UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2004.

                                     OR

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

                        Commission File Number: 027455

                                AirGate PCS, Inc.
             (Exact name of registrant as specified in its charter)


                  Delaware                              58-2422929
  (State or other jurisdiction of                  (I.R.S. Employer
   incorporation or organization)               Identification Number)

Harris Tower, 233 Peachtree St. NE, Suite 1700,
               Atlanta, Georgia                           30303
 (Address of principal executive offices)               (Zip code)

                                 (404) 525-7272
              (Registrant's telephone number, including area code)

     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  and 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 |_|

     Indicate by check mark whether the registrant is an  accelerated  filer (as
defined in Rule 12b-2 of the Exchange Act). Yes |_| No |X|

     11,815,284 shares of common stock,  $0.01 par value, were outstanding as of
May 12, 2004.




                                AIRGATE PCS, INC.
                         FORM 10-Q FOR THE QUARTER ENDED
                                 MARCH 31, 2004

                                TABLE OF CONTENTS

PART I         FINANCIAL INFORMATION
Item 1.        Financial Statements.....................................      3
               Condensed Consolidated Balance Sheets at
                March 31, 2004 (unaudited) and September 30, 2003.......      3
               Condensed Consolidated Statements of Operations
                for the three months and six months ended
                March 31, 2004 and 2003 (unaudited).....................      4
               Condensed Consolidated Statements of Cash Flows
                for the six months ended March 31, 2004 and
                2003 (unaudited)........................................      5
               Notes to Condensed Consolidated Financial
                Statements (unaudited)..................................      6
Item 2.        Management's Discussion and Analysis of Financial
                Condition and Results of Operations.....................     16
Item 3.        Quantitative and Qualitative Disclosures
                About Market Risk.......................................     34
Item 4.        Controls and Procedures..................................     35
PART II        OTHER INFORMATION
Item 1.        Legal Proceedings........................................     37
Item 2.        Changes in Securities and Use of Proceeds................     37
Item 3.        Defaults Upon Senior Securities..........................     37
Item 4.        Submission of Matters to a Vote of Security Holders......     37
Item 5.        Other Information........................................     38
Item 6.        Exhibits and Reports on Form 8-K.........................     38



PART I.  FINANCIAL INFORMATION

Item 1.  -- Financial Statements

                       AIRGATE PCS, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS




                                                                          March 31,        September 30,
                                                                             2004               2003
                                                                       ----------------  -----------------
                                                                         (unaudited)
                                                                       (Dollars in thousands, except share
                                                                              and per share amounts)
                                                                                  
Assets
Current assets:
    Cash and cash equivalents                                                  $ 48,593           $ 54,078
    Accounts receivable, net of allowance for doubtful
      accounts of $3,861 and $4,635                                              24,477             26,994
    Receivable from Sprint                                                       11,957             15,809
    Inventories                                                                   3,469              2,132
    Prepaid expenses                                                              5,699              2,107
    Other current assets                                                            316                145
                                                                       -----------------  -----------------
      Total current assets                                                       94,511            101,265
Property and equipment, net of accumulated depreciation and
    amortization of $153,645 and $129,986                                       161,772            178,070
Financing costs                                                                   3,182              6,682
Direct subscriber activation costs                                                2,662              3,907
Other assets                                                                      1,017                992
                                                                       ----------------  -----------------
                Total assets                                                  $ 263,144          $ 290,916
                                                                       =================  =================

Liabilities and Stockholders' Deficit
Current liabilities:
    Accounts payable                                                            $ 2,247            $ 5,945
    Accrued expense                                                              13,970             12,104
    Payable to Sprint                                                            48,761             45,069
    Deferred revenue                                                              8,621              7,854
    Current maturities of long-term debt                                         17,113             17,775
                                                                       -----------------  -----------------
      Total current liabilities                                                  90,712             88,747
Deferred subscriber activation fee revenue                                        4,585              6,701
Other long-term liabilities                                                       2,148              1,841
Long-term debt, excluding current maturities                                    257,237            386,509
Investment in iPCS                                                                    -            184,115
                                                                       -----------------  -----------------
      Total liabilities                                                         354,682            667,913

Commitments and contingencies                                                         -                  -

Stockholders' deficit:
    Preferred stock, $.01 par value; 1,000,000
      shares authorized; no shares issued and
      outstanding                                                                     -                  -
    Common stock, $.01 par value; 30,000,000
      shares authorized; 11,761,951 and 5,192,238
      shares issued and outstanding at March 31, 2004
      and September 30, 2003                                                        118                 52
    Additional paid-in-capital                                                1,046,193            924,095
    Unearned stock compensation                                                     (37)              (203)
    Accumulated deficit                                                      (1,137,812)        (1,300,941)
                                                                       -----------------  -----------------
      Total stockholders' deficit                                               (91,538)          (376,997)
                                                                       -----------------  -----------------
                Total liabilities and stockholders' deficit                   $ 263,144          $ 290,916
                                                                       =================  =================


                See accompanying notes to the unaudited condensed
                       consolidated financial statements.
                                       3



                       AIRGATE PCS, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (unaudited)



                                                                Three Months Ended             Six Months Ended
                                                                      March 31,                     March 31,
                                                        ------------------------------------  ------------------------------------
                                                              2004               2003               2004               2003
                                                        -----------------  -----------------  -----------------  -----------------
                                                               (Dollars in thousands, except share and per share amounts)
                                                                                                    
Revenue:
     Service revenue                                              61,656           $ 60,163          $ 123,829          $ 120,096
     Roaming revenue                                              13,498             13,895             29,981             32,805
     Equipment revenue                                             2,882              2,691              5,729              5,713
                                                        -----------------  -----------------  -----------------  -----------------
        Total revenue                                             78,036             76,749            159,539            158,614

Operating Expense:
     Cost of service and roaming (exclusive
        of depreciation and amortization
        as shown separately below)                                39,422             40,747             81,911             92,170
     Cost of equipment                                             7,202              3,455             13,788             10,302
     Selling and marketing expense                                11,916             11,384             26,063             28,203
     General and administrative expense                            6,337              5,844             12,804             10,036
     Depreciation and amortization of
        property and equipment                                    11,892             11,625             23,659             23,244
     Loss (gain) on disposal of property
        and equipment                                                 (3)               220                 (5)               418
                                                        -----------------  -----------------  -----------------  -----------------
        Total operating expense                                   76,766             73,275            158,220            164,373
                                                        -----------------  -----------------  -----------------  -----------------
        Operating income (loss)                                    1,270              3,474              1,319             (5,759)
Interest income                                                      165                 25                322                 25
Interest expense                                                 (11,311)           (10,197)           (22,627)           (20,391)
                                                        -----------------  -----------------  -----------------  -----------------
        Loss from continuing operations
           before income tax                                      (9,876)            (6,698)           (20,986)           (26,125)
Income tax                                                             -                  -                  -                  -
                                                        -----------------  -----------------  -----------------  -----------------
        Loss from continuing operations                           (9,876)            (6,698)           (20,986)           (26,125)
Discontinued Operations:
     Loss from discontinued operations                                 -            (14,324)                 -            (42,571)
     Gain on disposal of discontinued operations
        net of $0 income tax expense                                   -                  -            184,115                  -
                                                        -----------------  -----------------  -----------------  -----------------
        Income (loss) from discontinued operations                     -            (14,324)           184,115            (42,571)
                                                        -----------------  -----------------  -----------------  -----------------
        Net income (loss)                                       $ (9,876)         $ (21,022)         $ 163,129          $ (68,696)
                                                        =================  =================  =================  =================

Basic and diluted weighted-average number
  of shares outstanding                                        8,152,162          5,185,887          6,664,131          5,175,241

Basic and diluted earnings (loss) per share:
     Loss from continuing operations                             $ (1.21)           $ (1.29)           $ (3.15)           $ (5.05)
     Income (loss) from discontinued operations                        -              (2.76)             27.63              (8.22)
                                                        -----------------  -----------------  -----------------  -----------------
        Net income (loss)                                        $ (1.21)           $ (4.05)           $ 24.48           $ (13.27)
                                                        =================  =================  =================  =================


                See accompanying notes to the unaudited condensed
                       consolidated financial statements.
                                       4



                       AIRGATE PCS, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (unaudited)



                                                                                          Six Months Ended
                                                                                              March 31,
                                                                                ------------------------------------
                                                                                      2004               2003
                                                                                -----------------  -----------------
                                                                                      (Dollars in thousands)

                                                                                             
Cash flows from operating activities:
     Net income (loss)                                                                 $ 163,129          $ (68,696)
       Adjustments to reconcile net income (loss) to net cash provided by
       operating activities:
       Gain on disposal of discontinued operations                                      (184,115)                 -
       Loss from discontinued operations                                                       -             42,571
       Depreciation and amortization of property and equipment                            23,659             23,244
       Amortization of financing costs into interest expense                                 629                605
       Provision for doubtful accounts                                                      (718)             2,155
       Interest expense associated with accretion of discounts                            14,366             15,940
       Non-cash stock compensation                                                           302                352
       Loss (gain) on disposal of property and equipment                                      (5)               418
                Changes in assets and liabilities:
                   Accounts receivable                                                     3,235                364
                   Receivable from Sprint                                                  3,852             17,362
                   Inventories                                                            (1,337)             1,974
                   Prepaid expenses, other current and non-current assets                 (2,528)            (3,021)
                   Accounts payable, accrued expenses and other
                     long-term liabilities                                                (3,654)            (6,131)
                   Payable to Sprint                                                       3,692            (12,811)
                   Deferred revenue                                                          767              1,301
                                                                                -----------------  -----------------
       Net cash provided by operating activities                                          21,274             15,627
                                                                                -----------------  -----------------

Cash flows from investing activities:
     Purchases of property and equipment                                                  (7,361)            (6,654)
                                                                                -----------------  -----------------
       Net cash used in investing activities                                              (7,361)            (6,654)
                                                                                -----------------  -----------------

Cash flows from financing activities:
     Borrowings under credit facility                                                          -              8,000
     Repayments of credit facility                                                       (13,761)            (1,012)
     Financing cost on credit facility                                                      (884)                 -
     Equity issue costs                                                                   (4,758)                 -
     Stock issued to employee stock purchase plan                                              -                 57
     Proceeds from stock option exercises                                                      5                  -
                                                                                -----------------  -----------------
       Net cash (used in) provided by financing activities                                (19,398)            7,045
                                                                                -----------------  -----------------
       Net (decrease) increase in cash and cash equivalents                                (5,485)           16,018
Cash and cash equivalents at beginning of period                                           54,078             4,887
                                                                                -----------------  -----------------
Cash and cash equivalents at end of period                                               $ 48,593          $ 20,905
                                                                                =================  =================

Supplemental disclosure of cash flow information:
     Interest paid                                                                       $ 3,777            $ 3,947
Supplemental disclosure for non-cash investing activities:
     Capitalized interest                                                                     71                158
Supplemental disclosure of non-cash financing activities for debt recapitalization:
     Net carrying value of Old Notes                                                    (264,888)                 -
     Unamortized financing cost of Old Notes                                               3,755                  -
     Issuance of New Notes                                                               159,035                  -
     Carrying value difference on New Notes                                              (24,686)                 -
     Common stock issued in exchange for Old Notes                                       126,784                  -



                See accompanying notes to the unaudited condensed
                       consolidated financial statements.

                                       5


                       AIRGATE PCS, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2004
                                   (unaudited)

(1)  Business, Basis of Presentation and Liquidity

(a)  Basis of Presentation

The  accompanying  unaudited  condensed  consolidated  financial  statements  of
AirGate PCS, Inc. and  subsidiaries  (the "Company") are presented in accordance
with the rules and regulations of the Securities and Exchange Commission ("SEC")
and do not  include  all of the  disclosures  normally  required  by  accounting
principles generally accepted in the United States of America. In the opinion of
management,  these  statements  reflect  all  adjustments,  including  recurring
adjustments,  which  are  necessary  for a fair  presentation  of the  condensed
consolidated  financial  statements  for  the  interim  periods.  The  condensed
consolidated financial statements should be read in conjunction with the audited
consolidated  financial  statements and notes thereto contained in the Company's
Annual  Report on Form  10-K/A,  Amendment  No. 2 to 10-K/A  and in Form 8-K for
Discontinued   Operations  and  to  reflect  the  1-for-5  reverse  stock  split
(collectively,  the "Annual  Report")  for the fiscal year ended  September  30,
2003,  which are filed with the SEC and may be  accessed  via EDGAR on the SEC's
website at http://www.sec.gov. The results of operations for the quarter and six
months ended March 31, 2004 are not  necessarily  indicative of the results that
can be expected for the entire fiscal year ending  September  30, 2004.  Certain
prior year  amounts  have been  reclassified  to conform to the  current  year's
presentation.  Management  of the  Company  has made a number of  estimates  and
assumptions  relating  to the  reporting  of  assets  and  liabilities  and  the
disclosure of contingent  liabilities at the dates of the  consolidated  balance
sheets and revenues and expenses  during the reporting  periods to prepare these
condensed  consolidated  financial  statements  in  conformity  with  accounting
principles  generally  accepted in the United States of America.  Actual results
could differ from those  estimates.  All significant  intercompany  accounts and
transactions have been eliminated in consolidation.

AirGate PCS, Inc. and its restricted  subsidiaries  were created for the purpose
of providing wireless Personal  Communication Services ("PCS"). The Company is a
network  partner  of Sprint  with the right to market  and  provide  Sprint  PCS
products and services  using the Sprint brand name in a defined  territory.  The
accompanying condensed consolidated financial statements include the accounts of
AirGate PCS,  Inc. and its  wholly-owned  restricted  subsidiaries,  AGW Leasing
Company,  Inc., AirGate Service Company, Inc. and AirGate Network Services,  LLC
for all periods presented.

On November 30,  2001,  the Company  acquired  iPCS,  Inc. and its  subsidiaries
("iPCS") in a merger.  The  transaction  was  accounted  for under the  purchase
method of  accounting.  Although  iPCS's growth rates  initially met or exceeded
expectations,  the  slowdown  in  growth  in the  wireless  industry,  increased
competition, iPCS' dependence on Sprint and the reimposition and increase of the
deposit  for  sub-prime  credit  customers,  all  contributed  to slower  growth
subsequent to acquisition. In addition, iPCS' slow growth was compounded because
it was  earlier in its life  cycle  when  growth  slowed,  it had  approximately
one-third fewer subscribers than the Company, and it had a less complete network
than the Company.

