**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

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**FORM 10-K**

**(Mark One)**

**x**                                 ANNUAL REPORT PURSUANT TO SECTION 13OR 15 OF THE SECURITIES EXCHANGE ACT OF 1934

**Forthe fiscal year ended: December 31, 2006**

**or**

**o**                                   TRANSITION REPORT PURSUANT TOSECTION 13 OR 15 OF THE SECURITIES EXCHANGE ACT OF 1934

**For the transition periodfrom                         to                         **

**CommissionFile Numbers 333-32064**

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**iPCS, INC.**

(Exact name of registrantas 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**

(Address of principal executive offices)

Registrant’s telephone number, including area code:(847) 885 2833

**Securitiesregistered pursuant to Section 12(b) of the Act:**

| **Title of each class**                  | ** ** | **Name of  each exchange on which registered** |
|------------------------------------------|------------|------------------------------------------------|
| Common Stock, par  value $0.01 per share |       | The Nasdaq Stock  Market, Inc.            |

 

**Securities registeredpursuant 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 mark whether the registrant is alarge accelerated filer, an accelerated filer or a non-accelerated filer. Seedefinition of “accelerated filer and large accelerated filer” in Rule 12b-2of the Exchange Act). (Check one)

| Large accelerated filero | Accelerated filer x | Non-accelerated filer o |
|--------------------------|--------------------------|------------------------------|

 

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

The aggregate market valueof the voting and non-voting common equity held by non-affiliatescomputed by reference to the price at which the common equity was last sold(based on the closing price on the NASDAQ Stock Market) as of June 30,2006 (the last business day of the registrant’s most recently completed secondfiscal quarter) was approximately $663,473,000 million. For purposes ofthis computation, affiliates of the registrant include the registrant’sexecutive officers and directors and their respective affiliates as of June 30,2006.

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 March 7, 2007,there were 16,934,585 shares of common stock, $0.01 par value per share,outstanding.

**Documents Incorporated by Reference**

Part III incorporatesinformation by reference to the registrant’s definitive proxy statement to befiled with the Securities and Exchange Commission within 120 days after the endof the fiscal year.

 

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**TABLE OF CONTENTS**

| PART I                                                                                                                |   | 3  |   |
|----------------------------------------------------------------------------------------------------------------------------|--------|----|--------|
| ITEM  1. BUSINESS                                                                                                          |   | 3  |   |
| ITEM  1A. RISK FACTORS                                                                                                     |   | 33 |   |
| ITEM 1B.  UNRESOLVED STAFF COMMENTS                                                                                        |   | 45 |   |
| ITEM  2. PROPERTIES                                                                                                        |   | 46 |   |
| ITEM 3. LEGAL  PROCEEDINGS                                                                                                 |   | 46 |   |
| ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                                               |   | 46 |   |
| PART II                                                                                                               |   | 47 |   |
| ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED  STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |   | 47 |   |
| ITEM 6. SELECTED  FINANCIAL DATA                                                                                           |   | 49 |   |
| ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF  FINANCIAL CONDITION AND RESULTS OF OPERATIONS                        |   | 52 |   |
| ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                                       |   | 77 |   |
| ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                                                       |   | 77 |   |
| ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS  ON ACCOUNTING AND FINANCIAL DISCLOSURE                              |   | 77 |   |
| ITEM 9A. CONTROLS  AND PROCEDURES                                                                                          |   | 77 |   |
| ITEM 9B. OTHER  INFORMATION                                                                                                |   | 79 |   |
| PART III                                                                                                              |   | 80 |   |
| ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE                                                           |   | 80 |   |
| ITEM 11.  EXECUTIVE COMPENSATION                                                                                           |   | 80 |   |
| ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS  AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS                   |   | 80 |   |
| ITEM 13. CERTAIN RELATIONSHIPS AND RELATED  TRANSACTIONS, AND DIRECTOR INDEPENDENCE                                        |   | 81 |   |
| ITEM 14.  PRINCIPAL ACCOUNTING FEES AND SERVICES                                                                           |   | 81 |   |
| PART IV                                                                                                               |   | 82 |   |
| ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES                                                                          |   | 82 |   |
| SIGNATURES                                                                                                                 |   | 83 |   |

 

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**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 final outcome of our litigation against Sprint, Nextel and SprintPCS, as well as the impact and outcome of the other litigation involvingSprint, Sprint PCS, and another  PCSAffiliate of Sprint;

·       changes in Sprint’s affiliation strategy as a resultof the Sprint/Nextel merger and Sprint’s recent acquisitions of other PCSAffliliates of Sprint;

·       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, and the costs we incur to obtain such services;

·       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;

·       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;

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·       ourfailure to establish and maintain effective internal controls to satisfy therequirements of Section 404 of the Sarbanes-Oxley Act, which requiresannual management assessments of the effectiveness of internal control overfinancial reporting;

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

·       oursignificant level of indebtedness;

·       adequacyof bad debt and other reserves;

·       ouranticipated future losses;

·       oursubscriber purchasing patterns;

·       subscribersatisfaction with our network and operations, including with services providedto us by Sprint, such as billing and customer care;

·       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;

·       additionalterrorist attacks; 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-K containstrademarks, service marks and trade names of companies and organizations otherthan us. Other than with respect to Sprint PCS, our use or display of otherparties’ trade names, trademarks or products is not intended to and does notimply a relationship with, or endorsement or sponsorship of us by, the tradename or trademark owners.

Our website address iswww.ipcswirelessinc.com. Information contained on our website is not part ofthis annual report on Form 10-K. We provide public access to our annual reportson Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, andamendments to these reports filed with the Securities and Exchange Commission,or SEC, under the Securities Exchange Act of 1934. These documents may beaccessed free of charge on our website at the following address:www.ipcswirelessinc.com. These documents are provided promptly after filingwith the SEC. These documents also may be found at the SEC’s website atwww.sec.gov.

**General**

We are a holding company that operates as a PCSAffiliate of Sprint through three wholly owned subsidiaries, each having itsown affiliation agreements with Sprint PCS. As a PCS Affiliate of Sprint, weown and are responsible for building, operating and managing the portion of the100% digital, 100% PCS network of Sprint PCS located in our territory, and wehave the exclusive right to provide digital wireless personal communications services,or PCS, under the Sprint brand name in our territory. Our territory consists of80 markets primarily located in Illinois, Michigan, Pennsylvania, New York,Indiana, Iowa, Ohio and Tennessee. The territory includes key markets such asGrand Rapids (MI), Fort Wayne (IN), the Tri-Cities region of Tennessee (JohnsonCity, Kingsport and Bristol), Scranton (PA), Saginaw-Bay City (MI), and theQuad Cities region of Illinois and Iowa (Bettendorf and Davenport, IA, andMoline and Rock Island, IL). As of December 31, 2006, our licensedterritory had a total population of approximately 15.0 million residents, ofwhich our PCS network covered approximately 11.4 million residents, and we hadapproximately 561,300 subscribers.

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Our PCS network isdesigned to offer a seamless connection with the PCS network of Sprint PCS. SprintPCS, together with third party PCS affiliates of Sprint, like us, operate PCSnetworks in over 300 metropolitan markets, including 297 of the 300 largestU.S. metropolitan areas where more than 262 million people live or work. Weprovide nationwide service through a combination of: operating our own PCSnetwork in our territory, affiliating with Sprint PCS, roaming on otherproviders’ analog cellular networks using multi-mode and multi-band handsets,and roaming on other providers’ CDMA networks. We offer national calling plansdesigned by Sprint PCS as well as local plans tailored to our markets. Wemarket Sprint PCS products and services through a number of distributionoutlets located in our territory, which are comprised of our company-ownedretail stores, Sprint co-branded dealers, major national retailers and localthird party distributors.

**Our History**

We were formed in March 2000as a holding company for iPCS Wireless, Inc. iPCS Wireless, as thesuccessor to Illinois PCS, LLC, became a PCS Affiliate of Sprint in1999. We were acquired by AirGate PCS, Inc. on November 30, 2001 and,on October 17, 2003, AirGate transferred its ownership of us to trust, thebeneficial owners of which were AirGate’s stockholders as of such date. On February 23,2003, we filed for bankruptcy under Chapter 11 of the Bankruptcy Code and weemerged from bankruptcy on July 20, 2004. On July 1, 2005, we mergedwith Horizon PCS, Inc., a holding compay that operated as a PCS Affiliateof Sprint through its two wholly owned subsidiaries: Horizon PersonalCommunications, Inc. (“PerCom”) and Bright Personal CommunicationsServices, LLC (“Bright”). As a result of the merger, PerCom and Bright(collectively, “Horizon PCS”) became our wholly owned subsidiaries. Horizon PCS’sterritory—which is now part of our territory—consisted of 40 markets located inportions of nine contiguous states. At June 30, 2005—the last date forwhich such information was reported by Horizon PCS prior to our merger—HorizonPCS’s licensed territory had a total population of approximately 7.2 millionresidents, of which its wireless network covered approximately 5.4 millionresidents.

**Our RelationshipWith Sprint**

Sprint directly operates its PCS network in majormarkets throughout the United States and entered into affiliation agreementswith various companies, like us, under which each has become a PCS Affiliate ofSprint and has agreed to construct and manage PCS networks in smallermetropolitan areas and along major highways designed to operate seamlessly withthe Sprint PCS network.

Pursuant to our affiliation agreements with SprintPCS, we offer PCS services using Sprint’s spectrum under the Sprint brand nameon a wireless network built and operated to Sprint’s specifications at our ownexpense. We believe that we have completed the building of our network and weare in compliance with all applicable build-out requirements.

Although we areinvolved in various disputes with Sprint, we continue to believe that, overall,our strategic relationship with Sprint PCS provides us with significantcompetitive advantages. In particular, our affiliation agreements with SprintPCS allow us to offer nationwide, high-quality, nationally branded wirelessvoice and data services for a lower cost and lower capital requirements thanwould otherwise be possible, and provide us a high-margin roaming revenuestream from Sprint PCS, wireless resellers and other wireless carriers thatcontract with Sprint PCS for roaming services in our territory. For example, webenefit from Sprint PCS’s:

·                    ***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.

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·                    ***Sprint PCS network.  ***Oursubscribers can immediately access PCS networks in over 300 metropolitanmarkets, including 297 of the 300 largest U.S. metropolitan areas where morethan 262 million people live or work.

·                    ***Handset availability andpricing.  ***Sprint PCS’s purchasing leverage allows us toacquire the latest innovative handsets more quickly and at a lower cost than wecould without our affiliation with Sprint PCS.

·                    ***National reseller agreements.  ***Wereceive additional revenue as a result of Sprint PCS’s relationships withwireless resellers, such as Virgin Mobile, when subscribers of those resellersuse our PCS network.

We are currentlyengaged in the following disputes with Sprint, the outcome of any one of whichcould have a material adverse effect on us:

·       InJuly 2005, we filed two lawsuits against Sprint alleging, among otherthings, that following the consummation of the merger between SprintCorporation and Nextel Communications, Inc., Sprint’s conduct would breachits exclusivity obligations to us under our affiliation agreements with SprintPCS. Courts issued rulings that we believe were favorable to us in bothlawsuits in September 2006, and Sprint has appealed one of those rulings.Accordingly, the final outcome of our litigation with Sprint arising out ofSprint’s conduct following the merger with Nextel is unknown pending appeal. Fora detailed discussion of our litigation against Sprint, see “—LitigationAgainst Sprint” below. Also, see important risks to our business related toSprint’s merger with Nextel and our litigation in “Item 1A Risk Factors—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.”

·       InDecember 2006, we initiated arbitration against Sprint with respect toSprint’s proposed rates for providing back-office services to us for thethree-year period commencing on January 1, 2007. If the 2007 ratesproposed by Sprint for these services had been in effect in 2006, we would haveincurred additional expenses to Sprint of approximately $4.7 million for thefiscal year ended December 31, 2006. We strongly disagree with Sprint’sproposed rates and, pursuant to the terms of our affiliation agreements withSprint, elected to submit the determination of the new rates to bindingarbitration and continue to obtain the back-office services from Sprint at theamounts the arbitration panel determines. The rates determined by thearbitration panel will be retroactively applied to January 1, 2007. In themeantime, we began paying Sprint’s proposed rates on January 1, 2007. Fora detailed discussion of this dispute, see “Affiliation Agreements with SprintPCS—The services agreements” below.

·       Pursuant to our affiliationagreements with Sprint PCS, we agreed to reciprocal roaming rates with SprintPCS through December 31, 2006. We also agreed that, effective January 1,2007, the rates would be reset by Sprint based on its retail yield for theprior year. Sprint has notified us of its proposed reciprocal roaming rates for2007. Had these reciprocal roaming rates been in effect for 2006, the net effecton our operating loss for the fiscal year ended December 31, 2006 wouldhave been an increase of approximately $8.2 million. We strongly disagree withSprint’s new roaming rates and intend to vigorously oppose them, including bysubmitting the matter to arbitration or litigation if necessary. If the matteris submitted to an arbitration panel and the arbitration panel imposes ratesdifferent than the ones then in effect, the new rates would be retroactivelyapplied to the appropriate period. However in the meantime, beginning on January 1,2007, the new reciprocal roaming rates went into effect. For a detaileddiscussion of this dispute, see “—Roaming” below and “Item 1A Risk Factors—Beginningon January 1, 2007, the reciprocal per-minute and per-kilobyte roamingrate with Sprint PCS was reduced, resulting in us receiving less roamingrevenue, which will result in an increase in our operating loss.”

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**Litigation AgainstSprint**

On July 15, 2005, our wholly owned subsidiary,iPCS Wireless, Inc., filed a complaint against Sprint and Sprint PCS inthe Circuit Court of Cook County, Illinois. On July 22, 2005, our whollyowned subsidiaries, PerCom and Bright, filed a complaint against Sprint andSprint PCS and Nextel Communications, Inc. in the Court of Chancery of theState of Delaware, New Castle County. The complaints allege, among otherthings, that Sprint’s conduct following the consummation of the merger betweenSprint and Nextel, would breach its exclusivity obligations under ouraffiliation agreements, as amended. We sought, among other things, a temporaryrestraining order (a TRO), a preliminary injunction and a permanent injunctionenjoining Sprint and those acting in concert with it from engaging in conduct thatwould violate our affiliation agreements with Sprint PCS.

On July 28, 2005, we and certain of our whollyowned subsidiaries entered into a Forbearance Agreement with Sprint relating tothe complaints filed against Sprint. The Forbearance Agreement sets forth ouragreement that we would not seek a TRO or a preliminary injunction againstSprint so long as Sprint operates subject to the limitations set forth in theAgreement. Although the Forbearance Agreement expired on January 1, 2006in the territory managed by iPCS Wireless and on August 4, 2006 in theterritory managed by PerCom and Bright, Sprint committed to continue to abideby the terms of the Forbearance Agreement in the territory managed iPCSWireless during the pendency of Sprint’s appeal of the Illinois court(discussed below).

The trial in theDelaware court began in January 2006. On August 4, 2006, the Delawarecourt issued its decision and, on September 7, 2006 issued a final orderand judgment effecting its decision. The final order and judgment providesthat:

·                    Sprintwill violate the implied duty of good faith and fair dealing if it offers iDENproducts and services using the same Sprint brand and marks that plaintiffs(PerCom and Bright) have used or are using in connection with their sale ofSprint PCS products and services (the “Sprint pcs brand and/or marks”) or abrand or mark confusingly similar to the Sprint pcs brand or marks inplaintiffs’ service areas. Sprint may re-brand the legacy Nextel stores inplaintiffs’ service areas, but it must do so in a way that does not create alikelihood of confusion in the minds of consumers as to the sponsor of thestore or which products and services are available in it, and it may not usethe new Sprint logo.

·                    Withinplaintiffs’ service areas, Sprint and those acting in concert with it areenjoined from:

·                     offeringiDEN products and services that use the same or confusingly similar brands ormarks as the Sprint pcs brand or marks; provided that Sprint is not enjoined orotherwise prohibited from conducting national advertising offering iDENproducts and services that use the same or similar brands and marks as theSprint pcs brands or marks, subject to appropriate disclaimers regardingavailability in certain markets; and

·                     re-brandingthe legacy Nextel stores with the new Sprint logo or the same or confusinglysimilar brands or marks as the Sprint pcs brand and marks.

·                    Inlight of certain operational and confidentiality representations made bySprint, plaintiffs’ claims and requests for relief against such future Sprintbehavior were deemed not ripe for adjudication and therefore denied. If,however, Sprint in the future breaches these representations, the court willpromptly entertain a request for appropriate relief.

·                    Plaintiffs’claims for tortious interference and civil conspiracy against Nextel weredismissed with prejudice.

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The trial in theIllinois court was held for 25 days between early March and early July 2006.On August 14, 2006, the Illinois court issued its decision and on September 20,2006 issued a final order effecting its decision. The final order providesthat:

·                    Within180 days of the date of the final order, Sprint and those acting in concertwith it must cease owning, operating, and managing the Nextel wireless networkin iPCS Wireless’s territory.

·                    Sprintshall continue to comply with all terms and conditions of the ForbearanceAgreement.

On September 28, 2006, Sprint appealed the rulingof the Illinois trial court to the Appellate Court of Illinois, First JudicialDistrict. In early October 2006, Sprint requested a stay of the Illinoistrial court’s order pending appeal and an accelerated appeal. On October 13,2006, the Illinois appellate court denied Sprint’s request for an accelerated appealand ordered a stay of the Illinois trial court’s order pending appeal on thecondition that (i) Sprint continue to comply with the ForbearanceAgreement and (ii) Sprint comply with the September 7, 2006 order ofthe Delaware court. Accordingly, Sprint must comply with the ForbearanceAgreement, as well as the order of the Delaware court, in iPCS Wireless’sterritory pending a decision from the Illinois appellate court.

As of the date hereof, theparties are in the briefing stage of the appeal, after which the parties may berequested to present oral arguments before the appellate court. We expect aruling from the appellate court as soon as later this year or early 2008.

**Our Markets**

The following tables list the location, basic tradingarea number, megahertz of spectrum licensed and estimated total population foreach of the basic trading areas that comprise the territory covered under ouraffiliation agreements with Sprint PCS as of December 31, 2006. The firsttable relates to the territory covered under iPCS Wireless’s affiliationagreements with Sprint PCS, while the second table relates to the territorycovered under Horizon PCS’s affiliation agreements with Sprint PCS. The numberof estimated covered population for each state does not represent the number ofour subscribers in such state, nor does it represent the number of subscribersthat we expect to be based in such state.

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*iPCS Wireless, Inc.*

| **Location**                  | ** ** | ** ** | ** ** | **Basic   Trading   Area No.(1)** | ** ** | **MHz of   spectrum** | ** ** | **Estimated   Total   Population(2)** | ** ** | **Estimated   Covered   Population(3)** | ** ** |
|-------------------------------|------------|------------|------------|----------------------------------------|------------|----------------------------|------------|---------------------------------------|------------|-----------------------------------------|------------|
| ILLINOIS                      |       |       |       |                                   |       |                       |       |                                  |       |                                    |       |   |   |   |   |   |   |
| Bloomington                   |       |       | 46         |                                   |       |                       | 10         |                                  |       |                                    | 241,752    |   |   |   |   |   |   |
| Champaign-Urbana              |       |       | 71         |                                   |       |                       | 20         |                                  |       |                                    | 231,281    |   |   |   |   |   |   |
| Clinton-Sterling(4)           |       |       | 86         |                                   |       |                       | 30         |                                  |       |                                    | 148,141    |   |   |   |   |   |   |
| Danville(4)                   |       |       | 103        |                                   |       |                       | 20         |                                  |       |                                    | 110,012    |   |   |   |   |   |   |
| Davenport-Moline(4)           |       |       | 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)(4)        |       |       | 394        |                                   |       |                       | 30         |                                  |       |                                    | 49,120     |   |   |   |   |   |   |
| Springfield                   |       |       | 426        |                                   |       |                       | 10         |                                  |       |                                    | 268,645    |   |   |   |   |   |   |
| Total                         |       |       |       |                                   |       |                       |       |                                  |       |                                    | 2,811,177  |   |   |   | 2,443,094 |   |   |
| INDIANA                       |       |       |       |                                   |       |                       |       |                                  |       |                                    |       |   |   |   |   |   |   |
| Terre Haute (Partial)(4)      |       |       | 442        |                                   |       |                       | 30         |                                  |       |                                    | 2,998      |   |   |   |   |   |   |
| Total                         |       |       |       |                                   |       |                       |       |                                  |       |                                    | 2,998      |   |   |   | 673 |   |   |
| IOWA                          |       |       |       |                                   |       |                       |       |                                  |       |                                    |       |   |   |   |   |   |   |
| Burlington(4)                 |       |       | 61         |                                   |       |                       | 30         |                                  |       |                                    | 136,015    |   |   |   |   |   |   |
| Cedar Rapids                  |       |       | 70         |                                   |       |                       | 30         |                                  |       |                                    | 292,398    |   |   |   |   |   |   |
| Des Moines (Partial)          |       |       | 111        |                                   |       |                       | 30         |                                  |       |                                    | 218,327    |   |   |   |   |   |   |
| Dubuque(4)                    |       |       | 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    |   |   |   |   |   |   |

8

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| Sault Ste. Marie     |   |   | 409    |   |   |   | 30     |   |   |   | 57,605    |   |   |   |      |   |   |
|----------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|-----------|--------|--------|--------|-----------|--------|--------|
| Traverse City        |   |   | 446    |   |   |   | 30     |   |   |   | 250,514   |   |   |   |      |   |   |
| Total                |   |   |   |   |   |   |   |   |   |   | 2,641,859 |   |   |   | 2,081,427 |   |   |
| 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)(4)   |   |   | 332    |   |   |   | 30     |   |   |   | 235,440   |   |   |   |      |   |   |
| Total                |   |   |   |   |   |   |   |   |   |   | 667,879   |   |   |   | 332,448   |   |   |
| TOTAL                |   |   |   |   |   |   |   |   |   |   | 7,775,156 |   |   |   | 5,965,257 |   |   |

----

*Footnotes follow thefollowing table.*

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

| **Location**                      | ** ** | ** ** | ** ** | **Basic   Trading   Area No.(1)** | ** ** | **MHz of   Spectrum** | ** ** | **Estimated   Total   Population(2)** | ** ** | **Estimated   Covered   Population(3)** | ** ** |
|-----------------------------------|------------|------------|------------|----------------------------------------|------------|----------------------------|------------|---------------------------------------|------------|-----------------------------------------|------------|
| INDIANA                           |       |       |       |                                   |       |                       |       |                                  |       |                                    |       |   |   |   |   |   |   |
| Elkhart(4)                        |       |       | 126        |                                   |       |                       | 10         |                                  |       |                                    | 273,472    |   |   |   |   |   |   |
| Fort Wayne(4)                     |       |       | 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(4)                     |       |       | 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)(4)             |       |       | 321        |                                   |       |                       | 30         |                                  |       |                                    | 197,559    |   |   |   |   |   |   |
| Total                             |       |       |       |                                   |       |                       |       |                                  |       |                                    | 197,559    |   |   |   | 142,867 |   |   |
| NEW YORK                          |       |       |       |                                   |       |                       |       |                                  |       |                                    |       |   |   |   |   |   |   |
| Jamestown-Warren-Dunkirk(4)       |       |       | 215        |                                   |       |                       | 30         |                                  |       |                                    | 183,318    |   |   |   |   |   |   |
| Olean-Bradford(4)                 |       |       | 330        |                                   |       |                       | 30         |                                  |       |                                    | 238,615    |   |   |   |   |   |   |
| Total                             |       |       |       |                                   |       |                       |       |                                  |       |                                    | 421,933    |   |   |   | 239,997 |   |   |

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| OHIO                                 |   |   |   |   |   |   |   |   |   |   |      |   |   |   |      |   |   |
|--------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|--------|-----------|--------|--------|--------|-----------|--------|--------|
| Ashtabula                            |   |   | 21     |   |   |   | 10     |   |   |   | 102,559   |   |   |   |      |   |   |
| Athens                               |   |   | 23     |   |   |   | 20     |   |   |   | 130,996   |   |   |   |      |   |   |
| Canton-New  Philadelphia (Partial)   |   |   | 65     |   |   |   | 10     |   |   |   | 36,631    |   |   |   |      |   |   |
| Chillicothe                          |   |   | 80     |   |   |   | 20     |   |   |   | 101,820   |   |   |   |      |   |   |
| Cincinnati  (Partial)(4)             |   |   | 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(4)                        |   |   | 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(4)    |   |   | 229    |   |   |   | 20     |   |   |   | 714,038   |   |   |   |      |   |   |
| Knoxville  (Partial)                 |   |   | 232    |   |   |   | 10     |   |   |   | 112,883   |   |   |   |      |   |   |
| Total                                |   |   |   |   |   |   |   |   |   |   | 826,921   |   |   |   | 599,504   |   |   |
| WEST VIRGINIA                        |   |   |   |   |   |   |   |   |   |   |      |   |   |   |      |   |   |
| Parkersburg-Marietta(4)              |   |   | 342    |   |   |   | 20     |   |   |   | 181,824   |   |   |   |      |   |   |
| Total                                |   |   |   |   |   |   |   |   |   |   | 181,824   |   |   |   | 113,447   |   |   |
| TOTAL                                |   |   |   |   |   |   |   |   |   |   | 7,184,266 |   |   |   | 5,380,444 |   |   |

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(1)          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.

(2)          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.

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(3)          Estimated CoveredPopulation is based on our actual network coverage (neg 103db) measured bythird party proprietary mapping software using the 2000 population countscompiled by the U.S. Census Bureau adjusted by population growth rates fromthird party proprietary demographic databases.

(4)          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.

**Our PCS Network**

Our PCS network connects to the public switchedtelephone network to facilitate the origination and termination of trafficbetween our PCS network and both local exchange and long distance carriers.Through our arrangements with Sprint PCS and Sprint PCS’s arrangements withother wireless service providers, our subscribers have roaming capabilities oncertain other PCS networks utilizing similar technology. See “—Roaming” belowfor a detailed discussion.

As of December 31,2006, our PCS network included approximately 1,600 base stations, or sites, andfive switching centers.

**Roaming**

Generally, roaming occurs when a subscriber of onewireless service provider uses the wireless network of another wireless serviceprovider. We receive roaming revenue when wireless subscribers based outside ofour territory use our PCS network, and we incur roaming expense when oursubscribers use a network outside of our territory. Because we are part of theSprint PCS network, roaming is an important source of revenue for us. For thefiscal year ended December 31, 2006, approximately 33% of our revenue wasfrom roaming. The majority of our roaming revenue (approximately 87% for thefiscal year ended December 31, 2006) comes from Sprint PCS when Sprint PCSsubscribers based outside of our territory use our PCS network. Similarly, themajority of our roaming expense is paid to Sprint PCS when Sprint PCSsubscribers based in our territory use the Sprint PCS network outside of ourterritory. We also receive roaming revenue when non-Sprint PCS subscribers useour PCS network and we incur roaming expense when Sprint PCS subscribers basedin our territory use a non-Sprint PCS network.

We believe that themarkets in which we operate have favorable roaming characteristics that havehistorically resulted in more Sprint PCS inbound roaming than outbound roaming.Although our ratio of inbound to outbound roaming with Sprint PCS declined in2006, compared to 2005, and we expect it to decline further in the future, itremained favorable for the fiscal year ended December 31, 2006 atapproximately 1.4 to 1. We believe that the following characteristics havecontributed to our historically favorable roaming ratio with Sprint PCS:

·                    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 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 increased roaming revenue from wireless subscribers usingour PCS network.

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Our affiliation agreements with Sprint PCS set ourreciprocal roaming rate with Sprint PCS through December 31, 2006 at$0.058 per minute for voice and 2G data, and $0.0020 per kilobyte for 3G data. Thereafter,our affiliation agreements with Sprint PCS provide that the reciprocal roamingrates are to be calculated based upon Sprint’s retail yield for the prior year.In November 2006, Sprint advised us that its estimate of retail yield forvoice and 2G data was $0.045 per minute, and its estimate of retail yield for3G data was $0.0013 per kilobyte. Based on these estimates,  effective January 1, 2007, the roamingrate for voice and 2G data would have been $0.0405 per minute, and the roamingrate for 3G data would have been $0.0012 per kilobyte. On February 22,2007, Sprint notified us that the final reciprocal roaming rates that were putin place by Sprint on January 1, 2007, were $0.0403 per minute for voiceand 2G data and $0.001 per kilobyte for 3G data.

Had these rates of $0.0403per minute and $0.001 per kilobyte been in effect for 2006, our roaming revenuefrom Sprint PCS for the fiscal year ended December 31, 2006 would havedecreased by approximately $42.4 million or 43% and our roaming expense payableto Sprint would have decreased by approximately $34.2 million or 49% resultingin a net increase in our operating loss of approximately $8.2 million. Westrongly disagree with Sprint’s estimated new roaming rates and intend tovigorously oppose them, including by submitting the matter to arbitration orlitigation if necessary. If the matter is submitted to an arbitration panel andthe arbitration panel imposes rates different than the ones then in effect, thenew rates would be retroactively applied to the appropriate period. However inthe meantime, the new rates of $0.0403 per minute and $0.001 per kilobyte wentinto effect on January 1, 2007.

***Resellers***

We also recognize revenuefrom subscribers of various wholesale resellers of personal communicationsservice when those subscribers use our PCS network. These reseller agreementsare negotiated and entered into by Sprint PCS, and we receive a per minute ratefor each minute that the subscribers of these resellers use our PCS network.These subscribers may be based within or outside our territory. As describedbelow in the discussion of our management agreements with Sprint PCS, through December 31,2006, we were required to participate in all resale arrangements that metcertain pricing minimums. Although we are not required to participate in newresale arrangements after December 31, 2006, we may do so and, in anyevent, we have certain continuing obligations with respect to existing resalearrangements.

**Marketing Strategy**

Our marketing strategy is to complement Sprint’snational marketing strategies with techniques tailored to each of the specificmarkets 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 PCS network and the rest of the Sprint PCS network as aunified 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 andservices on a local level in our markets at our cost. We have the right to useany promotional or advertising materials developed by Sprint and only have topay the incremental cost of using those materials, such as the cost of localradio and television advertisement placements, and material costs andincremental printing costs. We also benefit from any advertising or promotionof Sprint PCS products and services by third party retailers in our territory,such as RadioShack and Best Buy. We must pay the cost of specialized Sprintprint advertising by third party retailers. Sprint also runs numerouspromotional campaigns which provide subscribers with 

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benefits such asadditional features at the same rate or free minutes or kilobytes of use forlimited time periods. We offer some of these promotional campaigns to potentialsubscribers in our territory.

***Sales force with local presence.******  ***We haveestablished local sales forces to execute our marketing strategy through ourcompany-owned retail stores, local distributors, directbusiness-to-business contacts and other channels.

**Sales andDistribution**

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 December 31, 2006, we operated 38 Sprint PCS stores within ourterritory. These stores provide us with a local presence and visibility incertain markets within our territory. Following the Sprint PCS model, thesestores are designed to facilitate retail sales, subscriber activation, billcollection and customer service.

***·******                   ***Co-BrandedDealers.***  ***We enter intoagreements with third party agents that operate Sprint PCS stores andkiosks in 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 ofDecember 31, 2006, we had 93 of these branded stores and kiosks operatingin our territory.

***·******                   ***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 December 31, 2006, these retailers had approximately 410locations 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 December 31, 2006, these local third party distributors hadapproximately 115 locations within our licensed territory. We compensate localthird party distributors through commissions for subscriber activations.

***·******                   ***Other.***  ***Sprintmaintains an internet site, www.sprint.com, and an 800 number from whichcustomers can order and pay for a handset and select a rate plan. We recognizethe revenues generated by wireless subscribers in our territory who purchaseSprint PCS products and services over the Sprint internet site or via theSprint maintained 800 number. Additionally, Sprint maintains abusiness-specific sales team that generates sales in our territory.

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***Distribution mix.******  ***Theapproximate percentage of our gross subscriber additions that originated fromeach of our distribution channels for the years ended December 31, 2006and September 30, 2005 is as follows:

| ** **                                                     | ** ** | **Year Ended  December 31,  2006** | ** ** | **Year  Ended  September 30,  2005** | ** ** |
|----------------------------------------------------------------|------------|----------------------------------------------|------------|-----------------------------------------------------|------------|
| Sprint retail  stores                                          |       |                                         | 35         | %                                                   |       |   | 39 | % |   |
| National third  party retail stores                            |       |                                         | 22         |                                                |       |   | 19 |   |   |
| Local third party  distributors (including co-branded dealers) |       |                                         | 22         |                                                |       |   | 24 |   |   |
| Other                                                          |       |                                         | 21         |                                                |       |   | 18 |   |   |
|                                                           |       |                                         | 100        | %                                                   |       |   | 100 | % |   |

 

**Technology**

The entire SprintPCS network, including our PCS network, uses code division multiple access, or CDMA,technology, 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 have upgraded our entire PCS network to 1xRTT,which is the name for the first phase of CDMA’s evolution to third generation,or 3G. We believe that 1xRTT technology provides high capacity and outstandingquality. In addition, 1xRTT enables subscribers to access enhanced dataservices, such as Sprint PCS’s “PCS Vision.” PCS Vision allows subscribers to use their PCS Vision-enableddevices to check e-mail, take and receive pictures, play games with full-colorgraphics and polyphonic sounds and browse the Internet wirelessly with speedsof up to 144 kilobytes per second with average throughput speeds in the rangeof 50-70 kilobytes per second.

Although we are not required to do so, we haveselectively deployed a new wireless high-speed data technology—called EvolutionData Optimized (“EV-DO”)—across a limited portion of our PCS network coveringapproximately 500,000 residents, principally in Grand Rapids, Michigan. EV-DOincreases average mobile-device data speeds up to 10 times faster when comparedto the prior generation technology. In addition, this technology deliversapplications and services available only on EV-DO-capable handsets and laptopsequipped with EV-DO-capable Sprint PCS Connection Cards. The services supportedby this technology, marketed by Sprint and us as “Power Vision”, give consumerand business customers access to numerous sophisticated applications usingEV-DO-capable devices, including mobile desktop, data messaging, imaging,entertainment and location-based applications. Sprint has stated that it plansto have EV-DO coverage across the majority of its PCS network by the end of2007.  As of December 31, 2006,Sprint’s EV-DO technology covers 200 million people.

Beginning in 2007 weintend to selectively deploy the next version of EV-DO technology, EV-DO Rev.A, across portions of our PCS network covering approximately 2.0 millionpeople, and we have entered into an agreement with Nortel Networks to purchaseEV-DO Rev. A equipment and services (see “Item 7—ContractualObligations”). We expect EV-DO Rev. A to further increase wireless data use assubscribers will be able to use the upgraded network to utilize applicationssuch as IP video telephony, high-performance push-to-talk (walkie-talkieservice), multi-user video conferencing, real-time gaming and video streamingof both content and live web cams simultaneously as they become available.Subscribers with enabled devices in these markets should experiencesignificantly faster average upload speeds of 300-400 kbps (compared with50-70 kbps on EV-DO networks). Average download speeds should alsoincrease to 450-800 kbps (compared with 400-700 kbps on EV-DOnetworks). Sprint has begun deploying EV-DO Rev. A across its PCS network andhas stated that it plans for coverage across the majority of the 

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footprintof its PCS network by the end of 2007. As of December 31, 2006, of the 200million people covered by Sprint’s EV-DO network, 75 million were covered byEV-DO Rev. A.

**Competition**

Competition in the wireless telecommunicationsindustry is intense. We principally compete with existing wireless serviceproviders and providers of traditional communications services (such asconventional landline telephone companies). We believe that in our territoryour primary competition is with national and regional wireless serviceproviders, such as ALLTEL, Centennial, AT&T (formerly known as Cingular),U.S. Cellular, Nextel/Nextel Partners, T-Mobile and Verizon. AlthoughSprint and Nextel merged in August 2005, and Nextel Partners (previouslyan affiliate of Nextel present in many of our markets) is now a wholly ownedsubsidiary of Sprint, we continue to compete with Nextel and Nextel Partners inour markets. See “—Litigation Against Sprint.”

Additionally, as potential subscribers find that theircommunications needs may be satisfied by other technologies, we areincreasingly competing for subscribers with providers of other services, suchas cable television, internet companies, satellite-based communications andwireless cable networks. For example, Verizon launched an internet-linked phoneand Sprint and various cable companies have formed a partnership that mayutilize cell phones designed to connect wirelessly to broadband internetconnections using wireless fidelity, or Wi-Fi, technology. As these newtechnologies develop, the level of competition that we face becomes moredifficult to anticipate and, therefore, compete against.

We also face competition from resellers who provide wirelessservices to customers but do not hold FCC licenses or own facilities. Instead,the resellers buy blocks of wireless telephone numbers and capacity from alicensed carrier and resell services through their own distribution network tothe public. Additionally, as the FCC auctions off additional spectrum, we mayface additional competition.

We compete toattract and retain subscribers principally on the basis of:

·       thestrength of the Sprint brand name, services and features;

·       SprintPCS’s network, including its evolving technology;

·       ournetwork coverage and reliability; and

·       thebenefits of CDMA’s 3G technology.

Our ability tocompete successfully will also depend, in part, on our ability to anticipateand respond to various competitive factors affecting the industry, including:

·       newservices and technologies that may be introduced;

·       changesin consumer preferences;

·       demographictrends;

·       economicconditions; and

·       discount pricing strategiesby competitors.

**Employees**

As of December 31,2006, we employed approximately 500 employees. Our employees are notrepresented by any labor union. We believe that we have a good relationshipwith our employees.

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**AffiliationAgreements with Sprint PCS**

Each Sprint PCSAffiliate enters into the following four major affiliation agreements withSprint PCS:

·       amanagement agreement;

·       aservices agreement; and

·       twotrademark and service mark license agreements with different Sprint entities.

Our affiliation agreements with Sprint PCS consist ofthree sets of the foregoing agreements, one set between Sprint PCS and each ofiPCS Wireless, Inc., Horizon Personal Communications, Inc. and BrightPersonal Communications Services, LLC. Except as described herein, the materialterms of each set of affiliation agreements with Sprint PCS are substantiallythe same.

Under our affiliation agreements with Sprint PCS, wehave the exclusive right to provide wireless mobility communications servicesusing the 1900 MHz frequency range under the Sprint brand name in ourterritory. Sprint PCS holds the spectrum licenses. The affiliation agreementswith Sprint PCS require us to interface with the Sprint PCS network by buildingour network to operate on the 10, 20 or 30 MHz wireless personal communicationsservices frequencies licensed to Sprint in the 1900 MHz range.

The following is a description of the material termsand provisions of our affiliation agreements with Sprint PCS.

***The management agreements.  ***Underthe management agreements with Sprint PCS, we have agreed to:

·       own,construct and manage a wireless personal communications services network in ourterritory in compliance with FCC license requirements and other technicalrequirements contained in the management agreements;

·       distributeSprint PCS products and services;

·       useSprint PCS’s and our own distribution channels in our territory;

·       conductadvertising and promotion activities in our territory; and

·       managethat portion of the wireless subscriber base assigned to our territory.

Sprint PCS has theright to monitor our wireless personal communications services networkoperations and the right to access our PCS network, including the right to testand monitor any of our facilities and equipment.

·       *Exclusivity.**  *Weare designated as the only person or entity that is a manager or operator forSprint PCS in our territory. Sprint PCS is prohibited from owning,operating, building or managing another wireless mobility communicationsnetwork using the 1900 MHz frequency range in our territory while ourmanagement agreements are in place and no event has occurred that would permitsuch agreements to terminate. Sprint PCS is permitted to make national sales tocompanies in the covered territory and to permit resale of the Sprint PCSproducts and services in the territory. Our complaints against Sprint alleged,among other things, that the merger between Sprint and Nextel and the operationof the combined companies after the merger would result in a breach of theexclusivity provisions of our affiliation agreements with Sprint PCS.

·       *Network build-out.**  *The management agreements specify the terms ofthe Sprint PCS affiliation, including the required network build-out plan. Wehave agreed to cover a specified percentage of the population within each ofthe markets that comprise our territory by specified dates. Sprint PCS hasnotified us that, based on the information we have provided to Sprint PCS, asof March 26, 2004, iPCS Wireless has completed the required build-out ofits network, including those aspects 

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of thebuild-out that were not required to be completed until a future date, and weare in compliance with all applicable build-out requirements in iPCS Wireless’sterritory. We believe that Horizon PCS is in compliance with allapplicable build-out requirements for its networks. If Sprint PCS decidesto expand our territory, Sprint PCS must provide us with written notice of theproposed expansion 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 agreements identify theproducts and services that we are required to offer in our territory. Theseservices include, but are not limited to, PCS consumer and business productsand services from Sprint PCS available as of the date of the agreement, or asmodified by Sprint PCS. Sprint PCS will use commercially reasonable efforts toprovide adequate quantities of any equipment necessary for us to offer, sell,promote and support the Sprint PCS products and services. We are allowed tosell wireless products and services that are not Sprint PCS products andservices if the offer of those additional products and services does notviolate our obligations under our affiliation agreements with Sprint PCS, causedistribution channel conflicts, materially impede the development of the SprintPCS network, cause consumer confusion with Sprint’s PCS products and servicesor violate the trademark license agreements. We must provide Sprint PCS withnotice that we intend to offer such products or services and Sprint PCS mayobject if it believes that such products or services are confusingly similar toSprint PCS products or services, or if Sprint PCS plans to introduce suchproducts or services as Sprint PCS products or services within the followingsix months. We may also cross-sell services such as specified types oflong distance service, Internet access, handsets and prepaid phone cards withSprint and other Sprint PCS Affiliates. If we decide to use third partiesto provide these services, we must give Sprint PCS an opportunity toprovide the services on the same terms and conditions. We cannot offertraditional telephone services based on wireless technology specificallydesigned for the competitive local exchange market in areas where Sprint ownsthe local telephone company unless we name the Sprint-owned localtelephone company as the exclusive distributor or Sprint PCS approves the termsand conditions.

·       *National sales programs.**  *We are required to participate in the SprintPCS wireless sales programs for sales to Sprint PCS’s corporate accounts andwill pay the expenses and receive the compensation from Sprint PCS relative tosales to customers of those accounts located in our territory. We are alsorequired to use Sprint’s long distance service for calls made from withindesignated portions of our territory to areas outside those designated portionsand to connect our network to the national platforms Sprint PCS uses to provideservices under the management agreements and services agreements. Sprint PCSwill purchase such long distance service from Sprint on our behalf at a priceand terms at least as favorable to Sprint PCS as the best prices and termsSprint Corporation offers to any similarly situated wholesaler. However, we maypurchase private line capacity for call routing directly from SprintCorporation, if we can obtain more favorable terms, and Sprint Corporation hasagreed to provide us with such capacity at the best price offered to similarlysituated third parties. Under the management agreements, we are prohibited fromreselling long distance service to other carriers; however, we may (1) transportlong distance calls for customers, (2) transport long distance calls forresellers when such resale is subject to FCC mandate or when Sprint chooses tomake such resale available, or (3) transport long distance calls forpurposes of roaming.

