |                         |       |         |         |           |       |                                         |       |   |   |   |   |   |   |   |   |   |   |
| For the Period  from October 1, 2003 through July 1, 2004 Allowance for doubtful  accounts |       |                          | $          | 2,460                 |       |                         |       | $            | —  |           |       |                                         | $          | 246  |   |   | $ | 1,545  |   |   | $ | (4,251  | ) |   |   | $ | —  |   |   |
| Year ended  September 30, 2003 Allowance for doubtful accounts                                       |       |                          | $          | 4,497                 |       |                         |       | $            | —  |           |       |                                         | $          | 3,187  |   |   | $ | 10,828  |   |   | $ | (16,052  | ) |   |   | $ | 2,460  |   |   |

----

(a)           Otherconsists of increases to the allowance for doubtful accounts recorded as areduction of revenue. Other also included $1,809 to net the allowance fordoubtful accounts against receivables as of the fresh-start date for theperiod from October 1, 2003 through July 1, 2004.

**(18)   Subsequent Events**

On December 1, 2005, the Company announced thatthe trial relating to the complaint filed by iPCS Wireless, Inc. in CookCounty, Illinois Circuit Court has been continued fromDecember 5, 2005, to February 6, 2005.

On December 12, 2005, the Company announced that thetrial relating to the complaint filed by Horizon Personal Communications, Inc.and Bright Personal Communications Services, LLC against Sprint PCS in the Courtof Chancery in the State of Delaware was consolidated with the trial relatingto the complaint filed by UbiquiTel Inc. and UbiquiTel Operating Companyagainst Sprint and Nextel in the Court of Chancery in the State of Delaware. Theconsolidated trial is scheduled to begin on January 9, 2006. In connectionwith the consolidation of the trials, Sprint agreed to extend the ForbearanceAgreement in the territories managed by Horizon Personal Communications, Inc.and Bright Personal Communications Services, LLC until the date that anydecision after trial is rendered by the Chancery Court in connection with themerits of the complaint, with certain limited exceptions that would requireapproval by the Chancery Court. The Forbearance Agreement is scheduled toexpire on January 1, 2006 in the territory managed by iPCSWireless, Inc.