On February 23, 2003, iPCS filed a Chapter 11 bankruptcy  petition in the United
States  Bankruptcy Court for the Northern District of Georgia for the purpose of
effecting a court administered reorganization.  Subsequent to February 23, 2003,
the Company no longer  consolidated  the accounts and results of  operations  of
iPCS,  and the accounts of iPCS were  recorded as an  investment  using the cost
method of accounting.

In   connection   with  the   issuance   of  common   stock  in  the   Company's
Recapitalization Plan (described below), the Company had an ownership change for
tax  purposes.  In order to avoid the  ownership  change of iPCS that would have
resulted from the Company's  ownership  change, on October 17, 2003, the Company
irrevocably  transferred  all of its shares of iPCS common  stock to a trust for
the benefit of the Company's  shareholders of record as of the date of transfer.
On October 17, 2003, the iPCS investment ($184.1 million credit balance carrying
amount) was  eliminated  and recorded as a  non-monetary  gain on disposition of
discontinuing   operations.   The  Company's  condensed  consolidated  financial
statements reflect the results of iPCS as discontinued operations.

(b)  Liquidity, Financial Restructuring and Going Concern

The financial  statements  have been prepared on a going  concern  basis,  which
contemplates  the  realization of assets and  satisfaction of liabilities in the
normal  course  of  business.  The  financial  statements  do  not  include  any
adjustments  relating to the recoverability and classification of asset carrying
amounts or the amount and classification of liabilities that might result should
the Company be unable to continue as a going concern.  In connection  with their
audit of the Company's fiscal 2003 consolidated  financial statements,  KPMG LLP
the Company's independent auditors,  included an explanatory paragraph regarding
the Company's ability to continue as a going concern in their audit opinion.

The PCS  market  is  characterized  by  significant  risks as a result  of rapid
changes in technology,  intense  competition  and the costs  associated with the
build-out,  on-going  operations  and  growth of a PCS  network.  The  Company's

                                       6



operations are dependent upon Sprint's ability to perform its obligations  under
the  agreements  between  the  Company  and Sprint  (see Note 3) under which the
Company has agreed to  construct  and manage its Sprint PCS network (the "Sprint
Agreements"). The Company's ability to attract and maintain a subscriber base of
sufficient size and credit quality is critical to achieving  sufficient positive
cash flow. Significant changes in technology,  increased competition, or adverse
economic  conditions  could impair the Company's  ability to achieve  sufficient
positive cash flow.

As shown in the condensed  consolidated  financial  statements,  the Company has
generated  significant losses from continuing operations since inception and has
an  accumulated  deficit  of $1.1  billion  and  stockholders'  deficit of $91.5
million  at March  31,  2004.  For the six  months  ended  March 31,  2004,  the
Company's loss from continuing operations amounted to $21.0 million. As of March
31,  2004,  the Company had  working  capital of $3.8  million and cash and cash
equivalents of $48.6  million,  and no remaining  availability  under its credit
facility. As a result, the Company is completely dependent on available cash and
operating  cash flow to pay debt service and meet its other  capital  needs.  If
such  sources  are  not  sufficient,  alternative  funding  sources  may  not be
available.

In addition  to its  capital  needs to fund  operating  losses,  the Company has
invested  large amounts to build-out its networks and for other capital  assets.
Since inception, the Company has invested over $300 million to purchase property
and equipment.

A number of factors,  including slower subscriber growth,  increased competition
and churn and our dependence on Sprint and Sprint's  changes to various programs
and fees  have had an  adverse  affect  on the  Company's  business  and led the
Company to revise its  business  strategy  and take  actions to cut costs during
fiscal year 2003. These actions included the following:

o    Restructuring  the Company's  organization  and  eliminating  more than 150
     positions;

o    Reducing capital expenditures;

o    Reducing spending for sales and marketing activities; and

o    Reducing  per  minute  network  operating  costs by more  closely  managing
     connectivity costs.

Despite  these  measures  and certain  amendments  to its credit  facility,  the
Company's  compliance with the financial covenants under its credit facility was
not assured and the Company's  ability to generate  sufficient cash flow to meet
its  financial  covenants  and  payment  obligations  in  2005  and  beyond  was
substantially  uncertain.  In  addition,  there  was  substantial  risk that the
Company  would  not  have had  sufficient  liquidity  to meet its cash  interest
obligations  under  the Old Notes  (defined  below)  in 2006.  As a result,  the
Company engaged in a financial restructuring (the "Recapitalization Plan") which
closed on February 13, 2004 and settled on February 20, 2004. See Note 10 to the
condensed consolidated  financial statements.  As a result, the Company believes
that it will be able to meet its liquidity needs for the next 12 months.

 (2)     Significant New Accounting Pronouncements

In May 2003, the Financial  Accounting Standards Board ("FASB") issued Statement
of Financial  Accounting  Standards  ("SFAS") No. 150,  "Accounting  for Certain
Financial  Instruments  with  Characteristics  of Liabilities and Equity," which
became  effective at the beginning of the first interim period  beginning  after
June 15, 2003. However, certain aspects of SFAS 150 have been deferred. SFAS No.
150 establishes standards for the Company's classification of liabilities in the
financial  statements that have  characteristics of both liabilities and equity.
The  implementation of SFAS 150 is not anticipated to have a significant  impact
on our results of operations, financial position or cash flows.

In 2003,  the FASB issued  Interpretation  No. 46R,  "Consolidation  of Variable
Interest  Entities," an interpretation  of Accounting  Research Bulletin ("ARB")
No. 51. This interpretation  addresses the consolidation by business enterprises
of  variable   interest  entities  as  defined  in  the   interpretation.   This
interpretation  applies  immediately to variable  interests  entities created or
acquired after January 31, 2003 and to special purpose  entities for the quarter
ended after December 15, 2003.  The  Interpretation  is generally  effective for
interim periods ending after March 15, 2004 for all variable  interests entities
created or  acquired  prior to January  31,  2003.  We do not have any  variable
interest entity arrangements.

In November 2002, the Emerging  Issues Task Force ("EITF") of the FASB reached a
consensus on EITF No. 00-21,  "Accounting for Revenue Arrangements with Multiple
Element   Deliverables."   The  EITF  guidance  addresses  how  to  account  for
arrangements that may involve multiple revenue-generating  activities, i.e., the
delivery or performance  of multiple  products,  services,  and/or rights to use
assets.  In applying  this  guidance,  separate  contracts  with the same party,
entered into at or near the same time, will be presumed to be a package, and the
consideration  will be measured and  allocated  to the  separate  units based on
their relative fair values.  This consensus guidance is applicable to agreements
entered into for quarters  beginning  after June 15, 2003.  The Company  adopted
this EITF on July 1, 2003.  The  adoption  of EITF 00-21 did not have a material
impact on our results of operations, financial position or cash flows.

(3)    Sprint Agreements

Under the  Sprint  Agreements,  Sprint  is  obligated  to  provide  the  Company
significant  support  services  such as  billing,  collections,  long  distance,
customer care, network operations support,  inventory logistics support,  use of
Sprint brand names,  national  advertising,  national  distribution  and product
development.  Additionally,  the Company derives substantial roaming revenue and

                                       7



expenses when Sprint's and Sprint's network partners' wireless subscribers incur
minutes of use in the Company's  territory  and when the  Company's  subscribers
incur  minutes  of use in  Sprint's  and  other  Sprint  network  partners'  PCS
territories. These transactions are recorded in roaming revenue, cost of service
and roaming,  cost of equipment,  and selling and marketing  expense captions in
the  accompanying  condensed  consolidated  statements  of  operations.  Cost of
service and roaming  transactions  include the 8% affiliation fee, long distance
charges,  roaming  expense and costs of services  such as billing,  collections,
customer  service and  pass-through  expenses.  Cost of  equipment  transactions
relate to  inventory  purchased  by the  Company  from  Sprint  under the Sprint
Agreements.  Selling and marketing  transactions  relate to subsidized  costs on
handsets  and   commissions   paid  by  the  Company  under  Sprint's   national
distribution  programs.  Amounts recorded  relating to the Sprint Agreements for
the three months and six months ended March 31, 2004 and 2003 are as follows:



                                                                Three Months Ended                   Six Months Ended
                                                                    March 31,                             March 31,
                                                         ----------------------------------  ----------------------------------
                                                              2004              2003              2004              2003
                                                         ----------------  ----------------  ----------------  ----------------
                                                                                   (Dollars in thousands)

                                                                                                  
Amounts included in the Condensed Consolidated
 Statements of Operations:
    Roaming revenue                                             $ 12,905          $ 13,032          $ 28,652          $ 30,993
    Cost of service and roaming:
      Roaming                                                   $ 10,500          $ 10,861          $ 23,774          $ 25,713
      Customer service                                             8,465            11,150            13,348            22,686
      Affiliation fee                                              4,685             4,708             9,384             9,545
      Long distance                                                3,407             3,259             6,675             6,044
      Other                                                          694               514             1,282               990
                                                         ----------------  ----------------  ----------------  ----------------
         Total cost of service and roaming                      $ 27,751          $ 30,492          $ 54,463          $ 64,978
                                                         ================  ================  ================  ================

    Purchased inventory                                         $  8,087          $  2,695          $ 15,415          $  8,345
                                                         ================  ================  ================  ================

    Selling and marketing                                       $  2,629          $  2,716          $  6,923          $  6,112
                                                         ================  ================  ================  ================



                                                                       As of
                                                         ----------------------------------
                                                            March 31,       September 30,
                                                              2004              2003
                                                         ----------------  ----------------
                                                              (Dollars in thousands)
                                                                         
Receivable from Sprint                                       $ 11,957          $ 15,809
Payable to Sprint                                            $ 48,761          $ 45,069





Because  approximately 96% of our revenue is collected by Sprint and 66% of cost
of service  and roaming in our  financial  statements  for the six months  ended
March 31, 2004,  are derived from fees and charges by (or  through)  Sprint,  we
have a variety  of  settlement  issues  and  other  contract  disputes  open and
outstanding from time to time. Currently,  this includes, but is not limited to,
the following items, all of which, for accounting  purposes,  have been reserved
or otherwise provided for:

    o In fiscal year 2002,  Sprint PCS asserted it has the right to recoup up to
      $3.9 million in  long-distance  access revenues  previously paid by Sprint
      PCS to AirGate,  for which Sprint PCS has invoiced $1.2  million.  We have
      disputed these amounts.

    o Sprint invoiced the Company and we have accrued approximately $0.4 million
      for fiscal year 2002 and $1.0  million for fiscal year 2003,  respectively
      to reimburse Sprint for certain 3G related development  expenses.  For the
      six months ended March 31, 2004,  Sprint  invoiced the Company and we have
      accrued  approximately  $1.4 million.  We are disputing  Sprint's right to
      charge 3G fees in 2002 and beyond.

    o Sprint  invoiced the Company and we have accrued for software  maintenance
      fees of approximately $1.7 million and $1.3 million for each of the fiscal
      years  2002 and 2003,  respectively.  For the six months  ended  March 31,
      2004, Sprint invoiced the Company and we have accrued  approximately  $1.0
      million.  We are disputing  Sprint's right to charge software  maintenance
      fees.

    o Sprint  invoiced  the Company and we have  accrued $1.2 million for fiscal
      year 2003 and $2.5 million for the six months ended March 31, 2004 for the
      cost of IT projects  completed by Sprint. We are disputing  Sprint's right
      to collect these fees.

                                       8


The payable to Sprint includes disputed amounts  (including,  but not limited to
amounts   disclosed  above)  for  which  Sprint  has  invoiced  the  Company  of
approximately  $12.4 million.  The invoiced amount does not include $2.7 million
which has accrued for long-distance  access revenues claimed but not invoiced by
Sprint,  or other  fees not yet  invoiced  relating  to  disputed  3G,  software
maintenance and information technology that Sprint would assert have accrued.

We intend to vigorously  contest  these charges and to closely  examine all fees
and charges  imposed by Sprint.  In addition  to these  disputes,  we have other
outstanding  issues  with  Sprint  which  could  result in set-offs to the items
described above or in payments due from Sprint.  For example,  we believe Sprint
has failed to calculate, pay and report on collected revenues in accordance with
our Sprint Agreements  which,  together with other cash remittance  issues,  has
resulted  in a  shortfall  in cash  payments  to the  Company.  Sprint  also has
unilaterally  reduced the  reciprocal  roaming rate charged among Sprint and its
network  partners,  in a manner  which we  believe  is a  breach  of our  Sprint
agreements.

During the six months ended March 31, 2004, the Company recorded $2.4 million in
credits  from Sprint as a reduction  of cost of  service,  consisting  of a $1.2
million  credit  resulting from Sprint's  decision to discontinue  their billing
system  conversion  and a special  cash  settlement  of the bad debt profile for
certain  subscribers,  which  resulted in a credit of $1.2  million.  Sprint had
previously  billed and passed on to us their  development  costs  related to the
billing system  conversion as part of the IT service bureau fee we were charged.
This  credit  positively  affects the six months  ended March 31, 2004  results;
however,  it is a non-cash item that was  previously  disputed and not paid. The
settlement for the bad debt profile for certain subscribers represents a special
settlement  resulting  from the  improvement  in actual bad debt  experience  as
compared to the  estimated  bad debt expense (bad debt  profile) for the periods
April 2000 through December 2003.

Sprint estimates monthly service charges at the beginning of each calendar year.
At the end of each year,  Sprint  calculates  the actual costs to provide  these
services  for its  network  partners  and  requires a final  settlement  for the
calendar year against the charges  actually  paid. If the costs to provide these
services are less than the amounts  paid by Sprint's  network  partners,  Sprint
issues a credit for these amounts. If the costs to provide the services are more
than the amounts paid by Sprint's network  partners,  Sprint charges the network
partners for these amounts. During the quarters ended December 31, 2003 and 2002
the  Company  received a credit from  Sprint for $2.6  million and $1.3  million
related to the calendar years 2003 and 2002,  respectively,  which were recorded
as a reduction  to cost of service.  The calendar  year 2003 service  bureau fee
credit included $0.9 million in previously  disputed  unpaid amounts;  therefore
$1.7 million of cash proceeds from Sprint were accrued  during the quarter ended
December 31, 2003 and received during the quarter ended March 31, 2004.