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·       *Service pricing.**  *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“PCS Vision” plans. We are permitted to establish our own local priceplans for PCS products and services offered only in our territory, subject toSprint PCS’s approval.

·       *Roaming and fees.**  *Weare entitled to receive a weekly fee from Sprint PCS equal to 92% of net “billedrevenues” related to subscriber activity less applicable write-offs, net ofdeposits applied and net of recoveries. Sprint PCS determines the write-offsfor any given time period. Outbound non-Sprint PCS roaming billed tosubscribers based in our territory, proceeds from the sales of handsets andaccessories, amounts collected with respect to taxes and surcharges forenhanced 911 and WLNP and universal service fund charges are not considered “billedrevenues.” Billed revenues generally include all other subscriber accountactivity for Sprint PCS products and services in our territory, which includessuch activities billed to, attributed to or otherwise reflected in subscribers’accounts. We generally are entitled to 100% of the proceeds from customers forequipment and accessories sold and 81.36% of fees for enhanced 911 attributableto subscribers 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.

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 PCS wirelesssubscriber from outside our territory enters our territory and uses ourservices, which is offset against amounts we owe as expenses for every minutethat Sprint PCS 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 voice and2G data subscribers who roam into the other party’s or another Sprint PCSAffiliate’s network was fixed through December 31, 2006 at $0.058 perminute, plus the actual long distance charges incurred. Beginning on January 1,2007, the reciprocal roaming rate will change annually to equal 90% of SprintPCS’s retail yield for voice and 2G data usage from the prior year. Sprint PCS’sretail yield for voice and 2G data usage is defined as Sprint PCS’s averagerevenue per user for voice and 2G data services divided by the average minutesof use per user. As discussed above in “Item 1 Business—Roaming”, on February 22,2007, Sprint notified us that the reciprocal roaming rate for voice and 2G datausage for 2007 would be $0.0403 per minute, down from the previous rate of$0.058 per minute. With respect to certain of our markets in western andeastern Pennsylvania, we receive the benefit of a special reciprocal rate forvoice and 2G data of $0.10 per minute. This special rate will terminate, withrespect to each of these two sets of markets, on the earlier of December 31,2011 or the first day of the calendar month which follows the first calendarquarter during which we achieve a subscriber penetration rate of at least 7% ofour 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 roaming rate for this 3G data was $0.0020 per kilobytethrough December 31, 2006. Beginning on January 1, 2007, the rate forthis service will change annually to equal 90% of Sprint PCS’s retail yield for3G data usage from the prior calendar year; provided that such amount will notbe less than our network costs (including a reasonable return using ourweighted average cost of capital applied against our net investment in ourservice area network) to provide such services. Sprint PCS’s retail yield for3G data usage is defined as Sprint PCS’s average revenue per user for 

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3G data usage divided bythe average kilobytes of use per user. As discussed above in “Item 1 Business—Roaming”,on February 22, 2007, Sprint notified us that the reciprocal roaming ratefor 3G data usage for 2007 would be $0.001 per kilobyte, down from the previousrate of $0.002 per kilobyte.

·       *Vendor purchase agreements.**  *Wemay participate 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.**  *Sprint PCS uses national television, radio,print, outdoor and other advertising campaigns to promote its products. Webenefit from the national advertising. In addition to Sprint PCS’s nationaladvertising campaigns, we advertise and promote Sprint PCS products andservices on a local level in our markets at our cost. We have the right to useany promotion or advertising materials developed by Sprint PCS and only have topay the incremental cost of using those materials, such as the cost of localradio and television advertisement placements and incremental printing costs.Sprint PCS also runs numerous promotional campaigns that provide subscriberswith benefits such as additional features at the same rate or free minutes ofuse for limited time periods. We generally offers these promotional campaignsto potential subscribers in our territory.

·       *Resale of products and services.**  *Sprint PCS may choose to offer a resaleproduct under which third party resellers, known as Mobile Virtual NetworkOperators, or MVNOs, will resell Sprint PCS products and services under brandnames other than “Sprint PCS.” The management agreements provide that wewill participate in all resale arrangements between Sprint PCS and resellersthat are entered into, renewed or extended by 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. With respect to all resalearrangements entered into, renewed or extended by Sprint PCS between April 1,2004 and December 31, 2006, we will receive the amount of fees collectedby Sprint PCS from such resellers on a pass-through basis as payment forthe use of the Sprint PCS network in our territory by customers of suchresellers. Because  we have not reachedagreement with Sprint regarding the terms and conditions under which we wouldcontinue to participate in reseller arrangements entered into, renewed orextended by Sprint after December 31, 2006, other than certain continuingobligations with respect to existing resellers, we are not required toparticipate in resale arrangements between Sprint PCS and resellers enteredinto, renewed or extended by Sprint PCS after December 31, 2006. Forpurposes of determining renewals and extensions of resale arrangements, if anarrangement does not expressly state an initial term, then the arrangement willbe deemed to have a five-year initial term, and if an arrangement states aninitial term in excess of ten years, then the arrangement shall be deemed tohave a ten-year initial term.

·       *Program requirements.**  *We must comply with the Sprint PCS programrequirements for technical standards, customer service standards, roamingcoverage and national and regional distribution and national accounts programs.Some of the technical standards relate to network up-time, dropped calls,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 

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change would either (i) havea negative net present value applying a five-year discounted cash flow model or(ii) cause our combined peak negative cash flow to be an amount greaterthen 3% of our “enterprise value” (defined as the combined book value of ouroutstanding debt and equity less cash) when considered individually, or anamount greater than 5% of our enterprise value when combined with all otherprogram requirement changes within the prior twelve months. Additionally, wecan decline to implement a “non-capital” program requirement change, defined asa change that would not require us to make a capital expenditure in excess of5% of our capital budget, if such change would either (i) cause ourcombined peak negative cash flow to be an amount greater than 3% of our “enterprisevalue” when considered individually, or an amount greater than 5% of ourenterprise value when combined with all other program requirement changeswithin the prior twelve months or (ii) cause a decrease in our forecastedfive-year discounted cash flow of more than 3% on a combined net present valuebasis when considered individually, or more than 5% on a combined net presentvalue basis when combined with all other program requirement changes within theprior twelve months. Notwithstanding the foregoing, we are required toimplement certain program requirement changes, regardless of whether wedetermine that such changes will exceed any of the above referenced parameters.We must implement a capital program requirement change if the capitalrequirement associated with such change is necessary to comply with the networkperformance standards required under our management agreement. Additionally, wemust implement any program requirement change if the change relates to apricing plan or a roaming program and Sprint PCS reasonably determines that thechange must be implemented immediately to respond to competitive market forces.Finally, Sprint PCS may require us to implement any program requirement changeif Sprint PCS compensates us the amount necessary to prevent us from exceedingall of the applicable above-referenced parameters.

·       *Non-competition.**  *We may not offer Sprint PCS products andservices 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 products and services on anon-branded, “private label” basis or under any brand, trademark or trade nameother than the Sprint PCS brands, except for sales to resellers or as otherwisepermitted under the trademark and service mark license agreements.

·       *Transfer of the PCS network.**  *In conjunction with the sale of its wirelessPCS network, Sprint PCS can sell, transfer or assign its wireless PCS networkand its FCC licenses to a third party if the third party agrees to be bound bythe terms of the management agreements and the services agreements.

·       *Change in control.**  *Sprint PCS has the right to withhold itsconsent to any transaction pursuant to which the “ultimate parent” of iPCSWireless,  Horizon Personal Communications,  or Bright PersonalCommunications Services, changes, but this consent cannot be unreasonablywithheld.

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·       *Rights of first refusal.**  *Sprint PCS has rights of first refusal,without stockholder approval, to buy iPCS Wireless’s and Bright PersonalCommunications Services’s assets upon a proposed sale of all or substantiallyall of their respective assets used in the operation of their respectivenetworks.

·       *Term.**  *Theinitial term of iPCS’ management agreement commenced on January 22, 1999and the initial terms of Horizon Personal Communications’s and Bright PersonalCommunication Services’s management agreements commenced on June 8, 1998and October 13, 1999, respectively, and each continues for a period of20 years. Following expiration of the initial term, the managementagreements will automatically renew for three successive 10-year renewalperiods (for a maximum of 50 years including the initial term), unless atleast two years prior to the commencement of any renewal period either partynotifies the other party that it does not wish to renew the applicablemanagement agreement.

·       *Termination of management agreements.**  *Each management agreement can be terminated asa result of the following events:

·        terminationof Sprint PCS’s spectrum licenses in the applicable company’s territory;

·        anuncured breach under our management agreement;

·        ourmanagement agreement not complying with any applicable law in any materialrespect; or

·        thetermination of any of our trademark and service mark license agreements.

The termination ornon-renewal of the management agreement triggers some of our rights and somerights of Sprint PCS. The right of either party to require the other party topurchase or sell the operating assets is discussed below.

If we have the right toterminate a management agreement because of an event of termination caused bySprint PCS, generally we may:

·        inthe case of the agreement with iPCS Wireless, require Sprint PCS to purchaseall of its operating assets used in connection with its network for an amountequal to at least 88% of its “entire business value” (as defined below);provided, however, in BTAs where Sprint PCS owns 10 MHz of spectrum or less, ifSprint PCS acquires additional spectrum, in the entirety of those BTAs iniPCS Wireless’ territory such that Sprint PCS is the licensee of 20 MHz ormore of PCS spectrum in iPCS Wireless’ territory, then the amount must be equalto at least 80% of iPCS Wireless’ “entire business value”;

·        inthe case of the agreements with each of Horizon Personal Communications, Inc.and Bright Personal Communications Services, LLC., require Sprint PCS topurchase either subsidiaries’ operating assets used in connection with itsnetwork for an amount equal to at least 80% of such subsidiary’s “entirebusiness value”;

·        inall areas in its territory where Sprint PCS was the licensee for 20 MHz or moreof the spectrum on the date the applicable management agreement was executed,require Sprint PCS to assign to us, subject to governmental approval, up to 10MHz of licensed spectrum for an amount equal to the greater of either (i) theoriginal cost to Sprint PCS of the license plus any microwave relocation costspaid by Sprint PCS and (ii) 9% of the applicable subsidiary’s “entirebusiness value”; or

·        choosenot to terminate the management agreement and sue Sprint PCS for damages orsubmit the matter to arbitration.

If Sprint PCS has theright to terminate a management agreement because of an event of terminationcaused by us, generally Sprint PCS may:

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·        requireus, without stockholder approval, to sell the operating assets of theapplicable subsidiary to Sprint PCS for an amount equal to 72% of the “entirebusiness value” of the applicable subsidiary;

·        requireus to purchase, subject to governmental approval, up to 10 MHz of licensedspectrum in our territory for an amount equal to the greater of either (i) theoriginal cost to Sprint PCS of the license plus any microwave relocation costspaid by Sprint PCS and (ii) 10% of the “entire business value” of theapplicable subsidiary;

·        takeany action as Sprint PCS deems necessary to cure the breach of the managementagreement, including assuming responsibility for, and operating, the network ofthe applicable subsidiary; or

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

·       *Non-renewal of management agreements.  *IfSprint PCS gives us timely notice that it does not intend to renew a managementagreement, we may:

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

·        inall areas in such subsidiary’s territory where Sprint PCS was the licensee for20 MHz or more of the spectrum on the date the applicable management agreementwas executed, require Sprint PCS to assign to such subsidiary, subject togovernmental approval, up to 10 MHz of licensed spectrum for an amount equal tothe greater of either (i) the original cost to Sprint PCS of the licenseplus any microwave relocation costs paid by Sprint PCS and (ii) 10% ofsuch subsidiary’s “entire business value.”

If we give Sprint PCS timely notice of non-renewal, orwe and Sprint PCS both give notice of non-renewal, or a management agreementexpires with neither party giving a written notice of non-renewal, or ifa management agreement can be terminated for failure to comply with legalrequirements or regulatory considerations, Sprint PCS may, subject to certainlimitations:

·        purchaseall of the applicable subsidiary’s operating assets, without stockholderapproval, for an amount 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.”

·       *Determination of entire business value.  *Ifthe “entire business value” of an operating subsidiary is to be determined,Sprint PCS and iPCS will each select one independent appraiser and the twoappraisers will select a third appraiser. The three appraisers will determinethe subsidiary’s “entire business value” on a going concern basis using thefollowing principles:

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

·        thethen-current customary means of valuing a wireless telecommunications businesswill be used;

·        thebusiness is conducted under the Sprint PCS brands and such company’saffiliation agreements with Sprint PCS;

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·        suchcompany is deemed to own the spectrum and frequencies presently owned by SprintPCS that are used by such company under such company’s affiliation agreementswith 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.  *We are required to obtainand maintain with financially reputable insurers who are licensed to dobusiness in all jurisdictions where any work is performed under such company’smanagement agreements, and who are reasonably acceptable to Sprint PCS, workers’compensation insurance, commercial general liability insurance, businessautomobile insurance, umbrella excess liability insurance and “all risk”property insurance.

·       *Indemnification.  *We have agreed toindemnify Sprint PCS and its directors, officers, employees and agents andrelated parties of Sprint PCS and their directors, officers, employees andagents against any and all claims against any of the foregoing arising from ourviolation of any law, a breach by us of any representation, warranty or covenantcontained in its management agreement or any other agreement between us andSprint PCS, our ownership of the operating assets or the actions or the failureto act of anyone employed or hired by us in the performance of any work underthe management agreement, except that we will not be obligated to indemnifySprint PCS for any claims arising solely from the negligence or willfulmisconduct of Sprint PCS. Sprint PCS has agreed to indemnify us and ourdirectors, officers, employees and agents against all claims against any of theforegoing arising from Sprint PCS’s violation of any law, from Sprint PCS’sbreach of any representation, warranty or covenant contained in our managementagreements or any other agreement between us and Sprint PCS, and, solely withrespect to the former Horizon PCS subsidiaries, from the actions or the failureto act of anyone who is employed by Sprint PCS in the performance of any workunder the management agreements between Sprint and such subsidiary, exceptSprint PCS will not be obligated to indemnify such subsidiary for any claimsarising solely from such subsidiary’s negligence or willful misconduct.

·       *Dispute resolution.  *If the partiescannot resolve any dispute between themselves, then our management agreementsprovide that the parties will continue to operate under our affiliationagreements with Sprint PCS and that either party may file suit in a court ofcompetent jurisdiction or commence an arbitration proceeding. Absent ourexpress agreement with Sprint PCS to submit an issue or dispute to arbitration,neither party can be compelled to submit a dispute to arbitration.

·       *Most favored nation clause.  *Wegenerally have the right to amend our management agreements or servicesagreements to obtain the most favorable terms provided under a managementagreement or services agreement between Sprint PCS and another Sprint PCSaffiliate of similar size (defined as having at least three million coveredpersons) if, prior to December 31, 2006, Sprint PCS amended the terms ofany of those agreements of another Sprint PCS affiliate of similar size ina manner that is more favorable than the terms of our agreements. This right isonly effective, however, if we agree to accept all of the terms and conditionsset forth in the other agreements agreed to after the date this right becameeffective; provided, however, that no specific changes will be made to such ouragreements if such changes were made to the other Sprint PCS Affiliates’agreements (1) solely because the affiliate owns spectrum on which itsnetwork operates (unless such Sprint PCS Affiliate acquired the spectrum fromSprint PCS after the date this right became effective), (2) such changeswere compelled by a law or regulation inapplicable to us, (3) such changeswere due solely to a change in a build-out plan or (4) such changes relateto unique terms or conditions.

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

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The “Sprint CCPU services” are support servicesprovided by Sprint relating to billing, customer care, collections, networkoperations control center monitoring, national platform, informationtechnology, interconnectivity, voice mail, directory assistance, operatorservices and roaming clearinghouse services. We agreed to continue to purchasethe Sprint CCPU service from Sprint PCS through December 31, 2006 at a monthlyrate per subscriber of $7.00 for 2005 and $6.75 for 2006. We also agreed thatthe monthly rate for the next three years for Sprint CCPU service would bereset to a mutually acceptable amount based on the amount necessary to recoverSprint PCS’s reasonable costs for providing Sprint CCPU services; provided,however that the monthly rate will not exceed $8.50 per subscriber. Sprint hasnotified us that, effective January 1, 2007, the monthly rate persubscriber for the Sprint CCPU services will be $7.50 for 2007, $7.09 for 2008and $6.81 for 2009. If the 2007 rate for Sprint CCPU services had been ineffect in 2006, we would have incurred additional expenses to Sprint ofapproximately $4.7 million for the fiscal year ended December 31, 2006. Westrongly disagree with Sprint’s proposed new rates for Sprint CCPU servicesand, pursuant to the terms of the services agreements, have elected to submitthe determination of the new rates for these services to binding arbitrationand to continue to obtain these services from Sprint at the amounts to bedetermined by the arbitration panel. If the arbitration panel imposes ratesdifferent than the ones proposed by Sprint, then the rates imposed by the panelwould be retroactively applied to January 1, 2007. However in themeantime, as required by the services agreements, we began paying the ratesproposed by Sprint for Sprint CCPU services on January 1, 2007.

The “Sprint CPGA services” are services provided bySprint relating to subscriber activation, credit verification, handsetlogistics and handset carrying and obsolescence costs. The cost for Sprint CPGAservice is included as a part of the total costs that we use to calculate thenon-GAAP financial measure that we use called “CPGA.”  We agreed to continue to purchase the SprintCPGA service from Sprint PCS through December 31, 2006 at a monthlyrate of $23.00 per gross subscriber addition in the service area managed byiPCS Wireless’s area, and $22.00 per gross subscriber addition in the servicesareas of Horizon Personal Communications and Bright Personal CommunicationsServices. We also agreed that the monthly rate for the next three years forSprint CPGA services would be reset to a mutually acceptable amount based onthe amount necessary to recover Sprint PCS’s reasonable costs for providingSprint CPGA services. Sprint has notified us that, effective January 1,2007, the monthly rate per subscriber activation for the Sprint CPGA serviceswill be $20.09 for 2007, $19.41 for 2008 and $18.58 for 2009 in our entireterritory. If the 2007 rate for Sprint CPGA services had been in effect in2006, we would have incurred $0.5 million less of expenses to Sprint for thefiscal year ended December 31, 2006. Although the rates that Sprint hasproposed are lower than the prior rates, we strongly disagree with the newrates and, pursuant to the terms of the services agreements, have elected tosubmit the determination of the new rates for these services to bindingarbitration and to continue to obtain these services from Sprint at the amountsto be determined by the arbitration panel. If the arbitration panel imposesrates different than the ones proposed by Sprint, then the rates imposed by thepanel would be retroactively applied to January 1, 2007. However in themeantime, as required by the services agreements, we began paying the ratesproposed by Sprint for Sprint CPGA services on January 1, 2007.

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Sprint PCS may contract with third parties to provideexpertise and services identical or similar to those to be made available orprovided to us. We have agreed not to use the services performed bySprint PCS in connection with any other business or outside our markets.Sprint PCS must give us nine months’ notice if it discontinues a significantservice, including customer service, billing or collections. If we wish tocontinue to receive that service, Sprint PCS will use commercially reasonableefforts to help us provide the service ourselves or find another vendor toprovide the service and to facilitate any transition.

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 andservice 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 canterminate our trademark and service mark license agreements if we file forbankruptcy or materially breach such agreements or if the associated managementagreement is terminated. We can terminate our trademark and service marklicense agreements upon Sprint’s or Sprint PCS’s abandonment of thelicensed marks or if Sprint or Sprint PCS files for bankruptcy or theassociated management agreement is terminated. Sprint can assign its interestsin the licensed marks to a third party if that third party agrees to be boundby the terms of the company’s trademark and service mark license agreements.

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**REGULATORY ENVIRONMENT**

**Regulation of 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;

·       requireservice providers to participate in number “pooling” programs and maintaindetailed records of numbers used subject to audit;

·       allocatespectrum for personal communications service and other wireless services andestablish procedures, including auction procedures, for awarding licenses toutilize spectrum for provision 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 ananticompetitive effect. Our merger with Horizon PCS did not implicate the FCC’srevised spectrum aggregation policy.

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**Conditions ofWireless Personal Communications Services Licenses**

Wireless personal communications service licenses aregenerally granted for ten-year terms conditioned upon timely compliance withthe FCC’s build-out requirements. Pursuant to the FCC’s build-out requirements,all 30 MHz broadband wireless personal communications service licensees mustconstruct facilities that offer coverage to one-third of the population intheir licensed areas within five years and to two-thirds of the population insuch areas within ten years, and all 10 MHz broadband wireless personalcommunications services licensees must construct facilities that offer coverageto at least one-quarter of the population in their licensed areas within fiveyears or make a showing of “substantial service” within that five-year period.

If the build-out requirements are not met, wirelesspersonal communications service licenses could be forfeited. Sprint has made allof the required build-out showings and filed renewal applications for thepersonal communications service licenses that we use for our network.

Although we use Sprint PCS’s licenses to providewireless service as a PCS Affiliate of Sprint, following the consummation ofour merger with Horizon PCS, we own one FCC license for personal communicationsservices for the Chillicothe, Ohio market, and a related FCC license formicrowave radio backhaul/control facilities. On October 25, 2006, the FCCgranted our application for renewal of the Chillicothe license. The Chillicothelicense does not currently play a significant role in our provision of personalcommunications service as a PCS Affiliate of Sprint.

The FCC also requires licensees to maintain controlover their licenses, which means that Sprint must maintain a sufficient degreeof supervisory power over our activities involving Sprint’s spectrum. Ouraffiliation agreements with Sprint PCS reflect an arrangement that the partiesbelieve meet the FCC requirements for licensee control 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.

**Wireless PersonalCommunications Services License Renewal**

Wireless personalcommunications service licensees can renew their licenses for additionalten-year terms. Wireless personal communications service renewal applications arenot 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” in this context as service that is sound, favorable andsubstantially above the level of mediocre service that might minimally warrantrenewal. The FCC’s renewal expectancy and procedures make it likely that Sprintwill retain the wireless personal communications service licenses that wemanage for the foreseeable future. It will also help us to retain theChillicothe personal communications service license we hold, if our businessplan calls for retention of this license.

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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 CMRSproviders for the termination of traffic. Interconnection agreements arenegotiated on a statewide 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 personal communications service networks of Sprint withlocal, national and international telecommunications networks. They alsodetermine the nature and amount of revenues that Sprint can receive forterminating calls originating on the networks of local exchange and othertelecommunications carriers.

**Other FCCRequirements**

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 FCCissued a *Memorandum Opinion and Order and Notice of ProposedRulemaking (WT Docket Nos. 00-193 and 05-265)* to examinewhether its current rules regarding roaming requirements applicable toCMRS licensees (*i.e.*, cellular, broadbandpersonal communications service and covered SMR) should be modified given thecurrent state of the CMRS market. Pursuant to this rulemaking, the FCC mayproceed with the proposal to simply eliminate the current manual registrationroaming requirement and not adopt an automatic roaming requirement, thusessentially leaving the future of roaming to “market forces”.

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 personal communications servicenetwork upgrade to support enhanced 911 service by December 31, 2002 andbegan providing a specified level of enhanced 911 service by June 30, 2002.In January of 2007, the FCC 

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denied a request by Sprintfor a two-year extension of time (until December 31, 2007) to meet the 95%penetration requirement for location-capable handsets. The FCC imposed furtherreporting requirements on Sprint, and it referred the matter to the FCCEnforcement Bureau for appropriate action.

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 electronic surveillanceby federal, state and local law enforcement personnel. Wireless personalcommunications service providers were generally required to comply with thecurrent industry CALEA capability standard, known as J-STD-025, by June 30,2000, for the electronic interception of voice communications, and with certainadditional standards by September 30, 2001. If they offer broadbandInternet access and voice over Internet Protocol (“VOIP”) services. Wirelesspersonal communications service providers are also required to implement “packet-mode”electronic interception capabilities for them. These “packet mode” CALEAcapabilities are presently required to be implemented by May 14, 2007. Althoughthe status of the CALEA standards for “packet mode” communications remainsunclear and “packet mode” CALEA software is not readily available, the FCC maynot extend the May 14 deadline. At the present time, most wireline andwireless carriers are considering Trusted Third Party options, Internetbackbone provider services, and custom CALEA solutions for their “packet mode”services if the May 14 deadline holds.

Most wireless personal communications serviceproviders are ineligible for federal reimbursement for the software andhardware upgrades necessary to comply with the CALEA capability and capacityrequirements. In sum, CALEA capability and capacity requirements are likely toimpose some additional CALEA compliance costs upon Sprint and the PCSAffiliates 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 personal communications service carriers.

**FederalTower/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”).The FCC and relevant authorities have entered into a second ProgrammaticAgreement in 2005, which will allow the construction of antenna towers incertain industrial and other settings without SHPO approval.

**Review of UniversalService 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 servicecontribution based only on the interstate portion of their revenues, but theUniversal Service Reform Act (if enacted) could broaden the USF contributionbase to include all wireless revenues.

**Partitioning/Disaggregation/SpectrumLeasing**

FCC rules allow broadband wireless personalcommunications services licensees to partition their market areas and/or todisaggregate their assigned spectrum and to transfer partial market areas orspectrum assignments to eligible third parties. These rules may enable usto purchase 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.

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**Wireless FacilitiesSiting**

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 addition, so long as a wireless network complies with theFCC’s rules, states and localities are prohibited from using radio frequencyhealth effects as a basis to regulate the placement, construction or operationof wireless facilities. These rules are designed to make it possible forSprint and the PCS Affiliates of Sprint and other wireless entities to acquirenecessary tower sites in the face of local zoning opposition and delays.However, states may require wireless providers to demonstrate that they complywith FCC regulations concerning the health effects of radio frequencyradiation. In addition, state and local safety and aesthetic regulations/zoningordinances apply to wireless providers, to the extent that such regulations arenot found by a court to prohibit the provision of wireless services ordiscriminate among wireless providers. Moreover, wireless providers must seekState Historic Preservation Office approval of tower or antenna siting actionsas described above; and wireless providers must also make filings necessary toregister to do business in each state 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.

**Other StateRegulation of Wireless Service**

With the rapid growth and penetration of wireless serviceshas 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 ofthe Communications Act preempts states from regulating the rates and entry ofCMRS providers. However, states may petition the FCC to regulate the rates andentry of those providers and the FCC may grant that petition if the statedemonstrates 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 universal 

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service support regimes onwireless and other telecommunications carriers, similar to the requirementsthat 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 entry of wireless personal communicationsservices and other wireless carriers into their jurisdictions via certificationand similar requirements, and from delaying or inhibiting aggressive or flexiblewireless price competition after entry.

**InterferenceTemperature**

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.

**CustomerProprietary Network Information**

The FCC regulates thehandling and disclosure of a personal communications service customer’spersonal and usage information, known as “Customer Proprietary NetworkInformatiom” or “CPNI.”  In January 2006,the FCC required all wireless and wireline service providers, includingresellers, to file with the Commission a certification of compliance with theCPNI rules, and a statement describing in detail how compliance is achieved. TheFCC and Congress are in the process of strengthening the requirements forsafeguarding CPNI, in response to reports of abuses of this information bypersons engaging in identity theft and other improper practices. The newstatutory and regulatory requirements (which can apply to us contractually andthrough our resale of Sprint services) may create new costs and procedures forour operation. Steeper FCC fines and other sanctions can be expected forviolations.

**Competition fromNew Licenses**

The FCC held a spectrumauction for licenses in the Advanced Wireless Services (or “AWS”) spectrum bandin 2006. The AWS spectrum is located immediately adjacent to the personalcommunications service spectrum band, and a least some of the winners of theAWS auction can be expected to compete with us for customers seeking personalcommunications services. In addition, the FCC is expected to auction asignificant number of licenses in the 700 MHz spectrum band in late 2007 or early2008, pursuant to a Congressional directive. It can be expected that at leastsome of these 700 MHz auction winners may wish to compete with us for customersseeking personal communications services. It is difficult to assess how suchcompetition will impact our operations.

**Studies ConcerningHealth Effects of Personal Wireless Device Use**

Certain research studies have suggested a link betweenthe use of personal wireless devices and adverse health effects, includingcancer. There have been numerous studies on this subject before, and theresults have been conflicting. Other studies have indicated that any potentialfor concern can be addressed by modifications to the wireless devices. Thewireless industry, including Sprint, is monitoring this issue. We will adjustour operations and sale of customer devices as advised by Sprint. In the eventthat a direct linkage is demonstrated between personal wireless devices alreadysold by us and certain health conditions, we will have to address any resultingliability claims.

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**ITEM1A.**   RISK FACTORS

**Risks Related to Our Business, Strategy and Operations**

***Oursubstantial leverage could adversely affect our ability to incur additionalindebtedness if needed and could negatively affect our ability to service ourdebt.***

We are highly leveraged.As of December 31, 2006, our total outstanding debt, including capitallease obligations but excluding the markup of the Horizon PCS debt to fairvalue at the time of our merger, was approximately $290.5 million. Suchindebtedness represented approximately 58% of our total capitalization as of December 31,2006. The indentures that govern our senior notes permit us and oursubsidiaries to incur additional indebtedness subject to certain limitations.The incurrence of additional indebtedness could further exacerbate the risksassociated with our leverage. If we incur additional indebtedness that ranksequally with the senior notes, the holders of that debt will be entitled toshare ratably with the holders of the senior notes in any proceeds distributedin connection with any insolvency, liquidation, reorganization, dissolution orother winding-up of us.

Oursubstantial indebtedness could adversely affect our financial health by, amongother things:

·       increasingour vulnerability to adverse economic conditions;

·       limitingour ability to obtain any additional financing we may need to operate, developand expand our business;

·       limitingour flexibility in planning for, or reacting to, changes in our business andthe industry in which we operate;

·       requiringus to dedicate a substantial portion of any cash flow from our operatingactivities to service our debt, which reduces the funds available foroperations and future business opportunities; and

·       potentiallymaking us more highly leveraged than our competitors, which could decrease ourability to compete in our industry.

The ability to makepayments on our debt will depend upon our future operating performance, whichis subject to general economic and competitive conditions, the final outcome ofour litigation with Sprint,  and tofinancial, business and other factors, many of which we cannot control. If thecash flow from our operating activities is insufficient, we may take actions,such as delaying or reducing capital expenditures, attempting to restructure orrefinance our debt, selling assets or operations or seeking additional equitycapital. Any or all of these actions may not be sufficient to allow us toservice our debt obligations. Further, we may be unable to take any of theseactions on satisfactory terms in a timely manner or at all. We may need torefinance all or a portion of our indebtedness on or before maturity. We maynot be able to refinance any of out indebtedness on commercially reasonableterms or at all. The indentures that govern the senior notes limit our abilityto take several of these actions. Our failure to generate sufficient funds topay our debts or to successfully undertake any of these actions could, amongother things, result in our bankruptcy.

***Weemerged from bankruptcy in 2004 and we have a history of net losses. We mayincur additional losses in the future, and our operating results couldfluctuate significantly on a quarterly and annual basis.***

iPCS emerged frombankruptcy in July 2004 and Horizon PCS emerged from bankruptcy in October 2004.Prior to our emergence from bankruptcy and the implementation of fresh-startaccounting, iPCS had a net accumulated deficiency of $393.5 million and HorizonPCS had a net accumulated deficiency of $685.9 million. Our future operatingprofitability and cash flows from operating activities will depend upon manyfactors, including, among others, the resolution of our currently pendingdisputes with Sprint (including the final outcome of our litigation andarbitration proceedings against Sprint), our ability 

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tomarket Sprint PCS products and services, achieve projected market penetrationand manage subscriber turnover rates. If we do not achieve and maintainoperating profitability and positive cash flows from operating activities, wemay be unable to service our debt obligations. Our inability to satisfy ourobligations may result in our restructuring or bankruptcy.

In addition, our futureoperating results and cash flows will be subject to quarterly and annualfluctuations due to many factors, some of which are outside our control. Thesefactors include increased costs we may incur in connection with the furtherdevelopment, expansion and upgrade of our PCS network and fluctuations in thedemands for our services. See “—We may incur substantial ongoing capitalexpenditures, and we may not have adequate capital resources to fund all of ourdesired capital expenditures.” We may not achieve or sustain profitability orpositive cash flows. To the extent our quarterly or annual results of operationsfluctuate significantly, we will be unable to satisfy our debt obligations. Ourinability to satisfy our obligations may result in our restructuring orbankruptcy.

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

We intend to continue togrow our subscriber base by expanding our sales distribution channels,particularly the number of Sprint co-branded dealers and company-ownedretail stores, and by increasing our sales and marketing activities. If we seekto accelerate our subscriber growth, we will incur significant up-frontsubscriber acquisition expenses, which initially will result in reduced levelsof cash flows from operating activities as compared to our most recent priorperiods. Moreover, we increasingly must attract a greater proportion of our newsubscribers from our competitor’s existing subscriber bases rather than firsttime purchasers. In addition, to the extent our subscriber growth includes ahigher percentage of sub-prime credit subscribers, our churn and bad debtexpense may increase, and also may impair our ability to maintain and increaseour revenues and cause a deterioration in our operating margin. Moreover,despite incurring increased sales and marketing expenses, we may not succeed ingrowing our subscriber base.

***Werely on independent third parties for a sizable percentage of our sales.***

For the fiscal year ended December 31,2006, approximately 65% of our gross subscriber additions originated fromdistribution channels operated by Sprint and independent third parties, namelynational retailers (for example, Costco, Best Buy, RadioShack) and local thirdparties (including Sprint co-branded dealers). For the three months ended December 31,2006, approximately 15% of our gross subscriber additions were generated by RadioShack,while another approximately 15% were generated by three independent local thirdparties. Although we believe that utilizing these independent third parties isbeneficial to us, it also presents a number of drawbacks, such as limitedcontrol. These independent third parties have a significant amount offlexibility in running their operations. Their employees are not our employees.Although we can exercise control over the local third parties through ourdistribution agreements, we have much less control over national retailers astheir agreements are with Sprint. To the extent that these third parties do notperform well, experience financial difficulty, reduce their distribution pointsor emphasize our competitor products and services over Sprint PCS products andservices, our results of operations may be adversely affected.

***Wehave experienced an increase in our bad debt expense that may have an adverseeffect on our results and operations.***

Our bad debt expense forthe fiscal year ended December 31, 2006 was $10.9 million, compared with$2.1 million for the fiscal year ended September 30, 2005. We believe thatthis increase in bad debt expense resulted from increases in our number ofsubscribers, especially sub-prime subscribers, and an increase in credit-relateddeactivations. At the same time, the average amount written-off per accountincreased. We increasingly must attract a greater proportion of our newcustomers from our competitors’ existing customer bases rather than from firsttime purchasers of wireless services. The higher overall market penetrationalso means that customers purchasing wireless services for the first time, onaverage, may have 

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a lowercredit rating than existing wireless users, which generally results in a higherrate of credit-related deactivations and increased bad debt expense.

***Ourfinancial condition and results of operations are not comparable to thefinancial condition and results of operations reflected in our historicalfinancial statements.***

As a result of iPCS’semergence from bankruptcy, we are subject to fresh-start accounting prescribedby generally accepted accounting principles. In accordance with fresh-startaccounting, assets and liabilities were recorded at fair value, with theenterprise value that was determined in connection with the reorganization.Accordingly, iPCS’s financial condition and results of operations for theperiods subsequent to July 1, 2004 are not comparable to the financialcondition or results of operations for the periods as of and prior to July 2,2004 reflected in our historical consolidated financial statements in thisreport. Additionally, we merged with Horizon PCS effective July 1, 2005. Accordingly,our financial condition and results of operation for periods prior to July 1,2005 are not comparable to our financial conditions and results of operationsfor period after July 1, 2005.

***Beginningon January 1, 2007, the reciprocal per-minute and per-kilobyte roamingrate with Sprint PCS was reduced, resulting in us receiving less roamingrevenue, which will result in an increase in our operating loss.***

As discussed above in “Item1 Business—Roaming”, Sprint has implemented lower reciprocal roaming rates for2007. Because a substantial portion of our revenue is derived from roamingrevenue when subscribers of Sprint PCS based outside of our territory roam ontoour PCS network, this reduction in the reciprocal roaming rates will decreasethe net amount earned from Sprint PCS and decrease our revenues. Had theselower reciprocal roaming rates been in effect for 2006, our roaming revenuefrom Sprint PCS for the fiscal year ended December 31, 2006 would havedecreased by approximately $42.4 million, or 43%, and our roaming expensepayable to Sprint would have decreased by approximately $34.2 million, or 49%,resulting in a net increase in our operating loss of approximately $8.2 million.We strongly disagree with Sprint’s proposed new roaming rates and intend tovigorously oppose them when they are finalized, including by submitting thematter to arbitration or litigation if necessary. If the matter is submitted toan arbitration panel and the arbitration panel imposes rates different than theones then in effect, the new rates would be retroactively applied to theappropriate period. However in the meantime, beginning on January 1, 2007,the new reciprocal roaming rates went into effect.

***If wereceive lower revenues or incur more fees than we anticipate for PCS roamingwith Sprint PCS, our results of operations may be negatively affected.***

As our subscriber basegrows, we expect to incur more fees for PCS roaming. Similarly, to the extentthat Sprint’s subscriber base does not grow, we expect to receive lowerrevenues for PCS roaming. Additionally, Sprint PCS subscribers based in ourterritory may spend more time outside our territory than we anticipate—resultingin us incurring more fees for PCS roaming—and wireless subscribers from outsideour territory may spend less time in our territory or may use our services lessthan we anticipate—resulting in us receiving lower revenues for PCS roaming. Ourratio of inbound to outbound roaming with Sprint PCS has been declining and isexpected to continue to decline over time. This ratio was approximately 1.3 to1 for the quarter ended December 31, 2006, down from 1.5 to 1 for thequarter ended December 31, 2005. Continuing declines in this ratio willnegatively affect our operating results.

***If welose the right to install our equipment on wireless towers or are unable torenew expiring leases for wireless towers on favorable terms or at all, our businessand results of operations could be adversely impacted.***

All of our base stationsare installed on leased facilities that may be shared with one or more otherwireless communications providers. In addition, a large portion of these leasedtower sites are owned by a limited number of tower companies. If a masteragreement with one of these tower companies were to terminate, or if one ofthese tower companies were unable to support the use of its tower sites by us,we would have to find new sites or may be required to rebuild the affectedportion of our PCS network. In 

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addition,the concentration of our tower leases with a limited number of tower companiescould adversely affect our results of operations and financial condition if anyof our operating subsidiaries is unable to renew its expiring leases with thesetower companies either on favorable terms or at all. If any of the towerleasing companies with whom we do business should experience severe financialdifficulties, or file for bankruptcy protection, our ability to use our towerscould be adversely affected. That, in turn, would adversely affect ourbusiness, revenues and financial condition if a material number of towers wereinvolved.

***Wedepend on other telecommunications companies for some services that, if delayedor interrupted, could delay our expected increases in subscribers and revenues.***

We depend on othertelecommunications companies to provide facilities and transport tointerconnect our PCS network and to connect our PCS network with the landlinetelephone system. Without these services, we could not offer Sprint PCSservices to our subscribers in some areas. From time to time, we haveexperienced delays in obtaining facilities and transport from some of thesecompanies, and in obtaining local telephone numbers for use by our subscribers,which are sometimes in short supply, and we may continue to experience delaysand interruptions in our network operations and our business may suffer. Delaysor interruptions could also result in a breach of our affiliation agreementswith Sprint PCS, subjecting these agreements to potential termination by SprintPCS.

***We relyexclusively on Nortel Networks for our network equipment. This equipment isgenerally not interchangeable/interoperable with network equipment from otherproviders and we would be materially adversely affected if we could not obtainadditional network equipment or support from Nortel Networks timely or at alland, in any event, cost effectively.***

Our PCS network equipmentis supplied solely by Nortel Networks. If additional equipment or support isneeded for expansion or repair of our network, it generally must come fromNortel Networks in order to be compatible with our existing network equipment. IfNortel Networks were to cease or delay supplying equipment, we would beprevented or delayed in expanding or repairing our network. Any inability toexpand or repair our network could have a material adverse effect on us. Inaddition, Nortel Networks potentially could exert significant bargaining powerover price, quality, warranty claims or other terms relating to its equipment. Additionally,if Nortel Networks has a significant disruption in its business or fails, ourbusiness and results of operations would likely be negatively impacted.

***Alternativetechnologies, including WiMax, and current uncertainties in the wireless andoverall communications market may make the technology we use obsolete or reducedemand for PCS products and services.***

The wirelesstelecommunications industry is experiencing significant and rapid technologicalchange, as evidenced by the continued pace of upgrades in existing digitalwireless systems, evolving industry standards, ongoing improvements in thecapacity and quality of digital technology, shorter development cycles for newproducts and enhancements and changes in end-user requirements and preferences.We rely on Sprint to keep pace with these technological changes. If Sprint isunable to keep pace with these technological changes or other changes in the wirelesscommunications market, the technology used in our PCS network or our businessstrategy may become obsolete. Other carriers are in the process of upgradingtheir networks to 3G technologies such as EV-DO, Universal MobileTelecommunications System (UMTS) or High-Speed Downlink Packet Access (HSDPA).We have deployed a 100% CDMA 1xRTT network across all our operating markets,and are currently offering PCS Vision services in markets representing 100% ofthe covered population in our territory. Sprint PCS has deployed EV-DOtechnology in portions of its service area and its EV-DO service, marketed as “PowerVision,” is accessible to about 200 million people as of December 31,2006. Although we are not required under our affiliation agreements with Sprintto deploy EV-DO across our network, we deployed EV-DO in Grand Rapids, Michiganand may similarly elect to deploy the next generation of EV-DO technology,EV-DO Rev. A, in portions of our service area, which would significantlyincrease our capital expenditures. If we fail to 

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implementsignificant technological changes, we may also lose subscribers and/or roamingrevenue and our ability to maintain and increase revenues will be impaired.

The convergence ofwireless, landline telephone service, cable television and Internet access isalso creating uncertainties in the overall communications market. Theproliferation of Wi-Fi and the potential application of WiMAX create additionaluncertainty about how customers will communicate wirelessly in 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 has interests in developing technologies anddelivery channels, such as its recently announced WiMax initiative and itsjoint venture with certain cable companies, including Comcast, Time Warner andCablevision, that may have a material adverse effect on our business.

