**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C.20549**

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**FORM 10-K**

| **(Mark One)**                                       | ** **                                                                                                               |
|------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------|
| x                                                    | **Joint Annual Report pursuant to Section 13  or 15(d) of the Securities Exchange Act of 1934** |
| **For the fiscal year ended December 31, 2005** |
| **or**                                               |
| o                                                    | **Transition report pursuant to  Section 13 or 15(d) of the Securities Exchange Act  of 1934**  |

 

**Forthe transition periodfrom                   to                   **

Commission File Number: **000-30761**

**UBIQUITEL INC.**

(Exact name ofCo-Registrant as specified in its charter)

| **Delaware******(State of  incorporation)                                                           | **23-3017909******(I.R.S. Employer  Identification No.) |
|-----------------------------------------------------------------------------------------------------|---------------------------------------------------------|
| **One West Elm Street,  Suite 400, Conshohocken, PA**(Address of  principal executive offices) | **19428******(Zip code)                                 |

 

Co-Registrant’s telephonenumber: **(610) 832-3300**

Commission File Number: **333-39950**

**UBIQUITEL OPERATINGCOMPANY**

(Exact name ofCo-Registrant as specified in its charter)

| **Delaware**(State of  incorporation)                                                               | **23-3024747**(I.R.S. Employer  Identification No.) |
|-----------------------------------------------------------------------------------------------------|-----------------------------------------------------|
| **One West Elm Street, Suite 400,  Conshohocken, PA**(Address of  principal executive offices) | **19428**(Zip code)                                 |

 

Co-Registrant’s telephonenumber: **(610) 832-3300**

Securities registeredpursuant to Section 12(b) of the Act: **None**

Securities registered pursuant toSection 12(g) of the Act:

**UbiquiTel Inc.,Common Stock, par value $0.0005 per share**

Indicate by check mark if the registrant is awell-known seasoned issuer, as defined in Rule 405 of the Securities Act.Yes x No o

Indicate by check mark if the registrant is notrequired to file reports pursuant to Section 13 or 15(d) of the Act.Yes oNo x

*Note*3⁄4Checkingthe box above will not relieve any registrant required to file reports pursuantto Section 13 or 15(d) of the Exchange Act from their obligations underthose Sections.

Indicate by check mark whether each of theco-registrants: (1) has filed all reports required to be filed by Section 13or 15(d) of the Securities Exchange Act of 1934 during the preceding12 months (or for such shorter period that each such co-registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days. Yes x No o

Indicate by check mark if disclosure of delinquentfilers pursuant to Item 405 of Regulation S-K is not contained herein, andwill not be contained, to the best of the registrant’s knowledge, in definitiveproxy or information statements incorporated by reference in Part III ofthis Form 10-K or any amendment to this Form 10-K. o

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 Exchange ActRule 12b-2.

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

Indicate by check mark whether the registrant is ashell company (as defined in Rule 12b-2 of the ExchangeAct). Yes o No x

The aggregate market value of the voting common stockheld by non-affiliates of UbiquiTel Inc. as of June 30, 2005 wasapproximately $657,316,200. Directors and executive officers ofUbiquiTel Inc. are considered affiliates for purposes of this calculationbut should not necessarily be deemed affiliates for any other purpose.

There were 94,218,994 shares of common stock, $0.0005par value, of UbiquiTel Inc. outstanding at March 1, 2006.

There were 1,000 shares of common stock, $0.01 parvalue, of UbiquiTel Operating Company outstanding at March 1, 2006, all ofwhich were owned by UbiquiTel Inc.

Explanatory Note: UbiquiTel Operating Company, a whollyowned subsidiary of UbiquiTel Inc., meets the conditions set forth inGeneral Instruction I(1)(a) and (b) of Form 10-K and istherefore filing this form with the reduced disclosure format.

**DocumentsIncorporated by Reference:**  Portions ofUbiquiTel Inc.’s definitive proxy statement for the 2006 annual meeting ofshareholders are incorporated by reference into Part II (Item 5) and Part III(Items 10-14) of this Joint Annual Report on Form 10-K.

 

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**UbiquiTel Inc.and UbiquiTel Operating CompanyJoint Annual Report on Form 10-KTABLE OF CONTENTS**

|                                                  | **PART I**                                                                                                     |   |
|--------------------------------------------------|---------------------------------------------------------------------------------------------------------------------|--------|
|  Item 1.                                    | Business                                                                                                            | 1      |
|  Item  1A.                                  | Risk  Factors                                                                                                       | 30     |
|  Item  1B.                                  | Unresolved Staff  Comments                                                                                          | 41     |
|  Item  2.                                   | Properties                                                                                                          | 41     |
|  Item  3.                                   | Legal  Proceedings                                                                                                  | 41     |
| *Item 4.                                         | Submission of  Matters to a Vote of Security Holders                                                                | 42     |
|                                             | **PART II**                                                                                                    |   |
|  Item  5.                                   | Market for  Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases  of Equity Securities | 43     |
|  Item  6.                                   | Selected Financial  Data                                                                                            | 44     |
|  Item  7.                                   | Management’s  Discussion and Analysis of Financial Condition and Results of Operations                         | 45     |
|  Item  7A.                                  | Quantitative  and Qualitative Disclosures About Market Risk                                                         | 61     |
|  Item  8.                                   | Financial  Statements and Supplementary Data                                                                        | 61     |
|  Item  9.                                   | Changes In and  Disagreements With Accountants on Accounting and Financial Disclosure                               | 61     |
|  Item  9A.                                  | Controls and  Procedures                                                                                            | 61     |
|  Item  9B.                                  | Other Information                                                                                                   | 62     |
|                                             | **PART III**                                                                                                   |   |
| *Item 10.                                        | Directors and  Executive Officers                                                                                   | 63     |
| *Item 11.                                        | Executive  Compensation                                                                                             | 63     |
| *Item 12.                                        | Security  Ownership of Certain Beneficial Owners and Management and Related Stockholder  Matters                    | 63     |
| *Item 13.                                        | Certain  Relationships and Related Transactions                                                                     | 63     |
| *Item 14.                                        | Principal  Accountant Fees and Services                                                                             | 63     |
|                                             | **PART IV**                                                                                                    |   |
|  Item  15.                                  | Exhibits and  Financial Statement Schedules                                                                         | 64     |
|  Signatures                                 | 68                                                                                                                  |
|  Index to Consolidated Financial Statements | F-1                                                                                                                 |

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*                    Theinformation contained therein pertains solely to UbiquiTel Inc.

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**PART I**

**ITEM 1.**                Business

**SpecialNote Concerning Forward-Looking Statements**

We believe that it is important to communicate ourfuture expectations to our security holders and to the public. This report,therefore, contains, or incorporates by reference, statements about futureevents and expectations which are “forward-looking statements” within themeaning of Sections 27A of the Securities Act of 1933 and 21E of the SecuritiesExchange Act of 1934, including the statements about our plans, objectives,expectations and prospects under the headings “Item 1. Business” and “Item 7.Management’s Discussion and Analysis of Financial Condition and Results ofOperations.” You can expect to identify these statements by forward-lookingwords such as “may,” “might,” “could,” “would,” “anticipate,” “believe,” “plan,”“estimate,” “project,” “forecast,” “expect,” “intend,” “seek” and other similarexpressions. Any statement contained or incorporated by reference in thisreport that is not a statement of historical fact may be deemed to be a forward-lookingstatement. Although we believe that the plans, objectives, expectations andprospects reflected in or suggested by our forward-looking statements arereasonable, those statements involve risks, uncertainties and other factorsthat may cause our actual results, performance or achievements to be materiallydifferent from any future results, performance or achievements expressed orimplied by these forward-looking statements, and we can give no assurancethat our plans, objectives, expectations and prospects will be achieved.

Important factors thatmight cause our actual results to differ materially from the resultscontemplated by the forward-looking statements are contained in “Item 1A.Risk Factors,” in “Item 7. Management’s Discussion and Analysis of FinancialCondition and Results of Operations,” and elsewhere in this report and ourfuture filings with the Securities and Exchange Commission. All written or oralforward-looking statements attributable to us are expressly qualified intheir entirety by these cautionary statements.

**Available Information**

Our Internet address iswww.ubiquitelpcs.com. We make available on our Internet website free of chargeour Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q,Current Reports on Form 8-K, and amendments to those reports as soonas practicable after we electronically file and/or furnish such material withor to the Securities and Exchange Commission. The information contained on ourwebsite is not incorporated by reference in this report.

**ExplanatoryNote and Certain Definitions**

The Consolidated Financial Statements included hereinare that of UbiquiTel Inc. (“UbiquiTel”). The Co-Registrants are UbiquiTeland UbiquiTel Operating Company (“Operating Company”), which is a wholly ownedsubsidiary of UbiquiTel and the issuer of 9.875% senior notes due 2011.UbiquiTel has provided a full, unconditional, joint and several guaranty ofOperating Company’s obligations under the 9.875% senior notes. UbiquiTel has nooperations separate from its investment in Operating Company. Pursuant to Rule 12h-5of the Securities Exchange Act, no separate financial statements and otherdisclosures concerning Operating Company other than narrative disclosures setforth in Note 13 to the Consolidated Financial Statements have beenpresented herein.

In this report, unless thecontext indicates otherwise, references to “UbiquiTel,” the “Company,” “we,” “us”and “our” means collectively UbiquiTel Inc., UbiquiTel Operating Companyand their consolidated subsidiary, UbiquiTel Leasing Company. “Sprint PCS”refers collectively to Sprint Spectrum L.P., WirelessCo, L.P., Sprint TelephonyPCS, L.P., Sprint PCS License, L.L.C. and Sprint Communications Company L.P. “Sprint”or “Sprint Nextel” refers collectively to Sprint Nextel 

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Corporationand its affiliates. A “PCS affiliate of Sprint Nextel” is an entity, such asus, whose sole or predominant business is operating (directly or through one ormore subsidiaries) a personal communications service business pursuant toaffiliation or management agreements with Sprint PCS and its affiliates ortheir successors. “Sprint PCS products and services” refers to digital wirelesspersonal communications services, including wireless voice and data services,and related retail products, including handsets and wireless devices, in anycase, offered under the Sprint brand name. Statements in this report regardingSprint Nextel are derived from information contained in or provided under ourmanagement and related agreements with Sprint PCS, periodic reports and otherdocuments filed by Sprint Nextel with the Securities and Exchange Commission,press releases issued by Sprint Nextel or other public statements of SprintNextel.

**Market and Other Data**

Market data and other statistical information usedthroughout this report are based on independent industry publications,government publications, reports by market research firms and other publishedindependent sources, as well as information provided to us by Sprint Nextel.Some data are also based on our good faith estimates, which are derived fromour review of internal surveys and independent sources, including informationprovided to us by Sprint Nextel, the U.S. Census Bureau and Kagan World Media.Although we believe these sources are reliable, we have not independentlyverified the information and cannot guarantee its accuracy and completeness.

This report containstrademarks, service marks and trade names of companies and organizations otherthan us.

**Use of Certain Terms**

In 2003, we initiated areseller program under which mobile virtual network operators (MVNOs) use ournetwork and resell wireless service under a private label. In this report,unless the context indicates otherwise, all references to “subscribers” or “customers”and other operating metrics mean subscribers or customers excluding resellersubscribers.

**Overview**

We have the exclusive right under our managementagreement with Sprint PCS to provide digital wireless personal communicationsservices, or PCS, under the Sprint brand name to certain markets in the westernand midwestern United States which include a total population of approximately10.8 million residents, which we refer to as POPs, covering portions ofCalifornia, Nevada, Washington, Idaho, Utah, Wyoming, Indiana, Kentucky andTennessee. Sprint has PCS licenses to cover more than 280 million peopleacross all 50 states, Puerto Rico and the U.S. Virgin Islands. Sprint operatesa 100% digital PCS wireless network in the United States and holds licenses toprovide PCS nationwide, using code division multiple access, or CDMA,technology. Sprint Nextel, directly and indirectly through PCS affiliates suchas us, provides PCS wireless services in more than 4,000 cities and communitiesacross the country. We do not own any PCS licenses in our markets or elsewhere,so generally we can only operate our business so long as we remain a PCSaffiliate of Sprint Nextel and Sprint Nextel and related entities continue toown the PCS licenses in our markets. Sprint Nextel directly operates its PCSnetwork in major metropolitan markets and certain midsize and smaller marketsthroughout the United States. Sprint Nextel also has management agreementsbetween Sprint PCS and PCS affiliates of Sprint Nextel, who are independentcompanies such as us, pursuant to which the PCS affiliates of Sprint Nextelhave constructed and manage PCS networks under the Sprint brand name in midsizeand smaller markets. As described below under “3⁄4SprintDevelopments,” five PCS affiliates of Sprint Nextel remain, including us.

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In August 2005, Sprint completed a merger withNextel Communications, Inc. (“Nextel”), and now additionally operates anational wireless network covering significant portions of the United Statesselling Nextel products and services using Nextel’s technology platform knownas integrated Digital Enhanced Network, or iDEN, and using Nextel’s wirelesslicenses. Outside of our markets and markets of certain other PCS affiliates ofSprint Nextel, Sprint Nextel presently markets the Nextel products and servicesin whole or in part under the Sprint brand.

As of December 31,2005, we had approximately 447,900 customers and total network coverage ofapproximately 8.3 million residents. For the year ended December 31,2005, we generated revenues of approximately $422.7 million.

**Sprint Developments**

On December 15, 2004, Sprint and Nextel announcedthat they had entered into a definitive agreement to consummate a merger ofequals. At that time, Nextel operated a competitive wireless mobility communicationsnetwork and business in markets in which we also provide wireless mobilitycommunications network products and services under the Sprint and affiliatedbrands. Since the closing of the merger in August 2005, Sprint Nextel hasoperated the legacy Nextel business in competition with us in approximately 80%of our market areas. Upon the closing of Sprint Nextel’s planned acquisition ofNextel’s affiliate, Nextel Partners, Inc., in the near future, SprintNextel will operate the legacy Nextel business in competition with us invirtually all of our market areas.

Following the announcement of the merger in late 2004,Sprint advised its PCS affiliates, including us, that it wished to reachmutually agreeable arrangements with the PCS affiliates regarding the potentialimpact of the Sprint-Nextel merger and integration of the Sprint and Nextelwireless businesses on the PCS affiliates and their rights under the managementagreements between Sprint PCS and the PCS affiliates. Despite our efforts toreach renegotiated arrangements with Sprint prior to the closing of the merger,we did not achieve this outcome and, to our knowledge, Sprint Nextel has notentered into such arrangements with any PCS affiliate either prior orsubsequent to the merger.

In July 2005, UbiquiTel filed in the DelawareCourt of Chancery an action against Nextel, Sprint and Sprint-related entities,alleging that, among other things, following the consummation of theSprint-Nextel merger in 2005, Sprint would breach its exclusivity and confidentialityobligations to us under our written agreements with Sprint and Sprint PCS andthat Nextel improperly interfered with our exclusivity rights under thoseagreements. The action further alleges that Sprint and Nextel conspired todeprive us of the exclusivity commitments in those agreements and to use ourconfidential business information available to Sprint under those agreements toadvantage Nextel’s business, which is directly competitive with our wirelessbusiness in our markets. The complaint seeks, among other things, a court orderrequiring Sprint Nextel to comply with the exclusivity provisions of thoseagreements.

The court consolidated the trial of UbiquiTel’s actionwith a similar case brought by Horizon Personal Communications, Inc. and BrightPersonal Communications Services, LLC, which are subsidiaries of iPCS, Inc.,another PCS affiliate of Sprint Nextel. The consolidated nine-day trialoccurred in January 2006. The vice chancellor presiding over the actionshas requested post-trial briefs and has tentatively scheduled final argumentsfor April 4, 2006. The vice chancellor will issue a ruling at some timefollowing the final arguments.

Shortly after filing the complaint, UbiquiTel enteredinto a forbearance agreement with Sprint imposing certain restrictions on,among other things, the operations of the legacy Nextel wireless business inour markets and the use and dissemination of our confidential businessinformation. The forbearance agreement and the restrictions it imposes remaineffective presently but will expire when the vice chancellor issues a finalruling in the action. Notwithstanding the forbearance agreement’s limitations, 

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Sprint’s ownership and operation of the legacyNextel business in our markets has, among other things, caused customerconfusion in our markets.

Over the past three quarters, Sprint Nextel hasacquired five PCS affiliates of Sprint Nextel, including the largest affiliate,Alamosa Holdings, Inc. Prior to Sprint Nextel’s acquisition of those PCSaffiliates, four of the PCS affiliates had filed suit against Sprint relatingto the merger of Sprint and Nextel. Five PCS affiliates remain, including iPCSand us. See “Item 1A. Risk Factors3⁄4Themerger between Sprint and Nextel, the outcome of our litigation relating theretoand other developments between Sprint Nextel and us and other PCS affiliatesmay have an adverse effect on us” for risks associated with the outcome of thelitigation and other developments between Sprint Nextel and us and/or other PCSaffiliates of Sprint Nextel.

During the trialproceedings, Sprint Nextel representatives provided sworn testimony to theeffect that Sprint Nextel does not presently intend to take some of the actionsthat potentially could have a material adverse effect on our operations andfinancial condition. Among other things, Sprint Nextel representativestestified that:

·       SprintNextel may not, without violating our management agreement with Sprint PCS,distribute Sprint PCS, or CDMA, products and services through legacy Nextel salesdistribution channels in our markets assigned to us under our managementagreement; furthermore, Sprint Nextel does not intend to do so in our markets;

·       SprintNextel’s planned wireless network of the future is its CDMA network, of whichour portion of the Sprint PCS network forms a part, and Sprint Nextel isworking on new technology architecture planned for launch in 2008 known asEV-DO Revision A, which will operate on the CDMA network; and that SprintNextel’s plans are focused on moving traffic off of its iDEN-based network tothe CDMA-based network;

·       SprintNextel has no plans to divert “travel traffic” off of our portion of the SprintPCS network; that is, Sprint Nextel has no plans that voice or data trafficgenerated within our markets from Sprint PCS CDMA customers based outside ofour markets will be diverted to the legacy Nextel network located in ourmarkets, operated by Sprint Nextel on a technology platform known as integratedDigital Enhanced Network, or iDEN, from the Sprint PCS CDMA network which weown and operate in our markets, for which traffic we are compensated by SprintNextel pursuant to the terms of our management agreement;

·       SprintNextel is developing with a vendor a dual-mode phone with both a CDMA radio andan iDEN radio in the handset, which will carry push-to-talk traffic on the iDENnetwork and data traffic and standard voice traffic on the CDMA network, sothat a user of the dual-mode phone within our markets who makes a standardvoice call or uses data services such as Internet access, email or picture mailwould utilize our Sprint PCS CDMA network, and that Sprint Nextel wouldcompensate PCS affiliates like us for the CDMA traffic on our networks underour management agreements;

·       SprintNextel does not presently plan to develop a dual-mode phone with both CDMA andiDEN radios that will carry standard voice traffic and data traffic on eitherthe CDMA or the iDEN networks; and

·       SprintNextel does not have plans to migrate wireless customers from the CDMA networkoperating at the 1900 MHz spectrum range, of which our portion of the SprintPCS network forms a part, to its iDEN-based network.

We cannot guarantee thatSprint Nextel’s testimony is accurate or reliable. Furthermore, we cannotpredict whether Sprint Nextel will change its plans in the future in ways thatdiffer from the plans set forth 

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in thetestimony of its witnesses described above, or whether any such change in planswill have an adverse effect on our operations or financial condition. See “Item1A. Risk Factors3⁄4The merger betweenSprint and Nextel, the outcome of our litigation relating thereto and otherdevelopments between Sprint Nextel and us and other PCS affiliates may have anadverse effect on us.”

**Business Strategy**

Our goal is to become one of the most profitableregional wireless providers while generating above average industry growth. In2005, our operating income growth rate of 189% was among the fastest in thewireless industry while our operating margins (operating income divided byservice revenues) grew from 6% in 2004 to 14% in 2005. The following objectivesare key components of our business strategy:

***Invest in andleverage third generation network technologies to increase recurring datarevenue and improve network performance.***   Wecompleted the upgrade of our network to 1xRTT, or one times radio transmissiontechnology, in 2002 and began offering third generation data services calledPCS Vision. 1xRTT also provided additional capabilities to offer short messageservice, or SMS. We completed an upgrade of our network in our Boise and Renomarkets in 2005, representing approximately one million residents, to the nextgeneration of CDMA network technologies called EV-DO, or Evolution DataOptimized. EV-DO provides wireless data speeds of up to 10 times faster thanPCS Vision and allowed us to launch a new service called Power Vision in thesemarkets. We plan additional investments in EV-DO over the next two years whichwe expect will cover approximately 4 million residents, or half of our coveredpopulation. These data products have been significant factors in generatingapproximately $43 million, or 11%, of our service revenues in 2005, and weexpect that they will be our fastest growing product segment in future periods.Our 1xRTT network platform has also been more efficient in processing voicecalls, which we believe has helped drive down our overall blocked call anddropped call rates to 1.2% and 0.9%, respectively, for the year ended December 31,2005.

***Capitalize on highmargin wholesale revenue opportunities.***   Weexperienced 104% growth in reseller revenues in the year ended December 31,2005 in comparison to the year ended December 31, 2004, from mobilevirtual network operators’, or MVNOs’, use of our network and resale ofwireless services under private labels, due to a combination of strong growthin reseller minutes and a stable rate environment. We launched a resellerprogram in 2003 under which minutes and kilobytes are sold at wholesale ratesto MVNOs. Virgin Mobile USA launched reseller service in the second quarter of2003. Qwest Communications launched reseller service in the second quarter of2004. Several new resellers have signed MVNO agreements in the past two yearsincluding Mobile ESPN, Disney and Helio, a joint venture between Earthlink andSK Telecom. Mobile ESPN launched reseller service in the fourth quarter of 2005and we expect several additional reseller launches in 2006. As of December 31,2005, we had approximately 145,000 reseller subscribers and reseller revenuesrepresented approximately 17% of roaming and wholesale revenues and 5% ofservice revenues.

***Maximize roamingrevenue opportunities from the Nextel merger with Sprint.***   Weexperienced 22% growth in roaming and wholesale revenues for the year ended December 31,2005 in comparison to the year ended December 31, 2004. Roaming revenuesfrom Sprint represented 73% of roaming and wholesale revenues and 22% ofservice revenues. Our 2005 roaming ratio (ratio of inbound to outbound minutesof use) of 1.8 to 1 was the highest of the public PCS affiliates of SprintNextel. In August 2005, Nextel merged with Sprint and announced atechnology evolution plan built around a CDMA platform. With slightly less thanhalf of Sprint Nextel’s 35 million customers *not*using CDMA-capable handsets as a result of the merger, we are planning todesign our CDMA network’s future coverage, capacity and capabilities to exploitthe expected migration of Sprint Nextel customers from the legacy Nextel iDENtechnology to 

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CDMA over the next severalyears. Our Sprint roaming revenues have gross margins of approximately 85%.

***Align product offerings and our cost structure withmarket demand.***   We will explore developingand offering new products for growing wireless segments or niches in which wedo not currently participate and align our cost structure with forecastedmarket demand. The wireless industry has recently reported that approximately20% of its incremental penetration came from the prepaid segment, wherecustomers can pay in advance for a predetermined amount of voice or data usage.In conjunction with Sprint Nextel, we will explore new products to participatedirectly in the prepaid segment of the market and other niche segments as theygrow. We streamlined our sales organization in the third quarter of 2005 tore-align our distribution with demand and changing shopping patterns. Cost pergross addition, or CPGA, declined by approximately 10% from the first ninemonths of 2005 to $445 in the fourth quarter of 2005 as a result. We willcontinually review our cost structure to expand margins.

**Our Markets**

We believe we operate in highly attractive marketswith favorable demographic characteristics for growing our customer base andgenerating roaming revenue for a number of reasons:

***Attractive marketfootprint.***   Our territory includes ninemarkets with greater than 400,000 POPs, which is more than any other PCSaffiliate of Sprint Nextel. In addition, our subscriber base historically hashad the highest percentage of on-network minutes of any PCS affiliate, whichcontributes significantly to our overall subscriber profitability.

***Contiguous to majorexisting Sprint markets.***   Our markets arecontiguous to major Sprint markets with a combined licensed population of over57 million. Some of the major contiguous markets include San Francisco,Los Angeles and Sacramento, California; Seattle, Washington; Salt Lake City,Utah; Las Vegas, Nevada; Indianapolis, Indiana; Nashville, Tennessee;Louisville, Kentucky; and Cincinnati, Ohio.

***Substantial overlapwith Qwest wireless markets.***   Our networkcovers approximately 1.8 million POPs currently served by Qwest. In mid-2004,we began carrying Qwest’s wireless traffic within our markets. We do not incurcustomer acquisition costs related to these revenues, which makes this businessattractive for us.

***Importanttransportation corridors.***   Our marketsinclude the most important and, in some cases, the only transportationcorridors that link the population centers within a particular market,including major interstates such as I-70, I-80, I-90, I-5,I-15 and I-65.

***Popular vacationand tourist destinations.***   Our marketscontain popular vacation and tourist destinations, including various nationalparks and ski resorts such as Yosemite National Park, Yellowstone NationalPark, Lake Tahoe, Squaw Valley, Sun Valley and Jackson Hole.

***Large studentpopulation centers.***   There are at least 35colleges and universities located within our markets, including 20 schools withstudent populations greater than 10,000 each, such as Fresno State University,Utah State University (Logan), Indiana University (Bloomington) and theUniversity of Nevada (Reno).

The following table lists the location, the basictrading areas, commonly referred to as BTAs, megahertz of spectrum, estimatedtotal residents, network coverage and percent coverage for each of our marketsunder our management agreement with Sprint PCS. The estimated total residentsdoes not represent expected customers but rather our total potential customerswithin each market.

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However,our network build-out plan focuses on providing service to the residents in themost densely populated and strategic areas of our markets which is representedby network coverage.

| **Location**                       | ** ** | ** ** | ** ** | **BTA No.(1)** | ** ** | **Megahertz of   Spectrum(2)** | ** ** | **Estimated Total   Residents   (000’s)(3)** | ** ** | **Network   Coverage   (000’s)(4)** | ** ** | **Percent   Coverage** | ** ** |
|------------------------------------|------------|------------|------------|---------------------|------------|-------------------------------------|------------|--------------------------------------------------------|------------|------------------------------------------|------------|------------------------|------------|
| **Reno/Tahoe/Northern California** |       |       |       |                |       |                                |       |                                                   |       |                                     |       |                   |       |   |   |   |   |   |   |   |   |
| Chico-Oroville, CA                 |       |       | 79         |                |       |                                | 30         |                                                   |       |                                     | 241        |                   |       |   |   |   |   |   |   |   |   |
| Eureka, CA                         |       |       | 134        |                |       |                                | 30         |                                                   |       |                                     | 157        |                   |       |   |   |   |   |   |   |   |   |
| Redding, CA                        |       |       | 371        |                |       |                                | 30         |                                                   |       |                                     | 297        |                   |       |   |   |   |   |   |   |   |   |
| Reno, NV                           |       |       | 372        |                |       |                                | 30         |                                                   |       |                                     | 642        |                   |       |   |   |   |   |   |   |   |   |
| Sacramento, CA                     |       |       | 389        | *                   |       |                                | 30         |                                                   |       |                                     | 306        |                   |       |   |   |   |   |   |   |   |   |
| Yuba City-Marysville, CA           |       |       | 485        | *                   |       |                                | 30         |                                                   |       |                                     | 149        |                   |       |   |   |   |   |   |   |   |   |
| Subtotal                           |       |       |       |                |       |                                |       |                                                   |       |                                     | 1,792      |                   |       |   | 1,390 |   |   |   | 78 | % |   |
| **Spokane**                        |       |       |       |                |       |                                |       |                                                   |       |                                     |       |                   |       |   |   |   |   |   |   |   |   |
| Lewiston-Moscow, ID                |       |       | 250        |                |       |                                | 30         |                                                   |       |                                     | 123        |                   |       |   |   |   |   |   |   |   |   |
| Spokane, WA                        |       |       | 425        |                |       |                                | 30         |                                                   |       |                                     | 774        |                   |       |   |   |   |   |   |   |   |   |
| Subtotal                           |       |       |       |                |       |                                |       |                                                   |       |                                     | 897        |                   |       |   | 657 |   |   |   | 73 | % |   |
| **Southern Idaho/Utah/Nevada**     |       |       |       |                |       |                                |       |                                                   |       |                                     |       |                   |       |   |   |   |   |   |   |   |   |
| Boise-Nampa, ID                    |       |       | 50         |                |       |                                | 30         |                                                   |       |                                     | 644        |                   |       |   |   |   |   |   |   |   |   |
| Idaho Falls, ID                    |       |       | 202        |                |       |                                | 30         |                                                   |       |                                     | 237        |                   |       |   |   |   |   |   |   |   |   |
| Las Vegas, NV                      |       |       | 245        | *                   |       |                                | 30         |                                                   |       |                                     | 35         |                   |       |   |   |   |   |   |   |   |   |
| Logan, UT                          |       |       | 258        |                |       |                                | 30         |                                                   |       |                                     | 109        |                   |       |   |   |   |   |   |   |   |   |
| Pocatello, ID                      |       |       | 353        |                |       |                                | 30         |                                                   |       |                                     | 100        |                   |       |   |   |   |   |   |   |   |   |
| Provo-Orem, UT                     |       |       | 365        | *                   |       |                                | 30         |                                                   |       |                                     | 16         |                   |       |   |   |   |   |   |   |   |   |
| St. George, UT                     |       |       | 392        |                |       |                                | 30         |                                                   |       |                                     | 161        |                   |       |   |   |   |   |   |   |   |   |
| Salt Lake City-Ogden, UT           |       |       | 399        | *                   |       |                                | 30         |                                                   |       |                                     | 110        |                   |       |   |   |   |   |   |   |   |   |
| Twin Falls, ID                     |       |       | 451        |                |       |                                | 30         |                                                   |       |                                     | 169        |                   |       |   |   |   |   |   |   |   |   |
| Subtotal                           |       |       |       |                |       |                                |       |                                                   |       |                                     | 1,581      |                   |       |   | 1,287 |   |   |   | 81 | % |   |
| **Southern  Indiana/Kentucky**     |       |       |       |                |       |                                |       |                                                   |       |                                     |       |                   |       |   |   |   |   |   |   |   |   |
| Anderson, IN                       |       |       | 15         | *                   |       |                                | 30         |                                                   |       |                                     | 43         |                   |       |   |   |   |   |   |   |   |   |
| Bloomington-Bedford, IN            |       |       | 47         |                |       |                                | 30         |                                                   |       |                                     | 246        |                   |       |   |   |   |   |   |   |   |   |
| Bowling Green-Glasgow, KY          |       |       | 52         |                |       |                                | 30         |                                                   |       |                                     | 262        |                   |       |   |   |   |   |   |   |   |   |
| Cincinnati, OH                     |       |       | 81         | *                   |       |                                | 30         |                                                   |       |                                     | 18         |                   |       |   |   |   |   |   |   |   |   |
| Clarksville, Hopkinsville, TN/KY   |       |       | 83         |                |       |                                | 30         |                                                   |       |                                     | 269        |                   |       |   |   |   |   |   |   |   |   |
| Columbus, IN                       |       |       | 93         |                |       |                                | 30         |                                                   |       |                                     | 158        |                   |       |   |   |   |   |   |   |   |   |
| Evansville, IN                     |       |       | 135        |                |       |                                | 30         |                                                   |       |                                     | 525        |                   |       |   |   |   |   |   |   |   |   |
| Indianapolis, IN                   |       |       | 204        | *                   |       |                                | 30         |                                                   |       |                                     | 91         |                   |       |   |   |   |   |   |   |   |   |
| Louisville, KY                     |       |       | 263        | *                   |       |                                | 30         |                                                   |       |                                     | 262        |                   |       |   |   |   |   |   |   |   |   |
| Madisonville, KY                   |       |       | 273        |                |       |                                | 30         |                                                   |       |                                     | 47         |                   |       |   |   |   |   |   |   |   |   |
| Owensboro, KY                      |       |       | 338        |                |       |                                | 30         |                                                   |       |                                     | 167        |                   |       |   |   |   |   |   |   |   |   |
| Paducah-Murray-Mayfield, KY        |       |       | 339        |                |       |                                | 30         |                                                   |       |                                     | 232        |                   |       |   |   |   |   |   |   |   |   |
| Richmond, IN                       |       |       | 373        |                |       |                                | 30         |                                                   |       |                                     | 102        |                   |       |   |   |   |   |   |   |   |   |
| Terre Haute, IN                    |       |       | 442        | *                   |       |                                | 30         |                                                   |       |                                     | 243        |                   |       |   |   |   |   |   |   |   |   |
| Vincennes-Washington, IN           |       |       | 457        |                |       |                                | 30         |                                                   |       |                                     | 96         |                   |       |   |   |   |   |   |   |   |   |
| Subtotal                           |       |       |       |                |       |                                |       |                                                   |       |                                     | 2,761      |                   |       |   | 1,698 |   |   |   | 61 | % |   |

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| **Central  Valley of California** |   |   |   |   |   |   |   |   |       |       |       |   |       |       |      |   |       |       |   |   |       |
|-----------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|------------|------------|------------|--------|------------|------------|-----------|--------|------------|------------|--------|--------|------------|
| Bakersfield, CA                   |   |   | 28     |   |   |   | 20     |   |       |       | 729        |   |       |       |      |   |       |       |   |   |       |
| Fresno, CA                        |   |   | 157    |   |   |   | 30     |   |       |       | 1,003      |   |       |       |      |   |       |       |   |   |       |
| Merced, CA                        |   |   | 291    |   |   |   | 30     |   |       |       | 256        |   |       |       |      |   |       |       |   |   |       |
| Modesto, CA                       |   |   | 303    |   |   |   | 30     |   |       |       | 564        |   |       |       |      |   |       |       |   |   |       |
| Stockton, CA                      |   |   | 434    |   |   |   | 30     |   |       |       | 702        |   |       |       |      |   |       |       |   |   |       |
| Visalia-Porterville-Hanford, CA   |   |   | 458    |   |   |   | 30     |   |       |       | 539        |   |       |       |      |   |       |       |   |   |       |
| Subtotal                          |   |   |   |   |   |   |   |   |       |       | 3,793      |   |       |       | 3,280     |   |       |       | 86     | %      |       |
| **TOTAL**                         |   |   |   |   |   |   |   |   | ** ** | ** ** | **10,824** |   | ** ** | ** ** | **8,312** |   | ** ** | ** ** | **77** | **%**  | ** ** |

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*                    Denotespartial portion of BTA.

(1)          A basic trading area, orBTA, is a collection of counties surrounding a metropolitan area in which thereis a commercial community of interest. The BTA number indicated in the table isassigned to that market by the Federal Communications Commission(alphabetically by market name) for the purpose of issuing licenses forwireless services.

(2)          Spectrum licensed toSprint or related parties of which we have exclusive access.

(3)          Estimated totalresidents is based on 2000 Census data for each BTA within a given market.

(4)          Networkcoverage is the estimated residents covered by our network.

**Our History**

In October 1998,UbiquiTel L.L.C. entered into a management agreement with Sprint PCS for theexclusive rights to market Sprint’s 100% digital, 100% PCS products andservices to the residents in the Reno/Tahoe, Nevada market. UbiquiTel L.L.C.had no financial transactions from its inception (August 24, 1998) to September 29,1999. On September 29, 1999, UbiquiTel Inc. (formerly, UbiquiTelHoldings, Inc.) was incorporated in Delaware. In November 1999,UbiquiTel L.L.C. assigned all of its material contracts including the rights tothe Sprint PCS agreements to UbiquiTel Inc. We formed UbiquiTel OperatingCompany in November 1999 to serve as our operating company and UbiquiTelLeasing Company in March 2000 to serve as our leasing company.UbiquiTel Inc. assigned the Sprint PCS agreements to UbiquiTel OperatingCompany following its formation. On December 28, 1999, we amended ourmanagement agreement with Sprint PCS to expand our markets to include northernCalifornia, Spokane/Montana, southern Idaho/Utah/Nevada and southernIndiana/Kentucky/Tennessee. On February 21, 2001, in connection with ouracquisition of VIA Wireless LLC, we amended our management agreement withSprint PCS to expand our markets effective at the closing in August 2001to include the central valley of California market. On August 13, 2001,upon the closing of the merger agreement, VIA Wireless became a wholly ownedsubsidiary of UbiquiTel Operating Company and was later merged into UbiquiTelOperating Company in June 2003. On July 31, 2003, we amended ourmanagement agreement with Sprint PCS to eliminate the obligation to build outthe state of Montana, thereby reducing our licensed resident population in ourmarkets to approximately 10.8 million.

**Network Operations**

Pursuant to our management agreement with Sprint PCS,we agreed to a minimum build-out plan for our portion of the Sprint PCSnetwork. We have further enhanced our build-out plan to provide better coveragefor our markets. We have focused our network coverage on the largest, mostdensely populated communities in our markets and the interstates and primaryroads connecting these communities to each 

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other and to the adjacentmajor metropolitan markets owned and operated by Sprint Nextel. At December 31,2005, our network consisted of five switches and switching centers and 975 cellsites in operation. A switching center serves several purposes, includingrouting calls, managing call handoffs, managing access to the public telephonenetwork and providing access to voice mail and other value-addedservices. Approximately 95% of our cell sites were co-located as of December 31,2005. Co-location describes the strategy of leasing available space on a toweror cell site owned by another company rather than building and owning the toweror cell site directly.

We utilize the Sprint PCS network operations controlcenter for around the clock monitoring as well as our own switching centers’capabilities for our network base stations and switches.

Through our arrangements with Sprint PCS and SprintPCS’ arrangements with other wireless service providers, our subscribers haveroaming capabilities on certain other networks utilizing similar CDMA or analogtechnology.

Our network connects to the public telephone networkthrough local exchange carriers, which facilitate the origination andtermination of traffic between our network and both local exchange and longdistance carriers. Through our management agreement, we have the benefit ofSprint negotiated interconnection agreements with our local exchange carriers.

We use Sprint Nextel andother third party providers for long distance services and for backhaulservices. Backhaul services are the telecommunications services which othercarriers provide to carry our traffic from our cell sites to our switchingfacilities.

**Products and Services**

We offer wireless voice and data products and servicesthroughout our markets under the Sprint brand name. Our service offerings aretypically designed to align with Sprint PCS service offerings and to integratewith the Sprint PCS network. The PCS service packages we currently offerinclude the following:

***100% digitalwireless network with service across the country.***   Weare part of a 100% digital wireless personal communications services networkspanning the United States. We believe the code division multiple access, orCDMA, technology that the Sprint PCS network employs offers significantlyimproved voice quality. CDMA provides voice transmissions encoded into adigital format with a significantly lower risk of cloning and eavesdroppingthan on analog or other digital based networks. Our customers may access PCSservices from Sprint throughout the Sprint PCS network, which includes over 300major metropolitan areas across the United States. Dual-band/dual-mode handsetsallow roaming on other CDMA and analog wireless networks where Sprint PCS hasroaming agreements.

***Third generationservices.***   We believe CDMA technology allowsexisting CDMA networks to be upgraded to the next generation in a timely andcost effective manner. We, along with Sprint and the other PCS affiliates ofSprint Nextel, launched third generation capability, named PCS Vision, in ournetworks in 2002. This capability allows more efficient utilization of ournetwork when voice calls are made using 3G-enabled handsets. It alsoprovides enhanced data services. PCS Vision allows our subscribers to use theirPCS Vision-enabled devices to check e-mail, take and receive pictures,play games with full-color graphics and polyphonic sounds and browse theInternet wirelessly with speeds of up to 144 kilobits per second with averagethroughput speeds in the range of 50-70 kilobits per second. SprintNextel has begun to deploy EV-DO next generation technology in portions of itsCDMA network and expects its EV-DO service, marketed as “Power Vision,” to beaccessible to about 150 million people in early 2006. EV-DO is expected todeliver wireless data at average download speeds of 400-700 kilobits persecond and a peak rate of up to 2.0 megabits per second, which could acceleratemobile-device data speeds up to 10 times faster than present networkcapabilities. EV-DO speeds should enhance data capabilities, includingdownloading music, streaming video and games, for wireless handsets and laptopsthrough wireless 

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connection cards. Althoughwe are not required to deploy EV-DO across our portion of the Sprint PCSnetwork, we have deployed EV-DO in selected markets covering approximately 10%of our network’s covered population, and may similarly elect to deploy EV-DOtechnology in additional areas of our network.

***Other services.***   Inaddition to these services, we also may offer wireless local loop services inour markets, but only where Sprint is not a local exchange carrier. Wirelesslocal loop is a wireless substitute for the landline-based telephones inhomes and businesses. We also believe that new features and services will bedeveloped on the Sprint PCS network to take advantage of CDMA technology.Sprint conducts ongoing research and development to produce innovative servicesto achieve competitive advantages. We may incur additional expenses inmodifying our technology if Sprint pursues or we chose to pursue providingthese additional features and services.