F-38

----

**INDEX TO EXHIBITS**

| Exhibit   Number | ** ** | ** **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | ** ** | **Description** |
|------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------|
| 2.1              |       | Agreement and Plan of  Merger, dated as of March 17, 2005, by and between iPCS, Inc. and  Horizon PCS, Inc. (Incorporated by reference to Exhibit 2.1 to the  current report on Form 8-K filed by iPCS, Inc. with the SEC  on March 18, 2005 (SEC File No. 333-32064))                                                                                                                                                                                                                                                                |
| 2.2              |       | Second Amended  and Restated Joint Plan of Reorganization for iPCS, Inc., iPCS  Wireless, Inc. and iPCS Equipment, Inc., dated as of May 26,  2004 (Incorporated by reference to Exhibit 2.1 to the registration  statement on Form S-4 filed by iPCS, Inc. with the SEC on  August 5, 2004 (SEC File No. 333-117942))                                                                                                                                                                                                           |
| 2.3              |       | Technical  Amendment to Second Amended and Restated Joint Plan of Reorganization for  iPCS, Inc., iPCS Wireless, Inc. and iPCS Equipment, Inc.,  dated as of July 8, 2004 (Incorporated by reference to Exhibit 2.2  to the registration statement on Form S-4 filed by iPCS, Inc.  with the SEC on August 5, 2004 (SEC File No. 333-117942))                                                                                                                                                                                    |
| 2.4              |       | Modification to  Second Amended and Restated Joint Plan of Reorganization for iPCS, Inc.,  iPCS Wireless Inc. and iPCS Equipment, Inc., dated as of July 8,  2004 (Incorporated by reference to Exhibit 2.3 to the registration  statement on Form S-4 filed by iPCS, Inc. with the SEC on  August 5, 2004 (SEC File No. 333-117942))                                                                                                                                                                                                 |
| 2.5              |       | Findings of Fact,  Conclusions of Law and Order under U.S.C. Section 1129(a) and  (b) and Federal Rules of Bankruptcy Procedure 3020 confirming the  Second Amended Joint Plan of Reorganization of iPCS, Inc., iPCS Wireless, Inc.  and iPCS Equipment, Inc., Debtors and Debtors In Possession, as  modified, dated as of July 8, 2004 (Incorporated by reference to  Exhibit 2.4 to the registration statement on Form S-4 filed  by iPCS, Inc. with the SEC on August 5, 2004 (SEC File No. 333-117942)) |
| 2.6              |       | Asset Purchase  Agreement, dated as of May 12, 2004, by and between Horizon  PCS, Inc., Horizon Personal Communications, Inc., Bright Personal  Communications Services, LLC and Sprint PCS, Inc. (Incorporated by  reference to Exhibit 2.1 to the registration statement on Form S-4  filed by Horizon PCS, Inc. with the SEC on March 17, 2005 (SEC File  No. 333-123383))                                                                                                                                                    |
| 2.7              |       | Joint Plan of  Reorganization of Horizon PCS, Inc., Horizon Personal  Communications, Inc. and Bright Personal Communications Services, LLC,  dated as of September 20, 2004 (Incorporated by reference to  Exhibit 2.2 to the registration statement on Form S-4 filed  by Horizon PCS, Inc. with the SEC on March 17, 2005 (SEC File  No. 333-123383))                                                                                                                                                                              |
| 3.1              |       | Second Restated  Certificate of Incorporation of iPCS, Inc. (Incorporated by reference to  Exhibit 3.1 to the current report on Form 8-K filed by  iPCS, Inc. with the SEC on July 1, 2005 (SEC File No. 333-32064))                                                                                                                                                                                                                                                                                                                            |
| 3.2              |       | Amended and  Restated Bylaws of iPCS, Inc. (Incorporated by reference to Exhibit 3.2  to the current report on Form 8- K filed by iPCS, Inc. with  the SEC on July 1, 2005 (SEC File No. 333-32064))                                                                                                                                                                                                                                                                                                                                            |
| 3.3              |       | Certificate of  Incorporation of iPCS Wireless, Inc. (Incorporated by reference to  Exhibit 3.4 to the registration statement on Form S-4 filed  by iPCS, Inc. with the SEC on January 8, 2001 (SEC File  No. 333-47688))                                                                                                                                                                                                                                                                                                                       |
| 3.4              |       | Bylaws of iPCS  Wireless, Inc. (Incorporated by reference to Exhibit 3.5 to the  registration statement on Form S-4 filed by iPCS, Inc. with  the SEC on January 8, 2001 (SEC File No. 333-47688))                                                                                                                                                                                                                                                                                                                                              |

----

 

