<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                    FORM 10-Q


(X)      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934.

         For the quarterly period ended March 31, 2002
                                        --------------

                                       OR

( )      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934.

         For the transition period from__________ to __________

                         Commission File Number 0-21389
                                                -------

                     PEGASUS SATELLITE COMMUNICATIONS, INC.
--------------------------------------------------------------------------------
             (Exact name of Registrant as specified in its charter)



                  Delaware                                   51-0374669
                  --------                                   ----------
         (State or other jurisdiction of                    (IRS Employer
          incorporation or organization)                 Identification Number)


         c/o Pegasus Communications Management Company;
         225 City Line Avenue, Suite 200, Bala Cynwyd, PA                19004
         ------------------------------------------------                -----
         (Address of principal executive offices)                     (Zip code)


         Registrant's telephone number, including area code:   (888) 438-7488
                                                               --------------


         Indicate by check mark whether the Registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes_X_  No___



         Number of shares of each class of the Registrant's common stock
outstanding as of May 10, 2002:

                     Class B, Common Stock, $0.01 par value   200





<PAGE>

                     PEGASUS SATELLITE COMMUNICATIONS, INC.

                                    Form 10-Q
                                Table of Contents
                  For the Quarterly Period Ended March 31, 2002

<TABLE>
<CAPTION>
                                                                                                 Page
                                                                                                 ----
         <S>              <C>                                                                    <C>
                          PART I. FINANCIAL INFORMATION


         Item 1.           Financial Statements

                           Condensed Consolidated Balance Sheets
                             March 31, 2002 and December 31, 2001                                 4

                           Consolidated Statements of Operations and
                             Comprehensive Loss Three months ended
                             March 31, 2002 and 2001                                              5

                           Condensed Consolidated Statements of Cash Flows
                             Three months ended March 31, 2002 and 2001                           6

                           Notes to Consolidated Financial Statements                             7

         Item 2.           Management's Discussion and Analysis of
                             Financial Condition and Results of Operations                       12

         Item 3.           Quantitative and Qualitative Disclosures About
                             Market Risk                                                         17


                           PART II. OTHER INFORMATION


         Item 1.           Legal Proceedings                                                     18

         Signature                                                                               19
</TABLE>




                                        2
<PAGE>


PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS











                                       3


<PAGE>




                     Pegasus Satellite Communications, Inc.
                      Condensed Consolidated Balance Sheets
                                 (In thousands)
<TABLE>
<CAPTION>
                                                                                                        March 31,   December 31,
                                                                                                           2002         2001
                                                                                                       ----------   ----------
                                                             ASSETS                                          (unaudited)
<S>                                                                                                    <C>         <C>
Current assets:
     Cash and cash equivalents                                                                         $   14,157   $  144,350
     Accounts receivable, net:
       Trade                                                                                               23,280       34,727
       Other                                                                                               23,274       18,153
     Deferred subscriber acquisition costs, net                                                            19,025       15,194
     Prepaid expenses                                                                                       9,595       12,686
     Other current assets                                                                                  27,552       27,521
                                                                                                       ----------   ----------
       Total current assets                                                                               116,883      252,631

Property and equipment, net                                                                                92,988       90,861
Intangible assets, net                                                                                  1,660,653    1,692,817
Other noncurrent assets                                                                                   112,057      112,727
                                                                                                       ----------   ----------
     Total assets                                                                                      $1,982,581   $2,149,036
                                                                                                       ==========   ==========

                            LIABILITIES, REDEEMABLE PREFERRED STOCK, AND COMMON STOCKHOLDER'S EQUITY

Current liabilities:
     Current portion of long term debt                                                                 $    5,176   $    8,728
     Accounts payable                                                                                       7,267       10,537
     Accrued interest                                                                                      24,484       27,979
     Accrued programming fees                                                                              68,211       67,225
     Accrued commissions and subsidies                                                                     42,529       45,746
     Accrued expenses                                                                                      33,493       30,279
     Other current liabilities                                                                              4,215        4,755
                                                                                                       ----------   ----------
       Total current liabilities                                                                          185,375      195,249

Long term debt                                                                                          1,251,831    1,329,923
Other noncurrent liabilities                                                                               60,904       79,530
                                                                                                       ----------   ----------
      Total liabilities                                                                                 1,498,110    1,604,702
                                                                                                       ----------   ----------

Commitments and contingent liabilities  (see Note 10)

Minority interest                                                                                           1,585        1,315

Redeemable preferred stock                                                                                189,391      183,503

Common stockholder's equity:
     Common stock                                                                                              --           --
     Other common stockholder's equity                                                                    293,495      359,516
                                                                                                       ----------   ----------
       Total common stockholder's equity                                                                  293,495      359,516
                                                                                                       ----------   ----------
     Total liabilities, redeemable preferred stock, and common stockholder's equity                    $1,982,581   $2,149,036
                                                                                                       ==========   ==========
</TABLE>



           See accompanying notes to consolidated financial statements



                                        4
<PAGE>
                     Pegasus Satellite Communications, Inc.
          Consolidated Statements of Operations and Comprehensive Loss
                                 (In thousands)
<TABLE>
<CAPTION>
                                                                         Three Months Ended March 31,
                                                                              2002         2001
                                                                           ---------    ---------
                                                                                (unaudited)
<S>                                                                        <C>          <C>
Net revenues:
     DBS                                                                   $ 214,724    $ 205,838
     Other businesses                                                          9,482        7,989
                                                                           ---------    ---------
       Total net revenues                                                    224,206      213,827

Operating expenses:
     DBS
       Programming                                                            96,318       88,162
       Other subscriber related expenses                                      51,741       48,902
                                                                           ---------    ---------
           Direct operating expenses  (excluding depreciation and
             amortization shown below)                                       148,059      137,064