**Roaming**

***Sprint PCS roaming.***   SprintPCS roaming includes both inbound roaming, when Sprint PCS subscribers basedoutside of our markets use our network, and outbound roaming, when oursubscribers use the Sprint PCS network or network of another PCS affiliateoutside of our markets. We have a reciprocal per minute fee with Sprint forinbound and outbound Sprint PCS roaming. The reciprocal rate is currently fixedat $0.058 per minute through December 31, 2006. Thereafter, the rate willbe calculated based upon a predetermined formula specified in our managementagreement. Our ratio of inbound to outbound roaming with Sprint wasapproximately 1.7 to 1 for the year ended December 31, 2005. Sprintroaming revenue is not subject to the 8% affiliation fee.

In addition to the reciprocal per minute fee for theSprint PCS roaming discussed above, we also recognize roaming revenue andexpense related to data usage from data services when wireless subscribers areusing such services outside of their home territory. We recognize revenue whena wireless subscriber based outside of our markets uses data services on ournetwork and we recognize expense when our subscribers use such services on theSprint PCS network or network of another PCS affiliate outside of our markets.This roaming activity is settled on a per kilobit (KB) basis and is currentlyfixed at a rate of $0.0020 per KB through December 31, 2006. Thereafter,the rate will be calculated based upon a predetermined formula specified in ourmanagement agreement.

***Non-Sprint PCSroaming.***   Non-Sprint PCS roaming includesboth inbound non-Sprint PCS roaming, when non-Sprint PCS subscribers use ournetwork, and outbound non-Sprint PCS roaming, when our subscribers use anon-Sprint PCS network. Pursuant to roaming agreements between Sprint PCS and otherwireless service providers, when another wireless service provider’s subscriberuses our network, we earn inbound non-Sprint PCS roaming revenue. Thesewireless service providers must pay fees for their subscribers’ use of ournetwork, and as part of our management agreement with Sprint PCS, we areentitled to 92% of these fees. Currently, pursuant to our services agreementwith Sprint PCS, Sprint PCS bills these wireless service providers for thesefees and passes our portion of the fees to us. When another wireless serviceprovider provides service to one of our subscribers, we pay outbound non-SprintPCS roaming fees. Sprint PCS then bills our subscriber for use of that provider’snetwork at rates specified in their contract and pays us 100% of this outboundnon-Sprint PCS roaming revenue collected from that subscriber on a monthlybasis. We bear the collection risk for all service.

***Reseller agreements.***   Wealso recognize revenue from subscribers of various wholesale resellers ofpersonal communications service, called mobile virtual network operators, orMVNOs, when those subscribers use our network. These reseller agreements arenegotiated by Sprint, and we receive a per minute or per kilobit rate for usagewhen the subscribers of these MVNOs use our network for voice or data services.Currently, we receive wholesale revenue from Sprint’s reseller agreements withVirgin Mobile, Qwest Communications and a number of smaller resellers. In thepast two years, Sprint entered 

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into severalreseller agreements including Mobile ESPN, Disney and Helio, a joint venturebetween Earthlink and SK Telecom, that could generate future wholesale revenuefor us as their subscribers use our network in future periods.

**Marketing Strategy**

Our marketing strategy is to complement Sprint Nextel’snational marketing strategies for Sprint PCS products and services withtechniques tailored to each of our specific markets.

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

***Advertising andpromotions.***   Sprint promotes Sprint PCSproducts and services through the use of national as well as regionaltelevision, radio, print, outdoor and other advertising campaigns. In additionto Sprint’s national advertising campaigns, we advertise and promote Sprint PCSproducts and services on a local level in our markets at our cost, includingthe use of local radio, television and newspaper advertising. We have the rightto use any promotional or advertising materials developed by Sprint and onlyhave to pay the incremental cost of using those materials, such as the cost oflocal radio and television advertisement placements, material costs andincremental printing costs. We also benefit from any advertising or promotionof Sprint PCS products and services by third party retailers in our markets,such as Best Buy and RadioShack. We must pay the cost of specialized Sprintprint advertising by third party retailers. Sprint also runs numerouspromotional campaigns that provide customers with benefits such as additionalfeatures at the same rate or free minutes of use or kilobits of use for limitedtime periods. We offer these promotional campaigns to potential customers inour markets.

***Sales force withlocal presence.***   We have established localsales forces to execute our marketing strategy through our company-ownedretail stores, local third party stores, direct business-to-businessrepresentatives and other channels. Our marketing teams also support localcivic organizations, clubs and charitable enterprises.

***Sprint sponsorships.***   Sprintis a sponsor of numerous selective, broad-based national, regional andlocal events. These sponsorships provide Sprint with brand name and productrecognition for Sprint PCS products and services in high profile events,provide a forum for sales and promotional events and enhance our promotionalefforts in our markets.

**Sales and Distribution**

Our sales and distribution plan focuses on localretail stores, local indirect agent retailers and national retailers withlocations in our markets with distribution arrangements with Sprint Nextel forSprint PCS products and services. Key elements of our sales and distributionplan consist of the following:

***Sprint RetailStores.***   As of December 31, 2005, weoperated 43 company-owned Sprint retail stores at various locations inour markets. These stores provide us with a local presence and visibility inour markets and are generally located in major traffic centers. Following theSprint model, these stores are designed to facilitate retail sales, customeractivation, bill collection and customer service. We train our salesrepresentatives to be informed and persuasive advocates for Sprint PCS productsand services. Our retail stores contributed approximately 35% of grosssubscriber additions for 2005 and approximately 32% and 39% of our 2004 and2003 gross subscriber additions, respectively.

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***Exclusive LocalIndirect Retailers.***   We contract directlywith local indirect agents who manage retail stores under the Sprint brand namein our markets. Exclusive local indirect retailers purchase handsets and otherPCS retail equipment from us and market and sell on our behalf Sprint PCSproducts and services exclusively. As of December 31, 2005, we had 98exclusive local third party retailers in operation selling only Sprint PCSproducts and services. Exclusive local indirect retailers in our markets contributedapproximately 22% of gross subscriber additions for 2005 and approximately 16%and 7% of our 2004 and 2003 gross subscriber additions, respectively.

***Multi-carrier LocalIndirect Retailers.***   Multi-carrier localindirect retailers which market and sell on our behalf Sprint PCS products andservices on a non-exclusive basis in our markets contributed approximately 4%of gross subscriber additions for 2005 and approximately 11% and 18% of our 2004and 2003 gross subscriber additions, respectively.

***National ThirdParty Retailers.***   Sprint Nextel has nationaldistribution agreements with various national retailers for the sale of SprintPCS products and services. These national agreements cover retailers’ stores inour markets and include RadioShack, Best Buy, Costco, Office Depot, Comp USA,Sam’s Club and Wal-Mart. These national third party retailer locationscontributed approximately 19% of gross subscriber additions for 2005 andapproximately 21% and 22% of our 2004 and 2003 gross subscriber additions,respectively.

***National Accountsand Direct Selling.***   We participate in SprintPCS’ national accounts program. Sprint Nextel has a national accounts teamwhich focuses on the corporate headquarters of Fortune 1000 companies. Once arepresentative reaches an agreement with the corporate headquarters, we servicethe offices of that corporation located in our markets. Our direct sales forcetargets the employees of these corporations in our markets and markets andsells to other local business clients. National accounts and direct sellingcontributed approximately 3% of gross subscriber additions for each of theyears 2005, 2004 and 2003.

***Sprint NextelDistribution and Other Channels.***   SprintNextel directly controls various distribution channels that sell Sprint PCSproducts and services to customers whose billing address is in our markets.These channels with activity in our markets include inbound telemarketing,web-based electronic commerce, and Sprint retail stores and kiosks.Additionally, the sales activities of Sprint Nextel and other PCS affiliates ofSprint Nextel have some incidental overflow into our markets. Sprint Nextel andother distribution channels contributed approximately 17% of gross subscriberadditions for 2005 and approximately 17% and 11% of our 2004 and 2003 grosssubscriber additions, respectively.

***Resellers.***   Webecame a participant in a resale arrangement between Sprint and Virgin Mobilein 2003 which allows Virgin Mobile to sell prepaid wireless services in ourmarkets. We also market Virgin Mobile prepaid wireless services in our company-ownedretail stores. We became a participant in a resale arrangement between Sprintand Qwest Communications in 2004 allowing Qwest to provide wireless voice anddata services to new and existing customers in Qwest’s service areas usingSprint’s network and the networks of PCS affiliates of Sprint Nextel whooverlap with Qwest’s service areas, including portions of our markets inWashington, Idaho and Utah. Transition of Qwest’s subscribers to our networkoccurred in mid-2004. Several new resellers have signed MVNO agreementsin the past two years including Mobile ESPN, Disney and Helio, a joint venturebetween Earthlink and SK Telecom. Mobile ESPN launched reseller service in thefourth quarter of 2005 and we expect several additional reseller launches in2006. At December 31, 2005 and 2004, we had approximately 145,000 and98,600 reseller subscribers, respectively.

**Seasonality**

Our business issubject to seasonality because the wireless telecommunications industry ismoderately dependent on fourth calendar quarter results. Among other things,the industry relies on significantly 

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highercustomer additions and handset sales in the fourth quarter as compared to theother three calendar quarters. A number of factors contribute to this trend,including:

·       theheavy reliance on retail distribution, which is dependent upon the year-endholiday shopping season;

·       thetiming of new product and service announcements and introductions;

·       competitivepricing pressures; and

·       aggressive marketing andpromotions.

**Suppliers and Equipment Vendors**

We do not manufacture any of the handsets or networkequipment we use in our operations. We purchase our network equipment andhandsets pursuant to various Sprint vendor arrangements that provide us withvolume discounts. These discounts have significantly reduced the overallcapital required to build our network.

Under such arrangements,we currently purchase most of our network equipment from Lucent Technologies.In addition, we currently purchase our handsets directly from Sprint and ouraccessories from Sprint and certain other third-party vendors.

**Technology**

***General.***   Inthe commercial mobile wireless communications industry there are two principalservices licensed by the Federal Communications Commission, or FCC, fortransmitting two-way, real time voice and data signals: “cellular” and wireless“personal communications services.” In addition, enhanced specialized mobileradio service allows for interconnected two-way real time voice and dataservices. The FCC licenses these services on a geographic basis, using distinctradio spectrum bands. Cellular service was the original form of widely-usedcommercial mobile wireless voice communications and was originally analog-based,but most cellular service is now digital. The FCC additionally allocated spectrumbands for wireless high capacity, commonly referred to as broadband personalcommunications services, to be provided utilizing digital technology.

Digital mobilewireless communications networks are divided into multiple geographic coverageareas, known as “cells.” In wireless personal communications services, eachcell contains a transmitter, a receiver and signaling equipment, known as theradio communications site. The radio communications site is connected bymicrowave or traditional telephone lines to a switch that uses computers tocontrol the operation of the digital wireless personal communications servicesnetwork. The switch:

·       controlsthe transfer of calls from radio communications site to radio communicationssite as a subscriber’s handset travels;

·       coordinatescalls to and from handsets;

·       allocatescalls among the radio communications sites within the network; and

·       connectscalls to the local wireline telephone system or to a long distance carrier.

Wireless communications providers establishinterconnection agreements with local telephone companies and long distancetelephone companies, thereby integrating their network with the existingcommunications network. Because the signal strength of a transmission between ahandset and a radio communications site declines as the handset moves away fromthe radio communications site, the switching office and the radiocommunications site monitor the signal strength of calls in progress. When thesignal 

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strength of a calldeclines to a predetermined level, the switching office may “hand off” the callto another radio communications site where the signal strength is stronger.

Wireless personal communications services networksemploy advanced digital technology that converts voice or data signals into astream of digits that permit a single radio channel to carry multiplesimultaneous transmissions. Wireless digital signal transmission isaccomplished through the use of various forms of frequency managementtechnology or “air interface protocols.” The FCC has not mandated a universalair interface protocol for digital wireless personal communications servicesnetworks. Digital wireless personal communications networks operate under oneof three principal air interface protocols: CDMA, time division multipleaccess, commonly referred to as TDMA, or global system for mobilecommunications, commonly referred to as GSM. Sprint Nextel uses a form ofenhanced specialized mobile radio technology in its Nextel network thatcombines wireless telephone service with a dispatch feature and paging, calledintegrated Digital Enhanced Network, or iDEN, technology. TDMA, GSM and iDENcommunications are time division multiple access networks but are incompatiblewith the other. CDMA is incompatible with GSM, TDMA and iDEN networks.Accordingly, a subscriber of a network that utilizes CDMA technology is unableto use a CDMA handset when traveling in an area not served by CDMA-basedwireless personal communications services operators, unless the customercarries a dual-band/dual-mode handset that permits the customer to use theanalog cellular network in that area. The same issue would apply to users ofTDMA or GSM systems. iDEN handsets presently operate only in the iDEN mode andcannot roam onto other digital or analog wireless networks. All of the wirelesspersonal communications services operators now have dual-mode handsetsavailable to their customers. Because digital networks do not cover all areasof the country, these handsets will remain necessary for segments of the subscriberbase.

***Benefits of CDMA technology.***   TheSprint PCS network and the networks of the PCS affiliates of Sprint Nextel alluse third generation, or 3G, digital CDMA technology in substantially all oftheir networks. We believe that CDMA provides important network performancebenefits such as:

·       ***Greater Capacity.  ***Webelieve, based on studies by CDMA manufacturers and our experience, that 3GCDMA networks can provide network capacity that is approximately 12 timesgreater than that of current analog technology and approximately four timesgreater than TDMA, GSM and iDEN digital networks.

·       ***Privacy and Security.  ***CDMAtechnology combines a constantly changing coding scheme with a low power signalto enhance call security and privacy.

·       ***Soft Hand-Off.  ***CDMAnetworks transfer calls throughout the CDMA network using a technique referredto as a “soft hand-off”, which connects a mobile customer’s call with a newradio communications site while maintaining a connection with the radiocommunications site currently in use. CDMA networks monitor the quality of thetransmission received by multiple radio communications sites simultaneously toselect a better transmission path and to ensure that the network does notdisconnect the call in one cell unless replaced by a stronger signal fromanother radio communications site. Analog, TDMA, GSM and iDEN networks use a “hardhand-off” and disconnect the call from the current radio communications site asit connects with a new one without any simultaneous connection to both radiocommunications sites.

·       ***Simplified Frequency Planning.  ***Frequencyplanning is the process used to analyze and test alternative patterns offrequency use within a wireless network to minimize interference and maximizecapacity. Unlike TDMA-, GSM- and iDEN-based networks, CDMA-based networks canreuse the same subset of allocated frequencies in every cell, substantiallyreducing the need for costly frequency reuse patterning and constant frequencyplan management.

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·       ***Longer Battery Life.  ***Dueto their greater efficiency in power consumption, CDMA handsets can providelonger standby time and more talk time availability when used in the digitalmode than handsets using alternative digital or analog technologies.

·       ***Efficient migration path.  ***Webelieve that CDMA technology has an efficient and incremental migration path tonext generation voice and data services. Unlike technologies that requireessentially a replacement investment to upgrade, CDMA upgrades can be completedincrementally. The first step—conversion to 1xRTT—was completed in 2002 forapproximately $13 million.

·       ***EV-DO.  ***SprintNextel has begun to deploy EV-DO next generation technology in portions of itsCDMA network and expects its EV-DO service, marketed as “Power Vision,” to beaccessible to about 150 million people in early 2006. EV-DO is expected todeliver wireless data at average download speeds of 400-700 kilobits persecond and a peak rate of up to 2.0 megabits per second, which could acceleratemobile-device data speeds up to 10 times faster than present networkcapabilities. EV-DO speeds should enhance data capabilities, includingdownloading music, streaming video and games, for wireless handsets and laptopsthrough wireless connection cards. Although we are not required to deploy EV-DOacross our portion of the Sprint PCS network, we have deployed EV-DO in selectedmarkets covering approximately 10% of our network’s covered population, and maysimilarly elect to deploy EV-DO technology in additional areas of our network.

**Competition**

Competition in the wireless telecommunicationsindustry is intense. Competition has caused, and we anticipate that competitionwill continue to cause, the market prices for wireless products and services todecline in the future and the cost to acquire new customers to remain high. Weface competition in our markets from national wireless carriers Verizon,Cingular, T-Mobile and Nextel (which is operated by Sprint Nextel subsequent tothe merger in August 2005), in addition to competition from regionalwireless carriers in certain markets. We also face competition from resellersin certain markets, which provide wireless services to customers but do nothold FCC licenses or own facilities. Instead, the resellers buy blocks ofwireless telephone numbers and capacity from a facilities-based carrierand resell services through their own distribution network to the public.Virgin Mobile, Qwest Communications and Mobile ESPN, among others, haveagreements with Sprint Nextel to act as resellers of PCS products and servicesin our markets.

Over the past several years, the FCC has auctioned andwill continue to auction large amounts of wireless spectrum that could be usedto compete with Sprint PCS products and services. Additionally, in the future,we expect to face increased competition from entities providing similarservices using other communications technologies, including Wi-Fi and WiMAX.While some of these technologies and services are currently operational, othersare being developed or may be developed in the future. Sprint Nextel hasinterests in developing technologies and delivery channels, such as itsrecently announced joint venture with cable companies Comcast Corporation, TimeWarner Cable, Cox Communications and Advance/Newhouse Communications that maycreate additional competition against us in our markets.

Many of our competitors have significantly greaterfinancial and technical resources and subscriber bases, more extensive coverageareas and more well-established marketing programs and brand names than we do.Some of our competitors may market other services, such as landline telephoneservice, cable television and Internet access, along with their wirelesstelecommunications services. Furthermore, there has been a recent trend in thewireless telecommunications industry towards consolidation of wireless serviceproviders, which has led to larger competitors. In 2003, the FCC rule imposinglimits on the amount of spectrum that can be held by one provider in a specificmarket was lifted, which has facilitated and may continue to facilitate theconsolidation of some national providers.

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The FCC’s mandate that wireless carriers provide forwireless local number portability, or WLNP, went into effect in late 2003. WLNPallows subscribers to keep their wireless phone numbers when switching to adifferent service provider, which could make it easier for competing providersto market their services to our existing users. WLNP makes customer defectionsmore likely, and we may be required to increase subsidies for product upgradesand/or reduce pricing to match competitors’ initiatives in an effort to retaincustomers or replace those who switch to other carriers.

We seek to attractand retain customers principally on the basis of:

·       thestrength of the Sprint brand name and Sprint PCS products, services andfeatures;

·       thenationwide Sprint PCS network;

·       ournetwork coverage and reliability;

·       thebenefits of CDMA technology;

·       ourmarketing and promotional programs; and

·       thequality of customer care services.

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.

**Intellectual Property**

The Sprint logo is a service mark registered with theUnited States Patent and Trademark Office. The service mark is owned by Sprint.We use the Sprint brand name, the Sprint logo and other service marks of Sprintin connection with marketing and providing wireless services within ourmarkets. Under the terms of our trademark and service mark license agreementswith Sprint and Sprint PCS, we do not pay a royalty fee for the use of theSprint brand name and Sprint service marks.

Except in instances that are noncompetitive and otherthan in connection with national distribution agreements, Sprint has agreed notto grant to any other person a right or license to use the licensed marks inour markets. In all other instances, Sprint reserves the right to use thelicensed marks in providing its services within or without our markets.

Our trademark and servicemark license agreements with Sprint and Sprint PCS contain numerousrestrictions with respect to the use and modification of any of the licensedmarks.

**Research and Development**

We currently do not conduct our own research anddevelopment. Instead we benefit from Sprint’s and our vendors’ extensiveresearch and development efforts, which provide us with access to newtechnological products and enhanced service features without significantresearch and development expenditures of our own.

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We have been providedprompt access to developments produced by Sprint for use in the Sprint PCSnetwork. We launched PCS Vision in 2002 concurrently with the national launchby Sprint. Sprint Nextel has begun to deploy EV-DO next generation technology andwe have deployed EV-DO in selected markets covering approximately 10% of ournetwork’s covered population concurrently. We believe that new features andservices will be developed for the Sprint PCS network to take advantage of CDMAtechnology. We may be required to incur additional expenses in modifying ournetwork in the future to provide these additional features and services.

**Sprint PCSAgreements**

The following is a summaryof the material terms and provisions of our Sprint PCS agreements. These agreementshave been amended through addendums in a number of respects to resolve issuesthat had arisen between Sprint PCS and us. We have filed the Sprint PCSagreements and addendums to the Sprint PCS agreements as exhibits to certain ofour filings with the Securities and Exchange Commission and urge you to reviewthem carefully. See “3⁄4SprintDevelopments,” and “Item 1A. Risk Factors3⁄4Themerger between Sprint and Nextel, the outcome of our litigation relatingthereto and other developments between Sprint Nextel and us and other PCSaffiliates may have an adverse effect on us,” for recent developments betweenSprint Nextel and us and other PCS affiliates of Sprint Nextel and risksrelated thereto.

***Overview of SprintPCS Relationship and Agreements***

Under long-term agreementswith Sprint PCS, we have the right to exclusively market PCS products andservices under the Sprint brand name in our markets. Sprint PCS owns thespectrum licenses and we are granted use of these licenses through ouragreements with Sprint PCS. The agreements with Sprint PCS require us tointerface with the Sprint PCS national wireless network by building our PCSnetwork to operate on the PCS frequencies licensed to Sprint PCS. The SprintPCS agreements also give us access to Sprint PCS’ equipment discounts, roamingrevenue from Sprint PCS customers traveling into our markets, and various otherback office services. Our relationship and agreements with Sprint PCS providedstrategic advantages, including avoiding the need to fund up-front spectrumacquisition costs and the costs of establishing billing and other customerservices infrastructure. The Sprint PCS agreements have an initial term of20 years ending in 2018 and will automatically renew for three additionalsuccessive 10-year terms for a total term of 50 years, unless we orSprint PCS provide the other with two years’ prior written notice to terminatethe agreements or unless we are in material default of our obligations underthe agreements.

Wehave four major agreements with Sprint PCS:

·       themanagement agreement;

·       theservices agreement;

·       thetrademark and service mark license agreement with Sprint; and

·       the trademark and servicemark license agreement with Sprint PCS.

***The ManagementAgreement***

Underour management agreement with Sprint PCS, we have agreed to:

·       constructand manage a network in our markets in compliance with Sprint PCS’ PCS licensesand the terms of the management agreement;

·       distributeduring the term of the management agreement Sprint PCS products and services;

·       useSprint PCS’ and our own distribution channels in our markets;

·       conductadvertising and promotion activities in our markets; and

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·       managethat portion of Sprint PCS’ customer base assigned to our markets.

Sprint PCS will superviseour PCS network operations and has the right to unconditional access to our PCSnetwork.

*Exclusivity.*   Weare designated as the only person or entity that can manage or operate a PCSnetwork for Sprint PCS in our markets. Sprint PCS and Sprint’s related partiesare prohibited from owning, operating, building or managing another wirelessmobility communications network operating in the 1900 MHz spectrum range in ourmarkets while our management agreement is in place and no event has occurredthat would permit the agreement to be terminated. Sprint PCS is permitted underour agreement to make national sales to companies in our markets and, asrequired by the FCC, to permit resale of Sprint PCS products and services inour markets. If Sprint PCS decides to expand the geographic area of ourbuild-out, Sprint PCS must provide us with written notice of the proposedexpansion. We have 90 days to determine whether we will build out theproposed area. If we do not exercise this right, Sprint PCS can build out themarkets or permit another PCS affiliate of Sprint Nextel to do so.

*Network build-out.*   Themanagement agreement specifies the terms of the requirements for our networkbuild-out plan and requires that we provide network coverage to a minimumnetwork coverage area within specified time frames. We believe we are incompliance with our network build-out requirements and have satisfied therequired deployment schedule under the management agreement. We also haveagreed to operate our PCS network, if technically feasible and commerciallyreasonable, to provide for a seamless handoff of a call initiated in ourmarkets to a neighboring Sprint PCS network.

*Products and services.*   Themanagement agreement identifies the products and services that we can offer inour markets. These products and services include, but are not limited to,Sprint PCS consumer and business products and services available as of the dateof the agreement, or as modified by Sprint PCS. We are allowed to resell SprintPCS services to wireless resellers who in turn resell Sprint PCS services totheir customers using our network. We also are allowed to sell wirelessproducts and services that are not Sprint PCS products and services if thoseadditional products and services do not cause distribution channel conflictsor, in Sprint PCS’ sole determination, consumer confusion with Sprint PCSproducts and services. We may cross-sell services such as long distance service,Internet access, handsets, and prepaid phone cards with Sprint, Sprint PCS andother Sprint PCS affiliates. If we decide to use third parties to provide theseservices, we must give Sprint PCS an opportunity to provide the services on thesame terms and conditions. We cannot offer traditional telephone services basedon wireless technology specifically designed for the competitive localtelephone market in areas where Sprint owns the local telephone company unlesswe name the Sprint-owned local telephone company as the exclusivedistributor or Sprint PCS approves the terms and conditions.

We participate in theSprint PCS sales programs for national sales to customers, and pay the expensesand receive the compensation from national accounts located in our markets. Asa participant in these sales programs, our responsibilities include assistingSprint PCS’ national sales team in our markets in connection with implementingnational sales programs, negotiating customer contracts and managing customeraccounts. We must use Sprint’s long distance service for calls made from withindesignated portions of our markets to areas outside those designated portionsand to connect our network to the national platforms Sprint PCS uses to providesome of its services under our services agreement. We must pay Sprint PCS thesame price for this service that Sprint PCS pays to Sprint, along with anadditional administrative fee.

*Service pricing, roaming,travel and fees.*   We must offer Sprint PCSsubscriber pricing plans designated for regional or national offerings. We arepermitted to establish our own local price plans for Sprint PCS products andservices offered only in our markets, subject to Sprint PCS’ approval. We areentitled to receive fees weekly from Sprint PCS equal to 92% of net “billedrevenue” related to customer activity less applicable write-offs, net ofdeposits applied. Sprint determines the write-offs for any given 

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time period.Outbound non-Sprint PCS roaming billed to subscribers based in our markets,proceeds from the sales of handsets and accessories, amounts collected withrespect to taxes and surcharges for enhanced 911, WLNP and universal servicefund charges, and customer handset insurance are not considered “billedrevenue.” Billed revenue generally includes all other customer account activityfor Sprint PCS products and services in our markets, which includes suchactivities billed to, attributed to or otherwise reflected in customersaccounts. We are generally entitled to 100% of the proceeds from customers forequipment and accessories sold or leased by us and to a percentage of fees forenhanced 911 and WLNP attributable to customers based in our markets lessapplicable write-offs. We also are entitled to 100% of the universal servicefunds from the Universal Service Administrative Company associated withcustomers in our markets. Many Sprint PCS subscribers purchase nationwidepricing plans that allow roaming anywhere on Sprint PCS’ and its affiliates’networks without incremental Sprint PCS roaming charges. However, we earnSprint PCS roaming revenue for every minute that a Sprint PCS subscriber fromoutside our markets enters our markets and uses our network. We earn revenuefrom Sprint PCS based on a per minute rate when Sprint PCS’ or other Sprint PCSaffiliates’ subscribers travel on our portion of the Sprint PCS network.Similarly, we pay the same rate for every minute our subscribers use the SprintPCS network outside our markets. The roaming rate onto a non-Sprint PCSprovider’s network is set under Sprint PCS’ third party roaming agreements.

Under our agreement withSprint PCS, the reciprocal roaming rate exchanged for customers who roam intothe other party’s or another PCS affiliate’s network was initially establishedat $0.20 per minute. In April 2001, we, along with other PCS affiliates ofSprint Nextel, reached an agreement in principle with Sprint PCS to reduce thisreciprocal roaming rate exchanged between Sprint PCS and the PCS affiliates.The rate was reduced from the original $0.20 per minute of use to $0.15 perminute of use beginning June 1, 2001, and to $0.12 per minute of usebeginning October 1, 2001. The rate was reduced to $0.10 per minute for2002 and further reduced to $0.058 per minute for 2003. The rate is currentlyfixed through December 31, 2006 at $0.058 per minute plus the actual longdistance charges incurred. Beginning on January 1, 2007, the reciprocalroaming rate will change annually to equal 90% of Sprint PCS’ retail yield fromthe prior year subject to certain limitations. Sprint PCS’ retail yield isdefined as Sprint PCS’ average revenue per user for voice services divided bythe average minutes of use per user.

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 data serviceswhen wireless subscribers are using such services outside of their hometerritory. We recognize revenue when a wireless subscriber based outside of ourmarkets uses data services on our network and we recognize expense when oursubscribers use such services on the Sprint PCS network or network of anotherPCS affiliate of Sprint Nextel outside of our markets. This roaming activity issettled on a per kilobit (KB) basis at a rate that is currently fixed at$0.0020 per KB through December 31, 2006. Thereafter, the rate will becalculated based upon a predetermined formula specified in our managementagreement.

We also receive wholesalerevenue at established rates from reseller programs in which we participate.

*Advertising andpromotions.*   Sprint PCS is responsible for allnational advertising and promotion of the Sprint PCS products and services. Weare responsible for advertising and promotion in our markets. Sprint PCS’service area includes the urban markets around our markets. Sprint PCS pays foradvertising in these markets. Given the proximity of those markets to ours, wereceive spill-over from Sprint PCS’ advertising in surrounding urban markets.

*Program requirements.*   Underour management agreement with Sprint PCS, we must comply with Sprint PCS’program requirements for technical standards, customer service standards andnational and regional distribution and national accounts programs. Some of thetechnical standards relate to network up-time, dropped calls, blocked callattempts and call origination and termination failures. We are required tobuild a network that meets minimum transport requirements established by SprintPCS for links between our cell sites and switches. These requirements aremeasured in milliseconds. We also are 

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required to have minimal loss and echo return loss onour telephone lines. We must meet network up-time percentage in excess of 95%.Sprint PCS can adjust the program requirements at its discretion, subject tocertain limitations, including those specified below. We can decline toimplement any “non-capital program requirement change” (as defined below) ifthe change will:

·       causeour combined peak negative cash flow to be an amount greater than 3% ofUbiquiTel Inc.’s “enterprise value” (as defined below);

·       whencombined with all other changes in the program requirements that we agree to orwere required to implement, within the prior 12 months, cause our combinedcumulative peak negative cash flow to be an amount greater than 5% ofUbiquiTel Inc.’s “enterprise value”;

·       causea decrease in our forecasted five-year discounted cash flow of more than 3% ona combined net present value basis; or

·       whencombined with all other changes in the program requirements that we agree to orwere required to implement, within the prior 12 months, cause a decreasein our forecasted five-year discounted cash flow of more than 5% on a combinednet present value basis.

For purposes ofdetermining whether a “non-capital program requirement change” will adverselyimpact our operations, UbiquiTel Inc.’s “enterprise value” is defined asthe book value of its outstanding debt and preferred stock, in addition to thefair market value of its publicly-traded equity (excluding preferredstock), less cash.

A “non-capital programrequirement change” means a program requirement change that does not require usto make any capital expenditures in excess of 5% of our capital budget asapproved by our board of directors for the fiscal year in which the programrequirement change is requested, but does not include changes to the trademarkusage guidelines, the marketing communications guidelines and the Sprint PCSnational or regional distribution program requirements.

We also may decline toimplement any change in any “capital program requirement” (as defined below),if the change will have a negative net present value applying a five-yeardiscounted cash flow model.

A “capital programrequirement change” means a program requirement change that requires us to makea capital expenditure that is greater than 5% of our capital budget as approvedby our board of directors for the fiscal year in which the program requirementchange is requested, but does not include changes to the trademark usageguidelines, the marketing communications guidelines and the Sprint PCS nationalor regional distribution program requirements.

Our management agreementsets forth a dispute resolution process if Sprint believes that we do not havethe right to decline to implement a change in the program requirements. In anyevent, we must implement a change in the program requirements if Sprint agreesto compensate us for amounts in excess of the criteria set forth above.

Notwithstanding the above,we have agreed to implement a change in program requirements if the adjustment relatesto a pricing plan or roaming program and Sprint reasonably determines that thechange must be implemented on an immediate or expedited basis to respond tocompetitive market forces. If the change would have exceeded one of thecriteria set forth above, our management agreement provides for appropriatecompensation from Sprint to the extent such criteria is exceeded.

Under our servicesagreement with Sprint PCS, Sprint PCS may terminate a significant service,including customer service, billing or collections, upon nine months’ advancewritten notice. We could then be required to establish and operate our owncustomer service center to, among other things, handle customer inquiries,activate handsets and accounts, handle billing or handle collections withinstringent time guidelines established by Sprint PCS.

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*Non-competition.*   Wemay not offer Sprint PCS products and services outside our markets without theprior written approval of Sprint PCS. Within our markets we may offer, marketor promote telecommunications products and services only under the Sprint brand,our own brand, brands of related parties of ours or other products and servicesapproved under the management agreement, 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 obtain licenses to provide PCS services outsideour markets, we may not use the spectrum to offer Sprint PCS products andservices without prior written consent from Sprint PCS. Additionally, ifcustomers from our markets travel to other geographic areas, we must routethose customers’ incoming and outgoing calls according to Sprint PCS’ roamingand inter-service area requirements, without regard to any wirelessnetworks that we or our affiliates operate.

*Inabilityto use non-Sprint PCS brand.*   We may not market,promote, advertise, distribute, lease or sell any Sprint PCS products andservices on a non-branded, “private label” basis or under any brand, trademarkor trade name other than the Sprint brand, except for sales to resellers or asotherwise permitted under the trademark and service mark license agreements.

*Changeof Control.*   A change of control of our ownershipis subject to Sprint PCS’ consent, which cannot be unreasonably withheld.

*Assignment.*   Wecannot assign the Sprint PCS agreements to any person without the prior consentof Sprint PCS, except that we can assign the agreements to any affiliate ofours that is not a significant competitor of Sprint PCS in thetelecommunications business.

*Rightsof First Refusal.*   Sprint PCS has rights of firstrefusal to buy our assets, without further approval of our shareholders, upon aproposed sale of all or substantially all of our assets that are used inconnection with the operation or management of the Sprint PCS network in ourmarkets.

*Termination of managementagreement.*   The management agreement can beterminated as a result of:

·       terminationof Sprint PCS’ PCS licenses;

·       anuncured breach under the management agreement;

·       bankruptcyof a party to the management agreement;

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

·       thetermination of either of the trademark and service mark license agreements.

The termination or non-renewal of the managementagreement triggers certain of our rights and those of Sprint PCS.

*Transferof Sprint PCS network.*   Sprint PCS may sell,transfer or assign its wireless personal communications services network to athird party if the third party agrees to be bound by the terms of our SprintPCS agreements.

*Rights on Termination.*   Ifwe have the right to terminate the management agreement because of an event oftermination caused by Sprint PCS, generally we may:

·       requireSprint PCS to purchase all of our operating assets used in connection with ourPCS network for an amount equal to 80% of our “entire business value” (asdetermined in the manner described below under “Determination of EntireBusiness Value”);

·       ifSprint PCS is the licensee for 20 MHz or more of the spectrum on the date ofthe management agreement, require Sprint PCS to assign to us, subject togovernmental approval, up to 10 MHz of licensed spectrum for an amount equal tothe greater of: the original cost to Sprint PCS of the 

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license plus any microwaverelocation costs paid by Sprint PCS; or 9% of our entire business value; or

·       sueSprint PCS for damages or submit the matter to arbitration and thereby notterminate the management agreement.

If Sprint PCS hasthe right to terminate the management agreement because of an event oftermination caused by us, generally Sprint PCS may:

·       requireus, without further approval of our shareholders, to sell our operating assetsto Sprint PCS for an amount equal to 72% of our entire business value;

·       requireus to purchase, subject to governmental approval, the licensed spectrum for anamount equal to the greater of: the original cost to Sprint PCS of the licenseplus any microwave relocation costs paid by Sprint; or 10% of our entirebusiness value;

·       takeany action as Sprint PCS deems necessary to cure our breach of the managementagreement, including assuming responsibility for, and operating, our PCSnetwork; or

·       sueus for damages or submit the matter to arbitration and thereby not terminatethe management agreement.

*Rights on Non-Renewal.*   IfSprint PCS gives us timely notice that it does not intend to renew the managementagreement, we may:

·       requireSprint PCS to purchase all of our operating assets used in connection with ourPCS network for an amount equal to 80% of our entire business value; or

·       ifSprint PCS is the licensee for 20 MHz or more of the spectrum on the date ofthe management agreement, require Sprint PCS to assign to us, subject togovernmental approval, up to 10 MHz of licensed spectrum for an amount equal tothe greater of: the original cost to Sprint PCS of the license plus anymicrowave relocation costs paid by Sprint PCS; or 10% of our entire businessvalue.

If we give SprintPCS timely notice of non-renewal, or we both give notice of non-renewal, or themanagement agreement can be terminated for failure to comply with legalrequirements or regulatory considerations, Sprint PCS may:

·       purchaseall of our operating assets, without further approval of our shareholders, foran amount equal to 80% of our entire business value; or

·       requireus to purchase, subject to governmental approval, the licensed spectrum for anamount equal to the greater of: the original cost to Sprint PCS of the licenseplus any microwave relocation costs paid by Sprint PCS; or 10% of our entirebusiness value.

*Determination of EntireBusiness Value.*   If our entire business value isto be determined, we and Sprint PCS will each select one independent appraiserand the two appraisers will select a third appraiser, each of whom must be anexpert in valuing wireless telecommunications companies. The three appraiserswill determine the entire business value on a going concern basis using thefollowing guidelines:

·       theentire business value will be based on the price a willing buyer would pay awilling seller for the entire ongoing business;

·       theappraisers will use then current customary means of valuing a wirelesstelecommunications business;

·       theappraisers will value the business as it is conducted under the Sprint brandand the Sprint PCS agreements;

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·       whereSprint PCS may, or is required to, purchase our operating assets the appraiserswill value the business as if we own the spectrum and frequencies that we useunder the management agreement; where we may, or are required to, purchase aportion of Sprint PCS’ licensed spectrum, the business will be valued as if wealready own that portion of the spectrum that we are going to purchase; and

·       thevaluation will not include any value for the business not directly related tothe Sprint PCS products and services.

*Insurance.*   Weare required to obtain and maintain with financially reputable insurers who arelicensed to do business in all jurisdictions where any work is performed underthe management agreement 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.*   Wehave agreed to indemnify Sprint PCS and its directors, employees and agents andrelated parties of Sprint PCS and their directors, managers, officers,employees, agents and representatives against any and all claims against any ofthe foregoing arising from our violation of any law, a breach by us of anyrepresentation, warranty or covenant contained in the management agreement orany other agreement between us and Sprint PCS, our ownership of the operatingassets or the actions or the failure to act of anyone employed or hired by usin the performance of any work under the agreement, except we will notindemnify Sprint PCS for any claims arising solely from the negligence orwillful misconduct of Sprint PCS. Sprint PCS has agreed to indemnify us and ourdirectors, managers, officers, employees, agents and representatives againstall claims against any of the foregoing arising from Sprint PCS’ violation ofany law and from Sprint PCS’ breach of any representation, warranty or covenantcontained in the management agreement or any other agreement between Sprint PCSand us, except Sprint PCS will not indemnify us for any claims arising solelyfrom our negligence or willful misconduct.

*Most favored nationclause.*   We generally have the right to amend ourmanagement agreement or services agreement to obtain the most favorable termsprovided under a management agreement or services agreement between Sprint andanother Sprint PCS affiliate of similar size (defined as having at least3.0 million covered POPs) if, prior to December 31, 2006, Sprintamends the terms of any of those agreements of another Sprint PCS affiliate ofsimilar size in a manner that are more favorable than the terms of ouragreements. This right is only effective, however, if we agree to accept all ofthe terms and conditions set forth in the other agreements agreed to after April 1,2004 and (1) those agreements were not amended with such Sprint PCSaffiliate, solely because the affiliate owns the spectrum on which its networkoperates (unless such PCS affiliate of Sprint Nextel acquired the spectrum fromSprint after April 1, 2004), (2) the amendments to those agreementswere not compelled by a law or regulation inapplicable to us, or (3) theamendments to those agreements were not due solely to a change in a build-outplan.

***The Services Agreement***

Pursuant to amendments to our services agreement in2003, Sprint PCS consolidated support services relating to billing, customercare, collections, network operations control center monitoring, nationalplatform interconnectivity, voice mail, directory assistance, operator servicesand roaming clearinghouse services into one back office service referred to asSprint CCPU service. Pursuant to the same amendments, Sprint PCS alsoconsolidated services relating to subscriber activation, credit verification,handset logistics and handset carrying and obsolescence costs into one categoryreferred to as Sprint CPGA service. The Sprint CCPU service and the Sprint CPGAservice include services and/or costs that we had been purchasing (in the caseof services) or bearing (in the case of costs) prior to the consolidation. Themonthly rate for 2006 for Sprint CCPU service is $6.75 per subscriber and therate for 2006 for Sprint CPGA service is $19.00 per gross addition. The rateswill be reset for three-year periods, and are due to be 

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reset for the three-yearperiod ending on December 31, 2009. Sprint Nextel has notified us ofproposed fees for these services for the next three-year period pursuant to ourservices agreement. We are presently in discussions with Sprint Nextelregarding its proposal. If we and Sprint Nextel cannot agree to new rates forthese services for the upcoming three-year period or any other future three-yearperiod, we have the option to continue to purchase the Sprint CCPU service orSprint CPGA service and have an arbitrator determine the new rate orself-provision or procure those services elsewhere, subject to certain rightsand procedures relating to our ability to transition only customer care andcollection services beginning in 2008.