| 3.5   |   | Certificate of  Incorporation of iPCS Equipment, Inc. (Incorporated by reference to  Exhibit 3.6 to the registration statement on Form S-4 filed  by iPCS, Inc. with the SEC on January 8, 2001 (SEC File  No. 333-47688))                                                                                                                                                                                                                                                    |
|-------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.6   |   | Bylaws of iPCS  Equipment, Inc. (Incorporated by reference to Exhibit 3.7 to the  registration statement on Form S-4 filed by iPCS, Inc. with  the SEC on January 8, 2001 (SEC File No. 333-47688))                                                                                                                                                                                                                                                                           |
| 3.7   |   | Articles of  Incorporation of Bright Personal Communications Services, LLC. (Incorporated  by reference to Exhibit 3.7 to the registration statement on Form S-1  filed by iPCS, Inc. with the SEC on August 11, 2005 (SEC File  No. 333-117944))                                                                                                                                                                                                                                  |
| 3.8   |   | Bylaws of Bright  Personal Communications Services, LLC (Incorporated by reference to  Exhibit 3.8 to the registration statement on Form S-1 filed  by iPCS, Inc. with the SEC on August 11, 2005 (SEC File  No. 333-117944))                                                                                                                                                                                                                                                      |
| 3.9   |   | Articles of  Incorporation of Horizon Personal Communications, Inc. (Incorporated by  reference to Exhibit 3.9 to the registration statement on Form S-1  filed by iPCS, Inc. with the SEC on August 11, 2005 (SEC File  No. 333-117944))                                                                                                                                                                                                                                     |
| 3.10  |   | Bylaws of Horizon  Personal Communications, Inc. (Incorporated by reference to  Exhibit 3.10 to the registration statement on Form S-1 filed  by iPCS, Inc. with the SEC on August 11, 2005 (SEC File  No. 333-117944))                                                                                                                                                                                                                                                       |
| 4.2   |   | Amended and  Restated Common Stock Registration Rights Agreement, dated as of  June 30, 2005, by and among iPCS, Inc., affiliates of Silver Point  Capital, affiliates of AIG Global Investment Corp., the Timothy M. Yager 2001  Trust, Apollo Investment Fund IV, L.P. and Apollo Overseas Partners IV, L.P.  (Incorporated by reference to Exhibit 99.1 to the current report on  Form 8-K filed by iPCS, Inc. with the SEC on July 1, 2005  (SEC File No. 333-32064) |
| 4.3   |   | Indenture dated  as of April 30, 2004, by and among, iPCS Escrow Company,  iPCS, Inc., iPCS Wireless, Inc., iPCS Equipment, Inc. and U.S.  Bank National Association (Incorporated by reference to Exhibit 4.1 to  the registration statement on Form S-4 filed by iPCS, Inc.  with the SEC on August 5, 2004 (SEC File No. 333-117942))                                                                                                                       |
| 4.4   |   | Indenture, dated  as of July 19, 2004, by and among Horizon PCS Escrow Company, Horizon  PCS, certain subsidiary guarantors and U.S. Bank National Association, as  Trustee (Incorporated by reference to Exhibit 4.1 to the registration  statement on Form S-4 filed by Horizon PCS, Inc. with the SEC  on March 19, 2005 (SEC File No. 333-123383))                                                                                                                        |
| 4.5   |   | First  Supplemental Indenture, dated as of June 30, 2005, by and between U.S.  Bank National Association, as Trustee, and iPCS, Inc. (Incorporated by  reference to Exhibit 4.2 to the current report on Form 8-K  filed by iPCS, Inc. with the SEC on July 1, 2005 (SEC File  No. 333-117942))                                                                                                                                                                          |
| 10.1* |   | Sprint PCS  Management Agreement dated as of January 22, 1999 between WirelessCo,  L.P., Sprint Spectrum, L.P., SprintCom, Inc., and Illinois PCS, L.L.C.  (predecessor of iPCS Wireless, Inc.) as amended by Addendum I through  Addendum V thereto (Incorporated by reference to Exhibit 10.1 to the  registration statement on Form S-4 filed by iPCS, Inc. with  the SEC on January 9, 2001 (SEC File No. 333-47688))                                           |
| 10.2  |   | Addendum VI to Sprint  PCS Management Agreement (Incorporated by reference to Exhibit 10.40 to  the annual report on Form 10-K filed by iPCS, Inc. with the  SEC on March 29, 2001 (SEC File No. 333-32064))                                                                                                                                                                                                                                                                       |

----

 