***Wemay incur substantial ongoing capital expenditures, and we may not haveadequate capital resources to fund all of our desired capital expenditures.***

We incur capitalexpenditures on an ongoing basis to maintain our network, to enhance theefficiency of our operations and to remain technologically current and competitive.Our total capital expenditures were $17.4 million for the fiscal yearended September 30, 2005 and $44.5 million for the fiscal year ended December 31,2006, including approximately $22 million related to our Nortel swap. Weexpect to incur capital expenditures in the range of approximately $38 to$42 million in 2007, including approximately $10 million for EV-DORev. A. We anticipate that our available cash resources and cash generatedfrom operations will be sufficient to fund our operating needs and capitalexpenditures for the foreseeable future. However, if we require additionalfunds to fund our capital expenditures, we may not be able to obtain them onfavorable terms, or at all. If we cannot maintain or upgrade our network as werequire, it could have a material adverse effect on our business, financialcondition and results of operations. In addition, the terms of the indenturesgoverning our senior notes may restrict our ability to obtain such financing.

***Acquisitionsmay be difficult to integrate, disrupt our business or divert the attention ofour management.***

Weconsider acquisition opportunities in the ordinary course of business, some ofwhich could be material in size and scope. There cannot be any assurance thatwe will be able to consummate any such transactions that we consider, or thatfuture acquisitions will be consummated at acceptable prices or on favorableterms. Acquisitions involve several risks, including:

·       thediversion of management’s attention to the acquired businesses and theiremployees and the expansion of operations;

·       theintegration of acquired businesses;

·       increasingdemands on our operational systems; and

·       possibleadverse effects on our operating results, particularly in the first severalreporting periods after any such acquisition is consummated.

Inaddition, we may finance any future acquisition with debt, which would increaseour interest costs. If we are unable to successfully integrate and manageacquired businesses, or if acquired businesses perform poorly, then ourbusiness and financial results may suffer. It is possible that the businessesthat we may acquire in the future may perform worse than expected or prove tobe more difficult to integrate and manage than expected. If that happens, theremay be a material adverse effect on our business and financial results for anumber of reasons, including:

·       wemay have to devote unanticipated financial and management resources to acquiredbusinesses;

·       wemay not be able to realize expected operating efficiencies or integrationbenefits from our acquisitions;

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·       wemay have to write-off goodwill or other intangible assets; and

·       wemay incur unforeseen obligations or liabilities in connection withacquisitions.

***Theloss of the officers and skilled employees upon whom we depend to operate ourbusiness could adversely affect our operating results.***

Our business is managed bya small number of executive officers on whom we depend to operate our business.We believe that our future success will depend in part on our continued abilityto retain these executive officers and to attract and retain other highlyqualified technical and management personnel. We may not be successful inretaining key personnel or in attracting and retaining other highly qualifiedtechnical and management personnel. Moreover, the uncertainly surrounding ourrelationship with Sprint, including Sprint’s acquisition of all but four PCSAffiliates of Sprint (including us), makes it more difficult for us to retainour existing employees and more difficult and expensive to fill vacancies. Forexample, these factors could make it more difficult and expensive to hire a newchief operating officer. The loss of the officers and skilled employees uponwhom we depend to operate our business or our inability to fill vacancies couldadversely affect operating results.

***Failureto achieve and maintain effective internal controls in accordance with Section 404of the Sarbanes-Oxley Act could result in a loss of investor confidenceregarding our financial reports or may have a material adverse effect on ourbusiness.***

We are required to complywith the reporting requirements of Section 404 of the Sarbanes-Oxley Actof 2002. In doing so, we may identify significant deficiencies or errors thatare not currently known to us. As a public company, we will be required toreport, among other things, control deficiencies that constitute a “materialweakness” or changes in internal controls that, or that are reasonably likelyto, materially affect internal controls over financial reporting. A “materialweakness” is a significant deficiency or combination of significantdeficiencies that results in more than a remote likelihood that a materialmisstatement of the annual or interim financial statements will not beprevented or detected.

Testing and maintaininginternal controls can divert our management’s attention from other matters thatare important to our business. We may not be able to conclude on an ongoingbasis that we have effective internal controls over financial reporting inaccordance with Section 404 or our independent registered publicaccounting firm may not be able or willing to issue a favorable assessment ifwe conclude that our internal controls over financial reporting areineffective. If we are unable to conclude that we have effective internalcontrols over financial reporting or our independent registered publicaccounting firm is unable to provide us with an unqualified report as requiredby Section 404, investors could lose confidence in our reported financialinformation and our company, which could negatively impact the value of oursecurities and could impact our ability to raise additional financing if neededin the future.

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

***Ourability to conduct our business would be severely restricted if Sprint PCSterminates our affiliation agreements.***

Our relationship withSprint PCS is governed by our affiliation agreements with it. We do not own anylicenses that are used in our PCS network and our business depends on thecontinued effectiveness of these affiliation agreements with Sprint PCS. SprintPCS may be able to terminate our affiliation agreements with it if wematerially breach the terms of the agreements. These terms include operationaland network requirements that are extremely technical and detailed and apply toeach retail store, cell site and switch site. Many of these operational andnetwork requirements can be changed by Sprint PCS, in certain cases, withlittle notice. As a result, we may not always be in compliance with allrequirements of our affiliation agreements with Sprint PCS. Sprint PCS conductsperiodic audits of compliance with various aspects of its program guidelinesand identifies 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 

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agreements,such failure could limit our ability to obtain any additional financing that wemay need in order to remedy such noncompliance. Additionally, our substantialindebtedness and our emergence from bankruptcy could further limit our abilityto obtain additional financing. If we cannot obtain additional financing, wemay be unable to remedy such noncompliance, thereby resulting in a materialbreach of our affiliation agreements which could lead to their termination bySprint PCS. If Sprint PCS terminates or fails to renew our affiliationagreements or fails to perform its obligations under those agreements, ourability to conduct business would be severely restricted.

***If wematerially breach our affiliation agreements with Sprint PCS, Sprint PCS mayhave the right to purchase our operating assets at a discount to market value.***

Our affiliation agreementswith Sprint PCS require that we provide network coverage to a minimum networkcoverage area within specified time frames, which we believe we have satisfied,and that we meet and maintain Sprint PCS’ technical and customer servicerequirements. A failure to meet Sprint PCS’s technical or customer servicerequirements contained in the affiliation agreements, among other things, wouldconstitute a material breach of the agreements, which could lead to terminationby Sprint PCS. We may amend our affiliation agreements with Sprint PCS in thefuture to expand our network coverage. Our affiliation agreements with SprintPCS provide that upon the occurrence of an event of termination caused by ourbreach of such agreements, Sprint PCS has the right to, among other things,purchase our operating assets without stockholder approval and for a priceequal to 72% of our “entire business value,” which is our appraised valuedetermined using certain principles set forth in our affiliation agreementswith Sprint PCS and based on the price a willing buyer would pay a willingseller for our entire business as a going concern. See “—Affiliation Agreementswith Sprint PCS” for a description of how we calculate our entire businessvalue.

***SprintPCS may make decisions that could reduce our revenues, increase our expensesand/or our capital expenditure requirements and make our affiliaterelationships with Sprint PCS less advantageous than expected.***

Under our affiliationagreements with Sprint PCS, Sprint PCS has a substantial amount of control overfactors that significantly affect the conduct of our business. We are requiredto offer PCS subscriber pricing plans from Sprint PCS designated for regionalor national offerings, including “Fair & Flexible” plans, “Free &Clear” plans and “PCS Vision” plans. Sprint PCS prices subscriber pricing plansbased on its own objectives and could set price levels or change othercharacteristics of its plans in a way that may not be economically advantageousfor our business, which would result in decreased revenues and/or increasedexpenses. In addition, subject to certain limitations set forth in ouraffiliation agreements with Sprint PCS, Sprint PCS may alter its network andtechnical requirements 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 specificcircumstances and without stockholder approval, Sprint PCS may purchase ouroperating assets or capital stock at a discount. In addition, Sprint PCS hasthe right to withhold its consent to any transaction in which the “ultimateparent” of any of our operating subsidiaries that is the party to theaffiliation agreements with Sprint PCS, changes. We must obtain the consent ofSprint PCS prior to any assignment by us of our affiliation agreements with it.Sprint PCS also has a right of first refusal if we decide to sell our operatingassets to a third party. We are also subject to a number of restrictions on thetransfer of our business, including a prohibition on the sale of our operatingassets to competitors of Sprint PCS. These restrictions and the otherrestrictions contained in our affiliation agreements with Sprint PCS restrictour ability to sell our business, may reduce the value a buyer would be willingto pay for our business, and may reduce our “entire business value,” which isour appraised value determined using principles set forth in our affiliationagreements with Sprint PCS and based on the price a willing buyer would pay awilling seller for our entire business as a going concern.

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

Werely on Sprint PCS’s internal support systems, including customer care, billingand back office support. Sprint PCS has entered into business processoutsourcing agreements with third parties to provide these services. Sprint PCSmay not be able to successfully add system capacity, its internal supportsystems may not be adequate and the third parties that Sprint PCS hascontracted with may not perform their obligations. In addition, we rely onSprint for the proper application of credit policies, the processing andcollection of receivables and bad debt collection. Problems with Sprint PCS’internal support systems could cause:

·       delaysor problems in our operations or services;

·       delaysor difficulty in gaining access to subscriber and financial information;

·       aloss of subscribers;

·       anincrease in bad debt expense; and 

·       anincrease in the costs of customer care, billing and back-office services.

Additionally, Sprint hasacquired six PCS Affiliates of Sprint, leaving four remaining PCS Affiliates ofSprint, including us. As a result of these acquisitions, Sprint may not devoteas much of its personnel and resources to the remaining PCS Affiliates ofSprint, which may have a material adverse effect on our operations.

As a result of the mergerbetween Sprint and Nextel, we expect that the combined company will integratethe internal support systems of Sprint and Nextel, which could include themigration of certain customers onto different systems. For example, Sprint hasannounced that it is implementing a common platform for customer billing.Customer migrations or systems conversions, or any delay or problems associatedwith these changes, may result in difficulty in gaining access to subscriberand financial information, increased customer dissatisfaction leading toincreased churn, and increased costs in providing such internal supportsystems; each of which could have a material adverse effect on our operations.

Should Sprint PCS fail todeliver timely and accurate information, this may lead to adverse short-termdecisions and inaccurate assumptions in our business plan. It could alsoadversely affect our cash flows, because Sprint PCS collects our receivablesand remits to us a net amount that is based on the financial information itproduces for us.

***Thecosts we incur for certain Sprint-provided back-office services increased on January 1,2007, and may increase further.***

As discussed more fully in“Item 1 Business—Affiliation Agreements with Sprint PCS—services agreements”,Sprint has notified us that, effective January 1, 2007, theper-average-monthly-subscriber rate we pay for certain back-office servicesprovided by Sprint increased from $6.75 per average monthly subscriber to $7.50for 2007, $7.09 for 2008 and $6.81 for 2009. If the 2007 rate for theseservices had been in effect in 2006, we would have incurred additional expensesto Sprint of approximately $4.7 million for the fiscal year ended December 31,2006. Although we strongly disagree with Sprint’s proposed new rates and,pursuant to the terms of our affiliation agreements with Sprint, have submittedthe determination of the new rates to binding arbitration, beginning on January 1,2007, we started paying Sprint’s proposed rate. If the arbitration panelimposes rates different than the ones proposed by Sprint, then the ratesimposed by the panel would be retroactively applied to January 1, 2007. Inaddition, because we incur the majority of these costs on aper-average-monthly-subscriber basis we expect the aggregate cost for suchservices to increase as the number of our subscribers increases.

Sprint PCS has the rightto terminate any service provided under our affiliation agreements upon ninemonths’ prior written notice; provided, however, that if we desire to continuereceiving such service, Sprint 

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PCS hasagreed 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.

***IfSprint PCS does not maintain control over its licensed spectrum, ouraffiliation agreements with Sprint PCS may be terminated which will negativelyaffect our operating results.***

Sprint PCS, not us, holdsthe licenses necessary to provide wireless services in our territory. The FCCrequires that licensees like Sprint PCS maintain control of their licensedsystems and not delegate control to third-party operators or managers withoutthe FCC’s consent. Our affiliation agreements with Sprint PCS reflect anarrangement that the parties believe meets the FCC requirements for licenseecontrol of licensed spectrum. However, if the FCC were to determine that any ofour affiliation agreements with Sprint PCS need to be modified to increase thelevel of licensee control, we have agreed with Sprint PCS to use our bestefforts to modify the agreements to comply with applicable law. If we cannotagree 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.

***TheFCC may fail to renew the Sprint PCS wireless licenses under certaincircumstances, which would prevent us from providing wireless services.***

Sprint PCS wirelesslicenses are subject to renewal and revocation by the FCC. Certain Sprint PCSwireless licenses in our territory are scheduled to expire in 2007. Sprint hasfiled renewal applications for those licenses expiring in April 2007 andwe expect Sprint to file renewal applications for those licenses expiring inJune 2007. We expect that all of these licenses will be renewed by Sprint foradditional ten-year terms. The FCC has adopted specific standards that apply towireless personal communications services license renewals. Any failure bySprint PCS or us to comply with these standards could result in the non-renewalof the Sprint PCS licenses for our territory. Additionally, if Sprint PCS doesnot demonstrate to the FCC that Sprint PCS has met the constructionrequirements for each of its wireless personal communications serviceslicenses, it can lose those licenses. If Sprint PCS loses its licenses in ourterritory for any of these reasons, we and our subsidiaries would not be ableto provide wireless services without obtaining rights to other licenses. IfSprint PCS loses its licenses in another territory, Sprint PCS or theapplicable PCS Affiliate of Sprint would not be able to provide wirelessservices without obtaining rights to other licenses and our ability to offernationwide calling plans would be diminished and potentially more costly.

***Partsof our territory have limited licensed spectrum, which may adversely affect thequality of our service.***

In the majority of ourmarkets, Sprint PCS has licenses covering 20 MHz or 30 MHz of spectrum.However, Sprint PCS has licenses covering only 10 MHz in approximately 25% 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 call volumeor changes or upgrades in technology and may lead to increased dropped callsand 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. It is more difficult andexpensive to deploy EV-DO Rev. A in these markets, and, as a result, wemay not be able to remain technologically competitive in these markets.

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***Werely on Sprint PCS for a substantial amount of our financial information. Ifthat information is not accurate, our ability to accurately report ourfinancial data could be adversely affected, and the investment community couldlose confidence in us.***

Under our affiliationagreements, Sprint performs our billing, customer care and collections, PCSnetwork systems support, inventory logistics, long-distance transport andnational third party sales support. The data provided by Sprint related tothese functions it performs for us is the primary source for our servicerevenue and for a significant portion of our cost of service and roaming, andselling and marketing expenses included in our statement of operations. We usethis data to record our financial results and prepare our financial statements.If Sprint fails to deliver timely and accurate information, this may lead us tomake adverse decisions and inaccurate assumptions for future business plans andcould also negatively affect our cash flows as Sprint collects our receivablesand remits a net amount to us that is based on the financial information itprovides. In addition, delays and inaccuracies which are material couldadversely affect the effectiveness of our disclosure controls and proceduresand if we later identify material errors in that data provided to us, we may berequired to restate our financial statements. If that occurs as to us or anyother PCS Affiliate of Sprint, investors and securities analysts may loseconfidence in us.

***IfSprint does not succeed, our business may not succeed.***

If Sprint has asignificant disruption to its business plan or PCS network, fails to operateits business in an efficient manner or suffers a weakening of its brand name,our business and results of operations would likely be negatively impacted. Forexample for the three months ended December 31, 2006, Sprint reportednegative post-paid subscriber additions. If Sprint should have significantfinancial problems, including bankruptcy, our business would suffer materialadverse consequences, which could include termination or revision of ouraffiliation agreements with Sprint PCS.

***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.***

As discussed above in “—LitigationAgainst Sprint,” we have been, and continue to be, engaged in litigation withSprint regarding its merger with Nextel. Although the Delaware ruling is final,the Illinois ruling is not, as Sprint has appealed the ruling.

The Delaware ruling doesnot protect us from all of the ways in which Sprint may operate the legacyNextel business in a manner that would have a material adverse effect on us. Tothe extent that Sprint desires to exploit limitations of the Delaware ruling,our business may be adversely affected. For example, the ruling provides thatSprint may engage in limited re-branding of the legacy Nextel stores in ourservice area. We do not know how or if Sprint will attempt to re-brand thelegacy Nextel stores in our service area. Additionally, in light of certainrepresentations that Sprint made to the Delaware court, the ruling does notimpose additional restrictions on Sprint’s use of our confidential information.It is difficult for us to monitor Sprint’s compliance with its representationsas to confidentiality. If we believe that Sprint is violating the Delawareruling, we may need to enforce the ruling through contempt proceedings inDelaware. On December 11, 2006, we filed a motion for contempt againstSprint in the Delaware court, which was denied without limiting our right toseek clarification of the final ruling or pursue additional relief with respectto Sprint’s use of certain brands and marks (such as “Fair & Flexible”)to offer iDEN products and services in the former Horizon PCS markets. Wecannot predict the outcome of these proceedings.

With respect to theIllinois ruling, we cannot predict the outcome of the appeal. If we do notprevail on appeal, Sprint may be permitted to change how it operates the legacyNextel business in our territory in a manner that has an adverse effect on ourbusiness and operations. If we do not prevail on appeal, our stock price may beadversely affected. Additionally, the Illinois ruling has been stayed pendingappeal. As a condition of the stay, Sprint must continue to comply with theForbearance Agreement—which by its terms has expired—and the Delaware ruling iniPCS Wireless’s service area. As noted above, the Delaware ruling does notprotect us from all of the ways in which Sprint may operate the legacy Nextelbusiness in a 

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mannerthat would have a material adverse effect on us. The protections afforded bythe Forbearance Agreement are limited as well.

Notwithstanding therulings and the Forbearance Agreement, Sprint’s ownership and operation of thelegacy Nextel business in our territory has, among other things, causedcustomer confusion in our territory that is having an adverse effect on ourbusiness and operations.

We do not know whether itis possible to reach agreement on mutually satisfactory terms for revisedaffiliation agreements, particularly in light of the lawsuits. Any such revisedaffiliation agreements may require us to modify our exclusivity, makesignificant payments to lease or acquire assets relating to the legacy Nextel networkin our territory, purchase legacy Nextel subscribers in our territory and/orcommit to a further build-out and expansion of our PCS network beyond what isrequired under our existing affiliation agreements with Sprint PCS. There is noassurance that we will have adequate funds on hand or the ability to borrowsuch funds in order to acquire the network assets or subscribers or tootherwise modify our PCS network. In addition, any borrowing would increase ourexisting substantial leverage.

We believe that our stockprice has been, and continues to be, affected by market speculation involvingpotential changes in our relationship with Sprint as a result of theSprint/Nextel merger and the final outcome of our disputes with Sprint,including our pending litigation and arbitration proceedings against Sprint. Webelieve that the market speculation has been further fueled by changes in therelationships between Sprint and other PCS Affiliates of Sprint, includingSprint’s acquisition of six other PCS Affiliates of Sprint since August 2005.Accordingly, the price of our common stock has been, and may continue to be,volatile.

Moreover, as a result ofSprint’s acquisitions of PCS Affiliates, Sprint may not devote as much of itspersonnel and resources to us and the other three PCS Affiliates of Sprint,which may have a material adverse effect on our business and results ofoperations.

**Risks Related to the Wireless TelecommunicationsIndustry**

***Wemay experience a high rate of subscriber turnover, which would adversely affectour financial performance.***

Thewireless telecommunications industry in general, and Sprint PCS and the PCSAffiliates of Sprint in particular, including us, have experienced a high rateof subscriber turnover, commonly known as churn. We believe this higher churnrate has resulted from Sprint PCS’s programs for marketing its services tosub-prime credit subscribers and Sprint PCS’ focus on adding subscribers fromthe consumer segment of the industry, rather than the business segment. As aresult, we have seen an increase in bad debt expense related to our subscribers,which also leads to higher churn. Additionally, significant competition in ourindustry and general economic conditions may cause our future churn rate to behigher than our historical rate. Factors that may contribute to higher churninclude:

·       inabilityor unwillingness of subscribers to pay, resulting in credit-related deactivations,which accounted for approximately 42% of our subscriber deactivations for thefiscal year ended December 31, 2006;

·       subscribermix and credit class, particularly sub-prime credit subscribers, whichaccounted for approximately 25% of our subscriber base as of December 31,2006;

·       attractivenessof our competitors’ products, services and pricing, coupled with the wirelesslocal number portability (“WLNP”) requirement enabling subscribers to keeptheir telephone numbers and thereby, making turnover easier;

·       networkperformance and coverage relative to our competitors;

·       customerservice;

·       failureby Sprint or us to offer competitive rates, service offerings, handset pricingand customer retention benefits to existing customers;

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·       anyincreased prices for services in the future;

·       customerconfusion as a result of the Sprint-Nextel merger; and

·       anyfuture changes by us in the products and services we offer or in the termsunder which we offer our products or services, especially to sub-prime creditsubscribers.

A high rate of subscriber turnover could adverselyaffect our competitive position, liquidity, financial position, results ofoperations and our costs of, or losses incurred in, obtaining new subscribers,especially because we subsidize most of the costs of initial purchases ofhandsets by subscribers

***Regulation bygovernment agencies and taxing authorities may increase our costs of providingservice or require us to change our services.***

Our operations and those of Sprint PCS are subject tovarying degrees of regulation by the FCC, the Federal Trade Commission, theFederal Aviation Administration, the Environmental Protection Agency, theOccupational Safety and Health Administration, and state and local regulatoryagencies and legislative bodies. Adverse decisions or regulations of theseregulatory bodies could negatively impact our operations and those of SprintPCS, thereby increasing our costs of doing business. For example, changes intax laws or the interpretation of existing tax laws by state and localauthorities could subject us to increased income, sales, gross receipts orother tax costs or require us to alter the structure of our currentrelationship with Sprint PCS.

***Concernsover health risks and safety posed by the use of wireless handsets may reduceconsumer demand for our services.***

Mediareports have suggested that radio frequency emissions from wireless handsetsmay:

·       belinked to various health problems resulting from continued or excessive use,including cancer;

·       interferewith various electronic medical devices, including hearing aids and pacemakers;and

·       causeexplosions if used while fueling an automobile.

Widespread concerns overradio frequency emissions may expose us to potential litigation, discourage theuse of wireless handsets or result in additional regulation imposingrestrictions or increasing requirements on the location and operation of cellsites or the use or design of wireless handsets. Any resulting decrease indemand for these services or increase in the cost of complying with additionalregulations could impair our ability to profitably operate our business. Suchconcerns may result in the loss of subscribers, which may impair our ability tomaintain and increase revenues and lower our operating margin. In addition, wemay need to dedicate a larger portion of any cash flow from our operatingactivities to comply with such additional regulations.

Due to safety concerns,some state and local legislatures have passed or are considering legislationrestricting the use of wireless telephones while driving automobiles. Concernsover safety risks and the effect of future legislation, if adopted in the areaswe serve, could limit our ability to market and sell our wireless services. Inaddition, it may discourage use of our wireless devices and decrease ourrevenues from subscribers who now use their wireless telephones while driving.Further, litigation relating to accidents, deaths or serious bodily injuriesallegedly incurred as a result of wireless telephone use while driving couldresult in damage awards, adverse publicity and further governmental regulation.

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***Market saturationcould limit or decrease our rate of new subscriber additions and increase coststo keep our current subscribers.***

Intense competition in the wireless telecommunicationsindustry could cause prices for wireless products and services to continue todecline. If prices drop, our rate of net subscriber additions will take ongreater significance in improving our financial condition and results ofoperations. However, as our and our competitors’ penetration rates in ourmarkets increase over time, our rate of adding net subscribers could decrease.If this decrease were to happen, it could materially adversely affect our liquidity,financial condition and results of operations. In addition, we may incuradditional costs through equipment upgrades and other retention costs to keepour current subscribers from switching to our competitors.

***Significant competition in the wireless telecommunicationsindustry may result in our competitors offering new services or lower prices,which could prevent us from operating profitably and may cause prices for ourservices to continue to decline in the future.***

Competition in thewireless telecommunications industry is intense. Competition has caused, and weanticipate that competition will continue to cause, the market prices fortwo-way wireless products and services to decline. Our ability to compete willdepend, in part, on our ability to anticipate and respond to variouscompetitive factors affecting the wireless telecommunications industry. Ifprices for our services continue to decline, it could adversely affect ourability to increase revenue, which would have a material adverse effect on ourfinancial condition and our results of operations. In addition, the viabilityof our business depends upon, among other things, our ability to compete withother wireless providers on reliability, quality of service, availability ofvoice and data features and customer care. In addition, the pricing of ourservices may be affected by competition, including the entry of new serviceproviders into our markets. Furthermore, there has been a recent trend in thewireless telecommunications industry toward consolidation of wireless serviceproviders, which we expect to lead to larger competitors over time.

Our dependence on SprintPCS to develop competitive products and services and the requirement that weobtain Sprint PCS’ consent to sell non-Sprint approved equipment may limit ourability to keep pace with our competitors on the introduction of new products,services and equipment. Some of our competitors are larger than us, possessgreater resources and more extensive coverage areas, and may market other services,such as landline telephone service, cable television and Internet access, alongwith their wireless communications services. In addition, we may be at acompetitive disadvantage because we may be more highly leveraged than some ofour 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 subscriberbase is composed of individual consumers, and in the event of an economicdownturn in the United States in which spending by individual consumers dropssignificantly, our business may be negatively affected.

**ITEM1B.**       UNRESOLVED STAFF COMMENTS

None.

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**ITEM2.**                PROPERTIES

As of December 31,2006, we do not own any real property that is used in our business. We leaseoffice space in various locations, including for our corporate headquarters inSchaumburg, Illinois. We also lease locations for our retail stores, ourswitching centers and space on wireless towers for our base stations. As of December 31,2006, we leased 38 retail stores, five switching centers and space on1,600 wireless structures, primarily towers. During the fiscalyear ended December 31, 2006, we sold the four remaining wirelesstowers that we owned. Accordingly, we currently do not own any wireless towers.We believe that our remaining facilities are adequate for our currentoperations and that additional leased space can be obtained if needed oncommercially reasonable terms.

**ITEM3.**                LEGAL PROCEEDINGS

As discussed more fully in“Item 1 Business—Litigation Against Sprint”, we are currently engaged in legalproceedings before the Appellate Court of Illinois, First Judicial District. OnSeptember 28, 2006, Sprint appealed the ruling of the Illinois trial courtfinding, among other things, that Sprint and those acting in concert with itmust, within 180 days of the date of the final order, cease owning, operating,and managing the Nextel wireless network in iPCS Wireless’s territory. On October 13,2006, the Illinois appellate court denied Sprint’s request for an acceleratedappeal and ordered a stay of the Illinois trial court’s order pending appeal onthe condition that (i) Sprint continue to comply with the ForbearanceAgreement and (ii) Sprint comply with the September 7, 2006 order ofthe Delaware court, in both cases, only with respect to iPCS Wireless’sterritory. Accordingly, Sprint must comply with the Forbearance Agreement, aswell as the order of the Delaware court, in iPCS Wireless’s territory pending adecision from the Illinois appellate court. As of the date hereof, the partiesare in the briefing stage of the appeal, after which the parties may berequested to present oral arguments before the appellate court. We expect aruling from the appellate court as soon as later this year or early 2008.

In addition to theforegoing, from time to time, we are involved in various legal proceedingsrelating to claims arising in the ordinary course of business. We are notcurrently a party to any such legal proceedings, the adverse outcome to which,individually or in the aggregate, is expected to have a material adverse effecton 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**

**ITEM 5.   MARKET FOR REGISTRANT’S COMMON EQUITY,RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES**

*Market Information.*   Ourcommon stock began trading on the Pink Sheets LLC on August 3, 2004 and onthe OTC Bulletin Board on April 29, 2005, under the symbol “IPCX”. Ourcommon stock began being quoted on the Nasdaq Capital Market on March 17,2006 and on the Nasdaq Global Select Market on February 27, 2007, in eachcase under the symbol “IPCS”.

For the quarters ended December 31,2006, September 30, 2006 and June 30, 2006, the table below setsforth the high and low closing sales prices of our common stock as reported onthe Nasdaq Capital Market. For the quarters ended March 31, 2006 andprior, the table below sets forth on a per share basis the high and low pricesfor our common stock as reported by the Pink Sheets LLC.

| ** **                                     | ** ** | **High** | ** ** | **Low** | ** ** |
|------------------------------------------------|------------|----------|------------|---------|------------|
| **Fiscal Year Ended  December 31, 2006**  |       |     |       |    |       |
| Fourth Quarter Ended December 31, 2006    |       | $        | 55.43      |    | $          | 51.84 |   |
| Third Quarter Ended September 30, 2006    |       | $        | 53.55      |    | $          | 44.06 |   |
| Second Quarter Ended June 30, 2006        |       | $        | 52.00      |    | $          | 45.86 |   |
| First Quarter Ended March 31, 2006        |       | $        | 48.50      |    | $          | 46.00 |   |
| **Quarter Ended December 31, 2005**       |       | $        | 48.25      |    | $          | 38.30 |   |
| **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 |   |

* *

*As of March 6, 2007, there wereapproximately 65 record holders of our common stock. The number of recordholders does not include beneficial owners whose shares are held in the namesof banks, brokers, nominees or other fiduciaries.*

*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.”

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*Performance Graph*.*  *The performance graph belowcompares the cumulative total stockholder return on our common stock from March 17,2006 (the effective date of our registration under the Securities Exchange Actof 1934) through December 31, 2006 against the cumulative total return ofThe Nasdaq Stock Market Composite Index and The Nasdaq Stock MarketTelecommunications Index.

Thegraph assumes that $100.00 was invested in our common stock and in each indexon March 17, 2006. The total return for the common stock and the indicesused assumes the reinvestment of dividends, even though dividends have neverbeen declared on our common stock. The comparisons in the graph below are basedupon historical data and are not indicative of, nor intended to forecast,future performance of our common stock.

|                            | ** ** | **03/17/06** | ** ** | **06/30/06** | ** ** | **09/30/06** | ** ** | **12/31/06** | ** ** |
|----------------------------|------------|--------------|------------|--------------|------------|--------------|------------|--------------|------------|
| iPCS                       |       |         | 100.00     |         |       |         | 100.84     |         |       |   | 111.80 |   |   |   | 115.57 |   |   |
| Nasdaq  Telecommunications |       |         | 100.00     |         |       |         | 107.02     |         |       |   | 114.98 |   |   |   | 128.44 |   |   |
| Nasdaq Composite Index     |       |         | 100.00     |         |       |         | 93.35      |         |       |   | 97.07 |   |   |   | 104.05 |   |   |

 

48

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**ITEM 6.   SELECTEDFINANCIAL DATA**

We derived the following balance sheet data as of December 31,2006 and 2005 and statement of operations data for the fiscal year ended December 31,2006, the period ended December 31, 2005, the fiscal year ended September 30,2005, and the periods ended September 30, 2004 and July 1, 2004 fromour audited consolidated financial statements, included elsewhere in thisreport. We derived the following balance sheet data as of September 30,2005, 2004, 2003 and 2002 and the statement of operations for the fiscal yearended September 30, 2003 and 2002 from our audited consolidated financialstatements, which are not included in this report.

In accordance with the American Institute of CertifiedPublic Accountants Statement of Position 90-7, “Financial Reporting by Entitiesin Reorganization under the Bankruptcy Code”, we adopted fresh-start accountingas of July 1, 2004, and our emergence from Chapter 11 resulted in a newreporting entity. Results for the periods as of and prior to July 1, 2004have been designated as results of the “Predecessor Company” and results forthe periods subsequent to July 1, 2004 have been designated as results ofthe “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 fiscal yearended September 30, 2005 include results for Horizon PCS from the date ofacquisition (July 1, 2005) and, accordingly, are not comparable to priorperiods.

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.

49

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|                                                                                              | ** ** | **Successor Company**                   | ** ** | **Predecessor Company**                          | ** ** |
|----------------------------------------------------------------------------------------------|------------|----------------------------------------------|------------|-------------------------------------------------------|------------|
| ** **                                                                                   | ** ** | **Year Ended  December 31,  2006** | ** ** | **Three Months  Ended  December 31,  2005** | ** ** | **Year Ended  September 30,  2005** | ** ** | **Period from  July 2, 2004  through  September 30,   2004** | ** ** | **Period from  October 1,  2003 through  July 1,  2004** | ** ** | **Year Ended  September 30,  2003** | ** ** | **Year Ended  September 30,  2002** | ** ** |
| **Statement of Operations Data:**                                                            | ** ** |                                         | ** ** | ** **                                            |       |   | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |
| Revenues:                                                                                    |       |                                         |       |                                                  |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Service revenue                                                                              |       |                                         | $          | 316,513                                               |       |   |   | $ | 70,996 |   |   |   | $ | 189,177 |   |   |   | $ | 37,909 |   |   |   | $ | 107,097 |   |   |   | $ | 145,249 |   |   |   | $ | 116,187 |   |   |
| Roaming revenue                                                                              |       |                                         | 161,848    |                                                  |       |   | 36,071 |   |   |   | 82,959 |   |   |   | 15,829 |   |   |   | 34,525 |   |   |   | 44,220 |   |   |   | 47,303 |   |   |
| Equipment and  other revenue                                                                 |       |                                         | 14,061     |                                                  |       |   | 2,485 |   |   |   | 7,911 |   |   |   | 1,644 |   |   |   | 4,240 |   |   |   | 4,824 |   |   |   | 6,931 |   |   |
| Total revenues                                                                               |       |                                         | 492,422    |                                                  |       |   | 109,552 |   |   |   | 280,047 |   |   |   | 55,382 |   |   |   | 145,862 |   |   |   | 194,293 |   |   |   | 170,421 |   |   |
| Operating expenses:                                                                          |       |                                         |       |                                                  |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cost of service  and roaming (exclusive of depreciation, as shown separately below)          |       |                                         | (285,979   | )                                                     |       |   | (62,766 | ) |   |   | (153,058 | ) |   |   | (29,090 | ) |   |   | (83,230 | ) |   |   | (130,065 | ) |   |   | (128,997 | ) |   |
| Cost of equipment                                                                            |       |                                         | (41,707    | )                                                     |       |   | (9,150 | ) |   |   | (27,260 | ) |   |   | (5,584 | ) |   |   | (12,801 | ) |   |   | (11,797 | ) |   |   | (20,484 | ) |   |
| Selling and  marketing                                                                       |       |                                         | (74,293    | )                                                     |       |   | (18,216 | ) |   |   | (44,424 | ) |   |   | (8,001 | ) |   |   | (20,976 | ) |   |   | (27,343 | ) |   |   | (44,983 | ) |   |
| General and  administrative expenses(a)                                                      |       |                                         | (20,944    | )                                                     |       |   | (7,907 | ) |   |   | (13,189 | ) |   |   | (1,714 | ) |   |   | (3,550 | ) |   |   | (5,546 | ) |   |   | (28,174 | ) |   |
| Reorganization  income (expense)(b)                                                          |       |                                         | —     |                                                  |       |   | — |   |   |   | — |   |   |   | — |   |   |   | 60,797 |   |   |   | (31,093 | ) |   |   | — |   |   |
| Depreciation                                                                                 |       |                                         | (50,522    | )                                                     |       |   | (12,039 | ) |   |   | (53,700 | ) |   |   | (8,790 | ) |   |   | (28,596 | ) |   |   | (37,274 | ) |   |   | (33,687 | ) |   |
| Amortization of  intangible assets                                                           |       |                                         | (37,958    | )                                                     |       |   | (9,489 | ) |   |   | (18,126 | ) |   |   | (3,051 | ) |   |   | — |   |   |   | (3,274 | ) |   |   | (3,915 | ) |   |
| Gain (loss) on  disposal of property and equipment                                           |       |                                         | (574       | )                                                     |       |   | (182 | ) |   |   | (141 | ) |   |   | 4 |   |   |   | (13 | ) |   |   | (474 | ) |   |   | (6,318 | ) |   |
| Impairment of  goodwill(c)                                                                   |       |                                         | —     |                                                  |       |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | (8,060 | ) |   |
| Impairment of  property and equipment(c)                                                     |       |                                         | —     |                                                  |       |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | (29,382 | ) |   |
| Impairment of  intangible assets(c)                                                          |       |                                         | —     |                                                  |       |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | (23,626 | ) |   |
| Total operating  expenses                                                                    |       |                                         | (511,977   | )                                                     |       |   | (119,749 | ) |   |   | (309,898 | ) |   |   | (56,226 | ) |   |   | (88,369 | ) |   |   | (246,866 | ) |   |   | (327,626 | ) |   |
| Operating income  (loss)                                                                     |       |                                         | (19,555    | )                                                     |       |   | (10,197 | ) |   |   | (29,851 | ) |   |   | (844 | ) |   |   | 57,493 |   |   |   | (52,573 | ) |   |   | (157,205 | ) |   |
| Interest income                                                                              |       |                                         | 5,490      |                                                  |       |   | 1,104 |   |   |   | 1,782 |   |   |   | 289 |   |   |   | 263 |   |   |   | 70 |   |   |   | 604 |   |   |
| Interest expense                                                                             |       |                                         | (32,086    | )                                                     |       |   | (8,108 | ) |   |   | (22,926 | ) |   |   | (5,425 | ) |   |   | (10,142 | ) |   |   | (20,301 | ) |   |   | (26,154 | ) |   |
| Cancellation of  debt(d)                                                                     |       |                                         | —     |                                                  |       |   | — |   |   |   | — |   |   |   | — |   |   |   | 131,956 |   |   |   | — |   |   |   | — |   |   |
| Other income  (expense), net                                                                 |       |                                         | 112        |                                                  |       |   | 15 |   |   |   | 57 |   |   |   | 4 |   |   |   | 7 |   |   |   | (63 | ) |   |   | 56 |   |   |
| Income (loss)  before income taxes and cumulative effect of a change in accounting principle |       |                                         | (46,039    | )                                                     |       |   | (17,186 | ) |   |   | (50,938 | ) |   |   | (5,976 | ) |   |   | 179,577 |   |   |   | (72,867 | ) |   |   | (182,699 | ) |   |
| (Provision for)  benefit from income taxes                                                   |       |                                         | —     |                                                  |       |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |
| Income (loss)  before cumulative effect of a change in accounting principle                  |       |                                         | (46,039    | )                                                     |       |   | (17,186 | ) |   |   | (50,938 | ) |   |   | (5,976 | ) |   |   | 179,577 |   |   |   | (72,867 | ) |   |   | (182,699 | ) |   |
| Cumulative effect  of a change in accounting principle, net of taxes(e)                      |       |                                         | —     |                                                  |       |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |   | 4,335 |   |   |
| Net income (loss)                                                                            |       |                                         | $          | (46,039                                               | )          |   |   | $ | (17,186 | ) |   |   | $ | (50,938 | ) |   |   | $ | (5,976 | ) |   |   | $ | 179,577 |   |   |   | $ | (72,867 | ) |   |   | $ | (178,364 | ) |   |
| **Other Data:**                                                                              | ** ** |                                         | ** ** | ** **                                            |       |   | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |
| Basic and diluted loss  per share of common stock(f)                                         |       |                                         | $          | (2.76                                                 | )          |   |   | $ | (1.03 | ) |   |   | $ | (4.60 | ) |   |   | $ | (0.65 | ) |   |   | n/a |   |   |   | n/a |   |   |   | n/a |   |   |

 

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| ** **                                   | ** ** | **Successor Company**                   | ** ** | **Predecessor Company**                 | ** ** |
|----------------------------------------------|------------|-----------------------------------------|------------|-----------------------------------------|------------|
| ** **                                   | ** ** | **As of  December 31,  2006** | ** ** | **As of  December 31,  2005** | ** ** | **As of  September 30,  2005** | ** ** | **As of  September 30,  2004** | ** ** | **As of  September 30,  2003** | ** ** | **As of  September 30,  2002** | ** ** |
| **Balance Sheet Data:**                      |       |                                    |       |                                    |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash and cash equivalents                    |       |                                    | $          | 120,499                                 |       |   |   | $ | 110,837 |   |   |   | $ | 98,107 |   |   |   | $ | 57,760 |   |   |   | $ | 17,654 |   |   |   | $ | 27,588 |   |   |
| Property and equipment,  net                 |       |                                    | 139,641    |                                    |       |   | 147,254 |   |   |   | 153,504 |   |   |   | 134,931 |   |   |   | 170,620 |   |   |   | 200,735 |   |   |
| Total assets                                 |       |                                    | 627,071    |                                    |       |   | 673,213 |   |   |   | 673,990 |   |   |   | 312,308 |   |   |   | 221,574 |   |   |   | 280,695 |   |   |
| Total current liabilities                    |       |                                    | 100,770    |                                    |       |   | 103,632 |   |   |   | 89,235 |   |   |   | 53,797 |   |   |   | 157,961 |   |   |   | 370,183 |   |   |
| Total liabilities not  subject to compromise |       |                                    | —     |                                    |       |   | — |   |   |   | — |   |   |   | — |   |   |   | 171,674 |   |   |   | — |   |   |
| Liabilities subject to  compromise(g)        |       |                                    | —     |                                    |       |   | — |   |   |   | — |   |   |   | — |   |   |   | 229,477 |   |   |   | — |   |   |
| Total liabilities                            |       |                                    | 412,886    |                                    |       |   | 418,208 |   |   |   | 403,908 |   |   |   | 223,262 |   |   |   | — |   |   |   | 387,405 |   |   |
| Stockholder’s equity (deficiency)(h)    |       |                                    | 214,185    |                                    |       |   | 255,005 |   |   |   | 270,082 |   |   |   | 89,046 |   |   |   | (179,577 | ) |   |   | (106,710 | ) |   |
|                                              |            |                                         |            |                                         |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

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(a)           General and administrative expenses for the fiscal yearended September 30, 2002 included approximately $18.4 million of expensesrelated to AirGate’s acquisition of us.

(b)           Reorganization income (expense) relate to costs andadjustments that relate to our Chapter 11 filing and the related fresh startaccounting adjustments to revalue our assets and liabilities to their fairvalue. Other costs included in reorganization expense include professionalfees, adjustments to carrying value of debt, employee severance payments,employee retention payments and lease termination accruals. See our notes toour consolidated financial statements included elsewhere in this report forfurther information.

(c)            In 2002, we recorded an impairment charge ofapproximately $8.1 million as a result of our annual impairment testing ofgoodwill as required by SFAS No. 142 “Goodwill and Other Intangibles”. Inaddition, we recorded impairment charges of approximately $53.0 million underSFAS No. 144 “Accounting for the Impairment or Disposal of Long-LivedAssets” which consisted of approximately $23.6 million of intangible assets and$29.4 million of property and equipment.

(d)          As of the effective date of our plan of reorganization,we recognized income of approximately $132.0 million on the cancellation ofdebt related to the discharge of certain of our liabilities subject tocompromise as required under our plan of reorganization.