Sprint Nextel may contract with third parties toprovide expertise and services identical or similar to those to be madeavailable or provided to us. We have agreed not to use the services performedby Sprint in connection with any other business or outside our markets. Sprintmust give us nine months’ notice if it discontinues a significant service,including customer service, billing or collections, and if we wish to continueto receive that service, Sprint will use commercially reasonable efforts tohelp us provide the service ourselves or find another vendor to provide theservice and to facilitate any transition.

We have agreed with SprintPCS to indemnify each other as well as officers, directors, employees andcertain other related parties and their officers, directors and employees forviolations of law or the services agreement except for any liabilitiesresulting from the indemnitee’s negligence or willful misconduct. The servicesagreement also provides that no party to the agreement will be liable to theother party for special, indirect, incidental, exemplary, consequential orpunitive damages, or loss of profits arising from the relationship of the partiesor the conduct of business under, or breach of, the services agreement exceptas may otherwise be required by the indemnification provisions. The servicesagreement automatically terminates upon termination of the management agreementand neither party may terminate the services agreement for any reason otherthan the termination of the management agreement.

***The Trademark and Service Mark License Agreements***

We have non-transferable, royalty-free licenses to usethe Sprint brand name and logo, and several other U.S. trademarks and servicemarks on Sprint PCS products and services. Our use of the licensed marks issubject to our adherence to quality standards determined by Sprint and use ofthe licensed marks in a manner that would not reflect adversely on the image ofquality symbolized by the licensed marks. We have agreed promptly to notifySprint of any infringement of any of the licensed marks within our markets ofwhich we become aware and to provide assistance to Sprint in connection withSprint’s enforcement of its rights. We have agreed with Sprint and Sprint PCSto indemnify each 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 our use ofthe licensed marks or marketing, promotion, advertisement, distribution, leaseor sale of any Sprint or Sprint PCS products and services other than lossesarising solely out of our use of the licensed marks in compliance with certainguidelines.

Sprint and Sprint PCS canterminate the trademark and service mark license agreements if we file forbankruptcy, materially breach the agreement or our management agreement isterminated. We can terminate the trademark and service mark license agreementsupon Sprint’s or Sprint PCS’ abandonment of the licensed marks or if Sprint orSprint PCS files for bankruptcy, or the management agreement is terminated.

**Environmental Compliance**

Our environmentalcompliance expenditures primarily result from the operation of standby powergenerators for our telecommunications equipment and compliance with variousenvironmental rules during network build-out and operations. Theexpenditures arise in connection with standards compliance or permits which areusually related to generators, batteries or fuel storage. Our environmental 

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complianceexpenditures have not been material to our financial statements or operationsand are not expected to be material in the future.

**Regulationof the Wireless Telecommunications Industry**

The FCC regulatesthe licensing, construction, operation, acquisition and interconnectionarrangements of wireless telecommunications networks in the United States. TheFCC has promulgated a series of rules, regulations and policies to, among otherthings:

·       grantor deny licenses for PCS frequencies;

·       grantor deny PCS license renewals;

·       rule onassignments and/or transfers of control of PCS licenses;

·       governthe interconnection of PCS networks with other wireless and wireline carriers;

·       establishaccess and universal service funding provisions;

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

·       governcertain aspects of the relationship between carrier and customer, such as theuse of personal information, and number portability;

·       establishservice requirements such as enhanced 911 service;

·       imposefines and forfeitures for violations of the Communications Act and the FCC’srules; and

·       regulatethe technical standards of PCS networks.

Through rules thatbecame effective in 2003, the FCC eliminated its spectrum cap for commercialmobile radio service, or CMRS, which includes broadband wireless personalcommunications services, cellular and SMR. The cap previously had limited CMRSproviders to 55 MHz of spectrum in any geographic area.

***Transfers and Assignments of PCS Licenses***

The FCC must give priorapproval to the assignment of licenses or transfers of licenses involvingsubstantial changes in ownership or control of a PCS license. Non-controllinginterests in an entity that holds a PCS license or operates PCS networksgenerally may be bought or sold without prior FCC approval. The FCC requiresonly post-consummation notification of certain pro forma assignments ortransfers of control. In the past few years, the FCC established new rules designedto facilitate the transfer of spectrum licenses. Among other things, those rules allowone company to lease all or part of its spectrum rights to another company, andprovide immediate and automatic FCC approval for certain types of licensetransfers.

***Conditions of PCS Licenses***

All PCS licenses are granted for 10-year termsconditioned upon compliance with various rules and regulations of the FCC,including timely compliance with the FCC’s build-out requirements. Pursuant tothe FCC’s build-out requirements, all 30 MHz broadband PCS licensees mustconstruct facilities that offer coverage to one-third of the population withintheir licensed service areas within five years and to two-thirds of thepopulation within ten years, and all 10 MHz broadband PCS licensees mustconstruct facilities that offer coverage to at least one-quarter of thepopulation in their licensed service areas within five years or make a showingof “substantial service” within that five-year period. If the build-outrequirements are not met, the PCS licenses could be forfeited.

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The FCC also requireslicensees to maintain control over their licenses. We believe that ourmanagement agreement with Sprint PCS meets the FCC requirements for licenseecontrol of licensed spectrum. If the FCC were to determine that our managementagreement with Sprint PCS needs to be modified to increase the level oflicensee control, the agreement may be modified to cure any purporteddeficiency regarding licensee control of the licensed spectrum. If theagreement cannot be modified, it may be terminated. As a result, it would beextremely difficult for us to conduct our business. In addition to revokinglicenses, the FCC could impose monetary penalties on us.

***PCS License Renewal***

PCS licenses can berenewed for additional 10-year terms. PCS license renewal applicationsare not subject to auctions. However, under the FCC’s rules, third parties mayoppose renewal applications and/or file competing applications. If one or morecompeting applications are filed, a renewal application will be subject to acomparative renewal hearing. The FCC’s rules afford PCS renewal applicantsinvolved in a comparative renewal hearing a “renewal expectancy.” The renewalexpectancy is the most important comparative factor in a comparative renewalhearing and is applicable if the PCS renewal applicant has provided “substantialservice” during its license term and substantially complied with all applicablelaws and FCC rules and policies. The FCC’s rules define “substantialservice” in this context as service that is sound, favorable and substantiallyabove the level of mediocre service that might minimally warrant renewal. Webelieve that the FCC’s renewal expectancy and procedures make it likely thatSprint will retain its PCS licenses that we manage for the foreseeable future.

***Interconnection***

The FCC has the authorityto order interconnection between commercial mobile radio service providers andincumbent local exchange carriers. The FCC has ordered local exchange carriersto establish reciprocal compensation with commercial mobile radio serviceproviders, which provide telecommunications services through wirelesstechnology for transport and termination of telecommunications. The FCC rules definereciprocal compensation as compensation from one carrier to another for thetransport and termination on each carrier’s network facilities of localtelecommunications traffic originating on the network facilities of the othercarrier. As a commercial mobile radio service provider, we are required to payreciprocal compensation to a wireline local exchange carrier that transportsand terminates a local call that originated on our network. Similarly, we areentitled to receive reciprocal compensation when we transport and terminate alocal call that originated on a wireline local exchange carrier’s network. Inconjunction with Sprint, we negotiate interconnection agreements for ournetwork with major incumbent local exchange carriers and smaller independentlocal telephone companies. If an agreement cannot be reached, under certaincircumstances, parties to interconnection negotiations can submit outstandingdisputes to state authorities for arbitration. Negotiated interconnectionagreements are subject to state approval. The FCC rules and rulings, aswell as the state arbitration proceedings, will directly impact the nature andcost of the facilities necessary for interconnection of the Sprint PCS networkwith other telecommunications networks. They also will determine the nature andamount of revenues we and Sprint can receive for terminating calls originatingon the networks of local exchange carriers and other telecommunicationscarriers.

***Other FCC Requirements***

CMRS providers, including Sprint, are required topermit manual roaming on their networks. With manual roaming, any user whosemobile phone is technically capable of connecting with a carrier’s network mustbe able to make a call by providing a credit card number or making some otherarrangement for payment. Since October 2000, the FCC has been consideringchanges in its rules that may terminate the manual roaming requirement andcould impose automatic roaming obligations, under which users with 

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capable equipment would bepermitted to originate or terminate calls without taking action other thanturning on their mobile phones.

FCC rules require that local exchange carriersand most commercial mobile radio service providers allow customers to changeservice providers without changing telephone numbers, which, for wirelessservice providers, is referred to as wireless local number portability, orWLNP. The FCC also has adopted rules governing the porting of wirelinenumbers to wireless carriers.

FCC rules require broadband PCS and othercommercial mobile radio service providers to employ enhanced emergency 911capabilities that provide the location of wireless 911 calls to “Public SafetyAnswering Points.” Sprint and other providers of cellular and PCS services arerequired to contribute to various state and local funds to support enhanced 911capability through charges on customer invoices.

FCC rules permitbroadband PCS and other commercial mobile radio service providers to providetraditional telephone services based on wireless technology and other fixedservices that would directly compete with the wireline services of localtelephone companies. The FCC currently is undertaking a rulemaking proceedingin which it is considering actions to help ensure that competitivetelecommunications providers have reasonable and non-discriminatory access torights-of-way, buildings, rooftops and facilities in multiple tenantenvironments, which could facilitate the provision of these services.

***Communications Assistance for Law Enforcement Act andUSA Patriot Act***

The CommunicationsAssistance for Law Enforcement Act, or CALEA, requires Sprint and othertelecommunications carriers to meet capability and capacity requirements neededby federal, state and local law enforcement to preserve their electronicsurveillance capabilities. Certain capability requirements established by theDepartment of Justice and Federal Bureau of Investigation were temporarily suspendedpending further review by the FCC. The USA Patriot Act includes certainprovisions that enable law enforcement agencies and other branches of thegovernment to more easily acquire records and information regarding certainuses of communications facilities from telecommunications carriers, includingPCS carriers.

***Customer Privacy Requirements***

Telecommunicationsproviders, including Sprint Nextel and other wireless providers, are requiredto protect the privacy of their customers’ network usage information, known asCustomer Proprietary Network Information or CPNI. In February 2006, theFCC proposed to adopt additional CPNI requirements to protect againstdisclosure of customer information to third party data brokers.

***Other Federal Regulations***

Wireless systems mustcomply with certain FCC and Federal Aviation Administration regulationsregarding the siting, lighting and construction of transmitter towers andantennas. In addition, the FCC has implemented the National EnvironmentalPolicy Act by requiring towers and antennas to meet certain land use and radiofrequency standards.

***Review of Universal Service Requirements***

The FCC and certain stateshave established “universal service” programs to ensure that affordable,quality telecommunications services are available to all Americans, and tosupport the availability of advanced telecommunications services to schools,libraries, and rural health care centers. Sprint is required to contribute tothe federal universal service program as well as existing state programs.Currently, Sprint and we, like other providers of telecommunications services,including wireless service providers, are 

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requiredto contribute to the federal Universal Service Fund based on revenues derivedfrom interstate telecommunications services. The FCC is considering changes tothe manner in which contributions to the federal Universal Service Fund areassessed. At the present time it is not possible to predict the extent ofSprint’s total federal and state universal service assessments or its abilityto recover from the universal service fund. Wireless providers may seekdesignation as “Eligible Telecommunications Carriers,” or ETCs, in specificgeographic areas. ETC designation makes those carriers eligible to receivefunds from the federal universal service fund to support the provision oftelecommunications service to customers in certain high cost areas. Within ourmarkets, Sprint has been designated as an ETC in the states of Indiana, Tennessee,Utah and Washington.

***Partitioning; Disaggregation***

FCC rules allowbroadband PCS licensees to partition their market areas and/or to disaggregatetheir assigned spectrum and to transfer partial market areas or spectrumassignments to eligible third parties.

***Wireless Facilities Siting***

States and localities arenot permitted to regulate the placement of wireless facilities so as to“prohibit” the provision of wireless services or to “discriminate” amongproviders of such services. In addition, so long as a wireless system complieswith the FCC’s rules, states and localities are prohibited from using radiofrequency health effects as a basis to regulate the placement, construction oroperation of wireless facilities. These rules are designed to make itpossible for us, Sprint and other wireless entities to acquire necessary towersites in the face of certain types of local zoning opposition and delays, butthey do not completely pre-empt state and local authority over tower siting.

***Equal Access***

Wireless providers are notrequired to provide equal access to common carriers for toll services. Thisenables us and Sprint to generate additional revenues by reselling the tollservices of Sprint and other long-distance carriers from whom we can obtainfavorable volume discounts. However, the FCC is authorized to require unblockedaccess to toll carriers subject to certain conditions.

***State Regulation of Wireless Service***

Section 332 ofthe Federal Communications Act preempts states from regulating the rates and entryof commercial mobile radio service providers. However, states may petition theFCC to regulate such providers. The FCC may grant such petition if the statedemonstrates that:

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

·       whencommercial mobile radio service is a replacement for traditional telephoneservice within the state.

To date, the FCC has granted no such petition. To theextent we provide fixed wireless service, we may be subject to additional stateregulation. These standards and rulings have prevented states from delaying theentry of wireless personal communications services and other wireless carriersinto their jurisdictions via certifications and similar requirements, and fromdelaying or inhibiting aggressive or flexible wireless price competition afterentry. Despite Section 332, states may regulate certain aspects ofcommercial mobile radio service other than market entry and pricing.

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In March 2006, theCalifornia Public Utilities Commission approved a telecommunications bill ofrights that will be applicable to Sprint and other wireless service providers.These requirements provide for improved consumer education and increasedenforcement by the Public Utilities Commission of rules governing wirelessservice. Compliance with these requirements could make it more costly forSprint and its affiliates like us to provide service in that state.

**Employees**

As of December 31,2005, we employed 425 full-time and 35 part-time employees. None of ouremployees is represented by a labor union. We believe that our relations withour employees are good.

**Executive Officers**

The name, age and position of each of our currentexecutive officers are as follows:

**Donald A. Harris,**53, has served as our President and Chief ExecutiveOfficer and as a director since our inception and was appointed Chairman of theBoard in May 2000. Mr. Harris has more than 20 years ofexperience in the telecommunications industry, and is the former president ofComcast Cellular Communications, Inc., and a former senior vice presidentof Comcast Corporation. He also participated in Comcast’s efforts on the boardof Nextel. Mr. Harris managed the build-out of and had operating responsibilityfor Comcast’s cellular operations in Pennsylvania, New Jersey and Delaware withover 8 million residents. Mr. Harris also was responsible for Comcast’sPCS experimental trials. Prior to joining Comcast in February 1992, Mr. Harriswas Vice President/General Manager of PacTel Cellular’s Los Angeles office, thethen largest traditional cellular operation in the United States. He also heldseveral senior management positions with PacTel, including Vice President ofCorporate Development, and President and Chief Executive Officer of the SanFrancisco Cellular Partnership. Mr. Harris began his career in thewireless communications industry as a consultant with McKinsey &Company. Mr. Harris is a graduate of the United States Military Academy atWest Point and holds a Master of Business Administration degree from ColumbiaUniversity.

**Dean E. Russell**,53, has been our Chief Operating Officer sinceOctober 1999. He is responsible for overseeing all of the functional areasof our operations including sales and marketing, network and field operationsand human resources. Prior to joining us, Mr. Russell was part of theexecutive management team of Education Management Corporation from October 1997to October 1999. He held various positions with Education ManagementCorporation including Director of Operations for the Art Institute of FortLauderdale and President of the Art Institute International at San Francisco.Previously, Mr. Russell was the General Sales Manager for Comcast CellularCommunications, Inc. in Atlantic City and Cape May County in NewJersey from October 1995 to October 1997. Prior to joining ComcastCellular Communications, Inc., Mr. Russell served in the UnitedStates Army for 20 years before retiring as a Lieutenant Colonel. Mr. Russellhas over 30 years of leadership experience including hands on experiencemanaging diverse operations. Mr. Russell holds a Bachelor of Sciencedegree in Engineering from the United States Military Academy at West Point, aMaster of Education degree from the University of Georgia and a Master ofBusiness Administration degree in International Business from Long IslandUniversity.

**James J. Volk**,42, joined us as Chief Financial Officer in July 2001and is responsible for all of the company’s financial activities. Prior tothat, he served as Regional Vice President of Finance and Chief FinancialOfficer of Cingular Wireless’ East Region since September 2000 where hewas responsible for all financial aspects of the region which provided serviceto approximately 4 million customers. He previously served as VicePresident of Finance and Chief Financial Officer of Cingular’s Philadelphiamarket from August 1999 to September 2000. Mr. Volk joinedCingular as Director of International Finance in January 1995 where he wasresponsible for all financial aspects of the international wireless operationsand 

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**businessdevelopment of the Comcast Cellular Division. He also served from May 1998to August 1999 as Director of Strategic Marketing Planning, where he wasresponsible for planning and analysis as well as business development for theComcast Cellular Division. Mr. Volk is a Certified Public Accountant andholds a Bachelor of Science degree in Accounting from the University ofDelaware and a Master of Business Administration degree from VillanovaUniversity.**

**Patricia E. Knese,** 47, joined usin November 2000 as Vice President and General Counsel, and she wasappointed our Secretary in February 2001 and Senior Vice President in May 2004.From May 1999 to November 2000, Ms. Knese served as HeadTransactions and E-Health Counsel for Aetna U.S. Healthcare Inc., theHartford, Connecticut-based health benefits company, and as GeneralCounsel for InteliHealth Inc., an Aetna Internet subsidiary, where she wasresponsible for mergers and acquisitions, strategic relationships andinvestments, and licensing and other e-commerce related legal matters. From September 1993to April 1999, she was an attorney at Morgan, Lewis & Bockius LLPin the Business and Finance area of the firm, and served as a federal judicialclerk from 1992 to 1993 with the chief judge of the United States DistrictCourt for the District of Delaware. She also has over ten years of managementexperience in the automotive industry with automotive manufacturers Subaru ofAmerica, Inc. and Chrysler Corporation. Ms. Knese holds a Bachelor ofScience degree in Management/Marketing from Saint Joseph’s University, a Masterof Business Administration degree from Drexel University and a Juris Doctordegree, *summa cum laude*, from Temple UniversitySchool of Law.

**David L. Zylka**, 45,joined us in January 2000 as Vice President-Engineering, and in January 2004 he wasappointed our Chief Technology Officer. In this role he is responsible foroverseeing all activities within the engineering, network operations,implementation and information technology organizations of the company. Mr. Zylkahas 14 years experience in the telecommunications industry. From January 1999to December 1999, he served as Vice President of Engineering for Frontier CellularCommunications in Rochester, New York where he developed and executed a$59 million CDMA (code division multiple access) network expansion plan.Before he joined Frontier Cellular Communications, Mr. Zylka held variouspositions at Comcast Communications in Philadelphia, Pennsylvania from May 1991to November 1998, most recently as Vice President of Operational andPerformance Engineering for the Comcast Cellular network. Mr. Zylka holdsa Bachelor of Science degree in Electrical Engineering from the United StatesMilitary Academy at West Point and a Master of Science degree in InformationSystems Management from Golden Gate University.

**ITEM 1A.**        RiskFactors

**Various provisions of this Annual Report on Form 10-Kcontain forward-looking statements that involve risks and uncertainties.Actual results, performance or achievements could differ materially from thoseanticipated in these forward-looking statements as a result of certainrisk factors, including those set forth below and elsewhere in this AnnualReport on Form 10-K.**

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

***The merger between Sprint and Nextel, the outcome ofour litigation relating thereto and other developments between Sprint Nexteland us and other PCS affiliates may have an adverse effect on us***

We cannot predict the outcome of our litigationagainst Sprint Nextel relating to the merger of Sprint and Nextel and theresulting violations of our exclusivity and other rights under the managementagreement. See “Item 1. Business3⁄4SprintDevelopments.” We do not know how Sprint Nextel will operate the legacy Nextelbusiness, which is a wireless business that is competitive with ours in ourmarkets, after expiration of the forbearance agreement or if the court issues aruling in the litigation favoring Sprint.

We are highly dependent on Sprint roaming revenues tosupplement our core subscriber business. Roaming revenues from Sprintrepresented 73% of roaming and wholesale revenues in 2005 and 22% of 

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service revenues andproduced margins of approximately 85%. If Sprint diverts Sprint PCS roamingtraffic from our network to the network of the legacy Nextel business in ourmarkets through the development, introduction and sale of handsets that operateon both networks or through other network or technological changes, this wouldhave a material adverse effect on our profitability and cash flows fromoperations, and our stock price may be adversely affected.

Notwithstanding thelimitations the forbearance agreement imposes on Sprint Nextel, Sprint Nextel’sownership and operation of the legacy Nextel business in our markets has, amongother things, caused customer confusion in our markets and has had a negativeimpact on our subscriber growth and subscriber revenues. If, following theexpiration of the forbearance agreement or a ruling in the litigation favoringSprint, Sprint Nextel engages in additional detrimental conduct, some examplesof which include the following, subscriber growth and revenues could beadversely affected:

·       changingthe branding of the legacy Nextel operations, products and services in ourmarkets that compete with us to the Sprint brands utilized by us to sell SprintPCS products and services under our management agreement, including branding ofdistribution points such as retail stores and national retailers operating inour markets, advertising, marketing materials, product branding and branding ofservices and rate plans;

·       sharingour confidential business information with persons at Sprint Nextel who areinvolved in the business and operations of the legacy Nextel business thatcompetes with us;

·       inducingand facilitating our Sprint PCS customers to transition their wireless serviceto Nextel through methods such as direct marketing, advertising, waivers ofearly termination fees, and customer service interactions;

·       withholdinginformation from us regarding its future technology, product or pricingplanning; and

·       devotingless personnel and resources to the remaining PCS affiliates including us as aresult of Sprint Nextel’s acquisition of more than fifty percent of thesubscriber base managed by PCS affiliates prior to the Sprint-Nextel merger.

If we do not prevail inour litigation with Sprint Nextel, upon the expiration of the forbearanceagreement Sprint Nextel may operate the legacy Nextel business in our marketsin a manner that would have an adverse effect on our business and operations,and our stock price may be adversely affected.

***Our substantial leverage could adversely affect ourfinancial health***

We are highlyleveraged. As of December 31, 2005, our total outstanding debt wasapproximately $423.7 million. Our substantial indebtedness could adverselyaffect our financial health by, among other 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 flows from operations to makeinterest and principal payments on our debt, which reduces funds available foroperations and future business opportunities; and

·       potentiallymaking us more highly leveraged than some of our competitors, which couldpotentially decrease our ability to compete in our industry.

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The ability to makepayments on our debt will depend upon our future operating performance, whichis subject to general economic and competitive conditions, the outcome of ourlitigation with Sprint Nextel, and to financial, business and other factors,many of which we cannot control. If the cash flow from our operating activitiesis insufficient, we may take actions, such as delaying or reducing capital expenditures,attempting to restructure or refinance our debt, selling assets or operationsor seeking additional equity capital. Any or all of these actions may not besufficient to allow us to service our debt obligations. Further, we may beunable to take any of these actions on satisfactory terms, in a timely manneror at all. The indenture governing our outstanding notes limits our ability totake several of these actions. Our failure to generate sufficient funds to payour debts or to successfully undertake any of these actions could, among otherthings, materially adversely affect the market value of our securities and ourability to repay our obligations under them. Additionally, the indenturegoverning our outstanding notes permits us to incur additional indebtedness,which may be secured by some or all of our assets, which could furtherexacerbate the risks associated with our leverage. We from time to timeevaluate options for additional financings to supplement our liquidity positionand maintain maximum financial flexibility. We may not be able to access thecredit markets for additional capital if we have insufficient cash to satisfythe needs of our business.

***We may not be able to achieve our projected growth orobtain sufficient revenues to sustain operating profitability or positive cashflows, which may result in our inability to meet our debt obligations or fundcapital expenditures***

Our business projectionsreflect continuing growth in our subscriber base. We incurred net losses fromour inception in 1999 through the year ended December 31, 2004 as wedeveloped and grew our network, distribution channels and subscriber base. Ourfuture operating profitability and cash flows from operating activities willdepend upon many factors, including, among others, the outcome of ourlitigation against Sprint Nextel and our ability to market Sprint PCS productsand services, achieve projected market penetration and manage subscriberturnover rates. If we acquire more new customers than we project, the upfront coststo acquire those customers (including the handset subsidy, commissions andpromotional expenses) may result in greater cash used in the near term and,thus, lower cash flows from operations, but provide greater cash flows fromoperations in later periods. Conversely, if there is a slowdown in newsubscriber growth in our markets or the wireless industry generally, we mayacquire fewer new customers, which would result in higher cash provided in thenear term and, thus, higher cash flows from operations, but provide lower cashflows from operations in later periods. If we do not sustain operatingprofitability and positive cash flows from operating activities, we may beunable to make interest or principal payments on our debt. We will have todedicate a substantial portion of any future cash flows from operations to makeinterest and principal payments on our debt and fund capital expenditures,which will reduce funds available for other purposes. Although we havecompleted our required network coverage build-out, our business requiresadditional capital expenditures for capacity enhancements, coverage expansionsand new technology enhancements. If we do not maintain positive cash flows fromoperations, or if our operating cash flows are insufficient to cover our debtobligations in the future, we may be unable to operate our business in aneffective or competitive manner or make required payments on our debt.

***If we receive less revenues or incur more fees than weanticipate for PCS roaming from Sprint Nextel, our results of operations may benegatively affected***

We are paid a fee fromSprint Nextel for every minute and kilobyte that a Sprint PCS subscriber basedoutside of our markets uses our network. Similarly, we pay a fee to SprintNextel for every minute that our customers use the Sprint PCS network outsideof our markets. The per-minute and per-kilobyte rates that we receive fromSprint Nextel and that we pay to Sprint Nextel are the same and are fixed untilthe end of December 2006. Thereafter, the rates will change, based on anagreed-upon formula that may have an adverse effect on us. In addition, SprintPCS subscribers based in our markets may spend more time in other Sprint PCScoverage areas than we anticipate, and Sprint PCS subscribers based outside ofour 

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marketsmay use our network less than we anticipate. Further, Sprint Nextel could takeactions that result in less usage of our network by Sprint PCS subscribersbased outside of our markets, such as diverting traffic to another network,which would have an adverse effect on us. As a result, we may receive lessSprint PCS roaming revenue and/or have to pay more in Sprint PCS roaming feesthan we anticipate. Our ratio of inbound to outbound roaming with Sprint Nextelwas approximately 1.7 to 1 for the year ended December 31, 2005.

***Revenues from subscribers of wireless communicationsproviders other than Sprint Nextel that roam on our network and revenues fromsubscribers of MVNOs may decline in the future***

We derive a significantamount of roaming revenue from wireless communications providers other thanSprint Nextel for permitting their subscribers to roam on our network when theyare in our markets. We do not have agreements directly with these wirelessproviders. Instead, we rely on roaming arrangements Sprint Nextel hasnegotiated and entered into. We also derive a significant amount of revenuesfrom subscribers of MVNOs who use our network at rates negotiated by SprintNextel that could be adjusted downward. If Sprint Nextel agrees to a lower negotiatedrate, it would lower our revenues. If the roaming rates offered by SprintNextel are not attractive, wireless communications providers with roamingarrangements providing us revenue may decide to build out their own networks inour markets and compete with us directly or enter into roaming arrangementswith our competitors who also have networks in our markets. Similarly, MVNOsmay attempt to establish more attractive rates with competitors, leading to areduction in revenues from subscribers of MVNOs using our network. Asignificant reduction in roaming or MVNO rates or the loss of all or asignificant portion of these revenues would have a material adverse effect onour financial condition and results of operations.

***We may incur additional charges against our earningsas a result of any future determination of an impairment of goodwill andintangible assets acquired in a business combination***

Our consolidated balancesheet included goodwill and an intangible asset resulting from a businesscombination totaling approximately $38.1 million and $60.3 million,respectively, as of December 31, 2005. The intangible asset consisted ofthe unamortized cost of a Sprint PCS management agreement, which had aremaining useful life of 14 years as of December 31, 2005. There can be noassurance that the recorded amounts of these assets, which representedapproximately 18% of our total assets as of December 31, 2005, will everbe realized by us. Any future determination of an impairment of goodwill andintangible assets that requires the write-off of a significant portion of theseassets could have an adverse effect on our results of operations.

***If we lose the right to install our equipment onwireless towers or are unable to renew expiring leases for wireless towers onfavorable terms or at all, we could incur greater operating and capitalexpenditures and our business and results of operations could be adverselyimpacted***

We lease a significant amount of the radiocommunications sites for our network through master lease agreements withseveral national communication site management companies. If a master leaseagreement 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, wewould have to find new sites or may be required to rebuild the affected portionof our network, which could result in a portion of our network having atemporary disruption in service and a material increase in our operating orcapital expenditures. In addition, the concentration of our tower leases with alimited number of tower companies could adversely affect our results ofoperations and financial condition if we were unable to renew a material numberof expiring site leases either on favorable terms or at all or identify andutilize alternative attractive capabilities for installing and operatingreplacement radio communications sites.

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***The terms of ourdebt place restrictions on us which may limit our operating flexibility***

Theindenture governing our outstanding notes imposes material operating andfinancial restrictions on us. These restrictions, subject in certain cases toordinary course of business and other exceptions, may limit our ability toengage in some transactions, including the following:

·       incurringadditional debt;

·       payingdividends, redeeming capital stock or making other restricted payments orinvestments;

·       creatingliens on assets;

·       merging,consolidating or disposing of assets;

·       enteringinto transactions with affiliates; and

·       placingrestrictions on the ability of subsidiaries to pay dividends or make otherpayments.

These restrictions couldlimit our ability to obtain debt financing, repurchase stock, refinance or payprincipal or interest on debt, complete acquisitions for cash or debt or reactto changes in our operating environment. Any future debt that we incur maycontain similar or more restrictive covenants.

***Our stock price hasbeen and may continue to be volatile and shareholders may not be able to selltheir shares at or above the price they paid for them***

Themarket price of our common stock is subject to wide fluctuations in response tofactors such as the following, some of which are beyond our control:

·       changesin our relationship with Sprint Nextel, including the outcome of our litigationagainst Sprint Nextel;

·       changesin the relationships of other PCS affiliates with Sprint Nextel, includingSprint Nextel’s acquisitions over the past three quarters of five PCSaffiliates of Sprint Nextel;

·       quarterlyvariations in our operating results;

·       operatingresults that vary from the expectations of securities analysts and investors;

·       changesin expectations as to our future financial performance, including financialestimates by securities analysts and investors;

·       announcementsby Sprint Nextel concerning its relationships with its PCS affiliates and theintegration of the Sprint and Nextel businesses, as well as developments orchanges in its business, financial condition or results of operations, or inits expectations as to future financial performance;

·       actualor potential defaults in debt agreements by us or other PCS affiliates ofSprint Nextel;

·       announcementsof technological innovations or changes to, or new, products and services bySprint Nextel or our competitors;

·       changesin results of operations, market valuations and investor perceptions of SprintNextel, other PCS affiliates of Sprint Nextel or of other companies in thetelecommunications industry in general and the wireless industry in particular,including our competitors;

·       changesin laws and regulations;

·       announcementsby third parties of significant claims or proceedings against us;

·       announcementsby us or our competitors of significant contracts, acquisitions, strategicpartnerships, joint ventures or capital commitments; and

·       general economic andcompetitive conditions.

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***Our certificate ofincorporation and bylaws include provisions that may discourage a change ofcontrol transaction***

Some provisions of ourcertificate of incorporation and bylaws and provisions of Delaware law couldhave the effect of delaying, deferring or preventing an acquisition of us. Forexample, we have a staggered board of directors, the members of which may onlybe removed for cause, authorized but unissued shares of preferred stock whichcould be used to fend off a takeover attempt, a prohibition on shareholderaction by written consent and limits on shareholders’ ability to make proposalsat shareholder meetings.

**RisksRelated to Our Relationship with Sprint Nextel**

***Our ability toconduct our business would be severely restricted if Sprint materially breachedor terminated our management agreement***

Our relationship withSprint Nextel is governed by our management agreement with Sprint PCS. Inaddition to the risks related to breaches of our management agreement inconnection with the merger of Sprint and Nextel, which are described aboveunder “3⁄4The merger betweenSprint and Nextel, the outcome of our litigation relating thereto and otherdevelopments between Sprint Nextel and us and other PCS affiliates may have anadverse effect on us,” because we do not own any licenses to operate a wirelessnetwork, our business depends on the continued effectiveness of our managementagreement. Sprint may terminate our management agreement if we materiallybreach the terms of the agreement. These terms include operational and networkrequirements that are extremely technical and detailed and apply to each retailstore, cell site and switch site. Many of these operational and networkrequirements can be changed by Sprint, in certain cases, with little notice. Asa result, we may not always be in compliance with all requirements of themanagement agreement. Sprint conducts periodic audits of compliance withvarious aspects of its program guidelines and identifies issues it believesneed to be addressed. There may be substantial costs associated with remedyingany non-compliance, and such costs may adversely affect our results ofoperations and cash flows. Our management agreement also requires that weprovide network coverage to a minimum network coverage area within specifiedtime frames and that we meet and maintain specified technology and networkrequirements. We believe we are in compliance with our network build-outrequirements and other technology and network requirements. A failure by us tomeet any expanded build-out requirements for our markets or other technology ornetwork requirements could constitute a material breach of the managementagreement, which could lead to its termination by Sprint. Sprint can alsochoose not to renew the agreement at the expiration of the 20-yearinitial term in 2018 or any ten-year renewal term thereafter. In any event, ourmanagement agreement terminates in approximately 44 years. If Sprintterminates or fails to renew our management agreement or fails to perform itsobligations under the agreement, our ability to conduct our business would beseverely restricted.

***If we materiallybreach our management agreement, Sprint may have the right to purchase ouroperating assets at a discount to market value on terms that have been agreedto and that are disadvantageous to us, and certain provisions of our managementagreement may diminish our value and restrict the sale of our business***

Our management agreementprovides that upon the occurrence of an event of termination caused by ourbreach of the agreement, we may be required to sell our operating assets toSprint. This sale may take place for a price equal to 72% of our “entirebusiness value” (as defined in the management agreement), subject to thevaluation criteria and procedures provided in our management agreement, andwithout shareholder approval. If Sprint materially breaches the managementagreement, one remedy we may exercise is the sale to Sprint of our operatingassets at a price equal to 80% of our “entire business value,” subject to thevaluation criteria and procedures provided in our management agreement, andwithout shareholder approval. These provisions of our management agreement thatallow Sprint to purchase our operating assets at a discount may limit ourability to sell our business, may reduce the value a buyer would be willing topay for our business and may reduce our “entire business value.”

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In addition, any change ofcontrol of our ownership and any assignment of our management agreement issubject to Sprint’s approval. Sprint also has a right of first refusal if wedecide to sell our operating assets to a third party. We also are subject to anumber of restrictions on the transfer of our business, including a prohibitionon the sale of our operating assets to competitors of Sprint. Theserestrictions and the other restrictions contained in our management agreementrestrict our ability to sell our business, may reduce the value a buyer wouldbe willing to pay for our business and may reduce our “entire business value.”

***Sprint may makedecisions that could increase our expenses and/or our capital expenditurerequirements, reduce our revenues or make our affiliate relationship withSprint less advantageous than expected***

Underour management agreement and services agreement with Sprint PCS, Sprint has asubstantial amount of control over factors that significantly affect theconduct of our business. Subject to certain limits set forth in our agreementswith Sprint, Sprint may make decisions that adversely affect our business, suchas the following:

·       Sprintprices subscriber pricing plans for Sprint PCS products and services based onits own objectives and could set price levels or change other characteristicsof its plans in a way that may not be economically advantageous for ourbusiness;

·       Sprintcould develop products and services or establish credit policies that may notbe economically advantageous for our business;

·       Sprintcould reduce levels of services or otherwise seek to increase expenses andother amounts charged for services;

·       Sprintmay alter its network and technical requirements or request that we build outadditional areas within our markets, which could result in increased equipmentand build-out costs or in Sprint building out that area itself or assigning itto another PCS affiliate of Sprint Nextel; and

·       Sprintcould make decisions that could adversely affect the Sprint brand name.

Conflicts between Sprintand us may arise as a result of decisions affecting our business, and we cannotpredict whether such conflicts will be resolved in a manner favorable to us.

***The FCC may fail torenew the Sprint wireless licenses for our markets under certain circumstances,which would prevent us from providing wireless services***

Sprint’s wireless licensesare subject to renewal and revocation by the FCC. The FCC has adopted specificstandards that apply to wireless personal communications services licenserenewals. Any failure by Sprint or us to comply with these standards couldresult in the nonrenewal of the licenses for our markets. Additionally, ifSprint does not demonstrate to the FCC that Sprint has met the constructionrequirements for each of its wireless personal communications serviceslicenses, it can lose those licenses. The original Sprint wireless licenses inour markets expired or expire on dates during 2004 through 2007, but may berenewed for additional ten-year terms. Those licenses with expiration datesprior to the present time period have been renewed. If Sprint loses itslicenses in our markets for any of these reasons, we would not be able toprovide wireless services without obtaining rights to other licenses. If Sprintloses its licenses in another territory, Sprint would not be able to providewireless services without obtaining rights to other licenses and our ability tooffer nationwide calling plans would be diminished and potentially more costly.

***Sprint Nextel’sfailure to timely and accurately generate revenue and cost data for thecompilation of our financial statements and other financial disclosures couldhave a material adverse effect on our business***

We place substantialreliance on the timeliness, accuracy and sufficiency of revenue and cost dataand information generated by Sprint Nextel for the compilation of our financialstatements and other financial 

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disclosures,including substantial portions of our revenues, expenses and accountsreceivable. As part of our agreements, we outsource several functions to SprintNextel including billing, customer care, national network operations support,inventory logistics support, long distance transport and national retailersales support. The data provided by Sprint Nextel is the primary source for ourrecognition of service revenue and a significant portion of our selling andmarketing and cost of service and operations expenses. In certain cases, thedata is provided at a level of detail that is not adequate for us to verify foraccuracy back to the originating source. We rely on Sprint Nextel to havedesigned adequate internal controls with respect to the processes establishedto provide this data. Because of this reliance, we are dependent on SprintNextel to periodically evaluate the effectiveness of these controls and reportany significant deficiencies and weaknesses in the design or operation of thesecontrols that could have a material impact on our financial statements anddisclosures. Sprint Nextel provides a semi-annual evaluation of these controlsto us by engaging its independent auditors to provide a “Report on ControlsPlaced in Operation and Tests of Operating Effectiveness for Affiliates” underguidance provided in Statement of Auditing Standards No. 70 (“SAS 70”).There can be no assurance that the SAS 70 procedures will identify allweaknesses that might be material to us. Additionally, at times, we have beeninvoiced by Sprint for charges or paid at rates that we have believed to becontractually incorrect. We review all charges and payments from Sprint anddispute items if appropriate based upon our interpretation of our agreementswith Sprint. We record estimates primarily based on invoiced amounts and werecord any subsequent adjustments at the time the dispute is resolved. Errorsthat are not reconciled on a timely basis by Sprint Nextel could cause us tomisstate our revenues or expenses and could result in out-of-period adjustmentsthat may materially adversely affect our financial results and could have amaterial adverse effect on our business, financial condition, results ofoperations and cash flows. Further, the failure of Sprint Nextel to remitcurrent or future amounts owing to PCS affiliates of Sprint Nextel, includingus, could lead to actions on the part of us or other PCS affiliates of SprintNextel to enforce rights under the Sprint agreements and other remediesavailable under applicable law.

***The inability ofSprint Nextel to provide high quality back office services, or our inability touse Sprint Nextel’s or its third party vendors’ back office services, couldlead to customer dissatisfaction, increase customer turnover or otherwisedisrupt our business and increase our costs***

We rely on Sprint Nextel’sinternal support systems, including customer care, billing and back officesupport. We also depend on Sprint Nextel’s willingness to continue to offerthese services and to provide these services effectively. Our operations couldbe disrupted if Sprint Nextel is unable to provide these back office servicesand systems in a high quality manner, or to efficiently outsource thoseservices and systems through third party vendors. Sprint Nextel has relied onthird party vendors for a significant number of important functions, includingbilling, customer care operations and components of its internal supportsystems and may continue to rely on outside vendors in the future or may takethese systems in-house. Any significant system change, the inability of SprintNextel to provide or maintain high quality back office services or ourinability to use Sprint Nextel’s back office services and third party vendors’back office systems could lead to customer dissatisfaction, increase customerturnover or otherwise disrupt our business and increase our costs. Our abilityto replace Sprint Nextel in providing back office services may be limited.