| 10.3   |   | Addendum VII to Sprint  PCS Management Agreement (Incorporated by reference to Exhibit 10.3 to  the registration statement on Form S-4 filed by iPCS, Inc.  with the SEC on August 5, 2004 (SEC File No. 333-117942))                                                                                                                                                                         |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.4   |   | Addendum VIII to  Sprint PCS Management Agreement (Incorporated by reference to  Exhibit 10.4 to the registration statement on Form S-4 filed  by iPCS, Inc. with the SEC on August 5, 2004 (SEC File No. 333-117942))                                                                                                                                                                        |
| 10.5   |   | Amended and  Restated Addendum VIII to Sprint PCS Management Agreement (Incorporated by  reference to Exhibit 10.1 to the current report on Form 8-K  filed by iPCS, Inc. with the SEC on November 4, 2004) (SEC File  No. 333-32064))                                                                                                                                                        |
| 10.6   |   | Addendum IX to  Sprint PCS Management Agreement (Incorporated by reference to  Exhibit 10.5 to the registration statement on Form S-4 filed  by iPCS, Inc. with the SEC on August 5, 2004 (SEC File No. 333-117942))                                                                                                                                                                          |
| 10.7*  |   | Sprint PCS  Services Agreement dated as of January 22, 1999 by and between Sprint  Spectrum, L.P. and Illinois PCS, L.L.C. (predecessor of iPCS  Wireless, Inc.) (Incorporated by reference to Exhibits 10.2 to the  registration statement on Form S-4 filed by iPCS, Inc. with  the SEC on January 8, 2001 (SEC File No. 333-47688))                                              |
| 10.8*  |   | Sprint Trademark  and Service Mark License Agreement dated as of January 22, 1999 between  Sprint Communications Company, L.L.C. and Illinois PCS, L.L.C. (predecessor  of iPCS Wireless, Inc.) (Incorporated by reference to Exhibit 10.3  to the registration statement on Form S-4 filed by iPCS, Inc.  with the SEC on January 8, 2001 (SEC File No. 333-47688))                |
| 10.9*  |   | Sprint Spectrum  Trademark and Service Mark License Agreement dated as of January 22,  1999 between Sprint Spectrum L.P. and Illinois PCS, L.L.C. (predecessor of  iPCS Wireless, Inc.) (Incorporated by reference to Exhibit 10.4 to  the registration statement on Form S-4 filed by iPCS, Inc.  with the SEC on December 1, 2000 (SEC File No. 333-47688))                       |
| 10.10* |   | Sprint PCS  Management Agreement, dated June 8, 1998, by and between Sprint  Spectrum, L.P., SprintCom, Inc. and Horizon Personal  Communications, Inc. (includes Addenda I, II and III) (Incorporated  by reference to Exhibit 10.3 to the registration statement on Form S-4  filed by Horizon PCS, Inc. with the SEC on December 15, 2000 (SEC  File No. 333-51238)).  |
| 10.11* |   | Addendum IV to  Sprint PCS Management Agreement, dated as of March 16, 2005, by and  between Sprint Spectrum L.P., Sprint Communications Company, L.P. and Bright  Personal Communications Services, LLC (Incorporated by reference to  Exhibit 10.7.1 to the registrations statement on Form S-4  filed by Horizon PCS, Inc. with the SEC on March 17, 2005 (SEC File  No. 333-123383)) |
| 10.11* |   | Addendum V to  Sprint PCS Management Agreement, dated as of June 1, 2001, by and  between Sprint Spectrum, L.P., SprintCom, Inc. and Horizon Personal  Communications, Inc. (Incorporated herein by reference to  Exhibit 10.3.1 to the registration statement on Form 10-12G/A  filed by Horizon Telcom, Inc. with the SEC on June 25, 2001 (SEC  File No. 000-32617))        |
| 10.12  |   | Addendum VI to Sprint  PCS Management Agreement, dated as of August 20, 2001, by and between  Sprint Spectrum, L.P., SprintCom, Inc. and Horizon Personal  Communications, Inc. (Incorporated by reference to Exhibit 10.3.2  to the current report on Form 8-K filed by Horizon PCS, Inc.  with the SEC on August 24, 2001 (SEC File No. 333-51240).                          |

----

 