(e)           In connection with AirGate’s acquisition of us, wechanged our method of recognizing interest expense on our then existing seniordiscount notes effective as of October 1, 2001. The cumulative effect ofthis change in accounting for the periods through September 30, 2001, wasa reduction in the carrying value of the senior discount notes by approximately$4.3 million along with a corresponding decrease in our net loss.

(f)             Basic and diluted loss per share for the SuccessorCompany are calculated by dividing the net loss available to commonstockholders by the weighted average number of shares of our common stock.Pursuant to our plan of reorganization, 8.6 million shares were distributed toour unsecured creditors on the effective date and the remaining 0.4 millionshares held in reserve were distributed in 2005 upon resolution of disputedclaims. The full nine million shares were used in the calculation of weightedaverage shares for the years ended September 30, 2005 and the period endedSeptember 30, 2004. The calculation was made in accordance with SFAS No. 128,“Earnings Per Share”. The basic and diluted loss per share are the same becausethe inclusion of the incremental potential shares from any assumed exercise ofstock options is antidilutive. Per share information is not presented for thePredecessor Company as it is not meaningful.

(g)           Amount includes approximately $206.7 million related toour then existing senior discount notes and other amounts owed to Sprint andother creditors.

(h)          As part of our plan of reorganization, our previouslyissued common stock was cancelled and new equity was issued to our generalunsecured creditors in satisfaction and retirement of their claims.

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**ITEM7.**                MANAGEMENT’SDISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 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 risks and uncertainties discussed in “Item 1A Risk Factors” in this Form 10-K.The following discussion and analysis should be read in conjunction with theForward Looking Statements and “Item 1A Risk Factors” each included in this Form 10-K.

Inthis Management’s Discussion and Analysis we use certain non-financial termsthat are not measures of financial performance under GAAP and we providecertain financial measures that are not calculated in accordance with GAAP. Non-financialterms such as “net subscriber additions” and “churn” are terms commonly used inthe wireless telecommunications industry. The non-GAAP financial measures ofaverage revenue per user (“ARPU”) and cost per gross addition (“CPGA”) reflectstandard 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 Management’s Discussion and Analysis are reconciled foreach period discussed below under the respective caption “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 in or out of our markets during theperiod.

·                    Averagemonthly churn is a measure of the rate at which subscribers based in ourterritory deactivate service on a voluntary or involuntary (credit-related) basis.We calculate average monthly churn based on the number of subscribersdeactivated during the period (net of transfers out of our territory and thosewho deactivated within 30 days of activation) as a percentage of ouraverage monthly subscriber base during the period divided by the number of monthsduring 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 of operationsby the number of our average monthly subscribers during the period divided bythe number of months in the period.

·                    CPGA,or cost per gross addition, is a measure of the average cost we incur to add anew subscriber in our territory. These costs include handset subsidies on newsubscriber activations, commissions, rebates and other selling and marketingcosts. We calculate CPGA by dividing (a) the sum of cost of products soldless product sales revenues associated with transactions with new subscribers,and selling and marketing expenses, net of stock-based compensation expense,during the measurement period, by (b) the total number of subscribersactivated in our territory during the period.

·                    Licensedpopulation represents the number of residents (usually expressed in millions)in the markets in our territory for which we have an exclusive right to providewireless mobility communications services under the Sprint brand name. Thenumber of residents located in our territory does not represent the number ofwireless subscribers that we serve or expect to serve in our territory.

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·                    Coveredpopulation represents the number of residents (usually expressed in millions)covered by our PCS network. 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 Management’s Discussionand Analysis, unless the context indicates otherwise, all references to “subscribers”or “customers” and other operating metrics mean subscribers or customersexcluding subscribers of resellers, also referred to as MVNOs, that use ournetwork and resell wireless service under private brands.

On February 23, 2003,we filed for Chapter 11 bankruptcy protection. In accordance with the AmericanInstitute of Certified Public Accountants Statement of Position 90-7, “FinancialReporting by Entities in Reorganization under Bankruptcy Code,” we adoptedfresh-start accounting as of July 1, 2004, and upon our emergence fromChapter 11 resulted in a new reporting entity. The periods as of and prior to July 1,2004, have been designated “Predecessor Company” and the periods subsequent to July 1,2004, have been designated as “Successor Company.”  As a result of the implementation offresh-start accounting, our financial statements after the effective date arenot comparable to our financial statements for prior periods. On July 1,2005, we completed a merger with Horizon PCS, Inc., another PCS Affiliateof Sprint. The financial results of Horizon PCS are included in our results asof July 1, 2005.

**Business Overview**

As a PCS Affiliate ofSprint, we have the exclusive right to provide digital wireless personalcommunications services, or PCS, under the Sprint brand name in 80 marketsincluding markets in Illinois, Michigan, Pennsylvania, New York, Indiana, Iowa,Ohio and Tennessee. The territory includes key markets such as Grand Rapids(MI), Fort Wayne (IN), the Tri-Cities region of Tennessee (Johnson City,Kingsport and Bristol), Scranton (PA), Saginaw-Bay City (MI), and the QuadCities region of Illinois and Iowa (Bettendorf and Davenport, IA, and Molineand Rock Island, IL). We own and are responsible for building, operating andmanaging the portion of the 100% digital, 100% PCS wireless network ofSprint PCS located in our territory. We offer national calling plansdesigned by Sprint PCS as well as local plans tailored to our markets. Our PCSnetwork is designed to offer a seamless connection with the wireless network ofSprint PCS. We market Sprint PCS products and services through a number ofdistribution outlets located in our territory, including our company-ownedretail stores, co-branded dealers, major national retailers and local thirdparty distributors. As of December 31, 2006, our licensed territory had atotal population of approximately 15.0 million residents, of which ourwireless network covered approximately 11.4 million residents, and we hadapproximately 561,300 subscribers.

We recognize revenues fromthe provision of wireless telecommunications services to our subscribers,proceeds from the sale of handsets and accessories through channels controlledby us and roaming fees. 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.

***Relationship withSprint***

Our relationship withSprint is the most significant relationship we have. The terms of ourrelationship are set forth in our affiliation agreements with Sprint PCS.Pursuant to these affiliation agreements, we agreed to offer PCS services usingSprint’s spectrum under the Sprint brand name on a wireless network built andoperated at our own expense. We believe that our strategic relationship withSprint PCS provides significant competitive advantages. In particular, webelieve that our affiliation agreements with Sprint PCS allow us to offer highquality, nationally branded wireless voice and data services for lower cost andlower capital requirements than would otherwise be possible.

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Sprint’s merger withNextel, which closed in August, 2005, has thrust our relationship with Sprintinto a state of uncertainty, the resolution of which may have a materiallyadverse effect on our business. As discussed in “—Commitments and Contingencies”below, Sprint’s merger with Nextel has been the subject of two separatelawsuits that we filed against Sprint in July 2005. Although we havereceived final orders in both lawsuits, Sprint has appealed the Illinois order.Accordingly, the final outcome of the dispute is still unknown pending appeal. Inaddition to our complaints, a number of other PCS Affiliates of Sprint alsofiled complaints against Sprint, Sprint PCS and Nextel, including AirGate PCS(a wholly owned subsidiary of Alamosa Holdings, Inc.), UbiquiTel, Inc.,U.S. Unwired, Inc., Gulf Coast Wireless, Inc., EnterpriseCommunications Partnership and Northern PCS Services, LLC. With the exceptionof Northern PCS, whose complaint remains outstanding, Sprint has acquired eachof these other PCS Affiliates of Sprint and the complaints have been dismissed.

We do not know the finaloutcome of our litigation against Sprint. If we do not prevail, Sprint mayengage in conduct that has a material adverse effect on our business andoperations. We intend to continue to enforce our rights to the fullest extent,but there is no assurance that we will prevail.

**Consolidated Results of Operations**

***Summary***

In February 2006, wechanged our fiscal year-end from September 30 to December 31,commencing in 2006. Accordingly, our 2005 fiscal year ended on September 30,2005 and our 2006 fiscal year ended on December 31, 2006. For the fiscalyears ended December 31, 2006 and September 30, 2005, our net losswas $46.0 million and $50.9 million, respectively. The lower net loss for thefiscal year ended December 31, 2006 was due to higher revenues mostlyoffset by higher operating and amortization expenses. The results of HorizonPCS were included for the entire 2006 fiscal year, compared to only threemonths of the 2005 fiscal year. Following the merger, we recorded higherrevenues and related costs due to a larger subscriber base.

Presented below is moredetailed comparative data and discussion regarding our consolidated results ofoperations for the fiscal year ended December 31, 2006 versus the fiscalyear ended September 30, 2005.

***Forthe Fiscal Year Ended December 31, 2006 compared to the Fiscal Year Ended September 30,2005***

Managementuses several key performance metrics to analyze the operations of our business.Below is a table setting forth the metrics for the fiscal years ended December 31,2006 and September 30, 2005:

| ** **                | ** ** | **As of and For the  Fiscal Year Ended  December 31, 2006** | ** ** | **As of and For the  Fiscal Year Ended  September 30, 2005** | ** ** |
|---------------------------|------------|-----------------------------------------------------------------------------------------------------|------------|------------------------------------------------------------------------------------------------------|------------|
| Total Subscribers         |       |                                                                                                | 561,300    |                                                                                                 |       |   | 476,400 |   |   |
| Net Subscriber  Additions |       |                                                                                                | 67,600     |                                                                                                 |       |   | 47,900 |   |   |
| Churn                     |       |                                                                                                | 2.5        | %                                                                                                    |       |   | 2.6 | % |   |
| ARPU                      |       |                                                                                                | $          | 50.53                                                                                                |       |   |   | $ | 51.27 |   |   |
| CPGA                      |       |                                                                                                | $          | 376                                                                                                  |       |   |   | $ | 377 |   |   |

 

***Net Subscriber Additions.******  ***Net subscriberadditions increased by 19,700, or 41%, for the fiscal year ended December 31,2006 compared to the fiscal year ended September 30, 2005, primarily as aresult of our acquisition of Horizon PCS markets and our increased marketingand distribution efforts in these markets. In the legacy iPCS markets, netsubscriber additions were approximately 29,800 for the fiscal year ended December 31,2006, down from approximately 40,600 for the fiscal year ended September 30,2005, a decrease of approximately 27%. This decrease was due to increasedcompetitive advertising, the relative attractiveness of competitors’ phones andpricing plans, continuing brand confusion related to the Sprint Nextel mergerand our efforts early in the fiscal year to de-emphasize “family add-a-phone”plans in order to maintain ARPU.

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***Churn.******  ***Churn for thefiscal year ended December 31, 2006 of 2.5% decreased from 2.6% for thefiscal year ending September 30, 2005 due to a decrease in voluntary churn.At December 31, 2006 approximately 91% of our subscribers were undercontract compared to 85% at September 30, 2005.

***Average Revenue Per User.******  ***ARPU for thefiscal year ended December 31, 2006 compared to the fiscal year ended September 30,2005 decreased due to a decline in average monthly voice revenue per subscriberpartially offset with an increase in average monthly data revenue persubscriber. We continue to experience decreasing voice revenue offset byincreasing data revenue. Average monthly data revenue increased from $5.66 inthe fiscal year ended September 30, 2005, to $8.14 for the fiscal yearended December 31, 2006, while average monthly voice revenue declined from$45.73 in the fiscal year ended September 30, 2005 to $41.99 for thefiscal year ended December 31, 2006 reflecting lower average minutes overplan revenue and lower monthly recurring charges. The decrease in minutes overplan revenue and monthly recurring charges can be attributed to the increasingpopularity of the “mobile-to-mobile” program (which also includes Nextelsubscribers), “Fair and Flexible” plans and “family add-a-phone” plans. Datarevenue continues to increase due to the popularity of our various dataproducts, including text messaging, downloading ringers, taking and receivingpictures, playing games and browsing the Internet.

***Cost Per Gross Addition.******  ***CPGA decreasedby $1 from $377 for the fiscal year ended September 30, 2005 compared to$376 for the fiscal year ended December 31, 2006. In the fiscal year endedDecember 31, 2006 compared to the fiscal year ended September 30,2005, lower average handset subsidies and lower average advertising expenseswere offset with higher salary and benefit costs and higher average commissioncosts. At December 31, 2006, we operated 38 retail stores and managed 93exclusive co-branded dealers. At September 30, 2005, we operated 33 retailstores and managed 59 exclusive co-branded dealers.

***Reconciliation of Non-GAAP Financial Measures (AllRevenues and Expenses in Thousands)***

We utilize certain financialmeasures that are not calculated in accordance with GAAP to assess ourfinancial performance. A non-GAAP financial measure is defined as a numericalmeasure of financial performance that (a) excludes amounts, or is subjectto adjustments that have the effect of excluding amounts, that are included inthe comparable measure calculated and presented in accordance with GAAP in thestatement of income or statement of cash flows; or (b) includes amounts,or is subject to adjustments that have the effect of including amounts, thatare excluded from the comparable measure so calculated and presented. Thenon-GAAP financial measures discussed in “—Results of Operations” are ARPU andCPGA. A description of each of these non-GAAP financial measures is provided in“—Definition of Operating Metrics.” The following tables reconcile the non-GAAPfinancial measures with our consolidated financial statements presented inaccordance with GAAP, excluding subscriber data:

| ** **          | ** **   | **For the Fiscal  Year Ended  December 31,   2006** | ** **   | **For the Fiscal  Year Ended  September 30,   2005** | ** **   |
|---------------------|--------------|-------------------------------------------------------------------------|--------------|-------------------------------------------------------------------------------|--------------|
| ***ARPU***          | *** *** |                                                                    | *** *** | *** ***                                                                  |         |   | *** *** | *** *** |   |
| Service revenue     |         |                                                                    | $            | 316,513                                                                       | *** *** |   |   | $ | 189,177 | *** *** |   |
| Average subscribers |         |                                                                    | 521,976      | *** ***                                                                  |         |   | 307,495 | *** *** |   |
| ARPU                |         |                                                                    | $            | 50.53                                                                         | *** *** |   |   | $ | 51.27 | *** *** |   |

 

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ARPU,which is utilized by most wireless companies to determine recurring monthlyrevenue on a per subscriber basis, is used by analysts and investors to comparerelative subscriber revenue across the wireless industry. We use ARPU to assistin evaluating past selling performance and the success of specific rate planpromotions. We also use ARPU as a basis to forecast future service revenues.

| ** **                                      | ** **   | **For the Fiscal  Year Ended  December 31,   2006** | ** **   | **For the Fiscal  Year Ended  September 30,   2005** | ** ** |
|-------------------------------------------------|--------------|------------------------------------------------------------------------------|--------------|-------------------------------------------------------------------------------|------------|
| ***CPGA***                                      | *** *** |                                                                         | *** *** | *** ***                                                                  |       |   | *** *** | *** *** |   |
| Selling and Marketing:                          |         |                                                                         | $            | 74,293                                                                        |       |   |   | $ | 44,424 |   |   |
| plus: Equipment costs, net of cost of upgrades  |         |                                                                         | 30,269       |                                                                          |       |   | 21,140 |   |   |
| less: Equipment revenue, net of upgrade revenue |         |                                                                         | (10,957      | )                                                                             |       |   | (5,841 | ) |   |
| less: Stock-based compensation expense          |         |                                                                         | (524         | )                                                                             |       |   | (83 | ) |   |
| CPGA costs                                      |         |                                                                         | $            | 93,081                                                                        |       |   |   | $ | 59,640 |   |   |
| Gross adds                                      |         |                                                                         | 247,472      |                                                                          |       |   | 158,225 |   |   |
| CPGA                                            |         |                                                                         | $            | 376                                                                           |       |   |   | $ | 377 |   |   |

 

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.******  ***The followingtable sets forth a breakdown of revenues by type:

| ** **                                                                         | ** ** | **For the Fiscal  Year Ended  December 31,  2006** | ** ** | **For the Fiscal  Year Ended  September 30,   2005** | ** ** |
|------------------------------------------------------------------------------------|------------|------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------|------------|
| Service revenue                                                                    |       |                                                                   | $          | 316,513                                                                       |       |   |   | $ | 189,177 |   |   |
| Roaming revenue  from subscribers of Sprint PCS and other PCS affiliates of Sprint |       |                                                                   | 141,174    |                                                                          |       |   | 73,096 |   |   |
| Roaming revenue  from other wireless carriers                                      |       |                                                                   | 8,995      |                                                                          |       |   | 5,493 |   |   |
| Reseller revenue                                                                   |       |                                                                   | 11,679     |                                                                          |       |   | 4,370 |   |   |
| Equipment revenue                                                                  |       |                                                                   | 14,022     |                                                                          |       |   | 7,692 |   |   |
| Other revenue                                                                      |       |                                                                   | 39         |                                                                          |       |   | 219 |   |   |
| Total revenues                                                                     |       |                                                                   | $          | 492,422                                                                       |       |   |   | $ | 280,047 |   |   |

 

·                     ***Service revenue.***   Servicerevenue comprises the monthly recurring charges for voice and data usage andthe monthly non-recurring charges for voice and data minutes over plan, longdistance, roaming usage charges, other feature revenues and late payment fee andearly cancellation fee revenues. Deductions for billing adjustments andpromotional credits are recorded as a reduction to service revenue. For thefiscal year ended December 31, 2006 compared to the fiscal year ended September 30,2005, service revenue increased by $127.3 million, or 67%. Of this increase, 18%was related to subscriber growth in the legacy iPCS markets and the remaining82% was due to our acquisition of, and subsequent growth in, the legacy HorizonPCS markets. This increase in subscribers for the fiscal year ended December 31,2006 was offset with a decrease of $4.6 million in service revenue due to thedecrease in ARPU as described above.

·                     ***Roaming revenue from subscribers ofSprint 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 

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any long distance callsmade by these subscribers while roaming on our network. The reciprocal roamingrate arrangement we have with Sprint PCS for inbound and outbound roaming forthe fiscal year ended December 31, 2006 and 2005 was $0.058 per minute forvoice traffic ($0.10 per minute in certain markets in eastern and westernPennsylvania) and $0.0020 per kilobyte for data traffic. These rates wereeffective through December 31, 2006 and were reset effective January 1,2007—see discussion below in “—Commitments and Contingencies”; provided,however the special rate for certain of our Pennsylvania markets will terminateon the earlier to occur of December 31, 2011 or the date that we achieve asubscriber penetration rate of at least 7% of our covered population in thesemarkets. For the fiscal year ended December 31, 2006 compared to thefiscal year ended September 30, 2005, roaming revenue from subscribers ofSprint PCS and other PCS Affiliates of Sprint increased by $68.1 million, or93%. Of this increase, 25% was driven by increased roaming revenue in thelegacy iPCS markets and the remaining 75% was due to our acquisition of thelegacy Horizon PCS markets. Of the 25% increase in the legacy iPCS markets, 79%of the increase reflected increased data revenue. We continue to experienceincreased growth in kilobyte data usage from subscribers of Sprint PCS andother PCS Affiliates of Sprint as more subscribers utilize data products withtheir handsets and aircards. Roaming minutes and kilobytes from subscribers ofSprint PCS and other PCS Affiliates of Sprint for the fiscal year ended December 31,2006 were 1.6 billion and 14.8 billion, respectively, compared to 1.0billion and 3.3 billion for the fiscal year ended September 30, 2005,respectively.

·                     ***Roaming revenue from other wirelesscarriers.***   We receive roaming revenue fromwireless carriers other than Sprint and other PCS Affiliates of Sprint whensubscribers of such other wireless carriers roam in our territory. We do nothave agreements with these other wireless carriers. Instead, we rely on roamingarrangements Sprint PCS has negotiated with them. We are paid on a per minutebasis for voice traffic pursuant to these agreements. For the fiscal year endedDecember 31, 2006 compared to the fiscal year ended September 30,2005, roaming revenue from other wireless carriers increased by $3.5 million,or 64%. The increase in roaming revenue was due to the acquisition of thelegacy Horizon PCS markets, which historically had stronger roaming revenuesthan the legacy iPCS markets. Roaming revenue in the legacy iPCS marketsdecreased 10% in the fiscal year ended December 31, 2006 compared to thefiscal year ended September 30, 2005 due primarily to a reduction in theaverage per minute roaming rate. Roaming minutes increased while the averageper minute rate decreased due mainly to a new roaming agreement Sprint signedwith Alltel. This agreement has increased the number of roaming minutes wereceive from Alltel, but at a rate significantly lower than what we hadpreviously received. For the fiscal year ended December 31, 2006, roamingminutes were 103.2 million compared to 45.5 million for the fiscalyear ended September 30, 2005. The average per minute rate decreased from$0.12 per minute for the fiscal year ended September 30, 2005 to $0.09 perminute for the fiscal year ended December 31, 2006.

·                     ***Reseller revenue.***   ThroughSprint PCS we allow resellers, also referred to as MVNOs, such as VirginMobile, to use our network. Pursuant to these arrangements, we are paid on aper minute and per kilobyte basis. For the fiscal year ended December 31,2006 compared to the fiscal year ended September 30, 2005, resellerrevenue increased $7.3 million or 167%. The increase in reseller revenuewas due to an increase in the number of reseller subscribers in our territory,in part as a result of our merger with Horizon PCS. For the legacy iPCS marketsalone, reseller revenue increased 113% in the fiscal year ended December 31,2006 compared to the fiscal year ended September 30, 2005 as the number ofreseller subscribers in the legacy iPCS markets increased 82% over this sameperiod. At December 31, 2006, we had approximately 227,200 resellersubscribers compared to approximately 147,800 at September 30, 2005.

·                     ***Equipment revenue.***   Equipmentrevenue is derived from the sale of handsets and accessories to new customersand from current customers who upgrade their handsets through our retail andlocal 

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distribution channels, ineach case, net of sales incentives, rebates and an allowance for returns.Through June 18, 2006, our handset return policy allowed customers toreturn their handsets for a full refund within 14 days after the date ofpurchase. With respect to handsets sold after such date, we allow customers toreturn their handsets for a full refund within 30 days after the date ofpurchase. For the fiscal year ended December 31, 2006 compared to thefiscal year ended September 30, 2005, equipment revenue increased by $6.3million, or 82%.  Equipment revenue in the legacy iPCS markets increasedapproximately 30% despite a 2% decrease in gross adds from our retail and localdealer distribution channels. The remaining increase is due to equipmentrevenue from the legacy Horizon PCS markets.

·                     ***Other revenue.***   For the fiscal year ended December 31, 2006, other revenue consisted ofrestocking fees for handsets returned by our exclusive co-branded dealers and asmall amount of network equipment leasing revenue. For the fiscal year ended September 30,2005, other revenue consisted primarily of tower leasing revenue along with asmall amount of restocking fee revenue for handsets returned by our exclusiveco-branded dealers. During fiscal 2005, we sold all of the owned towers in thelegacy iPCS markets, which eliminated the tower leasing revenue stream.

***Cost of Service andRoaming.***   Cost of service and roamingincludes network operations expense, roaming expense relating to when oursubscribers roam either on other Sprint PCS networks or other wireless carriers’networks, back-office customer services provided by Sprint PCS, the provisionfor doubtful accounts, long distance expense, the 8% affiliation fee due toSprint PCS for collected revenues and stock-based compensation expense. Networkoperations expenses include salaries and benefits for network personnel, cellsite rent, utilities and maintenance expenses, fees relating to the connectionof our cell sites to our switches and other transport and facility expenses.Roaming expense is our cost of our subscribers using Sprint PCS and otherwireless carriers’ networks. Roaming expense on the Sprint PCS network is atthe reciprocal rates as described above under “—Roaming revenue fromsubscribers of Sprint PCS and other PCS Affiliates of Sprint.” Roamingexpense when our subscribers use other wireless carriers networks is at ratesas determined by the roaming agreements signed by Sprint PCS with theseother wireless carriers. Cost of service and roaming was $286.0 million for thefiscal year ended December 31, 2006 compared to $153.1 million for thefiscal year ended September 30, 2005. Of this increase, 22% was from thelegacy iPCS markets with the remaining increase due to the increased costsassociated with the acquired Horizon PCS markets.  The increase was mainly due to the largernumber of subscribers served, increased bad debt expense and an increase inroaming expenses.  Customer service andaffiliate expenses increased due to the larger number of subscribers served andhigher revenues. The increase in bad debt to $10.9 million for the fiscal yearended December 31, 2006 from $2.1 million for the fiscal year ended September 30,2005 was due to a deterioration of our customer aging over the prior year andhigher write-offs per account written off. Roaming expenses grew substantiallyin the fiscal year ended December 31, 2006 due primarily to the increasein data expenses reflecting increased usage of data applications. While roamingexpense related to voice grew by 69% from the fiscal year ended September 30,2005 to the fiscal year ended December 31, 2006, roaming expense related todata grew 477% over this same time period and represented 26% of our overallroaming expense.

At December 31, 2006, our network consisted of1,600 leased cell sites and five switches. At September 30, 2005, ournetwork consisted of 1,488 cell sites and five switches.

***Cost of Equipment.***   Costof equipment includes the cost of handsets and accessories sold or upgradedfrom our retail and local distribution channels. Cost of equipment for thefiscal year ended December 31, 2006 and the fiscal year ended September 30,2005 was $41.7 million and $27.3 million, respectively, an increase of$14.4 million. For the fiscal year ended December 31, 2006 compared to thefiscal year ended September 30, 2005, cost of equipment in the legacy iPCSmarkets increased 8% due to 42% higher equipment upgrade costs partially offsetwith a decrease in cost of equipment expense associated with new 

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subscribers. The remainingincrease was due to the increased cost of equipment associated with theacquired Horizon PCS markets.

***Selling andMarketing.******  ***Selling and marketing expense includesthe costs to operate our retail stores, advertising and promotional expenses,commissions, equipment subsidies and rebate expenses relating to new subscriberadditions from national third parties and other Sprint-controlled channels andstock-based compensation expense. Selling and marketing expense for the fiscalyear ended December 31, 2006 and September 30, 2005 were$74.3 million and $44.4 million, respectively. Of this increase, 88% wasdue to the acquisition of the legacy Horizon PCS markets.

***General andAdministrative.******  ***General and administrativeexpenses include administrative salaries and benefits, legal fees, insuranceexpense, other professional expenses and stock-based compensation expenses. Forthe fiscal year ended December 31, 2006, general and administrative expensestotaled $20.9 million compared to $13.2 million for the fiscal year ended September 30,2005, an increase of 59%. The majority of this increase is attributable tohigher expenses related to our litigation with Sprint, as we spent $6.3 millionin the fiscal year ended December 31, 2006 compared to $1.1 million forthe fiscal year ended September 30, 2005, thereby accounting forapproximately 67% of the $7.8 million increase in general and administrativeexpenses. The remainder of the increase was primarily related to increasedpersonnel and administrative expenses, including our efforts to comply withSection 404 of the Sarbanes-Oxley Act, and increased stock-basedcompensation expense. With the adoption of SFAS No. 123R on October 1,2005, stock-based compensation expense included in general and administrativetotaled approximately $1.8 million for the fiscal year ended December 31,2006. For the fiscal year ended September 30, 2005, stock-basedcompensation expense totaled $1.2 million. Of this amount, approximately $0.6million was related to amendments to stock option award agreements of four ofour former directors who resigned from our board in connection with our mergerwith Horizon PCS. Effective with their resignation we amended each of thesedirector’s stock option award agreements to extend the termination date ofthese director’s options from 90 days to 210 days post resignation. Anadditional $0.5 million of stock-based compensation expense was recorded in thefiscal year ended September 30, 2005 for the intrinsic value of theHorizon PCS options.

***Depreciation andAmortization.******  ***For the fiscal year endedDecember 31, 2006 and September 30, 2005, depreciation andamortization expense totaled $88.5 million and $71.8 million,respectively. Of these amounts, amortization of intangibles totaled$38.0 million and $18.1 million for these same periods, respectively. Theincrease reflected a full twelve months of amortization related to theacquisition of Horizon PCS, compared to three months for the fiscal year endedSeptember 30, 2005. Depreciation expense totaled $50.5 million for thefiscal year ended December 31, 2006 compared to $53.7 million for thefiscal year ended September 30, 2005, a decrease of  $3.2 million. During the fiscal year endedSeptember 30, 2005, we recorded additional depreciation expense of $13.6million due to a reduction in the remaining useful lives of Lucent equipmentbeing replaced in our Michigan markets. In addition, Horizon PCS signed asimilar agreement with Nortel Networks to replace its existing Motorolaequipment in its Ohio, Indiana and Tennessee markets, and, as a result, werecorded accelerated depreciation totaling $2.8 million for these Motorolaassets from the date of the merger through September 30, 2005.

***Interest Income.******  ***For fiscalyear ended December 31, 2006 and the fiscal year ended September 30,2005, interest income totaled $5.5 million and $1.8 million, respectively.The increase was due to higher average invested cash balances and higheraverage yields earned on invested funds for the fiscal year endedDecember 31, 2006 compared to the fiscal year ended September 30,2005.

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***Interest Expense.***   Forthe fiscal year ended December 31, 2006 and the fiscal year ended September 30,2005,  interest expense was $32.1 millionand $22.9 million, respectively. Interest expense consists of interest on our 111¤2%senior notes and 113¤8%senior notes, net of capitalized interest and the fair value adjustmentrecorded on our 113¤8%senior notes in connection with our merger with Horizon PCS. The increase wasattributable to the interest expense associated with the 113¤8% senior notesassumed in our merger with Horizon PCS on July 1, 2005. In the fiscal yearended December 31, 2006, we capitalized interest of approximately $0.6million compared to $0.2 million in the fiscal year ended September 30,2005.

***For the Three Months Ended December 31, 2005***

We have includedthe audited financial statements for the three months ended December 31,2005 in connection with our change in fiscal year end from September 30 toDecember 31 effective for 2006. As the financial results for the three monthsended December 31, 2004 are not required to be included, the discussionbelow does not address comparisons with the comparative prior period.

Belowis a table setting forth our key performance metrics for the three months endedDecember 31, 2005:

| ** **                | ** ** | **As of and For the  Three Months Ended  December 31, 2005** | ** ** |
|---------------------------|------------|------------------------------------------------------------------------------------------------------|------------|
| Total Subscribers         |       |                                                                                                 | 495,300    |   |   |
| Net Subscriber  Additions |       |                                                                                                 | 18,900     |   |   |
| Churn                     |       |                                                                                                 | 2.6        | % |   |
| ARPU                      |       |                                                                                                 | $          | 48.78 |   |   |
| CPGA                      |       |                                                                                                 | $          | 357 |   |   |

 

***Net SubscriberAdditions.******  ***For the three months ended December 31,2005, our net subscriber additions were 18,900, driven by continued focus onincreasing our retail and exclusive co-branded dealer distribution outlets, andon sales and promotional efforts to attract new subscribers in our markets.

***Churn.******  ***For the threemonths ended December 31, 2005, our churn was 2.6% and driven byimprovements in network quality, and increased take rates of family add-a-phoneplans and Fair and Flexible plans. In addition, approximately 85% of oursubscribers were under contract at December 31, 2005.

***Average Revenue PerUser.******  ***For the three months ended December 31,2005, our ARPU was $48.78. Our average monthly minutes over plan revenue peruser was $2.21, average monthly recurring charges were $40.56 and averagemonthly data revenue was $6.38. Data revenue continued to increase due to thepopularity of our various data products, including text messaging, downloadingringers, taking and receiving pictures, playing games and browsing theInternet.

***Cost Per Gross Addition.******  ***For the threemonths ended December 31, 2005, our CPGA was $357, driven by increases inour sales and promotional efforts to drive subscriber growth and, as a result,our related costs. At December 31, 2005, we operated 37 retail stores,including 14 stores in the legacy Horizon PCS territory, and managed 68 exclusiveco-branded dealers, including 17 dealers in the legacy Horizon PCS territory.

***Reconciliation of Non-GAAP Financial Measures (AllRevenues and Expenses in Thousands)***

***The following tables reconcile the non-GAAP financialmeasures for this period with our consolidated financial statements presentedin accordance with GAAP, excluding subscriber data.***

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| ** **           | ** **   | **For the Three  Months Ended  December 31,   2005** | ** **   |
|----------------------|--------------|-------------------------------------------------------------------------------|--------------|
| ***ARPU***           | *** *** |                                                                          | *** *** | *** *** |   |
| Service revenue      |         |                                                                          | $            | 70,996 |   |   |
| Average  subscribers |         |                                                                          | 485,172      |   |   |
| ARPU                 |         |                                                                          | $            | 48.78 |   |   |

 

| ** **                                      | ** **   | **For the Three  Months Ended  December 31,   2005** | ** **   |
|-------------------------------------------------|--------------|-------------------------------------------------------------------------------|--------------|
| ***CPGA***                                      | *** *** |                                                                          | *** *** | *** *** |   |
| Selling and  Marketing:                         |         |                                                                          | $            | 18,216 |   |   |
| plus: Equipment costs, net of cost of upgrades  |         |                                                                          | 6,762        |   |   |
| less: Equipment revenue, net of upgrade revenue |         |                                                                          | (1,857       | ) |   |
| less: Stock-based compensation expense          |         |                                                                          | (208         | ) |   |
| CPGA costs                                      |         |                                                                          | $            | 22,913 |   |   |
| Gross adds                                      |         |                                                                          | 64,156       |   |   |
| CPGA                                            |         |                                                                          | $            | 357 |   |   |

 

***Revenues.******  ***The followingtable sets forth a breakdown of revenues by type:

| ** **                                                                         | ** ** | **For the Three  Months Ended  December 31,   2005** | ** ** |
|------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------------------|------------|
| Service revenue                                                                    |       |                                                                          | $          | 70,996 |   |   |
| Roaming revenue  from subscribers of Sprint PCS and other PCS affiliates of Sprint |       |                                                                          | 31,379     |   |   |
| Roaming revenue  from other wireless carriers                                      |       |                                                                          | 2,403      |   |   |
| Reseller revenue                                                                   |       |                                                                          | 2,289      |   |   |
| Equipment revenue                                                                  |       |                                                                          | 2,439      |   |   |
| Other revenue                                                                      |       |                                                                          | 46         |   |   |
| Total revenues                                                                     |       |                                                                          | $          | 109,552 |   |   |

 

·       ***Service revenue.***   For the threemonths ended December 31, 2005 service revenue was $71.0 million.

·       ***Roaming revenue from subscribers of Sprint PCS and other PCS Affiliatesof Sprint.***   We continue to experience increasedgrowth in kilobyte data usage from subscribers of Sprint PCS and other PCSAffiliates of Sprint. Roaming minutes and kilobytes from subscribers of SprintPCS and other PCS Affiliates of Sprint for the three months ended December 31,2005 were 398 million and 1.8 billion, respectively.

·       ***Roaming revenue from other wirelesscarriers.***    For the three months ended December 31,2005, roaming minutes were 21.4 million.

·       ***Reseller revenue.***   AtDecember 31, 2005, we had 174,000 reseller subscribers.

·       ***Equipment revenue.***   Forthe three months ended December 31, 2005, equipment revenue was $2.4 million.

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·       ***Other revenue.***   Duringfiscal year 2005, we sold all of our towers in the iPCS markets, whicheliminated this revenue stream. For the three months ended December 31,2005 other revenue consisted of leasing revenue for the use of one of our celltowers on wheels.

***Cost of Service andRoaming.******  ***For the three months ended December 31,2005, cost of service and roaming was $62.8 million. With the adoption ofSFAS No. 123R, stock-based compensation expense included in cost ofservice and roaming totaled approximately $0.2 million for the three monthsended December 31, 2005.

At December 31, 2005, our network consisted of1,508 cell sites, including 799 in the acquired Horizon PCS markets, and fiveswitches, including three switches in the acquired Horizon PCS markets.

***Cost of Equipment.******  ***Cost ofequipment for the three months ended December 31, 2005 was$9.2 million.

***Selling andMarketing.******  ***Selling and marketing expense for thethree months ended December 31, 2005 was $18.2 million. With theadoption of SFAS No. 123R, stock-based compensation expense included inselling and marketing totaled approximately $0.2 million for the three monthsended December 31, 2005.

***General andAdministrative.******  ***For the three months endedDecember 31, 2005, general and administrative expenses were$7.9 million. In addition, during the three months ended December 31,2005, we incurred approximately $3.1 million of costs related to our litigationwith Sprint and approximately $0.2 million of integration expenses related tothe merger with Horizon PCS. With the adoption of SFAS No. 123R,stock-based compensation expense included in general and administrative totaledapproximately $1.2 million for the three months ended December 31, 2005.

***Depreciation andAmortization.******  ***For the three months endedDecember 31, 2005, depreciation and amortization expense totaled$21.5 million. Of this amount, amortization of intangibles totaled$9.5 million.

***Interest Income.******  ***For the threemonths ended December 31, 2005, interest income totaled $1.1 million.

***Interest Expense.******  ***For the threemonths ended December 31, 2005, interest expense was $8.1 million.Interest expense consists of interest on our 111¤2% senior notes and 113¤8% senior notes, net of capitalizedinterest and the fair value adjustment recorded on our 113¤8% senior notes.

***Net Loss.******  ***Our net losswas $17.2 million for the three months ended December 31, 2005.

***For theFiscal Year Ended September 30, 2005 and the Periods EndedSeptember 30, 2004 and July 1, 2004***

Belowis a table setting forth our key performance metrics for the fiscal year endedSeptember 30, 2005 and the periods ended September 30, 2004 (threemonths) and July 1, 2004 (nine months):

| ** **                | ** ** | **Successor Company**                                                                         | ** ** | **Predecessor Company**                                                                      | ** ** |
|---------------------------|------------|----------------------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------|------------|
| ** **                | ** ** | **As of and For the  Twelve Months Ended  September 30,  2005** | ** ** | **As of and For the  Three Months Ended  September 30,  2004** | ** ** | **As of and For the  Nine Months Ended  July 1, 2004** | ** ** |
| Total Subscribers         |       |                                                                                               | 476,400    |                                                                                              |       |   | 240,500 |   |   |   | 233,000 |   |   |
| Net Subscriber  Additions |       |                                                                                               | 47,900     |                                                                                              |       |   | 7,500 |   |   |   | 12,900 |   |   |
| Churn.                    |       |                                                                                               | 2.6        | %                                                                                                 |       |   | 2.9 | % |   |   | 2.7 | % |   |
| ARPU.                     |       |                                                                                               | $          | 51.27                                                                                             |       |   |   | $ | 53.43 |   |   |   | $ | 53.04 |   |   |
| CPGA.                     |       |                                                                                               | $          | 377                                                                                               |       |   |   | $ | 368 |   |   |   | $ | 378 |   |   |

 

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***Net SubscriberAdditions.******  ***On July 1, 2005, we acquiredHorizon PCS which provided personal communication services to approximately188,000 subscribers as of June 30, 2005. The other increases in netsubscriber additions from 2004 to 2005 can be 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.

After our Chapter 11 bankruptcy filing inFebruary 2003, we closed stores and cancelled distribution agreements withlocal agents in order to limit new activations as a means to conserve cash.Throughout 2004, we began slowly ramping up our growth in new subscriberadditions.

***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 atSeptember 30, 2005, compared to approximately 75% at September 30,2004.

***Average Revenue PerUser.******  ***The reduction in ARPU reflected areduction in minutes over plan revenue, the elimination of accrued activationfees as part of fresh start accounting, and the July 2005 merger withHorizon PCS, whose subscribers historically had a lower ARPU. For the yearended September 30, 2005, our average monthly minutes over plan revenueper user was $4.01. For the periods ended September 30, 2004 andJuly 1, 2004, average monthly minutes over plan revenue per user was $6.08and $6.10, respectively. Average monthly data revenue, however, has increasedto $5.66 for the year ended September 30, 2005 compared to $4.38 and$2.86, respectively, for periods ended September 30, 2004 and July 1,2004. We expect this trend of increasing data revenue will help offsetcontinued decreases in minutes over plan revenue.

***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.These costs include promotional expenses, commissions and equipment subsidiesand rebate 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 bothSeptember 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 fourexclusive co-branded dealers, respectively.

***Reconciliation of Non-GAAP Financial Measures (AllRevenues and Expenses in Thousands)***

Thefollowing tables reconcile the non-GAAP financial measures for these periods withour consolidated financial statements presented in accordance with GAAP,excluding subscriber data.

| ** **           | ** **   | **Successor Company**                                                        | ** **   | **Predecessor Company**                                                     | ** **   |
|----------------------|--------------|-----------------------------------------------------------------------------------|--------------|----------------------------------------------------------------------------------|--------------|
| ** **           | ** **   | **For the Twelve Months Ended  September 30, 2005** | ** **   | **For the Three Months Ended  September 30, 2004** | ** **   | **For the Nine Months Ended  July 1, 2004** | ** ** |
| ***ARPU***           | *** *** |                                                                              | *** *** | *** ***                                                                     |         |   | *** *** | *** *** |   |   | *** *** | *** *** |   |
| Service revenue      |         |                                                                              | $            | 189,177                                                                          | *** *** |   |   | $ | 37,909 | *** *** |   |   | $ | 107,097 | *** *** |   |
| Average  subscribers |         |                                                                              | 307,495      | *** ***                                                                     |         |   | 236,505 | *** *** |   |   | 224,334 | *** *** |   |
| ARPU                 |         |                                                                              | $            | 51.27                                                                            | *** *** |   |   | $ | 53.43 | *** *** |   |   | $ | 53.04 | *** *** |   |

 

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| ** **                                                      | ** **   | **Successor Company**                                                        | ** **   | **Predecessor Company**                                                     | ** ** |
|-----------------------------------------------------------------|--------------|-----------------------------------------------------------------------------------|--------------|----------------------------------------------------------------------------------|------------|
| ** **                                                      | ** **   | **For the Twelve Months Ended  September 30, 2005** | ** **   | **For the Three Months Ended  September 30, 2004** | ** ** | **For the Nine Months Ended  July 1, 2004** | ** ** |
| ***CPGA***                                                      | *** *** |                                                                              | *** *** | *** ***                                                                     |       |   | *** *** | *** *** |   |   | *** *** | *** *** |   |
| Selling and  Marketing:                                         |         |                                                                              | $            | 44,424                                                                           |       |   |   | $ | 8,001 |   |   |   | $ | 20,976 |   |   |
| plus: Activation costs included in cost of service  and roaming |         |                                                                              | —       |                                                                             |       |   | (471 | ) |   |   | 1,070 |   |   |
| plus: Equipment costs, net of cost of upgrades                  |         |                                                                              | 21,140       |                                                                             |       |   | 4,828 |   |   |   | 9,669 |   |   |
| less: Equipment revenue, net of upgrade revenue                 |         |                                                                              | (5,841       | )                                                                                |       |   | (1,193 | ) |   |   | (3,179 | ) |   |
| less: Stock-based compensation                                  |         |                                                                              | (83          | )                                                                                |       |   | (5 | ) |   |   | — |   |   |
| CPGA costs                                                      |         |                                                                              | $            | 59,640                                                                           |       |   |   | $ | 11,160 |   |   |   | $ | 28,536 |   |   |
| Gross adds                                                      |         |                                                                              | 158,225      |                                                                             |       |   | 30,307 |   |   |   | 75,395 |   |   |
| CPGA                                                            |         |                                                                              | $            | 377                                                                              |       |   |   | $ | 368 |   |   |   | $ | 378 |   |   |

 

***Revenues.***The following table sets forth a breakdown ofrevenues by type:

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

 

·                     ***Service revenue.***   Increasesin service revenue from 2004 to 2005 reflect a larger number of subscribers onour network as a result of a focus on increased subscriber growth after weemerged from bankruptcy coupled with the subscribers acquired with the mergerwith Horizon PCS, offset with a decrease in ARPU.