***Our costs forinternal support systems may increase if Sprint Nextel terminates all or partof our services agreement with it***

Because we incur the costsfor the services provided by Sprint Nextel under our services agreement forbilling, customer care and other back office functions on a per subscriberbasis, we expect the aggregate cost for such services to increase as the numberof our subscribers increases. Sprint Nextel may terminate a significant serviceprovided under the agreement, including customer care, billing or collections,upon nine months’ prior written notice. If we would like to continue receivingsuch service, Sprint Nextel has agreed 

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that itwill assist us in developing that function internally or locating a third partyvendor that will provide that service. If Sprint Nextel terminates a servicefor which we have not developed or are unable to develop a cost-effectivealternative, our operating costs may increase beyond our expectations and ouroperations may be interrupted or restricted. We do not currently have acontingency plan if Sprint Nextel terminates a service we currently receive fromit.

***We may havedifficulty in obtaining an adequate supply of certain handsets and otherwireless devices from Sprint Nextel, which could adversely affect our resultsof operations***

Wedepend on our relationship with Sprint Nextel to obtain handsets and otherwireless devices at a competitive cost. Sprint Nextel orders handsets and otherwireless devices from various manufacturers. We could have difficulty obtainingspecific types of handsets and other wireless devices at a competitive cost andin a timely manner if:

·       SprintNextel does not adequately project the needs for handsets and devices foritself, its PCS affiliates and its other third party distribution channels,particularly during a transition to new technologies, such as EV-DO;

·       SprintNextel gives preference to other distribution channels;

·       wedo not adequately project our need for handsets or other wireless devices;

·       SprintNextel modifies its logistics and delivery plan in a manner that restricts ordelays our access to handsets and other wireless devices; or

·       thereis an adverse development in the relationship between Sprint Nextel and itssuppliers or vendors.

The occurrence of any ofthe foregoing could disrupt our customer service and/or result in a decrease inour subscribers, which could adversely affect our results of operations.

**RisksRelated to the Wireless Telecommunications Industry**

***We may continue toexperience a high rate of customer turnover, which would adversely affect ourfinancial performance***

The wireless telecommunications industry hasexperienced a high rate of customer turnover, commonly known as churn, althoughthe rate of churn has been decreasing over time. Due to significant competitionin the industry and general economic conditions, among other things, a declinein the churn rate may not continue and our future rate of customer turnover maybe higher than our historical rate or projections. Factors that may contributeto higher churn include customer confusion resulting from the Sprint-Nextelmerger, inability or unwillingness of customers to pay resulting in involuntarydeactivations, customer mix and credit class and in particular sub-prime creditclass customers, customer credit terms, deposit requirements for sub-primecustomers, number of customers receiving services under contracts with terms ofa year or greater, attractiveness of competitors’ products, services andpricing, network coverage and performance relative to competitors, customerservice and other competitive factors. A high rate of customer turnover adverselyaffects our competitive position, liquidity, results of operations and costsof, or losses incurred in, obtaining new subscribers, especially because wesubsidize a significant portion of the costs of initial purchases of handsetsby new customers. We may be required to increase subsidies for product upgradesand/or reduce pricing to match competitors’ initiatives and retain customers,which could adversely impact our revenues, liquidity and profitability.

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***Significant competition in the wirelesstelecommunications industry may result in our competitors offering new orbetter services or lower prices, which could adversely affect our profitabilityand may cause prices for our services to continue to decline in the future***

Competition in the wireless telecommunicationsindustry is intense. Competition has caused, and we anticipate that competitionwill continue to cause, the market prices for wireless products and services todecline in the future and the cost to acquire new customers to remain high. Weface competition in our markets from national wireless carriers Verizon,Cingular, T-Mobile and Nextel (which is operated by Sprint Nextel subsequent tothe merger in August 2005), in addition to competition from regionalwireless carriers in certain markets. We also face competition from resellersin certain markets, which provide wireless services to customers but do nothold FCC licenses or own facilities. Instead, the resellers buy blocks ofwireless telephone numbers and capacity from a facilities-based carrierand resell services through their own distribution network to the public.

Our dependence on Sprint Nextel to develop competitiveproducts and services, Sprint Nextel’s competition against us in our marketsthrough its legacy Nextel operations, and the requirement that we obtain SprintNextel’s consent to sell non-Sprint approved products may limit our ability tokeep pace with our competitors on the introduction of new products, servicesand equipment. Our success is, to a large extent, dependent on Sprint Nextel’sability to distinguish its Sprint PCS products and services from competitors bymarketing and anticipating and responding to various competitive factorsaffecting the wireless industry, including new services that may be introduced,changes in consumer preferences, demographic trends, economic conditions anddiscount pricing strategies by competitors. To the extent that Sprint Nextel isnot able to keep pace with technological advances or fails to respond timely tochanges in competitive factors in the wireless industry, it could cause us tolose market share or experience a decline in revenue.

Many of our competitors have significantly greaterfinancial and technical resources and subscriber bases, more extensive coverageareas and more well-established marketing programs and brand names than we do.Some of our competitors may market other services, such as landline telephoneservice, cable television and Internet access, along with their wirelesstelecommunications services. Furthermore, there has been a recent trend in thewireless telecommunications industry towards consolidation of wireless serviceproviders, which has led to larger competitors. We may be unable to competesuccessfully with larger companies that have substantially greater resources orthat offer more services than we do.

Our ability to competewill depend, in part, on our ability to anticipate and respond to variouscompetitive factors affecting the wireless telecommunications industry. Whilewe try to maintain and grow our average revenue per user, we cannot be certainthat we will be able to do so. If prices for our services continue to decline,it could adversely affect our ability to grow revenue, which would have amaterial adverse effect on our liquidity, financial condition and results ofoperations.

***Market saturation could limit or decrease our rate ofnew subscriber additions***

Intense competition in thewireless telecommunications industry could cause prices for wireless productsand services to continue to decline. If prices drop, then our rate of netsubscriber additions will take on greater significance in improving ourfinancial condition and results of operations. However, as our and ourcompetitors’ penetration rates in our markets increase over time, our rate ofadding net subscribers could decrease. If this decrease were to happen, itcould materially adversely affect our liquidity, financial condition andresults of operations.

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***Alternative technologies and current uncertainties inthe wireless and overall communications industries may reduce demand for SprintPCS products and services or cause us to increase our expenditures***

The wireless telecommunications industry isexperiencing significant and rapid technological change, as evidenced by thecontinued pace of upgrades in existing digital wireless systems, evolvingindustry standards, ongoing improvements in the capacity and quality of digitaltechnology, shorter development cycles for new products and enhancements andchanges in end-user requirements and preferences. We rely on Sprint Nextel forresearch and development efforts with respect to Sprint PCS products andservices and to keep pace with technological changes in the wireless industry.Sprint Nextel may not be able to respond to such changes and implement newtechnology on a timely basis, or at an acceptable cost to us.

If Sprint Nextel is unable to keep pace with thesetechnological changes or other changes in the wireless communications market,the technology used in our network or our business strategy may becomeobsolete. Other carriers are in the process of upgrading their networks to 3Gtechnologies such as EV-DO, Universal Mobile Telecommunications System (UMTS)or High-Speed Downlink Packet Access (HSDPA). We have upgraded our network toCDMA 1xRTT, which is the name for the first phase of CDMA’s evolution to 3G,and offer PCS Vision services in all of our markets. Sprint Nextel has begun todeploy EV-DO technology in portions of its CDMA network and expects its EV-DOservice, marketed as “Power Vision,” to be accessible to about 150 millionpeople in early 2006. Although we are not required to deploy EV-DO across ournetwork, we have deployed EV-DO in portions of our markets coveringapproximately 10% of our network’s covered population, and may similarly electto deploy EV-DO technology in additional portions of our markets, which couldsignificantly increase our capital expenditures. The implementation of EV-DO orother 3G technologies in networks of competitors in portions of our marketswill create a gap in product offerings unless we determine to increase capitaland operating expenditures to upgrade all or portions of our network with theenhanced technology.

Future FCC regulation orcongressional legislation may create additional spectrum allocations that wouldhave the effect of adding new entrants (and, consequently, additionalcompetitors) to the mobile telecommunications market. Future wirelessapplications on current or future portions of the wireless spectrum may alsoreduce demand for Sprint PCS products and services. In addition, theconvergence of wireless, landline telephone service, cable television andInternet access is creating uncertainties in the overall communications market.The proliferation of Wi-Fi and the potential application of WiMAX createadditional uncertainly about how customers will communicate wirelessly in thefuture. Sprint Nextel has interests in developing technologies and deliverychannels, such as its recently announced joint venture with cable companiesComcast Corporation, Time Warner Cable, Cox Communications and Advance/NewhouseCommunications that may create additional competition in our markets and reducedemand for Sprint PCS products and services offered by us.

***Regulation by government agencies and taxingauthorities may increase our costs of providing service or require us to changeour services, either of which could impair our financial performance***

Our operations and thoseof Sprint Nextel may be subject to varying degrees of regulation by the FCC,the Federal Trade Commission, the Federal Aviation Administration, theEnvironmental Protection Agency, the Occupational Safety and HealthAdministration and state and local regulatory agencies and legislative bodies.Adverse decisions or regulations of these regulatory bodies could negativelyimpact Sprint Nextel’s and our operations and our costs of doing business. Forexample, changes in tax laws or the interpretation of existing tax laws bystate and local authorities could subject us to increased income, sales, grossreceipts or other tax costs or require us to alter the structure of our currentrelationship with Sprint Nextel.

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***Concerns over health risks posed by the use ofwireless handsets may reduce consumer demand for our products and services***

Media reports havesuggested that radio frequency emissions from wireless handsets may be linkedto various health problems, including cancer, resulting from continued orexcessive use, may interfere with various electronic medical devices, includinghearing aids and pacemakers, and may cause explosions if used while fueling anautomobile. Widespread concerns over radio frequency emissions may expose us topotential litigation, discourage use of wireless handsets or result inadditional regulation imposing restrictions or increasing requirements on thelocation and operation of cell sites or the use or design of wireless handsets.Any resulting decrease in demand for wireless services or increase in the costof complying with additional regulations, or costs of litigation and damageawards, could impair our ability to sustain profitability.

***Regulation by government or potential litigationrelating to the use of wireless phones while driving may reduce consumer demandfor our products and services***

Some studies haveindicated that some aspects of using wireless phones while driving may impairdrivers’ attention in certain circumstances, making accidents more likely. Anumber of U.S. state and local governments have enacted or are consideringlegislation that would restrict or prohibit the use of a wireless handset whiledriving a vehicle or, alternatively, require the use of a hands-free wirelessphone. These concerns also could lead to potential litigation relating to accidents,deaths or serious bodily injuries. New restrictions or government regulationsthat restrict or prohibit wireless phone use resulting in a decrease in demandfor wireless services, or costs of litigation and damage awards, could impairour ability to sustain profitability.

**ITEM 1B.**       UnresolvedStaff Comments

None.

**ITEM 2.**                Properties

As of December 31, 2005, our material propertieswere as follows:

**Corporateand Regional Offices.**   Our principal executiveoffices consist of approximately 21,500 square feet of leased office spacelocated in Conshohocken, Pennsylvania. We own an approximately 34,000 squarefoot office building located in Fresno, California in which our regionaloperations for central California are located. We lease approximately 13,000square feet in this facility to two tenants and may lease additional space toother tenants in the future. We also lease space for regional operations inReno, Nevada; Boise, Idaho; and Evansville, Indiana.

**SprintStores.**   We lease space for 43 company-ownedSprint retail stores in our markets.

**SwitchingCenters.**   We lease space for four switchingcenters and own one switching center.

**CellSites.**   We lease space on approximately 929wireless towers and own approximately 46 towers.

We believe that ourfacilities are in good operating condition and are currently suitable andadequate for our business operations.

**ITEM 3.**                LegalProceedings

On July 12, 2005, UbiquiTel filed in the DelawareCourt of Chancery an action against Sprint Corporation, Sprint Spectrum L.P.,WirelessCo, L.P., Sprint Communications Company L.P., Sprint Telephony PCS,L.P., Sprint PCS License, L.L.C. (collectively, “Sprint”), and NextelCommunications, Inc. (“Nextel”) alleging that, among other things, followingthe consummation of the Sprint-Nextel merger, 

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which subsequentlyoccurred on August 12, 2005, Sprint would breach its exclusivity andconfidentiality obligations to us under our written agreements with Sprint andSprint PCS, and that Nextel improperly interfered with our exclusivity rightsunder those agreements. The action further alleges that Sprint and Nextelconspired to deprive us of the exclusivity commitments in those agreements andto use our confidential business information available to Sprint under thoseagreements to advantage Nextel’s business, which is directly competitive withour wireless business in our markets. The complaint seeks, among other things,a court order requiring Sprint Nextel to comply with the exclusivity provisionsof those agreements. A copy of the complaint was filed as Exhibit 99.1 toUbiquiTel’s Current Report on Form 8-K dated July 12, 2005filed with the Securities and Exchange Commission. The court consolidated thetrial of UbiquiTel’s action with a similar case brought by Horizon PersonalCommunications, Inc. and Bright Personal Communications Services, LLC,which are subsidiaries of iPCS, Inc., another PCS affiliate of SprintNextel. The consolidated nine-day trial occurred in January 2006. The vicechancellor presiding over the actions has requested post-trial briefs and hastentatively scheduled final arguments for April 4, 2006. The vicechancellor will issue a ruling at some time following the final arguments.Shortly after filing the complaint, UbiquiTel entered into a forbearanceagreement with Sprint imposing certain restrictions on, among other things, theoperations of the legacy Nextel wireless business in our markets and the useand dissemination of our confidential business information. The forbearance agreementand the restrictions it imposes remain effective presently but will expire whenthe vice chancellor issues a final ruling in the action. Copies of theforbearance agreement and an amendment to the forbearance agreement were filedas Exhibit 99.1 to UbiquiTel’s Current Reports on Form 8-Kdated July 29, 2005 and December 2, 2005, respectively, filed withthe Securities and Exchange Commission. Over the past three quarters, SprintNextel has acquired five PCS affiliates of Sprint Nextel, including the largestaffiliate, Alamosa Holdings, Inc. Prior to Sprint Nextel’s acquisition ofthose PCS affiliates, four of the PCS affiliates had filed suit against Sprintrelating to the merger of Sprint and Nextel. Five PCS affiliates remain,including iPCS and us. See “Item 1. Business3⁄4SprintDevelopments” and “Item 1A. Risk Factors3⁄4Themerger between Sprint and Nextel, the outcome of our litigation relatingthereto and other developments between Sprint Nextel and us and other PCSaffiliates may have an adverse effect on us,” for additional information andrisks concerning recent developments between Sprint Nextel and us.

In addition to theforegoing, we are involved in various claims and legal actions arising in theordinary course of business. The ultimate disposition of these matters is notexpected to have a material adverse effect on our financial condition, resultsof operations or liquidity.

**ITEM 4.**                Submissionof Matters to a Vote of Security Holders

No matters were submitted during the fourth quarter offiscal 2005 to a vote of security holders.

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**PART II**

**ITEM 5.**                Marketfor Registrant’s Common Equity, Related Stockholder Matters and IssuerPurchases of Equity Securities

*MarketInformation.*   Shares of UbiquiTel common stockbegan trading on The Nasdaq National Market on June 7, 2000 under thesymbol “UPCS.” Prior to that date, there was no public market for UbiquiTelcommon stock. Effective November 1, 2002, the listing of UbiquiTel’scommon stock was transferred from The Nasdaq National Market to The NasdaqSmallCap Market, and effective July 10, 2003, the listing of UbiquiTel’scommon stock was transferred from The Nasdaq SmallCap Market to The NasdaqNational Market. On March 1, 2006, there were 89 holders of record ofUbiquiTel common stock. There is no public market for the common stock of UbiquiTelOperating Company and all of such stock is held by UbiquiTel.

Thefollowing table lists the high and low bid prices for UbiquiTel common stockfor the quarterly periods for the years ended December 31, 2004 and 2005,as reported by The Nasdaq National Market.

| **2004**       | ** ** | ** **       | ** ** | **High** | ** ** | **Low** | ** ** |
|----------------|------------|------------------|------------|----------|------------|---------|------------|
| First Quarter  |       | $                | 4.00       |     | $          | 2.61    |       |
| Second Quarter |       | 4.81             |       | 2.62     |       |
| Third Quarter  |       | 4.71             |       | 3.41     |       |
| Fourth Quarter |       |   7.30 |       | 4.03     |       |
|                |            |                  |            |          |            |         |            |  |  |

 

| **2005**       | ** ** | ** ** | ** ** | **High** | ** ** | **Low** | ** ** |
|----------------|------------|------------|------------|----------|------------|---------|------------|
| First Quarter  |       | $          | 7.75       |     | $          | 6.12    |       |
| Second Quarter |       | 8.34       |       | 6.65     |       |
| Third Quarter  |       | 9.52       |       | 7.48     |       |
| Fourth Quarter |       | 10.24      |       | 7.87     |       |
|                |            |            |            |          |            |         |            |  |  |

 

*DividendPolicy.*   UbiquiTel has never paid any cashdividends on its common stock. UbiquiTel intends to retain its future earnings,if any, to fund the development and growth of its business and, therefore, doesnot anticipate paying cash dividends in the foreseeable future. Our futuredecisions concerning the payment of dividends on our common stock will dependupon our results of operations, financial condition and capital expenditureplans, as well as such other factors as the board of directors, in its solediscretion, may consider relevant. In addition, our existing indebtednessrestricts, and we anticipate our future indebtedness may restrict, our abilityto pay dividends.

*SecuritiesAuthorized For Issuance Under Equity Compensation Plans.*   Seeour disclosure in the subsection of UbiquiTel’s definitive proxy statemententitled “Equity Compensation Plan Information,” which disclosure isincorporated herein by reference.

*Stock Repurchases.*   Therewere no stock repurchases by us during the quarter ended December 31,2005.

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**ITEM 6.**                SelectedFinancial Data

In thetable below, we provide you with selected financial data for the years ended December 31,2005, 2004, 2003, 2002 and 2001, and balance sheet data as of December 31,2005, 2004, 2003, 2002 and 2001, which are derived from and should be read inconjunction with the audited consolidated financial statements ofUbiquiTel Inc. and subsidiaries. See also “Management’s Discussion andAnalysis of Financial Condition and Results of Operations” included herein.

| ** **                                  | ** ** | **Year Ended December 31,**                         | ** ** |
|---------------------------------------------|------------|--------------------------------------------------------------------|------------|
| ** **                                  | ** ** | **2005**                                                           | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** | **2001** | ** ** |
| ** **                                  | ** ** | **(In thousands, except per share data)** | ** ** |
| **Statement of Operations Data:**           |       |                                                               |       |   |   |   |   |   |   |   |   |
| Total revenues                              |       | $                                                                  | 422,727    |   | $ | 366,043 |   | $ | 273,266 |   | $ | 220,805 |   | $ | 93,573 |   |
| Costs and expenses:                         |       |                                                               |       |   |   |   |   |   |   |   |   |
| Cost of service and operations and products |       | 221,550                                                            |       | 208,579 |   | 177,726 |   | 184,363 |   | 95,571 |   |
| Selling and marketing                       |       | 67,450                                                             |       | 67,485 |   | 53,681 |   | 54,711 |   | 39,119 |   |
| General and administrative expenses         |       | 23,197                                                             |       | 17,185 |   | 15,022 |   | 15,401 |   | 11,436 |   |
| Non-cash compensation                       |       | 2,906                                                              |       | 3,371 |   | 205 |   | 378 |   | 387 |   |
| Depreciation, amortization and accretion    |       | 51,312                                                             |       | 49,913 |   | 46,909 |   | 51,571 |   | 24,348 |   |
| Total costs and  expenses                   |       | 366,415                                                            |       | 346,533 |   | 293,543 |   | 306,424 |   | 170,861 |   |
| Operating income  (loss)                    |       | $                                                                  | 56,312     |   | $ | 19,510 |   | $ | (20,277 | ) | $ | (85,619 | ) | $ | (77,288 | ) |
| Net income (loss)(1)                        |       | $                                                                  | 47,713     |   | $ | (15,297 | ) | $ | (8,593 | ) | $ | (117,837 | ) | $ | (108,023 | ) |
| Net income (loss)  per common share:        |       |                                                               |       |   |   |   |   |   |   |   |   |
| Basic                                       |       | $                                                                  | 0.51       |   | $ | (0.16 | ) | $ | (0.10 | ) | $ | (1.45 | ) | $ | (1.53 | ) |
| Diluted                                     |       | $                                                                  | 0.49       |   | $ | (0.16 | ) | $ | (0.10 | ) | $ | (1.45 | ) | $ | (1.53 | ) |

 

| ** **                 | ** ** | **As of December 31,** | ** ** |
|----------------------------|------------|---------------------------------------|------------|
| ** **                 | ** ** | **2005**                              | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** | **2001** | ** ** |
| ** **                 | ** ** | **(In thousands)**               | ** ** |
| **Balance Sheet Data:**    |       |                                  |       |   |   |   |   |   |   |   |   |
| Cash and cash  equivalents |       | $                                     | 121,127    |   | $ | 91,781 |   | $ | 57,225 |   | $ | 73,481 |   | $ | 124,744 |   |
| Total assets               |       | 562,863                               |       | 497,807 |   | 483,404 |   | 538,827 |   | 588,430 |   |
| Long-term obligations(2)   |       | 423,715                               |       | 424,116 |   | 404,873 |   | 457,721 |   | 399,699 |   |
|                            |            |                                       |            |  |  |  |  |  |  |  |  |  |  |  |  |  |

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(1)          For the year ended December 31,2005, net income included a deferred income tax benefit of approximately $32.1million relating to the reduction of our valuation allowance against deferredincome tax assets. See Note 9 to the Consolidated Financial Statements. For theyears ended December 31, 2004 and 2003, net loss included gains on debtretirements of approximately $4.9 million and $43.0 million, respectively.

(2)          Long-termobligations at December 31, 2004 and 2003 included future cash flowsassociated with our 14% senior discount notes due 2010 of approximately $23,600and $41.4 million, respectively. For all periods presented, long-term obligationsincludes capital lease obligations and current maturities of long-term debt.See Note 6 to the Consolidated Financial Statements.

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**ITEM 7.**                Management’sDiscussion and Analysis of Financial Condition and Results of Operations

The following discussionand analysis should be read in conjunction with the consolidated financialstatements and the related notes included elsewhere in this Annual Report on Form 10-K.The discussion contains forward-looking statements that involve risks anduncertainties. Our actual results could differ materially from the resultscontemplated in these forward-looking statements as a result of factorsincluding, but not limited to, those under “Item 1A. Risk Factors.”

**Use of Certain Terms**

In 2003, we initiated areseller program under which mobile virtual network operators (MVNOs) use ournetwork and resell wireless service under a private label. In this report,unless the context indicates otherwise, all references to “subscribers” or “customers”and other operating metrics mean subscribers or customers excluding resellersubscribers.

**Overview**

We have the exclusive right under our managementagreement with Sprint PCS to provide digital wireless personal communicationsservices, or PCS, under the Sprint brand name to certain markets in the westernand midwestern United States which include a total population of approximately10.8 million residents covering portions of California, Nevada,Washington, Idaho, Utah, Wyoming, Indiana, Kentucky and Tennessee. Sprint hasPCS licenses to cover more than 280 million people across all 50 states,Puerto Rico and the U.S. Virgin Islands. We do not own any PCS licenses, sogenerally we can only operate our business so long as we remain a PCS affiliateof Sprint Nextel and Sprint Nextel and related entities continue to own the PCSlicenses in our markets. Sprint Nextel directly operates its PCS network inmajor metropolitan markets and certain midsize and smaller markets throughoutthe United States. Sprint Nextel also has management agreements between SprintPCS and PCS affiliates of Sprint Nextel, who are independent companies such asus, pursuant to which the PCS affiliates of Sprint Nextel have constructed andmanage PCS networks under the Sprint brand name in midsize and smaller markets.There are five PCS affiliates of Sprint Nextel, including us. See “Item 1.Business3⁄4Sprint Developments”with respect to Sprint’s merger with Nextel Communications, Inc. and ourlitigation with Sprint and Nextel related to the merger.

As of December 31, 2005, we had approximately447,900 subscribers excluding resellers and approximately 145,000 resellersubscribers, for a total subscriber base of approximately 592,900. As of December 31,2005, our network covered approximately 8.3 million residents whichrepresented approximately 77% of the licensed population in our markets.

As a PCS affiliate of Sprint, we do not own thelicenses to operate our network and instead pay Sprint for, among other things,the use of its licenses. Under our management agreement with Sprint PCS, Sprintis entitled to receive 8.0% of billed revenue from Sprint PCS subscribers basedin our markets less current period bad debts, net of bad debt recoveries, fromSprint PCS subscribers based in our markets and fees from wireless serviceproviders other than Sprint PCS when their subscribers roam into our network.We are entitled to 100% of revenues collected from the sale of handsets andaccessories from our stores and on roaming revenues received when Sprint PCScustomers from a different territory make a wireless call on our PCS networkand outbound non-Sprint PCS roaming billed to subscribers based in our markets.We are responsible for building, owning and managing the portion of the PCSnetwork located in our markets under the Sprint brand name. Our results ofoperations are dependent on the Sprint PCS network and, to a lesser extent, onthe networks of other PCS affiliates of Sprint Nextel.

As a PCS affiliate ofSprint Nextel, we purchase a full suite of support services from Sprint Nextelincluding billing, customer care, collections and national platform services.We pay a monthly per subscriber rate for these services which is reset everythree years. The current period for the service rates 

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ends December 31,2006, and the rates are due to be reset for the three-year period ending on December 31,2009. Sprint Nextel has notified us of proposed fees for these services for thenext three-year period pursuant to our services agreement. We are presently indiscussions with Sprint Nextel regarding its proposal. If we and Sprint Nextelcannot agree to new rates for these services for the upcoming three-yearperiod, we have the option to continue to purchase the services and have anarbitrator determine the new rate or self-provision or procure those serviceselsewhere, subject to certain rights and procedures relating to our ability totransition only customer care and collection services beginning in 2008. Wehave access to these services during the term of our management agreementunless Sprint provides us at least nine months’ advance notice of its intentionto terminate any particular significant service. If Sprint terminates service,our operations may be interrupted or restricted.

**CriticalAccounting Policies and Estimates**

The preparation of ourconsolidated financial statements requires us to make estimates and judgmentsthat affect the reported amounts of assets, liabilities, revenues and expenses,and related disclosures of contingent liabilities. The methods, estimates andjudgments we use in applying our accounting policies have a significant impacton the results we report in our consolidated financial statements. Some of ouraccounting policies require us to make subjective judgments, often as a resultof the need to make estimates of matters that are inherently uncertain. On anongoing basis, we evaluate our estimates, including, but not limited to, thoserelated to long-lived assets, goodwill, lease transactions, property andequipment, bad debt, inventory valuation, income taxes, deferred revenue andcontingencies. We base our estimates on historical experience and on variousother assumptions we believe to be reasonable under the circumstances, theresults of which form the basis for making judgments about the carrying valuesof assets and liabilities that are not readily apparent from other sources.Actual results may differ from these estimates under different assumptions orconditions. Some of the most critical accounting policies, including those thatrequire a significant amount of estimation or judgment in their application,include:

***RevenueRecognition:***

We recognize revenues when services have been renderedor products have been delivered, the price to the buyer is fixed anddeterminable, and collectibility is reasonably assured. We account for rebates,discounts and other sales incentives as a reduction to revenue. Subscriberrevenue consists of monthly recurring service charges for voice and dataservices and monthly non-recurring charges for local, long distance, travel androaming airtime usage and data usage in excess of the pre-subscribed usage planreceived from our subscribers, cancellation and late fee revenues andsurcharges, less reductions for billing adjustments and credits. Equipmentrevenue includes sales of handsets and accessories. Our revenue recognitionpolicies are consistent with the guidance in Emerging Issues Task Force Issue No. 00-21,“Accounting for Revenue Arrangements with Multiple Deliverables” (“EITF 00-21”),and Staff Accounting Bulletin No. 104, “Revenue Recognition.”

We recognize revenue from our subscribers as they usethe service. We pro-rate access revenue over the billing period and recordairtime usage in excess of the pre-subscribed usage plan. Our subscribers payan activation fee to us when they initiate service. Non-refundable, up-frontactivation fees billed in our direct sales channel are included in equipmentrevenue in the consolidated statement of operations to the extent that theaggregate activation fee and handset proceeds received from a subscriber do notexceed the fair value of the handset sold.

Roaming and wholesale revenue includes resellerrevenue, Sprint PCS travel revenue and non-Sprint PCS roaming revenue. Werecord Sprint PCS travel revenue on a per minute rate for voice services and ona per kilobit rate for data services when Sprint PCS subscribers based outsideour markets use our network. We record non-Sprint PCS roaming revenue whennon-Sprint PCS subscribers use our network. 

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We record reseller revenuewhen reseller subscribers use our network. Minutes and kilobytes are sold atwholesale rates.

Equipment revenue consists of proceeds from sales ofhandsets and accessories, which are recorded at the time of sale. Revenues fromsales of handsets and accessories represent a separate earnings process fromservice revenues because sales of handsets and accessories do not requirecustomers to subscribe to wireless services. Equipment revenue also includes anallocation of the arrangement consideration from activation revenue received aspart of revenue arrangements with multiple deliverables.

We participate in theSprint national and regional distribution programs in which national retailerssuch as RadioShack, Best Buy and Costco sell Sprint PCS products and services.In order to facilitate the sale of Sprint PCS products and services, nationalretailers purchase wireless handsets from Sprint Nextel for resale and receivecompensation from Sprint Nextel for Sprint PCS products and services sold. Forindustry competitive reasons, Sprint subsidizes the price of these handsets byselling the handsets at a price below cost. Under our agreements with SprintPCS, when a national retailer sells a Sprint PCS handset purchased from Sprintto a subscriber in our markets, we are obligated to reimburse Sprint for thehandset subsidy. We do not receive any revenues from sales of handsets andaccessories by national retailers. For a new subscriber activation and ahandset upgrade to an existing subscriber, we include these handset subsidycharges in cost of products sold in the consolidated statements of operations.

***Valuation of Accounts Receivable and Inventories:***

**Reservefor Doubtful Accounts—**Estimates are used indetermining our allowance for bad debt and are based both on our historicalcollection experience, current trends and credit policy and on a percentage ofour accounts receivables by aging category. In determining these percentages,we look at historical write-offs of our receivables. We also look at currenttrends in the credit quality of our customer base and changes in the creditpolicies. Sub-prime credit class customers are required to make a depositranging from $125 to $250 that can be credited against future billings. Underour Sprint PCS service plans, sub-prime credit class customers also are subjectto account spending limits, ranging from $125 to $250 depending on the creditquality of the customer, to control credit exposure. If our estimates of baddebt are insufficient for any reason, our operating income and available cash wouldbe reduced.

**Provision forObsolete/Excess Inventory—**We record a provision forobsolete or excess handset and accessories inventory for models and accessoriesthat are no longer manufactured and defective models and accessories that havebeen returned by customers. If the estimate of obsolete inventory isunderstated, our operating income would be reduced.

***Long-Lived Assets and Goodwill:***

Statement of Financial Accounting Standards (“SFAS”) No. 144,“Accounting for the Impairment or Disposal of Long-Lived Assets,” requires thatlong-lived assets be reviewed for impairment whenever events or changes incircumstances indicate that the carrying amount of an asset may not berecoverable. Recoverability is assessed based on the future cash flows expectedto result from the use of the asset and its eventual disposition. If the sum ofthe undiscounted cash flows is less than the carrying value of the asset, animpairment loss is recognized. Any impairment loss, if indicated, is measuredas the amount by which the carrying amount of the asset exceeds the fair valueof the asset. SFAS No. 142, “Goodwill and Other Intangible Assets,”requires that goodwill and certain intangible assets resulting from businesscombinations be reviewed for recoverability, and that annual tests forimpairment of goodwill and intangible assets that have indefinite useful livesbe performed. Any write-offs would result in a charge to earnings and areduction in equity in the period taken. As of October 31, 2005, wecompleted our annual impairment review and determined that no impairment chargewas required.

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Intangible assets consistof the unamortized cost of a Sprint PCS management agreement acquired in abusiness combination. Intangible assets are amortized over their estimateduseful life. As of December 31, 2005, the remaining useful life of theacquired Sprint PCS management agreement was approximately 14 years. If therewas a reduction in the useful life of this asset, our operating income would bereduced.

***Lease Transactions:***

We lease office space, retail stores, land for radiocommunications sites, leased space on radio communications sites and officeequipment under operating leases. Our accounting for an operating leasetransaction as of the lease’s inception involves judgments in determining thenumber of lease renewal periods to be included in the lease term, in additionto the initial non-cancelable term, used in recognizing rent expense on astraight-line basis. This judgment considers various factors that we wouldconsider at the time of opting to renew such leases, particularly whether anynonrenewal could result in an economic detriment to us or the forgoing of aneconomic benefit available to us. Additionally, the lease term can impact thedetermination of the period over which depreciable assets associated withoperating leases are depreciated.

If a lease with a leaseterm containing one or more renewal periods is not renewed after the initialterm has expired, then the carrying values of the deferred rent liabilityresulting from straight-line recognition of rent expense and any lease-relatedassets reflected in the consolidated balance sheet would be written off andreflected in our results of operations in the period such nonrenewal occurred.

***Income Taxes:***

As part of the process of preparing our consolidatedfinancial statements, we are required to estimate our income taxes in each ofthe jurisdictions in which we operate. This process involves managementestimating the actual current income tax expense together with assessing temporarydifferences resulting from differing treatment of items for tax and accountingpurposes in accordance with the provisions of SFAS No. 109, “Accountingfor Income Taxes.” These differences result in deferred income tax assets andliabilities, which are included in the consolidated balance sheets.

We have historically hadsufficient uncertainty regarding the realization of our deferred income taxassets, including a history of recurring operating losses, which resulted inthe recording of a full valuation allowance against all deferred income taxassets that were not offset by anticipated reversals of deferred income taxliabilities excluding the liability arising from goodwill amortization. Duringthe fourth quarter of 2005, we assessed the realizability of our deferredincome tax assets, which consists primarily of the tax benefit of our netoperating loss carryforwards. As a result of our positive earnings in 2005,projections of future taxable income and improvements in our financialposition, we determined that it is more likely than not that our deferredincome tax assets will be realized and have released the valuation allowance onour deferred income tax assets. Any significant changes in our assessment ofthe future realization of our deferred income tax assets would require us toconsider the need to increase the valuation allowance in an amount that couldbe material.

***Sprint Charges and Payments:***

We review all charges andpayments from Sprint and dispute items if appropriate based upon our interpretationof our agreements with Sprint and we record estimates primarily based on ourhistorical trends and our estimate of the amount which we believe we will remitto or receive from Sprint after the disputed item or items have been settled.

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**Recent Accounting Pronouncements**

In December 2004, the Financial AccountingStandards Board (“FASB”) issued SFAS No. 123 (revised 2004), “Share-BasedPayments” (“SFAS No. 123R”). SFAS No. 123R requires the recognitionof the cost of employee services received in exchange for an award of equityinstruments in the financial statements and measurement based on the grant-datefair value of the award. It requires the cost to be recognized over the periodduring which an employee is required to provide service in exchange for theaward. Additionally, compensation expense will be recognized over the remainingemployee service period for the outstanding portion of any awards for whichcompensation expense had not been previously recognized or disclosed under SFASNo. 123, “Accounting for Stock-Based Compensation” (“SFAS No. 123”).SFAS No. 123R replaces SFAS No. 123 and supersedes AccountingPrinciples Board (“APB”) Opinion No. 25, “Accounting for Stock Issued toEmployees” (“APB No. 25”), and its related interpretations.

In April 2005, the Securities and ExchangeCommission announced the adoption of a new rule that amended thecompliance dates for SFAS No. 123R and required its adoption by no laterthan January 1, 2006. SFAS No. 123R provides for different transitionmethods for past award grants, including restatement of prior period results.We plan to apply the modified prospective transition method to all past awardsoutstanding and unvested as of the required effective date of January 1,2006 and will recognize the associated expense over the remaining vestingperiod based on the fair values previously determined and disclosed as part ofour pro forma disclosures under SFAS No. 123. As such, we will not restatethe results of prior periods. We do not expect the impact of adopting SFASNo. 123R to result in the recognition of an annual expense materiallydifferent from the stock-based employee compensation expense for the year endedDecember 31, 2005 reflected in our pro forma disclosures under SFASNo. 123. The stock-based employee compensation expense currentlyrecognized under variable accounting will no longer be recognized upon theadoption of SFAS No. 123R.

In March 2005, the FASB issued InterpretationNumber 47, “Accounting for Conditional Asset Retirement Obligations, aninterpretation of FASB Statement No. 143” (“FIN 47”). FIN 47 clarifies theterm “conditional asset retirement obligation” as used in SFAS No. 143,“Accounting for Asset Retirement Obligations,” and also clarifies when anentity would have sufficient information to reasonably estimate the fair valueof an asset retirement. FIN 47 is effective no later than the end of fiscalyears ending after December 15, 2005. The adoption of FIN 47 did not havea material impact on our financial position, results of operations or cashflows.

In May 2005, the FASB issued SFAS No. 154,“Accounting Changes and Error Corrections” (“SFAS No. 154”), whichreplaces APB Opinion No. 20, “Accounting Changes,” and SFAS No. 3,“Reporting Accounting Changes in Interim Financial Statements-An Amendment ofAPB Opinion No. 28.” SFAS No. 154 provides guidance on the accountingfor and reporting of accounting changes and error corrections. It establishesretrospective application, or the latest practicable date, as the requiredmethod for accounting for and reporting a change in accounting principle and acorrection of an error. SFAS No. 154 is effective for accounting changesand corrections of errors made in fiscal years beginning afterDecember 15, 2005, and we are required to adopt SFAS No. 154 no laterthan January 1, 2006. We do not expect that the adoption of SFASNo. 154 will have a material impact on our financial position, results ofoperations or cash flows.

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**Results ofOperations**

We provide certainfinancial measures that are calculated in accordance with accounting principlesgenerally accepted in the United States (GAAP) and adjustments to GAAP(non-GAAP) to assess our financial performance. In addition, we use certainnon-financial terms that are not measures of financial performance under GAAP.Terms such as customer net additions and churn are terms used in the wirelesscommunications industry. The non-GAAP financial measures of average revenue peruser and cost per gross addition reflect standard measures of liquidity,profitability or performance. The non-financial terms and the non-GAAP measuresreflect wireless communications industry conventions and are commonly used bythe investment community for comparability purposes. The non-GAAP measuresincluded in this report are reconciled below in “—Liquidity and CapitalResources—Reconciliation of non-GAAP financial measures.”

***Analysis of the years ended December 31, 2005 and2004***

***Customer NetAdditions***

As of December 31,2005, we provided personal communications services to approximately 447,900customers compared to approximately 398,500 customers as of December 31,2004. During the year ended December 31, 2005, we added 53,300 net newsubscribers compared to 70,800 net new subscribers for the year ended December 31,2004. The decrease was primarily attributable to lower gross customeradditions. As of April 1, 2005, we reclassified approximately 3,900customers to reseller subscribers. We expect customer net additions in 2006 totrend below 2005 levels.

***Churn***

Churn is the monthly rateof customer turnover expressed as the percentage of customers of the beginningcustomer base that both voluntarily and involuntarily discontinued serviceduring the period. Churn is computed by dividing the number of customers thatdiscontinued service during the month, net of 30 day returns, by the beginningcustomer base for the period. Churn for the year ended December 31, 2005was approximately 2.5% compared to approximately 2.9% for the year ended December 31,2004. Involuntary churn declined 0.2% due to the effect of changes in creditpolicies. Voluntary churn declined 0.2% due to an increased percentage of ourcustomer base on two-year contracts and service plans with lower overagecharges.

***Average Revenue PerUser (ARPU)***

Average revenue per user(ARPU) summarizes the average monthly subscriber revenue per customer. ARPU iscomputed by dividing subscriber revenue by the average subscribers for theperiod. During the years ended December 31, 2005 and 2004, our ARPU wasapproximately $56 and $57, respectively. Voice ARPU declined $4 primarily as aresult of increased penetration of customers on fair and flexible and familyplans and promotional credits, partially offset by an increase in data ARPU of$3. We expect increases in data ARPU to substantially offset voice ARPUdeclines in future periods.

***Cost Per GrossAddition (CPGA)***

Cost per gross addition(CPGA) summarizes the average cost to acquire new customers during the period.CPGA is computed by adding the statement of operations components of sellingand marketing expense and the cost of products sold, and reducing that amountby the equipment revenue recorded. The net result of these components is thendivided by the gross customers acquired during the period. CPGA wasapproximately $487 for the year ended December 31, 2005 compared to CPGAof approximately $471 for the year ended December 31, 2004. The increasein CPGA was primarily due to the effects of higher fixed costs spread overlower gross additions of $27 per gross addition and higher commission costs of$11 

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pergross addition, partially offset by the effect of lower handset promotion andsubsidy costs of $20 per gross addition. CPGA in 2006 is expected to remain at similarlevels as experienced in the fourth quarter of 2005, which was approximately$445 per gross addition.