| 10.13  |   | Addendum VII to Sprint  PCS Management Agreement, dated as of June 16, 2004, by and between  Sprint Spectrum, L.P., SprintCom, Inc. and Horizon Personal  Communications, Inc. (Incorporated by reference to Exhibit 10.3.4  to the annual report on Form 10-K filed by Horizon PCS, Inc.  with the SEC on March 31, 2005 (SEC File No. 333-37516))                                                                                          |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.14  |   | Addendum VIII to  Sprint PCS Management Agreement, dated as of March 16, 2005, among  Horizon Personal Communications, Inc., SprintCom, Inc., Sprint  Spectrum L.P., WirelessCo, L.P., PhillieCo, L.P., APC PCS, LLC and Sprint  Communications Company, L.P. (Incorporated by reference to Exhibit 10.3.5  to the registration statement on Form S-4 filed by Horizon  PCS, Inc. with the SEC on March 17, 2005 (SEC File No. 333-123383)). |
| 10.15* |   | Sprint PCS  Services Agreement, dated as of June 8, 1998, by and between Sprint  Spectrum, L.P. and Horizon Personal Communications, Inc. (Incorporated  by reference to Exhibit 10.4 to the registration statement on  Form S-4 filed by Horizon PCS, Inc. with the SEC on  December 15, 2000 (SEC File No. 333-51238)).                                                                                                                         |
| 10.16  |   | Sprint Trademark  and Service Mark License Agreement, dated as of June 8, 1998, by and  between Sprint Communications Company, L.P. and Horizon Personal  Communications, Inc. (Incorporated by reference to Exhibit 10.5 to  the registration statement on Form S-4 filed by Horizon  PCS, Inc. with the SEC on December 15, 2000 (SEC File No. 333-51238)).                                                                                     |
| 10.17  |   | Sprint Spectrum  Trademark and Service Mark License Agreement, dated as of June 8, 1998,  by and between Sprint Spectrum L.P. and Horizon Personal  Communications, Inc. (Incorporated by reference to Exhibit 10.6 to  the registration statement on Form S-4 filed by Horizon  PCS, Inc. with the SEC on December 15, 2000 (SEC File No. 333-51238)).                                                                                           |
| 10.18* |   | Sprint PCS  Management Agreement, dated as of October 13, 1999, by and between  Sprint Spectrum, L.P., SprintCom, Inc., Wirelessco, L.P. and Bright  Personal Communications Services, LLC (includes Addenda I, II and III)  (Incorporated by reference to Exhibit 10.7 to the registration statement  on Form S-4 filed by Horizon PCS, Inc. with the SEC on  December 15, 2000 (SEC File No. 333-51238)).                                  |
| 10.19  |   | Addendum IV to  Sprint PCS Management Agreement, dated as of March 16, 2005, by and  between Sprint Spectrum L.P., Sprint Communications Company, L.P. and Bright  Personal Communications Services, LLC. (Incorporated by reference to Exhibit 10.7.1  to the registration statement on Form S-4 filed by Horizon  PCS, Inc. with the SEC on March 17, 2005 (SEC File No. 333-123383)).                                                               |
| 10.20* |   | Sprint PCS  Services Agreement, dated as of October 13, 1999, by and between Sprint  Spectrum, L.P. and Bright Personal Communications Services, LLC (Incorporated  by reference to Exhibit 10.8 to the registration statement on  Form S-4 filed by Horizon PCS, Inc. with the SEC on  December 15, 2000 (SEC File No. 333-51238)).                                                                                                                   |
| 10.21  |   | Sprint Trademark  and Service Mark License Agreement, dated as of October 13, 1999, by and  between Sprint Communications Company, L.P. and Bright Personal  Communications Services, LLC (Incorporated by reference to Exhibit 10.9  to the registration statement on Form S-4 filed by Horizon PCS, Inc.  with the SEC on December 15, 2000 (SEC File No. 333-51238)).                                                                               |
| 10.22  |   | Sprint Spectrum  Trademark and Service Mark License Agreement, dated as of October 13,  1999, between Sprint Spectrum, L.P. and Bright Personal Communications  Services, LLC (Incorporated by reference to Exhibit 10.10 to the  registration statement on Form S-4 filed by Horizon PCS, Inc.  with the SEC on December 15, 2000 (SEC File No. 333-51238)).                                                                                          |

----

 