·                     ***Roaming revenue from subscribers of SprintPCS and other PCS Affiliates of Sprint.*****  **Theincrease in roaming revenue from subscribers of Sprint PCS and other PCSAffiliates of Sprint was due to an increase in roaming minutes and increasedkilobyte traffic per subscriber. As we have seen in our own subscriber usage,we also experienced increased growth in kilobyte data usage from subscribers ofSprint PCS and other PCS Affiliates of Sprint. Roaming minutes and kilobytes fromsubscribers of Sprint PCS and other PCS Affiliates of Sprint for the yearended September 30, 2005 were 1.0 billion and 3.3 billion,respectively, compared to 206 million and 516 million and466 million and 940 million for the periods ended September 30,2004, and July 1, 2004 respectively.

·                     ***Roaming revenue from other wirelesscarriers.*****  **Roamingrevenue from other wireless carriers has decreased from 2004 to 2005 as aresult of lower per minute rates Sprint PCS has negotiated. Roaming minutes forthe year ended September 30, 2005, the period ended September 30, 2004and 

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the period endedJuly 1, 2004 were 45.5 million, 10.9 million and32.3 million, respectively. For these same periods, the per minute rateswere $0.12, $0.11 and $0.14, respectively.

·                     ***Reseller revenue.*****  **The increase in reseller revenue is due to increasesin both reseller subscribers in our territory and an increase in the number ofagreements signed by Sprint PCS with resellers. At September 30, 2005, wehad 147,800 reseller subscribers, of which approximately 101,000 reseller subscribers were acquired in theHorizon PCS merger on July 1, 2005. At September 30, 2004 andJuly 1, 2004, we had approximately 10,000 and 4,000 reseller subscribers,respectively.

·                     ***Equipment revenue.*****  **The increase in equipment revenue is due to anincrease in subscriber growth which can be partially attributed to the increasein our distribution outlets, primarily from our retail stores and exclusiveco-branded dealers in our territory, and to our increased sales and promotionalefforts to attract new subscribers.

·                     ***Other revenue.*****  **Other revenue consists mostly of tower leasingrevenue. The decrease in other revenue is the result of our sales of our towersduring 2005. Because we no longer owned the towers, this revenue stream fromother wireless carriers who leased space on our towers was eliminated.

***Cost of Service andRoaming.*****  **For theyear ended September 30, 2005 and the periods ended September 30,2004 and July 1, 2004, cost of service and roaming was$153.1 million, $29.1 million, and $83.2 million, respectively.The increase in 2005 reflected our larger number of subscribers served, theincreased size of our network, increases in roaming expense and an increase incollected 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 for the year ended September 30, 2005 was $27.3 million.Cost of equipment for the periods ended September 30, 2004 andJuly 1, 2004, was $5.6 million and $12.8 million, respectively.The increase for the year ended September 30, 2005 primarily resulted fromboth the increased subscriber activations and subscribers upgraded as ourpoints of distribution in the retail and local distribution channels increased.

***Selling andMarketing.******  ***Selling and marketing expense for the yearended September 30, 2005 was $44.4 million. Selling and marketingexpense for the periods ended September 30, 2004 and July 1, 2004 was$8.0 million and $21.0 million, respectively. The increase in 2005reflected our continuing effort to increase our subscriber base across ourentire territory. During the year, we added new retail stores, exclusiveco-branded dealers and additional sales personnel responsible for managingindirect channels. We also significantly increased our advertising andpromotional expenses to attract and sign new subscribers.

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***General andAdministrative.******  ***For the year endedSeptember 30, 2005, general and administrative expenses were $13.2 million.For the periods ended September 30, 2004 and July 1, 2004, generaland administrative expenses were $1.7 million and $3.6 million, respectively.The increase in 2005 reflected the larger administrative infrastructurenecessary to manage the larger operations and increased costs related to beingan SEC reporting company. We also incurred approximately $0.3 million inintegration expenses related to the Horizon PCS merger during the yearended September 30, 2005. In addition, we incurred approximately$1.1 million in legal costs related to our litigation with Sprint.  For the fiscal year ended September 30, 2005,stock-based compensation expense totaled $1.2 million.  Of this amount, approximately $0.6 millionwas related to amendments to stock option award agreements of four of ourdirectors who resigned from our board in connection with our merger withHorizon PCS.  Effective with their resignation,we amended each of these director’s stock option award agreements to extend thetermination date of each of these director’s options from 90 days to 210 dayspost-resignation.  An additional $0.5million of stock-based compensation expense was recorded in the fiscal yearended September 30, 2005 for the intrinsic value of the Horizon PCS options.

***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 onJuly 1, 2004. There was no reorganization income or expense for the yearended September 30, 2005 or the period ended September 30, 2004.Reorganization income for the period ended July 1, 2004 totaled $60.8 million.

***Depreciationand Amortization.******  ***For the year ended September 30, 2005, theperiod ended September 30, 2004, and the period ended July 1, 2004,depreciation and amortization expense totaled $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. During the year endedSeptember 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.In addition, Horizon PCS signed a similar agreement with Nortel to replaceits existing Motorola equipment, and as a result, we recorded accelerateddepreciation totaling $2.8 million related to reducing the estimatedeconomic lives of these Motorola assets from the date of the merger throughSeptember 30, 2005.

Amortization of intangibles increased in the yearended September 30, 2005 as 2005 included a full year of amortizationexpense related to the intangibles recorded as a result of fresh-startaccounting and amortization expense from July 1, 2005 throughSeptember 30, 2005 related to the intangibles recorded as a result of ourmerger 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 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.

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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.***

**Liquidity andCapital Resources**

***Significant Sources of Cash***

We generated $47.3 million in operating cashflows for the fiscal year ended December 31, 2006, compared to $12.9 millionfor the fiscal year ended September 30, 2005, an increase of $34.4 million. Theincrease in operating cash flows is mostly attributable to improved operatingresults, excluding depreciation, amortization, provision for doubtful accountsand certain other non-cash items, as well as a smaller increase in workingcapital.  In addition, results for the fiscalyear ended December 31, 2006 included a full twelve months of operating resultsfrom Horizon PCS and therefore, we believe, are a better indication of ouroperating cash flows in future years.

For the fiscal year ended December 31, 2006, wereceived approximately $0.5 million from the sale of land and other equipmentno longer needed for operations and approximately $3.2 million from the sale ofused equipment which was replaced with equipment we purchased from NortelNetworks. In addition, for the fiscal year ended December 31, 2006, we receivedapproximately $0.4 million from the sale of the remaining four Horizon PCS ownedtowers. During the fiscal year ended September 30, 2005, we receivedapproximately $16.4 million for the remaining towers sold in the legacy iPCSmarkets and $1.0 million from the sale of used equipment which was replacedwith equipment we purchased from Nortel Networks. Other than in the ordinarycourse of business, we do not currently anticipate future cash from the sale ofequipment in the next twelve months.

We cannot predict whether cash generated from stockoption exercises will continue at the level generated in the fiscal year endedDecember 31, 2006.  For the fiscal yearended December 31, 2006, we received a total of $2.7 million in proceedsfrom the exercise of options representing approximately 118,800 shares of ourcommon stock.  As of December 31, 2006,there were 381,577 exercisable options outstanding with a weighted averageexercise price of $15.59. For the fiscal year ended September 30, 2005, wereceived $9.5 million in proceeds from the exercise of options representingapproximately 449,400 shares of our common stock. Lastly, through our mergerwith Horizon PCS, we acquired its outstanding cash and cash equivalents, net oftransaction costs, of $19.9 million.

We generated $20.9 million in operating cashflows for the period ended December 31, 2005. Operating cash flows in the periodended December 31, 2005 were increased by $16.7 million resulting from thenon-recurring sale of short-term investments that were acquired in the mergerwith Horizon PCS.

During the period endedDecember 31, 2005, we received approximately $0.3 million from thesale of used equipment which was replaced with equipment we purchased fromNortel Networks as described below in “—Contractual Obligations.”   For the period ended December 31, 2005,we received a total of $0.4 million in proceeds from the exercise ofoptions representing approximately 20,100 shares.

***Significant Uses of Cash***

Cash flows used for investing activities for the fiscalyear ended December 31, 2006 included $44.5 million for capitalexpenditures.  Included in this total was $22.1 million for the Nortelswap in our Horizon PCS markets, $19.4 million for new cell site constructionand other network-related capital expenditures, and $3.0 million for newstores, store improvements,  IT and othercorporate-related capital expenditures.

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Cash flows used for investing activities for the fiscalyear ended September 30, 2005 included $17.4 million for capitalexpenditures, of which $11.0 million related to the Nortel swap project in thelegacy iPCS markets. Other capital expenditures included $3.6 million for newcell site construction and other network-related capital expenditures and $2.8million for new stores, store improvements, IT and other corporate-relatedcapital expenditures.

Cash flows used for financing activities for the fiscalyear ended September 30, 2005 included $1.6 million for the payment of ourCEO’s withholding obligations related to his remaining stock unit awards, whichpayment was made through the return of shares to us.

Principal payments on our long-term debt, other thancapital leases, are not due until 2012.  During the fiscal year endedDecember 31, 2006, we made two semi-annual interest payments on our 113¤8 %senior notes of approximately $7.1 million each and two semi-annualinterest payments on our 111¤2%senior notes of approximately $9.5 million each.  The interest rates onour senior notes are fixed and therefore the amount of our interest paymentswould not be impacted by a change in the overall interest rate environment.

Cash flows used for investing activities for theperiod ended December 31, 2005 totaled $8.6 million. Capitalexpenditures totaled $8.9 million and included $5.8 million for theNortel swap in our Horizon PCS markets, $1.2 million for new cell siteconstruction and other related network capital expenditures, and $1.9 millionfor new store, store improvement, IT and corporate-related expenditures.  During the period ended December 31,2005, we made one semi-annual interest payment on our 111¤2%senior notes of approximately $9.5 million. 

Our uses of cash typically include providing foroperating expenditures, debt service requirements and capitalexpenditures.  We anticipate that totalcapital expenditures for 2007 will be between $38.0 million and $42.0million.  This includes cash uses for newcell sites, new retail stores, information technology, and other network-relatedexpenditures, including approximately $10.0 million for EVDO Rev. A deployment.

We continually evaluateour capital and debt capacity and how to prioritize the use of our excess cash,including for any or a combination of the following strategic options:  increase capital expenditures, pursuestrategic acquisitions, pay cash dividends or distributions, repurchase our stockor payoff debt.

***Recent Trends, Risks and Uncertainties ThatMay Affect Operating 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 financialperformance.  This section should be read in conjunction with the“Risks Related to Our Business, Strategy and Operations” section found inItem 1A of Part I of this annual report on Form 10-K.

·       Tothe extent that we continue to seek to accelerate our subscriber additions, wewill incur significant upfront subscriber acquisition expenses (including thecustomer handset subsidy, commissions and promotional expenses) that initiallywill result in increased losses and reduced levels of cash flows from operatingactivities. At the same time, competition in the wireless industry remainsintense as more competitors enter the market via MVNO or other relationshipswith existing carriers, or through the acquisition of new wireless spectrum,such as the FCC’s Advanced Wireless Services (AWS) spectrum auction in 2006 andadditional auctions of spectrum. Unlimited minute and pre-paid plans, neither of which we currentlyoffer, also continue to increase in popularity, offering consumers morealternatives.  Accordingly, we may incur higher per subscriber acquisitionexpenses and/or offer more aggressive rate plans in order to maintain orachieve our planned growth.  Alternatively, we may not be able to maintainor achieve our planned growth in subscribers or obtain sufficient revenue toachieve and sustain profitability.

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·       We are experiencing a highchurn rate, which may be increasing in the future due to credit-relateddeactivatons, increased competitive advertising, the relative attractiveness ofcompetitors’ phones and pricing plans and continuing brand confusion related tothe Sprint Nextel merger.   If churn continues to remain high or increasesover the long-term, we would lose the cash flows attributable to thesesubscribers and have greater than projected losses.

·       Our voice revenue per subscriber continues to decrease. Thewireless industry is very competitive and continued pressure in pricing isexpected in the future as a result of, among other things, increased focus onfamily plans and overage protection plans. Although we believe that familyplans and overage protection plans should improve churn, these plans tend tolower voice revenue on a per subscriber basis. Although the data portion ofARPU is expected to continue to increase as more subscribers utilize dataproducts, declining voice ARPU resulting in lower overall ARPU will make itmore difficult to obtain sufficient revenue to achieve or sustainprofitability.

·       We may experience highercosts to acquire subscribers. To the extent that we increase our distribution,we will increase the fixed costs in our sales and marketing organization. Inaddition, we may increase our marketing expenses in an effort to attract andacquire new subscribers. Also, more aggressive promotional efforts may lead tohigher handset subsidies. With a higher CPGA, subscribers must remain oursubscribers for a longer period of time at a stable ARPU for us to recoverthose acquisition costs.

·       Our operating costs continue to increase due to our largernumber of subscribers served, the increased size of our PCS network, increasesin roaming usage by subscribers based in our territory and an increase incollected revenue, upon which our 8% affiliation fee is calculated. If oursubscriber base continues to increase, our operating costs will continue toincrease. Our bad debt expense has been increasing and, to the extent thatour subscriber base includes a higher number of sub-prime credit subscribers,may continue to increase in the future. In addition, we may incur significantwireless handset costs for existing subscribers who upgrade to a new handset aspart of our promotional efforts to reduce churn. Outbound roaming kilobyteshave been growing rapidly and are expected to continue to grow reflectingincreased usage of data applications, thereby increasing our roaming expenses.However, as discussed above in “Item 1 Business—Roaming” roaming expenses paidto Sprint PCS are expected to be positively impacted by a lower reciprocalroaming rate that began on January 1, 2007. As also discussed below in “—Commitmentsand Contingencies,” the costs we incur for certain back office services weobtain from Sprint is expected to increase. We expect to continue to incursubstantial costs related to our litigation with Sprint. At the same time, alarge portion of our ongoing network and general and administrative expensesare fixed. We believe that we need to add more subscribers to recognizeincreased economies of scale in our business. If we are unable to add moresubscribers or continue to improve the efficiencies in our operating costs,results will be negatively affected.

·       A substantial portion ofour revenue (approximately 33% for the fiscal year ended December 31,2006) is derived from roaming revenue from subscribers of Sprint PCS basedoutside our territory. The increase in roaming revenue during the fiscal yearended December 31, 2006 was due to an increase in voice and 2G roaming onour PCS network and a substantial increase in 3G data roaming on our PCS network.The roaming revenue from Sprint PCS will be negatively impacted by a lowerreciprocal roaming rate that went into effect on January 1, 2007. Inaddition, there has been a significant slow down in Sprint PCS’s subscribergrowth during the past year which may adversely affect the growth in ourroaming revenue from Sprint PCS, thereby reducing our ratio of  inbound to outbound roaming. This ratiodeclined in 2006, compared to 2005, and is expected to decline further in thefuture. If we receive less roaming traffic on our network, our results ofoperations will be negatively affected.

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·       As we continue to addcapacity and coverage and to upgrade our PCS network, we will incur significantcapital expenditures. We incurred approximately $44.5 million in capitalexpenditures in the fiscal year ended December 31, 2006. We anticipatethat total capital expenditures for 2007 will be between $38.0 million and$42.0 million. To date, we have deployed EV-DO technology in a small portion ofour service area. We will begin selectively deploying EV-DO Rev. A technologyin portions of our service area in 2007, but may expand our deployment duringthe year which may significantly increase our anticipated capital expendituresand operating expenses beyond our current expectations. Unforeseen changes intechnology and changes in our plans to upgrade or expand our network mayrequire us to spend more money than we expected and have a negative effect onour cash flow.

·       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, productdevelopment, and financial information. Failure of Sprint to provide these andother services on a timely and cost efficient manner would negatively impactour results of operations. Sprint 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. Forexample, effective January 1, 2007, the rate that we pay for certainback-office functions that we purchase from Sprint increased by approximately10%. See “—Commitments and Contingencies” below.

·       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. If theneed for additional capital arises due to our actual results differingsignificantly from our business plan or for any other reason, we may be unableto raise additional capital.

***Commitments andContingencies***

As discussed in “Item 1Business—Litigation Against Sprint”, on September 28, 2006, Sprintappealed the ruling of the Illinois trial court to the Appellate Court ofIllinois, First Judicial District. We cannot predict the outcome of the appeal.If we do not prevail on appeal, Sprint may be permitted to operate the legacyNextel business in iPCS Wireless’s service area in a manner that has an adverseeffect on our business and operations. If we do not prevail on appeal, ourstock price may be adversely affected. Additionally, the Illinois ruling hasbeen stayed pending appeal. As a condition of the stay, Sprint must continue tocomply with the Forbearance Agreement—which by its terms has expired—and theDelaware ruling in iPCS Wireless’s service area. As noted in “Item 1A RiskFactors The merger between Sprint and Nextel and the outcome of our litigationrelating thereto may have an adverse effect on us in ways that would be beyondour control,” the Delaware ruling does not protect us from all of the ways inwhich Sprint may operate the legacy Nextel business in a manner that would havea material adverse effect on us. The protections afforded by the ForbearanceAgreement are limited as well.

As discussed more fully in “Item 1Business—Affiliation Agreements with Sprint PCS—Services agreements,” inDecember 2006, we initiated arbitration against Sprint with respect to therates that Sprint is charging us for back-office services for 2007, as well asSprint’s proposed rates for 2008 and 2009. If the rates that we are currentlypaying for these services had been in effect in 2006, we would have incurredadditional expenses to Sprint of approximately $4.7 million for the fiscalyear ended December 31, 2006. The rates determined by the arbitrationpanel will be retroactively applied to January 1, 2007. In the meantime,we began paying Sprint’s proposed rates on January 1, 2007.

As discussed more fully in“Item 1 Business—Roaming,” we strongly disagree with the reciprocal roamingrates that Sprint implemented on January 1, 2007. Had these reciprocal roamingrates been in effect for 2006, the net effect on our operating loss for thefiscal year ended December 31, 2006 would 

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havebeen an increase of approximately $8.2 million. We intend to vigorouslyoppose the new rates, including by submitting the matter to arbitration orlitigation if necessary. If the matter is submitted to an arbitration panel andthe arbitration panel imposes rates different than the ones then in effect, thenew rates would be retroactively applied to the appropriate period. However inthe meantime, the new reciprocal roaming rates went into effect on January 1,2007.

**ContractualObligations**

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 December 31, 2006, are asfollows (dollars in thousands):

| ** **                 | ** ** | ** ** | ** ** | **Payments Due by Period  Year Ended December 31,** | ** ** |
|----------------------------|------------|------------|------------|-----------------------------------------------------------------------------------|------------|
| ** **                 | ** ** | **Total**  | ** ** | **2007**                                                                          | ** ** | **2008** | ** ** | **2009** | ** ** | **2010** | ** ** | **2011** | ** ** | **Thereafter** | ** ** |
| Long-term debt             |       | $          | 290,000    |                                                                              | $          | — |   | $ | — |   | $ | — |   | $ | — |   | $ | — |   | $ | 290,000 |   |
| Cash interest              |       | 189,623    |       | 33,194                                                                            |       | 33,194 |   | 33,194 |   | 33,194 |   | 33,194 |   | 23,653 |   |
| Operating leases (1)       |       | 146,585    |       | 34,660                                                                            |       | 34,038 |   | 32,765 |   | 24,770 |   | 11,288 |   | 9,064 |   |
| Capital lease  obligations |       | 879        |       | 84                                                                                |       | 86 |   | 89 |   | 92 |   | 95 |   | 433 |   |
| Purchase  obligations      |       | 8,900      |       | 8,900                                                                             |       | — |   | — |   | — |   | — |   | — |   |
| Total                      |       | $          | 635,987    |                                                                              | $          | 76,838 |   | $ | 67,318 |   | $ | 66,048 |   | $ | 58,056 |   | $ | 44,577 |   | $ | 323,150 |   |

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(1)          Does not includepayments due under renewals to the original lease terms.

*SeniorNotes:  *Both of our senior notes contain covenants whichrestrict our ability to incur additional indebtedness, merge, pay dividends,dispose of our assets, and certain other matters as defined in the indentures.In addition, the senior notes:

·       rank*pari passu* in right of payment with allour existing and future unsecured senior indebtedness;

·       ranksenior in right of payment to all our future subordinated indebtedness; and

·       areunconditionally guaranteed by our domestic restricted 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 oursecured indebtedness to the extent of the assets securing such indebtedness,and to any indebtedness of our subsidiaries that do not guarantee the newsenior 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:**  *Intereston our 111¤2%senior notes is payable semi-annually in arrears on May 1 and November 1,commencing on November 1, 2004 to the holders of record on the immediatelypreceding April 15 and October 15. At any time prior to May 1,2007, we may redeem up to 35% of the aggregate principal 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:

·       atleast 65% of aggregate principal amount of senior notes originally issuedremains outstanding immediately after the redemption; and

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

Except pursuant to the preceding paragraph, the seniornotes will not be redeemable at our option prior to May 1, 2008.

On orafter May 1, 2008, we may redeem all or a part of the senior notes issuedunder the indenture upon not less than 30 nor more than 60 days’ notice,at the redemption prices (expressed as percentages of principal amount) setforth below plus accrued and unpaid interest and liquidated damages, if any, onthe senior notes redeemed, to the applicable redemption date, if redeemedduring the 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*% Senior Notes:*   Intereston our 113¤8%senior notes is 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:

·       atleast 65% of aggregate principal amount of senior notes originally issuedremains outstanding immediately after the redemption; and

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

Except pursuant to the preceding paragraph, the seniornotes will not be redeemable at our option prior to July 15, 2008.

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 the yearsindicated 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    | %              |       |

 

***Nortel NetworksEquipment Agreements***

On December 31, 2005, we signed a letter ofagreement with Nortel Networks to replace the Motorola equipment deployed inour Pennsylvania, New York, New Jersey and Maryland markets with Nortelequipment. Under the terms of the agreement, we are required to purchaseequipment necessary to replace 425 existing base stations and related networkinfrastructure, plus various additional equipment to support future networkfootprint and capacity expansion, totaling approximately $16.5 million. On 

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March 21, 2006, weamended the terms of this agreement accelerating payments for equipmenttotaling $4.0 million from 2007 to 2006. As of December 31, 2006, we hadpurchased $16.5 million of the required $16.5 million of equipment under thisagreement. Accordingly, we are not required to purchase any additional equipmentunder this agreement.

On December 29, 2006,we signed a letter of agreement with Nortel Networks to purchase EV-DO Rev. Aequipment and services totaling up to $17.1 million in the aggregate. The $17.1million commitment consists of a non-cancelable purchase of $8.9 million ofequipment and services and an option to purchase an additional $8.2 million ofequipment and services. Prior to December 31, 2006 we submitted anon-cancelable purchase order for $8.9 million of equipment and services and,therefore, have no further commitments under this letter of agreement. However,if we elect to exercise our option to purchase any additional equipment andservices from Nortel Networks under this letter of agreement, then we arerequired to purchase the entire additional $8.2 million of equipment andservices. In addition, if we elect to exercise this option after November 30,2007, we will be required to pay an additional $1.0 million.

**Off-Balance SheetArrangements**

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

**Seasonality**

Our business is subject tosome seasonality as the wireless telecommunications industry historically hasbeen dependent on fourth calendar quarter results. Among other things, theindustry as a whole relies on moderately higher subscriber additions andhandset sales in the fourth calendar quarter as compared to the other threecalendar quarters. A number of factors contribute to this trend, including: theuse of retail distribution, which is heavily dependent upon the year-endholiday shopping season; the timing of new product and service announcementsand introductions; competitive pricing pressures; and aggressive marketing andpromotions.

**Inflation**

We believe that inflationhas not had a significant impact in the past and is not likely to have asignificant impact in the foreseeable 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 accounting policies. Theassumptions and judgments we use in applying our accounting policies have asignificant impact on our reported amounts of assets, liabilities, revenue andexpenses. While we believe that the assumptions and judgments used in ourestimates are reasonable, actual results may differ from these estimates underdifferent assumptions or conditions.

We have identified the most critical accountingpolicies upon which our financial status depends. The critical policies weredetermined by considering accounting policies that involve the most complex orsubjective decisions or assessments. We also have other policies considered keyaccounting policies; however, these policies do not meet the definition ofcritical accounting policies because they do not generally require us to makeestimates or judgments that are complex or subjective.

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***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 revenue from thebill cutoff date to the end of the reporting period. These estimates are basedon the number of days in a month from each bill cycle cutoff date to the end ofthe reporting period assuming our customers use their service equally each daythroughout the month.

A change in usage that would have changed the unbilledrevenue by 10% for the fiscal year ended December 31, 2006 would havechanged service and roaming revenues by approximately $0.2 million and$0.8 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. In determiningthese estimates, we compare historical write-offs relative to the estimatedperiod in which the subscriber was originally billed. From this information, weassign specific percentages to the aging categories.

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 December 31, 2006, if each of our reservepercentages by aging category had been underreserved by 2%, we would haverecorded an additional $0.6 million in bad debt expense.

***Long-lived assetrecovery.******  ***Long-lived assets, excludingintangibles, consist 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 Statement ofFinancial Accounting Standard (“SFAS”) No. 144, “Accounting for theImpairment or Disposal of Long-Lived Assets”, whenever events or conditionschange such that the carrying amount may not be recoverable, the asset valuesmust be reviewed for impairment. This impairment analysis is performed bycomparing the carrying value of a group of assets to future net cash flows.This analysis requires a significant amount of judgment in determining growthrates for the company, future economic conditions, and future requirements oftechnological upgrades and advances.

Besides impairment analysis, estimates of estimateduseful life can change rapidly with changes in technology or changes inequipment vendors, as we experienced in 2005 and 2006. Because of our decisionsto change the network equipment in our Michigan markets from Lucent to Norteland the network equipment in the legacy Horizon PCS markets from Motorola toNortel , we accelerated the useful lives on these assets and, as a result, werecorded additional depreciation of approximately $1.4 million and $16.4 millionfor the years ended December 31, 2006 and September 30, 2005,respectively.

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***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 aresult of 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,“Goodwill and Other Intangible Assets.” SFAS No. 142 requires annual testsfor impairment of goodwill and intangible assets that have indefinite usefullives and interim tests when an event has occurred that more likely than nothas reduced the fair value of the assets.

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 fiscal year ended December 31,2006 would have decreased by approximately $3.5 million. If we were todecrease the estimated economic useful life of these assets by 10%, ouramortization expense for the fiscal year ended December 31, 2006 wouldhave increased by approximately $4.2 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 management judgment is required indetermining our provision for income taxes, our deferred tax assets andliabilities and any valuation allowance recorded against net deferred taxassets. In the event that actual results differ from these estimates or weadjust these estimates in future periods, we may need to establish anadditional valuation allowance that could materially impact our financialcondition and results of operations.

***Stock-based compensation.******  ***SFAS No. 123R (Revised2004) “Share-Based Payment” requires significant judgment and the use ofestimates in the assumptions for the model used to value the share-basedpayment awards, including stock price volatility, and expected option terms. Inaddition, expected forfeiture rates for the share-based awards must be estimated.Because of our small number of option grants, the relatively short period oftime that we have operated as a public company, and the limited trading of ourstock, we are limited in our historical experience to use as a basis for theseassumptions. While we believe that the assumptions and judgments used in ourestimates are reasonable, actual results may differ from these estimates underdifferent assumptions or conditions.

**Implementation ofFresh-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 

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“SOP 90-7,” theaccounting 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.

**New AccountingPronouncements**

In February 2007, the Financial AccountingStandards Board (“FASB”) issued SFAS No. 159, “The Fair Value Option forFinancial Assets and Financial Liabilities” (“SFAS No. 159”), to permitall entities to choose to elect, at specified election dates, to measureeligible financial instruments at fair value. An entity shall report unrealizedgains and losses on items for which the fair value option has been elected inearnings at each subsequent reporting date, and recognize upfront costs andfees related to those items in earnings as incurred and not deferred. SFAS No. 159applies to fiscal years beginning after November 15, 2007, with earlyadoption permitted for an entity that has also elected to apply the provisionsof SFAS No. 157, Fair Value Measurements. An entity is prohibited fromretrospectively applying SFAS No. 159, unless it chooses early adoption. SFASNo. 159 also applies to eligible items existing at November 15, 2007(or early adoption date). We are still evaluating the impact of theimplementation of SFAS No. 159 on our financial position, results ofoperations and cash flows.

In September 2006, the FASB issued SFAS No. 157,  “Fair Value Measurements” which defines fairvalue, establishes a framework for measuring fair value under generallyaccepted accounting principles, and expands disclosures about fair valuemeasurements. SFAS No. 157 applies to fair-value measurements that arealready required or permitted by existing standards except for measurements ofshare-based payments and measurements that are similar to, but not intended tobe, fair value and nullifies the Emerging Issues Task Force guidance thatprohibited recognition of gains or losses at the inception of derivativetransactions whose fair value is estimated by applying a model. SFAS No. 157clarifies that fair value is the amount that would be exchanged to sell anasset or transfer a liability in an orderly transaction between marketparticipants. SFAS No. 157 is effective for fiscal years beginning after November 15,2007. We do not anticipate that the implementation of SFAS No. 157 willhave a material impact on our financial position, results of operations andcash flows.

On July 13, 2006,FASB issued Interpretation No. 48, “Accounting for Uncertainty in IncomeTaxes” (“FIN 48”), which is effective for fiscal years beginning after December 15,2006. FIN 48 clarifies the accounting for uncertainty in income taxesrecognized in the financial statements in accordance with SFAS No. 109, “Accountingfor Income Taxes.” FIN 48 prescribes a comprehensive model for how acompany should recognize, measure, present and disclose in its financialstatements uncertain tax positions that the company has taken or expects totake on a tax return.  We do notanticipate that the implementation of FIN 48 will have a material impact on ourfinancial position, results of operations and cash flows.

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**ITEM 7A.**        QUANTITATIVEAND QUALITATIVE DISCLOSURES ABOUT 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.**                FINANCIALSTATEMENTS AND SUPPLEMENTARY DATA

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.**                CHANGESIN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

**None**

**ITEM 9A.**        CONTROLSAND PROCEDURES

**Evaluation ofDisclosure Controls and Procedures**

Each of our Chief Executive Officer and ChiefFinancial Officer has evaluated the effectiveness of our disclosure controlsand 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.

We place reliance on Sprint PCS to adequately designits internal controls with respect to the processes established to providefinancial information and other information to us and the otherPCS Affiliates of Sprint. To address this issue, Sprint engages anindependent registered public accounting firm to perform a periodic evaluationof these controls and to provide a “Report on Controls Placed in Operation andTests of Operating Effectiveness for Affiliates” under guidance provided inStatement of Auditing Standards No. 70. This report is providedbi-annually to us.

There have been no changesin our 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 December 31,2006 that have materially affected, or are reasonably likely to materiallyaffect, our internal control over financial reporting.

**Management Reporton Internal Control over Financial Reporting**

Our management is responsible for establishing andmaintaining adequate internal control over financial reporting. Our internalcontrol system was designed to provide reasonable assurance to our managementand board of directors regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance withgenerally accepted accounting principles.

Any internal control system, no matter how welldesigned, has inherent limitations and may not prevent or detect misstatements.Accordingly, even those systems determined to be effective can provide onlyreasonable assurance with respect to financial statement preparation andpresentation.

Our management conducted an assessment of theeffectiveness of our internal control over financial reporting as of December 31,2006. This assessment was based on the criteria set forth by the Committee ofSponsoring Organizations of the Treadway Commission, or COSO, in InternalControl—Integrated Framework. Based on this assessment, management believesthat, as of December 31, 2006, our internal control over financialreporting was effective.

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Deloitte &Touche LLP, our independent registered public accounting firm, issued anattestation report on our management’s assessment of our internal control overfinancial reporting. Their report appears below.
| /s/ Timothy M. Yager                   |   | /s/ Stebbins B. Chandor, Jr.                    |
|----------------------------------------|--------|------------------------------------------------------|
| Timothy M. Yager                       |   | Stebbins B. Chandor, Jr.                        |
| President and  Chief Executive Officer |   | Executive Vice President and Chief Financial Officer |
| March 16,  2007                   |   | March 16, 2007                                  |

 

**REPORT OFINDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

**To theBoard of Directors and Stockholders ofiPCS, Inc. and subsidiariesSchaumburg, Illinois**

We have audited management’s assessment, included inthe accompanying Management Report on Internal Control over FinancialReporting, that iPCS, Inc. and subsidiaries (the Company) maintainedeffective internal control over financial reporting as of December 31,2006, based on the criteria established in *Internal Control—IntegratedFramework* issued by the Committee of Sponsoring Organizations of theTreadway Commission. The Company’s management is responsible for maintainingeffective internal control over financial reporting and for its assessment ofthe effectiveness of internal control over financial reporting. Ourresponsibility is to express an opinion on management’s assessment and anopinion on the effectiveness of the Company’s internal control over financialreporting based on our audit.

We conducted our audit 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 effective internal control over financial reporting wasmaintained in all material respects. Our audit included obtaining anunderstanding of internal control over financial reporting, evaluatingmanagement’s assessment, testing and evaluating the design and operatingeffectiveness of internal control, and performing such other procedures as weconsidered necessary in the circumstances. We believe that our audit provides areasonable basis for our opinions.

A company’s internal control over financial reportingis a process designed by, or under the supervision of, the company’s principalexecutive and principal financial officers, or persons performing similarfunctions, and effected by the company’s board of directors, management, andother personnel to provide reasonable assurance regarding the reliability offinancial reporting and the preparation of financial statements for externalpurposes in accordance with generally accepted accounting principles. A company’sinternal control over financial reporting includes those policies andprocedures that (1) pertain to the maintenance of records that, inreasonable detail, accurately and fairly reflect the transactions anddispositions of the assets of the company; (2) provide reasonableassurance that transactions are recorded as necessary to permit preparation offinancial statements in accordance with generally accepted accountingprinciples, and that receipts and expenditures of the company are being madeonly in accordance with authorizations of management and directors of thecompany; and (3) provide reasonable assurance regarding prevention ortimely detection of unauthorized acquisition, use, or disposition of thecompany’s assets that could have a material effect on the financial statements.

Because of the inherent limitations of internalcontrol over financial reporting, including the possibility of collusion orimproper management override of controls, material misstatements due to erroror fraud may not be prevented or detected on a timely basis. Also, projectionsof any evaluation of the effectiveness of the internal control over financialreporting to future periods are subject to the risk that the controls may 

78

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become inadequate because of changes in conditions, orthat the degree of compliance with the policies or procedures may deteriorate.

In our opinion, management’s assessment that theCompany maintained effective internal control over financial reporting as of December 31,2006, is fairly stated, in all material respects, based on the criteriaestablished in Internal Control—Integrated Framework issued by the Committee ofSponsoring Organizations of the Treadway Commission. Also in our opinion, theCompany maintained, in all material respects, effective internal control overfinancial reporting as of December 31, 2006, based on the criteriaestablished in *Internal Control—Integrated Framework*issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standardsof the Public Company Accounting Oversight Board (United States), theconsolidated financial statements as of and for the year ended December 31,2006 of the Company and our report dated March 16, 2007 expressed anunqualified opinion on those financial statements.

/s/ DELOITTE & TOUCHE LLP

 

Davenport, Iowa

March 16, 2007

**ITEM 9B.**       OTHERINFORMATION

None.

79

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**PART III**

**ITEM 10.**         DIRECTORS,EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information requiredby Item 10 is incorporated by reference to the information set forth under thecaptions “Executive Officers and Executive Compensation” and “Election of Directorsof iPCS” in our proxy statement relating to our 2007 annual meeting ofstockholders, which will be filed with the SEC.

**ITEM 11.**         EXECUTIVECOMPENSATION

The information requiredby Item 11 is incorporated by reference to the information set forth under thecaption “Executive Officers and Executive Compensation” in our proxy statementrelating to our 2007 annual meeting of stockholders, which will be filed withthe SEC.

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

Certain informationrequired by Item 12 is incorporated by reference to the information set forthunder the caption “Security Ownership of Certain Beneficial Owners andManagement” in our proxy statement relating to our 2007 annual meeting ofstockholders, which will be filed with the SEC.

**Equity CompensationPlan Information**

Wecurrently maintain two equity compensation plans that provide for the issuanceof common stock to officers and other employees, directors and consultants. Eachof these compensation plans was approved by our security holders. The followingtable presents information with respect to our equity compensation plans as of December 31,2006:

| **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) |       |       | 650,603    |                                                                                                                                                        |       |                                                                                                               | $          | 15.57                                                                                                                                                                                                              |       |   |   | 839,097 |   |   |
| Total                                                      |       |       | 650,603    |                                                                                                                                                        |       |                                                                                                               | $          | 15.57                                                                                                                                                                                                              |       |   |   | 839,097 |   |   |

----

(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 and the Horizon PCSincentive plan that was implemented pursuant to Horizon PCS’s plan ofreorganization and approved by the security holders on September 28, 2006.

For further information,refer to Note 12 to the consolidated financial statements of this Form 10-K.

80

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**ITEM 13.**         CERTAINRELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information requiredby Item 13 is incorporated by reference to the information set forth under thecaptions “Executive Officers and Executive Compensation” and “Election ofDirectors of iPCS” in our proxy statement relating to our 2007 annual meetingof stockholders, which will be filed with the SEC.

**ITEM 14.**         PRINCIPALACCOUNTING FEES AND SERVICES

The information required by Item 14 is incorporated byreference to the information set forth under the caption “Ratification ofIndependent Registered Public Accounting Firm—Principal Accounting Fees andServices” in our proxy statement relating to our 2007 annual meeting of stockholders,which will be filed with the SEC.

81

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**PART IV**

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

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

**1. Financial Statements**

See the Index toConsolidated Financial Statements on page F-1.

2. Financial Statement Schedules. None

3. See the Exhibit Index following the financialstatements.

(b) See the Exhibit Indexfollowing the financial statements.

(c) Financial StatementSchedules. None

82

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**SIGNATURES**

Pursuant to the requirements of Section 13 or 15(d) ofthe Securities Exchange Act of 1934, the registrant has duly caused this reportto be signed on its behalf by the undersigned, thereunto duly authorized.
|        | iPCS, Inc. |
|--------|-----------------|
|   | By:             | /s/ TIMOTHY M. YAGER |
|   |            | Timothy M. Yager |
|   | * *        | *President and Chief Executive Officer* |
|   |            | Date: March 16, 2007 |

 

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              |       | March 16, 2007 |
| Timothy M. Yager                   |       | (Principal Executive Officer)  |       |                |
| /s/ TIMOTHY G. BILTZ               |       | Director                       |       | March 16, 2007 |
| Timothy G. Biltz                   |       |                           |       |                |
| /s/ JEFFREY W. JONES               |       | Director                       |       | March 16, 2007 |
| Jeffrey W. Jones                   |       |                           |       |                |
| /s/ RYAN L. LANGDON                |       | Director                       |       | March 16, 2007 |
| Ryan L. Langdon                    |       |                           |       |                |
| /s/ RICHARD S. PARISI              |       | Director                       |       | March 16, 2007 |
| Richard S. Parisi                  |       |                           |       |                |
| /s/ KEVIN M. ROE                   |       | Director                       |       | March 16, 2007 |
| Kevin M. Roe                       |       |                           |       |                |
| /s/ ERIC L. ZINTERHOFER            |       | Director                       |       | March 16, 2007 |
| Eric L. Zinterhofer                |       |                           |       |                |
|                               |       | Executive Vice President  and  |       |                |
| /s/ STEBBINS  B. CHANDOR, JR. |       | Chief Financial  Officer       |       | March 16, 2007 |
| Stebbins B. Chandor, Jr.      |       | (Principal Financial Officer)  |       |                |
| /s/ PATRICIA M. GRETEMAN           |       | Vice President and  Controller |       | March 16, 2007 |
| Patricia M. Greteman               |       | (Principal Accounting Officer) |       |                |

 

83

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**iPCS, INC. ANDSUBSIDIARIES**

**INDEXTO CONSOLIDATED FINANCIAL STATEMENTS**

|                                                                                                                                                                                                                                                                                                                                                                      | ** ** | **Page** |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------|
| Report of Independent Registered Public Accounting  Firm                                                                                                                                                                                                                                                                                                             |       | F-2      |
| Consolidated  Balance Sheets as of December 31, 2006 and 2005 (Successor Company)                                                                                                                                                                                                                                                                               |       | F-3      |
| Consolidated Statements of Operations for the year  ended December 31, 2006, the three months ended December 31, 2005,  the year ended September 30, 2005, the period from July 2, 2004  through September 30, 2004 (Successor Company), and the period from  October 1, 2003 through July 1, 2004 (Predecessor Company)          |       | F-4      |
| Consolidated Statements of Cash Flows for the year ended  December 31, 2006, the three months ended December 31, 2005, the  year ended September 30, 2005, the period from July 2, 2004 through  September 30, 2004 (Successor Company), and the period from  October 1, 2003 through July 1, 2004 (Predecessor Company)          |       | F-5      |
| Consolidated Statements of Equity (Deficiency) for the  year ended December 31, 2006, the three months ended December 31,  2005, the year ended September 30, 2005, the period from July 2,  2004 through September 30, 2004 (Successor Company), and the period from  October 1, 2003 through July 1, 2004 (Predecessor Company) |       | F-6      |
| Notes to Consolidated Financial Statements                                                                                                                                                                                                                                                                                                                           |       | F-7      |

 

F-1

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**REPORTOF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

Tothe Board of Directors and Stockholders of

iPCS,Inc. and subsidiaries

Schaumburg, Illinois

We have audited the accompanying consolidated balancesheets of iPCS, Inc. and subsidiaries (the “Company”) as of December 31,2006 and 2005 (Successor Company), and the related consolidated statements ofoperations, equity (deficiency) and cash flows for the year ended December 31,2006, the three months ended December 31, 2005, the year ended September 30,2005 and the period from July 2, 2004 through September 30, 2004(Successor Company), and the period from October 1, 2003 through July 1,2004 (Predecessor Company). These financial statements are the responsibilityof the Company’s management. Our responsibility is to express an opinion onthese 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. An audit includes examining, on a test basis, evidence supportingthe amounts and disclosures in the financial statements. An audit also includesassessing the accounting principles used and significant estimates made bymanagement, as well as evaluating the overall financial statement presentation.We believe that 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 accompanying consolidatedfinancial statements have been prepared in conformity with AICPA Statement ofPosition 90-7, “Financial Reporting by Entities in Reorganization Underthe Bankruptcy Code,” for the Successor Company as a new entity with assets,liabilities, and a capital structure having carrying values not comparable withprior periods as described in Note 4.