***Revenues***

·       *SubscriberRevenue*.   Subscriber revenue during the years ended December 31,2005 and 2004 was approximately $281.6 million and $250.0 million,respectively. Subscriber revenue consists of monthly recurring service chargesfor voice and data usage and monthly non-recurring charges for local, longdistance, travel and roaming airtime usage and data usage in excess of thepre-subscribed usage plan amount received from our subscribers, cancellationand late fee revenues and surcharges, less reductions for billing adjustmentsand billing corrections. Our customers’ charges are dependent on their rateplans, based on the number of minutes and data usage included in their plans.The increase in subscriber revenue was primarily attributable to the effect ofthe increase in our subscriber base of approximately $38.3 million offset bythe effect of the decrease in our average revenue per user (ARPU) ofapproximately $6.7 million. We expect subscriber revenue to grow at a slightlyslower rate in 2006 than that experienced in 2005.

·       *Roaming andWholesale Revenue*.   Roaming and wholesale revenue consists ofSprint PCS travel revenue, non-Sprint PCS roaming revenue and reseller revenue.Travel revenue is generated on a per minute rate for voice services or on a perkilobit rate for data services when a Sprint PCS subscriber based outside ourmarkets uses our network. An additional long distance rate per minute isgenerated when that customer initiates a call from our network to call outsidethe local calling area. Non-Sprint PCS roaming revenue is generated when a non-SprintPCS subscriber uses our network. Reseller revenue is generated when a resellersubscriber uses our PCS network. We have reseller programs with severalcompanies, including Virgin Mobile USA and Qwest Communications.

Roaming and wholesalerevenue during the years ended December 31, 2005 and 2004 wasapproximately $125.6 million and $102.9 million, respectively. The increase inroaming and wholesale revenue was due to increases in Sprint PCS travelrevenues for voice and data services of approximately $14.0 million and $5.3million, respectively, and an increase in reseller revenue of approximately$10.9 million offset by a decrease in non-Sprint PCS roaming revenue ofapproximately $7.5 million. The increase in Sprint PCS travel revenue wasprimarily due to increases in travel minutes of use and data usage of 23% and68%, respectively. The increase in reseller revenue was due to a full year ofQwest reseller revenue in 2005 as compared to approximately seven months ofsuch revenue in 2004. The decrease in non-Sprint PCS roaming revenue wasprimarily due to reductions in roaming minutes of use and the roaming rates wereceive of approximately $6.6 million and $0.9 million, respectively, both ofwhich were primarily related to roaming activity with a significant roamingpartner. We expect roaming and wholesale revenue in 2006 to grow at a slowerrate than that experienced in 2005.

·       *Equipment Revenue*.   Equipment revenue is generated fromthe sale of handsets and accessories and is recorded at the time of sale. Werecord and retain 100% of the revenue from the sale of handsets andaccessories, net of rebates, discounts and other sales incentives, as equipmentrevenue. Equipment revenue recorded during the years ended December 31,2005 and 2004 totaled approximately $15.5 million and $13.1 million,respectively. The increase was primarily due to sales of certain promotionalproducts to a third party totaling approximately $1.5 million.

***Cost of Service and Operations***

·       *Network Operations Expenses*.   Network operationsexpenses include radio communications site lease costs, utilities, networkcontrol maintenance, network control site leases, engineering 

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personnel, transportfacilities and interconnection charges. Network operations expenses totaled approximately$66.1 million during the year ended December 31, 2005 compared toapproximately $64.1 million during the year ended December 31, 2004.The increase in network operations expenses was primarily due to the effect ofan increase in interconnection charges resulting from increased minutes of useof approximately $1.0 million and an increase in radio communications sitelease expense of approximately $1.4 million primarily resulting from additionalradio communications sites. We expect network operations expenses in 2006 togrow at a similar rate as that experienced in 2005.

·       *Travel andRoaming Expenses*.   We pay Sprint PCStravel fees on a per minute rate for voice services or on a per kilobit ratefor data services when our customers use the Sprint PCS network outside ourmarkets and we incur additional long distance fees when our customers call longdistance originating outside our markets. We also pay roaming fees to otherwireless providers when our customers use their network. Travel and roaming expensestotaled approximately $56.1 million and $47.7 million for the years ended December 31,2005 and 2004, respectively. The increase in travel and roaming expenses wasprimarily due to the increase in our subscriber base. We expect travel androaming expenses to increase with growth in our subscriber base.

·       *Bad DebtExpense*.   Baddebt expense during the years ended December 31, 2005 and 2004 wasapproximately $4.3 million and $5.6 million, respectively. The decrease in baddebt expense was primarily attributable to lower customer write-offs fromhigher deposit requirements for customers in certain credit classes. We expectbad debt expense to grow proportionately with the growth of subscriber revenue.

·       *Sprint Operating Expenses*.   Sprint operatingexpenses during the years ended December 31, 2005 and 2004 wereapproximately $58.9 million and $52.9 million, respectively. Sprint operatingexpenses included Sprint PCS management fee expense and other fees we paid toSprint for the use of its support services, including billing and collectionsservices and customer care. The increase in Sprint operating expenses wasprimarily attributable to the effect of the increase in our subscriber base ofapproximately $8.0 million, offset by savings of approximately $2.0 millionfrom service fee reductions related to 2004 amendments to our agreements withSprint PCS. We expect Sprint operating expenses to grow consistently withgrowth in our subscriber base.

***Cost of ProductsSold***

The cost of products soldincludes the costs of handsets and accessories and totaled approximately $36.2million and $38.3 million during the years ended December 31, 2005 and2004, respectively. The cost of handsets generally exceeds the sales pricebecause we subsidize the cost of handsets to subscribers, consistent withindustry practice. Handset subsidies on units sold by third parties totaledapproximately $7.7 million and $12.7 million for the years ended December 31,2005 and 2004, respectively. The decrease in cost of products sold was primarilydue to the effects of the decrease in customer gross additions of approximately$2.3 million and sales of less expensive handset models of approximately $2.1million, partially offset by the cost of certain promotional products sold to athird party totaling approximately $1.7 million.

***Selling andMarketing***

Selling and marketingexpenses relate to our distribution channels, sales representatives, salessupport personnel, retail stores, advertising programs and commissions. Weincurred selling and marketing expenses of approximately $67.5 million duringeach of the years ended December 31, 2005 and 2004.

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***General andAdministrative***

We incurred general andadministrative expenses totaling approximately $23.2 million and $17.2 millionduring the years ended December 31, 2005 and 2004, respectively. For theyear ended December 31, 2005, general and administrative expenses includedexpenses incurred in connection with our litigation against Sprint Nextel ofapproximately $4.3 million. The remaining increase was primarily due toincreases in expenses for employee salaries, payroll taxes and benefits. Weexpect litigation expenses in connection with Sprint Nextel to be less in 2006than in 2005. Other general and administrative expenses are expected toincrease with the cost of inflation in 2006.

***Non-CashCompensation***

During the years ended December 31,2005 and 2004, non-cash compensation expense totaled approximately $2.9 millionand $3.4 million, respectively. We apply the provisions of APB No. 25 andrelated interpretations in accounting for our equity incentive plan. In May 2002,we modified 1,220,800 options previously issued to employees and board membersunder our equity incentive plan to reduce the exercise price to $4.00, whichwas approximately $2.14 per share above the fair market value on the date ofmodification. The modification reducing the exercise price resulted in variableaccounting for these options from the date of modification to the date theoptions are exercised, forfeited or expire unexercised. Under variableaccounting, stock-based employee compensation expense was recognized forincreases or decreases in the amount by which the fair market value of ourcommon stock exceeds the exercise price of the modified options, totalingapproximately $2.9 million and $3.4 million for the years ended December 31,2005 and 2004, respectively. Upon the adoption of SFAS No. 123R as of January 1,2006, we will begin recognizing stock-based employee compensation expense basedon the grant-date fair value of all equity awards to employees and will nolonger recognize expense under variable accounting.

***Depreciation, Amortization and Accretion***

Depreciation, amortizationand accretion expense for the years ended December 31, 2005 and 2004totaled approximately $51.3 million and $49.9 million, respectively. Wedepreciate our property and equipment using the straight-line method overtwo to 10 years. A building owned by us is being depreciated using thestraight-line method over 30 years. Amortization of intangible assets withfinite useful lives is over 18 years. Accretion expense increases the assetretirement obligation associated with our tower leases, switch site and retailand administrative locations to its present value. The increase indepreciation, amortization and accretion expense was primarily due to higherdepreciation expense resulting from net additions to our network equipmentduring the previous twelve months, partially offset by the impact ofaccelerated depreciation of our minicell base stations totaling approximately$5.0 million for the year ended December 31, 2004 as compared toapproximately $0.7 million for the year ended December 31, 2005.

***Interest Income***

For the years ended December 31,2005 and 2004, interest income was approximately $3.1 million and $0.9 million,respectively. Interest income increased as a result of maintaining higheraverage cash balances and earning more interest due to higher interest rates ascompared to the same period in 2004. We expect interest income to increase in 2006as cash and cash equivalents increase.

***Interest Expense***

Interest expense totaledapproximately $43.5 million and $40.1 million during the years ended December 31,2005 and 2004, respectively. Interest is accrued on our notes on a per annumbasis at the interest rate of 9.875%. Prior to the refinancings of our debtduring 2004, interest on our 14% senior discount notes due May 15, 2010 (“14%Senior Notes”) was recorded as part of the carrying value of the 

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14%Senior Notes and not included in our 2004 interest expense in accordance withapplicable provisions of SFAS No. 15, “Accounting for Debtors andCreditors for Troubled Debt Restructurings” (“SFAS No. 15”). After therefinancings, none of our debt follows the provisions of SFAS No. 15 and,as a result, interest expense was higher in 2005 as compared to 2004. We expectinterest expense in 2006 to be comparable to the amount recorded in 2005.

***Income Taxes***

For the years ended December 31,2005 and 2004, income tax benefit (expense) was approximately $31.7 million and$(0.6) million, respectively. As a result of the assessment of therealizability of our deferred income tax assets during the fourth quarter of2005, we released the valuation allowance on our deferred income tax assets,resulting in an income tax benefit in our consolidated statement of operationsof approximately $32.1 million. Deferred income tax assets consist primarily ofthe tax benefit of our net operating loss carryforwards, which now are morelikely than not to be realized. Income tax expense will be recognized during2006 based on the estimated annual federal and state effective tax rate appliedto pre-tax income. While this tax expense will reduce net income, no cash willbe paid for income taxes, other than any required alternative minimum tax andstate tax payments, until the net operating loss carryforwards have been fullyutilized.

***Net Income (Loss)***

For                the year ended December 31, 2005, our net incomewas approximately $47.7 million and for the year ended December 31, 2004,our net loss was approximately $(15.3) million. For the year ended December 31,2005, we recognized an income tax benefit of approximately $32.1 millionrelating to the release of our valuation allowance on our deferred income taxassets. We recognized a gain on debt retirement of approximately $4.9 millionfor the year ended December 31, 2004.

***Analysis of the years ended December 31, 2004 and2003***

***Customer Net Additions***

As of December 31,2004, we provided personal communications services to approximately 398,500customers, an increase of approximately 70,800 from December 31, 2003.During 2003, we added 70,700 net new subscribers.

***Churn***

Churn for the year endedDecember 31, 2004 was approximately 2.9% compared to approximately 3.2%for the year ended December 31, 2003. The decrease in churn was primarilythe result of the improvement in the credit quality of the overall customerbase resulting in less service being discontinued involuntarily.

***Average Revenue Per User (ARPU)***

During each of the yearsended December 31, 2004 and 2003, our ARPU was approximately $57.

***Cost Per Gross Addition (CPGA)***

CPGA was approximately$471 for the year ended December 31, 2004 compared to CPGA ofapproximately $450 for the year ended December 31, 2003. The increase inCPGA was primarily due to higher handset upgrade costs of approximately $15 pergross addition and the effect of increased handset promotion costs ofapproximately $3 per gross addition.

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***Revenues***

·       *Subscriber Revenue.  *Subscriberrevenue during the years ended December 31, 2004 and 2003 wasapproximately $250.0 million and $197.6 million, respectively. Theincrease in subscriber revenue was primarily attributable to the effect of theincrease in our subscriber base.

·       *Roaming and Wholesale Revenue  *Roaming and wholesale revenue during the years ended December 31, 2004 and2003 was approximately $102.9 million and $63.4 million, respectively. Theincrease in roaming and wholesale revenue was due to increases in Sprint PCStravel revenues for voice and data services of approximately $18.7 million and$4.9 million, respectively, and increases in non-Sprint roaming and resellerrevenues of approximately $6.0 million and $9.9 million, respectively. Theincreases in Sprint PCS travel revenue and non-Sprint roaming revenue wereprimarily due to increases in travel and roaming minutes of use and data usage.Our increase in reseller subscribers from approximately 22,700 as of December 31,2003 to approximately 98,600 as of December 31, 2004 was the primaryfactor for our increase in reseller revenues.

·       *Equipment Revenue*.   The amountsrecorded during the years ended December 31, 2004 and 2003 from equipmentrevenue totaled approximately $13.1 million and $12.2 million,respectively. The increase was primarily due to an increase in the allocationof activation revenue to equipment revenue in accordance with EITF 00-21of approximately $0.7 million.

***Cost of Service and Operations***

·       *Network Operations Expenses*.   Networkoperations expenses totaled approximately $64.1 million during the yearended December 31, 2004 compared to approximately $58.6 millionduring the year ended December 31, 2003. The increase was primarily due tothe effect of an increase in interconnection charges of approximately $2.2million resulting from increased minutes of use and the effect of an increasein radio communications sites on backhaul and site lease expenses ofapproximately $3.7 million.

·       *Travel and Roaming Expenses*.   Traveland roaming expense totaled approximately $47.7 million and $32.3 million forthe years ended December 31, 2004 and 2003, respectively. The increase intravel and roaming expenses was primarily due to increases in Sprint PCS travelexpenses for voice and data services of approximately $12.7 million and $2.8million, respectively. The increase in Sprint PCS travel expense was due toincreases in travel minutes of use and data usage, primarily due to anapproximate 26% increase in our subscriber base.

·       *Bad Debt Expense.  *Bad debt expenseduring the years ended December 31, 2004 and 2003 was approximately$5.6 million and $1.7 million, respectively. The increase in bad debtexpense was primarily attributable to the credit adjustment of approximately$1.2 million due to the resolution of disputed charges with Sprint and a$1.3 million reduction in operating expenses related to the transitionfrom the “collected revenue” to the “billed revenue” method with Sprint forreconciling amounts due to us for accounts receivable during the year ended December 31,2003. The remaining increase is primarily attributable to subscriber revenuegrowth.

·       *Sprint Operating Expenses  * Sprint operating expensesduring the years ended December 31, 2004 and 2003 were approximately$52.9 million and $44.9 million, respectively. The increase in Sprintoperating expenses was primarily attributable to the effect of the increase inour subscriber base of approximately $10.9 million, offset by savings relatedto the amendment to our agreements with Sprint PCS effective in 2003 ofapproximately $2.9 million.

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***Cost of Products Sold***

Cost of products soldtotaled approximately $38.3 million and $40.2 million during theyears ended December 31, 2004 and 2003, respectively. Handset subsidies onunits sold by third parties totaled approximately $12.7 million and$15.5 million for the years ended December 31, 2004 and 2003,respectively.

***Selling and Marketing***

We incurred selling andmarketing expenses of approximately $67.5 million and $53.7 million duringthe years ended December 31, 2004 and 2003, respectively. The increase inselling and marketing expenses was primarily attributable to the effects of theincreases in gross additions and the number of customer handset upgrades ofapproximately $5.1 million and $2.8 million, respectively, and an increase inadvertising expense of approximately $1.3 million.

***General and Administrative***

We incurred general andadministrative expenses totaling approximately $17.2 million and$15.0 million during the years ended December 31, 2004 and 2003,respectively. The increase in general and administrative expenses was primarilydue to an increase in compensation expenses of approximately $0.8 million, anincrease in insurance expenses of approximately $0.5 million due to increasesin certain insurance coverages and the initial costs of complying with theSarbanes-Oxley Act of 2002 of approximately $0.7 million.

***Non-Cash Compensation***

During the years ended December 31,2004 and 2003, non-cash compensation totaled approximately $3.4 million and$0.2 million, respectively. Under variable accounting for our modifiedstock options, compensation expense of approximately $3.4 million wasrecognized in 2004 for the excess of the common stock’s fair market value overthe modification price. During 2003, the fair market value of our common stockhad not exceeded the modified price and, as such, no compensation expense hadbeen recorded for our modified stock options.

***Depreciation, Amortization and Accretion***

Depreciation, amortizationand accretion expense for the years ended December 31, 2004 and 2003totaled approximately $49.9 million and $46.9 million, respectively. Theincrease in depreciation, amortization and accretion expense was primarily dueto the impact of accelerated depreciation of our existing minicell basestations resulting from our reduction of their estimated useful lives during2003 totaling approximately $5.0 million and increases in depreciation expenseof approximately $0.8 million resulting from net additions to our networkequipment during 2004, offset by an approximate $2.8 million decrease inamortization expense attributable to the VIA Wireless subscriber base, whichwas fully amortized as of March 31, 2003.

***Interest Income***

For the years ended December 31,2004 and 2003, interest income was approximately $0.9 million and$0.6 million, respectively.

***Interest Expense***

Interest expense totaledapproximately $40.1 million and $31.2 million during the years ended December 31,2004 and December 31, 2003, respectively. The increase in interest expenseprimarily 

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resultedfrom our refinancing of the outstanding borrowings under our senior securedcredit facility in the first quarter of 2004 with longer term higher fixed ratenotes.

***Gain on Debt Retirements***

During the first quarter of 2004,Operating Company issued $270.0 million aggregate principal amount of 9.875%senior notes due March 1, 2011 (the “9.875% Senior Notes”), in atransaction exempt from the registration requirements of the Securities Act of1933, as amended. The 9.875% Senior Notes were issued at a discount andgenerated approximately $265.3 million in proceeds. The proceeds were usedto repay and terminate Operating Company’s senior secured credit facility,including the repayment of $230.0 million in outstanding borrowings plusaccrued interest and termination of its unused $47.7 million revolvingline of credit, to redeem all of its outstanding 14% Series B seniordiscount notes due 2008 (“14% Series B Senior Notes”) ($14.5 millionoutstanding principal amount) for approximately $12.5 million, and topurchase $16.7 million principal amount of its outstanding 14% SeniorNotes for approximately $15.9 million.Therepayments of the senior secured credit facility and the 14% Series BSenior Notes and the purchase of the 14% Senior Notes resulted in a net gain ondebt retirements of approximately $1.1 million, consisting of a loss on thepurchase of the 14% Senior Notes of approximately $1.6 million, the write-offof deferred financing fees related to the senior secured credit facility andthe 14% Series B Senior Notes of approximately $7.7 million, the write-offof unamortized debt discount for detachable warrants associated with the 14% Series BSenior Notes of approximately $3.6 million and costs of approximately $0.1million related to the termination of the senior secured credit facility, netof a gain of approximately $14.1 million recognized on the reduction incarrying value of the future cash payments associated with the purchased 14%Senior Notes.

During the fourth quarterof 2004, Operating Company completed a financing of an additional $150.0million aggregate principal amount of 9.875% Senior Notes in a transactionexempt from the registration requirements of the Securities Act. These 9.875%Senior Notes are of the same class as the previously outstanding $270.0 millionaggregate principal amount of 9.875% Senior Notes and were issued at a price of103.5% generating approximately $155.3 million in proceeds. Operating Companyused approximately $139.3 million of these cash proceeds to fund a cash tenderoffer and consent solicitation for its outstanding 14% senior subordinateddiscount notes due 2010 (“14% Subordinated Notes”) and 14% Senior Notes.Approximately $100.4 million aggregate principal amount of 14% SubordinatedNotes and approximately $31.4 million aggregate principal amount of 14% SeniorNotes were validly tendered and accepted. The purchases of the 14% SubordinatedNotes and the 14% Senior Notes resulted in a net gain on debt retirements ofapproximately $3.8 million, consisting of a loss on the purchases of such notesof approximately $16.2 million, the write-off of deferred financing fees relatedto the notes of approximately $1.2 million and the write-off of unamortizeddebt discount for detachable warrants associated with the 14% SubordinatedNotes of approximately $2.9 million, net of a gain of approximately $24.1million recognized on the reduction in carrying value of the future cashpayments associated with the purchased 14% Senior Notes.

***Income Taxes***

For the years ended December 31,2004 and 2003, we recognized income tax expense of $0.6 million and$0.8 million, respectively. Income tax expense for 2004 and 2003 wascomprised primarily of deferred income taxes that resulted from an expectedincome tax deduction for amortization of goodwill, which is not amortizable toexpense for financial reporting purposes.

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***Net Loss***

For the years ended December 31,2004 and 2003, our net loss was approximately $15.3 million and$8.6 million, respectively. We recognized gains on debt retirements ofapproximately $4.9 million and $43.1 million during the years ended December 31,2004 and 2003, respectively.

**Liquidity and Capital Resources**

From inception through December 31, 2002, weprincipally relied on the proceeds from equity and debt financings, and to alesser extent revenues, as our primary sources of capital. In 2003, 2004 and2005, we generated cash flow from operating activities of approximately $14.5million, $55.4 million and $69.8 million, respectively.

Although we substantially completed our contractuallyrequired network coverage build-out in 2002, our business could requireadditional capital expenditures for capacity enhancements and coverageimprovements. Capital expenditures for the years ended December 31, 2005,2004 and 2003 totaled approximately $43.3 million, $27.0 million and $25.9million, respectively. Since 2003, we have funded and expect to fund all of ourfuture capital expenditures through cash flows from operating activities, cashand cash equivalent balances.

In February 2005, we announced a network coverageexpansion, which is expected to cost approximately $13 million and is expectedto be completed in 2006. As part of this expansion, we entered into anagreement with an equipment vendor to acquire network equipment. The agreementprovides for a minimum purchase commitment of $18 million in each of the years2006 through 2008 for all network equipment and performance services that wepurchase.

In December 2004, Sprint announced its intentionto deploy the next generation of CDMA technology known as EV-DO throughout itsnetwork. EV-DO technology is expected to generate higher network data speedsand allow the introduction of new data products and features. While Sprint hasnot required the implementation of EV-DO by us or its other PCS affiliates, webegan deploying EV-DO in selected markets in the third quarter of 2005 and coveredapproximately 10% of the population in our markets at the end of 2005 for anapproximate cost of $3.5 million.

In February 2004,Operating Company issued $270.0 million aggregate principal amount of the9.875% Senior Notes at a discount generating approximately $265.3 millionin proceeds, and in October 2004, Operating Company issued an additional$150.0 million aggregate principal amount of 9.875% Senior Notes of the sameclass at a price of 103.5% generating cash proceeds of approximately $155.3million, in transactions exempt from the registration requirements of theSecurities Act. The 9.875% Senior Notes were subsequently registered under theSecurities Act. Interest on the 9.875% Senior Notes became payable semiannuallybeginning on September 1, 2004. The 9.875% Senior Notes are redeemable inwhole or in part on or after March 1, 2007. UbiquiTel has fully andunconditionally guaranteed Operating Company’s obligations under the 9.875%Senior Notes. The proceeds from these offerings in 2004 were used to repay andterminate Operating Company’s senior secured credit facility, to redeem all ofits outstanding 14% Series B Senior Notes and to repurchase all of itsoutstanding 14% Subordinated Notes and 14% Senior Notes.

Under the indenture governing the 9.875% Senior Notes,Operating Company is permitted to issue additional notes from time to time.Prior to March 1, 2007, Operating Company may redeem up to 35% of theaggregate principal amount of the 9.875% Senior Notes with net cash proceeds ofa sale of its equity or a contribution to its common equity capital, providedthat at least 65% of the principal amount of 9.875% Senior Notes originallyissued under the indenture remains outstanding after giving effect to suchredemption and such redemption occurs within 45 days of the date of such saleof equity interests or contribution. We do not have any current plans to sellequity interests of Operating Company or make any 

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capital contributions toits common equity capital and, as such, do not currently anticipate exercisingthis optional redemption right.

The $420.0 million aggregate principal amount of9.875% Senior Notes outstanding as of December 31, 2005 will require cashpayments of interest of $41.5 million in each of the years 2006 through 2011.We presently are in compliance with all covenants in the indenture associatedwith the 9.875% Senior Notes. We may from time to time purchase outstanding9.875% Senior Notes and/or shares of UbiquiTel common stock in the open market,in privately negotiated transactions or otherwise in accordance with our debtagreements and applicable law.

As of December 31, 2005, we had approximately$127.3 million of working capital, including $121.1 million in cash and cashequivalents. Management expects cash and cash equivalents, combined with cashflow from operating activities, to be sufficient to meet capital expendituresneeds and service debt requirements through December 31, 2006 and into theforeseeable future.

While management does notanticipate the need to raise additional capital to meet our operating orcapital expenditure requirements in the foreseeable future, our funding statusis dependent on a number of factors influencing projections of operating cashflows, including those related to gross new customer additions, customerturnover, revenues, marketing costs, bad debt expense and roaming and resellerrevenue. Management believes our financial position will be sufficient to meetthe cash requirements of the business including capital expenditures, cashinterest and working capital needs. We from time to time evaluate options foradditional financings to supplement our liquidity position and maintain maximumfinancial flexibility. However, if actual results differ significantly fromthese assumptions, our liquidity position could be adversely affected and wecould be in a position that would require us to raise additional capital, whichmay not be available or may not be available on acceptable terms.

***Contractual Obligations***

We areobligated to make future payments under various contracts we have entered into,including amounts pursuant to noncancelable operating lease agreements foroffice space, retail stores, land for radio communications sites, leased spaceon radio communications sites and office equipment; purchase obligations; thebuilding mortgage; and the 9.875% Senior Notes. The following table lists ourexpected future minimum contractual cash obligations for the next five yearsand in the aggregate as of December 31, 2005 (dollars in thousands):

| ** **                      | ** ** | ** ** | ** ** | ** ** | ** ** | **Payments due by year ending December 31,** | ** ** | ** ** | ** ** |
|---------------------------------|------------|------------|------------|------------|------------|----------------------------------------------------------------------------|------------|------------|------------|
| **Contractual obligation** | ** ** | ** ** | ** ** | **Total**  | ** ** | **2006**                                                                   | ** ** | **2007**   | ** ** | **2008** | ** ** | **2009** | ** ** | **2010** | ** ** | **Thereafter** | ** ** |
| Operating  leases(1)            |       | $          | 91,510     |       | $          | 18,662                                                                     |       | $          | 18,027     |   | $ | 15,939 |   | $ | 15,090 |   | $ | 11,754 |   | $ | 12,038 |   |
| Purchase  obligations(2)        |       | 64,228     |       | 22,582     |       | 20,627                                                                     |       | 19,570     |       | 903 |   | 546 |   | — |   |
| Building  mortgage(3)           |       | 3,005      |       | 240        |       | 257                                                                        |       | 275        |       | 295 |   | 317 |   | 1,621 |   |
| 9.875% Senior  Notes(3)         |       | 420,000    |       | —     |       | —                                                                     |       | —     |       | — |   | — |   | 420,000 |   |
|                            |       | $          | 578,743    |       | $          | 41,484                                                                     |       | $          | 38,911     |   | $ | 35,784 |   | $ | 16,288 |   | $ | 12,617 |   | $ | 433,659 |   |

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(1)          Doesnot include payments due under renewals to the original lease term.

(2)          OperatingCompany is committed to purchase network equipment and network performanceservices at a minimum annual commitment of $18 million during the years 2006through 2008 pursuant to an agreement with a third party. Also includescommitments for backhaul circuits under usage agreements with certaintelecommunications providers through 2010.

(3)          Totalrepayments, excluding interest payments, are based on borrowings outstanding asof December 31, 2005.

Thereare provisions in the indenture governing the 9.875% Senior Notes that providefor an acceleration of repayment upon an event of default, as defined in theindenture.

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***Analysis of Cash Flows***

A significant portion of our revenues is generatedfrom customers who subscribe to service from us, our resellers or Sprint Nextelon contracts that range from one to two years. Our cash flow from operatingactivities will fluctuate with the size of our subscriber base and indirectlyfrom the size of Sprint Nextel’s PCS subscriber base and the recurringsubscriber, reseller and roaming revenue streams generated from Sprint PCScustomers. We expect cash flow from operating activities will continue to growin 2006 and in future periods as our subscriber base continues to grow.

Net cash provided by operating activities wasapproximately $69.8million and $55.4million for the years ended December 31, 2005 and 2004, respectively. Theincrease in cash provided by operating activities was primarily due to theincrease in operating income of approximately $36.8 million partially offset bythe increase in cash paid for interest of approximately $24.2 million.

Net cash used in investing activities wasapproximately $43.3million and $25.8million for the years ended December 31, 2005 and 2004, respectively. Theincrease resulted primarily from higher capital expenditures for base stationsfor network coverage expansion and EV-DO deployment.

Net cash provided byfinancing activities for the year ended December 31, 2005 wasapproximately $2.9million,consisting primarily of proceeds from the exercise of stock options andwarrants. Net cash provided by financing activities was approximately $5.0 million for the year ended December 31,2004, resulting primarily from cash proceeds of approximately $155.3 millionfrom our October 2004 issuance of 9.875% Senior Notes net of cash paymentsof approximately $139.3 million to purchase approximately $100.4 millionaggregate principal amount of 14% Subordinated Notes and approximately $31.4million aggregate principal amount of 14% Senior Notes.

***Reconciliation of non-GAAP financial measures***

We utilize certainfinancial measures that are not calculated in accordance with accountingprinciples generally accepted in the United States, or GAAP, to assess ourfinancial performance. A non-GAAP financial measure is defined as a numericalmeasure of a company’s financial performance that (a) excludes amounts, oris subject to adjustments that have the effect of excluding amounts, that areincluded in the comparable measure calculated and presented in accordance withGAAP in the statement of income or statement of cash flows; or (b) includesamounts, or is subject to adjustments that have the effect of includingamounts, that are excluded from the comparable GAAP measure so calculated andpresented. The non-GAAP financial measures discussed in “—Results of Operations”are average revenue per user (ARPU) and cost per gross addition(CPGA).Descriptions of these non-GAAP financial measures are provided where theparticular measures are discussed in “—Results of Operations—Analysis of theyears ended December 31, 2005 and 2004,” and the following tablesreconcile the non-GAAP financial measures with our consolidated financialstatements presented in accordance with GAAP (excluding subscriber data).

| ** **                                              | ** ** | **Year Ended December 31,** | ** **  |
|---------------------------------------------------------|------------|--------------------------------------------|-------------|
| **Average revenue per user (ARPU)** | ** ** | ** **                                 | ** **  | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| Subscriber  revenue                                     |       | $                                          | 281,622,000 |   | $ | 250,034,000 |   | $ | 197,633,000 |   |
| Average  subscribers                                    |       | 422,500                                    |        | 365,100 |   | 290,100 |   |
| ARPU                                                    |       | $                                          | 56          |   | $ | 57 |   | $ | 57 |   |
|                                                         |            |                                            |             |  |  |  |  |  |  |  |  |  |

 

We believe ARPU, which calculates the average monthlyservice revenue per customer, is a useful measure to assist in evaluating ourpast and forecasting our future subscriber revenue. In addition, it provides agauge to compare our subscriber revenue to that of other wirelesscommunications providers, although other wireless communications providers mayinclude or exclude certain items from their calculations which may make thecomparison less meaningful.

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| ** **                                             | ** ** | **Year Ended December 31,** | ** ** |
|--------------------------------------------------------|------------|--------------------------------------------|------------|
| **Cost per gross addition (CPGA)** | ** ** | ** **                                 | ** ** | **2005** | ** ** | **2004** | ** ** | **2003** | ** ** |
| Selling and  marketing                                 |       | $                                          | 67,450,000 |   | $ | 67,485,000 |   | $ | 53,681,000 |   |
| Add: Cost of products sold                             |       | 36,166,000                                 |       | 38,314,000 |   | 40,247,000 |   |
| Less: Equipment revenue                                |       | (15,456,000                                | )          | (13,089,000 | ) | (12,205,000 | ) |
| Total CPGA costs                                       |       | $                                          | 88,160,000 |   | $ | 92,710,000 |   | $ | 81,723,000 |   |
| Gross additions                                        |       | 181,200                                    |       | 196,600 |   | 181,800 |   |
| CPGA                                                   |       | $                                          | 487        |   | $ | 471 |   | $ | 450 |   |
|                                                        |            |                                            |            |  |  |  |  |  |  |  |  |  |

 

We believe CPGA, whichmeasures the average cost to acquire new customers during the period, is auseful measure used to compare our average cost to acquire a new subscriber tothat of other wireless communication providers, although other wirelesscommunications providers may include or exclude certain items from theircalculations which may make the comparison less meaningful. The inclusion ofcost of products sold net of the equipment revenues earned is critical to ourunderstanding of how much it costs us to acquire a new customer.

***Inflation***

We believe that inflationhas not had, and will not have, a material adverse effect on our results ofoperations.

***Seasonality***

Our business is seasonalbecause the wireless industry is moderately dependent on fourth quarterresults. Among other things, the industry relies on higher customer additionsand handset sales in the fourth quarter as compared to the other three fiscalquarters. The factors contributing to this trend include the increasing use ofretail distribution, which is dependent on years-end holiday shopping, thetiming of new product and service offerings, competitive pricing pressures andaggressive marketing and promotions during the holiday season. The increasedlevel of activity requires a greater use of our available financial resourcesduring this period.

**ITEM 7A.   Quantitative and QualitativeDisclosures About Market Risk**

Market risk is thepotential loss arising from adverse changes in market prices and rates,including interest rates. The interest rate on our notes is fixed at 9.875%. Wehave not entered into derivatives or other financial instruments for trading,speculative or hedging purposes, though we may do so from time to time if suchinstruments are available to us on acceptable terms and prevailing marketconditions are accommodating. No principal repayments on our notes are dueuntil March 2011.

**ITEM 8.   Financial Statements and SupplementaryData**

Reference is made to Item15 for the financial statements meeting the requirements of Regulation S-X.

**ITEM 9.   Changes In and Disagreements WithAccountants on Accounting and Financial Disclosure**

None.

**ITEM 9A.   Controls and Procedures**

**Evaluationof Disclosure Controls and Procedures**

Our management, under thesupervision and with the participation of our Chief Executive Officer and ChiefFinancial Officer (who serves as our principal financial and accounting officer),conducted an 

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evaluationof our “disclosure controls and procedures” (as defined in the SecuritiesExchange Act of 1934 (“Exchange Act”) Rules 13a-15(e) or 15d-15(e)) as of December 31, 2005. Based on that evaluation, our ChiefExecutive Officer and Chief Financial Officer concluded that our disclosurecontrols and procedures were effective as of December 31, 2005.

**Management’sReport on Internal Control Over Financial Reporting**

The management of UbiquiTel is responsible forestablishing and maintaining adequate internal control over financialreporting. UbiquiTel’s internal control over financial reporting was designedto provide reasonable assurance regarding the reliability of the financialreporting process and the preparation of financial statements for externalreporting purposes in accordance with generally accepted accounting principles.

Because of its inherent limitations, internal controlover financial reporting may not prevent or detect misstatements. Also,projections of any evaluation of effectiveness to future periods are subject tothe risk that controls may become inadequate because of changes in conditions,or that the degree of compliance with the policies or procedures maydeteriorate.

As required by Section 404 of the Sarbanes-OxleyAct of 2002, management has assessed the effectiveness of UbiquiTel’s internalcontrol over financial reporting as of December 31, 2005. In making thisassessment, management used the criteria set forth by the Committee ofSponsoring Organizations on the Treadway Commission (COSO) in “Internal Control—IntegratedFramework.” Management has concluded that, based on its assessment under thosecriteria, UbiquiTel’s internal control over financial reporting was effectiveas of December 31, 2005.

Our management’s assessmentof the effectiveness of UbiquiTel’s internal control over financial reportingas of December 31, 2005 has been audited by PricewaterhouseCoopers LLP, anindependent registered public accounting firm, as stated in their report whichappears herein on page F-2.

**Changesin Internal Control Over Financial Reporting**

There were no changes in our internal control overfinancial reporting identified in connection with the evaluation required byparagraph (d) of Exchange Act Rules 13a-15 or 15d-15 thatoccurred during the three months ended December 31, 2005 that havematerially affected, or are reasonably likely to materially affect, ourinternal control over financial reporting.

Management is responsible for all of our disclosurecontrols and procedures and internal control over financial reporting includingthose relating to functions outsourced to a third party, Sprint Nextel, andincluding controls over the information flow to and from the third partyservice organization. We also are responsible for assessing the identifiedcontrols over financial reporting over the outsourced operations. We place reliance on Sprint Nextel toadequately design its internal controls with respect to the processesestablished to provide financial information and other information to us andthe other PCS affiliates of Sprint Nextel. To address this issue, Sprint Nextelengages its independent auditors to perform a periodic evaluation of thesecontrols and to provide a “Report on Controls Placed in Operation and Tests ofOperating Effectiveness for Affiliates” under guidance provided in Statement ofAuditing Standards No. 70 (“SAS 70”). This report is providedsemi-annually to us and we have placed reliance on this SAS 70 report for assessing theidentified controls over financial reporting over the outsourced operations.

**ITEM 9B.**    OtherInformation

None.

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**PART III**

**ITEM 10.   Directors and Executive Officers**

Information concerning our directors is incorporatedherein by reference to UbiquiTel’s definitive proxy statement to be filedwithin 120 days of our fiscal year end in connection with solicitation ofproxies for our annual meeting of shareholders. For information concerningUbiquiTel’s executive officers, see “Item 1. Business—Executive Officers.”

We will provide to anyperson, without charge, a copy of our code of ethics applicable to ourprincipal executive officer, principal financial officer and principalaccounting officer or controller on the written request of any such personaddressed to Investor Relations at UbiquiTel Inc., One West Elm Street,Suite 400, Conshohocken, Pennsylvania 19428.

**ITEM 11.   Executive Compensation**

The information requiredby this item is incorporated herein by reference to UbiquiTel’s definitiveproxy statement to be filed within 120 days of our fiscal year end inconnection with solicitation of proxies for our annual meeting of shareholders.

**ITEM12.   Security Ownership of Certain Beneficial Owners and Management andRelated Stockholder Matters**

The information requiredby this item is incorporated herein by reference to UbiquiTel’s definitiveproxy statement to be filed within 120 days of our fiscal year end inconnection with solicitation of proxies for our annual meeting of shareholders.

**ITEM 13.   Certain Relationships and RelatedTransactions**

The information requiredby this item is incorporated herein by reference to UbiquiTel’s definitiveproxy statement to be filed within 120 days of our fiscal year end inconnection with solicitation of proxies for our annual meeting of shareholders.

**ITEM 14.   Principal Accountant Fees and Services**

The information requiredby this item is incorporated herein by reference to UbiquiTel’s definitiveproxy statement to be filed within 120 days of our fiscal year end inconnection with solicitation of proxies for our annual meeting of shareholders.

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**PART IV**

**ITEM 15.   Exhibits and Financial StatementSchedules**

**(a)****         1.   FinancialStatements.**

| **UbiquiTel Inc. and Subsidiaries—Consolidated  Financial Statements**                                       |   |   |   |
|-------------------------------------------------------------------------------------------------------------------|--------|--------|--------|
| Report of Independent  Registered Public Accounting Firm                                                          |   | F-2    |   |
| Consolidated Balance  Sheets as of December 31, 2005 and 2004                                                |   | F-4    |   |
| Consolidated Statements  of Operations for the years ended December 31, 2005, 2004 and 2003                  |   | F-5    |   |
| Consolidated Statements  of Cash Flows for the years ended December 31, 2005, 2004 and 2003                  |   | F-6    |   |
| Consolidated Statements  of Stockholders’ Equity for the years ended December 31, 2005, 2004   and 2003 |   | F-7    |   |
| Notes to Consolidated  Financial Statements                                                                       |   | F-8    |   |

 

**2.   FinancialStatement Schedules.**   Financial statementschedules have been omitted because they are not applicable or the requiredinformation is shown in the Consolidated Financial Statements or the Notesthereto.