| 10.23       |   | Master Lease Agreement  dated as of August 31, 2000 between iPCS Wireless, Inc. and Trinity  Wireless Towers, Inc. (Incorporated by reference to Exhibit 10.43  to the annual report on Form 10-K filed by iPCS, Inc. with  the SEC on March 29, 2001) (SEC File No. 333-32064))                               |
|-------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.24       |   | Master Tower  Space Reservation and License Agreement dated as of July 20, 2002 by and  between American Tower, L.P. and iPCS Wireless, Inc. (Incorporated by  reference to Exhibit 10.10 to the registration statement on Form S-4  filed by iPCS, Inc. with the SEC on August 5, 2004 (SEC File  No. 333-117942)) |
| 10.25† |   | Restructuring  Management Services Agreement between iPCS, Inc. and YMS Management LLC  dated as of January 27, 2003, as amended. (Incorporated by reference to  Exhibit 10.11 to the registration statement on Form S-4 filed  by iPCS, Inc. with the SEC on August 5, 2004 (SEC File No. 333-117942))             |
| 10.26† |   | iPCS, Inc.  Amended and Restated 2004 Long-Term Incentive Plan, (Incorporated by  reference to Exhibit 99.1 to the current report on Form 8-K  filed by iPCS, Inc. with the SEC on February 2, 2005) (SEC File  No. 333-32064))                                                                                          |
| 10.27† |   | Employment  Agreement, dated as of July 20, 2004, by and between Timothy M. Yager  and iPCS Wireless, Inc. (Incorporated by reference to Exhibit 10.13  to the registration statement on Form S-4 filed by iPCS, Inc.  with the SEC on August 5, 2004 (SEC File No. 333-117942))                                    |
| 10.28† |   | Employment  Agreement, dated as of July 20, 2004, by and between Stebbins B.  Chandor, Jr. and iPCS Wireless, Inc. (Incorporated by reference to  Exhibit 10.14 to the registration statement on Form S-4 filed  by iPCS, Inc. with the SEC on August 5, 2004 (SEC File No. 333-117942))                       |
| 10.29† |   | Employment  Agreement, dated as of July 20, 2004, by and between Patricia M.  Greteman and iPCS Wireless, Inc. (Incorporated by reference to  Exhibit 10.15 to the registration statement on Form S-4 filed  by iPCS, Inc. with the SEC on August 5, 2004 (SEC File No. 333-117942))                                |
| 10.30† |   | Employment  Agreement, dated as of July 20, 2004, by and between Craig A. Kinley and  iPCS Wireless, Inc. (Incorporated by reference to Exhibit 10.16 to  the registration statement on Form S-4 filed by iPCS, Inc.  with the SEC on August 5, 2004 (SEC File No. 333-117942))                                     |
| 10.31† |   | Form of  Incentive Stock Option Agreement (Incorporated by reference to  Exhibit 10.17 to the registration statement on Form S-4 filed  by iPCS, Inc. with the SEC on August 5, 2004 (SEC File No. 333-117942))                                                                                                          |
| 10.32† |   | Form of Non-Qualified  Stock Option Agreement (Incorporated by reference to Exhibit 10.18 to  the registration statement on Form S-4 filed by iPCS, Inc.  with the SEC on August 5, 2004 (SEC File No. 333-117942))                                                                                                      |
| 10.33† |   | Form of  Director Non-Qualified Stock Option Agreement (Incorporated by  reference to Exhibit 10.19 to the registration statement on Form S-4  filed by iPCS, Inc. with the SEC on August 5, 2004 (SEC File  No. 333-117942))                                                                                            |
| 10.34† |   | Timothy M.  Yager’s Amended and Restated Stock Unit Agreement, dated as of  January 27, 2005 (Incorporated by reference to Exhibit 99.3 to the  current report on Form 8-K filed by iPCS, Inc. with the SEC  on February 2, 2005) (SEC File No. 333-32064))                                                         |
| 10.35† |   | Form of Restricted  Stock Agreement (Incorporated by reference to Exhibit 10.21 to the  registration statement on Form S-1 filed by iPCS, Inc. with  the SEC on October 5, 2004 (SEC File No. 333-117944))                                                                                                          |

----

 