In our opinion, the consolidated financial statementspresent fairly, in all material respects, the financial position of iPCS, Inc.and subsidiaries at December 31, 2006 and 2005 (Successor Company), andthe results of their operations and their cash flows for the year endedDecember 31, 2006, the three months ended December 31, 2005, the yearended September 30, 2005 and the period from July 2, 2004 throughSeptember 30, 2004 (Successor Company), and the period from October 1,2003 through July 1, 2004 (Predecessor Company), in conformity withaccounting principles generally accepted in the United States of America. 

We have also audited, inaccordance with the standards of the Public Company Accounting Oversight Board(United States), the effectiveness of the Company’s internal control overfinancial reporting as of December 31, 2006, based on the criteriaestablished in *Internal Control—Integrated Framework*issued by the Committee of Sponsoring Organizations of the Treadway Commissionand our report dated March 16, 2007 expressed an unqualified opinion onmanagement’s assessment of the effectiveness of the Company’s internal controlover financial reporting and an unqualified opinion on the effectiveness of theCompany’s internal control over financial reporting.

/s/ DELOITTE & TOUCHELLP

Davenport,Iowa

March 16, 2007

F-2

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**iPCS, INC. ANDSUBSIDIARIES**

**CONSOLIDATEDBALANCE SHEETS**

**(Dollarsin thousands, except share and per share amounts)**

| ** **                                                                                                                                    | ** ** | **Successor Company**  | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------|------------|
| ** **                                                                                                                                    | ** ** | **December 31,  2006** | ** ** | **December 31,   2005** | ** ** |
| **Assets**                                                                                                                                    | ** ** |                        | ** ** | ** ** |   |   | ** ** | ** ** |   |
| Current Assets:                                                                                                                               |       |                        |       |   |   |   |   |   |   |
| Cash and cash  equivalents                                                                                                                    |       |                        | $          | 120,499 |   |   |   | $ | 110,837 |   |   |
| Accounts  receivable, net                                                                                                                     |       |                        | 29,700     |   |   |   | 31,115 |   |   |
| Receivable from  Sprint (Note 5)                                                                                                              |       |                        | 40,724     |   |   |   | 44,193 |   |   |
| Inventories, net  (Note 5)                                                                                                                    |       |                        | 4,291      |   |   |   | 3,583 |   |   |
| Prepaid expenses                                                                                                                              |       |                        | 7,468      |   |   |   | 6,387 |   |   |
| Other current  assets                                                                                                                         |       |                        | 272        |   |   |   | 3,125 |   |   |
| Total current assets                                                                                                                          |       |                        | 202,954    |   |   |   | 199,240 |   |   |
| Property and  equipment, net (Note 6)                                                                                                         |       |                        | 139,641    |   |   |   | 147,254 |   |   |
| Financing costs  (Note 2)                                                                                                                |       |                        | 7,724      |   |   |   | 9,147 |   |   |
| Customer  activation costs                                                                                                                    |       |                        | 3,252      |   |   |   | 1,435 |   |   |
| Intangible  assets, net (Note 7)                                                                                                              |       |                        | 131,353    |   |   |   | 169,311 |   |   |
| Goodwill (Note 7)                                                                                                                             |       |                        | 141,783    |   |   |   | 146,391 |   |   |
| Other assets                                                                                                                                  |       |                        | 364        |   |   |   | 435 |   |   |
| Total assets                                                                                                                                  |       |                        | $          | 627,071 |   |   |   | $ | 673,213 |   |   |
| **Liabilities  and Stockholders’ Equity**                                                                                                | ** ** |                        | ** ** | ** ** |   |   | ** ** | ** ** |   |
| Current liabilities:                                                                                                                          |       |                        |       |   |   |   |   |   |   |
| Accounts payable                                                                                                                              |       |                        | $          | 7,387 |   |   |   | $ | 6,751 |   |   |
| Accrued expenses                                                                                                                              |       |                        | 14,340     |   |   |   | 16,351 |   |   |
| Payable to Sprint  (Note 5)                                                                                                                   |       |                        | 58,196     |   |   |   | 60,204 |   |   |
| Deferred revenue                                                                                                                              |       |                        | 11,065     |   |   |   | 10,557 |   |   |
| Accrued interest                                                                                                                              |       |                        | 9,758      |   |   |   | 9,758 |   |   |
| Current  maturities of long-term debt and capital lease obligations (Note 8)                                                             |       |                        | 24         |   |   |   | 11 |   |   |
| Total current liabilities                                                                                                                     |       |                        | 100,770    |   |   |   | 103,632 |   |   |
| Customer  activation fee revenue                                                                                                              |       |                        | 3,252      |   |   |   | 1,435 |   |   |
| Other long-term  liabilities                                                                                                                  |       |                        | 6,819      |   |   |   | 9,104 |   |   |
| Long-term debt  and capital lease obligations, excluding current maturities (Note 8)                                                     |       |                        | 302,045    |   |   |   | 304,037 |   |   |
| Total liabilities                                                                                                                             |       |                        | 412,886    |   |   |   | 418,208 |   |   |
| 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, 16,774,060 and 16,656,352  shares issued and outstanding, respectively |       |                        | 168        |   |   |   | 167 |   |   |
| Additional  paid-in-capital                                                                                                                   |       |                        | 334,156    |   |   |   | 328,938 |   |   |
| Accumulated  deficiency                                                                                                                       |       |                        | (120,139   | ) |   |   | (74,100 | ) |   |
| Total  stockholders’ equity                                                                                                              |       |                        | 214,185    |   |   |   | 255,005 |   |   |
| Total liabilities and  stockholders’ equity                                                                                              |       |                        | $          | 627,071 |   |   |   | $ | 673,213 |   |   |

 

See Notes to consolidated financial statements.

F-3

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**iPCS, INC. ANDSUBSIDIARIES**

**CONSOLIDATEDSTATEMENTS OF OPERATIONS**

**(Dollarsin thousands, except share data)**

| ** **                                                                          | ** ** | **Successor Company**                                 | ** ** | **Predecessor  Company**                                                | ** ** |
|-------------------------------------------------------------------------------------|------------|------------------------------------------------------------|------------|-------------------------------------------------------------------------|------------|
| ** **                                                                          | ** ** | **For the Year  Ended  December 31,  2006** | ** ** | **For the Three  Months Ended  December 31,  2005** | ** ** | **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** | ** ** |
| **Revenues:**                                                                       | ** ** |                                                       | ** ** | ** **                                                              |       |   | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |
| Service revenue                                                                     |       |                                                       | $          | 316,513                                                                 |       |   |   | $ | 70,996 |   |   |   | $ | 189,177 |   |   |   | $ | 37,909 |   |   |   | $ | 107,097 |   |   |
| Roaming revenue                                                                     |       |                                                       | 161,848    |                                                                    |       |   | 36,071 |   |   |   | 82,959 |   |   |   | 15,829 |   |   |   | 34,525 |   |   |
| Equipment and other                                                                 |       |                                                       | 14,061     |                                                                    |       |   | 2,485 |   |   |   | 7,911 |   |   |   | 1,644 |   |   |   | 4,240 |   |   |
| Total revenues                                                                      |       |                                                       | 492,422    |                                                                    |       |   | 109,552 |   |   |   | 280,047 |   |   |   | 55,382 |   |   |   | 145,862 |   |   |
| **Operating Expenses:**                                                             | ** ** |                                                       | ** ** | ** **                                                              |       |   | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |
| Cost of service and roaming (exclusive of  depreciation, as shown separately below) |       |                                                       | (285,979   | )                                                                       |       |   | (62,766 | ) |   |   | (153,058 | ) |   |   | (29,090 | ) |   |   | (83,230 | ) |   |
| Cost of equipment                                                                   |       |                                                       | (41,707    | )                                                                       |       |   | (9,150 | ) |   |   | (27,260 | ) |   |   | (5,584 | ) |   |   | (12,801 | ) |   |
| Selling and marketing                                                               |       |                                                       | (74,293    | )                                                                       |       |   | (18,216 | ) |   |   | (44,424 | ) |   |   | (8,001 | ) |   |   | (20,976 | ) |   |
| General and administrative                                                          |       |                                                       | (20,944    | )                                                                       |       |   | (7,907 | ) |   |   | (13,189 | ) |   |   | (1,714 | ) |   |   | (3,550 | ) |   |
| Reorganization income (Note 4)                                                 |       |                                                       | —     |                                                                    |       |   | — |   |   |   | — |   |   |   | — |   |   |   | 60,797 |   |   |
| Depreciation (Note 6)                                                               |       |                                                       | (50,522    | )                                                                       |       |   | (12,039 | ) |   |   | (53,700 | ) |   |   | (8,790 | ) |   |   | (28,596 | ) |   |
| Amortization of intangible assets (Note 7)                                     |       |                                                       | (37,958    | )                                                                       |       |   | (9,489 | ) |   |   | (18,126 | ) |   |   | (3,051 | ) |   |   | — |   |   |
| Gain (loss) on disposal of property and equipment                                   |       |                                                       | (574       | )                                                                       |       |   | (182 | ) |   |   | (141 | ) |   |   | 4 |   |   |   | (13 | ) |   |
| Total operating expenses                                                            |       |                                                       | (511,977   | )                                                                       |       |   | (119,749 | ) |   |   | (309,898 | ) |   |   | (56,226 | ) |   |   | (88,369 | ) |   |
| **Operating income (loss)**                                                         |       |                                                       | (19,555    | )                                                                       |       |   | (10,197 | ) |   |   | (29,851 | ) |   |   | (844 | ) |   |   | 57,493 |   |   |
| Interest income                                                                     |       |                                                       | 5,490      |                                                                    |       |   | 1,104 |   |   |   | 1,782 |   |   |   | 289 |   |   |   | 263 |   |   |
| Interest expense                                                                    |       |                                                       | (32,086    | )                                                                       |       |   | (8,108 | ) |   |   | (22,926 | ) |   |   | (5,425 | ) |   |   | (10,142 | ) |   |
| Cancellation of debt (Note 4)                                                       |       |                                                       | —     |                                                                    |       |   | — |   |   |   | — |   |   |   | — |   |   |   | 131,956 |   |   |
| Other income, net                                                                   |       |                                                       | 112        |                                                                    |       |   | 15 |   |   |   | 57 |   |   |   | 4 |   |   |   | 7 |   |   |
| **Income (loss) before (provision for) benefit  from income taxes**                 |       |                                                       | (46,039    | )                                                                       |       |   | (17,186 | ) |   |   | (50,938 | ) |   |   | (5,976 | ) |   |   | 179,577 |   |   |
| (Provision for) benefit from income taxes                                           |       |                                                       | —     |                                                                    |       |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |
| **Net income (loss)**                                                               |       |                                                       | $          | (46,039                                                                 | )          |   |   | $ | (17,186 | ) |   |   | $ | (50,938 | ) |   |   | $ | (5,976 | ) |   |   | $ | 179,577 |   |   |
| Basic and diluted loss  per share of common stock                                   |       |                                                       |       |                                                                    |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loss available to common   stockholders                                             |       |                                                       | $          | (2.76                                                                   | )          |   |   | $ | (1.03 | ) |   |   | $ | (4.60 | ) |   |   | $ | (0.65 | ) |   |   | n/a |   |   |
| Weighted average  common shares outstanding                                         |       |                                                       | 16,703,142 |                                                                    |       |   | 16,645,467 |   |   |   | 11,073,435 |   |   |   | 9,257,582 |   |   |   | n/a |   |   |

 

See Notes to consolidated financial statements.

F-4

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**iPCS, INC. ANDSUBSIDIARIES**

**CONSOLIDATEDSTATEMENTS OF CASH FLOWS**

**(Inthousands)**

| ** **                                                                                                              | ** ** | **Successor Company**                                 | ** ** | **Predecessor  Company**                                                  | ** ** |
|-------------------------------------------------------------------------------------------------------------------------|------------|------------------------------------------------------------|------------|---------------------------------------------------------------------------|------------|
| ** **                                                                                                              | ** ** | **For the Year  Ended  December 31,  2006** | ** ** | **For the Three   Months  Ended  December 31,  2005** | ** ** | **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** | ** ** |
| **Cash Flows from Operating  Activities:**                                                                              | ** ** |                                                       | ** ** | ** **                                                                |       |   | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |
| Net income (loss)                                                                                                       |       |                                                       | $          | (46,039                                                                   | )          |   |   | $ | (17,186 | ) |   |   | $ | (50,938 | ) |   |   | $ | (5,976 | ) |   |   | $ | 179,577 |   |   |
| Adjustments to reconcile  net income (loss) to net cash flows from operating activities:                                |       |                                                       |       |                                                                      |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (Gain) loss on disposal of property and equipment                                                                       |       |                                                       | 574        |                                                                      |       |   | 182 |   |   |   | 141 |   |   |   | (4 | ) |   |   | 13 |   |   |
| Depreciation and amortization of intangible assets                                                                      |       |                                                       | 88,480     |                                                                      |       |   | 21,528 |   |   |   | 71,826 |   |   |   | 11,841 |   |   |   | 28,596 |   |   |
| Non-cash interest expense net of amortization of debt  fair value adjustment                                            |       |                                                       | (650       | )                                                                         |       |   | (162 | ) |   |   | 504 |   |   |   | 208 |   |   |   | 455 |   |   |
| Cancellation of debt                                                                                                    |       |                                                       | —     |                                                                      |       |   | — |   |   |   | — |   |   |   | — |   |   |   | (131,956 | ) |   |
| Non-cash reorganization income                                                                                          |       |                                                       | —     |                                                                      |       |   | — |   |   |   | — |   |   |   | — |   |   |   | (68,276 | ) |   |
| Stock-based compensation expense                                                                                        |       |                                                       | 2,496      |                                                                      |       |   | 1,659 |   |   |   | 1,200 |   |   |   | 22 |   |   |   | — |   |   |
| Provision for doubtful accounts                                                                                         |       |                                                       | 10,893     |                                                                      |       |   | 1,660 |   |   |   | 2,139 |   |   |   | 489 |   |   |   | 246 |   |   |
| Purchases of investments                                                                                                |       |                                                       | (22,447    | )                                                                         |       |   | — |   |   |   | (2,650 | ) |   |   | — |   |   |   | — |   |   |
| Sales of investments                                                                                                    |       |                                                       | 22,447     |                                                                      |       |   | 16,700 |   |   |   | 2,750 |   |   |   | — |   |   |   | — |   |   |
| Changes  in assets and liabilities:                                                                                     |       |                                                       |       |                                                                      |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Accounts receivable                                                                                                     |       |                                                       | (9,565     | )                                                                         |       |   | (7,174 | ) |   |   | (1,373 | ) |   |   | (385 | ) |   |   | 459 |   |   |
| Receivable from Sprint                                                                                                  |       |                                                       | 3,469      |                                                                      |       |   | (13,357 | ) |   |   | (9,935 | ) |   |   | (2,531 | ) |   |   | (4,251 | ) |   |
| Inventories, net                                                                                                        |       |                                                       | (708       | )                                                                         |       |   | (404 | ) |   |   | (1,314 | ) |   |   | (266 | ) |   |   | (444 | ) |   |
| Prepaid expenses, other current and long term assets                                                                    |       |                                                       | (2,667     | )                                                                         |       |   | (414 | ) |   |   | (150 | ) |   |   | 476 |   |   |   | 1,254 |   |   |
| Accounts payable, accrued expenses and other long  term   liabilities                                                   |       |                                                       | 681        |                                                                      |       |   | (1,743 | ) |   |   | (5,715 | ) |   |   | 766 |   |   |   | 4,587 |   |   |
| Payable to Sprint                                                                                                       |       |                                                       | (2,008     | )                                                                         |       |   | 19,069 |   |   |   | 5,375 |   |   |   | (2,959 | ) |   |   | 9,639 |   |   |
| Deferred revenue                                                                                                        |       |                                                       | 2,325      |                                                                      |       |   | 503 |   |   |   | 1,039 |   |   |   | 764 |   |   |   | (999 | ) |   |
| Net cash flows from operating activities                                                                                |       |                                                       | 47,281     |                                                                      |       |   | 20,861 |   |   |   | 12,899 |   |   |   | 2,445 |   |   |   | 18,900 |   |   |
| **Cash Flows from Investing  Activities:**                                                                              | ** ** |                                                       | ** ** | ** **                                                                |       |   | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |
| Cash acquired in acquisition, net of transaction costs                                                                  |       |                                                       | —     |                                                                      |       |   | — |   |   |   | 19,935 |   |   |   | — |   |   |   | — |   |   |
| Purchases of property and equipment                                                                                     |       |                                                       | (44,458    | )                                                                         |       |   | (8,904 | ) |   |   | (17,440 | ) |   |   | (3,402 | ) |   |   | (8,634 | ) |   |
| Proceeds from disposition of fixed assets                                                                               |       |                                                       | 4,127      |                                                                      |       |   | 333 |   |   |   | 17,370 |   |   |   | 153 |   |   |   | 86 |   |   |
| Net cash flows from investing activities                                                                                |       |                                                       | (40,331    | )                                                                         |       |   | (8,571 | ) |   |   | 19,865 |   |   |   | (3,249 | ) |   |   | (8,548 | ) |   |
| **Cash Flows from Financing  Activities:**                                                                              | ** ** |                                                       | ** ** | ** **                                                                |       |   | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |
| Proceeds from senior notes offering                                                                                     |       |                                                       | —     |                                                                      |       |   | — |   |   |   | — |   |   |   | — |   |   |   | 165,000 |   |   |
| Proceeds from the exercise of stock options                                                                             |       |                                                       | 2,723      |                                                                      |       |   | 449 |   |   |   | 9,536 |   |   |   | — |   |   |   | — |   |   |
| Stock purchases and retirements                                                                                         |       |                                                       | —     |                                                                      |       |   | — |   |   |   | (1,626 | ) |   |   | — |   |   |   | — |   |   |
| Repayments under senior credit facilities                                                                               |       |                                                       | —     |                                                                      |       |   | — |   |   |   | — |   |   |   | (126,570 | ) |   |   | (1,141 | ) |   |
| Payments on capital lease obligations                                                                                   |       |                                                       | (11        | )                                                                         |       |   | (9 | ) |   |   | (21 | ) |   |   | — |   |   |   | (3 | ) |   |
| Debt financing costs                                                                                                    |       |                                                       | —     |                                                                      |       |   | — |   |   |   | (306 | ) |   |   | (5,269 | ) |   |   | (1,459 | ) |   |
| Net cash flows from financing activities                                                                                |       |                                                       | 2,712      |                                                                      |       |   | 440 |   |   |   | 7,583 |   |   |   | (131,839 | ) |   |   | 162,397 |   |   |
| Net increase (decrease) in cash and cash equivalents                                                                    |       |                                                       | 9,662      |                                                                      |       |   | 12,730 |   |   |   | 40,347 |   |   |   | (132,643 | ) |   |   | 172,749 |   |   |
| **Cash and cash equivalents at beginning of period**                                                                    |       |                                                       | 110,837    |                                                                      |       |   | 98,107 |   |   |   | 57,760 |   |   |   | 190,403 |   |   |   | 17,654 |   |   |
| **Cash and cash equivalents at end of period**                                                                          |       |                                                       | $          | 120,499                                                                   |       |   |   | $ | 110,837 |   |   |   | $ | 98,107 |   |   |   | $ | 57,760 |   |   |   | $ | 190,403 |   |   |
| **Supplemental disclosure of cash flow  information—cash paid   for interest**                                     |       |                                                       | $          | 33,194                                                                    |       |   |   | $ | 9,488 |   |   |   | $ | 26,137 |   |   |   | $ | 467 |   |   |   | $ | 8,362 |   |   |
| **Supplemental disclosure for  non-cash investing activities:**                                                         | ** ** |                                                       | ** ** | ** **                                                                |       |   | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |   | ** ** | ** ** |   |
| Capitalized interest                                                                                                    |       |                                                       | $          | 578                                                                       |       |   |   | $ | 60 |   |   |   | $ | 191 |   |   |   | $ | — |   |   |   | $ | — |   |   |
| Accounts payable and accrued expenses incurred for  the acquisition of property, equipment and construction in progress |       |                                                       | 1,976      |                                                                      |       |   | 2,328 |   |   |   | 5,301 |   |   |   | 248 |   |   |   | 279 |   |   |
| Capital lease obligations incurred for the  acquisition of property and equipment                                       |       |                                                       | 106        |                                                                      |       |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |
| Acquisition of  business through issuance of common stock, net of cash acquired and  transaction costs (Note 3)         |       |                                                       | —     |                                                                      |       |   | — |   |   |   | 210,872 |   |   |   | — |   |   |   | — |   |   |
| Adjustment to  goodwill (Note 7)                                                                                        |       |                                                       | 4,608      |                                                                      |       |   | — |   |   |   | — |   |   |   | — |   |   |   | — |   |   |

 

See Notes to consolidated financial statements.

F-5

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**iPCS, INC.AND SUBSIDIARIES**

**CONSOLIDATED STATEMENTS OF 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, 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 and restricted stock        |       | —                |       |           | —     | ** **          |       |             | —     |   |   |   | 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 and restricted stock        |       | —                |       |           | —     | ** **          |       |             | —     |   |   |   | 624 |   |   |   | — |   |   |
| **Balance at September 30, 2005**                               |       | 16,635,482            |       |           | 166        | ** **          |       |             | 328,202    |   |   |   | (1,372 | ) |   |   | (56,914 | ) |   |
| Net loss                                                             |       | —                |       |           | —     | ** **          |       |             | —     |   |   |   | — |   |   |   | (17,186 | ) |   |
| Grant of  restricted stock                                           |       | 800                   |       |           | —     | ** **          |       |             | —     |   |   |   | — |   |   |   | — |   |   |
| Exercise of stock  options                                           |       | 20,070                |       |           | 1          | ** **          |       |             | 449        |   |   |   | — |   |   |   | — |   |   |
| Reclassification  from unearned compensation                         |       |                  |       |           |       | ** **          |       |             | (1,372     | ) |   |   | 1,372 |   |   |   |   |   |   |
| Stock-based  compensation   expense                                  |       | —                |       |           | —     | ** **          |       |             | 1,659      |   |   |   | — |   |   |   | — |   |   |
| **Balance at December 31, 2005**                                |       | 16,656,352            |       |           | 167        | ** **          |       |             | 328,938    |   |   |   | — |   |   |   | (74,100 | ) |   |
| Net loss                                                             |       | —                |       |           | —     | ** **          |       |             | —     |   |   |   | — |   |   |   | (46,039 | ) |   |
| Forfeiture of  restricted stock                                      |       | (1,042                | )          |           | —     | ** **          |       |             | —     |   |   |   | — |   |   |   | — |   |   |
| Exercise of stock  options                                           |       | 118,750               |       |           | 1          | ** **          |       |             | 2,722      |   |   |   | — |   |   |   | — |   |   |
| Stock-based  compensation expense                                    |       | —                |       |           | —     | ** **          |       |             | 2,496      |   |   |   | — |   |   |   | — |   |   |
| **Balance  at December 31, 2006**                               |       | 16,774,060            |       |           | $          | 168                 | ** ** |             |       | $ | 334,156 |   |   |   | $ | — |   |   |   | $ | (120,139 | ) |   |

 

See Notes to consolidated financial statements.

F-6

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**iPCS, INC. ANDSUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL 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 separate affiliation agreements 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. The Companyoperates in one segment which is the wireless personal communication servicebusiness.

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 by AirGate PCS, Inc. (“AirGate”), anotherPCS Affiliate of Sprint. iPCS was designated as an unrestricted subsidiaryof AirGate and both companies operated as separate business entities. On February 23,2003, the Company and its subsidiaries filed for Chapter 11 bankruptcyprotection. The Bankruptcy Court confirmed the Company’s Joint Plan ofReorganization on July 9, 2004 and it was declared effective onJuly 20, 2004. In accordance with the American Institute of CertifiedPublic Accountants Statement of Position 90-7, “Financial Reporting byEntities in Reorganization under the Bankruptcy Code,” the Company adoptedfresh-start accounting as of July 1, 2004 (See Note 4), and theCompany’s emergence from Chapter 11 resulted in a new reporting entity.The periods 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 reorganization equityvalue of the company was allocated to the assets and liabilities based on theirrespective fair values and was in conformity with Statement of FinancialAccounting Standard (“SFAS”) No. 141 “Business Combinations.” As a resultof the implementation of fresh-start accounting, the financial statements ofthe Company after July 1, 2004 are not comparable to the Company’sfinancial statements for prior periods.

On October 17,2003, AirGate irrevocably transferred its ownership of iPCS 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 the Company.Upon the Company’s emergence from bankruptcy (see Note 4), iPCS’s common stockheld by the trust was cancelled and the trust terminated by its terms.

On July 1,2005, iPCS completed a merger with Horizon PCS, Inc. (“Horizon PCS”),another PCS Affiliate of Sprint, in which Horizon PCS merged with and intoiPCS, Inc., with iPCS, Inc. as the surviving corporation (see Note3). Through its two affiliation agreements with Sprint PCS, two wholly ownedsubsidiaries of Horizon PCS have the exclusive right to market and provideSprint PCS products and services in 40 markets in Ohio, Indiana, Tennessee,Michigan, New York, New Jersey, Maryland, Pennsylvania, and West Virginia.

In February 2006,the Company changed its fiscal year-end from September 30 to December 31,commencing in 2006. The Company’s 2005 fiscal year ended on September 30,2005.

The PCS market is characterized by significant risksas a result of rapid changes in technology and increasing competition. TheCompany’s continuing operations are dependent upon Sprint’s ability to performits obligations under the affiliation agreements. In addition, the Company mustbe able to attract and maintain a sufficient customer base and achievesatisfactory growth while successfully managing operations to generate enoughcash from operations to meet future obligations. Changes in technology, 

F-7

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increased competition, orthe inability to obtain required financing or achieve break-even operating cashflow, among other factors, could have an adverse effect on the Company’sfinancial position and results of operations.

**(2)**          Summaryof Significant Accounting Policies

*(a) Principles ofConsolidation*

The accompanyingfinancial statements include the accounts of the Company and its operatingsubsidiaries, iPCS Wireless, Inc., iPCS Equipment, Inc., HorizonPersonal Communications, Inc. and Bright Personal Communications Services,LLC. All significant intercompany balances and transactions have beeneliminated in consolidation.

*(b) Cash and cashequivalents*

Cash and cashequivalents include cash on hand, demand deposits and money market funds withoriginal maturities of three months or less.

*(c) Investments*

Investments includemarketable debt securities with original purchase maturities greater than threemonths. The Company classifies these investments as trading securities becausethe securities are bought and held principally for the purpose of selling themin the near term. Trading securities are recorded at fair value.

*(d) Allowance forDoubtful Accounts*

Estimates are usedin determining the allowance for doubtful accounts and are based on historicalwrite-off experience and the uncollectibility of accounts receivable by agingcategory, as well as current information regarding the credit quality of theCompany’s customers. Using this information, the Company estimates allowancesfor uncollectibility relative to the aging categories. Bad debt expense as apercentage of service revenues for the year ended December 31, 2006, thethree months ended December 31, 2005, the year ended September 30,2005, the period ended September 30, 2004, and the period ended July 1,2004, was 3.4%, 2.3%, 1.1%, 1.3% and 0.2%, respectively. The allowance fordoubtful accounts as of December 31, 2006 and 2005 was $6.7 millionand $3.7 million, respectively.

*(e) Inventory*

Inventory consistsof wireless handsets and related accessories held for resale. Inventories arecarried at the lower of cost or market using the first-in, first-out method.Cost is based on prices paid to Sprint. Market is determined using replacementcost which is consistent with industry practices. The Company maintains areserve for obsolete or excess handset inventory for models that remain ininventory after 90 days of being discontinued by Sprint PCS. The reservefor obsolescence at December 31, 2006 and 2005 was $0.2 million and $0.4million, respectively.

*(f) Property andequipment, net*

Propertyand equipment are stated at cost 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 year       | s          |
| Computer equipment                        |       | 3 years         |       |
| Furniture, fixtures and  office equipment |       | 3-5 year        | s          |

 

F-8

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Leaseholdimprovements are amortized over the shorter of the remaining term of the leaseor the estimated useful life of the improvement. Construction in progressincludes expenditures for the purchase of capital equipment, design services,and construction services and testing of the Company’s network. The Companycapitalizes interest on its construction in progress activities. Interestcapitalized for the year ended December 31, 2006, the three months ended December 31,2005, and the year ended September 30, 2005, totaled $0.6 million,$0.1 million and $0.2 million, respectively. There was no interestcapitalized in the period ended July 1, 2004 or the period ended September 30,2004. When the network assets are placed in service, the Company transfers theassets from construction in progress to network assets and depreciates thoseassets over their estimated useful life.

*(g) Financing Costs*

Costsincurred in connection with the senior credit facility were deferred andamortized into interest expense over the term of the financing using thestraight-line method. In conjunction with the Company’s plan of reorganization,the unamortized amount of the deferred financing costs related to the seniorcredit facility was charged to reorganization expense as the balance of thesenior credit facility was paid off in full as part of the Company’s plan ofreorganization (see Note 4). Costs incurred in connection with the 111¤2%senior notes and 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. Accumulatedamortization expense at December 31, 2006 and 2005 was $3.5 millionand $2.1 million, respectively.

*(h) Goodwill andIntangible Assets*

Goodwill and intangible assets have been recorded inaccordance with fresh-start accounting as a result of the Company’sreorganization and also as a result of purchase accounting in connection with itsmerger 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.

In conformity with SFAS No. 142,“Goodwill and Other Intangibles”, the Company does not amortize its indefinitelife intangibles, which include goodwill and the FCC license in Ohio. UnderSFAS No. 142, the Company is required to test these assets for impairmentat least annually, or more frequently if indicators of impairment exist. Theimpairment test for indefinite life intangible assets uses a two-step approach,which is performed at the business unit level. Step one compares the fair valueof the net assets of the reporting unit to its carrying value. Fair value isdetermined using a discounted cash flow model. If the carrying value exceedsthe fair value, there is a potential impairment and step two must be performed.Step two compares the carrying value of the reporting unit’s goodwill to itsimplied fair value. If the carrying value of goodwill exceeds its implied fairvalue, the excess is required to be recorded as an impairment. The Companyperformed its annual impairment test in the third quarter of 2006 anddetermined no impairment was necessary.

*(i) Impairment ofLong-lived Assets*

The Company accounts forlong-lived assets in accordance with the provisions of 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 

F-9

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asset.If such assets are considered to be impaired, the impairment to be recognizedis measured by the amount by which the carrying amount of the assets exceedsthe fair value of the assets. Assets to be disposed of are reported at thelower of the carrying amount or fair value less costs to sell.

*(j) Income Taxes*

Aspart of the process of preparing the Company’s consolidated financial statements,the Company is required to estimate its taxes in each of the jurisdictions ofoperation. This process involves management estimating the actual current taxexpense together with assessing temporary differences resulting from differingtreatment of items for tax and accounting purposes. These differences result indeferred tax assets and liabilities, which are included within the consolidatedbalance sheets. The Company must then assess the likelihood that the deferredtax assets will be recovered from future taxable income and to the extentrealization is not more likely than not, the Company must establish a valuationallowance. Future taxable income depends on the ability to generate income inexcess of allowable deductions. To the extent the Company establishes avaluation allowance or increases this allowance in a period, an expense isrecorded within the tax provision in the consolidated statement of operations.Significant management judgment is required in determining the Company’sprovision for income taxes, its deferred tax assets and liabilities and anyvaluation allowance recorded against net deferred tax assets.

*(k) RevenueRecognition*

The Company recognizesrevenues when persuasive evidence of an arrangement exists, services have beenrendered, the price to the buyer is fixed or determinable, and collectibilityis reasonably assured. Effective July 1, 2003, the Company adoptedEmerging Issues Task Force (“EITF”) Issue No. 00-21, “Accounting forRevenue Arrangements with Multiple Deliverables.” The EITF guidance addressesaccounting for arrangements that involve multiple revenue-generatingactivities. In applying this guidance, separate contracts with the same party,entered into at or near the same time, are presumed to be a bundled transaction.Prior to the adoption of EITF 00-21, 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 under the provisions of StaffAccounting Bulletin (“SAB”) No. 101. Accordingly, the Company deferred allactivation fee revenue and its associated costs and amortized these revenuesand costs over the average life of its customers, which is estimated to be30 months. Under EITF 00-21, the Company is not required to considerwhether customers can use their handsets without the wireless service providedto them. Because the Company meets the criteria stipulated in EITF 00-21,the adoption of EITF 00-21 requires the Company to account for thesale of the handset as a separate unit of accounting from the subsequentservice to the customer. With the adoption of EITF 00-21, the Company nowrecognizes activation fee revenue generated from its retail stores as equipmentrevenue. In addition, the Company recognizes the portion of the activation feecosts related to the handsets sold in its retail stores. The Company hascontinued to apply the provisions of SAB No. 101 and defers and amortizesactivation fee revenue and costs generated by subscribers outside its retailstores.

The Company recognizesservice revenue from its customers as they use the service. The Companyprovides a reduction of recorded revenue for billing adjustments, estimateduncollectible late payment fees and estimated uncollectible early cancellationfees.

Roaming revenue includesroaming revenue when Sprint PCS customers and customers of other PCS Affiliatesof Sprint use the Company’s network, roaming revenue when non-Sprint PCScustomers use the Company’s network, and reseller revenue. Roaming revenue isrecorded based on a per minute charge for voice services and a per kilobytecharge for data services.

F-10

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Equipment revenue, net ofany rebates or discounts, includes the proceeds from sales of handsets andaccessory sales sold through channels directly controlled by the Company.Handset sales are recorded net of an allowance for sales returns. The allowanceis estimated based on Sprint PCS’s handset return policy that allows customersto return handsets for a full refund within 30 days of purchase. When handsetsare returned, the Company may be able to resell the handsets to other customersat little additional cost. However, when handsets are returned to Sprint PCSfor refurbishing, the Company is allocated a certain number of replacement refurbishedphones which it can purchase at a reduced price. As mentioned above, from July 1,2003, equipment revenue also includes an allocation of the activation feerevenue as part of revenue arrangements with multiple deliverables.

The Company participatesin the Sprint PCS national and regional distribution programs in which nationalretailers, such as Radio Shack and Best Buy, sell Sprint PCS products andservices. In order to facilitate the sale of Sprint PCS products and services,national retailers purchase wireless handsets from Sprint PCS for resale andreceive compensation from Sprint PCS for products and services sold. Forindustry competitive reasons, Sprint PCS subsidizes the price of these handsetsby selling the handsets at a price below cost. Under the Sprint PCS agreements,when a national retailer sells a handset purchased from Sprint PCS to asubscriber in the Company’s territory, the Company is obligated to reimburseSprint PCS for the handset subsidy that Sprint PCS originally incurred.The national retailers sell Sprint PCS wireless services under the SprintPCS brands and marks. The Company does not receive any revenues from the saleof wireless handsets by national retailers. The Company classifies theseSprint PCS wireless handset subsidy charges as a selling and marketingexpense for a wireless handset sale to a new customer and classifies thesesubsidies as a cost of service for a wireless handset upgrade to an existingcustomer.

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) Advertising Costs*

TheCompany expenses advertising costs when the advertisement occurs. For the yearended December 31, 2006, the three months ended December 31, 2005,the year ended September 30, 2005, the period ended September 30,2004 and the period ended July 1, 2004, advertising expense was$17.8 million, $4.1 million, $10.4 million, $2.4 million,and $5.0 million, respectively.

*(m) Reorganization Items*

Reorganizationitems relate 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-start accountingadjustments, and other items. Reorganization items are separately identified onthe Consolidated Statements of Operations.

*(n) Loss Per Share*

Basicand diluted loss per share for the Successor Company are calculated by dividingthe net loss available to common stockholders by the weighted average number ofshares of common stock of the Company. Pursuant to the Company’s Plan ofReorganization, 8.6 million shares were distributed to its 

F-11

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unsecured creditors on the effective date ofJuly 1, 2004 and upon resolution of disputed claims the remaining0.4 million shares held in reserve were distributed in the year ended September 30,2005. The full nine million shares were used in the calculation of weightedaverage shares for both the year ended September 30, 2005 and the periodended September 30, 2004. The calculation was made in accordance with SFASNo. 128, “Earnings Per Share.” The basic and diluted loss per share arethe same because the inclusion of the incremental potential common shares fromany assumed exercise of stock options is antidilutive. Potential common sharesexcluded from the loss per share computations for the year ended December 31,2006, the three months ended December 31, 2005, the year ended September 30,2005 and the period ended September 30, 2004 were 650,603, 773,086,837,784, and 575,500 common shares, respectively. Per share information is notpresented for the Predecessor Company as it is not meaningful.

*(o) Stock-Based Compensation*

As further discussed inNote 12, effective October 1, 2005, the Company adopted SFAS No. 123R,“Share-Based Payment”, utilizing the modified prospective method. Under SFAS No. 123R,companies are required to record compensation expense for all share-basedpayment award transactions measured at fair value. Under the modifiedprospective method, SFAS No. 123R requires compensation cost to berecognized for 1) all share-based compensation expense arrangements grantedafter the adoption date and 2) all remaining unvested share-based compensationexpense arrangements granted prior to the adoption date. Accordingly, priorperiods have not been restated.

Prior to the adoption ofSFAS No. 123R, the Company applied 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 based onfair value 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 | ) |   |

 

F-12

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TheCompany’s calculation of fair value of the options was made using theBlack-Scholes model 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 period from October 1, 2003 through July 1, 2004, the number ofAirGate options granted to employees of the Company and the pro formastock-based compensation expense calculated in accordance with SFAS No. 123were deemed immaterial.

*(p) Use ofEstimates*

Management of the Companyhas made a number of estimates and assumptions relating to the reporting ofassets and liabilities and the disclosure of contingent liabilities at thedates of the consolidated balance sheets and revenues and expenses during thereporting periods to prepare these consolidated financial statements inconformity with accounting principles generally accepted in the United Statesof America. Actual results could differ from those estimates.

Themost significant of such estimates include:

·       Allowancefor doubtful accounts;

·       Impairmentand useful lives of long-lived assets; and

·       Accounting for incometaxes.

*(q) Concentration of Risk*

The Company relies onSprint PCS to provide certain back-office functions such as billing andcustomer care, activation of new subscribers, handset logistics and technologydevelopment. Should Sprint PCS be unable to provide these services, theCompany could be negatively impacted (see Note 5).

The Company’s cell sitesare located on towers leased from a limited number of tower companies, with onecompany owning approximately 25% of the Company’s leased towers.

The Company maintains cashand cash equivalents in accounts with financial institutions in excess of theamount insured by the Federal Deposit Insurance Corporation. Management doesnot believe there is significant credit risk associated with deposits in excessof federally insured amounts.

Concentrationsof credit risk with respect to accounts receivable are limited due to a largecustomer base. 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 Accounting Pronouncements*

In February 2007, theFinancial Accounting Standards Board (“FASB”) issued SFAS No. 159, “TheFair Value Option for Financial Assets and Financial Liabilities”, to permitall entities to choose to elect, at specified election dates, to measureeligible financial instruments at fair value. An entity shall report unrealizedgains and losses on items for which the fair value option has been elected inearnings at each 

F-13

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subsequentreporting date, and recognize upfront costs and fees related to those items inearnings as incurred and not deferred. SFAS No. 159 applies to fiscalyears beginning after November 15, 2007, with early adoption permitted foran entity that has also elected to apply the provisions of SFAS No. 157,Fair Value Measurements. An entity is prohibited from retrospectively applyingSFAS No. 159, unless it chooses early adoption. SFAS No. 159 alsoapplies to eligible items existing at November 15, 2007 (or early adoptiondate). The Company is still evaluating the impact of the implementation of SFASNo. 159 on its financial position, results of operations and cash flows.

In September 2006, the FASB issued SFAS No. 157,“Fair Value Measurements” which defines fair value, establishes a framework formeasuring fair value under generally accepted accounting principles, andexpands disclosures about fair value measurements. SFAS No. 157 applies tofair-value measurements that are already required or permitted by existingstandards except for measurements of share-based payments and measurements thatare similar to, but not intended to be, fair value and nullifies the EmergingIssues Task Force guidance that prohibited recognition of gains or losses atthe inception of derivative transactions whose fair value is estimated byapplying a model. SFAS No. 157 clarifies that fair value is the amountthat would be exchanged to sell an asset or transfer a liability in an orderlytransaction between market participants. SFAS No. 157 is effective forfiscal years beginning after November 15, 2007. The Company does notanticipate that the implementation of SFAS No. 157 will have a materialimpact on its financial position, results of operations and cash flows.

In July 2006, FASB issued Interpretation No. 48,“Accounting for Uncertainty in Income Taxes” (“FIN 48”), which is effective forfiscal years beginning after December 15, 2006. FIN 48 clarifies theaccounting for uncertainty in income taxes recognized in the financialstatements in accordance with SFAS No. 109, “Accounting for Income Taxes”.FIN 48 prescribes a comprehensive model for how a company should recognize,measure, present, and disclose in its financial statements uncertain taxpositions that the company has taken or expects to take on a tax return. TheCompany does not anticipate that the implementation of FIN 48 will have amaterial impact on its financial position, results of operations and cashflows.

**(3)   Merger with Horizon PCS, 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  the surviving corporation. HorizonPCS was a PCS Affiliate of Sprint whose territory included 40 markets in ninecontiguous states. Based on covered population and the number of subscribers,the merger resulted in the Company being the second largest Sprint affiliate.In addition, the transaction almost doubled the size of the Company’soperations, thereby providing 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.

F-14

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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 allocated to the net tangibleand intangible assets acquired and liabilities assumed as follows:

| Current assets                  |   | $        | 65,615  |   |
|---------------------------------|--------|----------|---------|--------|
| Tangible  noncurrent assets     |   | 75,008   |    |
| Identifiable  intangible assets |   | 121,500  |    |
| Goodwill                        |   | 141,783  |    |
| Current  liabilities assumed    |   | (34,187  | )       |
| Long term  liabilities assumed  |   | (843     | )       |
| Long-term debt  assumed         |   | (139,687 | )       |
| Unearned  compensation          |   | 1,618    |    |
|                            |   | $        | 230,807 |   |

 

F-15

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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 |   |   |

----

(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 of Reorganization**

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.The Company believed actions taken by Sprint, including decreasing the roamingrate and imposing new and higher fees, were the primary reasons for the declinein its liquidity. Accordingly, in connection with the bankruptcy filing, theCompany filed a complaint against Sprint Corporation and Sprint PCS allegingthat Sprint PCS had breached its affiliation agreements with the Company. TheCompany continued to operate as a debtor-in-possession, which allowed theCompany to use cash collateral and post-petition collections of receivables inaccordance with 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-16

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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 for general corporate purposes.