The Sprint  Agreements  require the Company to maintain  certain minimum network
performance  standards and to meet other performance  requirements.  The Company
was in compliance in all material  respects with these  requirements as of March
31, 2004.

 (4) Litigation

In May 2002,  putative class action  complaints  were filed in the United States
District Court for the Northern  District of Georgia  against AirGate PCS, Inc.,
Thomas M.  Dougherty,  Barbara L. Blackford,  Alan B.  Catherall,  Credit Suisse
First Boston, Lehman Brothers, UBS Warburg LLC, William Blair & Company,  Thomas
Wiesel  Partners LLC and TD Securities.  The complaints do not specify an amount
or range of damages that the plaintiffs are seeking.  The complaints  seek class
certification  and  allege  that  the  prospectus  used in  connection  with the
secondary  offering  of the  Company's  common  stock  by  certain  former  iPCS
shareholders  on December 18, 2001  contained  materially  false and  misleading
statements and omitted material information  necessary to make the statements in
the  prospectus not false and  misleading.  The alleged  omissions  included (i)
failure to disclose that in order to complete an effective  integration of iPCS,
drastic  changes would have to be made to the Company's  distribution  channels,
(ii) failure to disclose that the sales force in the acquired iPCS markets would
require  extensive  restructuring and (iii) failure to disclose that the "churn"
or "turnover" rate for subscribers  would increase as a result of an increase in
the amount of sub-prime  credit quality  subscribers  the Company added from its
merger with iPCS. On July 15, 2002, certain plaintiffs and their counsel filed a
motion seeking  appointment as lead  plaintiffs and lead counsel.  Subsequently,
the court denied this motion  without  prejudice,  and two of the plaintiffs and
their counsel filed a renewed motion seeking  appointment as lead plaintiffs and
lead counsel.  On September 12, 2003,  the court again denied the motion without
prejudice and on December 2, 2003,  certain plaintiffs and their counsel filed a
modified renewed motion.

On December 11, 2003, Stuart Tinney, an AirGate  shareholder,  filed suit in the
U.S. District Court for the District of Delaware against Genesco Communications,
Inc., Cambridge Telecom,  Inc., The Blackstone Group, Trust Company of the West,
Cass  Communications  Management,  Inc.,  Technology Group, LLC, Montrose Mutual
PCS, Inc.,  Gridley  Enterprises,  Inc., Timothy M. Yager, Peter G. Peterson and
Stephen A. Schwarzman (collectively, the "Defendants"). The lawsuit alleges that
the  Defendants,  as  either  officers,  directors  or 10%  shareholders  of the
Company,  purchased and sold the Company's  securities within a six-month period
ended  December 15, 2001 and profited  from these  transactions  in violation of
Section  16(b) of the Exchange  Act.  The lawsuit  seeks  disgorgement  of these
"short swing" profits and payment of the profits to the Company,  which is named
as a nominal  defendant  in the lawsuit for its failure to directly  take action
against the Defendants.

While there is no pending  litigation with Sprint, we have a variety of disputes
with Sprint, which are described in Note 3.

                                       9


We are also  subject to a variety of other claims and suits that arise from time
to time in the ordinary course of business.

While  management  currently  believes  that  resolving  all of  these  matters,
individually or in the aggregate, will not have a material adverse impact on our
liquidity,  financial  condition or results of  operations,  the  litigation and
other claims noted above are subject to inherent  uncertainties and management's
view may change in the future.  If an unfavorable  outcome were to occur,  there
exists the possibility of a material adverse impact on our liquidity,  financial
condition and results of operations  for the period in which the effect  becomes
reasonably estimable.

(5)  Income Taxes

Income taxes are accounted for under the asset and  liability  method.  Deferred
income tax assets and liabilities are recognized for the future tax consequences
attributable to differences  between the financial statement carrying amounts of
existing  assets and  liabilities  and their  respective tax bases and operating
loss and tax credit carry  forwards.  Deferred income tax assets and liabilities
are measured using enacted tax rates applied to expected  taxable income for the
years in which those  temporary  differences  are  expected to be  recovered  or
settled.  The effect on deferred  income tax assets and liabilities for a change
in tax rates is  recognized  as income in the period that includes the enactment
date. A valuation  allowance  is provided  for deferred  income tax assets based
upon the  Company's  assessment  of whether it is more  likely than not that the
deferred  income tax assets will be realized.  No such amounts were  realized in
the quarters  and six months ended March 31, 2004 and 2003,  nor will amounts be
realized in the future unless management believes the recoverability of deferred
tax assets is more likely than not. The non-monetary  gain on the disposition of
discontinued  operations recorded during the quarter ended December 31, 2003 did
not impact the Company's net operating  loss  carryforwards  as the  disposition
resulted in a non-deductible loss for tax purposes. As a result of the Company's
restructuring,  the  Company's  existing net operating  losses  ("NOLs") will be
subject to annual limitations as required by Section 382 of the Internal Revenue
Code  of  1986,  as  amended.   The  Company  estimates  that  it  had  NOLs  of
approximately  $290  million  through  the date of  restructuring.  The  Company
estimates that the annual limitation associated with these NOLs is approximately
$4.5 million.  Thus, should the Company generate taxable income in excess of the
annual limit, it would be exposed to a liability for current income taxes.

(6)  Discontinued Operations

On October 17, 2003, the Company  irrevocably  transferred  all of its shares of
iPCS common stock to a trust for the benefit of the  Company's  shareholders  of
record on the date of the transfer.  On that date, the iPCS  investment  ($184.1
million credit balance carrying amount) was eliminated and recorded as a gain on
disposal  of  discontinued  operations.  The  results  for iPCS for all  periods
presented are shown as discontinued operations. Subsequent to February 23, 2003,
the Company accounted for iPCS under the cost method.  Therefore,  excluding the
gain on disposal of $184.1  million  recorded  October 17,  2003,  there were no
losses from  discontinued  operations for the quarter and six months ended March
31, 2004. The following  reflects the loss from discontinued  operations of iPCS
for the quarter and six months ended March 31, 2003 (dollars in thousands):

                                       For the Quarter     For the Six Months
                                            Ended                Ended
                                          March 31,            March 31,
                                      ------------------    -----------------
                                            2003                  2003
                                      ------------------    -----------------
Revenue                                        $ 27,829             $ 79,364
Cost of revenue                                  21,197               63,200
Selling and marketing                             4,312               16,418
General and administrative                        3,550                6,881
Depreciation and amortization                     7,718               20,989
                                      ------------------    -----------------
   Operating expense                             36,777              107,488
                                      ------------------    -----------------
   Operating loss                                (8,948)             (28,124)
   Interest expense, net                         (5,376)             (14,447)
                                      ------------------    -----------------
   Loss from discontinued operations          $ (14,324)           $ (42,571)
                                      ==================    =================


 (7)  Condensed Consolidating Financial Statements

AGW Leasing  Company,  Inc. ("AGW") is a wholly-owned  restricted  subsidiary of
AirGate.  AGW has fully and  unconditionally  guaranteed the New Notes (see Note
10), Old Notes and the credit  facility.  AGW was formed to hold the real estate
interests for the Company's  PCS network and retail  operations.  AGW also was a
registrant under the Company's  registration statement declared effective by the
SEC on September 27, 1999.

                                       10


AirGate Network Services LLC ("ANS") is a wholly-owned  restricted subsidiary of
the Company.  ANS has fully and  unconditionally  guaranteed the New Notes,  Old
Notes and the credit facility. ANS was formed to provide construction management
services for the Company's PCS network.

AirGate  Service  Company,  Inc.  ("Service  Co") is a  wholly-owned  restricted
subsidiary of the Company.  Service Co has fully and unconditionally  guaranteed
the New  Notes,  Old Notes and the  credit  facility.  Service  Co was formed to
provide management services to the Company and iPCS.

The following shows the unaudited condensed  consolidating  financial statements
for the Company and its guarantor subsidiaries, as listed above, as of March 31,
2004 and  September 30, 2003 and for the three months and six months ended March
31, 2004 and 2003 (dollars in thousands):



                Unaudited Condensed Consolidating Balance Sheets
                              As of March 31, 2004

                                                                AirGate
                                        AirGate PCS,           Guarantor
                                            Inc.              Subsidiaries          Eliminations          Consolidated
                                     -------------------   -------------------   -------------------   -------------------

                                                                                          
Cash and cash equivalents                     $  48,605              $    (12)            $       -             $  48,593
Other current assets                            106,935                   529               (61,546)               45,918
                                     -------------------   -------------------   -------------------   -------------------
    Total current assets                        155,540                   517               (61,546)               94,511
Property and equipment, net                     129,449                32,323                     -               161,772
Other noncurrent assets                           6,861                     -                     -                 6,861
                                     -------------------   -------------------   -------------------   -------------------
    Total assets                              $ 291,850              $ 32,840             $ (61,546)            $ 263,144
                                     ===================   ===================   ===================   ===================

Current liabilities                           $  91,016              $ 61,242             $ (61,546)            $  90,712
Intercompany                                   (118,644)              118,644                     -                     -
Long-term debt                                  257,237                     -                     -               257,237
Other long-term liabilities                       6,733                     -                     -                 6,733
Investment in subsidiaries                      147,046                     -              (147,046)                    -
                                     -------------------   -------------------   -------------------   -------------------
    Total liabilities                           383,388               179,886              (208,592)              354,682
                                     -------------------   -------------------   -------------------   -------------------
Stockholders' deficit                           (91,538)             (147,046)              147,046               (91,538)
                                     -------------------   -------------------   -------------------   -------------------
    Total liabilities and
     stockholders' deficit                    $ 291,850              $ 32,840             $ (61,546)            $ 263,144
                                     ===================   ===================   ===================   ===================



                Unaudited Condensed Consolidating Balance Sheets
                            As of September 30, 2003



                                                                AirGate
                                        AirGate PCS,           Guarantor
                                            Inc.              Subsidiaries          Eliminations          Consolidated
                                     -------------------   -------------------   -------------------   -------------------
                                                                                          
Cash and cash equivalents                    $   54,078             $       -             $       -             $  54,078
Other current assets                            108,136                   529               (61,478)               47,187
                                     -------------------   -------------------   -------------------   -------------------
    Total current assets                        162,214                   529               (61,478)              101,265
Property and equipment, net                     141,129                36,941                     -               178,070
Other noncurrent assets                          11,581                     -                     -                11,581
                                     -------------------   -------------------   -------------------   -------------------
    Total assets                             $  314,924             $  37,470             $ (61,478)            $ 290,916
                                     ===================   ===================   ===================   ===================

Current liabilities                          $   89,036             $  61,189             $ (61,478)            $  88,747
Intercompany                                   (108,890)              108,890                     -                     -
Long-term debt                                  386,509                     -                     -               386,509
Other long-term liabilities                       8,542                     -                     -                 8,542
Investment in subsidiaries                      316,724                     -              (132,609)              184,115
    Total liabilities                           691,921               170,079              (194,087)              667,913
                                     -------------------   -------------------   -------------------   -------------------
Stockholders deficit                          (376,997)             (132,609)              132,609               (376,997)
                                     -------------------   -------------------   -------------------   -------------------
    Total liabilities and
     stockholders' deficit                   $ 314,924              $ 37,470             $ (61,478)            $ 290,916
                                     ===================   ===================   ===================   ===================





                                       11


            Unaudited Condensed Consolidating Statement of Operations
                      For the Quarter Ended March 31, 2004



                                                                             AirGate
                                                       AirGate PCS,         Guarantor
                                                           Inc.           Subsidiaries        Eliminations       Consolidated
                                                     -----------------   ----------------   -----------------  -----------------

                                                                                                  
Revenue                                                      $ 78,036                $ -                 $ -           $ 78,036

Cost of revenue                                                42,426              4,198                   -             46,624
Selling and marketing                                          11,347                569                   -             11,916
General and administrative                                      6,180                157                   -              6,337
Depreciation and amortization of property
  and equipment                                                 9,508              2,384                   -             11,892
Gain on disposal of property and equipment                         (3)                 -                   -                 (3)
                                                     -----------------   ----------------   -----------------  -----------------
     Total operating expense                                   69,458              7,308                   -             76,766
                                                     -----------------   ----------------   -----------------  -----------------
     Operating income (loss)                                    8,578             (7,308)                  -              1,270
Loss in subsidiaries                                           (7,267)                 -               7,267                  -
Interest income                                                   165                  -                   -                165
Interest expense                                              (11,352)                41                   -            (11,311)
                                                     -----------------   ----------------   -----------------  -----------------
     Loss from continuing operations before
        income tax                                             (9,876)            (7,267)              7,267             (9,876)
     Income tax                                                     -                  -                   -                  -
                                                     -----------------   ----------------   -----------------  -----------------
       Loss from continuing operations                         (9,876)            (7,267)              7,267             (9,876)
       Income from discontinued operations                          -                  -                   -                  -
                                                     -----------------   ----------------   -----------------  -----------------
       Net loss                                              $ (9,876)          $ (7,267)            $ 7,267           $ (9,876)
                                                     =================   ================   =================  =================



            Unaudited Condensed Consolidating Statement of Operations
                      For the Quarter Ended March 31, 2003

                                                                             AirGate
                                                       AirGate PCS,         Guarantor
                                                           Inc.           Subsidiaries        Eliminations       Consolidated
                                                     -----------------   ----------------   -----------------  -----------------

                                                                                                  
Revenue                                                      $ 76,749                $ -                 $ -           $ 76,749

Cost of revenue                                                39,598              4,604                   -             44,202
Selling and marketing                                          10,195              1,189                   -             11,384
General and administrative                                      5,335                509                   -              5,844
Depreciation and amortization of property
  and equipment                                                 9,272              2,353                   -             11,625
Loss on disposal of property and equipment                        220                  -                   -                220
                                                     -----------------   ----------------   -----------------  -----------------
     Total operating expense                                   64,620              8,655                   -             73,275
                                                     -----------------   ----------------   -----------------  -----------------
     Operating income (loss)                                   12,129             (8,655)                  -              3,474
Loss in subsidiaries                                           (8,616)                 -               8,616                  -
Interest income                                                   (14)                39                   -                 25
Interest expense                                              (10,197)                 -                   -            (10,197)
                                                     -----------------   ----------------   -----------------  -----------------
     Loss from continuing operations before
       income tax                                              (6,698)            (8,616)              8,616             (6,698)
     Income tax                                                     -                  -                   -                  -
                                                     -----------------   ----------------   -----------------  -----------------
       Loss from continuing operations                         (6,698)            (8,616)              8,616             (6,698)
       Loss from discontinued operations                      (14,324)                 -                   -            (14,324)
                                                     -----------------   ----------------   -----------------  -----------------
       Net loss                                             $ (21,022)          $ (8,616)            $ 8,616          $ (21,022)
                                                     =================   ================   =================  =================