       Promotions and incentives                                               1,743       16,933
       Advertising and selling                                                 8,301       37,059
       General and administrative                                              7,917        9,162
       Depreciation and amortization                                          39,450       62,754
                                                                           ---------    ---------
           Total DBS                                                         205,470      262,972

     Other businesses
       Programming                                                             3,342        2,718
       Other direct operating expenses                                         3,337        1,805
                                                                           ---------    ---------
           Direct operating expenses  (excluding depreciation and
             amortization shown below)                                         6,679        4,523

       Promotions and incentives                                                 328           --
       Advertising and selling                                                 2,102        1,882
       General and administrative                                              1,797        4,098
       Depreciation and amortization                                           1,309        1,424
                                                                           ---------    ---------
           Total other businesses                                             12,215       11,927

     Corporate expenses                                                        4,071        3,279
     Corporate depreciation and amortization                                     380          336
     Development costs                                                            --          249
     Other operating expenses, net                                             8,036        8,523
                                                                           ---------    ---------
       Loss from operations                                                   (5,966)     (73,459)

Interest expense                                                             (36,052)     (34,331)
Interest income                                                                  192        2,708
Other nonoperating income (expense), net                                       1,126       (3,495)
                                                                           ---------    ---------
     Loss from operations before income taxes                                (40,700)    (108,577)

Benefit for income taxes                                                     (15,310)     (37,935)
                                                                           ---------    ---------
     Net loss                                                                (25,390)     (70,642)

Other comprehensive loss:
     Unrealized loss on marketable securities, net of income tax benefit
        of $1,315 and $4,665, respectively                                    (2,146)      (7,611)
                                                                           ---------    ---------

     Comprehensive loss                                                    $ (27,536)   $ (78,253)
                                                                           =========    =========
</TABLE>




           See accompanying notes to consolidated financial statements

                                        5
<PAGE>
                     Pegasus Satellite Communications, Inc.
                 Condensed Consolidated Statements of Cash Flows
                                 (In thousands)
<TABLE>
<CAPTION>
                                                                                      Three Months   Ended March 31,
                                                                                          2002            2001
                                                                                        ---------      ---------
                                                                                              (unaudited)
<S>                                                                                      <C>                <C>
Cash flows from operating activities:
    Net cash used for operating activities                                              $ (3,439)     $ (68,650)
                                                                                        ---------     ----------

Cash flows from investing activities:
       Other capital expenditures                                                         (7,431)        (7,418)
       Purchases of intangible assets                                                          -         (2,632)
       Other                                                                                   -           (889)
                                                                                        ---------     ----------

    Net cash used for investing activities                                                (7,431)       (10,939)
                                                                                        ---------     ----------

Cash flows from financing activities:
       Repayments of long term debt                                                       (5,879)        (3,037)
       Net (repayments) borrowings on bank credit facilities                             (80,687)        31,313
       Net distributions to Pegasus Communications Corporation                           (32,597)             -
       Other                                                                                (160)        (2,743)
                                                                                        ---------     ----------

    Net cash (used for) provided by financing activities                                (119,323)        25,533
                                                                                        ---------     ----------

Net decrease in cash and cash equivalents                                               (130,193)       (54,056)
Cash and cash equivalents, beginning of year                                             144,350        214,361
                                                                                        ---------     ----------

Cash and cash equivalents, end of period                                                $ 14,157      $ 160,305
                                                                                        =========     ==========
</TABLE>








           See accompanying notes to consolidated financial statements

                                        6

<PAGE>




                     PEGASUS SATELLITE COMMUNICATIONS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.   General

         "We", "us", and "our" refer to Pegasus Satellite Communications, Inc.
together with its subsidiaries. "PSC" refers to Pegasus Satellite
Communications, Inc. individually. "PCC" refers to Pegasus Communications
Corporation, the parent company of PSC. "PM&C" refers to Pegasus Media &
Communications, Inc., one of our subsidiaries. "DBS" refers to direct broadcast
satellite.

Significant Risks and Uncertainties

         We are highly leveraged. At March 31, 2002, we had a combined carrying
amount of debt and redeemable preferred stocks outstanding of $1.4 billion.
Because we are highly leveraged, we are more vulnerable to adverse economic and
industry conditions. We dedicate a substantial portion of cash to pay amounts
associated with debt. In the first quarter of 2002, we paid interest of $33.0
million. In July 2002, we are scheduled to begin paying cash dividends on our
12-3/4% series preferred stock, amounting to $11.7 million in 2002 and $23.5
million annually thereafter. Our ability to make payments on and to refinance
indebtedness and redeemable preferred stocks outstanding and to fund planned
capital expenditures and other activities will depend on our ability to generate
cash in the future. Our ability to generate cash will depend upon the success of
our business strategy, prevailing economic conditions, regulatory risks, our
ability to integrate acquired assets successfully into our operations,
competitive activities by other parties, equipment strategies, technological
developments, level of programming costs, levels of interest rates, and
financial, business, and other factors that are beyond our control. We cannot
assure that our business will generate sufficient cash flow from operations or
that alternative financing will be available to us in amounts sufficient to
service outstanding debt and redeemable preferred stocks or to fund other
liquidity needs. Our indebtedness and preferred stocks contain numerous
covenants that, among other things, generally limit the ability to incur
additional indebtedness and liens, issue other securities, make certain payments
and investments, pay dividends, transfer cash, dispose of assets, and enter into
other transactions, and impose limitations on the activities of subsidiaries.
Failure to make debt payments or comply with covenants could result in an event
of default that, if not cured or waived, could have a material adverse effect on
us.

2.   Basis of Presentation

         The unaudited financial statements herein include the accounts of PSC
and all of its subsidiaries on a consolidated basis. All intercompany
transactions and balances have been eliminated. The balance sheets and
statements of cash flows are presented on a condensed basis. These financial
statements are prepared in accordance with the instructions to Form 10-Q and
Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. The financial statements reflect all
adjustments consisting of normal recurring items that, in our opinion, are
necessary for a fair presentation, in all material respects, of our financial
position and the results of our operations and comprehensive loss and our cash
flows for the interim period. The interim results of operations contained herein
may not necessarily be indicative of the results of operations for the full
fiscal year. Prior year amounts have been reclassified where appropriate to
conform to the current year classification for comparative purposes.