| 10.36       |   | Agreement of Purchase  and Sale, dated September 8, 2004, between iPCS Wireless, Inc. and  TCP Communications LLC (Incorporated by reference to Exhibit 10.1 to the  current report on the Form 8-K filed by iPCS, Inc. with  the SEC on September 14, 2004) (SEC File No. 333-32064))                              |
|-------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.37† |   | Employment  Agreement by and between iPCS Wireless, Inc. and John J. Peterman, dated  as of August 24, 2004 (Incorporated by reference to Exhibit 10.1 to  the current report on the Form 8-K filed by iPCS, Inc. with  the SEC on September 14, 2004 (SEC File No. 333-32064))                                          |
| 10.38† |   | Employment  Agreement by and between iPCS Wireless, Inc. and Edmund L.  Quatmann, Jr. dated as of November 30, 2004 (Incorporated by  reference to Exhibit 10.1 to the current report on Form 8-K  filed by iPCS, Inc. with the SEC on December 3, 2004 (SEC File  No. 333-32064))                                  |
| 10.39† |   | Form of Non-Qualified  Stock Option Agreement for Non-Employee Directors (Employing  Stockholder version) (Incorporated by reference to Exhibit 99.2 to the  current report on Form 8-K filed by iPCS, Inc. with the SEC  on February 2, 2005 (SEC File No. 333-32064))                                                       |
| 10.40† |   | Amended and  Restated Non-Employee Directors Non-Qualified Stock Option  Agreement, dated as of June 30, 2005, by and between iPCS, Inc. and  Donald L. Bell (Incorporated by reference to Exhibit 99.2 to the current  report on Form 8-K filed by iPCS, Inc. with the SEC on  July 1, 2005 (SEC File No. 333-32064))   |
| 10.41† |   | Amended and  Restated Non-Employee Directors Non-Qualified Stock Option  Agreement, dated as of June 30, 2005, by and between iPCS, Inc. and  Eugene I. Davis (Incorporated by reference to Exhibit 99.3 to the  current report on Form 8-K filed by iPCS, Inc. with the SEC  on July 1, 2005 (SEC File No. 333-32064))  |
| 10.42† |   | Amended and  Restated Non-Employee Directors Non-Qualified Stock Option  Agreement, dated as of June 30, 2005, by and between iPCS, Inc. and  Eric F. Ensor (Incorporated by reference to Exhibit 99.4 to the current  report on Form 8-K filed by iPCS, Inc. with the SEC on  July 1, 2005 (SEC File No. 333-32064))    |
| 10.43† |   | Amended and  Restated Non-Employee Directors Non-Qualified Stock Option  Agreement, dated as of June 30, 2005, by and between iPCS, Inc. and  James J. Gaffney (Incorporated by reference to Exhibit 99.5 to the  current report on Form 8-K filed by iPCS, Inc. with the SEC  on July 1, 2005 (SEC File No. 333-32064)) |
| 10.44† |   | Horizon  PCS, Inc. 2004 Stock Incentive Plan (Incorporated by reference to  Exhibit 10.16 to the annual report on Form 10-K filed by  Horizon PCS, Inc. with the SEC on March 31, 2005 (SEC File  No. 333-37516))                                                                                                             |
| 10.45† |   | Form of  Nonqualified Stock Option Agreement for Non-Employee Directors under  the Horizon PCS, Inc. 2004 Stock Incentive Plan (Incorporated by  reference to Exhibit 10.13 to the annual report on Form 10-K  filed by Horizon PCS, Inc. with the SEC on March 31, 2005 (SEC File  No. 333-37516))                      |
| 10.46† |   | Employment  Agreement, dated as of August 5, 2005 by and between iPCS  Wireless, Inc. and Alan G. Morse (Incorporated by reference to  Exhibit 99.1 to the current report on Form 8-K filed by  iPCS, Inc. with the SEC on August 11, 2005 (Sec File No. 333-32064)).                                                    |
| 10.47† |   | Nonqualified Stock  Option Agreement, dated as of October 21, 2004, by and between Horizon  PCS, Inc. and Alan G. Morse (Incorporated by reference to  Exhibit 10.11.1 to the annual report on Form 10-K filed by  Horizon PCS, Inc. with the SEC on March 31, 2005 (SEC File  No. 333-37516))                           |