                                       12




            Unaudited Condensed Consolidating Statement of Operations
                     For the Six Months Ended March 31, 2004




                                                                             AirGate
                                                       AirGate PCS,         Guarantor
                                                           Inc.           Subsidiaries        Eliminations       Consolidated
                                                     -----------------   ----------------   -----------------  -----------------

                                                                                                 
Revenue                                                     $ 159,539                $ -                 $ -          $ 159,539

Cost of revenue                                                87,300              8,399                   -             95,699
Selling and marketing                                          24,984              1,079                   -             26,063
General and administrative                                     12,527                277                   -             12,804
Depreciation and amortization of property
   and equipment                                               18,906              4,753                   -             23,659
Gain on disposal of property and equipment                         (5)                 -                   -                 (5)
                                                     -----------------   ----------------   -----------------  -----------------
     Total operating expense                                  143,712             14,508                   -            158,220
                                                     -----------------   ----------------   -----------------  -----------------
     Operating income (loss)                                   15,827            (14,508)                  -              1,319
Loss in subsidiaries                                          (14,437)                 -              14,437                  -
Interest income                                                   322                  -                   -                322
Interest expense                                              (22,698)                71                   -            (22,627)
                                                     -----------------   ----------------   -----------------  -----------------
     Loss from continuing operations before
        income tax                                            (20,986)           (14,437)             14,437            (20,986)
     Income tax                                                     -                  -                   -                  -
                                                     -----------------   ----------------   -----------------  -----------------
       Loss from continuing operations                        (20,986)           (14,437)             14,437            (20,986)
       Income from discontinued operations                    184,115                  -                   -            184,115
                                                     -----------------   ----------------   -----------------  -----------------
       Net income (loss)                                    $ 163,129          $ (14,437)           $ 14,437          $ 163,129
                                                     =================   ================   =================  =================



            Unaudited Condensed Consolidating Statement of Operations
                     For the Six Months Ended March 31, 2003


                                                                             AirGate
                                                       AirGate PCS,         Guarantor
                                                           Inc.           Subsidiaries        Eliminations       Consolidated
                                                     -----------------   ----------------   -----------------  -----------------

                                                                                                 
Revenue                                                     $ 158,614                $ -                 $ -          $ 158,614

Cost of revenue                                                93,535              8,937                   -            102,472
Selling and marketing                                          26,256              1,947                   -             28,203
General and administrative                                      8,797              1,239                   -             10,036
Depreciation and amortization of property
   and equipment                                               18,448              4,796                   -             23,244
Loss on disposal of property and equipment                        418                  -                   -                418
                                                     -----------------   ----------------   -----------------  -----------------
     Total operating expense                                  147,454             16,919                   -            164,373
                                                     -----------------   ----------------   -----------------  -----------------
     Operating income (loss)                                   11,160            (16,919)                  -             (5,759)
Loss in subsidiaries                                          (16,766)                 -              16,766                  -
Interest income                                                  (128)               153                   -                 25
Interest expense                                              (20,391)                 -                   -            (20,391)
                                                     -----------------   ----------------   -----------------  -----------------
     Loss from continuing operations
       before income tax                                      (26,125)           (16,766)             16,766            (26,125)
     Income tax                                                     -                  -                   -                  -
                                                     -----------------   ----------------   -----------------  -----------------
       Loss from continuing operations                        (26,125)           (16,766)             16,766            (26,125)
       Loss from discontinued operations                      (42,571)                 -                   -            (42,571)
                                                     -----------------   ----------------   -----------------  -----------------
       Net loss                                             $ (68,696)         $ (16,766)           $ 16,766          $ (68,696)
                                                     =================   ================   =================  =================



                                       13



            Unaudited Condensed Consolidating Statement of Cash Flows
                     For the Six Months Ended March 31, 2004



                                                                          AirGate
                                                  AirGate PCS,           Guarantor
                                                      Inc.              Subsidiaries         Eliminations          Consolidated
                                               --------------------  -------------------  --------------------  -------------------

                                                                                                   
Operating activities, net                                 $ 21,151                $ 123                   $ -             $ 21,274
Investing activities, net                                   (7,226)                (135)                    -               (7,361)
Financing activities, net                                  (19,398)                   -                     -              (19,398)
                                               --------------------  -------------------  --------------------  -------------------
    Change in cash and cash equivalents                     (5,473)                 (12)                    -               (5,485)
Cash and cash equivalents at
  beginning of period                                       54,078                    -                     -               54,078
                                               --------------------  -------------------  --------------------  -------------------
Cash and cash equivalents at end of period                $ 48,605                $ (12)                  $ -             $ 48,593
                                               ====================  ===================  ====================  ===================





            Unaudited Condensed Consolidating Statement of Cash Flows
                     For the Six Months Ended March 31, 2003


                                                                          AirGate
                                                  AirGate PCS,           Guarantor
                                                      Inc.              Subsidiaries         Eliminations          Consolidated
                                               --------------------  -------------------  --------------------  -------------------

                                                                                                   
Operating activities, net                                 $ 15,101                $ 526                   $ -             $ 15,627
Investing activities, net                                   (6,000)                (654)                    -               (6,654)
Financing activities, net                                    7,045                    -                     -                7,045
                                               --------------------  -------------------  --------------------  -------------------
    Change in cash and cash equivalents                     16,146                 (128)                    -               16,018
Cash and cash equivalents at
   beginning of period                                       4,769                  118                     -                4,887
                                               --------------------  -------------------  --------------------  -------------------
Cash and cash equivalents at end of period                $ 20,915                $ (10)                  $ -             $ 20,905
                                               ====================  ===================  ====================  ===================




(8)  Basic and Diluted Earnings (Loss) Per Share

Basic earnings (loss) per share is computed by dividing net income (loss) by the
weighted-average  number of common shares outstanding during the period.  Common
stock  equivalent  securities  of  24,106,  11,465,  24,133,  and  9,191 for the
quarters  and six months ended March 31, 2004 and 2003  respectively,  have been
excluded  from the  computation  of dilutive  earnings  (loss) per share for the
periods  because  the Company has a loss from  continuing  operations  and their
effect would have been  antidilutive.  All share and per share amounts have been
restated to give retroactive effect to the 1-for-5 reverse stock split.

(9)  Stock-based Compensation Plans

We have elected to continue to account for our  stock-based  compensation  plans
under APB  Opinion  No. 25,  "Accounting  for Stock  Issued to  Employees",  and
disclose  pro forma  effects  of the plans on a net income  (loss) and  earnings
(loss) per share basis as provided by SFAS No. 123,  "Accounting for Stock-Based
Compensation."  Consistent with the provisions of SFAS No. 123, had compensation
expense  for these  plans been  determined  based on the fair value at the grant
date during the three months and six months  ended March 31, 2004 and 2003,  the
pro forma net income  (loss) and  earnings  (loss) per share  would have been as
follows:



                                       14





                                                              Three Months Ended                  Six Months Ended
                                                                    March 31,                          March 31,
                                                      -----------------------------------   -----------------------------------
                                                           2004               2003               2004               2003
                                                      ----------------  -----------------   ----------------  -----------------
                                                                   (Dollars in thousands, except per share data)
                                                                                                 
Net income (loss), as reported                               $ (9,876)         $ (21,022)         $ 163,129          $ (68,696)
Add: stock based compensation expense included in
    determination of net income (loss)                            197                177                302                353
Less: stock based compensation expense determined
    under the fair value based method                          (1,398)            (2,426)            (2,797)            (4,852)
                                                      ----------------  -----------------   ----------------  -----------------
Pro forma, net income (loss)                                $ (11,077)         $ (23,271)         $ 160,634          $ (73,195)
                                                      ================  =================   ================  =================

Basic and diluted earnings (loss) per share:
    As reported                                               $ (1.21)           $ (4.05)           $ 24.48           $ (13.27)
    Pro forma                                                 $ (1.36)           $ (4.49)           $ 24.10           $ (14.14)



(10)  Recapitalization Plan

The  Recapitalization  Plan included the following  public and private  exchange
offers and consent solicitations:

o    The  Company  offered  to  exchange  all of the  outstanding  13.5%  senior
     subordinated discount notes due 2009 (the "Old Notes") for (i) newly issued
     shares of common stock representing 56% of the shares of common stock to be
     issued and outstanding immediately after the Recapitalization Plan and (ii)
     $160.0  million  aggregate  principal  amount of newly issued 9 3/8% senior
     subordinated notes due 2009 (the "New Notes");

o    The  consent  solicitations  requested  the  consents of holders of the Old
     Notes to  remove  substantially  all of the  restrictive  covenants  in the
     indenture  governing  the Old Notes,  release  collateral  that secured the
     Company's  obligations  thereunder  and  waive  any  defaults  or events of
     default that occur in connection with the restructuring;

o    The Company also solicited  acceptances  from holders of the Old Notes of a
     prepackaged  plan of  reorganization  under Chapter 11 of the United States
     Bankruptcy Code (the "Prepackaged  Plan").  The Prepackaged Plan would have
     effected the same transactions as the Recapitalization Plan, only under the
     governance of a bankruptcy court.

In  addition,  the  Company  held a Special  Meeting of  Shareholders  ("Special
Meeting") on February 12, 2004 at which its shareholders:

o    Approved  the issuance in the  restructuring  of an  additional  56% of the
     Company's common stock immediately after the restructuring;

o    Approved the amendment and  restatement  of the  Company's  certificate  of
     incorporation to implement a 1-for-5 reverse stock split; and

o    Approved the amendment and  restatement  of the 2002 AirGate PCS, Inc. Long
     Term Incentive Plan to increase the number of shares available and reserved
     for issuance  thereunder,  and to make certain other changes,  and approved
     the grant of certain  performance-vested  restricted  stock units and stock
     options to certain executives of the Company.

On the  same  date,  the  exchange  offers  expired,  and the  Company  accepted
$298,205,000  of Old Notes (or  99.4% of the Old  Notes  outstanding)  that were
validly  tendered and not  withdrawn in the exchange  offers.  Under the offers,
each holder of the  Company's Old Notes  received,  for each $1,000 of aggregate
principal amount due at maturity tendered,  22.0277 shares of the Company's post
reverse stock split common stock,  $533.33 in principal  amount of the Company's
New Notes and cash resulting from the  elimination of any fractional  shares and
fractional notes.

On February 13, 2004, the Company  effected the 1-for-5  reverse stock split and
shareholders  received one share of common stock,  and cash  resulting  from the
elimination of any fractional shares, in exchange for each five shares of common
stock then  outstanding.  Unless  otherwise  indicated,  all share and per share
amounts have been restated to give  retroactive  effect to this 1-for-5  reverse
stock split.

On February 17, 2004, our stock began trading on a post split basis.  We settled
the exchange offers on February 20, 2004.

Debt Restructuring

The following summarizes the accounting related to certain key provisions of the
Recapitalization  Plan as it relates  to the  condensed  consolidated  financial
statements as of and for the six months ended March 31, 2004.

The  Old  Notes  with  a net  carrying  value  of  $264.8  million  and  related
unamortized  financing  costs of $3.8  million  as of  February  13,  2004  were
exchanged for New Notes with a principal balance of $159.0 million and 6,568,706

                                       15



shares of common stock as adjusted for the 1-for-5  reverse stock split,  valued
at $126.8  million as of February  13, 2004,  based upon a closing  common stock
market price of $19.30 on that date.

The financial  restructuring was accounted for as a troubled debt  restructuring
in  accordance  with  Statement  of  Financial   Accounting   Standards  No.  15
"Accounting by Debtors and Creditors for Troubled Debt  Restructurings" and EITF
02-4,  "Determining Whether a Debtors Modification or Exchange of Debt is within
the scope of FASB statement No. 15." Based on the terms of the  Recapitalization
Plan,  no gain  on the  transaction  was  recognized  since  total  future  cash
payments,  including interest, exceeded the remaining carrying amount of the Old
Notes after  reducing the Old Notes by the fair value of the common  stock.  The
difference of approximately $24.7 million between the principal value of the New
Notes and the  carrying  value of the Old Notes will be  amortized  as  interest
expense over the term of the New Notes under the interest method.  The New Notes
have a stated  rate of 9.375% with  interest  due July and January of each year,
beginning  July 1, 2004.  As of March 31, 2004,  the  carrying  value of the New
Notes was  approximately  $135.1  million,  with an effective  interest  rate of
approximately 13.3%.

Transaction costs of $3.0 million and $3.1 million were incurred during the year
ended  September  30,  2003 and  during  the six months  ended  March 31,  2004,
respectively,  to  raise  capital  related  to the debt  and  were  expensed  as
incurred.  Transaction costs of $4.8 million, incurred to raise capital, related
to the equity were recorded as an offset to additional paid in capital.