3.    Adoption of FAS 141

         On January 1, 2002, we adopted in its entirety Statement of Financial
Accounting Standards No. 141 "Business Combinations" ("FAS 141"). FAS 141, as
well as FAS 142 discussed below, makes a distinction between intangible assets
that are goodwill and intangible assets that are other than goodwill. When we
use the term "intangible asset or assets", we mean it to be an intangible asset
or assets other than goodwill, and when we use the term "goodwill", we mean it
to be separate from intangible assets. The principal impact to us of adopting
FAS 141 was the requirement to reassess at January 1, 2002 the classification on
our balance sheet of the carrying amounts of our goodwill and intangible assets
recorded in acquisitions we made before July 1, 2001. The adoption of FAS 141
did not have a significant impact on our financial position.





                                        7
<PAGE>





                     PEGASUS SATELLITE COMMUNICATIONS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)



4.    Adoption of FAS 142

         On January 1, 2002, we adopted in its entirety Statement of Financial
Accounting Standards No. 142 "Goodwill and Other Intangible Assets" ("FAS 142").
A principal provision of the standard is that goodwill and intangible assets
that have indefinite lives are not subject to amortization, but are subject to
an impairment test at least annually. The principal impacts to us of adopting
FAS 142 were: 1) reassessing on January 1, 2002 the useful lives of intangible
assets existing on that date that we had recorded in acquisitions we made before
July 1, 2001 and adjusting remaining amortization periods as appropriate; 2)
ceasing amortization of goodwill and intangible assets with indefinite lives
effective January 1, 2002; 3) establishing reporting units as needed for the
purpose of testing goodwill for impairment; 4) testing on January 1, 2002
goodwill and intangible assets with indefinite lives existing on that date for
impairment; and 5) separately reporting on our balance sheet goodwill and
intangible assets. The provisions of this standard were not permitted to be
retroactively applied to periods before the date we adopted FAS 142.

         We believe that the estimated remaining useful life of the DBS rights
assets should be based on the estimated useful lives of the satellites at the
101 degree west longitude orbital location available to provide DirecTV
services under the NRTC-DirecTV Contract ("contract"). The contract sets forth
the terms and conditions under which the lives of those satellites are deemed to
expire, based on fuel levels and transponder functionality. We estimate that the
useful life of the DirecTV satellite resources provided under the contract
(without regard to renewal rights) expires in November 2016. Because the cash
flows for all of our DBS rights assets emanate from the same source, we believe
that it is appropriate for all of the estimated useful lives of our DBS rights
assets to end at the same time. Prior to the adoption of FAS 142, our DBS rights
assets had estimated useful lives of 10 years from the date we obtained the
rights. Linking the lives of our DBS rights assets in such fashion extended the
amortization period for the unamortized carrying amount of the assets and the
range of the useful lives of the rights from the date of their inception. The
life of our DBS rights is subject to litigation. See "Legal Matters" under Note
10 for information regarding this litigation.

         We determined that our broadcast licenses had indefinite lives because
under past and existing Federal Communications Commission's regulations the
licenses can be routinely renewed indefinitely with little cost. Ceasing
amortization on goodwill and broadcast licenses had no material effect. The
adoption of FAS 142 did not have a significant effect on our other intangible
assets. Our industry segments already established equate to the reporting units
required under the standard. We determined that there were no impairments to be
recorded.

         At March 31, 2002 and December 31, 2001, intangible assets that were
amortized had the following balances (in thousands):

                                       March 31,     December 31,
Cost:                                    2002            2001
                                    --------------  --------------
   DBS rights assets.............     $2,291,422      $2,259,231
   Other.........................         50,854         110,415
                                      ----------      ----------
                                       2,342,276       2,369,646
                                      ----------      ----------
Accumulated amortization:
   DBS rights assets.............        669,509         624,115
   Other.........................         27,788          52,714
                                      ----------      ----------
                                         697,297         676,829
                                      ----------      ----------
Net..............................     $1,644,979      $1,692,817
                                      ==========      ==========

         Aggregate amortization expense for the three months ended March 31,
2002 and 2001 was $29.9 million and $61.3 million, respectively. Aggregate
amortization expense for 2001 was $245.4 million. The estimated aggregate amount
of amortization expense in each of the next five years, beginning with 2002, is
$117.8 million in 2002, $116.9 million in 2003, $116.9 million in 2004, $114.7
million in 2005, and $111.4 million in 2006.



                                        8




<PAGE>



                     PEGASUS SATELLITE COMMUNICATIONS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

         At March 31, 2002, intangible assets that were not amortized consisted
of broadcast licenses with a carrying amount of $15.6 million. We had no
intangible assets that were not amortized at December 31, 2001. At March 31,
2002 and December 31, 2001, total goodwill had a carrying amount of $15.8
million and was all associated with our broadcast segment. Because the carrying
amount of goodwill is not significant, we report it in other noncurrent assets
on the balance sheet at each date.

         A reconciliation of reported net income for the three months ended
March 31, 2001 as adjusted for the effects of our initially applying FAS 142 to
exclude amortization expense related to goodwill and intangible assets not
amortized and for adjustments for changes in useful lives of intangible assets
amortized, net of related income tax effects, is as follows (in thousands):
<TABLE>
<S>                                                                               <C>
Reported net loss...............................................................  $(70,642)
Add back goodwill amortization..................................................       101
Add back amortization for broadcast licenses....................................       101
Adjust amortization for a change in the useful life of DBS rights assets........    16,657
                                                                                  --------
Adjusted net loss...............................................................  $(53,783)
                                                                                  ========
</TABLE>

5.   Redeemable Preferred Stock

         The number of shares of PSC's 12-3/4% cumulative exchangeable preferred
stock issued and outstanding was 183,978 and 172,952 at March 31, 2001 and
December 31, 2001, respectively. The increase in the number of shares resulted
from the semiannual dividend declared and paid in January 2002 aggregating $11.0
million that was paid in its own shares. The increase in the carrying amount
from December 31, 2001 was due to accrued dividends and accretion on the series.