·       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 emergencefrom Chapter 11 proceedings resulted in a new reporting entity with theadoption of fresh-start accounting in accordance with the SOP 90-7.Pursuant to SOP 90-7, the accounting for the effects of thereorganization occurred as of the confirmation date because there were noremaining conditions precedent to the effectiveness of the plan as of the July 9,2004 confirmation date. For accounting purposes, the Company appliedfresh-start accounting as of July 1, 2004, because the results ofoperations for the eight days through July 9, 2004 did not have a materialimpact on the reorganized company’s financial position, results of operationsand cash flows. The estimated reorganization equity value of the Company of$95.0 million, which served as the basis for the plan approved by theBankruptcy Court, was used to determine the value allocated to the assets andliabilities of the Successor Company in proportion to their fair values and isin conformity with SFAS No. 141 “Business Combinations.” Thereorganization equity value was determined utilizing appraisals, commonly useddiscounted cash flow valuation methods and selected price earnings multiples ofpublicly-traded companies similar to the Company to determine the relative fairvalues of the Company’s assets and liabilities. Factors taken intoconsideration included projected revenue growth, market and industry growthrates, competition and general economic conditions, working capital and capitalexpenditure requirements.

As a result of the Company’sreorganization and application 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 income of approximately $79.9 millionrelated to the revaluation of the Company’s assets and liabilities.

F-17

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Thetable below shows our unaudited consolidated balance sheet that reflectsreorganization and fresh-start accounting adjustments that the Company recordedas 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)          Reflectsthe accrual of additional restructuring expenses relating to success fees forfinancial advisors, other professional fees, and estimated amounts payable fordisputed claims.

F-18

----

(5)          Reflectsthe discharge of liabilities subject to compromise. Per the terms of the planof reorganization, 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)          Reflectsthe elimination of 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.

**Reorganization Income (Expense)**

Thefollowing items are included in reorganization income in the statements ofoperations for the period from October 1, 2003 through July 1, 2004(in thousands):

| ** **                                                                                                    | ** ** | **Predecessor Company**                                                                           | ** ** |
|---------------------------------------------------------------------------------------------------------------|------------|--------------------------------------------------------------------------------------------------------|------------|
| ** **                                                                                                    | ** ** | **For the period from  October 1, 2003  through July 1, 2004** | ** ** |
| 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    | ) |   |
| Costs relating to  the closing of stores and rejecting leases                                                 |       |                                                                                                   | (1,435     | ) |   |
| Write off of debt  financing costs on senior credit facility                                                  |       |                                                                                                   | (2,305     | ) |   |
|                                                                                                          |       |                                                                                                   | $          | 60,797 |   |   |

 

Thefresh-start accounting adjustments represent the recording of intangible assetsof $78.5 million, the write-down of property and equipment of$8.7 million, and other fair value adjustments of $10.1 million.

**(5)**          SprintAgreements

Each of iPCS Wireless, Inc., Horizon PersonalCommunications, Inc. and Bright Personal Communications Services, LLC hasentered into a set of affiliation agreements with Sprint PCS. Under theseagreements, which have been amended from time to time, Sprint PCS provides theCompany significant support services such as customer service, billing, long distancetransport services, national network operations support, inventory logisticssupport, use of the Sprint and Sprint PCS brand name, national advertising,national distribution and product development.

The costs incurred by the Company for the supportservices provided by Sprint are determined on a per-average-monthly-subscriberrate and on a per-customer-addition rate. Pursuant to the Company’s affiliationagreements with Sprint PCS, the per-average-monthly-subscriber rate was set at$7.25 for 2004, $7.00 for 2005 and $6.75 for 2006 and the per-customer-additionrate was set at $23.00 in iPCS Wireless’s territory and $22.00 in theHorizon/Bright territory. The agreements also provide that, for each three-yearperiod after December 31, 2006, these rates will be reset based on Sprint’sreasonable costs (see Note 19).

The Company derives substantial roaming revenue whenwireless customers of Sprint PCS and other PCS Affiliates of Sprint use theCompany’s PCS network and incurs expense to Sprint PCS and to other 

F-19

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PCS Affiliates of Sprint when the Company’s customersuse the Sprint PCS network outside of the Company’s territories. The Company’saffiliation agreements with Sprint PCS set the reciprocal roaming rate withSprint PCS through December 31, 2006 at $0.058 per minute for voice and 2Gdata, and $0.0020 per kilobyte for 3G data. Thereafter, the affiliationagreements provide that the reciprocal roaming rates are to be calculated basedupon Sprint’s retail yield for the prior year (see Note 19). With respectto certain of the Company’s markets in western and eastern Pennsylvania, theCompany receives the benefit of special reciprocal rate for voice and 2G dataof $0.10 per minute. This special rate will terminate, with respect toeach of these two sets of markets, on the earlier of December 31, 2011 orthe first day of the calendar month which follows the first calendar quarterduring which the Company achieves a subscriber penetration rate of at least 7%of the Company’s covered populations in those markets.

The Company’s affiliation agreements with Sprint PCSalso provide the Company with protective rights to decline to implement certainfuture program requirement changes that Sprint PCS proposes that wouldadversely affect the Company’s business. The Company also has a right of firstrefusal 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.

Roaming 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 Company’s affiliationagreements with Sprint PCS. Selling and marketing transactions relate tosubsidized costs on wireless handsets and commissions under Sprint PCS’snational distribution program.

For the year ended December 31, 2006, the threemonths ended December 31, 2005, the year ended September 30, 2005,the period from July 2, 2004 through September 30, 2004, and theperiod from October 1, 2003 through July 1, 2004, 97%, 98%, 97%, 97%,and 97%, respectively, of the Company’s revenue was derived from data providedby Sprint PCS. Of the Company’s cost of service and roaming, 68%, 67%, 69%,68%, and 65% for the year ended December 31, 2006, the three months endedDecember 31, 2005, the year ended September 30, 2005, the period fromJuly 2, 2004 through September 30, 2004 and the period from October 1,2003 through July 1, 2004, 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. The Company had no disputed charges with Sprint atDecember 31, 2006. At December 31, 2005, the Company had $0.1 millionin disputed charges.

F-20

----

Amounts relating to theSprint affiliation agreements are as follows (in thousands):

| ** **                                                      | ** ** | **Successor Company**                                         | ** ** | **Predecessor  Company**                                                    | ** ** |
|-----------------------------------------------------------------|------------|--------------------------------------------------------------------|------------|-----------------------------------------------------------------------------|------------|
| ** **                                                      | ** ** | **For the Year Ended  December 31, 2006** | ** ** | **For the Three  Months Ended  December 31, 2005** | ** ** | **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** | ** ** |
| Amounts included in the  Consolidated Statements of Operations: |       |                                                               |       |                                                                        |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Service revenue                                                 |       |                                                               | $          | 316,513                                                                     |       |   |   | $ | 70,996 |   |   |   | $ | 189,177 |   |   |   | $ | 37,909 |   |   |   | $ | 107,097 |   |   |
| Roaming revenue                                                 |       |                                                               | $          | 161,848                                                                     |       |   |   | $ | 36,071 |   |   |   | $ | 82,959 |   |   |   | $ | 15,829 |   |   |   | $ | 34,525 |   |   |
| Cost of service and  roaming:                                   |       |                                                               |       |                                                                        |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Roaming                                                         |       |                                                               | $          | 109,182                                                                     |       |   |   | $ | 22,043 |   |   |   | $ | 52,019 |   |   |   | $ | 9,645 |   |   |   | $ | 22,932 |   |   |
| Customer service                                                |       |                                                               | 45,031     |                                                                        |       |   | 10,655 |   |   |   | 27,187 |   |   |   | 5,294 |   |   |   | 12,897 |   |   |
| Affiliation fees                                                |       |                                                               | 24,788     |                                                                        |       |   | 5,676 |   |   |   | 15,136 |   |   |   | 3,018 |   |   |   | 8,685 |   |   |
| Long distance                                                   |       |                                                               | 12,678     |                                                                        |       |   | 3,163 |   |   |   | 7,912 |   |   |   | 1,465 |   |   |   | 5,946 |   |   |
| Other                                                           |       |                                                               | 2,224      |                                                                        |       |   | 713 |   |   |   | 3,597 |   |   |   | 436 |   |   |   | 3,326 |   |   |
| Total cost of service and roaming                               |       |                                                               | $          | 193,903                                                                     |       |   |   | $ | 42,250 |   |   |   | $ | 105,851 |   |   |   | $ | 19,858 |   |   |   | $ | 53,786 |   |   |
| Cost of equipment                                               |       |                                                               | $          | 41,707                                                                      |       |   |   | $ | 9,150 |   |   |   | $ | 27,260 |   |   |   | $ | 5,584 |   |   |   | $ | 12,801 |   |   |
| Selling and marketing                                           |       |                                                               | $          | 19,860                                                                      |       |   |   | $ | 6,028 |   |   |   | $ | 12,589 |   |   |   | $ | 2,393 |   |   |   | $ | 8,792 |   |   |
| Cancellation of  payable to Sprint                              |       |                                                               | $          | —                                                                      |       |   |   | $ | — |   |   |   | $ | — |   |   |   | $ | — |   |   |   | $ | 11,026 |   |   |

 

| ** **                                            | ** ** | **Successor Company**  | ** ** |
|-------------------------------------------------------|------------|-----------------------------|------------|
| ** **                                            | ** ** | **December 31,  2006** | ** ** | **December 31,  2005** | ** ** |
| Amounts included in the  Consolidated Balance Sheets: |       |                        |       |   |   |   |   |   |   |
| Receivable from Sprint                                |       |                        | $          | 40,724 |   |   |   | $ | 44,193 |   |   |
| Inventories, net                                      |       |                        | 4,291      |   |   |   | 3,583 |   |   |
| Payable to Sprint                                     |       |                        | 58,196     |   |   |   | 60,204 |   |   |
|                                                       |            |                             |            |  |  |  |  |  |  |  |  |

 

**(6)**          Propertyand Equipment

Propertyand equipment consists of the following at December 31, 2006 and 2005 (inthousands):

| ** **                                      | ** ** | **Successor Company**  | ** ** |
|-------------------------------------------------|------------|-----------------------------|------------|
| ** **                                      | ** ** | **December 31,  2006** | ** ** | **December 31,  2005** | ** ** |
| Network assets                                  |       |                        | $          | 214,348 |   |   |   | $ | 182,898 |   |   |
| Computer  equipment                             |       |                        | 4,299      |   |   |   | 2,315 |   |   |
| Furniture,  fixtures and office equipment       |       |                        | 7,117      |   |   |   | 5,743 |   |   |
| Vehicles                                        |       |                        | 294        |   |   |   | 396 |   |   |
| Construction in  progress                       |       |                        | 16,143     |   |   |   | 8,783 |   |   |
| Total property  and equipment                   |       |                        | 242,201    |   |   |   | 200,135 |   |   |
| Less accumulated  depreciation and amortization |       |                        | (102,560   | ) |   |   | (52,881 | ) |   |
| Total property and  equipment, net              |       |                        | $          | 139,641 |   |   |   | $ | 147,254 |   |   |

 

F-21

----

Thefollowing is a summary of property and equipment under capital leases includedin the accompanying consolidated balance sheets as follows (in thousands):

| ** **                                | ** ** | **Successor Company**  | ** ** |
|-------------------------------------------|------------|-----------------------------|------------|
| ** **                                | ** ** | **December 31,  2006** | ** ** | **December 31,   2005** | ** ** |
| Network assets                            |       |                        | $          | 446 |   |   |   | $ | 340 |   |   |
| Furniture,  fixtures and office equipment |       |                        | 73         |   |   |   | 73 |   |   |
| Less accumulated  depreciation            |       |                        | (93        | ) |   |   | (57 | ) |   |
| Net                                       |       |                        | $          | 426 |   |   |   | $ | 356 |   |   |

 

On July 1, 2004, as aresult of our reorganization and in accordance with fresh-start accountingunder SOP 90-7, we wrote down our property and equipment to theirestimated fair values and recorded charges totaling $8.7 million toreorganization expense.

TheCompany’s decision to replace the Lucent equipment in its Michigan markets withNortel equipment, and to replace the Motorola equipment in its legacy Horizonmarkets with Nortel equipment (see Note 15), resulted in accelerateddepreciation due to the retirement of assets before the end of their estimateduseful life. For the year ended December 31, 2006 and the year ended September 30,2005, the Company recorded $1.4 million and $16.4 million, respectively, ofaccelerated depreciation for these replacement projects.

**(7)**          Goodwilland Intangible Assets

On July 1, 2004, as aresult of our reorganization and in accordance with fresh-start accountingunder SOP 90-7, we revalued our assets to their estimated fair values.With the implementation of fresh-start accounting, the Company recordedintangible assets of $19.8 million relating to the fair value of thecustomer base and $62.1 million relating to the fair value of the right toprovide service under the Sprint affiliation agreements. The resolution of theremaining outstanding unsecured claims in June 2005 resulted in a decreaseto the customer base and the right to provide service under the Sprintaffiliation agreements of $0.8 million, and $2.6 million, respectively.

In connection with themerger with Horizon PCS (see Note 3), the Company allocated portions of thepurchase price to identifiable intangible assets consisting of the right toprovide service under the Sprint affiliation agreements, the acquired customerbase, and an FCC license for a small market in Ohio. The amount allocated tothe right to provide service under the Sprint affiliation agreements, thecustomer base and the FCC license was $67.0 million, $53.0 million, and $1.5million, respectively. In addition, the excess of the purchase price over thefair value of the net assets acquired, including these identifiable intangible assets,which totaled $141.8 million was recorded as goodwill. Goodwill was adjustedfor final purchase accounting in 2006 and is not deductible for income taxes.

Changes in the carryingvalue of goodwill are as follows (in thousands):

| ** **                     | ** ** | **Successor Company**  | ** ** |
|--------------------------------|------------|-----------------------------|------------|
| ** **                     | ** ** | **December 31,  2006** | ** ** | **December 31,  2005** | ** ** |
| Goodwill,  beginning of period |       |                        | $          | 146,391 |   |   |   | $ | 146,391 |   |   |
| Adjustment to  goodwill        |       |                        | (4,608     | ) |   |   | — |   |   |
| Goodwill, end of period        |       |                        | $          | 141,783 |   |   |   | $ | 146,391 |   |   |

 

F-22

----

The amortization expensefor the year ended December 31, 2006, the three months ended December 31,2005, the year ended September 30, 2005, the period ended September 30,2004, was $38.0 million, $9.5 million, $18.1 million, and$3.1 million, respectively. There was no amortization expense for theperiod ended July 1, 2004. The weighted average amortization period, grosscarrying amount, accumulated amortization and net carrying amount of intangibleassets at December 31, 2006 and 2005 are as follows (in thousands):

| ** **                                                        | ** ** | **Successor Company**                      | ** **      |
|-------------------------------------------------------------------|------------|-------------------------------------------------|-----------------|
| ** **                                                        | ** ** | **December 31, 2006**                 | ** **      |
| ** **                                                        | ** ** | **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 |   |   | (17,868 | ) |   | 108,653 |   |
| Customer base                                                     |       |                                            | 30 months  | ** ** |   | 71,956 |   |   | (50,756 | ) |   | 21,200 |   |
|                                                              |       |                                            | 117 months | ** ** |   | $ | 199,977 |   |   | $(68,624 | ) |   | $ | 131,353 |   |
|                                                                   |            |                                                 |                 |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

| ** **                                                        | ** ** | **Successor Company**                      | ** **      |
|-------------------------------------------------------------------|------------|-------------------------------------------------|-----------------|
| ** **                                                        | ** ** | **December 31, 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 |   |   | (8,692 | ) |   | 117,829 |   |
| Customer base                                                     |       |                                            | 30 months  | ** ** |   | 71,956 |   |   | (21,974 | ) |   | 49,982 |   |
|                                                              |       |                                            | 117 months | ** ** |   | $ | 199,977 |   |   | (30,666 | ) |   | $ | 169,311 |   |
|                                                                   |            |                                                 |                 |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

Aggregateamortization expense relative to intangible assets for the periods shown belowwill be as follows:

| Year ended  December 31, |   |   |    |
|-------------------------------|--------|--------|---------|
| 2007                          |   | $      | 30,376  |   |
| 2008                          |   | 9,176  |    |
| 2009                          |   | 9,176  |    |
| 2010                          |   | 9,176  |    |
| 2011                          |   | 9,176  |    |
| Thereafter                    |   | 62,773 |    |
| Total                         |   | $      | 129,853 |   |

 

F-23

----

 

**(8)**          Long-TermDebt and Capital Lease Obligations

Long-termdebt consists of the following at December 31, 2006 and 2005 (inthousands):

| ** **                                                                  | ** ** | **Successor Company**  | ** ** |
|-----------------------------------------------------------------------------|------------|-----------------------------|------------|
| ** **                                                                  | ** ** | **December 31,  2006** | ** ** | **December 31,  2005** | ** ** |
| Senior notes 111¤2%  $165 million due 2012                             |       |                        | $          | 165,000 |   |   |   | $ | 165,000 |   |   |
| Senior notes 113¤8%  $125 million due 2012                             |       |                        | 125,000    |   |   |   | 125,000 |   |   |
| Unamortized fair  value adjustment for 113¤8% senior  notes            |       |                        | 11,577     |   |   |   | 13,651 |   |   |
| Capital lease  obligations                                                  |       |                        | 492        |   |   |   | 397 |   |   |
| Total long-term  debt and capital lease obligations                         |       |                        | 302,069    |   |   |   | 304,048 |   |   |
| Less: current  maturities                                                   |       |                        | (24        | ) |   |   | (11 | ) |   |
| Long-term debt and  capital lease obligations, excluding current maturities |       |                        | $          | 302,045 |   |   |   | $304,037 |   |   |

 

At December 31,2006, future minimum capital lease payments are as follows (in thousands):

| **Year**                                                 | ** ** | ** ** | ** ** | **Capital Lease  Obligations** | ** ** |
|----------------------------------------------------------|------------|------------|------------|-------------------------------------|------------|
| 2007                                                     |       |       | $          | 84                                  |       |   |
| 2008                                                     |       |       | 86         |                                |       |
| 2009                                                     |       |       | 89         |                                |       |
| 2010                                                     |       |       | 92         |                                |       |
| 2011                                                     |       |       | 95         |                                |       |
| Thereafter                                               |       |       | 433        |                                |       |
| Total minimum  payments                                  |       |       | 879        |                                |       |
| Less: amount  representing interest                      |       |       | (387       | )                                   |       |
| Present value of  minimum payments                       |       |       | 492        |                                |       |
| Less: current  maturities                                |       |       | (24        | )                                   |       |
| Capital lease  obligations, excluding current maturities |       |       | $          | 468                                 |       |   |

 

F-24

----

***$165.0 Million 11***1¤2%Senior Notes

On April 21, 2004, iPCS Escrow Holding Companyand iPCS Escrow Company were formed as wholly owned subsidiaries of theCompany. iPCS Escrow Holding Company was a wholly owned direct subsidiaryof iPCS, Inc. iPCS Escrow Company was a wholly owned direct subsidiary ofiPCS Escrow Holding Company and was not part of the bankruptcy estate ofiPCS Inc. iPCS Escrow Company was a special purpose vehicle and wascreated solely to issue $165.0 million of senior notes.

On April 22, 2004,the senior notes offering was priced at 111¤2% coupon rate and the offering proceedsof $165.0 million closed into escrow on April 30, 2004. In addition,the Company funded interest of 123 days of approximately $6.5 millioninto the escrow account. On July 20, 2004, the effective date of theCompany’s reorganization, iPCS Escrow Holding Company merged with and into iPCS, Inc.and the notes became general unsecured obligations of iPCS, Inc. Theindenture for the 111¤2% senior notes containcovenants 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% senior notes:

·       rank*pari passu* in right of payment with allexisting and future unsecured senior indebtedness of the Company

·       rank senior in right ofpayment to all future subordinated indebtedness of the Company; and

·       are unconditionallyguaranteed by the Company’s domestic unrestricted subsidiaries, including iPCSWireless, Inc., iPCS Equipment, Inc., Horizon Personal Communications, Inc.and Bright Personal Communications Services, LLC and any new domesticrestricted subsidiaries of the Company.

However, the 111¤2% senior notes aresubordinated to all secured indebtedness of the Company to the extent of theassets securing such indebtedness, and to any indebtedness of subsidiaries ofthe Company that do not guarantee the 111¤2% senior notes.

Interest is payable semi-annually in arrears on May 1and November 1, commencing on November 1, 2004 to the holders ofrecord on the immediately preceding April 15 and October 15. At anytime prior to May 1, 2007, the Company may redeem up to 35% of theaggregate principal amount of the 111¤2% senior notes at a redemption price of111.50% of the principal amount thereof, plus accrued and unpaid interest, andliquidated damages (as defined in the indenture), if applicable, to theredemption date with the net cash proceeds of a sale of equity interests of theCompany or a contribution to the Company’s common equity capital; providedthat:

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

·       the redemption occurswithin 45 days of the date of the closing of such sale of equity interestsor contribution.

Upon a change of controlas defined in the indenture, the Company will be required to make an offer topurchase the 111¤2% senior notes at a price equal to 101%of the aggregated principal amount of the 111¤2% senior notes repurchased plus accruedand unpaid interest and liquidated damages, if any, to the date of purchase.

***$125.0Million 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 December 31, 2006, the three months ended December 31,2005 and 

F-25

----

the year ended September 30,2005, the reduction to interest expense was approximately $2.1 million, $0.5million, and $0.5 million, respectively. This amortization will not increasethe principal amount due to the senior note holders or reduce the amount ofinterest owed to the senior note holders.

The indenture for the 113¤8% 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 113¤8% senior notes:

·       rank*pari passu* in right of payment with allexisting and future unsecured senior indebtedness of the Company

·       rank senior in right ofpayment to all future subordinated indebtedness of the Company; and

·       are unconditionallyguaranteed by the Company’s domestic unrestricted subsidiaries, including iPCSWireless, Inc., iPCS Equipment, Inc., Horizon Personal Communications, Inc.and Bright Personal Communications Services, LLC and any new domesticrestricted 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.

Interest is payable semi-annually in arrears on July 15and January 15, commencing on July 15, 2005 to the holders of recordon the immediately preceding July 1 and January 1. At any time priorto July 15, 2007, the Company may redeem up to 35% of the aggregateprincipal 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:

·       at least 65% of aggregateprincipal amount of 113¤8%notes originally issued remains outstanding immediately after the redemption;and

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

Upona change of control as defined in the indenture, the Company will be requiredto make an offer to purchase the 113¤8% senior notesat a price equal to 101% of the aggregated principal amount of the 113¤8%senior notes repurchased plus accrued and unpaid interest and liquidateddamages, if any, to the date of purchase.

At December 31, 2006, the Company was incompliance with the indentures governing its 113¤8% senior notesand its 111¤2%senior notes.

***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(“senior credit facility”). The senior credit facility contained certainfinancial ratios and other financial conditions and was collateralized by allof the Company’s assets and assignment of the Sprint affilation agreements.

Prior to the Company’sbankruptcy filing, it was in default of certain of the covenants and thelenders accelerated the debt. As part of the Company’s reorganization, as ofthe effective date, the senior lenders were paid in full and the remaining$2.3 million of unamortized financing costs were written off toreorganization expense (see Note 4).

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***SeniorDiscount Notes***

On July 12, 2000, the Company issued 300,000units consisting of $300.0 million 14% senior discount notes dueJuly 15, 2010 (the “Notes”) and warrants to purchase 2,982,699 shares ofcommon stock at an exercise price of $5.50 per share. The Notes were issued ata substantial discount such that the Company received gross proceeds ofapproximately $152.3 million. The Notes were a general unsecured obligation,subordinated in right of payment to all senior debt, including all obligationsunder the senior credit facility. On the effective date of the Companyreorganization (see Note 4), 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.

**(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**      | ** ** |
|-------------------------------------------|------------|---------------------------------|------------|
| ** **                                | ** ** | **December 31, 2006** | ** ** | **December 31, 2005** | ** ** |
| ** **                                | ** ** | **Carrying  amount**            | ** ** | **Estimated  fair value** | ** ** | **Carrying  amount** | ** ** | **Estimated  fair value** | ** ** |
| Cash and cash  equivalents(a)             |       | $                               | 120,499    |   | $ | 120,499 |   | $ | 110,837 |   | $ | 110,837 |   |
| Accounts  receivable, net(a)              |       | 29,700                          |       | 29,700 |   | 31,115 |   | 31,115 |   |
| Receivable from  Sprint(a)                |       | 40,724                          |       | 40,724 |   | 44,193 |   | 44,193 |   |
| Accounts  payable(a)                      |       | 7,387                           |       | 7,387 |   | 6,751 |   | 6,751 |   |
| Accrued  expenses(a)                      |       | 24,098                          |       | 24,098 |   | 26,109 |   | 26,109 |   |
| Payable to  Sprint(a)                     |       | 58,196                          |       | 58,196 |   | 60,204 |   | 60,204 |   |
| 111¤2%  $165 million senior notes(b) |       | 165,000                         |       | 183,563 |   | 165,000 |   | 189,338 |   |
| 113¤8%  $125 million senior notes(b) |       | 125,000                         |       | 139,531 |   | 125,000 |   | 143,438 |   |
|                                           |            |                                 |            |  |  |  |  |  |  |  |  |  |  |

----

(a)                 Thecarrying amounts of cash and cash equivalents, accounts receivable, receivablefrom Sprint, 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.

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**(10)**         IncomeTaxes

The income tax (expense) benefit for the perioddiffered from the amounts computed by applying the statutory U.S. Federalincome tax rate of 35% as set forth below:

| ** **                                                    | ** ** | **Successor Company**                                 | ** ** | **Predecessor Company**                                            | ** ** |
|---------------------------------------------------------------|------------|------------------------------------------------------------|------------|-------------------------------------------------------------------------|------------|
| ** **                                                    | ** ** | **For the Year  Ended  December 31,  2006** | ** ** | **For the Three  Months Ended  December 31,  2005** | ** ** | **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** | ** ** |
| U.S. Federal  statutory rate                                  |       |                                                       | 35.00      | %                                                                       |       |   | 35.00 | % |   |   | 35.00 | % |   |   | 35.00 | % |   |   | 35.00 | % |   |
| State income  taxes, net of federal tax benefit               |       |                                                       | 5.00       |                                                                    |       |   | 5.00 |   |   |   | 5.00 |   |   |   | 5.00 |   |   |   | 5.00 |   |   |
| Nondeductible  interest associated with senior discount notes |       |                                                       | —     |                                                                    |       |   | — |   |   |   | — |   |   |   | — |   |   |   | (2.25 | ) |   |
| Other permanent  nondeductible items                          |       |                                                       | (0.12      | )                                                                       |       |   | (0.08 | ) |   |   | (0.06 | ) |   |   | (0.07 | ) |   |   | — |   |   |
| Change in  valuation allowance for deferred tax assets        |       |                                                       | (39.88     | )                                                                       |       |   | (39.92 | ) |   |   | (39.94 | ) |   |   | (39.93 | ) |   |   | (37.75 | ) |   |
| Effective tax rate                                            |       |                                                       | 0.00       | %                                                                       |       |   | 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**  | ** ** |
|--------------------------------------------------------------------------|------------|-----------------------------|------------|
| ** **                                                               | ** ** | **December 31,  2006** | ** ** | **December 31,  2005** | ** ** |
| Deferred tax  assets:                                                    |       |                        |       |   |   |   |   |   |   |
| Accrued  liabilities                                                     |       |                        | $          | 3,389 |   |   |   | $ | 3,378 |   |   |
| Deferred  transaction costs                                              |       |                        | 357        |   |   |   | 357 |   |   |
| Compensation  expense                                                    |       |                        | 5,001      |   |   |   | 4,725 |   |   |
| Net operating  loss carryforwards                                        |       |                        | 190,208    |   |   |   | 185,696 |   |   |
| Allowance for bad  debts                                                 |       |                        | 1,811      |   |   |   | 606 |   |   |
| Other                                                                    |       |                        | 14,221     |   |   |   | 13,567 |   |   |
| Total gross  deferred tax assets                                         |       |                        | 214,987    |   |   |   | 208,329 |   |   |
| Less valuation  allowance                                                |       |                        | (171,992   | ) |   |   | (153,031 | ) |   |
| Deferred tax  assets                                                     |       |                        | 42,995     |   |   |   | 55,298 |   |   |
| Deferred tax  liabilities—property, equipment and intangible assets |       |                        | 42,995     |   |   |   | 55,298 |   |   |
| Net deferred tax assets                                                  |       |                        | $          | — |   |   |   | $ | — |   |   |

 

In assessing therealizability of deferred tax assets, management considers whether it is morelikely than not that some portion or all of the deferred tax assets will not berealized. The ultimate realization of deferred tax assets is dependent upon thegeneration of future taxable income during the periods in which those temporarydifferences become deductible. No benefit for federal income taxes has beenrecorded for the year ended December 31, 2006, the three months ended December 31,2005, the year ended September 30, 2005, for the period ended September 30,2004, and for the period ended July 1, 2004, as the net deferred tax assetgenerated, primarily from temporary differences related to the net operating 

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loss,was offset by a full valuation allowance because it is considered more likelythan not that these benefits will not be realized due to the Company’s lossessince inception.

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 December 31,2006, the Company has net operating loss carryforwards for federal income taxpurposes of approximately $475.5 million including approximately $197.3million related to Horizon PCS’s net operating losses as of the date ofacquisition which are available to offset future taxable income through 2025.The utilization of approximately $222.6 of such net operating losscarryforwards are limited as a result of the ownership change in connectionwith the plan of reorganization. The amount of this annual limitation isapproximately $4.5 million. The net operating loss carryforwards of Horizon PCSas of the date of the acquisition totaling approximately $197.3 million aresubject to two separate IRC Section 382 limitations, one as a result ofHorizon PCS’s ownership change on October 1, 2004 (emergence frombankruptcy) and the second based on Horizon PCS’s merger with the Company. Netoperating loss carryovers of approximately $189.0 million related to the firstownership change are limited to approximately $7.0 million per year. Theremaining $8.0 million of pre-acquisition net operating losses increasethe annual limitation to $10.0 million per year until such losses areutilized, after which the annual limitation decreases back to $7.0 millionper year. Net operating loss carryforwards of approximately $55.6 millionare unrestricted in their utilization. Benefits realized from preconfirmationnet operating losses will first reduce intangible assets and then be reportedas a direct addition to paid-in-capital and any future realization of thevaluation allowance established at the date of the Company’s merger withHorizon PCS will first be utilized to reduce goodwill and intangibleassets to zero and then will be utilized to reduce income tax expense.

**(11)**         EmployeeBenefits

The Company has established a 401(k) plan (the “Plan”)in which substantially all employees may participate. The Plan allows eligibleemployees to contribute up to 50% of their eligible compensation up to themaximum amount allowed by law and provides that the Company will make matchingcontributions of 100% up to 4% of an employee’s eligible compensation. Inaddition, the Company may make discretionary contributions to the Plan. Inconnection with the merger with Horizon PCS (see Note 3), the Company assumed theHorizon PCS’s 401(k) Plan (“Horizon PCS’s Plan”), and in September 2005,merged it into the Plan. The Horizon PCS Plan allowed eligible employees tocontribute up to 15% of their eligible compensation up to the maximum amountallowed by law and provided that the Company will make matching contributionsof 100% up to 3% of an employee’s compensation. Company contributions to thePlan and the Horizon PCS Plan were approximately $568,000, $155,000, $298,000for the year ended December 31, 2006, the three months ended December 31,2005 and the year ended September 30, 2005, respectively. Companycontributions to the Plan were approximately $57,000 and $194,000 for theperiod ended September 30, 2004, and the period ended July 1, 2004,respectively.

**(12)**         Stock-BasedCompensation

TheCompany has two long-term incentive plans. The iPCS 2004 long-term incentiveplan, as amended (the “iPCS Plan”), was approved by the Company’s board ofdirectors as provided by the 

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Company’splan of reorganization.  The Horizon PCS2004 stock incentive plan, as amended (the “Horizon Plan”), was assumed by theCompany in its merger with Horizon PCS, Inc., effective July 1, 2005(see Note 3). Both plans have been approved by the Company’s stockholders.

**iPCS Plan.****  **Under the iPCS Plan, the Company maygrant to employees, directors and consultants of the Company or itssubsidiaries incentive and non-qualified stock options, stock appreciationrights, restricted and unrestricted stock awards and cash incentive awards. Allof the stock options and restricted stock awarded to date under the iPCS Planhave a ten-year life with vesting on a quarterly basis over four years foremployees, and over one year for directors. The iPCS Plan has been amendedtwice to increase the number of shares available for issuance thereunder. On May 5,2005, the iPCS Plan was amended to increase the number of shares available forissuance by 250,000 shares, and on September 28, 2006, the iPCS Plan wasamended to increase the number of shares available for issuance by 500,000shares. In connection with the second amendment to the iPCS Plan, the HorizonPlan (discussed below) was amended to decrease the number of shares availablefor issuance thereunder by 211,227. Each of these amendments was approved bythe Company’s stockholders. Giving effect to these amendments, the total numberof shares that may be awarded under the iPCS Plan is 1.75 million shares ofcommon stock, of which amount, 838,698 shares remain available for awards as ofDecember 31, 2006.

**HorizonPlan.****  **Underthe Horizon Plan, the Company may grant to employees, directors and consultantsof the Company or its subsidiaries incentive or non-qualified stock options orstock appreciation rights. All of the stock options issued to date under theHorizon Plan have a ten-year life and vest equally in six-month increments overthree years from the date of grant. As discussed above, in connection with themost recent amendment to the iPCS Plan, the Horizon Plan was amended todecrease the number of shares available for issuance thereunder by 211,227. Thisamendment was approved by the Company’s stockholders. Giving effect to thisamendment, the total number of shares that may be granted under the HorizonPlan is 551,000 shares of common stock, which equals the number of sharesunderlying awards previously made under the Horizon Plan.

Effective October 1,2005, the Company adopted SFAS No. 123R, “Share-Based Payment” utilizingthe modified prospective method. Under SFAS No. 123R companies arerequired to record compensation expense for all share based payment awardtransactions measured at fair value. Under the modified prospective method,SFAS No. 123R requires compensation cost to be recognized for 1) allshare-based compensation expense arrangements granted after the adoption dateand 2) all remaining unvested share-based compensation arrangements grantedprior to the adoption date. Accordingly, prior periods have not been restated.The Company uses the Black-Scholes model to value its stock option grants;however, there have been no stock option grants from the date the Companyadopted SFAS No. 123R through December 31, 2006.

Prior to October 1, 2005, the Company applied APBOpinion No. 25, “Accounting for Stock Issued to Employees,” and relatedinterpretations to account for its employee and director stock options. TheCompany did not record any stock-based compensation expense for stock optionawards prior to October 1, 2005, because all stock option awards weregranted at fair market value.

F-30

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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 |   |   |
| Exercised                                          |       |                        | (20,070    | )                                         |       |   | 22.37 |   |   |
| Forfeited                                          |       |                        | (44,628    | )                                         |       |   | 23.00 |   |   |
| Options  outstanding as of December 31, 2005  |       |                        | 773,086    |                                      |       |   |   16.73 |   |   |
| Exercised                                          |       |                        | (118,750   | )                                         |       |   | 22.93 |   |   |
| Forfeited                                          |       |                        | (3,733     | )                                         |       |   | 23.00 |   |   |
| Options outstanding as  of December 31, 2006  |       |                        | 650,603    |                                      |       |   | $ | 15.57 |   |   |

 

Thefollowing table shows stock-based compensation expense by type of share-basedaward for the year ended December 31, 2006, the three months ended December 31,2005, the year ended September 30, 2005 and the period ended September 30,2004 included in the consolidated statements of operations (in thousands):

| ** **                                                    | ** ** | **For the Year  ended  December 31,  2006** | ** ** | **For the Three  Months ended  December 31,  2005** | ** ** | **For the Year  ended  September  30, 2005** | ** ** | **Period ended  September 30,  2004** | ** ** |
|---------------------------------------------------------------|------------|------------------------------------------------------------|------------|-------------------------------------------------------------------------|------------|-------------------------------------------------------------|------------|-------------------------------------------------|------------|
| Restricted stock                                              |       |                                                       | $          | 99                                                                      |       |                                                        |       | $                                               | 27         |   |   |   | $ | 95 |   |   |   | $ | 22 |   |   |
| Amortization of  unearned compensation of stock option awards |       |                                                       | 359        |                                                                    |       |                                                        | 221        |                                            |       |   | 529 |   |   |   | — |   |   |
| Fair value  expense of stock option awards                    |       |                                                       | 2,038      |                                                                    |       |                                                        | 1,411      |                                            |       |   | — |   |   |   | — |   |   |
| Modification of  stock option awards                          |       |                                                       | —     |                                                                    |       |                                                        | —     |                                            |       |   | 576 |   |   |   | — |   |   |
| Total stock-based  compensation                               |       |                                                       | $          | 2,496                                                                   |       |                                                        |       | $                                               | 1,659      |   |   |   | $ | 1,200 |   |   |   | $ | 22 |   |   |

 

Thefollowing table shows the total remaining unrecognized compensation costrelated to: restricted stock grants, unearned compensation of stock optionawards, and fair value expense of stock option awards; as well as the weightedaverage remaining required service period over which such costs will berecognized:

| ** **                                    | ** ** | **Total Remaining  Unrecognized  Compensation Cost  (in millions)** | ** ** | **Weighted Average  Remaining Required  Service Period  (in years)** | ** ** |
|-----------------------------------------------|------------|------------------------------------------------------------------------------------|------------|------------------------------------------------------------------------------------------|------------|
| Restricted stock                              |       |                                                                               | $          | 0.2                                                                                      |       |   |   | 1.82 |   |   |
| Unearned  compensation of stock option awards |       |                                                                               | 0.3        |                                                                                     |       |   | 0.75 |   |   |
| Fair value expense of  stock option awards    |       |                                                                               | 2.7        |                                                                                     |       |   | 1.46 |   |   |

 

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Stock-basedcompensation expense is included in the consolidated statements of operationsas follows (in thousands):

| ** **                      | ** ** | **For the Year  ended  December 31,  2006** | ** ** | **For the Three  Months ended  December 31,  2005** | ** ** | **For the Year  ended  September 30,  2005** | ** ** | **Period ended  September 30,  2004** | ** ** |
|---------------------------------|------------|------------------------------------------------------------|------------|-------------------------------------------------------------------------|------------|-------------------------------------------------------------|------------|-------------------------------------------------|------------|
| Cost of service  and roaming    |       |                                                       | $          | 123                                                                     |       |                                                        |       | $                                               | 225        |   |   |   | $ | 63 |   |   |   | $ | 8 |   |   |
| Sales and  marketing            |       |                                                       | 524        |                                                                    |       |                                                        | 208        |                                            |       |   | 83 |   |   |   | 5 |   |   |
| General and  administrative     |       |                                                       | 1,849      |                                                                    |       |                                                        | 1,226      |                                            |       |   | 1,054 |   |   |   | 9 |   |   |
| Total stock-based  compensation |       |                                                       | $          | 2,496                                                                   |       |                                                        |       | $                                               | 1,659      |   |   |   | $ | 1,200 |   |   |   | $ | 22 |   |   |

 

Thefollowing is a summary of options outstanding and exercisable at December 31,2006:

| ** **                              | ** ** | **Options Outstanding** | ** ** | **Options Exercisable**                                         | ** ** |
|-----------------------------------------|------------|------------------------------|------------|----------------------------------------------------------------------|------------|
| **Range of  Exercise Prices** | ** ** | **Number  Outstanding**      | ** ** | **Weighted  Average  Remaining  Contractual  Life  (in years)** | ** ** | **Weighted  Average  Exercise  Price** | ** ** | **Aggregate  Intrinsic  Value (in  thousands)** | ** ** | **Number  Exercisable** | ** ** | **Weighted  Average  Remaining  Contractual  Life  (in years)** | ** ** | **Weighted  Average  Exercise  Price** | ** ** | **Aggregate  Intrinsic  Value (in  thousands)** | ** ** |
| $10.27                                  |       |                         | 429,375    |                                                                 |       |   | 7.55 |   |   |   | $ | 10.27 |   |   |   |   |   |   |   | 254,059 |   |   |   | 7.55 |   |   |   | $ | 10.27 |   |   |   |   |   |   |
| $19.00                                  |       |                         | 47,000     |                                                                 |       |   | 7.65 |   |   |   | 19.00 |   |   |   |   |   |   |   | 28,250 |   |   |   | 7.65 |   |   |   | 19.00 |   |   |   |   |   |   |
| $23.00-$25.60                           |       |                         | 121,087    |                                                                 |       |   | 7.84 |   |   |   | 23.79 |   |   |   |   |   |   |   | 60,346 |   |   |   | 7.84 |   |   |   | 23.73 |   |   |   |   |   |   |
| $35.00-$40.50                           |       |                         | 53,141     |                                                                 |       |   | 8.55 |   |   |   | 36.62 |   |   |   |   |   |   |   | 38,922 |   |   |   | 8.54 |   |   |   | 35.20 |   |   |   |   |   |   |
|                                    |       |                         | 650,603    |                                                                 |       |   | 7.69 |   |   |   | $ | 15.57 |   |   |   | $ | 25,889 |   |   |   | 381,577 |   |   |   | 7.70 |   |   |   | $ | 15.59 |   |   |   | $ | 15,176 |   |   |
|                                         |            |                              |            |                                                                      |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

AtDecember 31, 2006, the number of stock options vested or expected to vestwas 641,952. For these stock options, the weighted average remainingcontractual life in years, the weighted average exercise price and theaggregate intrinsic value was 6.99, $15.24 and $25.8 million.

The intrinsic value of stock options exercised in theyear ended December 31, 2006, and the three months ended December 31,2005 was $3.3 million and $0.3 million, respectively.