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

Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations ("MD&A") contains "forward-looking statements." These forward-looking
statements  are  based  on  current  expectations,   estimates,   forecasts  and
projections  about us, our  future  performance,  our  liquidity,  the  wireless
industry, our beliefs and management's  assumptions.  In addition, other written
and oral statements that constitute forward-looking statements may be made by us
or on our behalf. Such  forward-looking  statements include statements regarding
expected  financial results and other planned events,  including but not limited
to, anticipated  liquidity,  churn rates, ARPU and CPGA (all as defined below in
"Non-GAAP Financial Measures and Key Operating Metrics"),  roaming rates, EBITDA
(as defined below in "Non-GAAP  Financial Measures and Key Operating  Metrics"),
and  capital  expenditures.  Words such as  "anticipate,"  "assume,"  "believe,"
"estimate,"  "expect,"  "intend," "plan," "seek,"  "project,"  "target," "goal,"
variations of such words and similar  expressions  are intended to identify such
forward-looking  statements.  These  statements  are not  guarantees  of  future
performance and involve certain risks,  uncertainties  and assumptions  that are
difficult  to predict.  Therefore,  actual  future  events or results may differ
materially from these statements. These risks and uncertainties include:

     o    our dependence on the success of Sprint's wireless business;

     o    the  competitiveness  and  impact of  Sprint's  pricing  plans and PCS
          products and services and  introduction  of pricing plans and programs
          that may adversely affect our business;

     o    intense competition in the wireless market and the unsettled nature of
          the wireless market;

     o    the  potential  to  experience  a  continued  high rate of  subscriber
          turnover;

     o    the ability of Sprint  (directly or through third  parties) to provide
          back  office  billing,  subscriber  care and  other  services  and the
          quality and costs of such services or,  alternatively,  our ability to
          outsource all or a portion of these  services at acceptable  costs and
          the quality of such services;

     o    subscriber credit quality;

     o    the  ability to  successfully  leverage 3G products  and  services;

     o    inaccuracies in financial information provided by Sprint;

     o    new  charges  and fees,  or  increased  charges  and fees,  imposed by
          Sprint;

     o    the impact and outcome of disputes with Sprint;

     o    our ability to predict future  customer  growth,  as well as other key
          operating metrics;

     o    the impact of spending cuts on network quality, customer retention and
          customer growth;

     o    rates of penetration in the wireless industry;

     o    our significant level of indebtedness and debt covenant requirements;

     o    the  impact and  outcome of legal  proceedings  between  other  Sprint
          network partners and Sprint;

     o    the potential need for additional sources of capital and liquidity;

     o    risks related to our ability to compete with larger,  more established
          businesses;

     o    anticipated future losses;

     o    rapid technological and market change;

     o    an adequate supply of subscriber equipment;

     o    declines in growth of wireless subscribers;

                                       16


     o    the effect of wireless local number portability; and

     o    the volatility of the market price of our common stock.

These  forward-looking  statements  involve a number of risks and  uncertainties
that could cause actual results to differ materially from those suggested by the
forward-looking  statements.  Forward-looking  statements should,  therefore, be
considered in light of various important  factors,  including those set forth in
the  Company's  Annual  Report for the fiscal year ended  September 30, 2003 and
elsewhere in this report.  Moreover,  we caution you not to place undue reliance
on these forward-looking  statements,  which speak only as of the date they were
made.  Except  as  required  under  Federal  Securities  laws  and the  rule and
regulations of the SEC, we do not undertake any  obligation to publicly  release
any  revisions  to  these  forward-looking   statements  to  reflect  events  or
circumstances  after the date of this  report or to reflect  the  occurrence  of
unanticipated events. All subsequent  forward-looking statements attributable to
us or any person acting on our behalf are expressly  qualified in their entirety
by the cautionary statements contained in or referred to in this report.

For a further listing and description of such risks and  uncertainties,  see the
Company's  Annual Report for the fiscal year ended  September 30, 2003 and other
reports filed by us with the SEC.

You should read this discussion in conjunction with our  consolidated  financial
statements and  accompanying  notes  contained in our Annual Report for the year
ended September 30, 2003.

Overview

AirGate PCS,  Inc. and its  subsidiaries  and  predecessors  were formed for the
purpose  of  becoming  a  leading   regional   provider  of  wireless   Personal
Communication  Services, or "PCS." We are a network partner of Sprint PCS, which
is a group of  wholly-owned  subsidiaries  of Sprint  Corporation (a diversified
telecommunications  service  provider),  that  operate and manage  Sprint's  PCS
products and services.

Sprint  operates a 100%  digital PCS wireless  network in the United  States and
holds the licenses to provide PCS nationwide using a single frequency band and a
single technology. Sprint, directly and indirectly through network partners such
as us,  provides  wireless  services in more than 4,000  cities and  communities
across  the  country.   Sprint  directly  operates  its  PCS  network  in  major
metropolitan markets throughout the United States.  Sprint has also entered into
independent  agreements with various network  partners,  such as us, under which
the network partners have agreed to construct and manage PCS networks in smaller
metropolitan areas and along major highways.

As of March 31,  2004,  the Company had 367,807  subscribers  and total  network
coverage of approximately 6.1 million residents,  representing approximately 82%
of the residents in its territory.

iPCS, Inc.

On November 30, 2001, we acquired iPCS in a merger. In light of consolidation in
the  wireless  communications  industry in general and among  Sprint PCS network
partners in  particular,  we believed  that the merger  represented  a strategic
opportunity to significantly expand the size and scope of our operations, attain
access to attractive markets,  and provide greater operational  efficiencies and
growth  potential  than we  would  have  had on our  own.  The  transaction  was
accounted for under the purchase method of accounting.

Although  iPCS's  growth  rates  initially  met or  exceeded  expectations,  the
slowdown  in growth  in the  wireless  industry,  increased  competition,  iPCS'
dependence  on Sprint and the  reimposition  and  increase  of the  deposit  for
sub-prime  credit  customers,  all  contributed  to slower growth  subsequent to
acquisition.  In  addition,  iPCS'  slow  growth was  compounded  because it was
earlier in its life cycle when growth  slowed,  it had  approximately  one-third
fewer subscribers than the Company,  and it had a less complete network than the
Company.

On February 23, 2003, iPCS filed a Chapter 11 bankruptcy  petition in the United
States  Bankruptcy Court for the Northern District of Georgia for the purpose of
effecting a court administered reorganization.  Subsequent to February 23, 2003,
the Company no longer  consolidated  the accounts and results of  operations  of
iPCS,  and the accounts of iPCS were  recorded as an  investment  using the cost
method of accounting.

In   connection   with  the   issuance   of  common   stock  in  the   Company's
Recapitalization  Plan (as  described in Note 10 to our  Condensed  Consolidated
Financial  Statements),  the Company had an ownership  change for tax  purposes.
Such ownership  change would also have caused an ownership change of iPCS, which
could have had a detrimental  effect on the use of certain net operating  losses
of iPCS. In order to avoid the ownership change of iPCS that would have resulted
from  the  Company's   ownership  change,  on  October  17,  2003,  the  Company
irrevocably  transferred  all of its shares of iPCS common  stock to a trust for
the benefit of the Company's  shareholders of record as of the date of transfer.
On October 17, 2003, the iPCS investment ($184.1 million credit balance carrying
amount) was  eliminated  and recorded as a  non-monetary  gain on disposition of
discontinuing  operations.  The results for iPCS for all periods  presented  are
shown as  discontinued  operations.  The results  for AirGate  only are shown as
continuing operations.

The following description of the Company's business is limited to AirGate alone,
and does not reflect the business of iPCS.

                                       17


Critical Accounting Policies

The Company relies on the use of estimates and makes assumptions that impact its
financial  condition and results.  These  estimates and assumptions are based on
historical results and trends as well as the Company's forecasts as to how these
might  change in the  future.  While we believe  that the  estimates  we use are
reasonable, actual results could differ from those estimates. The Company's most
critical accounting policies that may materially impact the Company's results of
operations include:

Revenue Recognition

The Company  recognizes  revenue  when  persuasive  evidence  of an  arrangement
exists,  services have been rendered or products have been delivered,  the price
to the  buyer  is fixed  and  determinable,  and  collectibility  is  reasonably
assured.  Effective July 1, 2003 the Company adopted EITF No. 00-21, "Accounting
for Revenue Arrangements with Multiple Element  Deliverables." The EITF guidance
addresses   how  to  account  for   arrangements   that  may  involve   multiple
revenue-generating  activities,  i.e.,  the delivery or  performance of multiple
products,  services,  and/or rights to use assets.  In applying  this  guidance,
separate  contracts with the same party,  entered into at or near the same time,
will be  presumed to be a bundled  transaction,  and the  consideration  will be
measured  and  allocated  to the  separate  units based on their  relative  fair
values.  The consensus  guidance is  applicable  to agreements  entered into for
quarters  beginning after June 15, 2003. The adoption of EITF 00-21 has resulted
in substantially all of the activation fee revenue generated from  Company-owned
retail  stores and  associated  costs being  recognized  at the time the related
wireless  handset is sold.  Upon  adoption  of EITF 00-21,  previously  deferred
revenues and costs will continue to be amortized  over the  remaining  estimated
life of a subscriber, not to exceed 30 months. Revenue and costs for activations
at other retail  locations will continue to be deferred and amortized over their
estimated lives.

The Company  recognizes  service  revenue from its  subscribers  as they use the
service.  The  Company  provides a  reduction  of  recorded  revenue for billing
adjustments and credits, and estimated uncollectible late payment fees and early
cancellation  fees.  The Company also reduces  recorded  revenue for rebates and
discounts given to subscribers on wireless handset sales in accordance with EITF
No.  01-9  "Accounting  for  Consideration  Given  by a  Vendor  to  a  Customer
(Including  a Reseller of the  Vendor's  Products)."  For  industry  competitive
reasons, the Company sells wireless handsets at a loss. The Company participates
in the Sprint  national and  regional  distribution  programs in which  national
retailers  such as  Radio  Shack  and  Best Buy sell  Sprint  PCS  products  and
services.  In order to facilitate  the sale of Sprint PCS products and services,
national retailers purchase wireless handsets from Sprint for resale and receive
compensation from Sprint for Sprint PCS products and services sold. For industry
competitive  reasons,  Sprint  subsidizes the price of these handsets by selling
the handsets at a price below cost. Under the Company's Sprint Agreements,  when
a national retailer sells a handset purchased from Sprint to a subscriber in the
Company's  territory,  the  Company is  obligated  to  reimburse  Sprint for the
handset  subsidy.  The Company  does not  receive  any revenue  from the sale of
handsets and  accessories  by such national  retailers.  The Company  classifies
these  handset  subsidy  charges as a selling  and  marketing  expense for a new
subscriber  handset sale and classifies these subsidies as a cost of service and
roaming for a handset upgrade to an existing subscriber.

The Company records  equipment  revenue from the sale of handsets to subscribers
in its retail stores upon delivery in  accordance  with EITF 00-21.  The Company
does not record  equipment  revenue on handsets and  accessories  purchased from
national third-party retailers such as Radio Shack and Best Buy or directly from
Sprint by subscribers in its territory.

Sprint is entitled to retain 8% of collected  service  revenue from  subscribers
based in the Company's markets and from non-Sprint subscribers who roam onto the
Company's network. The amount of affiliation fees retained by Sprint is recorded
as cost of service and  roaming.  Revenue  derived from the sale of handsets and
accessories by the Company and from certain roaming  services are not subject to
the 8% affiliation fee from Sprint.

Allowance for Doubtful Accounts

Estimates are used in  determining  the allowance for doubtful  accounts and are
based on historical collection and write-off experience,  current trends, credit
policies, accounts receivable by aging category and current trends in the credit
quality of its subscriber  base. In  determining  these  estimates,  the Company
compares historical  write-offs in relation to the estimated period in which the
subscriber was originally  billed.  The Company also looks at the historical and
projected  average length of time that elapses between the original billing date
and the date of  write-off in  determining  the  adequacy of the  allowance  for
doubtful accounts by aging category. From this information, the Company provides
specific amounts to the aging categories.  The Company provides an allowance for
substantially all receivables over 90 days old.

Using historical  information,  the Company provides a reduction in revenues for
certain  billing   adjustments   and  credits,   late  payment  fees  and  early
cancellation  fees that it anticipates  will not be collected.  The reserves for
billing  adjustments and credits,  late payment fees and early cancellation fees
are included in the allowance for doubtful  accounts  balance.  If the allowance
for doubtful  accounts is not adequate,  it could have a material adverse affect
on the Company's liquidity, financial position and results of operations.

                                       18


First Payment Default Subscribers

Prior to March 2003,  the Company  estimated the  percentage of new  subscribers
that would never pay a bill and reserved for the related  percentage  of monthly
revenue  through a reduction in revenues.  In 2002,  the Company  reinstated the
deposit  requirement  for sub-prime  credit  customers,  and then  increased the
deposit  amounts in  February  2003.  These  changes to our credit  policy  were
sufficient to mitigate the collection  risk and resulted in  improvements in the
credit quality of our subscriber  base.  Accordingly,  in March 2003 the Company
ceased  recording  this  reserve,  which  resulted in the  addition of 4,187 net
subscriber additions.

The Company continually evaluates its credit policy and evaluates the impact the
subscriber base will have on the business and raises or lowers credit  standards
periodically,  as allowed by Sprint.  On April 6, 2004,  the Company  reduced or
eliminated  the deposit  requirement  for a segment of potential  subscribers in
selected  market  areas.  The  Company  will  continue  to review  our  customer
performance  and modify  our  credit  policy to meet  short-term  and  long-term
business  objectives  and  monitor  the  impact of  sub-prime  customers  on our
allowance for doubtful accounts.

Valuation and Recoverability of Long-Lived Assets

Long-lived assets such as property and equipment represent  approximately 61% of
the  Company's  total assets as of March 31, 2004.  Property and  equipment  are
stated  at  original  cost,  less  accumulated  depreciation  and  amortization.
Depreciation  is recorded  using the  straight-line  method  over the  estimated
useful lives of 15 years for the 1 tower which we own, 3 to 5 years for computer
equipment, 5 years for furniture, fixtures and office equipment and 5 to 7 years
for network assets (other than towers).  The Company reviews  long-lived  assets
for impairment in accordance  with the  provisions of SFAS No. 144,  "Accounting
for the Impairment or Disposal of Long-Lived Assets."

We review our  long-lived  assets for impairment  whenever  events or changes in
circumstances  indicate that the carrying amount may not be recoverable.  If the
total of the expected  undiscounted  future cash flows is less than the carrying
amount of the asset, a loss, if any, is recognized  for the  difference  between
the fair value and the carrying value of the asset. Impairment analysis is based
on our current business and technology  strategy,  our views of growth rates for
the business, anticipated future economic and regulatory conditions and expected
technological  availability.  Assets to be disposed of are reported at the lower
of the carrying amount or fair value less costs to sell the asset.

Significant New Accounting Pronouncements

See Note 2 to the condensed  consolidated financial statements for a description
of significant new accounting pronouncements and their impact on the Company.

Results of Operations

Revenues

We derive our revenue from the following sources:

Service. We sell wireless personal communications services. The various types of
service revenue associated with wireless communications services include monthly
recurring  access and  feature  charges and  monthly  non-recurring  charges for
local,  wireless  long  distance  and  roaming  airtime  usage in  excess of the
subscribed usage plan.