6.   Changes in Other Stockholder's Equity

         Changes in other stockholder's equity from December 31, 2001 to March
31, 2002 consist of: net loss of $25.4 million; dividends accrued on preferred
stock of $5.9 million; net cash distributions to PCC of $32.6 million; and net
change in accumulated other comprehensive loss of $2.1 million.

7.   Long Term Debt

         During the three months ended March 31, 2002, PM&C repaid $80.0 million
under its revolving credit facility. There was no principal amount outstanding
under the revolving credit facility at March 31, 2002, compared to $80.0 million
outstanding at December 31, 2001. Letters of credit outstanding under PM&C's
revolving credit facility, which reduce the availability thereunder, were $62.9
million at March 31, 2002 and $63.2 million at December 31, 2001. At March 31,
2002, the commitment for PM&C's revolving credit facility was permanently
reduced by approximately $8.4 million as scheduled under the terms of the credit
agreement to approximately $194.1 million. The commitment for the revolving
credit facility will continue to be permanently reduced by approximately $8.4
million in the month that each calendar quarter ends throughout 2002.
Availability under PM&C's revolving credit facility at March 31, 2002 was
approximately $131.0 million. The principal amount outstanding under PM&C's term
loan facility was reduced to approximately $271.6 million as scheduled in the
governing agreement. The weighted average variable rate of interest including
applicable margins on principal amounts outstanding under PM&C's term facility
was approximately 5.4% at March 31, 2002 and December 31, 2001.

8.   Industry Segments

         Our only reportable segment at March 31, 2002 was the DBS business.
Information on DBS' revenue and measure of profit/loss and how these contribute
to our consolidated loss from continuing operations before income taxes for each
period reported is as presented on the statements of operations and
comprehensive loss. DBS derived all of its revenues from external customers for
each period presented. Identifiable total assets for DBS were approximately $1.9
billion at March 31, 2002, which did not change significantly from the total DBS
assets at December 31, 2001.


                                        9
<PAGE>

                     PEGASUS SATELLITE COMMUNICATIONS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)


9.   Supplemental Cash Flow Information

         Significant noncash investing and financing activities were as follows
(in thousands):
<TABLE>
<CAPTION>
                                                                                      Three Months
                                                                                     Ended March 31,
                                                                                     2002        2001
                                                                                   -------     -------
<S>                                                                                 <C>         <C>
Preferred stock dividends accrued and accretion on preferred stock............      $5,888      $5,432
Payment of 12-3/4% series preferred stock dividends in its own stock..........      11,026       9,744
NRTC patronage capital investment accrued.....................................       5,425       5,425
Net unrealized loss on marketable securities, net of related deferred income
    taxes.....................................................................       2,146       7,611
</TABLE>

10.  Commitments and Contingent Liabilities

Legal Matters
-------------

DIRECTV Litigation:

         National Rural Telecommunications Cooperative

         Our subsidiaries, Pegasus Satellite Television ("PST") and Golden Sky
Systems ("GSS"), are affiliates of the National Rural Telecommunications
Cooperative ("NRTC") that participate through agreements in the NRTC's direct
broadcast satellite program. "DIRECTV" refers to the programming services
provided by DirecTV, Inc. ("DirecTV").

         As reported in our 2001 Form 10-K filed on April 9, 2002, on June 3,
1999, the NRTC filed a lawsuit in United States District Court, Central District
of California against DirecTV seeking a court order to enforce the NRTC's
contractual rights to obtain from DirecTV certain premium programming formerly
distributed by United States Satellite Broadcasting Company, Inc. for exclusive
distribution by the NRTC's members and affiliates in their rural markets. On
July 22, 1999, DirecTV filed a counterclaim seeking judicial clarification of
certain provisions of DirecTV's contract with the NRTC. As part of the
counterclaim, DirecTV is seeking a declaratory judgment that the term of the
NRTC's agreement with DirecTV is measured only by the orbital life of DBS-1, the
first DIRECTV satellite launched, and not by the orbital lives of the other
DIRECTV satellites at the 101 degree W orbital location. While the NRTC has a
right of first refusal to receive certain services from any successor DIRECTV
satellite, the scope and terms of this right of first refusal are also being
disputed in the litigation, as discussed below. If DirecTV were to prevail on
its counterclaim, any failure of DBS-1 could have a material adverse effect on
our DIRECTV rights. On August 26, 1999, the NRTC filed a separate lawsuit in
federal court against DirecTV claiming that DirecTV had failed to provide to the
NRTC its share of launch fees and other benefits that DirecTV and its affiliates
have received relating to programming and other services. On November 15, 1999,
the court granted a motion by DirecTV and dismissed the portion of this lawsuit
asserting tort claims, but left in place the remaining claims asserted by the
NRTC. The NRTC and DirecTV have also filed indemnity claims against one another
that pertain to the alleged obligation, if any, of the NRTC to indemnify DirecTV
for costs incurred in various lawsuits described herein. These claims have been
severed from the other claims in the case and will be tried separately. Each
side has filed a summary judgment motion relating to the claims.