**3.   Exhibits.**   Thefollowing exhibits are filed herewith or are incorporated by reference toexhibits previously filed with the Securities and Exchange Commission.

| Exhibit Number | ** ** | **Description**                                                                                                                                                                             |
|----------------|------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| *3.1           |       | Amended and Restated  Certificate of Incorporation of UbiquiTel Inc. (3.1)                                                                                                                  |
| **3.2          |       | Amendment to Amended and  Restated Certificate of Incorporation of UbiquiTel Inc. (3.2)                                                                                                     |
| *3.3           |       | Amended and Restated  Bylaws of UbiquiTel Inc. (3.2)                                                                                                                                        |
| *4.1           |       | Warrant Agreement dated  as of April 11, 2000 between UbiquiTel Inc. and American Stock  Transfer & Trust Company. (10.21)                                                    |
| ***4.2         |       | First Amendment, dated  as of June 12, 2000, to Warrant Agreement dated as of April 11,  2000 between UbiquiTel Inc. and American Stock Transfer & Trust  Company. (4.3) |
| +4.3           |       | Form of Registered  9.875% Senior Note Due 2011. (4.4)                                                                                                                                 |
| ++4.4          |       | Notation of Guarantee  dated as of February 23, 2004 of UbiquiTel Inc. (10.3)                                                                                                          |
| +++4.5         |       | Form of Registered  9.875% Senior Note Due 2011. (4.4).                                                                                                                                |
| #4.6           |       | Notation of Guarantee  dated as of October 14, 2004 of UbiquiTel Inc. (10.5)                                                                                                           |
| †*10.1    |       | Sprint PCS Management  Agreement, as amended, dated as of October 15, 1998 by and between  Sprint Spectrum, LP, WirelessCo., LP and UbiquiTel, LLC. (10.1)                             |
| †*10.2    |       | Sprint PCS Services  Agreement dated as of October 15, 1998 by and between Sprint Spectrum,  LP and UbiquiTel, LLC. (10.2)                                                             |
| *10.3          |       | Sprint Trademark and  Service Mark License Agreement dated as of October 15, 1998 by and  between Sprint Communications Company, LP and UbiquiTel, LLC. (10.3)                         |
| *10.4          |       | Sprint Spectrum  Trademark and Service Mark License Agreement dated as of October 15,  1998 by and between Sprint Spectrum, LP and UbiquiTel, LLC. (10.4)                              |
| ##10.5         |       | Addendum VI dated  February 22, 2001 to Sprint PCS Management Agreement by and between  Sprint Spectrum, LP, Wireless Co., LP, and UbiquiTel Operating Company.  (10.36)               |

64

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| ###10.6           |   | Addendum VII dated  July 31, 2003 to Sprint PCS Management Agreement by and between Sprint  Spectrum L.P., WirelessCo., L.P., Sprint Communications Company L.P., Sprint  Telephony PCS, L.P. and Sprint PCS License, L.L.C., and UbiquiTel Operating Company.  (10.3)                                                |
|-------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ^10.7             |   | Addendum X dated  December 8, 2004 to Sprint PCS Management Agreement by and between  Sprint Spectrum L.P., WirelessCo., L.P., Sprint Communications Company L.P.,  Sprint Telephony PCS, L.P. and Sprint PCS License, L.L.C., and UbiquiTel  Operating Company. (10.1)                                               |
| †*10.8       |   | Asset Purchase Agreement  dated as of December 28, 1999, as amended, by and between Sprint  Spectrum, LP, Sprint Spectrum Equipment Company, LP, Sprint Spectrum Realty  Company, LP, Cox Communications PCS, LP, Cox PCS Leasing Co., LP, Cox PCS  Assets, LLC and UbiquiTel Holdings, Inc. (10.5)              |
| ^^10.9            |   | Forbearance Agreement  dated July 29, 2005 among Sprint Corporation, Sprint Spectrum L.P.,  WirelessCo L.P., Sprint Communications Company L.P., Sprint Telephony PCS,  L.P., Sprint PCS License, L.L.C., UbiquiTel Inc. and UbiquiTel Operating  Company. (99.1)                                                     |
| ^^^10.10          |   | Amendment No. 1  dated December 2, 2005 to Forbearance Agreement dated July 29, 2005  among Sprint Corporation, Sprint Spectrum L.P., WirelessCo L.P., Sprint  Communications Company L.P., Sprint Telephony PCS, L.P., Sprint PCS License,  L.L.C., UbiquiTel Inc. and UbiquiTel Operating Company. (99.1) |
| *10.11            |   | Employment Agreement  dated as of November 29, 1999 by and between UbiquiTel Inc. and Donald  A. Harris. (10.17)                                                                                                                                                                                                      |
| >10.12         |   | Employment Agreement  dated as of November 30, 2002 by and between UbiquiTel Inc. and Donald  A. Harris. (10.28)                                                                                                                                                                                                      |
| >>10.13     |   | Employment Agreement  dated as of March 11, 2005 by and between UbiquiTel Inc. and Dean E.  Russell. (10.11)                                                                                                                                                                                                          |
| >>>10.14 |   | Employment Agreement  dated as of November 19, 2003 by and between UbiquiTel Inc. and James J.  Volk. (10.46)                                                                                                                                                                                                         |
| >>10.15     |   | Amendment to Employment  Agreement dated as of March 11, 2005 by and between UbiquiTel Inc. and  James J. Volk. (10.13)                                                                                                                                                                                               |
| >>>10.16 |   | Employment Agreement  dated as of November 19, 2003 by and between UbiquiTel Inc. and Patricia  E. Knese. (10.47)                                                                                                                                                                                                     |
| >>10.17     |   | Amendment to Employment  Agreement dated as of March 11, 2005 by and between UbiquiTel Inc. and  Patricia E. Knese. (10.15)                                                                                                                                                                                           |
| >>10.18     |   | Employment Agreement  dated as of March 11, 2005 by and between UbiquiTel Inc. and David L.  Zylka. (10.16)                                                                                                                                                                                                           |
| <10.19         |   | Amended and Restated  2000 Equity Incentive Plan of UbiquiTel Inc. (10.39)                                                                                                                                                                                                                                                 |
| <<10.20     |   | UbiquiTel Inc. Amended  and Restated 2002 Employee Stock Purchase Plan. (10.1)                                                                                                                                                                                                                                             |
| ++10.21           |   | Indenture for UbiquiTel  Operating Company’s 9.875% Senior Notes Due 2011 dated as of  February 23, 2004 among UbiquiTel Operating Company, UbiquiTel Inc. and  The Bank of New York, as trustee. (10.2)                                                                                                         |
| ###10.22          |   | Master Site Agreement  dated as of October 15, 2003 between UbiquiTel Leasing Company and  GoldenState Towers, LLC. (10.1)                                                                                                                                                                                            |

65

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| *10.23            |   | Master Site Agreement  dated as of May 11, 2000 between SpectraSite Communications, Inc.  and UbiquiTel Leasing Company. (10.27)                                                                                                                                                            |
|-------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| <<<10.24 |   | Master Tower Space  License Agreement dated as of April 4, 2001 between American Tower, L.P.  and UbiquiTel Leasing Company and First Amendment thereto dated June 18,  2001. (10.32)                                                                                                       |
| <<<10.25 |   | Master License Agreement  dated as of December 15, 2000 between Crown Atlantic Company LLC, Crown  Communication New York, Inc., Crown Castle PT Inc., Crown Castle South  Inc., Crown Castle GT Company LLC, Crown Communication Inc. and UbiquiTel  Leasing Company. (10.33)              |
| >>10.26     |   | Second Amendment dated  as of December 22, 2004 to Master License Agreement dated as of  December 15, 2000 between Crown Atlantic Company LLC, Crown Castle PT  Inc., Crown Castle South LLC, Crown Castle GT Company LLC, Crown  Communication Inc. and UbiquiTel Leasing Company. (10.27) |
| 21.1              |   | Subsidiaries of  UbiquiTel Inc.                                                                                                                                                                                                                                                                       |
| 23.1              |   | Consent of  PricewaterhouseCoopers LLP.                                                                                                                                                                                                                                                               |
| 24.1              |   | Powers of Attorney  (included on signature pages).                                                                                                                                                                                                                                                    |
| 31.1              |   | Certification Pursuant  to Item 601(b)(31) of Regulation S-K, as adopted pursuant to  Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                             |
| 31.2              |   | Certification Pursuant to  Item 601(b)(31) of Regulation S-K, as adopted 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 9.06 of  the Sarbanes-Oxley Act of 2002 (furnished pursuant to Item 601(b)(32)  of Regulation S-K).                                                                                                       |
| 32.2              |   | Certification Pursuant  to 18 U.S.C. Section 1350, as adopted pursuant to Section 9.06 of  the Sarbanes-Oxley Act of 2002 (furnished pursuant to Item 601(b)(32)  of Regulation S-K).                                                                                                       |

 

----

| *   |   | Incorporated by reference to the exhibit shown in  parentheses and filed with the Registration Statement on Form S-1  of UbiquiTel Inc. (Reg. No. 333-32236).                                                          |
|-----|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| **  |   | Incorporated by  reference to the exhibit shown in parentheses and filed with the Registration  Statement on Form S-3 of UbiquiTel Inc. (Reg. No. 333-39956).                                                          |
| *** |   | Incorporated by  reference to the exhibit shown in parentheses and filed with the Registration  Statement on Form S-1 of UbiquiTel Inc. (Reg. No. 333-39956).                                                          |
| +   |   | Incorporated by  reference to the exhibit shown in parentheses and filed with the Registration  Statement on Form S-4 of UbiquiTel Operating Company (Reg.  No. 333-115626).                                                |
| ++  |   | Incorporated by  reference to the exhibit shown in parentheses and filed with the Joint  Quarterly Report on Form 10-Q for the fiscal quarter ended  March 31, 2004 of UbiquiTel Inc. and UbiquiTel Operating Company. |
| +++ |   | Incorporated by  reference to the exhibit shown in parentheses and filed with the Registration  Statement on Form S-4 of UbiquiTel Operating Company (Reg.  No. 333-121137).                                                |

66

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| #                  |   | Incorporated by  reference to the exhibit shown in parentheses and filed with the Joint  Quarterly Report on Form 10-Q for the fiscal quarter ended  September 30, 2004 of UbiquiTel Inc. and UbiquiTel Operating  Company.                              |
|--------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ##                 |   | Incorporated by  reference to the exhibit shown in parentheses and filed with the Joint Annual  Report on Form 10-K, as amended by Form 10-K/A, for the  fiscal year ended December 31, 2000 of UbiquiTel Inc. and UbiquiTel  Operating Company.    |
| ###                |   | Incorporated by reference  to the exhibit shown in parentheses and filed with the Joint Quarterly Report  on Form 10-Q for the fiscal quarter ended September 30, 2003  of UbiquiTel Inc. and UbiquiTel Operating Company.                               |
| ^                  |   | Incorporated by  reference to the exhibit shown in parentheses and filed with the Current  Report on Form 8-K dated December 8, 2004 of  UbiquiTel Inc.                                                                                                  |
| ^^                 |   | Incorporated by  reference to the exhibit shown in parentheses and filed with the Current  Report on Form 8-K dated July 29, 2005 of UbiquiTel Inc.                                                                                                      |
| ^^^                |   | Incorporated by  reference to the exhibit shown in parentheses and filed with the Current  Report on Form 8-K dated December 2, 2005 of  UbiquiTel Inc.                                                                                                  |
| >          |   | Incorporated by  reference to the exhibit shown in parentheses and filed with the Joint Annual  Report on Form 10-K for the fiscal year ended December 31,  2002 of UbiquiTel Inc. and UbiquiTel Operating Company.                                      |
| >>      |   | Incorporated by  reference to the exhibit shown in parentheses and filed with the Joint Annual  Report on Form 10-K for the fiscal year ended December 31, 2004  of UbiquiTel Inc. and UbiquiTel Operating Company.                                      |
| >>>  |   | Incorporated by  reference to the exhibit shown in parentheses and filed with the Joint Annual  Report on Form 10-K for the fiscal year ended December 31,  2003 of UbiquiTel Inc. and UbiquiTel Operating Company.                                      |
| <          |   | Incorporated by  reference to the exhibit shown in parentheses and filed with the Registration  Statement on Form S-3 of UbiquiTel Inc. (Reg. No. 333-68082).                                                                                            |
| <<      |   | Incorporated by  reference to the exhibit shown in parentheses and filed with the Joint  Quarterly Report on Form 10-Q for the fiscal quarter ended  September 30, 2002 of UbiquiTel Inc. and UbiquiTel Operating  Company.                              |
| <<<  |   | Incorporated by  reference to the exhibit shown in parentheses and filed with the Joint  Quarterly Report on Form 10-Q, as amended by Form 10-Q/A,  for the fiscal quarter ended March 31, 2001 of UbiquiTel Inc. and  UbiquiTel Operating Company. |
| †             |   | Confidential treatment  has been granted on portions of these documents.                                                                                                                                                                                                |
|               |   | Each management contract  or compensatory plan or arrangement required to be filed as an exhibit to  this report pursuant to Item 15 is listed in exhibit numbers 10.11, 10.12,  10.13, 10.14, 10.15, 10.16, 10.17, 10.18, 10.19 and 10.20.                             |

 

67

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**SIGNATURES**

Pursuantto the requirements of Section 13 or 15(d) of the Securities ExchangeAct of 1934, UbiquiTel Inc. has duly caused this report to be signed onits behalf by the undersigned, thereunto duly authorized, in the City ofConshohocken, State of Pennsylvania, on the 15th day of March, 2006.

|        |   |   | UBIQUITEL INC. |
|--------|--------|--------|---------------------|
|   |   |   | By:                 | /s/  DONALD A. HARRIS |
|   |   |   |                | Donald A. Harris |
|   |   |   |                | *President  and Chief Executive Officer* |

 

**POWER OF ATTORNEY**

**KNOW ALL MEN BY THESEPRESENTS**, that each person whosesignature appears below hereby constitutes and appoints Donald A. Harris andJames J. Volk his true and lawful attorneys-in-fact, each acting alone, withfull powers of substitution and resubstitution, for him and in his name, placeand stead, in any and all capacities, to sign any or all amendments to thisreport, and to file the same, with exhibits thereto, and other documents inconnection therewith, with the Securities and Exchange Commission, herebyratifying and confirming all that said attorneys-in-fact or their substitutes,each acting alone, may lawfully do or cause to be done by virtue hereof.

Pursuantto the requirements of the Securities Exchange Act of 1934, this report hasbeen signed by the following persons in the capacities and on the datesindicated.

|                          | **Signature** | ** **                                             | ** ** | ** **          | **Title** | ** ** | ** ** | ** ** | **Date** | ** ** |
|--------------------------|---------------|--------------------------------------------------------|------------|---------------------|-----------|------------|------------|------------|----------|------------|
| /s/  DONALD A. HARRIS    |          | Chairman of the Board,  President and                  |       | March 15, 2006 |
| Donald A. Harris         |          | Chief Executive Officer  (Principal Executive Officer) |       |                |
| /s/  JAMES J. VOLK       |          | Chief Financial Officer  (Principal                    |       | March 15, 2006 |
| James J. Volk            |          | Financial Officer and  Accounting Officer)             |       |                |
| /s/  ROBERT A. BERLACHER |          | Director                                               |       | March 15, 2006 |
| Robert A.  Berlacher     |          |                                                   |       |                |
| /s/  JAMES E. BLAKE      |          | Director                                               |       | March 15, 2006 |
| James E. Blake           |          |                                                   |       |                |
| /s/  MATTHEW J. BOOS     |          | Director                                               |       | March 15, 2006 |
| Matthew J. Boos          |          |                                                   |       |                |
| /s/  PETER LUCAS         |          | Director                                               |       | March 15, 2006 |
| Peter Lucas              |          |                                                   |       |                |
| /s/  BRUCE E. TOLL       |          | Director                                               |       | March 15, 2006 |
| Bruce E. Toll            |          |                                                   |       |                |

68

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| /s/ EVE  M. TRKLA      |   | Director |   | March 15,  2006 |
|------------------------|--------|----------|--------|----------------------|
| Eve M. Trkla           |   |     |   |                 |
| /s/  JOSEPH N. WALTER  |   | Director |   | March 15, 2006  |
| Joseph N. Walter       |   |     |   |                 |
| /s/  ERIC S. WEINSTEIN |   | Director |   | March 15, 2006  |
| Eric S. Weinstein      |   |     |   |                 |

 

69

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**SIGNATURES**

Pursuant to therequirements of Section 13 or 15(d) of the Securities Exchange Act of1934, UbiquiTel Operating Company has duly caused this report to be signed onits behalf by the undersigned, thereunto duly authorized, in the City ofConshohocken, State of Pennsylvania, on the 15th day of March, 2006.

|        |   |   | UBIQUITEL OPERATING COMPANY |
|--------|--------|--------|-----------------------------|
|   |   |   | By:                         | /s/* *DONALD A. HARRIS |
|   |   |   |                        | Donald A. Harris |
|   |   |   |                        | *President  and Chief Executive Officer* |

 

**POWER OF ATTORNEY**

**KNOW ALL MEN BY THESEPRESENTS**, that each personwhose signature appears below hereby constitutes and appoints Donald A. Harrisand James J. Volk his true and lawful attorneys-in-fact, each acting alone,with full powers of substitution and resubstitution, for him and in his name,place and stead, in any and all capacities, to sign any or all amendments tothis report, and to file the same, with exhibits thereto, and other documentsin connection therewith, with the Securities and Exchange Commission, herebyratifying and confirming all that said attorneys-in-fact or their substitutes,each acting alone, may lawfully do or cause to be done by virtue hereof.

Pursuantto the requirements of the Securities Exchange Act of 1934, this report hasbeen signed by the following persons in the capacities and on the datesindicated.

|                       | **Signature** | ** **                          | ** ** |                      | **Title** | ** ** | ** ** |  | **Date** | ** ** |
|-----------------------|---------------|-------------------------------------|------------|----------------------|-----------|------------|------------|--|----------|------------|
| /s/ DONALD A.  HARRIS |          | Sole Director,  President and Chief |       | March 15,  2006 |
| Donald  A. Harris     |          | Executive Officer (Principal        |       |                 |
|                  |          | Executive Officer)                  |       |                 |
| /s/ JAMES J.  VOLK    |          | Chief Financial  Officer (Principal |       | March 15, 2006  |
| James J. Volk         |          | Financial Officer  and Accounting   |       |                 |
|                  |          | Officer)                            |       |                 |

 

 

70

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**UBIQUITEL INC. AND SUBSIDIARIESINDEX TO CONSOLIDATED FINANCIAL STATEMENTS**

| **UbiquiTel Inc. and Subsidiaries—Consolidated Financial Statements**                                             |   |   |   |
|------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|
| Report of Independent Registered Public Accounting  Firm                                                               |   | F-2    |   |
| Consolidated  Balance Sheets as of December 31, 2005 and 2004                                                     |   | F-4    |   |
| Consolidated Statements of Operations for the years  ended December 31, 2005, 2004 and 2003                       |   | F-5    |   |
| Consolidated Statements of Cash Flows for the years  ended December 31, 2005, 2004 and 2003                       |   | F-6    |   |
| Consolidated Statements of Stockholders’ Equity for  the years ended December 31, 2005, 2004  and  2003 |   | F-7    |   |
| Notes to Consolidated Financial Statements                                                                             |   | F-8    |   |

 

F-1

----

**REPORTOF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

To the Board of Directors and Shareholders ofUbiquiTel Inc.:

We have completed integratedaudits of UbiquiTel Inc.’s 2005 and 2004 consolidated financial statements andof its internal control over financial reporting as of December 31, 2005,and an audit of its 2003 consolidated financial statements in accordance withthe standards of the Public Company Accounting Oversight Board (United States).Our opinions, based on our audits, are presented below.

*Consolidated financial statements*

In our opinion, the consolidatedfinancial statements listed in the accompanying index present fairly, in allmaterial respects, the financial position of UbiquiTel Inc. and itssubsidiaries****at December 31, 2005 and2004, and the results of their operations and their cash flows for each of thethree years in the period ended December 31, 2005****inconformity with accounting principles generally accepted in the United Statesof America. These financial statements are the responsibility of the Company’smanagement. Our responsibility is to express an opinion on these financialstatements based on our audits. We conducted our audits of these statements inaccordance with the standards of the Public Company Accounting Oversight Board(United States). Those standards require that we plan and perform the audit toobtain reasonable assurance about whether the financial statements are free ofmaterial misstatement. An audit of financial statements includes examining, ona test basis, evidence supporting the amounts and disclosures in the financialstatements, assessing the accounting principles used and significant estimatesmade by management, and evaluating the overall financial statementpresentation. We believe that our audits provide a reasonable basis for ouropinion.

*Internal controlover financial reporting*

Also, in our opinion, management’s assessment,included in the accompanying Management’s Report on Internal Control OverFinancial Reporting, that the Company maintained effective internal controlover financial reporting as of December 31, 2005 based on criteriaestablished in *Internal Control—Integrated Framework issuedby the Committee of Sponsoring Organizations of the Treadway Commission (COSO)*,is fairly stated, in all material respects, based on those criteria.Furthermore, in our opinion, the Company maintained, in all material respects,effective internal control over financial reporting as of December 31, 2005,based on criteria established in *InternalControl—Integrated Framework*issued by the COSO. The Company’smanagement is responsible for maintaining effective internal control overfinancial reporting and for its assessment of the effectiveness of internalcontrol over financial reporting. Our responsibility is to express opinions onmanagement’s assessment and on the effectiveness of the Company’s internalcontrol over financial reporting based on our audit. We conducted our audit ofinternal control over financial reporting in accordance with the standards ofthe Public Company Accounting Oversight Board (United States). Those standardsrequire that we plan and perform the audit to obtain reasonable assurance aboutwhether effective internal control over financial reporting was maintained inall material respects. An audit of internal control over financial reportingincludes obtaining an understanding of internal control over financialreporting, evaluating management’s assessment, testing and evaluating thedesign and operating effectiveness of internal control, and performing suchother procedures as we consider necessary in the circumstances. We believe thatour audit provides a reasonable basis for our opinions.

A company’s internal control over financial reportingis a process designed to provide reasonable assurance regarding the reliabilityof financial 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 (i) pertain to the maintenance of records that, inreasonable detail, accurately and fairly reflect the transactions anddispositions of the 

F-2

----

assets of the company; (ii) providereasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally acceptedaccounting principles, and that receipts and expenditures of the company arebeing made only in accordance with authorizations of management and directorsof the company; and (iii) provide reasonable assurance regardingprevention or timely detection of unauthorized acquisition, use, or dispositionof the company’s assets that could have a material effect on the financialstatements.

Because of its inherentlimitations, internal control over financial reporting may not prevent ordetect misstatements. Also, projections of any evaluation of effectiveness tofuture periods are subject to the risk that controls may become inadequatebecause of changes in conditions, or that the degree of compliance with thepolicies or procedures may deteriorate.

PricewaterhouseCoopers LLP

Philadelphia, PennsylvaniaMarch 15, 2006

F-3

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**UbiquiTel Inc.and SubsidiariesConsolidated Balance Sheets(In Thousands, Except Per Share Data)**

| ** **                                                                                                                                                               | ** ** | **December 31, 2005** | ** ** | **December 31, 2004** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|---------------------------------|------------|---------------------------------|------------|
| **ASSETS**                                                                                                                                                               |       |                            |       | ** **                      |       |   | ** ** | ** ** |   |
| CURRENT ASSETS:                                                                                                                                                          |       |                            |       |                            |       |   |   |   |   |
| Cash and cash  equivalents                                                                                                                                               |       |                            | $          | 121,127                         |       |   |   | $ | 91,781 |   |   |
| Accounts receivable, net  of allowance for doubtful accounts of $3,435 and $3,358 at December 31,  2005 and 2004, respectively                                      |       |                            | 30,082     |                            |       |   | 22,609 |   |   |
| Inventory                                                                                                                                                                |       |                            | 4,777      |                            |       |   | 4,025 |   |   |
| Prepaid expenses and  other assets                                                                                                                                       |       |                            | 17,411     |                            |       |   | 17,680 |   |   |
| Deferred income taxes                                                                                                                                                    |       |                            | 20,290     |                            |       |   | — |   |   |
| Total current assets                                                                                                                                                     |       |                            | 193,687    |                            |       |   | 136,095 |   |   |
| PROPERTY AND EQUIPMENT,  NET                                                                                                                                             |       |                            | 244,163    |                            |       |   | 243,679 |   |   |
| CONSTRUCTION IN PROGRESS                                                                                                                                                 |       |                            | 2,169      |                            |       |   | 1,867 |   |   |
| DEFERRED FINANCING  COSTS, NET                                                                                                                                           |       |                            | 9,184      |                            |       |   | 10,868 |   |   |
| GOODWILL                                                                                                                                                                 |       |                            | 38,138     |                            |       |   | 38,138 |   |   |
| INTANGIBLES, NET                                                                                                                                                         |       |                            | 60,261     |                            |       |   | 64,565 |   |   |
| DEFERRED INCOME TAXES                                                                                                                                                    |       |                            | 13,038     |                            |       |   | — |   |   |
| OTHER LONG-TERM  ASSETS                                                                                                                                                  |       |                            | 2,223      |                            |       |   | 2,595 |   |   |
| Total assets                                                                                                                                                             |       |                            | $          | 562,863                         |       |   |   | $ | 497,807 |   |   |
| **LIABILITIES  AND STOCKHOLDERS’ EQUITY**                                                                                                                           |       |                            |       |                            |       |   |   |   |   |
| CURRENT LIABILITIES:                                                                                                                                                     |       |                            |       |                            |       |   |   |   |   |
| Current maturities of  long-term debt                                                                                                                                    |       |                            | $          | 240                             |       |   |   | $ | 223 |   |   |
| Accounts payable                                                                                                                                                         |       |                            | 11,062     |                            |       |   | 3,124 |   |   |
| Accrued expenses                                                                                                                                                         |       |                            | 18,230     |                            |       |   | 18,824 |   |   |
| Accrued compensation and  benefits                                                                                                                                       |       |                            | 4,770      |                            |       |   | 4,591 |   |   |
| Interest payable                                                                                                                                                         |       |                            | 13,825     |                            |       |   | 13,825 |   |   |
| Taxes payable                                                                                                                                                            |       |                            | 2,677      |                            |       |   | 2,672 |   |   |
| Deferred revenue                                                                                                                                                         |       |                            | 12,455     |                            |       |   | 12,274 |   |   |
| Other                                                                                                                                                                    |       |                            | 3,165      |                            |       |   | 1,501 |   |   |
| Total current  liabilities                                                                                                                                               |       |                            | 66,424     |                            |       |   | 57,034 |   |   |
| LONG-TERM DEBT,  EXCLUDING CURRENT MATURITIES                                                                                                                            |       |                            | 423,475    |                            |       |   | 423,893 |   |   |
| OTHER LONG-TERM  LIABILITIES                                                                                                                                             |       |                            | 11,357     |                            |       |   | 11,462 |   |   |
| Total long-term  liabilities                                                                                                                                             |       |                            | 434,832    |                            |       |   | 435,355 |   |   |
| Total liabilities                                                                                                                                                        |       |                            | 501,256    |                            |       |   | 492,389 |   |   |
| COMMITMENTS AND  CONTINGENCIES                                                                                                                                           |       |                            | —     |                            |       |   | — |   |   |
| STOCKHOLDERS’ EQUITY:                                                                                                                                               |       |                            |       |                            |       |   |   |   |   |
| Preferred stock, par  value $0.001 per share; 10,000 shares authorized; 0 shares issued and  outstanding at December 31, 2005 and 2004                              |       |                            | —     |                            |       |   | — |   |   |
| Common stock, par value  $0.0005 per share; 240,000 shares authorized; 94,209 and 93,016 shares issued  and outstanding at December 31, 2005 and 2004, respectively |       |                            | 47         |                            |       |   | 46 |   |   |
| Additional paid-in-capital                                                                                                                                               |       |                            | 312,305    |                            |       |   | 303,830 |   |   |
| Accumulated deficit                                                                                                                                                      |       |                            | (250,745   | )                               |       |   | (298,458 | ) |   |
| Total stockholders’  equity                                                                                                                                         |       |                            | 61,607     |                            |       |   | 5,418 |   |   |
| Total liabilities and stockholders’ equity                                                                                                                          |       |                            | $          | 562,863                         |       |   |   | $ | 497,807 |   |   |

 

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

F-4

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**UbiquiTel Inc. and SubsidiariesConsolidated Statementsof Operations(In Thousands, Except Per Share Data)**

| ** **                                                                                                        | ** ** | **Year Ended December 31,** | ** ** |
|-------------------------------------------------------------------------------------------------------------------|------------|--------------------------------------------|------------|
| ** **                                                                                                        | ** ** | **2005**                                   | ** ** | **2004** | ** ** | **2003** | ** ** |
| REVENUES:                                                                                                         |       |                                       | ** ** | ** ** | ** ** | ** ** | ** ** |
| Subscriber revenue                                                                                                |       | $                                          | 281,622    |   | $ | 250,034 |   | $ | 197,633 |   |
| Roaming and wholesale revenue                                                                                     |       | 125,649                                    |       | 102,920 |   | 63,428 |   |
| Service revenue                                                                                                   |       | 407,271                                    |       | 352,954 |   | 261,061 |   |
| Equipment revenue                                                                                                 |       | 15,456                                     |       | 13,089 |   | 12,205 |   |
| Total revenues                                                                                                    |       | 422,727                                    |       | 366,043 |   | 273,266 |   |
| COSTS AND EXPENSES:                                                                                               |       |                                       |       |   |   |   |   |
| Cost of service and operations (exclusive of  depreciation, amortization and accretion as shown separately below) |       | 185,384                                    |       | 170,265 |   | 137,479 |   |
| Cost of products sold                                                                                             |       | 36,166                                     |       | 38,314 |   | 40,247 |   |
| Selling and marketing                                                                                             |       | 67,450                                     |       | 67,485 |   | 53,681 |   |
| General and administrative                                                                                        |       | 23,197                                     |       | 17,185 |   | 15,022 |   |
| Non-cash compensation                                                                                             |       | 2,906                                      |       | 3,371 |   | 205 |   |
| Depreciation, amortization and accretion                                                                          |       | 51,312                                     |       | 49,913 |   | 46,909 |   |
| Total costs and expenses                                                                                          |       | 366,415                                    |       | 346,533 |   | 293,543 |   |
| OPERATING INCOME  (LOSS)                                                                                          |       | 56,312                                     |       | 19,510 |   | (20,277 | ) |
| INTEREST INCOME                                                                                                   |       | 3,110                                      |       | 877 |   | 649 |   |
| INTEREST EXPENSE                                                                                                  |       | (43,469                                    | )          | (40,070 | ) | (31,249 | ) |
| GAIN ON DEBT  RETIREMENTS                                                                                         |       | 40                                         |       | 4,947 |   | 43,050 |   |
| INCOME (LOSS)  BEFORE INCOME TAXES                                                                                |       | 15,993                                     |       | (14,736 | ) | (7,827 | ) |
| INCOME TAX  BENEFIT (EXPENSE)                                                                                     |       | 31,720                                     |       | (561 | ) | (766 | ) |
| NET INCOME (LOSS)                                                                                                 |       | $                                          | 47,713     |   | $ | (15,297 | ) | $ | (8,593 | ) |
| NET INCOME (LOSS)  PER COMMON SHARE:                                                                              |       |                                       |       |   |   |   |   |
| BASIC                                                                                                             |       | $                                          | 0.51       |   | $ | (0.16 | ) | $ | (0.10 | ) |
| DILUTED                                                                                                           |       | $                                          | 0.49       |   | $ | (0.16 | ) | $ | (0.10 | ) |
| WEIGHTED AVERAGE COMMON  SHARES OUTSTANDING:                                                                      |       |                                       |       |   |   |   |   |
| BASIC                                                                                                             |       | 93,576                                     |       | 92,761 |   | 86,875 |   |
| DILUTED                                                                                                           |       | 97,582                                     |       | 92,761 |   | 86,875 |   |

 

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

F-5

----

**UbiquiTel Inc. and SubsidiariesConsolidated Statementsof Cash Flows(In Thousands)**

| ** **                                                                                | ** ** | **Year Ended December 31,** | ** ** |
|-------------------------------------------------------------------------------------------|------------|--------------------------------------------|------------|
| ** **                                                                                | ** ** | **2005**                                   | ** ** | **2004** | ** ** | **2003** | ** ** |
| CASH FLOWS FROM OPERATING  ACTIVITIES:                                                    |       |                                       |       |   |   |   |   |
| Net income (loss)                                                                         |       | $                                          | 47,713     |   | $ | (15,297 | ) | $ | (8,593 | ) |
| Adjustments to reconcile  net income (loss) to net cash provided by operating activities: |       |                                       |       |   |   |   |   |
| Amortization of deferred financing costs                                                  |       | 1,776                                      |       | 1,497 |   | 1,835 |   |
| Amortization of debt (premium) discount                                                   |       | (124                                       | )          | 823 |   | 1,315 |   |
| Amortization of intangible assets                                                         |       | 4,304                                      |       | 4,304 |   | 7,058 |   |
| Depreciation and accretion                                                                |       | 47,008                                     |       | 45,609 |   | 39,852 |   |
| Interest accrued on discount notes                                                        |       | —                                     |       | 9,749 |   | 15,260 |   |
| Non-cash compensation from stock options  granted to employees                            |       | 2,906                                      |       | 3,371 |   | 205 |   |
| Deferred income taxes                                                                     |       | (32,055                                    | )          | 316 |   | — |   |
| (Gain) loss on disposal of equipment                                                      |       | (421                                       | )          | (308 | ) | 39 |   |
| Gain on debt retirements                                                                  |       | (40                                        | )          | (4,947 | ) | (43,050 | ) |
| Changes in operating  assets and liabilities exclusive of capital expenditures:           |       |                                       |       |   |   |   |   |
| Accounts receivable                                                                       |       | (7,473                                     | )          | (2,995 | ) | 2,148 |   |
| Inventory                                                                                 |       | (752                                       | )          | (617 | ) | (657 | ) |
| Prepaid expenses and other assets                                                         |       | 565                                        |       | (1,366 | ) | 263 |   |
| Income tax receivable                                                                     |       | —                                     |       | 141 |   | 8,567 |   |
| Accounts payable and accrued expenses                                                     |       | 6,408                                      |       | 15,111 |   | (9,790 | ) |
| Net cash provided by operating activities                                                 |       | 69,815                                     |       | 55,391 |   | 14,452 |   |
| CASH FLOWS FROM INVESTING  ACTIVITIES:                                                    |       |                                       |       |   |   |   |   |
| Capital expenditures                                                                      |       | (43,333                                    | )          | (26,984 | ) | (25,928 | ) |
| Proceeds from sale of towers, net of transaction  costs                                   |       | —                                     |       | — |   | 10,524 |   |
| Proceeds from disposal of equipment                                                       |       | 5                                          |       | — |   | — |   |
| Change in restricted cash                                                                 |       | —                                     |       | 1,137 |   | (1,095 | ) |
| Net cash used in investing activities                                                     |       | (43,328                                    | )          | (25,847 | ) | (16,499 | ) |
| CASH FLOWS FROM FINANCING  ACTIVITIES:                                                    |       |                                       |       |   |   |   |   |
| Proceeds from issuance of 9.875% senior notes                                             |       | —                                     |       | 420,552 |   | — |   |
| Repayments under senior secured credit facility                                           |       | —                                     |       | (230,000 | ) | (15,000 | ) |
| Proceeds from issuance of 14% Series B senior  discount notes                        |       | —                                     |       | — |   | 10,914 |   |
| Purchases of 14% senior discount notes and 14% senior  subordinated discount notes        |       | (14                                        | )          | (155,194 | ) | (10,701 | ) |
| Repayment of 14% Series B senior discount notes                                      |       | —                                     |       | (12,478 | ) | — |   |
| Financing costs                                                                           |       | (92                                        | )          | (12,396 | ) | (4,588 | ) |
| Repayment of other long-term debt                                                         |       | (223                                       | )          | (305 | ) | (683 | ) |
| Change in book cash overdraft                                                             |       | —                                     |       | (5,671 | ) | 5,671 |   |
| Proceeds from issuance of common stock                                                    |       | 436                                        |       | 262 |   | 32 |   |
| Proceeds from exercise of stock options and warrants                                      |       | 2,801                                      |       | 420 |   | 146 |   |
| Repurchase of common stock                                                                |       | (49                                        | )          | (178 | ) | — |   |
| Net cash provided by (used in) financing activities                                       |       | 2,859                                      |       | 5,012 |   | (14,209 | ) |
| NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                      |       | 29,346                                     |       | 34,556 |   | (16,256 | ) |
| CASH AND CASH EQUIVALENTS, beginning of period                                            |       | 91,781                                     |       | 57,225 |   | 73,481 |   |
| CASH AND CASH EQUIVALENTS, end of period                                                  |       | $                                          | 121,127    |   | $ | 91,781 |   | $ | 57,225 |   |
| SUPPLEMENTAL DISCLOSURE  OF CASH FLOW INFORMATION:                                        |       |                                       |       |   |   |   |   |
| Cash paid for interest                                                                    |       | $                                          | 41,809     |   | $ | 17,605 |   | $ | 13,207 |   |
| Cash paid for income taxes                                                                |       | 361                                        |       | 320 |   | 354 |   |
| SUPPLEMENTAL DISCLOSURE  OF NON-CASH INVESTING ACTIVITY:                                  |       |                                       |       |   |   |   |   |
| Network equipment acquired but not yet paid                                               |       | $                                          | 4,488      |   | $ | — |   | $ | 311 |   |
| SUPPLEMENTAL DISCLOSURE  OF NON-CASH FINANCING ACTIVITY:                                  |       |                                       |       |   |   |   |   |
| Tax benefits from  stock-based employee compensation plan                                 |       | $                                          | 2,382      |   | $ | — |   | $ | — |   |

 

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

F-6

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**UbiquiTel Inc. and SubsidiariesConsolidated Statementsof Stockholders’ Equity(In Thousands)**

| ** **                                                                                                       | ** ** | **Preferred Stock** | ** ** | **Common Stock** | ** ** | **Additional  Paid-in** | ** ** | **Accumulated** | ** ** | **Total  Stockholders’** | ** ** |
|------------------------------------------------------------------------------------------------------------------|------------|--------------------------|------------|-----------------------|------------|-------------------------|------------|-----------------|------------|-------------------------------|------------|
| ** **                                                                                                       | ** ** | **Shares**               | ** ** | **Amount**            | ** ** | **Shares**              | ** ** | **Amount**      | ** ** | **Capital**                   | ** ** | **Deficit** | ** ** | **Equity** | ** ** |
| BALANCE,** **December** **31,** **2002                                                            |       |                     | —     |                  |       |                    | $          | —          |       |                          | 81,432     |   |   | $ | 41 |   |   | $ | 295,236 |   | $ | (274,568 | ) |   | $ | 20,709 |   |   |
| Issuance of common stock to employee stock purchase  plan                                                        |       |                     | —     |                  |       |                    | —     |            |       | 159                           |       |   | — |   |   | 32 |   | — |   |   | 32 |   |   |
| Amortization of deferred stock compensation expense  granted to employees for general and administrative matters |       |                     | —     |                  |       |                    | —     |            |       | —                        |       |   | — |   |   | 205 |   | — |   |   | 205 |   |   |
| Exercise of options                                                                                              |       |                     | —     |                  |       |                    | —     |            |       | 75                            |       |   | — |   |   | 37 |   | — |   |   | 37 |   |   |
| Issuance of detachable warrants                                                                                  |       |                     | —     |                  |       |                    | —     |            |       | —                        |       |   | — |   |   | 4,341 |   | — |   |   | 4,341 |   |   |
| Exercise of warrants                                                                                             |       |                     | —     |                  |       |                    | —     |            |       | 10,913                        |       |   | 5 |   |   | 104 |   | — |   |   | 109 |   |   |
| Net loss                                                                                                         |       |                     | —     |                  |       |                    | —     |            |       | —                        |       |   | — |   |   | — |   | (8,593 | ) |   | (8,593 | ) |   |
| BALANCE, December 31, 2003                                                                                  |       |                     | —     |                  |       |                    | $          | —          |       |                          | 92,579     |   |   | $ | 46 |   |   | $ | 299,955 |   | $ | (283,161 | ) |   | $ | 16,840 |   |   |
| Issuance of common stock to employee stock purchase  plan                                                        |       |                     | —     |                  |       |                    | —     |            |       | 91                            |       |   | — |   |   | 262 |   | — |   |   | 262 |   |   |
| Exercise of options                                                                                              |       |                     | —     |                  |       |                    | —     |            |       | 374                           |       |   | — |   |   | 420 |   | — |   |   | 420 |   |   |
| Repurchase and retirement of common stock                                                                        |       |                     | —     |                  |       |                    | —     |            |       | (28                           | )          |   | — |   |   | (178 | ) | — |   |   | (178 | ) |   |
| Stock-based employee compensation expense                                                                        |       |                     | —     |                  |       |                    | —     |            |       | —                        |       |   | — |   |   | 3,371 |   | — |   |   | 3,371 |   |   |
| Net loss                                                                                                         |       |                     | —     |                  |       |                    | —     |            |       | —                        |       |   | — |   |   | — |   | (15,297 | ) |   | (15,297 | ) |   |
| BALANCE, December 31, 2004                                                                                  |       |                     | —     |                  |       |                    | $          | —          |       |                          | 93,016     |   |   | $ | 46 |   |   | $ | 303,830 |   | $ | (298,458 | ) |   | $ | 5,418 |   |   |
| Issuance of common stock to employee stock purchase  plan                                                        |       |                     | —     |                  |       |                    | —     |            |       | 84                            |       |   | — |   |   | 436 |   | — |   |   | 436 |   |   |
| Exercise of options                                                                                              |       |                     | —     |                  |       |                    | —     |            |       | 1,028                         |       |   | 1 |   |   | 2,111 |   | — |   |   | 2,112 |   |   |
| Exercise of warrants                                                                                             |       |                     | —     |                  |       |                    | —     |            |       | 86                            |       |   | — |   |   | 689 |   | — |   |   | 689 |   |   |
| Repurchase and retirement of common stock                                                                        |       |                     | —     |                  |       |                    | —     |            |       | (5                            | )          |   | — |   |   | (49 | ) | — |   |   | (49 | ) |   |
| Stock-based employee compensation expense                                                                        |       |                     | —     |                  |       |                    | —     |            |       | —                        |       |   | — |   |   | 2,906 |   | — |   |   | 2,906 |   |   |
| Tax benefits from stock-based employee compensation  plan                                                        |       |                     | —     |                  |       |                    | —     |            |       | —                        |       |   | — |   |   | 2,382 |   | — |   |   | 2,382 |   |   |
| Net income                                                                                                       |       |                     | —     |                  |       |                    | —     |            |       | —                        |       |   | — |   |   | — |   | 47,713 |   |   | 47,713 |   |   |
| BALANCE,** **December** **31,** **2005                                                            |       |                     | —     |                  |       |                    | $          | —          |       |                          | 94,209     |   |   | $ | 47 |   |   | $ | 312,305 |   | $ | (250,745 | ) |   | $ | 61,607 |   |   |

 

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

F-7

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**UbiquiTel Inc. and Subsidiaries Notes to Consolidated Financial Statements**

**1.**                 ORGANIZATIONAND NATURE OF BUSINESS

**Organization and Nature of Business**

UbiquiTel Inc. and its subsidiaries (“UbiquiTel”or the “Company”) was formed for the purpose of becoming the exclusive providerof Sprint personal communications services (“PCS”) in certain defined midsizemarkets in the western and midwestern United States.