Roaming.  The Company  receives roaming revenue at a per-minute rate from Sprint
and other Sprint PCS network partners when Sprint's or its network partner's PCS
subscribers from outside of the Company's  territory use the Company's  network.
The Company  pays the same  reciprocal  roaming rate when  subscribers  from its
territories  use the  network of Sprint or its other PCS network  partners.  The
Company also  receives  non-Sprint  roaming  revenue when  subscribers  of other
wireless service  providers who have roaming  agreements with Sprint roam on the
Company's network.

Equipment.  We sell wireless  personal  communications  handsets and accessories
that are used by our  subscribers  in  connection  with our  wireless  services.
Equipment  revenue is derived  from the sale of handsets  and  accessories  from
Company  owned  stores,  net of sales  incentives,  rebates and an allowance for
returns.  The Company's handset return policy allows subscribers to return their
handsets  for a full refund  within 14 days of  activation.  When  handsets  are
returned to the  Company,  the  Company  may be able to reissue the  handsets to
subscribers at little  additional cost. When handsets are returned to Sprint for
refurbishing, the Company receives a credit from Sprint.

                                       19




                                            For the Quarters Ended March 31,
                         -----------------------------------------------------------------------
                                                                    Increase         Increase
                               2004               2003            (Decrease)$      (Decrease)%
                         -----------------   ----------------   --------------  ----------------
                                        (Dollars in thousands)

                                                                         
Service revenue                  $ 61,656           $ 60,163       $ 1,493                2.5%
Roaming revenue                    13,498             13,895          (397)              (2.9%)
Equipment revenue                   2,882              2,691           191                7.1%
                         -----------------   ----------------   --------------
    Total                        $ 78,036           $ 76,749       $ 1,287                1.7%
                         =================   ================   ==============



For the quarter  ended March 31,  2004  compared to the quarter  ended March 31,
2003:

Service Revenue

The  increase in service  revenue for the quarter  ended March 31, 2004 over the
same  quarter  of  the  previous  year  reflects  a  higher  average  number  of
subscribers  using  our  network,  relatively  consistent  average  revenue  per
subscriber,  higher monthly  recurring revenue and feature charges and increased
data revenue, partially offset by higher credits and lower revenue from "minutes
over plan," or airtime usage in excess of the  subscribed  usage plans.  In late
calendar year 2002,  Sprint  implemented a new PCS to PCS product offering under
which  subscribers  receive  unlimited  quantities  of minutes  for little or no
additional  cost for any calls made from one Sprint  PCS  subscriber  to another
("PCS to PCS").  Pursuant to our Sprint  Agreements,  we are required to support
this  program  in our  territory.  The  number of  minutes-over-plan  charged to
subscribers for plan overages used and associated  revenues  decreased while the
number of minutes used for PCS to PCS calls has increased significantly.

Roaming Revenue

The  decrease in roaming  revenue for the quarter  ended March 31, 2004 over the
same  quarter  of the  previous  year is  attributable  primarily  to the  lower
reciprocal  roaming  rate  charged  among  Sprint and its PCS network  partners,
partially offset by increased volume in inbound roaming traffic.  The reciprocal
roaming rate between  Sprint and the Company  declined from $0.058 per minute of
use to  $0.041  in  calendar  years  2003 and 2004,  respectively.  The  Company
believes that these  reductions are in violation of our agreements  with Sprint.
The Company's roaming revenue from Sprint and its PCS network partners was $12.9
million  and  $13.0  million  or 96% and 94% of total  roaming  revenue  for the
quarters ended March 31, 2004 and 2003, respectively.

Equipment Revenue

Equipment  revenue for the quarter ended March 31, 2004  increased over the same
quarter of the previous year,  primarily due to increased  handset sales of $5.0
million or 168% prior to rebates and promotion  costs,  offset by a $4.8 million
increase in handset  rebates and  promotions.  The increase in handset  sales is
comprised  of a $2.5  million  increase in sales of new or upgraded  handsets to
existing subscribers,  a $2.3 million increase in sales to new subscribers and a
$0.2 million increase in accessory sales.

Cost of Service and Roaming

Cost of  service  and  roaming  principally  consists  of costs to  support  the
Company's subscriber base including:

     o    Cost of roaming;

     o    Network operating costs (including salaries, cell site lease payments,
          fees related to the  connection of the Company's  switches to the cell
          sites that they support, inter-connect fees and other expenses related
          to network operations);

     o    Bad  debt  expense   related  to  estimated   uncollectible   accounts
          receivable;

     o    Wireless  handset  subsidies on existing  subscriber  upgrades through
          national third-party retailers; and

     o    Other cost of service, which includes:

          o    Back office  services  provided by Sprint such as customer  care,
               billing and activation;

          o    The 8% of  collected  service  revenue  representing  the  Sprint
               affiliation fee; and

                                       20


          o    Long distance expense relating to inbound roaming revenue and the
               Company's  own  subscriber's  long  distance  usage  and  roaming
               expense when subscribers from the Company's territory place calls
               on Sprint's or its network partners' networks.



                                                                              For the Quarters Ended March 31,
                                                           -----------------------------------------------------------------------
                                                                                                      Increase         Increase
                                                                 2004               2003            (Decrease)$      (Decrease)%
                                                           -----------------   ----------------   --------------  ----------------
                                                                          (Dollars in thousands)

                                                                                                        
Cost of roaming                                                    $ 11,022           $ 11,468         $   (446)            (3.9%)
Network operating costs                                              15,416             13,971            1,445             10.3%
Bad debt expense                                                     (1,122)               (32)          (1,090)          3406.3%
Wireless handset subsidies                                              298              1,770           (1,472)           (83.2%)
Other cost of service                                                13,808             13,570              238              1.8%
                                                           -----------------   ----------------   --------------
    Total cost of service and roaming                              $ 39,422           $ 40,747         $ (1,325)            (3.3%)
                                                           =================   ================   ==============


Cost of Roaming

Cost of roaming  decreased  for the quarter ended March 31, 2004 compared to the
same quarter of the previous year as a result of the decrease in the  reciprocal
roaming rate charged among Sprint and its network partners,  partially offset by
increased  volume.  The  reciprocal  roaming rate between Sprint and the Company
declined  from  $0.058  per minute of use to $0.041 in  calendar  years 2003 and
2004, respectively.  The Company believes that these reductions are in violation
of our agreements  with Sprint.  The Company's cost of roaming  attributable  to
Sprint and its network partners was 95% of the total cost of roaming for each of
the quarters ended March 31, 2004 and 2003.

Network Operating Costs

Network  operating costs increased for the quarter ended March 31, 2004 compared
to the same quarter of the previous year as a result of increased  network costs
related to increased network usage of approximately  36%,  including higher long
distance costs and increased interconnect charges.

Bad Debt Expense

Bad debt expense  decreased for the quarter ended March 31, 2004 compared to the
same quarter of the previous year.  During the quarter ended March 31, 2004, the
Company  recorded  a  $1.2  million  special  settlement  received  from  Sprint
resulting  from a change in the bad debt  profile  for certain  subscribers.  In
addition,  we believe the improvements in the credit quality and payment profile
of our  subscriber  base  since we  re-imposed  deposits  for  sub-prime  credit
subscribers in early 2002 and the subsequent increases in February 2003 resulted
in  significant   improvements  in  accounts  receivable  write-off  experience,
increased  collections,  and the associated decrease in bad debt expense for the
quarter.

Wireless Handset Subsidies

Despite  an  increase  in the  number  of  subscribers  making  handset  upgrade
purchases,  wireless  handset  subsidies on existing  subscriber  upgrades  sold
through national third-party retailers decreased for the quarter ended March 31,
2004  compared to the same quarter of the  previous  year as a result of reduced
subsidies per handset paid to national third-party retailers.  Subsidies paid to
national  third-party  retailers  decreased  as a result  of  increased  handset
rebates and promotions  offered  directly to our customers  through the national
third party  channels.  Handset rebates and promotions sold through the national
third party channels  offered  directly to our customers are included in selling
and marketing expense.

Other Cost of Service

Other cost of service increased for the quarter ended March 31, 2004 compared to
the same quarter of the  previous  year as a result of higher  customer  loyalty
retention costs,  offset by a rate reduction in the fees paid to Sprint for back
office services provided.

                                       21


Cost of Equipment, Other Operating Expenses and Interest




                                                                              For the Quarters Ended March 31,
                                                           -----------------------------------------------------------------------
                                                                                                      Increase         Increase
                                                                 2004               2003            (Decrease)$      (Decrease)%
                                                           -----------------   ----------------   --------------  ----------------
                                                                          (Dollars in thousands)

                                                                                                            
Cost of equipment                                                   $ 7,202            $ 3,455            3,747            108.5%
Selling and marketing expense                                        11,916             11,384              532              4.7%
General and administrative expense                                    6,337              5,844              493              8.4%
Depreciation and amortization of property and equipment              11,892             11,625              267              2.3%
Loss (gain) on disposal of property
    and equipment                                                        (3)               220              223            101.4%
Interest income                                                         165                 25              140            560.0%
Interest expense                                                    (11,311)           (10,197)           1,114             10.9%


Cost of Equipment

We purchase  handsets and  accessories to resell to our  subscribers  for use in
connection  with our services.  To remain  competitive  in the  marketplace,  we
subsidize  the price of the  handset  sales;  therefore  the cost of handsets is
higher than the retail price to the subscriber.  Cost of equipment increased for
the quarter  ended March 31, 2004  compared to the same  quarter of the previous
year  primarily as a result of increased  retail  upgrade  sales for handsets to
existing subscribers, partially offset by decreased subscriber gross additions.

Selling and Marketing Expense

Selling and marketing  expense  includes retail store costs such as salaries and
rent, promotion, advertising and commission costs, and handset subsidies for new
activations  on units sold by national  third-party  retailers  and Sprint sales
channels  for which the Company  does not record  revenue.  Under the  Company's
agreements with Sprint,  when a national  retailer or other Sprint  distribution
channel sells a handset purchased from Sprint to a subscriber from the Company's
territory,  the Company is obligated to reimburse Sprint for the handset subsidy
and related selling costs that Sprint originally incurred. Selling and marketing
expenses  increased  for the quarter  ended March 31, 2004  compared to the same
quarter of the previous  year  reflecting  increased  advertising  and promotion
expense,  offset by staff  reductions  and store  closings  implemented in early
fiscal 2003.

General and Administrative Expense

General and  administrative  expense  increased  for the quarter ended March 31,
2004  compared to the same quarter of the previous  year,  as a result of higher
salaries and other employee  costs of $0.9 million,  offset by a net decrease in
outside  consulting  services of $0.4  million.  The higher  salaries  and other
employee  costs  are the  result of fully  absorbing  corporate  overhead  costs
previously shared with iPCS.

Depreciation and Amortization of Property and Equipment

The Company  capitalizes network development costs incurred to ready its network
for use and costs for  leasehold  improvements  to our retail  stores and office
space.  Depreciation  of these costs begins when the  equipment is ready for its
intended  use and is  amortized  over the  estimated  useful  life of the asset.
Depreciation  expense  increased  slightly for the quarter  ended March 31, 2004
compared  to the same  quarter of the  previous  year  primarily  as a result of
additional  network  assets  placed in service in the later part of fiscal  year
2003.  The Company  purchased  $5.8  million of property  and  equipment  in the
quarter ended March 31, 2004,  compared to property and  equipment  purchases of
$1.0 million in the quarter ended March 31, 2003.

Interest Expense

Interest expense increased for the quarter ended March 31, 2004 to $11.3 million
compared to $10.2  million for the same quarter of the previous year as a result
of interest  accruing on the New Notes beginning  January 1, 2004 in conjunction
with accreted  interest on the Old Notes until acceptance of the exchange offers
on  February  12,  2004.  This  increase  was  partially  offset by a decline in
interest rates and reduced  borrowings on the credit  facility.  The Company had
outstanding  credit facility  borrowings of $137.7 million at a weighted average
interest  rate of 4.96% at March  31,  2004,  compared  to $143.5  million  at a
weighted average interest rate of 5.37% at March 31, 2003.

Under Generally Accepted Accounting  Principles,  the difference in the carrying
value of the Old Notes and aggregate  principal and interest payments of the New
Notes was recognized as a $24.7 million  discount to the stated value of the New
Notes,  which is amortized  to interest  expense over the term of the New Notes.
For the quarter ended March 31, 2004,  total  interest on the New Notes was $4.5
million,  which  reflects  future cash  payments of interest of $3.8 million and

                                       22


$0.7 million  resulting from  amortization  of the discount on the New Notes. We
believe our interest expense for the quarter ended June 30, 2004 will not exceed
$8.0 million.

Income Tax

No income tax benefit was  recorded  for the  quarters  ended March 31, 2004 and
2003,  as it was more likely  than not that the income tax benefit  would not be
realized.

Loss from Continuing Operations

For the quarter ended March 31, 2004, loss from continuing  operations increased
to $9.9  million  compared to $6.7  million for the same quarter of the previous
year.  The  increase  is the result of higher  cost of  equipment,  selling  and
marketing expense,  increased spending associated with the Recapitalization Plan
of $0.8 million and higher interest expense of $1.1 million, partially offset by
the $1.2 million special settlement  received from Sprint related to an improved
bad debt expense profile related to certain customers.

Income (Loss) from Discontinued Operations

Discontinued  operations  reflect a loss from iPCS of $14.3  million  during the
quarter ended March 31, 2003.

For the six months  ended March 31, 2004  compared to the six months ended March
31, 2003:



                                                                              For the Six Months Ended March 31,
                                                           -----------------------------------------------------------------------
                                                                                                      Increase         Increase
                                                                 2004               2003            (Decrease)$      (Decrease)%
                                                           -----------------   ----------------   --------------  ----------------
                                                                          (Dollars in thousands)

                                                                                                           
Service revenue                                                   $ 123,829          $ 120,096       $ 3,733                3.1%
Roaming revenue                                                      29,981             32,805        (2,824)              (8.6%)
Equipment revenue                                                     5,729              5,713            16                0.3%
                                                           -----------------   ----------------   --------------
    Total                                                         $ 159,539          $ 158,614       $   925                0.6%
                                                           =================   ================   ==============


Service Revenue

The increase in service revenue for the six months ended March 31, 2004 over the
same period of the previous year reflects a higher average number of subscribers
using our network, relatively consistent average revenue per subscriber,  higher
monthly  recurring  revenue and  feature  charges and  increased  data  revenue,
partially  offset by higher  credits and lower revenue from "minutes over plan,"
or airtime usage in excess of the subscribed  usage plans. In late calendar year
2002,  Sprint  implemented the new PCS to PCS product offering  described above.
Pursuant to our Sprint  Agreements,  we are  required to support this program in
our territory.  The number of minutes-over-plan  charged to subscribers for plan
overages used and associated revenues decreased while the number of minutes used
for PCS to PCS calls has increased significantly.