                                       10
<PAGE>
                     PEGASUS SATELLITE COMMUNICATIONS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

         Pegasus Satellite Television and Golden Sky Systems

         As reported in our 2001 Form 10-K, on January 10, 2000, PST and GSS
filed a class action lawsuit in United States District Court, Central District
of California against DirecTV as representatives of a proposed class that would
include all members and affiliates of the NRTC that are distributors of DIRECTV.
The complaint contained causes of action for various torts, common counts and
declaratory relief based on DirecTV's failure to provide the NRTC with certain
premium programming, and on DirecTV's position with respect to launch fees and
other benefits, term and right of first refusal. The complaint sought monetary
damages and a court order regarding the rights of the NRTC and its members and
affiliates. On February 10, 2000, PST and GSS filed an amended complaint which
added new tort claims against DirecTV for interference with PST's and GSS'
relationships with manufacturers, distributors and dealers of direct broadcast
satellite equipment. The class action allegations PST and GSS previously filed
were withdrawn to allow a new class action to be filed on behalf of the members
and affiliates of the NRTC. The new class action was filed on February 29, 2000.
The court certified the plaintiff's class on December 28, 2000. On March 9,
2001, DirecTV filed a counterclaim against PST and GSS, as well as the class
members. In the counterclaim, DirecTV seeks two claims for relief: (i) a
declaratory judgment that PST and GSS have no right of first refusal in their
agreements with the NRTC to have DirecTV provide any services after the
expiration of the term of these agreements, and (ii) an order that DBS-1 is the
satellite (and the only satellite) that measures the term of PST's and GSS'
agreements with the NRTC.

         As reported in our 2001 Form 10-K, on June 22, 2001, DirecTV brought
suit against PST and GSS in Los Angeles County Superior Court for breach of
contract and common counts. The lawsuit pertains to the seamless marketing
agreement dated August 9, 2000, as amended, between DirecTV and PST and GSS. On
July 13, 2001, PST and GSS terminated the seamless marketing agreement. On July
16, 2001, PST and GSS filed a cross complaint against DirecTV alleging, among
other things, that (i) DirecTV has breached the seamless marketing agreement,
and (ii) DirecTV has engaged in unlawful and/or unfair business practices, as
defined in Section 17200, et seq. of California Business and Professions Code.
This suit has since been moved to the United States District Court, Central
District of California.

         Both of the NRTC's lawsuits against DirecTV have been consolidated for
discovery and pretrial purposes. All five lawsuits discussed above, including
both lawsuits brought by the NRTC, the class action, and PST's and GSS' lawsuit,
are pending before the same judge. The court has set a trial date of December 2,
2002, although, as noted above, it is not clear whether all the lawsuits will be
tried together.

Patent Infringement Litigation:

         As reported in our 2001 Form 10-K, in December 2001, one of our
subsidiaries (along with DirecTV, Inc., Hughes Electronics, EchoStar
Communications, and others) was served with a complaint in a patent
infringement lawsuit by Broadcast Innovations, L.L.C. The precise nature of the
plaintiff's claims is not clear from the complaint. However, the plaintiff
claims in response to interrogatories that the satellite broadcast systems and
equipment of defendants, including those used for DIRECTV programming services,
infringe its patent. The defendants named in the complaint have denied the
allegation and have raised defenses of patent invalidity and noninfringement. We
are still in the process of evaluating the matter in order to determine whether
it is material to our business.

Other Legal Matters:

         In addition to the matters discussed above, from time to time we are
involved with claims that arise in the normal course of our business. In our
opinion, the ultimate liability, if any, with respect to these claims will not
have a material adverse effect on our operations, cash flows, or financial
position.

Commitments
-----------

         We recently entered into a new agreement with the same provider of
communications services commencing in 2002 that replaced the prior agreement
with this provider. Under this new agreement, our annual minimum commitment was
reduced to $6.0 million over the three year term of the agreement, from $7.0
million under the prior agreement.

11.  New Accounting Pronouncements

         Statement of Financial Accounting Standards No. 143 "Accounting for
Asset Retirement Obligations" addresses financial accounting and reporting for
obligations associated with the retirement of tangible long lived assets and the
associated asset retirement costs. This statement is effective for financial
statements issued for fiscal years beginning after June 15, 2002. We are
studying the provisions of this statement and have not yet determined the
impacts, if any, that this statement may have on us.

         Statement of Financial Accounting Standards No. 145 "Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statemnt No. 13, and Technical
Corrections" was issued April 30, 2002. A principal provision of this statement
is the reporting of gains and losses associated with extinguishments of debt. In
the past, we have extinguished debt, and may do so in the future. We are
studying the provisions of this statement and have not yet determined the
impacts, if any, that this statement may have on us.



                                       11
<PAGE>




                     PEGASUS SATELLITE COMMUNICATIONS, INC.


ITEM 2.           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                  AND RESULTS OF OPERATIONS

         This report contains certain forward looking statements (as such term
is defined in the Private Securities Litigation Reform Act of 1995) and
information relating to us that are based on our beliefs, as well as assumptions
made by and information currently available to us. When used in this report, the
words "estimate," "project," "believe," "anticipate," "hope," "intend,"
"expect," and similar expressions are intended to identify forward looking
statements. Such statements reflect our current views with respect to future
events and are subject to unknown risks, uncertainties and other factors that
may cause actual results to differ materially from those contemplated in such
forward looking statements. Such factors include, among other things, the
following: general economic and business conditions, both nationally,
internationally and in the regions in which we operate; catastrophic events,
including acts of terrorism; relationships with and events affecting other
parties like DirecTV, Inc. and the National Rural Telecommunications
Cooperative; litigation with DirecTV; the proposed merger of Hughes Electronics
Corporation with EchoStar Communications Corporation; demographic changes;
existing government regulations and changes in, or the failure to comply with,
government regulations; competition; the loss of any significant numbers of
subscribers or viewers; changes in business strategy or development plans; the
cost of pursuing new business initiatives; expansion of land based communication
systems; technological developments and difficulties; the ability to attract and
retain qualified personnel; our significant indebtedness; the availability and
terms of capital to fund the expansion of our businesses; and other factors
referenced in this report and in reports and registration statements filed from
time to time with the Securities and Exchange Commission, including our Annual
Report on Form 10-K for the fiscal year ended December 31, 2001. Readers are
cautioned not to place undue reliance on these forward looking statements, which
speak only as of the date of this report. We do not undertake any obligation to
publicly release any revisions to these forward looking statements to reflect
events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.