Thefollowing is a summary of restricted shares for the year endedDecember 31, 2006:

| ** **                                   | ** ** | ** ** | ** ** | **Wtd Avg**    | ** ** |
|----------------------------------------------|------------|------------|------------|---------------------|------------|
| ** **                                   | ** ** | **Shares** | ** ** | **Fair Value** | ** ** |
| Restricted shares  at January 1, 2006   |       | 13,256     |       |                | $          | 21.92 |   |   |
| Granted                                      |       | —     |       |                | —     |   |   |
| Vested                                       |       | (4,662     | )          |                | $21.38     |   |   |
| Forfeited                                    |       | (1,042     | )          |                | 18.90      |   |   |
| Restricted shares at December 31,  2006 |       | 7,552      |       |                | $22.67     |   |   |

 

In connection with the closing of the Company’s mergerwith Horizon PCS (see Note 3), four directors resigned from the Company’s boardof directors. Effective with their resignation, the Company amended each ofthese director’s stock option award agreements to extend the termination dateof these director’s options from 90 days to 210 days post-resignation. As aresult 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.

As part of the Company’sreorganization (see Note 4), the Company awarded 250,000 stock and stockunit awards to Mr. Yager. The related compensation expense ofapproximately $2.6 million for these stock unit awards was included inreorganization expense of the Predecessor Company during the period ended 

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July 1, 2004. Perthe terms of this award agreement, Mr. Yager was allowed to surrender unitawards to the Company as payment for his withholding obligations. During theperiod ended September 30, 2004, Mr. Yager received 125,000 unitawards of the 250,000 unit awards granted to him. During the year ended September 30,2005, Mr. Yager received approximately 79,000 unit awards of the remaining125,000 unit awards not yet received and Mr. Yager surrenderedapproximately 46,000 unit awards as payment for his tax withholding obligationsof approximately $1.6 million.

**(13)**         RelatedParty Transactions

At the request of thesenior lenders and the majority holders of the senior discount notes, on January 27,2003, the Company signed a restructuring management services agreement with YMSManagement, L.L.C. to perform restructuring management services for the Companyand to appoint a Chief Restructuring Officer (“CRO”). The Company appointedTimothy Yager as CRO at the time the agreement was signed. Under terms of thisagreement, YMS received a weekly fee of $15,000, reimbursement of reasonable administrativeexpenses plus a success fee, as defined in the agreement. During the periodended July 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 thistransaction are comparable to those that could have been obtained intransactions with unrelated parties.

**(14)**         TowerSales

On September 4, 2004,the Company signed an agreement with TCP Communications, LLC (“TCP”) wherebythe Company agreed to sell up to 92 of its owned towers to TCP. The towers werepriced individually and, after the sale, the Company leases space on the towerssold to TCP at rates and terms consistent with that of the Company’s othertower leases. During the year ended September 30, 2005 the Company sold 76towers to TCP for proceeds totaling approximately $13.6 million.

On May 25, 2005, theCompany signed an agreement with Global Tower, LLC (“Global Tower”), wherebythe Company agreed to sell its remaining 16 owned towers to Global Tower. Thetowers were priced individually and, after the sale, the Company leases spaceon the towers sold to Global Tower at market rates and terms consistent withthat of the Company’s other tower leases. During the year ended September 30,2005, the Company sold 16 towers to Global Tower for proceeds totalingapproximately $2.8 million. Because the cost basis of these towers sold toTCP and Global Tower was adjusted to fair value as part of fresh-startaccounting, no gain or loss on the sales was recorded.

During the yearended December 31, 2006, the Company sold 4 towers acquired with theacquisition of Horizon PCS, Inc. (see Note 3) to Global Tower for proceedsof approximately $0.4 million. Because the cost basis of these towers wasadjusted to fair value as part of purchase accounting, no gain or loss on thesales was recorded.

**(15)**         Commitmentsand Contingencies

*(a)**          Commitments*

On December 29, 2006,the Company signed a letter of agreement with Nortel Networks to purchase EV-DORev. A equipment and services totaling $17.1 million in aggregate. The $17.1million commitment consists of a non-cancelable purchase of $8.9 million ofequipment and services and an option to purchase an additional $8.2 million ofequipment and services. Prior to December 31, 2006 the Company submitted anon-cancelable purchase order for $8.9 million of equipment and services and,therefore has no further commitments under this letter of agreement. However,if the Company elects to exercise its option to purchase any additionalequipment and services from Nortel Networks under this letter of agreement,then the Company is required to purchase the entire additional $8.2 million ofequipment and services. In 

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addition, if the Companyelects to exercise this option after November 30, 2007, it will berequired to pay an additional $1.0 million.

On December 31, 2005,the Company signed a letter of agreement with Nortel Networks to replace theCompany’s Motorola equipment deployed in its Pennsylvania, New York, New Jerseyand Maryland markets with Nortel equipment. Under the terms of the agreement,the Company was required to purchase equipment necessary to replace 425existing base stations and related network infrastructure, plus variousadditional equipment to support future network footprint and capacityexpansion, totaling approximately $16.5 million. On March 21, 2006, theCompany amended the terms of this agreement accelerating payments for equipmenttotaling $4.0 million from 2007 to 2006. As of December 31, 2006, theCompany had purchased $16.5 million of the required $16.5 million of equipmentunder this agreement. Accordingly, the Company is not required to purchase anyadditional equipment under this agreement.

*(b)**          OperatingLeases*

The Company isobligated under non-cancelable operating lease agreements for offices, stores,network operating space and cell sites. These leases typically provide forautomatic renewal options and escalation terms that are either fixed or tied tothe Consumer Price Index. At December 31, 2006, the future minimum annuallease payments under these agreements are as follows (in thousands):

| **December 31 ,** | ** ** | ** ** | ** ** | ** ** | ** ** |
|-----------------------------|------------|------------|------------|------------|------------|
| 2007                        |       | $          | 34,660     |       |
| 2008                        |       | 34,038     |       |
| 2009                        |       | 32,765     |       |
| 2010                        |       | 24,770     |       |
| 2011                        |       | 11,288     |       |
| Thereafter                  |       | 9,064      |       |
| Total                       |       | $          | 146,585    |       |

 

Rent expense was approximately $35.2 million, $8.2million, $18.3 million, $3.2 million and $8.8 million,respectively, for the year ended December 31, 2006, the three months endedDecember 31, 2005, the year ended September 30, 2005, the periodended September 30, 2004, and the period ended July 1, 2004.

*(c)**           FCCLicenses*

Sprint PCS holds thelicenses necessary to provide wireless services in the Company’s territory. TheFederal Communications Commission (“FCC”) requires that licensees like SprintPCS maintain control of their licensed spectrums and not delegate control tothird-party operators or managers without FCC consent and are subject to renewaland revocation by the FCC. Certain Sprint PCS wireless licenses in theCompany’s territory are scheduled to expire in 2007. Sprint has filed renewalapplications for those licenses expiring in April 2007 and the Companyexpects Sprint to file renewal applications for those licenses expiring inJune 2007. The Company expects that all licenses 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 orthe Company to comply with these standards could result in the non-renewal ofthe Sprint PCS licenses for the Company’s territory. Additionally, if SprintPCS does not demonstrate to the FCC that Sprint PCS has met the constructionrequirements for each of its wireless personal communications services licenses,it can lose those licenses. If Sprint PCS loses its licenses in the Company’sterritory for any of these reasons, the Company would not be able to providewireless services without obtaining rights to other licenses. If Sprint PCSloses its licenses in another territory, Sprint PCS or the applicable PCSAffiliate or Sprint would not be able to provide wireless services withoutobtaining 

F-34

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rights to other licensesand the Company’s ability to offer nationwide calling plans would be dimishedand potentially more costly.

*(d)**          Litigation*

On July 15, 2005,iPCS Wireless, Inc., a wholly owned subsidiary of iPCS, Inc., filed acomplaint against Sprint and Sprint PCS in the Circuit Court of Cook County,Illinois. On July 22, 2005, Horizon Personal Communications, Inc. andBright Personal Communications 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 allege, among other things, that Sprint’s conduct following theconsummation of the merger between Sprint and Nextel, would breach itsexclusivity obligations under the Company’s affiliation agreements, as amended.The Company sought, among other things, a temporary restraining order (a TRO),a preliminary injunction and a permanent injunction enjoining Sprint and thoseacting in concert with it from engaging in conduct that would violate theCompany’s affiliation agreements with Sprint PCS.

On July 28, 2005, iPCS, Inc. and certain ofits wholly owned subsidiaries entered into a Forbearance Agreement with Sprintrelating to the complaints filed against Sprint. The Forbearance Agreement setsforth the Company’s agreement that it would not seek a TRO or a preliminaryinjunction against Sprint so long as Sprint operates subject to the limitationsset forth in the Forbearance Agreement. Although the Forbearance Agreementexpired on January 1, 2006 in the territory managed by iPCS Wireless andon August 4, 2006 in the territory managed by Horizon PersonalCommunications and Bright Personal Communications Services, Sprint committed tocontinue to abide by the terms of the Forbearance Agreement in the territorymanaged iPCS Wireless during the pendency of Sprint’s appeal of the Illinoiscourt final order (discussed below).

The trial in the Delawarecourt occurred in January 2006. On August 4, 2006, the Delaware courtissued its decision and, on September 7, 2006 issued a final order andjudgment effecting its decision. The final order and judgment provides that:

·       Sprintwill violate the implied duty of good faith and fair dealing if it offers iDENproducts and services using the same Sprint brand and marks that plaintiffs(Horizon Personal Communications and Bright Personal Communications Services)have used or are using in connection with their sale of Sprint PCS Products andServices (the “Sprint pcs brand and/or marks”) or a brand or mark confusinglysimilar to the Sprint pcs brand or marks in plaintiffs’ Service Areas. Sprintmay re-brand the legacy Nextel stores in plaintiffs’ Service Areas, but it mustdo so in a way that does not create a likelihood of confusion in the minds ofconsumers as to the sponsor of the store or which products and services areavailable in it, and it may not use the new Sprint logo.

·       Withinplaintiffs’ Service Areas, Sprint and those acting in concert with it areenjoined from:

·        offering iDEN products andservices that use the same or confusingly similar brands or marks as the Sprintpcs brand or marks; provided that Sprint is not enjoined or otherwiseprohibited from conducting national advertising offering iDEN products andservices that use the same or similar brands and marks as the Sprint pcs brandsor marks, subject to appropriate disclaimers regarding availability in certainmarkets; and

·        re-brandingthe legacy Nextel stores with the new Sprint logo or the same or confusinglysimilar brands or marks as the Sprint pcs brand and marks.

·       Inlight of certain operational and confidentiality representations made bySprint, plaintiffs’ claims and requests for relief against such future Sprintbehavior were deemed not ripe for adjudication 

F-35

----

and therefore denied. If,however, Sprint in the future breaches these representations, the court willpromptly entertain a request for appropriate relief.

·       Plaintiffs’claims for tortious interference and civil conspiracy against Nextel weredismissed with prejudice.

The trial in the Illinois court was held for 25 daysbetween early March and early July 2006. On August 14, 2006, theIllinois court issued its decision and on September 20, 2006 issued afinal order effecting its decision. The final order provides that:

·       Within180 days of the date of the final order, Sprint and those acting in concertwith it must cease owning, operating, and managing the Nextel wireless networkin iPCS Wireless’s territory.

·       Sprintshall continue to comply with all terms and conditions of the ForbearanceAgreement.

On September 28,2006, Sprint appealed the ruling of the Illinois trial court to the AppellateCourt of Illinois, First Judicial District. In early October 2006, Sprintrequested a stay of the Illinois trial court’s order pending appeal and anaccelerated appeal. On October 13, 2006, the Illinois appellate courtdenied Sprint’s request for an accelerated appeal and ordered a stay of theIllinois trial court’s order pending appeal on the condition that (i) Sprintcontinue to comply with the Forbearance Agreement and (ii) Sprint complywith the September 7, 2006 order of the Delaware court. Accordingly,Sprint must comply with the Forbearance Agreement, as well as the order of theDelaware court, in iPCS Wireless’s territory pending a decision from theIllinois appellate court.

Asof the date hereof, the parties are in the briefing stage of the appeal, afterwhich the parties may be requested to present oral arguments before theappellate court. The Company expects a ruling from the appelate court as soonas later this year or early 2008.

In addition to the foregoing, from time to time, theCompany is involved in various legal proceedings relating to claims arising inthe ordinary course of business. The Company is not currently a party to anysuch legal proceedings, the outcome of which, individually or in the aggregate,is expected to have a material adverse effect on the Company’s business,financial condition or results of operations.

F-36

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**(16)**         ConsolidatingFinancial Information

The 111¤2% senior notesand the 113¤8%senior notes are fully, unconditionally and joint and severally guaranteed bythe Company’s domestic unrestricted subsidiaries, including iPCSWireless, Inc., iPCS Equipment, Inc., Horizon PersonalCommunications, Inc., and Bright Personal CommunicationsServices, LLC, which are wholly owned subsidiaries of iPCS, Inc. Thefollowing consolidating financial information as of December 31, 2006 and2005 and for the year ended December 31, 2006, the three months endedDecember 31, 2005, the year ended September 30, 2005, for the periodfrom July 2, 2004 through  September 30, 2004 and for the periodfrom October 1, 2003 through July 1, 2004 is presented foriPCS, Inc., iPCS Wireless, Inc., iPCS Equipment, Inc., HorizonPersonal Communications, Inc., and Bright Personal CommunicationsServices, LLC (in thousands):

**Condensed Consolidating Balance Sheet**

**As ofDecember 31, 2006**

**(SuccessorCompany)**

| ** **                                                         | ** ** | **iPCS Inc.** | ** ** | **iPCS  Wireless** | ** ** | **iPCS  Equipment** | ** ** | **Horizon  Per Com** | ** ** | **Bright** | ** ** | **Eliminations** | ** ** | **iPCS  Consolidated** | ** ** |
|--------------------------------------------------------------------|------------|--------------------|------------|--------------------|------------|---------------------|------------|---------------------------|------------|------------|------------|------------------|------------|------------------------|------------|
| Cash and cash equivalents                                          |       | $                  | —     |               | $          | 85,474              |       |                      | $          | —     |       |             | $          | 34,823                 |       | $ | 202 |   |   | $ | — |   |   |   | $ | 120,499 |   |   |
| Other current assets                                               |       | 139,294            |       | 73,621             |       |                | 38,200     |                      |       | 94,771     |       | 72,499           |       |                   | (335,930   | ) |   |   | 82,455 |   |   |
| Total current assets                                               |       | 139,294            |       | 159,095            |       |                | 38,200     |                      |       | 129,594    |       | 72,701           |       |                   | (335,930   | ) |   |   | 202,954 |   |   |
| Property and equipment,  net                                       |       | —             |       | 64,773             |       |                | 6,375      |                      |       | 51,960     |       | 16,597           |       |                   | (64        | ) |   |   | 139,641 |   |   |
| Intangible assets, net                                             |       | —             |       | 49,259             |       |                | —     |                      |       | 166,609    |       | 57,268           |       |                   | —     |   |   |   | 273,136 |   |   |
| Other noncurrent assets                                            |       | 4,790              |       | 1,756              |       |                | —     |                      |       | 4,079      |       | 715              |       |                   | —     |   |   |   | 11,340 |   |   |
| Investment in  subsidiaries                                        |       | 253,001            |       | —             |       |                | —     |                      |       | —     |       | —           |       |                   | (253,001   | ) |   |   | — |   |   |
| Total assets                                                       |       | $                  | 397,085    |               | $          | 274,883             |       |                      | $          | 44,575     |       |             | $          | 352,242                |       | $ | 147,281 |   |   | $ | (588,995 | ) |   |   | $ | 627,071 |   |   |
| Current liabilities                                                |       | $                  | 17,900     |               | $          | 232,247             |       |                      | $          | 42         |       |             | $          | 127,688                |       | $ | 58,887 |   |   | $ | (335,994 | ) |   |   | $ | 100,770 |   |   |
| Long-term debt                                                     |       | 165,000            |       | 468                |       |                | —     |                      |       | 104,400    |       | 32,177           |       |                   | —     |   |   |   | 302,045 |   |   |
| Other long-term  liabilities                                       |       | —             |       | 4,088              |       |                | —     |                      |       | 5,402      |       | 581              |       |                   | —     |   |   |   | 10,071 |   |   |
| Total liabilities                                                  |       | 182,900            |       | 236,803            |       |                | 42         |                      |       | 237,490    |       | 91,645           |       |                   | (335,994   | ) |   |   | 412,886 |   |   |
| Stockholders’ equity  (deficiency)                            |       | 214,185            |       | 38,080             |       |                | 44,533     |                      |       | 114,752    |       | 55,636           |       |                   | (253,001   | ) |   |   | 214,185 |   |   |
| Total liabilities and stockholders’  equity (deficiency) |       | $                  | 397,085    |               | $          | 274,883             |       |                      | $          | 44,575     |       |             | $          | 352,242                |       | $ | 147,281 |   |   | $ | (588,995 | ) |   |   | $ | 627,071 |   |   |

 

**CondensedConsolidating Statement of Operations**

**Forthe Year Ended December 31, 2006**

**(Successor Company)**

| ** **                                         | ** ** | **iPCS Inc.** | ** ** | **iPCS  Wireless** | ** ** | **iPCS  Equipment** | ** ** | **Horizon  Per Com** | ** ** | **Bright** | ** ** | **Eliminations** | ** ** | **iPCS  Consolidated** | ** ** |
|----------------------------------------------------|------------|--------------------|------------|--------------------|------------|---------------------|------------|---------------------------|------------|------------|------------|------------------|------------|------------------------|------------|
| Total revenues                                     |       | $                  | —     |               | $          | 277,074             |       |                      | $          | 4,339      |       |             | $          | 140,186                |       | $ | 75,162 |   |   | $ | (4,339 | ) |   |   | $ | 492,422 |   |   |
| Cost of revenues                                   |       | —             |       | (183,505           | )          |                | —     |                      |       | (101,272   | )          | (47,248          | )          |                   | 4,339      |   |   |   | (327,686 | ) |   |
| Selling and  marketing                             |       | —             |       | (40,415            | )          |                | —     |                      |       | (23,436    | )          | (10,442          | )          |                   | —     |   |   |   | (74,293 | ) |   |
| General and  administrative                        |       | (2,219             | )          | (10,189            | )          |                | (1         | )                         |       | (6,564     | )          | (1,971           | )          |                   | —     |   |   |   | (20,944 | ) |   |
| Depreciation and  amortization                     |       | —             |       | (34,385            | )          |                | (4,771     | )                         |       | (38,293    | )          | (11,031          | )          |                   | —     |   |   |   | (88,480 | ) |   |
| Gain (loss) on  disposal of property and equipment |       | —             |       | (802               | )          |                | 509        |                      |       | (293       | )          | (12              | )          |                   | 24         |   |   |   | (574 | ) |   |
| Total operating  expenses                          |       | (2,219             | )          | (269,296           | )          |                | (4,263     | )                         |       | (169,858   | )          | (70,704          | )          |                   | 4,363      |   |   |   | (511,977 | ) |   |
| Other, net                                         |       | (19,873            | )          | 397                |       |                | 3,577      |                      |       | (7,729     | )          | (2,856           | )          |                   | —     |   |   |   | (26,484 | ) |   |
| Loss in  subsidiaries                              |       | (23,971            | )          | —             |       |                | —     |                      |       | —     |       | —           |       |                   | 23,971     |   |   |   | — |   |   |
| Net income (loss)                                  |       | $                  | (46,063    | )                  | $          | 8,175               |       |                      | $          | 3,653      |       |             | $          | (37,401                | )          | $ | 1,602 |   |   | $ | 23,995 |   |   |   | $ | (46,039 | ) |   |

 

F-37

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**CondensedConsolidating Statement of Cash Flows**

**For the Year EndedDecember 31, 2006**

**(SuccessorCompany)**

| ** **                                            | ** ** | **iPCS Inc.** | ** ** | **iPCS  Wireless** | ** ** | **iPCS  Equipment** | ** ** | **Horizon  Per Com** | ** ** | **Bright** | ** ** | **Eliminations** | ** ** | **iPCS  Consolidated** | ** ** |
|-------------------------------------------------------|------------|--------------------|------------|--------------------|------------|---------------------|------------|---------------------------|------------|------------|------------|------------------|------------|------------------------|------------|
| Operating activities                                  |       |               | $          | —             |       |                | $          | 28,527                    |       |       | $          | (3,264           | )          |                   | $          | 16,753 |   | $ | 5,265 |   |   | $ | — |   |   |   | $ | 47,281 |   |   |
| Investing activities                                  |       |               | —     |               |       | (14,758             | )          |                      | 3,264      |       |       | (23,029          | )          | (5,808                 | )          |   | — |   |   |   | (40,331 | ) |   |
| Financing activities                                  |       |               | —     |               |       | 2,712               |       |                      | —     |       |       | —           |       | —                 |       |   |   |   |   |   | 2,712 |   |   |
| Increase (decrease) in cash and cash equivalents |       |               | —     |               |       | 16,481              |       |                      | —     |       |       | (6,276           | )          | (543                   | )          |   | — |   |   |   | 9,662 |   |   |
| Cash and cash equivalents at beginning of period      |       |               | —     |               |       | 68,993              |       |                      | —     |       |       | 41,099           |       | 745                    |       |   | — |   |   |   | 110,837 |   |   |
| Cash and cash  equivalents at end of period           |       |               | $          | —             |       |                | 85,474     |                      |       | $          | —     |             |       | $                      | 34,823     |   | $ | 202 |   |   | $ | — |   |   |   | $ | 120,499 |   |   |
|                                                       |            |                    |            |                    |            |                     |            |                           |            |            |            |                  |            |                        |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

**Condensed ConsolidatingBalance Sheet**

**As of December 31,2005**

**(SuccessorCompany)**

| ** **                                                    | ** ** | **iPCS Inc.** | ** ** | **iPCS  Wireless** | ** ** | **iPCS  Equipment** | ** ** | **Horizon  Per Com** | ** ** | **Bright** | ** ** | **Eliminations** | ** ** | **iPCS  Consolidated** | ** ** |
|---------------------------------------------------------------|------------|--------------------|------------|--------------------|------------|---------------------|------------|---------------------------|------------|------------|------------|------------------|------------|------------------------|------------|
| Cash and cash equivalents                                     |       | $                  | —     |               | $          | 68,993              |       |                      | $          | —     |       |             | $          | 41,099                 |       | $ | 745 |   |   | $ | — |   |   |   | $ | 110,837 |   |   |
| Other current assets                                          |       | 143,586            |       | 48,917             |       |                | 26,945     |                      |       | 54,199     |       | 38,202           |       |                   | (223,446   | ) |   |   | 88,403 |   |   |
| Total current assets                                          |       | 143,586            |       | 117,910            |       |                | 26,945     |                      |       | 95,298     |       | 38,947           |       |                   | (223,446   | ) |   |   | 199,240 |   |   |
| Property and equipment, net                                   |       | —             |       | 70,521             |       |                | 13,968     |                      |       | 45,771     |       | 17,082           |       |                   | (88        | ) |   |   | 147,254 |   |   |
| Intangible assets, net                                        |       | —             |       | 60,946             |       |                | —     |                      |       | 190,043    |       | 64,713           |       |                   | —     |   |   |   | 315,702 |   |   |
| Other non-current assets                                      |       | 5,688              |       | 1,194              |       |                | —     |                      |       | 3,153      |       | 982              |       |                   | —     |   |   |   | 11,017 |   |   |
| Investment in subsidiaries                                    |       | 276,972            |       | —             |       |                | —     |                      |       | —     |       | —           |       |                   | (276,972   | ) |   |   | — |   |   |
| Total assets                                                  |       | $                  | 426,246    |               | $          | 250,571             |       |                      | $          | 40,913     |       |             | $          | 334,265                |       | $ | 121,724 |   |   | $ | (500,506 | ) |   |   | $ | 673,213 |   |   |
| Current liabilities                                           |       | $                  | 6,241      |               | $          | 217,039             |       |                      | $          | 33         |       |             | $          | 69,184                 |       | $ | 34,669 |   |   | $ | (223,534 | ) |   |   | $ | 103,632 |   |   |
| Long-term debt                                                |       | 165,000            |       | 386                |       |                | —     |                      |       | 105,985    |       | 32,666           |       |                   | —     |   |   |   | 304,037 |   |   |
| Other long-term liabilities                                   |       | —             |       | 3,242              |       |                | —     |                      |       | 6,943      |       | 354              |       |                   | —     |   |   |   | 10,539 |   |   |
| Total liabilities                                             |       | 171,241            |       | 220,667            |       |                | 33         |                      |       | 182,112    |       | 67,689           |       |                   | (223,534   | ) |   |   | 418,208 |   |   |
| Stockholders’ equity (deficiency)                        |       | 255,005            |       | 29,904             |       |                | 40,880     |                      |       | 152,153    |       | 54,035           |       |                   | (276,972   | ) |   |   | 255,005 |   |   |
| Total liabilities  and stockholders’ equity (deficiency) |       | $                  | 426,246    |               | $          | 250,571             |       |                      | $          | 40,913     |       |             | $          | 334,265                |       | $ | 121,724 |   |   | $ | (500,506 | ) |   |   | $ | 673,213 |   |   |

 

F-38

----

**CondensedConsolidating Statement of Operations**

**For the ThreeMonths Ended December 31, 2005**

**(SuccessorCompany)**

| ** **                                        | ** ** | **iPCS Inc.** | ** ** | **iPCS  Wireless** | ** ** | **iPCS  Equipment** | ** ** | **Horizon  Per Com** | ** ** | **Bright** | ** ** | **Eliminations** | ** ** | **iPCS  Consolidated** | ** ** |
|---------------------------------------------------|------------|--------------------|------------|--------------------|------------|---------------------|------------|---------------------------|------------|------------|------------|------------------|------------|------------------------|------------|
| Total revenues                                    |       | $                  | —     |               | $          | 61,739              |       |                      | $          | 1,321      |       |             | $          | 32,269                 |       | $ | 15,544 |   |   | $ | (1,321 | ) |   |   | $ | 109,552 |   |   |
| Cost of revenues                                  |       | —             |       | (40,819            | )          |                | —     |                      |       | (22,801    | )          | (9,617           | )          |                   | 1,321      |   |   |   | (71,916 | ) |   |
| Selling and  marketing                            |       | —             |       | (10,033            | )          |                | —     |                      |       | (5,506     | )          | (2,677           | )          |                   | —     |   |   |   | (18,216 | ) |   |
| General and administrative                        |       | (529               | )          | (3,517             | )          |                | —     |                      |       | (3,835     | )          | (26              | )          |                   | —     |   |   |   | (7,907 | ) |   |
| Depreciation and amortization                     |       | —             |       | (8,504             | )          |                | (1,395     | )                         |       | (8,846     | )          | (2,783           | )          |                   | —     |   |   |   | (21,528 | ) |   |
| Gain (loss) on disposal of property and equipment |       | —             |       | (58                | )          |                | (8         | )                         |       | (88        | )          | (34              | )          |                   | 6          |   |   |   | (182 | ) |   |
| Total operating expenses                          |       | (529               | )          | (62,931            | )          |                | (1,403     | )                         |       | (41,076    | )          | (15,137          | )          |                   | 1,327      |   |   |   | (119,749 | ) |   |
| Other, net                                        |       | (4,968             | )          | (60                | )          |                | 768        |                      |       | (2,005     | )          | (724             | )          |                   | —     |   |   |   | (6,989 | ) |   |
| Loss in subsidiaries                              |       | (11,695            | )          | —             |       |                | —     |                      |       | —     |       | —           |       |                   | 11,695     |   |   |   | — |   |   |
| Net income (loss)                                 |       | $                  | (17,192    | )                  | $          | (1,252              | )          |                      | $          | 686        |       |             | $          | (10,812                | )          | $ | (317 | ) |   | $ | 11,701 |   |   |   | $ | (17,186 | ) |   |

 

**CondensedConsolidating Statement of Cash Flows**

**For the Three MonthsEnded December 31, 2005**

**(SuccessorCompany)**

| ** **                                            | ** ** | **iPCS Inc.** | ** ** | **iPCS  Wireless** | ** ** | **iPCS  Equipment** | ** ** | **Horizon  Per Com** | ** ** | **Bright** | ** ** | **Eliminations** | ** ** | **iPCS  Consolidated** | ** ** |
|-------------------------------------------------------|------------|--------------------|------------|--------------------|------------|---------------------|------------|---------------------------|------------|------------|------------|------------------|------------|------------------------|------------|
| Operating activities                                  |       |               | $          | —             |       |                |       | $                         | (1,792     | )          |       |             | $          | 116                    |       |   |   | $ | 19,572 |   |   | $ | 2,965 |   |   | $ | — |   |   |   | $ | 20,861 |   |   |
| Investing activities                                  |       |               | —     |               |       |                | (5,467     | )                         |       |       | (116       | )                |       |                   | (578       | ) |   | (2,410 | ) |   | — |   |   |   | (8,571 | ) |   |
| Financing activities                                  |       |               | —     |               |       |                | 447        |                      |       |       | —     |             |       |                   | (7         | ) |   | — |   |   | — |   |   |   | 440 |   |   |
| Increase (decrease) in cash and cash equivalents |       |               | —     |               |       |                | (6,812     | )                         |       |       | —     |             |       |                   | 18,987     |   |   | 555 |   |   | — |   |   |   | 12,730 |   |   |
| Cash and cash equivalents at beginning of period      |       |               | —     |               |       |                | 75,805     |                      |       |       | —     |             |       |                   | 22,112     |   |   | 190 |   |   | — |   |   |   | 98,107 |   |   |
| Cash and cash  equivalents at end of period           |       |               | $          | —             |       |                |       | $                         | 68,993     |       |       |             | $          | —                 |       |   |   | $ | 41,099 |   |   | $ | 745 |   |   | $ | — |   |   |   | $ | 110,837 |   |   |

 

F-39

----

**CondensedConsolidating Statement of Operations**

**For the Year Ended September 30,2005**

**(SuccessorCompany)**

| ** **                                        | ** ** | **iPCS Inc.** | ** ** | **iPCS  Wireless** | ** ** | **iPCS  Equipment** | ** ** | **Horizon  Per Com** | ** ** | **Bright** | ** ** | **Eliminations** | ** ** | **iPCS  Consolidated** | ** ** |
|---------------------------------------------------|------------|--------------------|------------|--------------------|------------|---------------------|------------|---------------------------|------------|------------|------------|------------------|------------|------------------------|------------|
| Total revenues                                    |       | $                  | —     |               | $          | 232,759             |       |                      | $          | 6,239      |       |             | $          | 31,209                 |       | $ | 16,079 |   |   | $ | (6,239 | ) |   |   | $ | 280,047 |   |   |
| Cost of revenues                                  |       | —             |       | (154,024           | )          |                | (938       | )                         |       | (22,126    | )          | (9,465           | )          |                   | 6,235      |   |   |   | (180,318 | ) |   |
| Selling and marketing                             |       | —             |       | (36,845            | )          |                | —     |                      |       | (5,182     | )          | (2,397           | )          |                   | —     |   |   |   | (44,424 | ) |   |
| General and administrative                        |       | (986               | )          | (9,006             | )          |                | (1         | )                         |       | (2,696     | )          | (500             | )          |                   | —     |   |   |   | (13,189 | ) |   |
| Depreciation and amortization                     |       | —             |       | (52,105            | )          |                | (5,595     | )                         |       | (10,423    | )          | (3,703           | )          |                   | —     |   |   |   | (71,826 | ) |   |
| Gain (loss) on disposal of property and equipment |       | —             |       | (162               | )          |                | —     |                      |       | 1          |       | —           |       |                   | 20         |   |   |   | (141 | ) |   |
| Total operating expenses                          |       | (986               | )          | (252,142           | )          |                | (6,534     | )                         |       | (40,426    | )          | (16,065          | )          |                   | 6,255      |   |   |   | (309,898 | ) |   |
| Other, net                                        |       | (19,865            | )          | (1,162             | )          |                | 2,611      |                      |       | (2,002     | )          | (669             | )          |                   | —     |   |   |   | (21,087 | ) |   |
| Loss in subsidiaries                              |       | (30,103            | )          | —             |       |                | —     |                      |       | —     |       | —           |       |                   | 30,103     |   |   |   | — |   |   |
| Net income (loss)                                 |       | $                  | (50,954    | )                  | $          | (20,545             | )          |                      | $          | 2,316      |       |             | $          | (11,219                | )          | $ | (655 | ) |   | $ | 30,119 |   |   |   | $ | (50,938 | ) |   |

 

**CondensedConsolidating Statement of Cash Flows**

**For the Year Ended September 30,2005**

**(SuccessorCompany)**

| ** **                                       | ** ** | **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-40

----

**CondensedConsolidating Statement of Operations**

**Forthe 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                            |       |               | —     |                     |       | (35,961             | )          |             | (772       | )                      |       |   | 2,059 |   |   |   | (34,674 | ) |   |
| Selling and marketing                       |       |               | —     |                     |       | (8,001              | )          |             | —     |                   |       |   | — |   |   |   | (8,001 | ) |   |
| General and  administrative                 |       |               | (145       | )                        |       | (1,569              | )          |             | —     |                   |       |   | — |   |   |   | (1,714 | ) |   |
| 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 | ) |   |

 

**CondensedConsolidating Statement of Cash Flows**

**Forthe 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 |   |   |

 

**CondensedConsolidating Statement of Operations**

**Forthe Period October 1, 2003 through July 1, 2004**

**(PredecessorCompany)**

| ** **                                              | ** ** | **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 |   |   |

 

 

F-41

----

**CondensedConsolidating Statement of Cash Flows**

**For the Period October 1,2003 through July 1, 2004**

**(PredecessorCompany)**

| ** **                                             | ** ** | **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 |   |   |

 

**(17)**         Valuationand 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 December 31, 2006 Allowance  for doubtful accounts                                |       |                          | $          | 3,650                  | ** ** |                         |       | $            | —     | ** **     |       |                                         | $          | 10,893 | ** ** |   |   | $ | 12,290 | ** ** |   |   | $ | (20,170 | ) |   |   | $ | 6,663 | ** ** |   |
| For the Three Months ended December 31, 2005  Allowance for doubtful accounts                        |       |                          | $          | 3,653                  | ** ** |                         |       | $            | —     | ** **     |       |                                         | $          | 1,660 | ** ** |   |   | $ | 2,862 | ** ** |   |   | $ | (4,525 | ) |   |   | $ | 3,650 | ** ** |   |
| For the Year ended September 30, 2005 Allowance  for doubtful accounts                               |       |                          | $          | 1,217                  | ** ** |                         |       | $            | 1,388      | ** **     |       |                                         | $          | 2,139 | ** ** |   |   | $ | 6,950 | ** ** |   |   | $ | (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 | ) |   |   | $ | — | ** ** |   |

----

(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 the periodfrom October 1, 2003 through July 1, 2004.

F-42

----

**(18)**         QuarterlyResults of Operations (Unaudited)

| ** **                            | ** ** | **Quarter ended**                                             | ** ** |
|---------------------------------------|------------|--------------------------------------------------------------------|------------|
| ** **                            | ** ** | **March 31,  2006**                                           | ** ** | **June 30,  2006** | ** ** | **September 30,  2006** | ** ** | **December 31,  2006** | ** ** |
| ** **                            | ** ** | **(in thousands, except per share data)** | ** ** |
| Net sales                             |       | $                                                                  | 112,485    |   | $ | 120,373 |   |   | $ | 126,606 |   |   |   | $ | 132,957 |   |   |
| Operating loss                        |       | (10,095                                                            | )          | (3,785 | ) |   | (109 | ) |   |   | (5,567 | ) |   |
| Net loss                              |       | (17,000                                                            | )          | (10,374 | ) |   | (6,683 | ) |   |   | (11,982 | ) |   |
| Basic and diluted  net loss per share |       | (1.02                                                              | )          | (0.62 | ) |   | (0.40 | ) |   |   | (0.72 | ) |   |
|                                       |            |                                                                    |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

| ** **                            | ** ** | **December 31,  2004** | ** ** | **March 31,  2005** | ** ** | **June 30,  2005** | ** ** | **September 30,  2005** | ** ** | **December 31,  2005** | ** ** |
|---------------------------------------|------------|-----------------------------|------------|--------------------------|------------|-------------------------|------------|------------------------------|------------|-----------------------------|------------|
| Net sales                             |       |                        | $          | 55,997                   |       |                    | $          | 55,454                       |       | $                           | 59,513     |   |   | $ | 109,083 |   |   |   | $ | 109,552 |   |   |
| Operating loss                        |       |                        | (2,887     | )                        |       | (9,825                  | )          | (7,962                       | )          |                        | (9,177     | ) |   |   | (10,197 | ) |   |
| Net loss                              |       |                        | (7,716     | )                        |       | (14,436                 | )          | (12,525                      | )          |                        | (16,261    | ) |   |   | (17,186 | ) |   |
| Basic and diluted net  loss per share |       |                        | (0.83      | )                        |       | (1.56                   | )          | (1.35                        | )          |                        | (0.99      | ) |   |   | (1.03 | ) |   |
|                                       |            |                             |            |                          |            |                         |            |                              |            |                             |            |  |  |  |  |  |  |  |  |  |  |  |

 

On July 1, 2005, iPCScompleted a merger with Horizon PCS and the financial results of Horizon PCSare included in iPCS’s reported results from the date of acquisition.Accordingly, the results of iPCS before the merger are not comparable to theresults after the merger.

**(19)**         SubsequentEvents

In February 2007,Sprint notified the Company that the per average monthly cash cost per userrate (“CCPU”) would be $7.50 for 2007, $7.09 for 2008, and $6.81 for 2009, andthe cost per gross customer addition (“CPGA”) rate would be $20.09 for 2007,$19.41 for 2008 and $18.58 for 2009. If the 2007 rates for CCPU and CPGA hadbeen in effect in 2006, the Company would have incurred $4.7 million morein CCPU expense and $0.5 million less in CPGA expense. The Company stronglydisagrees with Sprint’s proposed new rates, and pursuant to the terms of itsaffiliation agreements with Sprint, has elected to submit the determination ofthe new rates to binding arbitration and continue to obtain the supportservices from Sprint at the amounts to be determined by the arbitration panel.If the arbitration panel imposes rates different than the ones proposed bySprint, then the rates imposed by the panel would be retroactively applied toJanuary 1, 2007. However, in the meantime, as required by the servicesagreements, beginning on January 1, 2007, the Company began paying therates proposed by Sprint.

In February 2007 Sprintnotified the Company that effective January 1, 2007, the reciprocal roamingrates are $0.0403 per minute for voice and 2G data and $0.001 per kilobyte for3G data. If these 2007 reciprocal roaming rates had been in effect for 2006,the Company’s roaming revenue from Sprint would have decreased by $42.4 millionand the Company’s roaming expense payable to Sprint would have decreased $34.2 million,resulting in a net increase in the Company’s operating loss of $8.2 million.The Company strongly disagrees with Sprint’s proposed reciprocal roaming ratesand intends to vigorously oppose them, including by submitting the matter toarbitration or litigation, if necessary. If the matter is submitted to anarbitration panel and the arbitration panel imposes rates different than theones then in effect, the new rates would be retroactively applied to theappropriate period. However, in the meantime, the new rates went into effect onJanuary 1, 2007.

On January 24, 2007, theCompany awarded a total of 12,000 options and 3,000 shares of restrictedstock at a fair value price of $52.60, which was the fair value on the grantdate. Both the stock options and restricted shares vest quarterly over fouryears.

OnMarch 7, 2007, the Company awarded a total of 197,050 options to directors,management and employees at an option price of $50.41, which was the fair valueon the grant date. In addition, 52,700 shares of restricted stock were grantedto management at  the same fair valueprice of $50.41. Other than options for directors, which vest quarterly overone year, all other options and restricted stock vest quarterly over fouryears.

F-43

----

**INDEX TO EXHIBITS**

| Exhibit   Number | ** ** | **Description**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 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))                                                                  |

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| 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)).                                                                                            |

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| 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† |   | 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))                                                                                                                                                                                        |
| 10.26† |   | Amended and Restated Employment  Agreement, dated as of March 7, 2007, by and between Timothy M. Yager  and iPCS Wireless, Inc. (Incorporated by reference to Exhibit 99.1  to the current report on Form 8-K filed by iPCS, Inc. with the SEC  on March 13, 2007 (SEC File No. 000-51844))                                                                                                                      |
| 10.27† |   | Amended and Restated Employment  Agreement, dated as of March 7, 2007, by and between Stebbins B.  Chandor, Jr. and iPCS Wireless, Inc. (Incorporated by reference to  Exhibit 99.2 to the current report on Form 8-K filed by  iPCS, Inc. with the SEC on March 13, 2007 (SEC File  No. 000-51844))                                                                                                        |

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| 10.29† |   | Amended and Restated Employment  Agreement, dated as of March 7, 2007, by and between Craig A. Kinley and  iPCS Wireless, Inc. (Incorporated by reference to Exhibit 99.4 to  the current report on Form 8-K filed by iPCS, Inc. with the SEC on  March 13, 2007 (SEC File No. 000-51844))            |
|-------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.30† |   | 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))                                                                                            |
| 10.31† |   | 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))                                                                                        |
| 10.32† |   | 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))                                                                               |
| 10.33† |   | 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))                                           |
| 10.34† |   | 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))                                                                                            |
| 10.35       |   | 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))           |
| 10.36† |   | Amended and Restated Employment  Agreement by and between iPCS Wireless, Inc. and John J. Peterman, dated  as of March 7, 2007 (Incorporated by reference to Exhibit 99.3 to  the current report on the Form 8-K filed by iPCS, Inc. with  the SEC on March 13, 2007 (SEC File No. 000-51844))        |
| 10.37† |   | Amended and Restated Employment  Agreement by and between iPCS Wireless, Inc. and Edmund L.  Quatmann, Jr. dated as of March 7, 2007 (Incorporated by reference  to Exhibit 99.5 to the current report on Form 8-K filed by  iPCS, Inc. with the SEC on March 13, 2007 (SEC File No. 000-51844)) |
| 10.38† |   | 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))                                    |
| 10.39† |   | Horizon PCS, Inc. Amended  and Restated 2004 Stock Incentive Plan (Incorporated by reference to  Exhibit 99.2 to the current report on Form 8-K filed by iPCS, Inc.  with the SEC on September 28, 2006 (SEC File No. 000-51844))                                                                          |
| 10.40† |   | 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))   |

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| 10.41† |   | 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)).                                                                                                                                                                                                                                                 |
|-------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.42† |   | 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))                                                                                                                                                                                                                        |
| 10.43       |   | 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)). |
| 10.44*      |   | 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)).                                                                                                                                                                                                       |
| 10.45*      |   | 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)).                                                                                                                                                                                                                   |
| 10.46       |   | 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)).              |
| 10.47*      |   | 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)).                                                                                                                                                                                         |
| 10.48*      |   | 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)).                                                                                                                                                                                               |
| 10.49*      |   | 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)).                                                                                                                                                                                       |
| 10.50       |   | 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)).                                                                                                                                                                                                   |

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| 10.51       |   | 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)). |
|-------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.52       |   | 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)).                          |
| 10.53† |   | 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)).                                                 |
| 10.54† |   | 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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