Roaming Revenue

The decrease in roaming revenue for the six months ended March 31, 2004 over the
same  period  of the  previous  year  is  attributable  primarily  to the  lower
reciprocal  roaming  rate  charged  among  Sprint and its PCS network  partners,
partially  offset by increased  volume in inbound roaming  traffic.  For the six
months ended March 31, 2004, the Company's  roaming  revenue from Sprint and its
PCS network  partners was $28.7  million,  or  approximately  96% of the roaming
revenue, compared to $31.0 million or approximately 95% for the six months ended
March 31, 2003.

Equipment Revenue

Equipment  revenue for the six months  ended March 31, 2004  increased  slightly
over the same period of the previous  year,  primarily due to increased  handset
sales of $6.3 million or 68% prior to rebates and promotion  costs,  offset by a
$6.3 million  increase in handset rebates and promotions and a decrease in gross
additions  from our retail  and local  distributor  channels.  The  increase  in
handset  sales  is  comprised  of a $4.4  million  increase  in  sales of new or
upgraded  handsets to existing  subscribers and a $1.9 million increase in sales
to new subscribers.

                                       23


Cost of Service and Roaming



                                                                              For the Six Months Ended March 31,
                                                           -----------------------------------------------------------------------
                                                                                                      Increase         Increase
                                                                 2004               2003            (Decrease)$      (Decrease)%
                                                           -----------------   ----------------   --------------  ----------------
                                                                          (Dollars in thousands)

                                                                                                         
Cost of roaming                                                    $ 24,736           $ 27,135         $ (2,399)            (8.8%)
Network operating costs                                              31,158             28,846            2,312              8.0%
Bad debt expense                                                       (718)             2,155           (2,873)          (133.3%)
Wireless handset subsidies                                              996              3,353           (2,357)           (70.3%)
Other cost of service                                                25,739             30,681           (4,942)           (16.1%)
                                                           -----------------   ----------------   --------------
    Total cost of service and roaming                              $ 81,911           $ 92,170        $ (10,259)           (11.1%)
                                                           =================   ================   ==============



Cost of Roaming

Cost of roaming  decreased  for the six months ended March 31, 2004  compared to
the  same  period  of the  previous  year as a  result  of the  decrease  in the
reciprocal  roaming rate charged among Sprint and its network partners partially
offset by higher volumes.  Cost of roaming of $23.8 million and $25.7 million or
96% and 95% of the total  cost of  roaming  was  attributable  to Sprint and its
network partners for the six months ended March 31, 2004 and 2003, respectively.

Network Operating Costs

Network  operating  costs  increased  for the six months  ended  March 31,  2004
compared  to the same  period  of the  previous  year as a result  of  increased
network costs related to increased network usage of approximately 33%, including
higher long distance cost and increased interconnect charges.

Bad Debt Expense

Bad debt expense  decreased  for the six months ended March 31, 2004 compared to
the same  period of the  previous  year.  During the six months  ended March 31,
2004,  the Company  recorded a $1.2 million  special  settlement  received  from
Sprint resulting from a change in the bad debt profile for certain  subscribers.
In  addition,  we believe  the  improvements  in the credit  quality and payment
profile of our subscriber base since we re-imposed deposits for sub-prime credit
subscribers in early 2002 and the subsequent increases in February 2003 resulted
in  significant   improvements  in  accounts  receivable  write-off  experience,
increased  collections,  and the associated decrease in bad debt expense for the
six months ended March 31, 2004.

Wireless Handset Subsidies

Despite  an  increase  in the  number  of  subscribers  making  handset  upgrade
purchases,  wireless  handset  subsidies on existing  subscriber  upgrades  sold
through national third-party  retailers decreased for the six months ended March
31, 2004 compared to the same period of the previous year as a result of reduced
subsidies paid per handset to national third-party retailers.  Subsidies paid to
national  third-party  retailers  decreased  as a result  of  increased  handset
rebates and promotions  offered  directly to our customers  through the national
third party channel.  Handset  rebates and promotions  sold through the national
third party channels  offered  directly to our customers are included in selling
and marketing expense.

Other Cost of Service

Other cost of service decreased for the six months ended March 31, 2004 compared
to the same period of the previous year. The decrease was  attributable to lower
service bureau costs and fees paid to Sprint, a $2.6 million special  settlement
from Sprint for service  bureau fees charged for  calendar  year 2003 and a $1.2
million special settlement resulting from Sprint's decision to discontinue their
billing system conversion in 2004.

                                       24


Cost of Equipment, Other Operating Expenses and Interest





                                                                              For the Six Months Ended March 31,
                                                           -----------------------------------------------------------------------
                                                                                                      Increase         Increase
                                                                 2004               2003            (Decrease)$      (Decrease)%
                                                           -----------------   ----------------   --------------  ----------------
                                                                          (Dollars in thousands)

                                                                                                            
Cost of equipment                                                  $ 13,788           $ 10,302            3,486             33.8%
Selling and marketing expense                                        26,063             28,203           (2,140)            (7.6%)
General and administrative expense                                   12,804             10,036            2,768             27.6%
Depreciation and amortization of property and equipment              23,659             23,244              415              1.8%
Loss (gain) on disposal of property
    and equipment                                                        (5)               418              423            101.2%
Interest income                                                         322                 25              297           1188.0%
Interest expense                                                    (22,627)           (20,391)           2,236             11.0%


Cost of Equipment

Cost of equipment  increased for the six months ended March 31, 2004 compared to
the same period of the previous year  primarily as a result of increased  retail
upgrade  sales  of  handsets  to  existing  subscribers,   offset  by  decreased
subscriber gross additions.

Selling and Marketing Expense

Selling and marketing  expense decreased for the six months ended March 31, 2004
compared  to the same  period of the  previous  year  reflecting  the  effect of
reduced  advertising  and  promotion  expense  and  staff  reductions  and store
closings implemented in early fiscal 2003, partially offset by increased rebates
for handset upgrade costs through national third parties.

General and Administrative Expense

General and administrative  expense increased for the six months ended March 31,
2004  compared  to the same  period  of the  previous  year,  as a result  of an
increase in outside consulting  services of $1.7 million and higher salaries and
other  employee  costs of $1.1 million.  The higher  salaries and other employee
costs are the result of fully  absorbing  corporate  overhead  costs  previously
shared with iPCS.

Depreciation and Amortization of Property and Equipment

Depreciation  expense increased for the six months ended March 31, 2004 compared
to the same period of the  previous  year  primarily  as a result of  additional
network  assets  placed in service in the later  part of fiscal  year 2003.  The
Company purchased $7.4 million of property and equipment in the six months ended
March 31, 2004,  compared to property and equipment purchases of $6.7 million in
the six months ended March 31, 2003.

Interest Expense

Interest  expense  increased for the six months ended March 31, 2004 compared to
the same period of the previous year as a result of interest accruing on the New
Notes beginning January 1, 2004 in conjunction with accreted interest on the Old
Notes until  acceptance  of the  exchange  offers on  February  12,  2004.  This
increase  was  partially  offset  by a decline  in  interest  rates and  reduced
borrowings on the credit facility.  The Company had outstanding  credit facility
borrowings  of $137.7  million at a weighted  average  interest rate of 4.96% at
March 31, 2004,  compared to $143.5 million at a weighted  average interest rate
of 5.37% at March 31, 2003.

Income Tax

No income tax benefit on continuing  operations  was recorded for the six months
ended March 31, 2004 and 2003 as it was more likely than not that the income tax
benefit would not be realized.

Loss from Continuing Operations

For the six  months  ended  March  31,  2004,  loss from  continuing  operations
improved to $21.0  million  compared to $26.1 million for the same period of the
previous  year.  The  improvement  is the result of lower  cost of  service  and
selling and marketing expense,  offset by increased spending associated with the
Recapitalization  Plan of  $3.1  million,  increased  interest  expense  of $2.2
million and higher cost of equipment.

                                       25


Income (Loss) from Discontinued Operations

Discontinued  operations is comprised of a $184.1 million non-monetary gain from
the  elimination  of the  investment  in iPCS for the six months ended March 31,
2004 and a loss from the discontinued operations of iPCS of $42.6 million during
the six months ended March 31, 2003.

Non-GAAP Financial Measures and Key Operating Metrics

We use certain  operating  and  financial  measures  that are not  calculated in
accordance with accounting principles generally accepted in the United States of
America, or GAAP. A non-GAAP financial measure is defined as a numerical measure
of a company's financial performance that (i) excludes amounts, or is subject to
adjustments that have the effect of excluding amounts,  that are included in the
comparable  measure  calculated  and  presented in  accordance  with GAAP in the
statement of income or statement of cash flows; or (ii) includes amounts,  or is
subject to  adjustments  that have the  effect of  including  amounts,  that are
excluded from the comparable measure so calculated and presented.

Terms such as  subscriber  net  additions,  average  revenue per user  ("ARPU"),
churn, and cost per gross addition ("CPGA") are important operating metrics used
in the wireless  telecommunications  industry.  These  metrics are  important to
compare us to other wireless service providers.  ARPU and CPGA assist management
in budgeting and CPGA also assists  management in  quantifying  the  incremental
costs  to  acquire  a new  subscriber.  Except  for  churn  and  net  subscriber
additions,  we have  included  a  reconciliation  of these  metrics  to the most
directly  comparable GAAP financial measure.  Churn and subscriber net additions
are operating  statistics  with no comparable GAAP financial  measure.  ARPU and
CPGA are supplements to GAAP financial  information and should not be considered
an  alternative  to, or more  meaningful  than,  revenues,  expenses,  loss from
continuing  operations,  or net income (loss) as  determined in accordance  with
GAAP.

Earnings before interest, taxes, depreciation and amortization,  or "EBITDA," is
a  performance  metric we use and which is used by other  companies.  Management
believes that EBITDA is a useful adjunct to loss from continuing  operations and
other  measurements under GAAP because it is a meaningful measure of a company's
performance,   as  interest,  taxes,  depreciation  and  amortization  can  vary
significantly  between  companies  due in  part  to  differences  in  accounting
policies, tax strategies,  levels of indebtedness,  capital purchasing practices
and interest  rates.  EBITDA also assists  management  in  evaluating  operating
performance  and  is  sometimes  used  to  evaluate  performance  for  executive
compensation.  We have  included  below a  presentation  of the  GAAP  financial
measure  most  directly  comparable  to  EBITDA,  which is loss from  continuing
operations,  as well as a  reconciliation  of  EBITDA  to loss  from  continuing
operations.  EBITDA is a supplement to GAAP financial information and should not
be considered an  alternative  to, or more  meaningful  than, net income (loss),
loss from  continuing  operations,  or operating  income (loss) as determined in
accordance  with GAAP.  EBITDA has  distinct  limitations  as  compared  to GAAP
information  such as net income  (loss),  loss from  continuing  operations,  or
operating income (loss). By excluding interest and income taxes for example,  it
may not be apparent  that both  represent a reduction  in cash  available to the
Company.  Likewise,   depreciation  and  amortization,   while  non-cash  items,
represent  generally the  decreases in the value of assets that produce  revenue
for the Company.

ARPU, churn,  CPGA, and EBITDA as used by the Company may not be comparable to a
similarly titled measure of another company.

The following terms used in this report have the following meanings:

    o "ARPU" summarizes the average monthly service revenue per user,  excluding
      roaming  revenue.  The  Company  excludes  roaming  revenue  from its ARPU
      calculation because this revenue is generated from customers of Sprint and
      other carriers that use our network and not directly from our subscribers.
      ARPU is computed  by  dividing  average  monthly  service  revenue for the
      period by the average number of subscribers for the period.

    o "Churn" is the  average  monthly  rate of  subscriber  turnover  that both
      voluntarily  and  involuntarily  discontinued  service  during the period,
      expressed as a percentage  of the average  number of  subscribers  for the
      period.  Churn is  computed  by dividing  the number of  subscribers  that
      discontinued  service  during the period,  net of 30-day  returns,  by the
      average subscribers for the period.

    o "CPGA"  summarizes the average cost to acquire new subscribers  during the
      period.  CPGA is computed  by adding the income  statement  components  of
      selling and marketing expense  (including  commissions and upgrade costs),
      cost of equipment and activation  costs (which are included as a component
      of cost of service and roaming) and reducing  that amount by the equipment
      revenue  recorded.  That net  amount  is then  divided  by the  total  new
      subscribers acquired during the period.

    o "EBITDA" means  earnings  before  interest,  taxes,  depreciation  and
       amortization.

                                       26


The tables,  which follow present and reconcile  non-GAAP financial measures and
key  operating  metrics for the Company for the  quarters  and six months  ended
March 31, 2004 and 2003.