         The following discussion of our financial condition, results of
operations, and liquidity and capital resources should be read in conjunction
with the consolidated financial statements and related notes herein.

General

         Approximately 96% of our consolidated revenues and 89% of the expenses
of our consolidated operations for the three months ended March 31, 2002, and
approximately 97% of our assets at March 31, 2002, were associated with our
direct broadcast satellite ("DBS") business that provides multichannel
DIRECTV(R) audio and video services as an independent DIRECTV provider. DIRECTV
is a service of DirectTV, Inc. ("DirecTV"). We may be adversely affected by any
material adverse changes in the assets, financial condition, programming,
technological capabilities, or services of DirecTV. Separately, we are involved
in litigation with DirecTV. An outcome in this litigation that is unfavorable to
us could have a material adverse effect on our DBS business. See Note 10 of the
Notes to Consolidated Financial Statements for information on the litigation.
Additionally, Hughes Electronics Corporation, which is the parent company of
DirecTV, has agreed to merge with EchoStar Communications Corporation, which
owns the only other nationally branded DBS programming service in the United
States. At this time, we are unable to predict the effect of our litigation with
DirecTV or the merger of EchoStar Communications and Hughes Electronics, should
it occur, on our financial position, results of operations, cash flows, and
future operations.




                                       12
<PAGE>

                     PEGASUS SATELLITE COMMUNICATIONS, INC.


Results of Operations

         In this section, amounts and changes specified are for the three months
ended March 31, 2002 compared to the three months ended March 31, 2001, unless
indicated otherwise.

Comparison of Three Months Ended March 31, 2002 and 2001

         DBS Business
         ------------

         Revenues

         Revenues increased $8.9 million to $214.7 million. This increase was
primarily due to the rate increase for our core packages that we instituted in
the fourth quarter 2001.

         Operating Expenses

         Programming increased $8.2 million to $96.3 million. This increase was
primarily due to an increase in programming rates charged to us by the National
Rural Telecommunications Cooperative, through which we receive our DIRECTV
programming, instituted in January 2002.

         Other subscriber related expenses increased by $2.8 million to $51.7
million principally due to the growth in the estimated amount of uncollectible
accounts receivable. This growth is largely the result of increased experience
with nonpaying subscribers due to the impact that the slowness in the economy
may have on the ability of our subscribers to pay for the services rendered to
them.

         Promotions and incentives decreased by $15.2 million to $1.7 million
mainly due to amounts we deferred or capitalized in the first quarter 2002
aggregating $13.1 million. We did not defer or capitalize any promotions and
incentives costs in the first quarter 2001. We are able to defer the direct and
incremental costs we incur, related to our subscription plans that have minimum
service commitment periods, not to exceed the amount of applicable termination
fees associated with the plans. These costs are amortized over the period of the
commitment for which the early termination fees apply and are charged to
amortization expense. We are able to capitalize equipment costs and subsidies as
fixed assets under our subscription plans in which we retain or take title to
the equipment delivered to subscribers. The equipment costs and subsidies
related to this equipment are capitalized as fixed assets and depreciated. All
of our subscription plans starting February 2002 contain minimum commitment
periods and early termination fees, whereas in 2001 we instituted such
provisions for only certain of our plans in mid year, and increased the number
of plans having such provisions in the fourth quarter 2001. We incurred greater
equipment subsidies and buydowns of approximately $2.0 million as a result of
the seamless marketing agreement with DirecTV in effect during that time.
Further, we incurred less costs in the current period than in the prior period
because we had less subscribers added in the current period than in the prior
year period.

         Advertising and selling decreased by $28.8 million to $8.3 million. We
incurred more expenses in the prior year quarter as a result of the greater
commissions we incurred of approximately $11.0 million associated with the
seamless marketing agreement with DirecTV in effect during that time. Further,
we incurred less costs in the current period than in the prior period because we
had less subscribers added in the current period than in the prior year period.
Additionally, we deferred $2.5 million of commissions that otherwise would have
been included in advertising and selling costs in the first quarter 2002, in
accordance with our deferral practice described above. We did not defer
advertising and selling costs in the first quarter 2001. All of our subscription
plans starting February 2002 contain minimum commitment periods and early
termination fees, whereas in 2001 we instituted such provisions for only certain
of our plans in mid year, and increased the number of plans having such
provisions in the fourth quarter 2001.


                                       13
<PAGE>


                     PEGASUS SATELLITE COMMUNICATIONS, INC.


         Depreciation and amortization decreased $23.3 million to $39.5 million.
This principally resulted from our adoption of Statement of Financial Accounting
Standards No. 142 "Goodwill and Other Intangible Assets" ("FAS 142") in its
entirety on January 1, 2002. In accordance with FAS 142, we reassessed the
estimated lives of our intangible assets. We believe that the estimated
remaining useful life of the DBS rights assets should be based on the estimated
useful lives of the satellites at the 101 degree west longitude orbital location
available to provide DirecTV services under the NRTC-DirecTV Contract. The
contract sets forth the terms and conditions under which the lives of those
satellites are deemed to expire, based on fuel levels and transponder
functionality. We estimate that the useful life of the DirecTV satellite
resources provided under the contract (without regard to renewal rights) expires
in November 2016. Because the cash flows for all of our DBS rights assets
emanate from the same source, we believe that it is appropriate for all of the
estimated useful lives of our DBS rights assets to end at the same time. Prior
to the adoption of FAS 142, our DBS rights assets had estimated useful lives of
10 years from the date we obtained the rights. Linking the lives of our DBS
rights assets in such fashion extended the amortization period for the
unamortized carrying amount of the assets and the range of the useful lives of
the rights from the date of their inception. The life of our DBS rights is
subject to litigation. See "Legal Matters" under Note 10 of the Notes
Consolidated Financial Statements for information regarding this litigation.