In October 1998, UbiquiTel L.L.C. (a Washingtonstate limited liability company) entered into a management agreement withSprint PCS for the exclusive rights to market Sprint’s 100% digital, 100% PCSproducts and services to the residents in the Reno/Tahoe, Nevada market.UbiquiTel L.L.C. had no financial transactions from its inception (August 24,1998) to September 29, 1999. On September 29, 1999,UbiquiTel Inc. (formerly, UbiquiTel Holdings, Inc.) was incorporatedin Delaware. In November 1999, UbiquiTel L.L.C. assigned all of itsmaterial contracts including the rights to the Sprint PCS agreements toUbiquiTel Inc. On November 9, 1999, UbiquiTel Operating Company (aDelaware corporation, formerly a Delaware limited liability company) (“OperatingCompany”), was formed to serve as the operating company for UbiquiTel Inc.Also, on March 17, 2000, UbiquiTel Leasing Company (a Delawarecorporation) was formed to serve as the leasing company for UbiquiTel Inc.UbiquiTel Inc. assigned the Sprint PCS agreements to Operating Companyfollowing its formation. On December 28, 1999, UbiquiTel amended itsmanagement agreement with Sprint PCS to expand its markets to include northernCalifornia, Spokane/Montana, southern Idaho/Utah/Nevada and southernIndiana/Kentucky/Tennessee. On February 21, 2001, in connection withUbiquiTel’s acquisition of VIA Wireless LLC, UbiquiTel amended its managementagreement with Sprint PCS to expand its markets effective at the closing in August 2001to include the central valley of California market. On August 13, 2001,upon the closing of the merger agreement, VIA Wireless became a wholly ownedsubsidiary of Operating Company and was later merged into Operating Company in June 2003.On July 31, 2003, Operating Company amended its management agreement withSprint PCS to eliminate the obligation to build out the state of Montana,thereby reducing its licensed resident population in its markets toapproximately 10.8 million. See Note 15 with respect to Sprint’s merger inAugust 2005 with Nextel Communications, Inc. and the Company’slitigation against Sprint and Nextel related to the merger.

The consolidated financialstatements contain the financial information of UbiquiTel Inc. and itssubsidiaries, UbiquiTel Operating Company and UbiquiTel Leasing Company. TheCompany operates under one segment.

**2.**                 SUMMARYOF SIGNIFICANT ACCOUNTING POLICIES

**Principlesof Consolidation and Use of Estimates**

The accompanying financial statements include theaccounts of UbiquiTel Inc. and its subsidiaries. All significantintercompany balances and transactions have been eliminated.

The preparation offinancial statements in conformity with generally accepted accountingprinciples requires management to make estimates and assumptions. Theseestimates and assumptions affect the reported amounts of assets and liabilitiesand disclosure of contingent assets and liabilities at the date of thefinancial statements. These assumptions also affect the reported amounts ofrevenues and expenses during the reporting periods. Actual results could differfrom those estimates and assumptions.

F-8

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**UbiquiTel Inc. and Subsidiaries Notes to Consolidated Financial Statements (Continued)**

**Recent Accounting Pronouncements**

In December 2004, the Financial AccountingStandards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”)No. 123 (revised 2004), “Share-Based Payments” (“SFAS No. 123R”).SFAS No. 123R requires the recognition of the cost of employee servicesreceived in exchange for an award of equity instruments in the financialstatements and measurement based on the grant-date fair value of the award. Itrequires the cost to be recognized over the period during which an employee isrequired to provide service in exchange for the award. Additionally,compensation expense will be recognized over the remaining employee serviceperiod for the outstanding portion of any awards for which compensation expensehad not been previously recognized or disclosed under SFAS No. 123, “Accountingfor Stock-Based Compensation” (“SFAS No. 123”). SFAS No. 123Rreplaces SFAS No. 123 and supersedes Accounting Principles Board (“APB”)Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB No. 25”),and its related interpretations.

In April 2005, the Securities and ExchangeCommission announced the adoption of a new rule that amended thecompliance dates for SFAS No. 123R and required its adoption by no laterthan January 1, 2006. SFAS No. 123R provides for different transitionmethods for past award grants, including restatement of prior period results.The Company plans to apply the modified prospective transition method to allpast awards outstanding and unvested as of the required effective date of January 1,2006 and will recognize the associated expense over the remaining vesting periodbased on the fair values previously determined and disclosed as part of its proforma disclosures under SFAS No. 123. As such, the Company will notrestate the results of prior periods. The Company does not expect the impact ofadopting SFAS No. 123R to result in the recognition of an annual expensematerially different from the stock-based employee compensation expense for theyear ended December 31, 2005 reflected in its pro forma disclosures underSFAS No. 123. The stock-based employee compensation expense currentlyrecognized under variable accounting will no longer be recognized upon theadoption of SFAS No. 123R.

In March 2005, the FASB issued InterpretationNumber 47, “Accounting for Conditional Asset Retirement Obligations, aninterpretation of FASB Statement No. 143” (“FIN 47”). FIN 47 clarifies theterm “conditional asset retirement obligation”**as used in SFAS No. 143, “Accounting for Asset RetirementObligations,” and also clarifies when an entity would have sufficientinformation to reasonably estimate the fair value of an asset retirement. FIN47 is effective no later than the end of fiscal years ending after December 15,2005. The adoption of FIN 47 did not have a material impact on the Company’sfinancial position, results of operations or cash flows.

In May 2005, the FASBissued SFAS No. 154, “Accounting Changes and Error Corrections” (“SFAS No. 154”),which replaces APB Opinion No. 20, “Accounting Changes,” and SFAS No. 3,“Reporting Accounting Changes in Interim Financial Statements-An Amendment ofAPB Opinion No. 28.” SFAS No. 154 provides guidance on the accountingfor and reporting of accounting changes and error corrections. It establishesretrospective application, or the latest practicable date, as the requiredmethod for accounting for and reporting a change in accounting principle and acorrection of an error. SFAS No. 154 is effective for accounting changesand corrections of errors made in fiscal years beginning after December 15,2005, and the Company is required to adopt SFAS No. 154 no later than January 1,2006. The Company does not expect that the adoption of SFAS No. 154 willhave a material impact on its financial position, results of operations or cashflows.

F-9

----

**UbiquiTel Inc. and Subsidiaries Notes to Consolidated Financial Statements (Continued)**

**Cash and Cash Equivalents**

Cash and cash equivalentsinclude cash and short-term investments with original maturities of threemonths or less.

**Fair Value of Financial Instruments**

Fair value estimates, assumptions and methods used toestimate fair value of the Company’s financial instruments are made inaccordance with the requirements of SFAS No. 107, “Disclosures about FairValue of Financial Instruments.” The Company has used available information toderive its estimates. However, because these estimates are made as of aspecific point in time, they are not necessarily indicative of amounts theCompany could ultimately realize. The use of different assumptions orestimating methods may have a material effect on the estimated fair valueamounts.

The carrying amounts of cash and cash equivalents,accounts receivable net, accounts payable and accrued expenses approximate fairvalue due to the short-term nature of the instruments.

Long-term debt iscomprised primarily of the 9.875% senior notes due 2011. The fair value of the9.875% senior notes is measured at quoted market value and was approximately$466.2 million as of December 31, 2005 versus a carrying value ofapproximately $420.7 million. As of December 31, 2004, the fair valueof the 9.875% senior notes was approximately $470.4 million versus a carryingvalue of approximately $420.8 million.

**Inventory**

Inventory consists ofhandsets and related accessories. Inventories purchased for resale are carriedat the lower of cost or market using replacement cost.

**Propertyand Equipment and Construction in Progress**

Property and equipment are reported at cost lessaccumulated depreciation. Costs incurred to design and construct the wirelessnetwork in a market are classified as construction in progress. When thenetwork assets are placed into service, the related costs are transferred fromconstruction in progress to property and equipment. Repair and maintenancecosts are charged to expense as incurred; significant renewals and bettermentsare capitalized. Costs for software and its installation that are paid to thirdparties and benefit future periods are capitalized. When property is retired orotherwise disposed of, the cost of the property and the related accumulateddepreciation are removed from the accounts, and any resulting gains or lossesare reflected in the consolidated statement of operations.

Property and equipment are depreciated using thestraight-line method based on estimated useful lives of the assets.

Assetslives are as follows:

| Network equipment               |   | 2-10 years |   |
|---------------------------------|--------|------------|--------|
| Computer  equipment             |   | 4 years    |   |
| Furniture and  office equipment |   | 4 years    |   |
| Vehicles                        |   | 5 years    |   |
| Building                        |   | 30 years   |   |

 

F-10

----

**UbiquiTel Inc. and Subsidiaries Notes to Consolidated Financial Statements (Continued)**

Leasehold improvements are depreciated over theshorter of the remaining term of the lease or the estimated useful life of theimprovement. Cell site assets associated with towers under operating leases arerecorded in network equipment and are depreciated over the shorter of theassets’ useful lives or the lease term. The Company considers the lease term toinclude the renewal periods of any lease that could cause a significanteconomic detriment to the Company if such lease renewal option is notexercised.

Construction in progressat December 31, 2005 and 2004 included equipment not yet placed intoservice and engineering and site development costs incurred in connection withthe build-out of the Company’s PCS network.

**Deferred Costs**

Costs incurred in connection with the negotiation anddocumentation of debt instruments are deferred and amortized as interestexpense over the terms of the debt instruments using the effective interestrate method.

Amortization of deferredfinancing charges amounted to approximately $1.8 million, $1.5 million and$1.8 million for the years ended December 31, 2005, 2004 and 2003,respectively, and was included in interest expense.

**Goodwill and Intangible Assets**

Goodwill is subject to at least an annual assessmentfor impairment by applying a fair value-based test. If the carryingamount exceeds the fair value, goodwill is considered to be impaired. As of October 31,2005, the Company completed its annual impairment review and determined that noimpairment charge was required. The Company continually evaluates whetherevents and circumstances have occurred that indicate the remaining balance ofgoodwill may not be recoverable. In evaluating impairment, the Company estimatesthe sum of the expected future cash flows derived from such goodwill. Suchevaluations for impairment are significantly impacted by estimates of futurerevenues, costs and expenses and other factors. If the goodwill is consideredto be impaired, the impairment loss to be recognized is measured by the amountby which the carrying amount of the goodwill exceeds the fair value of theexpected future cash flows. Goodwill was approximately $38.1 million at December 31,2005 and 2004.

Intangible assets are amortized on a straight-linebasis over their estimated useful life. Intangible assets of approximately$60.3 million and $64.6 million, net of accumulated amortization expenseof approximately $18.9 million and $14.6 million, for the years endedDecember 31, 2005 and 2004, respectively, consisted of the unamortizedcost of a Sprint PCS management agreement acquired in a business combination.Amortization expense for intangible assets was approximately $4.3 millionfor each of the years ended December 31, 2005, 2004 and 2003.

Estimatedfuture amortization expense of intangible assets for the next five years at December 31,2005 is as follows:

| **Years Ending December 31,** | ** ** | ** ** | ** ** | **(In Thousands)** | ** ** |
|----------------------------------------------|------------|------------|------------|-------------------------|------------|
| 2006                                         |       |       | $          | 4,304                   |       |   |
| 2007                                         |       |       | 4,304      |                    |       |
| 2008                                         |       |       | 4,304      |                    |       |
| 2009                                         |       |       | 4,304      |                    |       |
| 2010                                         |       |       | 4,304      |                    |       |

 

F-11

----

**UbiquiTel Inc. and Subsidiaries Notes to Consolidated Financial Statements (Continued)**

**Impairment of Long-Lived Assets**

Long-lived assets arereviewed for impairment whenever events or changes in circumstances indicatethat the carrying amount of an asset may not be recoverable. Recoverability isassessed based on the future cash flows expected to result from the use of theasset and its eventual disposition. If the sum of the undiscounted cash flowsis less than the carrying value of the asset, an impairment loss is recognized.Any impairment loss, if indicated, is measured as the amount by which thecarrying amount of the asset exceeds the estimated fair value of the asset.

**Income Taxes**

The Company accounts forincome taxes in accordance with the provisions of SFAS No. 109, “Accountingfor Income Taxes” (“SFAS No. 109”). SFAS No. 109 requires an assetand liability approach which requires the recognition of deferred income taxassets and deferred income tax liabilities for the expected future taxconsequences of temporary differences between the carrying amounts and the taxbases of assets and liabilities. Valuation allowances have been establishedwhen necessary to reduce deferred income tax assets to the amount expected tobe realized.

**Net Income (Loss) Per Share**

The Company computes net income (loss) per commonshare in accordance with SFAS No. 128, “Earnings per Share” (“SFASNo. 128”). Under the provisions of SFAS No. 128, basic net income(loss) per common share is computed by dividing the net income (loss)applicable to common stockholders for the period by the weighted average numberof shares of common stock outstanding. In accordance with SFAS No. 128,incremental potential common shares from stock options and warrants areincluded in the calculation of diluted net income (loss) per share except whenthe effect would be antidilutive.

Thecalculations for basic and diluted net income (loss) per share were as follows:

| ** **                                                    | ** ** | **Year Ended December 31,**             | ** ** |
|---------------------------------------------------------------|------------|--------------------------------------------------------|------------|
| ** **                                                    | ** ** | **2005**                                               | ** ** | **2004** | ** ** | **2003** | ** ** |
| ** **                                                    | ** ** | **(In Thousands, Except Per Share Amounts)** | ** ** |
| Basic                                                         |       |                                                   |       |   |   |   |   |
| Net income (loss)                                             |       | $                                                      | 47,713     |   | $ | (15,297 | ) | $ | (8,593 | ) |
| Weighted average common shares outstanding                    |       | 93,576                                                 |       | 92,761 |   | 86,875 |   |
| Net income (loss)  per share                                  |       | $                                                      | 0.51       |   | $ | (0.16 | ) | $ | (0.10 | ) |
| Diluted                                                       |       |                                                   |       |   |   |   |   |
| Net income (loss)                                             |       | $                                                      | 47,713     |   | $ | (15,297 | ) | $ | (8,593 | ) |
| Weighted average common shares outstanding                    |       | 93,576                                                 |       | 92,761 |   | 86,875 |   |
| Effect of dilutive options                                    |       | 4,006                                                  |       | — |   | — |   |
| Weighted average common shares outstanding assuming  dilution |       | 97,582                                                 |       | 92,761 |   | 86,875 |   |
| Net income (loss) per  share                                  |       | $                                                      | 0.49       |   | $ | (0.16 | ) | $ | (0.10 | ) |

 

F-12

----

**UbiquiTel Inc. and Subsidiaries Notes to Consolidated Financial Statements (Continued)**

Thefollowing table summarizes the securities that are excluded from the dilutednet income (loss) per share calculation, as amounts would have an antidilutiveeffect.

| ** **    | ** ** | **December 31, 2005** | ** ** | **December 31, 2004** | ** ** | **December 31, 2003** | ** ** |
|---------------|------------|---------------------------------|------------|---------------------------------|------------|---------------------------------|------------|
| Stock options |       |                            | —     |                            |       |                            | 7,841,225  |   |   |   | 6,637,875 |   |   |
| Warrants      |       |                            | 3,579,000  |                            |       |                            | 3,665,183  |   |   |   | 3,665,183 |   |   |
| Total         |       |                            | 3,579,000  |                            |       |                            | 11,506,408 |   |   |   | 10,303,058 |   |   |

 

**Stock-Based Compensation**

At December 31,2005, the Company had two stock-based employee compensation plans, anemployee stock purchase plan and an equity incentive plan, which are describedin Note 8. The employee stock purchase plan was suspended effective withthe offering period beginning January 1, 2003 and resumed effective withthe offering period beginning January 1, 2004. The Company accounts forthe plans in accordance with APB No. 25 and related interpretations. Thefollowing table illustrates the effect on net income (loss) and net income(loss) per share if the Company had applied the fair value recognitionprovisions of SFAS No. 123.

| ** **                                                                                                             | ** ** | **Year Ended December 31,**                        | ** ** |
|------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------------------------------------|------------|
| ** **                                                                                                             | ** ** | **2005**                                                          | ** ** | **2004** | ** ** | **2003** | ** ** |
| ** **                                                                                                             | ** ** | **(In Thousands, Except  Per Share Amounts)** | ** ** |
| Net income  (loss), as reported                                                                                        |       | $                                                                 | 47,713     |   | $ | (15,297 | ) | $ | (8,593 | ) |
| Add: stock-based  employee compensation included in reported net income (loss), net of related  tax                    |       | 1,867                                                             |       | 3,371 |   | 205 |   |
| Deduct: total  stock-based employee compensation expense determined under fair value-based  method, net of related tax |       | (1,348                                                            | )          | (2,082 | ) | (2,260 | ) |
| Pro forma net  income (loss)                                                                                           |       | $                                                                 | 48,232     |   | $ | (14,008 | ) | $ | (10,648 | ) |
| Basic net income  (loss) per share:                                                                                    |       |                                                              |       |   |   |   |   |
| As reported                                                                                                            |       | $                                                                 | 0.51       |   | $ | (0.16 | ) | $ | (0.10 | ) |
| Pro forma                                                                                                              |       | $                                                                 | 0.52       |   | $ | (0.15 | ) | $ | (0.12 | ) |
| Diluted net  income (loss) per share:                                                                                  |       |                                                              |       |   |   |   |   |
| As reported                                                                                                            |       | $                                                                 | 0.49       |   | $ | (0.16 | ) | $ | (0.10 | ) |
| Pro forma                                                                                                              |       | $                                                                 | 0.49       |   | $ | (0.15 | ) | $ | (0.12 | ) |

 

Thefair value of all option grants was estimated on the date of grant using theBlack-Scholes model with the following weighted-average assumptionsused for grants:

| ** **                                | ** ** | **Year Ended December 31,** | ** ** |
|-------------------------------------------|------------|--------------------------------------------|------------|
| ** **                                | ** ** | **2005**                                   | ** ** | **2004** | ** ** | **2003** | ** ** |
| Weighted-average  risk-free interest rate |       | 3.83                                       | %          | 2.51 | % | 1.50 | % |
| Expected dividend  yield                  |       | 0                                          | %          | 0 | % | 0 | % |
| Expected life in  years                   |       | 4.2                                        |       | 2.0 |   | 2.0 |   |
| Expected volatility                       |       | 46                                         | %          | 86 | % | 143 | % |

 

F-13

----

**UbiquiTel Inc. and Subsidiaries Notes to Consolidated Financial Statements (Continued)**

**Revenue Recognition**

The Company recognizes revenues when services havebeen rendered or products have been delivered, the price to the buyer is fixedand determinable, and collectibility is reasonably assured. The Companyaccounts for rebates, discounts and other sales incentives as a reduction torevenue. Subscriber revenue consists of monthly recurring service charges for voiceand data services and monthly non-recurring charges for local, long distance,travel and roaming airtime usage and data usage in excess of the pre-subscribedusage plan received from the Company’s subscribers, cancellation and late feerevenues and surcharges, less reductions for billing adjustments and credits.Equipment revenue includes sales of handsets and accessories. The Company’srevenue recognition policies are consistent with the guidance in EmergingIssues Task Force Issue No. 00-21, “Accounting for RevenueArrangements with Multiple Deliverables” (“EITF 00-21”), and StaffAccounting Bulletin No. 104, “Revenue Recognition.”

The Company recognizes revenue from its subscribers asthey use the service. The Company pro-rates access revenue over the billingperiod and records airtime usage in excess of the pre-subscribed usage plan.The Company’s subscribers pay an activation fee to the Company when theyinitiate service. Prior to the adoption of EITF 00-21 on July 1,2003, the Company deferred all activation fee revenue and direct customeractivation costs on a straight-line basis over the average life of itssubscribers, which was estimated to be 30 months. Direct customeractivation costs in excess of activation fee revenue were recognized immediately.Upon adoption of EITF 00-21, non-refundable, up-front activation feesbilled in the Company’s direct sales channel are included in equipment revenuerather than subscriber revenue in the consolidated statement of operations tothe extent that the aggregate activation fee and handset proceeds received froma subscriber do not exceed the fair value of the handset sold. For the yearsended December 31, 2005, 2004 and 2003, the Company recognizedapproximately $3.8 million, $4.9 million and $4.9 million,respectively, of activation fee revenue. As of December 31, 2005 and 2004,deferred revenue in the consolidated balance sheets included deferredactivation fee revenue of approximately $2.5 million and$3.1 million, respectively, and also included approximately$10.0 million and $9.2 million of deferred access revenue, whichrepresented customer access fees billed one month in advance, as of December 31,2005 and 2004, respectively. Deferred activation fee revenue also was includedin other long-term liabilities and totaled approximately $1.2 million and$1.4 million as of December 31, 2005 and 2004, respectively.

Roaming and wholesale revenue includes resellerrevenue, Sprint PCS travel revenue and non-Sprint PCS roaming revenue. TheCompany records Sprint PCS travel revenue on a per minute rate for voiceservices and on a per kilobit rate for data services when Sprint PCSsubscribers based outside the Company’s markets use the Company’s network. TheCompany earned approximately $91.5 million, $72.2 million and$48.7 million of Sprint PCS travel revenue for the years ended December 31,2005, 2004 and 2003, respectively. The Company records non-Sprint PCS roamingrevenue when non-Sprint PCS subscribers use the Company’s network. The Companyearned approximately $12.7 million, $20.2 million and $14.2 millionof non-Sprint PCS roaming revenue for the years ended December 31, 2005,2004 and 2003, respectively. The Company records reseller revenue when resellersubscribers use the Company’s network. The Company earned approximately $21.4million, $10.5 million and $0.6 million of reseller revenue for the yearsended December 31, 2005, 2004 and 2003, respectively.

Equipment revenue consists of proceeds from sales ofhandsets and accessories which are recorded at the time of sale. Revenues fromsales of handsets and accessories represent a separate earnings process fromservice revenues because sales of handsets and accessories do not requirecustomers to subscribe to 

F-14

----

**UbiquiTel Inc. and Subsidiaries Notes to Consolidated Financial Statements (Continued)**

wireless services.Equipment revenue also includes an allocation of the arrangement considerationfrom activation revenue received as part of revenue arrangements with multipledeliverables.

The Company participates in the Sprint national andregional distribution programs in which national retailers such as RadioShack,Best Buy and Costco sell Sprint PCS products and services. In order tofacilitate the sale of Sprint PCS products and services, national retailerspurchase wireless handsets from Sprint Nextel for resale and receivecompensation from Sprint Nextel for Sprint PCS products and services sold. Forindustry competitive reasons, Sprint subsidizes the price of these handsets byselling the handsets at a price below cost. Under the Company’s agreements withSprint PCS, when a national retailer sells a Sprint PCS handset purchased fromSprint to a subscriber in the Company’s markets, the Company is obligated toreimburse Sprint for the handset subsidy. The Company does not receive anyrevenues from sales of handsets and accessories by national retailers. For anew subscriber activation and a handset upgrade to an existing subscriber, theCompany includes these handset subsidy charges in cost of products sold in theconsolidated statements of operations. Handset subsidy charges included in costof products sold for the years ended December 31, 2005, 2004 and 2003 wereapproximately $7.7 million, $12.7 million and $15.5 million,respectively.

Accountsreceivable, net includes amounts due from subscribers and the Company’s localindirect agents. The Company records an allowance for doubtful accounts toreflect the expected loss on the collection of receivables. The provision fordoubtful accounts is included in the cost of service and operations in theconsolidated statements of operations. Estimates are used in determining theallowance for bad debt and are based both on historical collection experience,current trends and credit policy and on a percentage of the Company’s accountsreceivable by aging category. In determining these percentages, the Company looksat historical write-offs of its receivables. The Company also looks at currenttrends in the credit quality of its customer base and changes in the creditpolicies. Sub-prime credit class customers are required to make a deposit thatcan be credited against future billings. Certain sub-prime credit classcustomers also are subject to account spending limits. Activity in theallowance for doubtful accounts for the years ended December 31, 2005,2004 and 2003 was as follows:

| ** **                    | ** ** | **December 31, 2005** | ** ** | **December 31, 2004** | ** ** | **December 31, 2003** | ** ** |
|-------------------------------|------------|---------------------------------|------------|---------------------------------|------------|---------------------------------|------------|
| ** **                    | ** ** | **(In Thousands)**         | ** ** |
| Balance,  beginning of year   |       |                            | $          | 3,358                           |       |                            |       | $ | 2,722 |   |   |   | $ | 4,343 |   |   |
| Provision charged  to expense |       |                            | 4,327      |                            |       |                            | 5,554      |   |   |   | 1,663 |   |   |
| Charges to  allowance         |       |                            | (4,250     | )                               |       |                            | (4,918     | ) |   |   | (3,284 | ) |   |
| Balance, end of year          |       |                            | $          | 3,435                           |       |                            |       | $ | 3,358 |   |   |   | $ | 2,722 |   |   |

 

**Advertising Expenses**

The Company expensesadvertising costs when the advertising occurs. Total advertising expensesamounted to approximately $10.9 million, $9.3 million and$8.0 million for the years ended December 31, 2005, 2004 and 2003,respectively, and are included in selling and marketing expenses in theconsolidated statements of operations.

**Concentration of Risk**

Financial instruments, which potentially subject theCompany to concentration of credit risk, consist principally of cash and cashequivalents and accounts receivable. The Company maintains cash and cashequivalents in accounts with financial institutions in excess of the amountinsured by the Federal Deposit 

F-15

----

**UbiquiTel Inc. and Subsidiaries Notes to Consolidated Financial Statements (Continued)**

Insurance Corporation.Management does not believe there is significant credit risk associated withdeposits in excess of the federally insured amounts. Further, the Companymaintains accounts with nationally recognized investment managers. Suchdeposits are not insured by the Federal Deposit Insurance Corporation.Management does not believe there is significant credit risk associated withthese uninsured deposits.

Concentrations of credit risk with respect to accountsreceivable are limited due to a large subscriber base. Initial creditevaluations of subscribers’ financial condition are performed and securitydeposits are generally obtained for subscribers with a high credit riskprofile. The Company maintains an allowance for doubtful accounts for potentialcredit losses.

Additionally, the Companyderives substantial revenues and expenses from Sprint Nextel Corporation (“Sprint”or “Sprint Nextel”). A significant amount of the Company’s financialtransactions result from the Company’s relationship with Sprint.

**Comprehensive Income**

No statement of comprehensiveincome has been included in the accompanying financial statements since theCompany does not have any other comprehensive income to report.

**3.**                 SPRINTAGREEMENTS

The Company entered into four major agreements withSprint PCS and Sprint in late 1998. They are the management agreement, theservices agreement, the trademark and service mark license agreement withSprint and the trademark and service mark license agreement with Sprint PCS.The agreements, as amended to date, allow the Company to exclusively providedigital wireless personal communications services, or PCS, under the Sprintbrand name to certain markets in the western and midwestern United States whichinclude a total population of approximately 10.8 million residentscovering portions of California, Nevada, Washington, Idaho, Utah, Wyoming,Indiana, Kentucky and Tennessee. See Note 15 with respect to Sprint’s merger inAugust 2005 with Nextel Communications, Inc. and the Company’slitigation against Sprint and Nextel related to the merger.

The management agreement has an initial term of20 years ending in October 2018 with three 10-year renewals. Itcan be terminated if either party provides the other with two years’ priorwritten notice or either Sprint PCS or the Company is in material default ofits obligations. The key clauses within the management agreement are summarizedas follows:

*Exclusivity.*   TheCompany is designated as the only person or entity that can manage or operate aPCS network for Sprint PCS in the Company’s markets. Sprint PCS and Sprint’srelated parties (as defined in the management agreement) are prohibited fromowning, operating, building or managing another wireless mobilitycommunications network operating in the 1900 MHz spectrum range in the Company’smarkets while the management agreement is in place and no event has occurredthat would permit the agreement to be terminated.

*NetworkBuild-out.*   The management agreement specifiesthe terms of the Sprint PCS affiliation, including the required networkbuild-out plan, which requires that the Company provide network coverage to aminimum network coverage area within specified time frames. The Companybelieves it is in compliance with the Company’s network build-out requirementsand has satisfied the required deployment schedule under the managementagreement.

F-16

----

**UbiquiTel Inc. and Subsidiaries Notes to Consolidated Financial Statements (Continued)**

*Productsand Services Offered For Sale.*   The managementagreement identifies the products and services that can be offered for sale inthe Company’s markets. These products and services include, but are not limitedto, Sprint PCS consumer and business products and services available as of thedate of the agreement or as modified by Sprint PCS. The Company also is allowedto resell Sprint PCS services to wireless resellers who in turn resell SprintPCS services to their customers using the Company’s network.

*ServicePricing, Roaming, Travel and Fees.*   The Companymust offer Sprint PCS subscriber pricing plans designated for regional ornational offerings. The Company is permitted to establish its own local priceplans for Sprint PCS products and services offered only in its markets, subjectto Sprint PCS’ approval. The Company is entitled to receive fees weekly fromSprint PCS equal to 92% of net “billed revenue” related to customer activityless applicable write-offs, net of deposits applied. Sprint determines thewrite-offs for any given time period. Outbound non-Sprint PCS roaming billed tosubscribers based in the Company’s markets, proceeds from the sales of handsetsand accessories, amounts collected with respect to taxes and surcharges forenhanced 911, wireless local number portability and universal service fundcharges, and customer handset insurance are not considered “billed revenue.”Billed revenue generally includes all other customer account activity forSprint PCS products and services in the Company’s markets, which includes suchactivities billed to, attributed to or otherwise reflected in customersaccounts. The Company is generally entitled to 100% of the proceeds fromcustomers for equipment and accessories that it sells or leases and to apercentage of fees for enhanced 911 and wireless local number portabilityattributable to customers based in the Company’s markets less applicablewrite-offs. The Company also is entitled to 100% of the universal service fundsfrom the Universal Service Administrative Company associated with customers inthe Company’s markets. Many Sprint PCS subscribers purchase nationwide pricingplans that allow roaming anywhere on Sprint PCS’ and its affiliates’ networkswithout incremental Sprint PCS roaming charges. The Company earns roamingrevenue from Sprint based on a per minute rate when Sprint PCS subscribers fromoutside of the Company’s markets use the Company’s portion of the Sprint PCSnetwork. Similarly, the Company pays the same rate for every minute the Company’ssubscribers use the Sprint PCS network outside of the Company’s markets. TheCompany earns roaming revenue when a wireless subscriber based outside of theCompany’s markets uses PCS data services on the Company’s network and theCompany recognizes expense when its subscribers use such services on the SprintPCS network outside of the Company’s markets. The roaming rate onto anon-Sprint PCS provider’s network is set under Sprint Nextel’s third partyroaming agreements.

In September 2003, the Company recorded anon-recurring adjustment to reduce operating expenses by approximately$3.2 million relating to the resolution of more than $7.5 million ofpreviously disputed charges with Sprint for which the Company had fullyreserved the amounts under dispute. The adjustment reduced cost of service and operationsexpense by approximately $3.2 million and the Company paid Sprintapproximately $4.3 million in conjunction with other previously disputedcharges in November 2003. In addition, in the fourth quarter of 2003, theCompany recorded a $1.3 million adjustment to reduce operating expenseswhen it transitioned from the “collected revenue” to the “billed revenue”method for reconciling amounts due to the Company for accounts receivable.

*Advertisingand Promotion.*   Sprint is responsible for allnational advertising and promotion of Sprint PCS products and services. TheCompany is responsible for advertising and promotion in the Company’s markets.

F-17

----

**UbiquiTel Inc. and Subsidiaries Notes to Consolidated Financial Statements (Continued)**

*ProgramRequirements Including Technical and Customer Care Standards.*   TheCompany must comply with the Sprint PCS program requirements for technicalstandards, customer service standards and national and regional distributionand national accounts programs. Some of the technical standards relate tonetwork up-time, dropped calls, blocked call attempts and call origination andtermination failures. The Company is required to build a network that meetsminimum transport requirements established by Sprint for links between its cellsites and switches. These requirements are measured in milliseconds. TheCompany is also required to have minimal loss and echo return loss on itstelephone lines. The Company must meet substantially high network up-timepercentage in excess of 95%. Sprint can adjust the program requirements at itsdiscretion, though the Company has protective rights under certain conditionsto decline to implement program requirement changes that Sprint could imposethat adversely affect the Company’s business.

*Non-Competition.*   TheCompany may not offer Sprint PCS products and services outside the Company’smarkets.

*Inabilityto Use Non-Sprint PCS Brands.*   The Company maynot market, promote, advertise, distribute, lease or sell any of the Sprint PCSproducts and services on a non-branded, “private label” basis or under anybrand, trademark or trade name other than the Sprint brand, except for sales toresellers or as otherwise permitted under the trademark and service licenseagreements.

*Rightsof First Refusal.*   Sprint has certain rights offirst refusal to buy the Company’s assets upon a proposed sale.

*MostFavored Nation Clause.*   The Company generally hasthe right to amend the management agreement and services agreement to obtainthe most favorable terms provided under a management agreement or servicesagreement between Sprint PCS and a PCS affiliate of Sprint Nextel similarlysituated to the Company (defined as having at least 3.0 million POPs) if,prior to December 31, 2006, Sprint amends the terms of any of thoseagreements of such similarly situated PCS affiliate of Sprint Nextel. Thisright is only effective, however, if the Company agrees to accept all the termsand conditions set forth in the other agreements agreed to after April 1,2004 and is subject to specified restrictions on its applicability.

*Rightson Termination and Non-Renewal.*   If the Companyhas the right to terminate the management agreement because of an event oftermination caused by Sprint PCS, generally the Company may either (1) requireSprint to purchase all of its operating assets used in connection with its PCSnetwork for an amount equal to 80% of its “entire business value” (as definedin the management agreement), or (2) if Sprint PCS is the licensee for 20MHz or more of the spectrum on the date of the management agreement, requireSprint PCS to assign to the Company, subject to governmental approval, up to 10MHz of licensed spectrum for an amount equal to the greater of (x) theoriginal cost to Sprint of the license plus any microwave relocation costs paidby Sprint or (y) 9% of the Company’s entire business value, or (3) sueSprint for damages or submit the matter to arbitration and thereby notterminate the management agreement. If Sprint PCS has the right to terminatethe management agreement because of an event of termination caused by theCompany, generally Sprint PCS may either (1) require the Company, withoutfurther approval of the Company’s shareholders, to sell its operating assets toSprint PCS for an amount equal to 72% of its entire business value, or (2) requirethe Company to purchase, subject to governmental approval, the licensedspectrum for an amount equal to the greater of (x) the original cost toSprint of the license plus any microwave relocation costs paid by Sprint or (y) 10%of the Company’s entire business value, or (3) take any action as SprintPCS deems necessary to cure the Company’s breach of the 

F-18

----

**UbiquiTel Inc. and Subsidiaries Notes to Consolidated Financial Statements (Continued)**

management agreement,including assuming responsibility for, and operating, its PCS network, or (4) suethe Company for damages or submit the matter to arbitration and thereby notterminate the management agreement.

If Sprint PCS gives the Company timely notice that itdoes not intend to renew the management agreement, the Company may either (1) requireSprint to purchase all of the Company’s operating assets used in connectionwith its PCS network for an amount equal to 80% of its entire business value,or (2) if Sprint PCS is the licensee for 20 MHz or more of the spectrum onthe date of the management agreement, require Sprint to assign to the Company,subject to governmental approval, up to 10 MHz of licensed spectrum for anamount equal to the greater of (x) the original cost to Sprint of thelicense plus any microwave relocation costs paid by Sprint or (y) 10% ofthe Company’s entire business value. If the Company gives Sprint PCS timelynotice of non-renewal, or both parties give notice of non-renewal, or themanagement agreement can be terminated for failure to comply with legalrequirements or regulatory considerations, Sprint PCS may either (1) purchaseall of the Company’s operating assets, without further approval of the Company’sshareholders, for an amount equal to 80% of its entire business value, or (2) requirethe Company to purchase, subject to governmental approval, the licensedspectrum for an amount equal to the greater of (x) the original cost toSprint of the license plus any microwave relocation costs paid by Sprint or (y) 10%of its entire business value.

*ServicesAgreement.*   The services agreement outlinesvarious support services such as activation, billing and customer care thatwill be provided to the Company by Sprint Nextel. These services are availableto the Company at established rates. Sprint may discontinue a service providedthat it gives nine months’ written notice. The services agreement automaticallyterminates upon termination of the management agreement.

*Trademark and Service MarkLicense Agreements.*   The trademark and servicemark license agreements with Sprint and Sprint PCS provide the Company withnon-transferable, royalty free licenses to use the Sprint brand name, theSprint logo and several other trademarks and service marks. The Company’s useof the licensed marks is subject to adherence to quality standards determinedby Sprint. Sprint can terminate the trademark and service mark licenseagreements if the Company files for bankruptcy, materially breaches theagreement or if the management agreement is terminated.

**4.   PROPERTY ANDEQUIPMENT**

Propertyand equipment consisted of the following:

| ** **                       | ** ** | **December 31, 2005** | ** ** | **December 31, 2004** | ** ** |
|----------------------------------|------------|---------------------------------|------------|---------------------------------|------------|
| ** **                       | ** ** | **(In Thousands)**         | ** ** |
| Network equipment                |       |                            | $          | 383,371                         |       |   |   | $ | 347,746 |   |   |
| Vehicles                         |       |                            | 1,594      |                            |       |   | 1,508 |   |   |
| Furniture and  office equipment  |       |                            | 5,551      |                            |       |   | 5,211 |   |   |
| Computer  equipment and software |       |                            | 10,647     |                            |       |   | 8,548 |   |   |
| Leasehold  improvements          |       |                            | 5,284      |                            |       |   | 4,403 |   |   |
| Land                             |       |                            | 130        |                            |       |   | 130 |   |   |
| Buildings                        |       |                            | 4,670      |                            |       |   | 4,670 |   |   |
|                             |       |                            | 411,247    |                            |       |   | 372,216 |   |   |
| Accumulated  depreciation        |       |                            | (167,084   | )                               |       |   | (128,537 | ) |   |
| Property and  equipment, net     |       |                            | $          | 244,163                         |       |   |   | $ | 243,679 |   |   |

 

F-19

----

**UbiquiTel Inc. and Subsidiaries Notes to Consolidated Financial Statements (Continued)**

Depreciation expense wasapproximately $46.9 million, $45.5 million and $39.7 million forthe years ended December 31, 2005, 2004 and 2003, respectively.