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| 10.48  |   | Settlement Agreement and  Mutual Release, dated as of March 16, 2005, by and between Sprint  Spectrum L.P., SprintCom, Inc., WirelessCo, L.P., PhillieCo, L.P., APC  PCS, LLC, Sprint Communications Company L.P., Horizon Personal  Communications, Inc. Bright Personal Communications Services, LLC and  Horizon PCS, Inc. (Incorporated by reference to Exhibit 10.14 to  the registration statement on Form S-4 filed by Horizon  PCS, Inc. with the SEC on March 17, 2005 (SEC File No. 333-123383)). |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.49* |   | Site Development  Agreement, dated as of August 17, 1999, by and between Horizon Personal  Communications, Inc. and SBA Towers, Inc. (Incorporated by  reference to Exhibit 10.26 to the registration statement on Form S-4  filed by Horizon PCS with the SEC on December 15, 2000 (SEC File  No. 333-51238)).                                                                                                                                                                                                       |
| 10.50* |   | Master Site  Agreement, dated as of July 1999, by and between SBA Towers, Inc.  and Horizon Personal Communications, Inc. (Incorporated by reference to  Exhibit 10.27 to the registration statement on Form S-4 filed  by Horizon PCS with the SEC on December 15, 2000 (SEC File No. 333-51238)).                                                                                                                                                                                                                   |
| 10.51  |   | Settlement and  Assumption Agreement and Release, dated as of August 31, 2004, by and  between Horizon PCS, Inc., Horizon Personal Communications, Inc.,  Bright Personal Communications Services, LLC, SBA Broadband, Inc., SBA  Network Services, Inc., SBA Sites, Inc. and SBA Towers, Inc.  (Incorporated by reference to Exhibit 10.27.1 to the registration  statement on Form S-4 filed by Horizon PCS, Inc. with the SEC  on March 17, 2005 (SEC File No. 333-123383)).              |
| 10.52* |   | Master Design  Build Agreement, dated as of August 17, 1999, by and between Horizon  Personal Communications, Inc. and SBA Towers, Inc. (Incorporated by  reference to Exhibit 10.28 to the registration statement on Form S-4  filed by Horizon PCS, Inc. with the SEC on December 15, 2000 (SEC  File No. 333-51238)).                                                                                                                                                                                         |
| 10.53* |   | Master Site  Agreement, dated as of October 1, 1999, by and between SBA  Towers, Inc. and Bright Personal Communications Services, LLC  (Incorporated by reference to Exhibit 10.29 to the registration  statement on Form S-4 filed by Horizon PCS, Inc. with the SEC  on December 15, 2000 (SEC File No. 333-51238)).                                                                                                                                                                                               |
| 10.54* |   | Master Design  Build Agreement, dated as of October 1, 1999, by and between Bright  Personal Communications Services, LLC and SBA Towers, Inc. (Incorporated  by reference to Exhibit 10.30 to the registration statement on  Form S-4 filed by Horizon PCS, Inc. with the SEC on  December 15, 2000 (SEC File No. 333-51238)).                                                                                                                                                                                       |
| 10.55  |   | Lease Agreement,  dated as of May 1, 2000, by and between Chillicothe Telephone Company  and Horizon Personal Communications, Inc. (Incorporated by reference to  Exhibit 10.32 to the registration statement on Form S-4 filed  by Horizon PCS, Inc. with the SEC on December 15, 2000 (SEC File  No. 333-51238)).                                                                                                                                                                                                   |
| 10.56  |   | Settlement Agreement and  Mutual Release, dated as of May 12, 2004, by and among Sprint  PCS, Inc., Horizon PCS, Inc., Horizon Personal  Communications, Inc. and Bright Personal Communications Services, LLC  (Incorporated by reference to Exhibit 10.34 to the registration  statement on Form S-4 filed by Horizon PCS, Inc. with the SEC  on March 17, 2005 (SEC File No. 333-123383)).                                                                                                               |

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| 10.57       |   | Settlement Agreement, dated as of June 5, 2004,  by and among Horizon Personal Communications, Inc., Horizon  PCS, Inc., Virginia PCS Alliance, L.C. and West Virginia PCS Alliance,  L.C. (Incorporated by reference to Exhibit 10.35 to the registration  statement on Form S-4 filed by Horizon PCS, Inc. with the SEC  on March 17, 2005 (SEC File No. 333-123383)). |
|-------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.58† |   | Letter Agreement,  dated as of August 5, 2005, by and between iPCS Wireless, Inc. and  Alan G. Morse regarding amendments to Mr. Morse’s stock option  agreement (Incorporated by reference to Exhibit 99.3 to the current  report on Form 8-K filed by iPCS, Inc. with the SEC on  August 11, 2005 (SEC File No. 333-32064)).                       |
| 10.59† |   | Letter Agreement,  dated as of August 5, 2005, by and between iPCS Wireless, Inc. and  Alan G. Morse regarding relocation expenses (Incorporated by  reference to Exhibit 99.4 to the current report on Form 8-K  filed by iPCS, Inc. with the SEC on August 11, 2005 (SEC File  No. 333-32064)).                                                                   |
| 21.1        |   | Subsidiaries of  iPCS, Inc.                                                                                                                                                                                                                                                                                                                                                                                 |
| 23.1        |   | Consent of  Deloitte & Touche LLP                                                                                                                                                                                                                                                                                                                                                                       |
| 31.1        |   | Certification of  Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley  Act of 2002                                                                                                                                                                                                                                                                                              |
| 31.2        |   | Certification of  Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley  Act of 2002                                                                                                                                                                                                                                                                                              |
| 32.1        |   | Certification Pursuant  to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of  the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                               |

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*                    Confidentialtreatment has been granted on portions of these documents.

†       Indicatesmanagement contract or compensatory arrangement.

 

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