         Aggregate depreciation and amortization of promotions and incentives
capitalized or deferred and advertising and selling deferred was $8.5 million
and $874 thousand for the three months ended March 31, 2002 and 2001,
respectively.

         Subscribers

         As previously reported in our 2001 Form 10-K, we undertook in the first
quarter 2002 a review of the method by which we publicly report the number of
our subscribers. In the past, our subscriber counts included accounts whose
service had been suspended for prolonged periods of time. We changed our method
of reporting subscribers to exclude these accounts, resulting in a one time
reduction of approximately 138,000 reported subscribers during the quarter. The
adjustment did not have any impact on our financial statements.

         Apart from the above mentioned adjustment, our number of subscribers
decreased during the three months ended March 31, 2002, as the number of our
subscribers that churned was slightly more than the number of the subscribers we
added. We believe that the reasons for the decrease were due to: 1) our focus on
enrolling more credit worthy subscribers; 2) competition from digital cable
providers and a competing direct broadcast satellite provider in the territories
we serve; 3) the economic slow down that has decelerated our growth; and 4) a
reduction in the number of new subscribers we obtain from DirecTV's national
retail chains. We will continue to focus on enrolling more credit worthy
subscribers and face competition from these other providers throughout 2002. We
also anticipate a continued reduction in the number of new subscribers obtained
from DirecTV's national retail chains in 2002. The reduction in the number of
subscribers from national retail chains under arrangements directly with DirecTV
is the result of efforts by DirecTV to minimize certain subscriber acquisition
costs that they have paid to national retail chains for their enrollment of
subscribers who reside in our exclusive territories. Our number of subscribers
at March 31, 2002 was 1,377,000.

         We are most interested in adding high quality, creditworthy
subscribers. Our subscriber acquisition efforts in 2002 and beyond now include:
1) the diversification of our sales and distribution channels; 2) the alignment
of channel economics more closely to expected quality and longevity of
subscribers; and 3) the refinement and expansion of our offers and promotions to
consumers.


                                       14

<PAGE>

         Other Statement of Operations and Comprehensive Loss Items
         ----------------------------------------------------------

         For the three months ended March 31, 2002 and 2001, our other
businesses, consisting of our broadcast and broadband businesses, had revenues
of $9.5 million and $8.0 million, respectively, and their net operations yielded
losses of $2.7 million and $3.9 million, respectively. The operations of our
other businesses are not significant to our consolidated results of operations.

         For the three months ended March 31, 2002, we had other nonoperating
income, net of $1.1 million, compared to other nonoperating expense, net of $3.5
million for the three months ended March 31, 2001. The change is primarily due
to the increase in the fair value of our interest rate instruments. For the
first quarter 2002, we recorded income of $1.2 million for the increase in the
fair value of the instruments, whereas in the first quarter 2001 we recorded a
charge of $3.3 million for the decrease in the fair value of the instruments.

         The income tax benefit on the loss from continuing operations decreased
$22.6 million to $15.3 million primarily due to a lesser amount of pretax loss
in the current year period.

         New Accounting Pronouncements

         Statement of Financial Accounting Standards No. 143 "Accounting for
Asset Retirement Obligations" addresses financial accounting and reporting for
obligations associated with the retirement of tangible long lived assets and the
associated asset retirement costs. This statement is effective for financial
statements issued for fiscal years beginning after June 15, 2002. We are
studying the provisions of this statement and have not yet determined the
impacts, if any, that this statement may have on us.

         Statement of Financial Accounting Standards No. 145 "Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections" was issued April 30, 2002. A principal provision of this statement
is the reporting of gains and losses associated with extinguishments of debt. In
the past, we have extinguished debt, and may do so in the future. We are
studying the provisions of this statement and have not yet determined the
impacts, if any, that this statement may have on us.




                                       15
<PAGE>

                     PEGASUS SATELLITE COMMUNICATIONS, INC.


Liquidity and Capital Resources

         We are highly leveraged. At March 31, 2002, we had a combined carrying
amount of debt and redeemable preferred stocks outstanding of $1.4 billion.
Because we are highly leveraged, we are more vulnerable to adverse economic and
industry conditions. We dedicate a substantial portion of cash to pay amounts
associated with debt. In the first quarter of 2002, we paid interest of $33.0
million. In July 2002, we are scheduled to begin paying cash dividends on our
12-3/4% series preferred stock, amounting to $11.7 million in 2002 and $23.5
million annually thereafter. Our ability to make payments on and to refinance
indebtedness and redeemable preferred stocks outstanding and to fund planned
capital expenditures and other activities will depend on our ability to generate
cash in the future. Our ability to generate cash will depend upon the success of
our business strategy, prevailing economic conditions, regulatory risks, our
ability to integrate acquired assets successfully into our operations,
competitive activities by other parties, equipment strategies, technological
developments, level of programming costs, levels of interest rates, and
financial, business, and other factors that are beyond our control. We cannot
assure that our business will generate sufficient cash flow from operations or
that alternative financing will be available to us in amounts sufficient to
service outstanding debt and redeemable preferred stocks or to fund other
liquidity needs. Our indebtedness and preferred stocks contain numerous
covenants that, among other things, generally limit the ability to incur
additional indebtedness and liens, issue other securities, make certain payments
and investments, pay dividends, transfer cash, dispose of assets, and enter into
other transactions, and impose limitations on the activities of subsidiaries.
Failure to make debt payments or comply with covenants could result in an event
of default that, if not cured or waived, could have a material adverse effect on
us.