**5.   ACCRUED EXPENSES**

As of December 31,2005 and 2004, accrued expenses consisted of the following accruals:

| ** **                           | ** ** | **December 31, 2005** | ** ** | **December 31, 2004** | ** ** |
|--------------------------------------|------------|---------------------------------|------------|---------------------------------|------------|
| ** **                           | ** ** | **(In Thousands)**         | ** ** |
| Fees and expenses  payable to Sprint |       |                            | $          | 8,695                           |       |   |   | $ | 9,868 |   |   |
| Agent  compensation                  |       |                            | 2,214      |                            |       |   | 2,673 |   |   |
| Use taxes payable                    |       |                            | 948        |                            |       |   | 1,247 |   |   |
| Other                                |       |                            | 6,373      |                            |       |   | 5,036 |   |   |
| Accrued expenses                     |       |                            | $          | 18,230                          |       |   |   | $ | 18,824 |   |   |

 

**6.   LONG-TERM DEBTAND DEBT RETIREMENTS**

Long-termdebt outstanding as of December 31, 2005 and 2004 was as follows:

| ** **                                                                          | ** ** | **December 31, 2005** | ** ** | **December 31, 2004** | ** ** |
|-------------------------------------------------------------------------------------|------------|---------------------------------|------------|---------------------------------|------------|
| ** **                                                                          | ** ** | **(In Thousands)**         | ** ** |
| 9.875% senior  notes                                                                |       |                            | $          | 420,000                         |       |   |   | $ | 420,000 |   |   |
| Plus: premium                                                                       |       |                            | 710        |                            |       |   | 834 |   |   |
| Building mortgage                                                                   |       |                            | 3,005      |                            |       |   | 3,228 |   |   |
| 14% senior  discount notes                                                          |       |                            | —     |                            |       |   | 32 |   |   |
| Less: discount                                                                      |       |                            | —     |                            |       |   | (2 | ) |   |
| Subtotal                                                                            |       |                            | 423,715    |                            |       |   | 424,092 |   |   |
| Future cash flows  associated with 14% senior discount notes for interest and other |       |                            | —     |                            |       |   | 24 |   |   |
| Total long-term  debt                                                               |       |                            | 423,715    |                            |       |   | 424,116 |   |   |
| Less: current maturities                                                            |       |                            | 240        |                            |       |   | 223 |   |   |
| Total long-term  debt, excluding current maturities                                 |       |                            | $          | 423,475                         |       |   |   | $ | 423,893 |   |   |

 

Aggregateminimum annual principal payments due on all issues of long-term debt for thenext five years at December 31, 2005 and thereafter are as follows:

| **Years Ending December 31,** | ** ** | ** ** | ** ** | **(In Thousands)** | ** ** |
|----------------------------------------------|------------|------------|------------|-------------------------|------------|
| 2006                                         |       |       | $          | 240                     |       |   |
| 2007                                         |       |       | 257        |                    |       |
| 2008                                         |       |       | 275        |                    |       |
| 2009                                         |       |       | 295        |                    |       |
| 2010                                         |       |       | 317        |                    |       |
| Thereafter                                   |       |       | 421,621    |                    |       |
| Total future long-term  debt payments        |       |       | $          | 423,005                 |       |   |

 

F-20

----

**UbiquiTel Inc. and Subsidiaries Notes to Consolidated Financial Statements (Continued)**

**Notes**

In April 2000, Operating Company issued in aprivate placement $300.0 million aggregate principal amount of 14% seniorsubordinated discount notes due April 15, 2010 (the “14% SubordinatedNotes”) that were accreting in value until April 15, 2005 with interestpayable semiannually beginning on October 15, 2005, and warrants topurchase 3,579,000 shares of common stock of UbiquiTel at an exercise price of$11.37 per share. The 14% Subordinated Notes were subsequently registered underthe Securities Act of 1933, as amended. All outstanding 14% Subordinated Noteswere purchased by the Company in a series of transactions in 2003 and 2004described below.

In February 2003, Operating Company consummatedcertain private placement transactions to reduce its long-term debtoutstanding, including an exchange of $48.2 million aggregate principalamount of 14% senior discount notes due May 15, 2010 (“14% Senior Notes”)and $9.6 million in cash for $192.7 million aggregate principalamount of its outstanding 14% Subordinated Notes, and a related financing of$12.8 million aggregate principal amount of 14% Series B seniordiscount notes due 2008 (“14% Series B Senior Notes”) in which OperatingCompany received cash proceeds of $9.6 million to fund the cash portion ofthe exchange. The Company issued detachable warrants under the financing topurchase up to approximately 9.6 million shares of UbiquiTel’s commonstock at an exercise price of $0.01 per share. The 14% Senior Notes wereaccreting in value until, and were redeemable on or after, April 15, 2005,with interest payable semiannually beginning on October 15, 2005. The 14%Senior Notes were subsequently registered under the Securities Act. The 14% Series BSenior Notes were immediately redeemable and accreting in value until April 15,2005 with interest payable semiannually beginning on October 15, 2005. Ina series of additional private placement financings in the second quarter of2003, Operating Company received cash proceeds of approximately$1.3 million, of which $1.1 million were used by Operating Company tofund open market purchases of $6.9 million aggregate principal amount($5.3 million aggregate accreted value) of 14% Subordinated Notes, and theCompany issued approximately $1.7 million aggregate principal amount ofOperating Company’s 14% Series B Senior Notes and detachable warrants topurchase up to approximately 1.3 million shares of UbiquiTel’s commonstock at an exercise price of $0.01 per share. All outstanding 14% Senior Noteswere purchased by the Company in a series of transactions in 2004 and 2005 andall outstanding 14% Series B Senior Notes were redeemed by the Company ina series of transactions in 2004 described below. During 2003, the holdersexercised all of the warrants issued in connection with the issuance of the 14%Series B Senior Notes, and UbiquiTel issued 10,913,607 shares of itscommon stock in the aggregate upon the exercises.

In February 2004,Operating Company issued $270.0 million aggregate principal amount of 9.875%senior notes due March 1, 2011 (“9.875% Senior Notes”) at a discountgenerating approximately $265.3 million in proceeds, and in October 2004,Operating Company issued an additional $150.0 million aggregate principalamount of 9.875% Senior Notes of the same class at a price of 103.5% generatingcash proceeds of approximately $155.3 million, in transactions exempt from theregistration requirements of the Securities Act. The 9.875% Senior Notes weresubsequently registered under the Securities Act. Interest on the 9.875% SeniorNotes became payable semiannually beginning on September 1, 2004. The9.875% Senior Notes are redeemable in whole or in part on or after March 1,2007. Prior to March 1, 2007, Operating Company may redeem up to 35% ofthe aggregate principal amount of the 9.875% Senior Notes with net cashproceeds of a sale of its equity or a contribution to its common equitycapital, provided that at least 65% of the principal amount of 9.875% SeniorNotes originally issued under the indenture remains outstanding after givingeffect to such redemption and such redemption occurs within 45 days of the dateof such sale of equity interests or contribution. The indenture governing the9.875% Senior Notes contains 

F-21

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**UbiquiTel Inc. and Subsidiaries Notes to Consolidated Financial Statements (Continued)**

customary covenants,including covenants limiting indebtedness, dividends and distributions on, andredemptions and repurchases of, capital stock and other similar payments, theacquisition and disposition of assets, and transactions with affiliates orrelated persons. The indenture governing the 9.875% Senior Notes provides forcustomary events of default, including cross defaults, judgment defaults andevents of bankruptcy. Operating Company is permitted to issue additional 9.875%Senior Notes under the indenture from time to time.

The proceeds from the sale of the 9.875% Senior Noteswere used in February 2004 to repay and terminate Operating Company’ssenior secured credit facility, including the repayment of $230.0 millionin outstanding borrowings plus accrued interest and termination of its unused$47.7 million revolving line of credit, to redeem all of Operating Company’soutstanding 14% Series B Senior Notes ($14.5 million outstandingprincipal amount) for approximately $12.5 million and to purchase$16.7 million principal amount of Operating Company’s outstanding 14%Senior Notes for approximately $15.9 million, and were used in October 2004to fund a cash tender offer and consent solicitation for its remainingoutstanding 14% Subordinated Notes and 14% Senior Notes. Approximately $100.4million aggregate principal amount of 14% Subordinated Notes, representing allof the outstanding 14% Subordinated Notes, and approximately $31.4 millionaggregate principal amount of 14% Senior Notes were validly tendered andaccepted. The remaining outstanding approximately $32,000 aggregate principalamount of 14% Senior Notes were redeemed in April 2005.

The $420.0 million aggregate principal amount of9.875% Senior Notes outstanding as of December 31, 2005 will require cashpayments of interest of $41.5 million in each of the years 2006 through 2010.

The Company presently is in compliance with allcovenants associated with the 9.875% Senior Notes. UbiquiTel has fully andunconditionally guaranteed Operating Company’s obligations under the 9.875%Senior Notes. UbiquiTel has no independent assets or operations separate fromits investment in Operating Company.

The Company may from timeto time purchase outstanding 9.875% Senior Notes in the open market, inprivately negotiated transactions or otherwise in accordance with its debtinstruments and applicable law.

**Building Mortgage**

The Company has a mortgageon an owned building and land with a balance of approximately $3.0 millionat December 31, 2005. The mortgage carries a fixed interest rate of 6.99%and is payable in monthly installments of approximately $37,000. The mortgageis due to be repaid in full by April 2015.

**7.   STOCKHOLDERS’EQUITY**

**Common Stock**

The holders of commonstock are entitled to one vote for each share held of record on all matterssubmitted to a vote of shareholders and do not have any cumulative votingrights. Subject to the rights of the holders of any series of preferred stock,holders of common stock are entitled to receive ratably such dividends as maybe declared by the board of directors out of funds legally available therefor.Holders of shares of common stock have no preemptive, conversion, redemption,subscription or similar rights. If the Company liquidates, dissolves or windsup, the holders of shares of common stock are entitled to share 

F-22

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**UbiquiTel Inc. and Subsidiaries Notes to Consolidated Financial Statements (Continued)**

ratablyin the assets which are legally available for distribution, if any, remainingafter the payment or provision for the payment of all debts and otherliabilities and the payment and setting aside for payment of any preferentialamount due to the holders of shares of any series of preferred stock.

**Warrants**

At December 31, 2005,the Company had outstanding warrants to purchase an aggregate of 3,579,000shares of common stock issued in connection with the 14% Subordinated Notes.These warrants, which were detachable, have been exercisable at any time after April 15,2001 at $11.37 per share and expire on April 15, 2010. Warrants topurchase 86,183 shares of common stock at an exercise price of $8.00 per sharewere issued to Credit Suisse First Boston Corporation in connection with the14% Subordinated Notes offering and were exercised for cash during 2005.

**8.   STOCK-BASEDCOMPENSATION**

**Employee Stock Purchase Plan**

The Company maintains an Employee Stock Purchase Plan(the “ESP Plan”). Under the terms of the ESP Plan, during any calendar yearthere were four quarterly offering periods beginning January 1st, April 1st, July 1st and October 1st, during which eligible employees couldparticipate. The purchase price is the lower of 85% of the fair market value ofthe common stock on the first trading day of the offering period or 85% of thefair market value of the common stock on the last trading day of the offeringperiod. The Company issued 83,938 shares of common stock at an average pershare price of approximately $5.19 in 2005, 90,804 shares of common stock at anaverage per share price of approximately $2.89 in 2004 and 158,686 shares ofcommon stock at an average per share price of approximately $0.20 in 2003.

On October 29, 2002,UbiquiTel’s board of directors approved amendments to the ESP Plan, which amongother items, authorized the suspension of the ESP Plan, which suspension becameeffective with the offering period beginning January 1, 2003. The ESP Planwas resumed effective January 1, 2004.

**Equity Incentive Plan**

On November 29, 1999, the Company entered into anemployment agreement with its chief executive officer. Under the employmentagreement, the Company granted non-qualified options for 2,550,000 shares ofcommon stock at a purchase price of $0.50 per share which the Company believeswas the fair market value of the stock at that time. The options vested ratablyover three years beginning on November 29, 2000.

In January 2000, the board of directors andshareholders of the Company approved the 2000 Equity Incentive Plan. In 2001,the Company’s board of directors and shareholders approved the Amended andRestated 2000 Equity Incentive Plan (the “Equity Incentive Plan”). The purposeof the Equity Incentive Plan is to attract, retain and reward key employees,consultants and non-employee directors. A committee consisting of non-employee,independent members of the Company’s board of directors administers the EquityIncentive Plan. The committee may grant stock options, stock appreciationrights and other equity-based awards to eligible persons, as defined inthe Equity Incentive Plan, including directors. The Equity Incentive Planauthorizes up to 7,500,000 shares of common stock for issuance and does notinclude awards paid in cash. Stock options are normally granted with anexercise price equal to the fair value of the common stock on the date ofgrant. Stock options granted to employees have generally vested in four 

F-23

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**UbiquiTel Inc. and Subsidiaries Notes to Consolidated Financial Statements (Continued)**

equal annual amountsbeginning on the anniversary date of each grant and have a maximum term of tenyears.

In May 2002, the Company modified 1,220,800options previously issued to employees and board members under the EquityIncentive Plan to reduce the exercise price to $4.00, which was approximately$2.14 per share above the fair market value on the date of modification. Themodification reducing the exercise price resulted in variable accounting forthese options from the date of modification to the date the options areexercised, forfeited or expire unexercised. Under variable accounting, stock-basedemployee compensation expense was recognized for increases or decreases in theamount by which the fair market value of the Company’s common stock exceeds theexercise price of the modified options, totaling approximately $2.9 million,$3.4 million and $0 for the years ended December 31, 2005, 2004 and 2003,respectively. Upon the adoption of SFAS No. 123R as of January 1,2006, the stock-based employee compensation expense currently recognized undervariable accounting will no longer be recognized.

Thefollowing is a summary of the options granted and outstanding at December 31,2005, 2004 and 2003, respectively:

| ** **                                                  | ** ** | **December 31, 2005** | ** ** | **December 31, 2004**        | ** ** | **December 31, 2003** | ** ** |
|-------------------------------------------------------------|------------|---------------------------------|------------|----------------------------------------|------------|---------------------------------|------------|
| ** **                                                  | ** ** | **Shares**                      | ** ** | **Weighted  Average  Exercise  Price** | ** ** | **Shares**                      | ** ** | **Weighted  Average  Exercise  Price** | ** ** | **Shares** | ** ** | **Weighted  Average  Exercise  Price** | ** ** |
| Outstanding at  beginning of year                           |       | 7,841,225                       |       |                                   | $          | 2.02                            |       |   | 6,637,875 |   |   | $ | 1.55 |   |   | 5,335,800 |   |   | $ | 1.57 |   |   |
| Granted                                                     |       | 798,600                         |       |                                   | 7.28       |                            |       | 1,907,600 |   |   | 3.54 |   |   | 1,512,500 |   |   | 1.51 |   |   |
| Exercised                                                   |       | (1,028,375                      | )          |                                   | 2.05       |                            |       | (374,450 | ) |   | 1.12 |   |   | (75,000 | ) |   | 0.50 |   |   |
| Forfeited                                                   |       | (255,075                        | )          |                                   | 3.12       |                            |       | (329,800 | ) |   | 2.33 |   |   | (135,425 | ) |   | 2.54 |   |   |
| Outstanding at  end of year                                 |       | 7,356,375                       |       |                                   | $          | 2.55                            |       |   | 7,841,225 |   |   | $ | 2.02 |   |   | 6,637,875 |   |   | $ | 1.55 |   |   |
| Options  exercisable at end of year                         |       | 4,743,100                       |       |                                   | $          | 1.80                            |       |   | 4,622,925 |   |   | $ | 1.53 |   |   | 4,238,934 |   |   | $ | 1.36 |   |   |
| Weighted average fair  value of options granted during year |       |                            |       |                                   | $          | 3.02                            |       |   |   |   |   | $ | 1.67 |   |   |   |   |   | $ | 1.04 |   |   |

 

Thefollowing table summarizes information about stock options outstanding at December 31,2005:

| **Range of Exercise Prices** | ** ** | ** ** | ** ** | **Options  Outstanding at  December 31, 2005** | ** ** | **Weighted-Average  Exercise Price** | ** ** | **Weighted-Average  Remaining  Contractual Life** | ** ** | **Options  Exercisable at  December 31, 2005** | ** ** | **Weighted-Average  Exercise Price** | ** ** |
|---------------------------------------------|------------|------------|------------|---------------------------------------------------------------|------------|-------------------------------------------|------------|--------------------------------------------------------|------------|---------------------------------------------------------------|------------|-------------------------------------------|------------|
| $0.50–$0.58                            |       |       | 2,591,250  |                                                          |       |                                      | $          | 0.50                                                   |       |                                                          |       | 3.8 years                                 |       |   |   | 2,590,000 |   |   |   | $ | 0.50 |   |   |
| $1.14–$1.86                            |       |       | 1,444,925  |                                                          |       |                                      | $          | 1.62                                                   |       |                                                          |       | 7.2 years                                 |       |   |   | 686,700 |   |   |   | $ | 1.65 |   |   |
| $3.52–$4.16                            |       |       | 2,535,600  |                                                          |       |                                      | $          | 3.72                                                   |       |                                                          |       | 7.1 years                                 |       |   |   | 1,346,400 |   |   |   | $ | 3.88 |   |   |
| $7.08–$7.29                            |       |       | 784,600    |                                                          |       |                                      | $          | 7.28                                                   |       |                                                          |       | 9.4 years                                 |       |   |   | 120,000 |   |   |   | $ | 7.29 |   |   |

 

F-24

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**UbiquiTel Inc. and Subsidiaries Notes to Consolidated Financial Statements (Continued)**

**9.   INCOME TAXES**

Incometax (benefit) expense consisted of the following:

| ** **                          | ** ** | **Year Ended December 31,** | ** ** |
|-------------------------------------|------------|--------------------------------------------|------------|
| ** **                          | ** ** | **2005**                                   | ** ** | **2004** | ** ** | **2003** | ** ** |
| ** **                          | ** ** | **(In Thousands)**                    | ** ** |
| Current:                            |       |                                       |       |   |   |   |   |
| Federal                             |       | $                                          | 295        |   | $ | — |   | $ | (27 | ) |
| State                               |       | 40                                         |       | 245 |   | — |   |
|                                |       | 335                                        |       | 245 |   | (27 | ) |
| Deferred:                           |       |                                       |       |   |   |   |   |
| Federal                             |       | (26,644                                    | )          | 316 |   | 793 |   |
| State                               |       | (5,411                                     | )          | — |   | — |   |
|                                |       | (32,055                                    | )          | 316 |   | 793 |   |
| Total income tax  (benefit) expense |       | $                                          | (31,720    | ) | $ | 561 |   | $ | 766 |   |

 

The Company historically had sufficient uncertaintyregarding the realization of its deferred income tax assets, including ahistory of recurring operating losses, which resulted in the recording of afull valuation allowance against all deferred income tax assets that were notoffset by anticipated reversals of deferred income tax liabilities excludingthe liability arising from goodwill amortization. During the fourth quarter of2005, the Company assessed the realizability of its deferred income tax assets,which consisted primarily of the tax benefit of net operating losscarryforwards. As a result of the Company’s positive earnings in 2005,projections of future taxable income and improvements in financial position,the Company determined that it is more likely than not that the deferred incometax assets will be realized and has released the valuation allowance on these deferredincome tax assets, resulting in an income tax benefit of approximately $32.1million during the fourth quarter of 2005. The increase in deferred income taxliabilities during the years ended December 31, 2004 and 2003 resultedfrom an income tax deduction for amortization of goodwill, which was notamortizable to expense for financial reporting purposes.

As of December 31, 2005, the Company hadconsolidated net operating loss carryforwards for federal income tax purposestotaling approximately $243.0 million, which will carry forward to futureyears. The net operating loss carryforwards will begin to expire in 2022. Forthe year ended December 31, 2005, the Company utilized approximately $17.5million of its federal net operating loss carryforwards, which resulted in nocurrent federal income taxes for 2005 except for alternative minimum taxes ofapproximately $295,000.

F-25

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**UbiquiTel Inc. and Subsidiaries Notes to Consolidated Financial Statements (Continued)**

Incometax expense (benefit) for the years ended December 31, 2005, 2004 and 2003differed from the amount computed by applying the statutory federal income taxrate to reported income (loss) before income taxes as a result of thefollowing:

| ** **                                                  | ** ** | **Year Ended December 31,** | ** ** |
|-------------------------------------------------------------|------------|--------------------------------------------|------------|
| ** **                                                  | ** ** | **2005**                                   | ** ** | **2004** | ** ** | **2003** | ** ** |
| ** **                                                  | ** ** | **(In Thousands)**                    | ** ** |
| Computed  “expected” income tax expense (benefit) |       | $                                          | 5,598      |   | $ | (5,010 | ) | $ | (2,614 | ) |
| State tax  benefit, net of federal benefit                  |       | (3,491                                     | )          | (204 | ) | (2,346 | ) |
| 14% Subordinated  Notes and 14% Senior Notes interest       |       | —                                     |       | 707 |   | 813 |   |
| Change in  valuation allowance                              |       | (33,932                                    | )          | 7,349 |   | (466 | ) |
| Debt retirements                                            |       | —                                     |       | (2,328 | ) | 5,359 |   |
| Other                                                       |       | 105                                        |       | 47 |   | 20 |   |
| Total income tax  (benefit) expense                         |       | $                                          | (31,720    | ) | $ | 561 |   | $ | 766 |   |

 

The Company’s net deferredincome tax asset (liability) consisted of the following amounts of deferredincome tax assets and liabilities as of December 31, 2005 and 2004:

| ** **                            | ** ** | **December 31,**   | ** ** |
|---------------------------------------|------------|-------------------------|------------|
| ** **                            | ** ** | **2005**                | ** ** | **2004** | ** ** |
| ** **                            | ** ** | **(In Thousands)** | ** ** |
| **Deferred income tax assets:**       |       |                    |       |   |   |
| Allowance for  doubtful accounts      |       | $                       | 1,353      |   | $ | 1,300 |   |
| Non-cash  compensation                |       | 2,344                   |       | 1,305 |   |
| Deferred  activation                  |       | 1,476                   |       | 1,760 |   |
| Accumulated  amortization             |       | 2,350                   |       | 2,843 |   |
| Net operating  losses                 |       | 95,560                  |       | 104,710 |   |
| Deferred rent  expense                |       | 1,783                   |       | 736 |   |
| Deferred gain on  sale of towers      |       | 1,623                   |       | 1,799 |   |
| Federal and state  tax credits        |       | 661                     |       | 328 |   |
| Other                                 |       | 201                     |       | 137 |   |
| Total deferred income tax assets      |       | $                       | 107,351    |   | $ | 114,918 |   |
| **Deferred income tax  liabilities:** |       |                    |       |   |   |
| Accumulated  depreciation             |       | $                       | 47,399     |   | $ | 48,582 |   |
| Purchase  accounting                  |       | 23,743                  |       | 25,002 |   |
| Deferred expenses                     |       | 1,487                   |       | 1,770 |   |
| Goodwill amortization                 |       | 1,394                   |       | 1,109 |   |
| Total deferred income tax liability   |       | 74,023                  |       | 76,463 |   |
| Subtotal                              |       | 33,328                  |       | 38,455 |   |
| Valuation  allowance                  |       | —                  |       | (39,564 | ) |
| Net deferred tax  asset (liability)   |       | $                       | 33,328     |   | $ | (1,109 | ) |

 

F-26

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**UbiquiTel Inc. and Subsidiaries Notes to Consolidated Financial Statements (Continued)**

**10.   COMMITMENTS**

**Leases**

TheCompany is obligated under operating leases for office space, retail stores,land for radio communications sites, leased space on radio communications sitesand office equipment. The Company recognizes rent expense on a straight-linebasis over the life of the lease, which establishes deferred rent on thebalance sheet. The Company considers the lease term to include the renewalperiods of any lease that could cause a significant economic detriment to theCompany if such lease renewal option is not exercised. Future minimum annuallease payments under these operating leases for the next five years at December 31,2005 and thereafter are as follows:

| **Years ending December 31:** | ** ** | ** ** | ** ** | **(In Thousands)** | ** ** |
|----------------------------------------------|------------|------------|------------|-------------------------|------------|
| 2006                                         |       |       | $          | 18,662                  |       |   |
| 2007                                         |       |       | 18,027     |                    |       |
| 2008                                         |       |       | 15,939     |                    |       |
| 2009                                         |       |       | 15,090     |                    |       |
| 2010                                         |       |       | 11,754     |                    |       |
| Thereafter                                   |       |       | 12,038     |                    |       |
| Total future minimum  lease payments         |       |       | $          | 91,510                  |       |   |

 

Rental expense foroperating leases was approximately $21.4 million, $18.8 million and$17.3 million for the years ended December 31, 2005, 2004 and 2003,respectively.

**Purchase Obligation**

In September 2004,the Company entered into an agreement with an equipment vendor to purchasenetwork equipment for coverage improvements. The agreement provides for aminimum purchase commitment of $18.0 million in each of the years 2006 through2008 for all network equipment and performance services.

**Employment Agreements**

In November 2002, the Company entered into a newemployment agreement with its chief executive officer. The employment agreementwas for a three-year term and was subsequently extended for an additional yearending November 29, 2006. In addition to his base salary, which was set at$409,500 effective January 1, 2006, the chief executive officer iseligible to receive bonuses in such amounts and at such times as determined bythe disinterested members of the board of directors. The employment agreementprovides that the chief executive officer’s employment may be terminated by theCompany with or without cause, as defined in the employment agreement, at anytime or by the chief executive officer for any reason at any time upon 30 days’written notice to the Company. If the Company terminates the employment of theexecutive without cause, or if the executive terminates employment for goodreason, as defined in the employment agreement, within 30 days oftermination (or such other date mutually agreed to) the Company must pay theexecutive a single lump sum payment in cash equal to one year’s gross salary ineffect at the time of termination, plus all outstanding unreimbursed expenses.Following termination for a period of one year, the Company is required tomaintain for the executive health, life insurance, long-term disability, dentaland medical programs specified in the employment agreement. If the Company isrequired to make such payment within 24 months of a change of control, asdefined in the employment 

F-27

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**UbiquiTel Inc. and Subsidiaries Notes to Consolidated Financial Statements (Continued)**

agreement, or theexecutive is terminated without cause or terminates for good reason, each asdefined in the employment agreement, due to, and within six months prior to, achange of control, the executive would be entitled to receive a lump sum cashpayment (in lieu of any other payments), within 30 days of termination,equal to 2.99 times of the executive’s annual gross salary and bonus for theyear in which the change of control occurs or the immediately preceding year,whichever is higher. The executive would be entitled to health, life insurance,long-term disability, dental and medical program benefits for him and hisfamily for the greater of 12 months or the remainder of the term as if hisemployment had not been terminated.

In November 2003, the Company entered intoemployment agreements with two executive officers of the Company, including thechief financial officer and the senior vice president and general counsel. Theemployment agreements provide that the executive officer’s employment may beterminated by the Company with or without cause, as defined in the employmentagreement, at any time or by the executive officer for any reason at any timeupon 30 days’ written notice to the Company. If the Company terminates theemployment of the executive officer without cause, or if the executive officerterminates employment for good reason, as defined in the employment agreement,within 30 days of termination (or such other date mutually agreed to) theCompany must pay the executive officer a single lump sum payment in cash equalto the total of one year’s gross salary in effect at the time of terminationand the amount of the executive officer’s bonus for the fiscal year precedingthe year in which the termination occurs, plus all outstanding unreimbursedexpenses. If the Company is required to make such payment within 24 monthsof a change of control, as defined in the employment agreement, or theexecutive officer is terminated without cause or terminates for good reason,each as defined in the employment agreement, due to, and within six monthsprior to, a change of control, the executive officer would be entitled toreceive from the Company or the Company’s successor-in-interest, as applicable,a lump sum cash payment, within 30 days of termination, equal to two timesthe executive officer’s gross salary, excluding bonus, for the twelve-monthperiod preceding the date of termination, plus all outstanding unreimbursed expenses,and the executive officer’s outstanding stock options will terminate on theearlier of the date that is three years following the date on which theexecutive officer’s employment is terminated or the termination date in theapplicable stock option agreement. Following a termination by the Company orits successor-in-interest, if applicable, of the executive officer withoutcause, in connection with a change of control or otherwise, for a period of oneyear following termination, the Company is required to maintain for theexecutive officer health, life insurance, long-term disability, dental andmedical program benefits to which the executive officer is then entitled.

In March 2005, the Company entered into anemployment agreement with the chief operating officer, an executive officer ofthe Company. The employment agreement provides that the executive officer’semployment may be terminated by the Company with or without cause, as definedin the employment agreement, at any time or by the executive officer for anyreason at any time upon 30 days’ written notice to the Company. If the Companyterminates the employment of the executive officer without cause, or if theexecutive officer terminates employment for good reason, as defined in theemployment agreement, within 30 days of termination (or such other datemutually agreed to) the Company must pay the executive officer a single lumpsum payment in cash equal to the total of one year’s gross salary in effect atthe time of termination and the amount of the executive officer’s bonus for thefiscal year preceding the year in which the termination occurs, plus alloutstanding unreimbursed expenses. If the Company is required to make suchpayment within 24 months of a change of control, as defined in theemployment agreement, or the executive officer is terminated without cause orterminates for good reason, each as defined in the 

F-28

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**UbiquiTel Inc. and Subsidiaries Notes to Consolidated Financial Statements (Continued)**

employment agreement, dueto, and within six months prior to, a change of control, the executive officerwould be entitled to receive from the Company or the Company’ssuccessor-in-interest, as applicable, a lump sum cash payment, within30 days of termination, equal to two times the executive officer’s annualgross salary for the year in which the change of control occurs and bonus paidto the executive officer for the fiscal year preceding the year in which thechange of control occurs, plus all outstanding unreimbursed expenses, and theexecutive officer’s outstanding stock options will terminate on the earlier ofthe date that is three years following the date on which the executive officer’semployment is terminated or the termination date in the applicable stock optionagreement. Following a termination by the Company or its successor-in-interest,if applicable, of the executive officer without cause, in connection with achange of control or otherwise, for a period of one year following termination,the Company is required to maintain for the executive officer health, lifeinsurance, long-term disability, dental and medical program benefits to whichthe executive officer is then entitled.

In March 2005, theCompany entered into an employment agreement with the chief technology officer,an executive officer of the Company. The employment agreement provides that theexecutive officer’s employment may be terminated by the Company with or withoutcause, as defined in the employment agreement, at any time or by the executiveofficer for any reason at any time upon 30 days’ written notice to the Company.If the Company terminates the employment of the executive officer withoutcause, or if the executive officer terminates employment for good reason, asdefined in the employment agreement, within 30 days of termination (orsuch other date mutually agreed to) the Company must pay the executive officera single lump sum payment in cash equal to the total of one year’s gross salaryin effect at the time of termination and one month’s gross salary for each fullyear of employment of the executive officer by the Company not to exceed anadditional six month’s gross salary, plus all outstanding unreimbursedexpenses. If the Company is required to make such payment within 24 monthsof a change of control, as defined in the employment agreement, or theexecutive officer is terminated without cause or terminates for good reason,each as defined in the employment agreement, due to, and within six monthsprior to, a change of control, the executive officer would be entitled toreceive from the Company or the Company’s successor-in-interest, as applicable,a lump sum cash payment, within 30 days of termination, equal to theexecutive officer’s gross salary, excluding bonus, for the twelve-monthperiod preceding the date of termination and one-twelfth of the foregoingamount for each full year of employment of the executive officer by the Companynot to exceed six-twelfths of the foregoing amount, plus all outstandingunreimbursed expenses, and the executive officer’s outstanding stock optionswill terminate on the earlier of the date that is three years following thedate on which the executive officer’s employment is terminated or thetermination date in the applicable stock option agreement. Following atermination by the Company or its successor-in-interest, if applicable, of theexecutive officer without cause, in connection with a change of control orotherwise, for a period of one year following termination, the Company isrequired to maintain for the executive officer health, life insurance,long-term disability, dental and medical program benefits to which theexecutive officer is then entitled.

**11.   RELATED PARTYTRANSACTIONS**

Three directors ofUbiquiTel or their affiliates participated in the Company’s private placementfinancings of 14% Series B Senior Notes and warrants in the first andsecond quarters of 2003 (see Note 6) in which they paid total consideration ofapproximately $3.75 million and were issued approximately $5.0 millionaggregate principal amount of 14% Series B Senior Notes and approximately3.75 million 

F-29

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**UbiquiTel Inc. and Subsidiaries Notes to Consolidated Financial Statements (Continued)**

detachablewarrants to purchase common stock of UbiquiTel for $0.01 per share, whichwarrants were subsequently exercised in 2003. In February 2004, OperatingCompany redeemed the 14% Series B Senior Notes issued to all investors,including the directors or their affiliates, with a portion of the proceedsfrom Operating Company’s sale of 9.875% Senior Notes.

**12.   LITIGATION**

See Note 15 with respect to Sprint Corporation’smerger with Nextel Communications, Inc. and the Company’s litigationagainst Sprint and Nextel related to the merger.

In addition to theforegoing, the Company is involved in various claims and legal actions arisingin the ordinary course of business. The ultimate disposition of these mattersis not expected to have a material adverse effect on the Company’s financialcondition, results of operations or liquidity.

**13.**   WHOLLYOWNED OPERATING SUBSIDIARY

UbiquiTel has fully andunconditionally guaranteed Operating Company’s obligations under the 9.875%Senior Notes (see Note 6). UbiquiTel has no independent assets oroperations separate from its investment in Operating Company. UbiquiTel LeasingCompany is a minor subsidiary.

**14.   SUPPLEMENTARY FINANCIAL INFORMATION**

The following table summarizes theCompany’s quarterly financial data for the years ended December 31, 2005and December 31, 2004, respectively.

| ** **            | ** ** | **Quarter Ended**                                                | ** ** |
|-----------------------|------------|-----------------------------------------------------------------------|------------|
| ** **            | **2005**   | ** **                                                            | ** ** | **March 31,** | ** ** | **June 30,** | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
| ** **            | ** ** | **(In Thousands, Except Per Share Amounts)** | ** ** |
| Total revenues        |       |                                                                  | $          | 99,931 |   |   | $ | 106,193 |   |   | $ | 108,763 |   |   |   | $ | 107,840 |   |   |
| Operating income      |       |                                                                  | 12,990     |   |   | 14,713 |   |   | 16,420 |   |   |   | 12,189 |   |   |
| Net income(1)         |       |                                                                  | 2,452      |   |   | 4,384 |   |   | 6,234 |   |   |   | 34,643 |   |   |
| Net income per share: |       |                                                                  |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                 |       |                                                                  | $          | 0.03 |   |   | $ | 0.05 |   |   | $ | 0.07 |   |   |   | $ | 0.37 |   |   |
| Diluted               |       |                                                                  | $          | 0.02 |   |   | $ | 0.04 |   |   | $ | 0.06 |   |   |   | $ | 0.35 |   |   |
|                       |            |                                                                       |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

| ** **                   | ** ** | **Quarter Ended**                                                | ** ** |
|------------------------------|------------|-----------------------------------------------------------------------|------------|
| ** **                   | **2004**   | ** **                                                            | ** ** | **March 31,** | ** ** | **June 30,** | ** ** | **September 30,** | ** ** | **December 31,** | ** ** |
| ** **                   | ** ** | **(In Thousands, Except Per Share Amounts)** | ** ** |
| Total revenues               |       |                                                                  | $          | 81,310 |   |   | $ | 88,681 |   |   | $ | 97,748 |   |   |   | $ | 98,304 |   |   |
| Operating income (loss)      |       |                                                                  | (1,333     | ) |   | 3,438 |   |   | 12,090 |   |   |   | 5,315 |   |   |
| Net income (loss)(2)(3)      |       |                                                                  | (8,591     | ) |   | (6,872 | ) |   | 1,519 |   |   |   | (1,353 | ) |   |
| Net income (loss) per share: |       |                                                                  |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic                        |       |                                                                  | $          | (0.09 | ) |   | $ | (0.07 | ) |   | $ | 0.02 |   |   |   | $ | (0.01 | ) |   |
| Diluted                      |       |                                                                  | $          | (0.09 | ) |   | $ | (0.07 | ) |   | $ | 0.02 |   |   |   | $ | (0.01 | ) |   |
|                              |            |                                                                       |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

F-30

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**UbiquiTel Inc. and Subsidiaries Notes to Consolidated Financial Statements (Continued)**

The sum of the quarterly per share amounts may not equalthe annual per share amount due to relative changes in the weighted averagenumber of shares used in the per share computation.

(1)          For quarter ended December 31,2005, includes deferred income tax benefit of approximately $32.1 millionrelating to the reduction of the Company’s valuation allowance against deferredincome tax assets.

(2)          For quarter ended March 31,2004, includes gain on debt retirement of approximately $1.1 million inconnection with the Company’s redemption of its 14% Series B Senior Notesand purchases of its 14% Senior Notes.

(3)          For quarter ended December 31, 2004, includes gain ondebt retirement of approximately $3.8 million in connection with the Company’spurchases of its 14% Subordinated Notes and 14% Senior Notes.

**15.   SPRINT DEVELOPMENTS**

On December 15, 2004, Sprint Corporation (“Sprint”)and Nextel Communications, Inc. (“Nextel”) announced that they had enteredinto a definitive agreement to consummate a merger of equals. At that time,Nextel operated a competitive wireless mobility communications network andbusiness in markets in which the Company also provides wireless mobilitycommunications network products and services under the Sprint and affiliatedbrands. Since the closing of the merger in August 2005, the merged entity,SprintNextel Corporation (“Sprint Nextel”), has operated the legacy Nextel businessin competition with the Company in approximately 80% of the Company’s marketareas. Upon the closing of Sprint Nextel’s planned acquisition of Nextel’saffiliate, Nextel Partners, Inc., in the near future, Sprint Nextel willoperate the legacy Nextel business in competition with the Company in virtuallyall of the Company’s market areas.

Following the announcement of the merger in late 2004,Sprint advised its PCS affiliates, including the Company, that it wished toreach mutually agreeable arrangements with the PCS affiliates regarding thepotential impact of the Sprint-Nextel merger and integration of the Sprint andNextel wireless businesses on the PCS affiliates and their rights under themanagement agreements between Sprint PCS and the PCS affiliates. Despite theCompany’s efforts to reach renegotiated arrangements with Sprint prior to theclosing of the merger, the Company did not achieve this outcome and, to theCompany’s knowledge, Sprint Nextel has not entered into such arrangements withany PCS affiliate either prior or subsequent to the merger.

In July 2005, UbiquiTel filed in the DelawareCourt of Chancery an action against Nextel, Sprint and Sprint-related entities,alleging that, among other things, following the consummation of theSprint-Nextel merger in 2005, Sprint would breach its exclusivity andconfidentiality obligations to the Company under the Company’s writtenagreements with Sprint and Sprint PCS and that Nextel improperly interferedwith the Company’s exclusivity rights under those agreements. The actionfurther alleges that Sprint and Nextel conspired to deprive the Company of theexclusivity commitments in those agreements and to use the Company’sconfidential business information available to Sprint under those agreements toadvantage Nextel’s business, which is directly competitive with the wirelessbusiness of the Company in its markets. The complaint seeks, among otherthings, a court order requiring Sprint Nextel to comply with the exclusivityprovisions of those agreements.

The court consolidated the trial of the Company’saction with a similar case brought by Horizon Personal Communications, Inc.and Bright Personal Communications Services, LLC, which are subsidiaries ofiPCS, Inc., another PCS affiliate of Sprint Nextel. The consolidatednine-day trial occurred 

F-31

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**UbiquiTel Inc. and Subsidiaries Notes to Consolidated Financial Statements (Continued)**

in January 2006. Thevice chancellor presiding over the actions has requested post-trial briefs andhas tentatively scheduled final arguments for April 4, 2006. The vicechancellor will issue a ruling at some time following the final arguments.

Shortly after filing the complaint, UbiquiTel enteredinto a forbearance agreement with Sprint imposing certain restrictions on,among other things, the operations of the legacy Nextel wireless business inthe Company’s markets and the use and dissemination of the Company’s confidentialbusiness information. The forbearance agreement and the restrictions it imposesremain effective presently but will expire when the vice chancellor issues afinal ruling in the action.

Over the past three quarters, Sprint Nextel hasacquired five PCS affiliates of Sprint Nextel, including the largest affiliate,Alamosa Holdings, Inc. Prior to Sprint Nextel’s acquisition of those PCSaffiliates, four of the PCS affiliates had filed suit against Sprint relatingto the merger of Sprint and Nextel. Five PCS affiliates remain, including iPCSand UbiquiTel. See “Item 1A. Risk Factors3⁄4Themerger between Sprint and Nextel, the outcome of our litigation relatingthereto and other developments between Sprint Nextel and us and other PCSaffiliates may have an adverse effect on us” of this Joint Annual Report on Form 10-Kfor risks associated with the outcome of the litigation and other developmentsbetween Sprint Nextel and the Company and/or other PCS affiliates of SprintNextel.

F-32

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**EXHIBIT INDEX**

| Exhibit  Number | ** ** |                                                                                                                                                                                                           | **Description** | ** ** |
|-----------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------|------------|
| 21.1            |       | Subsidiaries of  UbiquiTel Inc.                                                                                                                                                                           |
| 23.1            |       | Consent of  PricewaterhouseCoopers LLP.                                                                                                                                                                   |
| 24.1            |       | Powers of  Attorney (included on signature pages).                                                                                                                                                        |
| 31.1            |       | Certification Pursuant  to Item 601(b)(31) of Regulation S-K, as adopted pursuant to  Section 302 of the Sarbanes-Oxley Act of 2002.                                                            |
| 31.2            |       | Certification  Pursuant to Item 601(b)(31) of Regulation S-K, as adopted 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 9.06 of the Sarbanes-Oxley Act of 2002 (furnished pursuant to  Item 601(b)(32) of Regulation S-K). |
| 32.2            |       | Certification Pursuant  to 18 U.S.C. Section 1350, as adopted pursuant to Section 9.06 of  the Sarbanes-Oxley Act of 2002 (furnished pursuant to Item 601(b)(32) of  Regulation S-K). |

 

 

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