         We had cash and cash equivalents on hand at March 31, 2002 of
approximately $14.2 million compared to $144.4 million at December 31, 2001. The
change in cash is discussed below in terms of the amounts shown in our cash flow
statement, relative to the cash flow items for the prior year period. At March
31, 2002, the commitment for Pegasus Media & Communications' ("PM&C") revolving
credit facility was permanently reduced by approximately $8.4 million as
scheduled under the terms of the credit agreement to approximately $194.1
million. The commitment for the revolving credit facility will continue to be
permanently reduced by approximately $8.4 million in the month that each
calendar quarter ends throughout 2002. Availability under PM&C's revolving
credit facility at March 31, 2002 was approximately $131.0 million.

         For the three months ended March 31, 2002 and 2001, net cash used by
operating activities was $3.4 million and $68.7 million, respectively. The
principal reasons for the decreased use of cash were: 1) reduced cash interest
paid in the first quarter 2002 due to lower variable interest rates available to
us in the quarter compared to the rates available to us in the first quarter
2001; 2) increased revenues in the current quarter compared to the prior year
quarter that provided more cash collected; 3) less commissions and subsidies
paid to our DirecTV dealers as a result of less subscribers added in the current
year period than in the prior year period; and 4) the greater amounts we
incurred in the prior year period associated with the seamless marketing
agreement we had with DirecTV that was in effect at that time.

         For the three months ended March 31, 2002 and 2001, net cash used for
investing activities was $7.4 million and $10.9 million, respectively. All of
the investing activity for the current year period was for capital expenditures.
The principal investing activity in the prior year period was for capital
expenditures of $7.4 million.

         For the three months ended March 31, 2002, our financing activities
used cash of $119.3 million. For the three months ended March 31, 2001, our
financing activities provided cash of $25.5 million. The principal activity in
both periods was borrowings and repayments under PM&C's bank credit facilities.
In the current year period, we repaid $80.7 million outstanding under the
facilities, whereas in the prior year period we borrowed $31.3 million under the
facilities. Additionally, we distributed $32.6 million in the current year
period to our parent company Pegasus Communications Corporation to fund the
redemption of one of their series of preferred stock and for general corporate
purposes.




                                       16
<PAGE>


                     PEGASUS SATELLITE COMMUNICATIONS, INC.


         Premarketing cash flow of our DBS business was $58.7 million and $59.6
million for the three months ended March 31, 2002 and 2001, respectively. EBITDA
for our DBS business was $48.7 million and $5.6 million for the three months
ended March 31, 2002 and 2001, respectively. DBS premarketing cash flow is
calculated by taking the revenues of the DBS business and deducting programming
expense, other subscriber related expenses, and general and administrative
expenses. DBS EBITDA is DBS premarketing cash flow less promotions and
incentives and advertising and selling expenses. We present DBS premarketing
cash flow and DBS EBITDA because the DBS business is our only significant
segment and this business forms the principal portion of our results of
operations and cash flows.

         Adjusted operating cash flow for the 12 months ended March 31, 2002 was
$210.5 million. Adjusted operating cash flow is operating cash flow of the DBS
business for the current quarter times four, plus operating cash flow from other
operating divisions for the last four quarters. Operating cash flow, for the
purpose of only calculating adjusted operating cash flow, is income or loss from
operations, adding back depreciation, amortization, and other noncash items
therein, and subscriber acquisition costs. We present this measure for purpose
of compliance with our debt indenture, and such measure is not required to be
presented on a comparative basis.

         DBS premarketing cash flow, DBS EBITDA, and adjusted operating cash
flow are not, and should not be considered, alternatives to income from
operations, net income, net cash provided by operating activities, or any other
measure for determining our operating performance or liquidity, as determined
under generally accepted accounting principles. DBS premarketing cash flow, DBS
EBITDA, and adjusted operating cash flow also do not necessarily indicate
whether our cash flow will be sufficient to fund working capital, capital
expenditures, or to react to changes in our industry or the economy generally.
We believe that DBS premarketing cash flow, DBS EBITDA, and adjusted operating
cash flow are important because people who follow our industry frequently use
them as measures of financial performance and ability to pay debt service, and
they are measures that we, our lenders, and investors use to monitor our
financial performance and debt leverage. Although EBITDA is a common measure
used by other companies, our calculation of EBITDA may not be comparable with
that of others.

         We may from time to time engage in transactions in which we acquire
through purchases and/or exchanges our securities, the securities of our parent,
Pegasus Communications Corporation, or of our subsidiary Pegasus Media &
Communications. Such transactions may be made in the open market or in privately
negotiated transactions and may involve cash or the issuance of securities. The
amount and timing of such transactions, if any, will depend on market conditons
and other considerations.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         Our principal market risk exposure continues to be interest rate risk.
Our primary exposure is variable rates of interest associated with borrowings
under our credit facilities. The amount of interest we incur also depends upon
the amount of borrowings outstanding. The way we manage these risks did not
change during the three months ended March 31, 2002, and we have not experienced
any material changes in interest rates or effects of our interest rate
instruments during this period.




                                       17

<PAGE>
                     PEGASUS SATELLITE COMMUNICATIONS, INC.



PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

         For information relating to litigation with DirecTV, Inc. and others,
we incorporate by reference herein the disclosure reported under Note 10 to the
Notes to Consolidated Financial Statements. The Notes to Consolidated Financial
Statements can be found under Part I, Item 1 of this Quarterly Report on Form
10-Q. We have previously filed reports during the fiscal year disclosing some or
all of the legal proceedings referenced above. In particular, we have reported
on such proceedings in our Annual Report on Form 10-K for the year ended
December 31, 2001.


































                                       18
<PAGE>


                    PEGASUS SATELLITE COMMUNICATIONS, INC.


                                    SIGNATURE


Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, Pegasus Satellite Communications, Inc. has duly caused this Report
to be signed on its behalf by the undersigned thereunto duly authorized.


                                    Pegasus Satellite Communications, Inc.



         May 15, 2002               By: /s/ Joseph W. Pooler, Jr.
----------------------------        -----------------------------------
             Date                   Joseph W. Pooler, Jr.

                                    Vice President - Finance and Controller
                                    (Principal Financial and Accounting Officer)








                                       19