For the quarter  ended March 31,  2004  compared to the quarter  ended March 31,
2003:

The table  below  sets  forth key  operating  metrics  for the  Company  for the
quarters  ended March 31, 2004 and 2003 (dollars in  thousands,  except unit and
per unit data):




                                                            For the Quarters Ended March 31,
                                        -----------------------------------------------------------------------
                                                                                   Increase         Increase
                                              2004               2003            (Decrease)       (Decrease)
                                        -----------------   ----------------   --------------  ----------------

                                                                                    
Total subscribers, end of period             367,807             358,564             9,243           2.6%
Subscriber gross additions                    41,741              43,003            (1,262)         (2.9%)
Subscriber net additions                       7,909               5,755             2,154          37.4%
Churn                                          2.92%               3.30%            (0.38%)            NM
ARPU                                        $  56.48            $  56.38          $   0.10           0.2%
CPGA                                           $ 409               $ 302             $ 107          35.4%
EBITDA                                      $ 13,162            $ 15,099          $ (1,937)        (12.8%)





The reconciliation of ARPU to service revenue,  as determined in accordance with
GAAP, is as follows (dollars in thousands, except per unit data):


                                                           For the Quarters Ended March 31,
                                        -----------------------------------------------------------------------
                                                                                   Increase         Increase
                                              2004               2003            (Decrease)        (Decrease)
                                        -----------------   ----------------   --------------  ----------------

                                                                                      
Average Revenue Per User (ARPU):
Service revenue                            $ 61,656            $ 60,163            $ 1,493            2.5%
Average subscribers                         363,853             355,687              8,166            2.3%
ARPU                                       $  56.48            $  56.38            $  0.10            0.2%








The  reconciliation of CPGA to selling and marketing  expense,  as determined in
accordance with GAAP, is calculated as follows (dollars in thousands, except per
unit data):

                                       27





                                                        For the Quarters Ended March 31,
                                           ------------------------------------------------------------
                                                                            Increase        Increase
                                               2004           2003        (Decrease)      (Decrease)
                                           -------------  --------------  -------------  --------------

                                                                              
Cost Per Gross Addition (CPGA):
Selling and marketing expense                  $ 11,916        $ 11,384        $   532            4.7%
Plus: activation costs                              838             843             (5)          (0.6%)
Plus: cost of equipment                           7,202           3,455          3,747          108.5%
Less: equipment revenue                          (2,882)         (2,691)          (191)          (7.1%)
                                           -------------  --------------  -------------
Total acquisition costs                        $ 17,074        $ 12,991        $ 4,083           31.4%
                                           =============  ==============  =============
Gross additions                                  41,741          43,003         (1,262)          (2.9%)
CPGA                                           $    409        $    302        $   107           35.4%





The reconciliation of EBITDA to our reported loss from continued operations,  as
determined in accordance with GAAP, is as follows (dollars in thousands):



                                                                  For the Quarters Ended March 31,
                                               -----------------------------------------------------------------------
                                                                                          Increase         Increase
                                                     2004               2003            (Decrease)       (Decrease)
                                               -----------------   ----------------   --------------  ----------------

                                                                                          
Loss from continuing operations                    $ (9,876)           $ (6,698)        $ (3,178)         (47.4%)
Depreciation and amortization of property
  and equipment                                      11,892              11,625              267            2.3%
Interest income                                        (165)                (25)            (140)             NM
Interest expense                                     11,311              10,197            1,114           10.9%
                                                   -------------     --------------     -------------
EBITDA                                             $ 13,162            $ 15,099         $ (1,937)         (12.8%)
                                                   =============     ==============     =============


Subscriber Gross Additions

Subscriber  gross additions  decreased  slightly for the quarter ended March 31,
2004 compared to the same quarter in 2003.  This decrease is due to the increase
in the deposit for sub-prime  customers  and Sprint's  loss of certain  national
third-party distribution channels.

Subscriber Net Additions

Subscriber  net  additions  increased  for the  quarter  ended  March 31,  2004,
compared to the same quarter in 2003. The increase is due to improved subscriber
churn, partially offset by a reduction in subscriber gross additions.

Average Revenue Per User

ARPU  increased  slightly for the quarter  ended March 31, 2004  compared to the
same quarter for 2003 primarily as a result of an increase in subscriber monthly
recurring  charges and higher data revenue offset by a reduction in revenue from
customers  using  minutes in excess of their  subscriber  usage plans and higher
customer credits.

Churn

Churn  improved  for the  quarter  ended  March 31,  2004,  compared to the same
quarter for 2003. The Company has focused on improving the credit quality of the
subscriber base. We believe this improvement in credit quality may have resulted
in the  reduction in churn for the quarter  ended March 31, 2004 compared to the
same period in 2003.


                                       28


Cost per Gross Addition

CPGA increased for the quarter ended March 31, 2004 compared to the same quarter
in  2003.  The  increase  reflects  increased  costs  for  marketing,   selling,
advertising,  handset sales incentives, handset upgrade costs through our retail
and  national  third party  channels  and rebates  that were spread over a lower
number of gross additions.

EBITDA

EBITDA for the quarter ended March 31, 2004  decreased  from the same quarter in
2003.  This  decrease  is a result  of  higher  equipment  costs,  and  selling,
marketing, and advertising costs and $0.8 million in Restructuring Costs, offset
by  slightly  higher  revenues,  lower cost of service and roaming and a special
Sprint settlement of $1.2 million recorded related to the improvement in certain
customers bad debt profiles.

For the six months  ended March 31, 2004  compared to the six months ended March
31, 2003:

The table  below sets forth key  operating  metrics  for the Company for the six
months ended March 31, 2004 and 2003 (dollars in thousands,  except unit and per
unit data):



                                                       For the Six Months Ended March 31,
                                        --------------------------------------------------------------
                                                                           Increase        Increase
                                            2004           2003           (Decrease)      (Decrease)%
                                        -------------  --------------  -------------  ----------------

                                                                                 
Total subscribers, end of period             367,807         358,564          9,243              2.6%
Subscriber gross additions                    77,342          98,624        (21,282)           (21.6%)
Subscriber net additions                       8,347          19,425        (11,078)           (57.0%)
Churn                                          2.99%           3.53%         (0.54%)               NM
ARPU                                        $  56.76        $  57.38        $ (0.62)            (1.1%)
CPGA                                        $    463        $    354        $   109             30.8%
EBITDA                                      $ 24,978        $ 17,485        $ 7,493             42.9%




The reconciliation of ARPU to service revenue,  as determined in accordance with
GAAP, is as follows (dollars in thousands, except per unit data):




                                                           For the Six Months Ended March 31,
                                        -----------------------------------------------------------------------
                                                                                   Increase         Increase
                                              2004               2003            (Decrease)       (Decrease)%
                                        -----------------   ----------------   --------------  ----------------
                                                       (Dollars in thousands)
                                                                                 
Average Revenue Per User (ARPU):
Service revenue                             $ 123,829          $ 120,096         $ 3,733            3.1%
Average subscribers                           363,634            348,852          14,728            4.2%
ARPU                                            56.76              57.38           (0.62)          (1.1%)






                                       29



The  reconciliation of CPGA to selling and marketing  expense,  as determined in
accordance with GAAP, is calculated as follows (dollars in thousands, except per
unit data):



                                                       For the Six Months Ended March 31,
                                        --------------------------------------------------------------
                                                                           Increase        Increase
                                            2004           2003           (Decrease)      (Decrease)%
                                        -------------  --------------  -------------  ----------------

                                                                           
Cost Per Gross Addition (CPGA):
Selling and marketing expense               $ 26,063        $ 28,203       $ (2,140)            (7.6%)
Plus: activation costs                         1,718           2,111           (393)           (18.6%)
Plus: cost of equipment                       13,788          10,302          3,486             33.8%
Less: equipment revenue                       (5,729)         (5,713)           (16)            (0.3%)
                                        -------------  --------------  -------------
Total acquisition costs                     $ 35,840        $ 34,903       $    937              2.7%
                                        =============  ==============  =============
Gross additions                               77,342          98,624        (21,282)           (21.6%)
CPGA                                        $    463        $    354       $    109             30.8%




The reconciliation of EBITDA to our reported loss from continued operations,  as
determined in accordance with GAAP, is as follows (dollars in thousands):




                                                           For the Six Months Ended March 31,
                                            --------------------------------------------------------------
                                                                               Increase        Increase
                                                2004           2003           (Decrease)      (Decrease)%
                                            -------------  --------------  -------------  ----------------

                                                                                     
Loss from continuing operations                $ (20,986)      $ (26,125)       $ 5,139             19.7%
Depreciation and amortization of property
  and equipment                                   23,659          23,244            415              1.8%
Interest income                                     (322)            (25)          (297)               NM
Interest expense                                  22,627          20,391          2,236             11.0%
                                            -------------  --------------  -------------
EBITDA                                          $ 24,978        $ 17,485        $ 7,493             42.9%
                                            =============  ==============  =============



Subscriber Gross Additions

Subscriber  gross  additions  decreased  for the six months ended March 31, 2004
compared to the same period in 2003. This decrease is due to the increase in the
deposit for sub-prime credit  customers,  the loss of distribution  from closing
retail stores,  and Sprint's loss of certain national  third-party  distribution
channels.

Subscriber Net Additions

Subscriber  net  additions  decreased  for the six months  ended March 31, 2004,
compared to the same period in 2003.  This  decrease is due to the  reduction in
subscriber  gross additions,  partially  offset by the reduced  subscriber churn
rate.

Average Revenue Per User

ARPU  decreased  for the six months  ended March 31,  2004  compared to the same
period for 2003  primarily as a result of a reduction in revenue from  customers
using  minutes in excess of their  subscriber  usage  plans and higher  customer
credits, offset by an increase in subscriber monthly recurring charges.

Churn

Churn  improved for the six months  ended March 31,  2004,  compared to the same
period for 2003.  The Company has focused on improving the credit quality of the
subscriber base. We believe this improvement in credit quality may have resulted
in the  reduction in churn for the six months  ended March 31, 2004  compared to
the same period in 2003.

Cost per Gross Addition

CPGA  increased  for the six months  ended March 31,  2004  compared to the same
period in 2003. The increase  reflects  increased costs for marketing,  selling,
advertising,  handset sales incentives, handset upgrade costs through our retail
and  national  third party  channels  and rebates  that were spread over a lower
number of gross additions.

                                       30


EBITDA

EBITDA for the six months ended March 31, 2004 increased from the same period in
2003.  This  increase  is a result of an  increase  in  revenues  and  decreased
spending in cost of services  and selling and  marketing,  and a special  Sprint
settlement of $1.2 million  recorded for the change in certain customer bad debt
profiles and a $1.2 million special settlement  resulting from Sprint's decision
to  discontinue  their  billing  system  conversion,  offset by $3.1  million in
Restructuring Costs.

Liquidity and Capital Resources

As of March 31, 2004, the Company had $48.6 million in cash and cash equivalents
compared to $54.1  million in cash and cash  equivalents  at September 30, 2003.
The Company's  working capital for March 31, 2004 was $3.8 million,  compared to
working  capital of $12.5  million at September  30,  2003.  The decrease in the
Company's  cash  position  of $5.5  million  is  attributable  to the  following
(dollars in thousands):

                                               For the Six Months Ended
                                                       March 31,
                                                         2004
                                              ---------------------------
Operating Activities
Cash received from Sprint                      $                 128,184
Cash paid to Sprint                                              (36,822)
Cash paid to vendors and employees                               (65,559)
Credit facility interest payments                                 (4,529)
                                              ---------------------------
                                                                  21,274
                                              ---------------------------
Investing Activities
                                              ---------------------------
Capital expenditures                                              (7,361)
                                              ---------------------------

Financing Activities
Credit facility principal payments                               (13,761)
Other financing costs                                             (5,637)
                                              ---------------------------
                                                                 (19,398)
                                              ---------------------------
                                                                $ (5,485)
                                              ===========================






                                                                    For the Six Months Ended March 31,
                                                 -----------------------------------------------------------------------
                                                                                            Increase         Increase
                                                       2004               2003            (Decrease)$       (Decrease)%
                                                 -----------------   ----------------   --------------  ----------------
                                                          (Dollars in thousands)

                                                                                           
Cash provided by operating activities               $ 21,274          $  15,627         $   5,647               36.1%
Cash used in investing activities                     (7,361)            (6,654)             (707)             (10.6%)
Cash (used in) provided by financing activities      (19,398)             7,045           (26,443)            (375.3%)
                                                  ----------------  ----------------  ----------------  ----------------
     Net (decrease) increase                        $ (5,485)         $  16,018         $ (21,503)            (134.2%)
                                                  ================  ================  ================  ================



Net Cash Provided By Operating Activities

The $21.3  million of cash provided by operating  activities  for the six months
ended March 31, 2004 was the result of the Company's  $163.1  million net income
offset  by  non-cash   items   including   gain  on   discontinued   operations,
depreciation,  amortization of note discounts,  financing  costs,  provision for
doubtful  accounts,  non-cash stock  compensation and loss (gain) on disposal of
property and  equipment  totaling  $145.8  million.  These  non-cash  items were
partially offset by favorable  changes in other operating assets and liabilities
of $4.0 million.  The $15.6 million of cash provided by operating activities for
the six  months  ended  March 31,  2003 was the  result of the  Company's  $68.7
million  net loss  offset  by  non-cash  items  including  loss on  discontinued
operations,  depreciation,  amortization  of note  discounts,  financing  costs,
provision for doubtful  accounts and non-cash  stock option  compensation,  loss
(gain) on disposal of property  and  equipment  totaling  $85.3  million.  These
non-cash items were partially offset by a decrease in other operating assets and
liabilities of $1.0 million.

                                       31


Net Cash Used in Investing Activities

The $7.4 million of cash used in investing  activities  for the six months ended
March 31, 2004  represents  purchases  of property and  equipment.  Purchases of
property  and  equipment  for the six months  ended  March 31,  2004  related to
expansion of switch capacity and  improvements in service  quality.  For the six
months ended March 31, 2003, cash used in investing  activities was $6.7 million
for purchases of property and equipment.

Net Cash (Used In)Provided by Financing Activities

The $19.4  million in cash used in  financing  activities  during the six months
ended  March  31,  2004,  consisted  of $13.8  million  for  principal  payments
associated with the credit facility and $4.8 million in debt restructuring costs
which were capitalized to paid in capital,  and $0.9 million in fees capitalized
related to amending the credit  facility.  The $7.0 million of cash  provided by
financing  activities  during the six months  ended March 31, 2003  consisted of
$8.0  million  borrowed  under the credit  facility,  offset by $1.0  million of
principal payments associated with the credit facility.

Liquidity, Financial Restructuring and Going Concern

The financial  statements  have been prepared on a going  concern  basis,  which
contemplates  the  realization of assets and  satisfaction of liabilities in the
normal  course  of  business.  The  financial  statements  do  not  include  any
adjustments  relating to the recoverability and classification of asset carrying
amounts or the amount and classification of liabilities that might result should
the Company be unable to continue as a going concern.

As shown in the condensed  consolidated  financial  statements,  the Company has
generated  significant net losses since inception and has an accumulated deficit
of $1.1 billion and  stockholders'  deficit of $91.5  million at March 31, 2004.
For the six months  ended March 31, 2004,  the  Company's  loss from  continuing
operations  amounted to $21.0 million.  In addition to its capital needs to fund
operating  losses,  the Company has  invested  large  amounts to  build-out  its
networks and for other capital assets. Since inception, the Company has invested
over $300 million to purchase property and equipment.  As of March 31, 2004, the
Company had working  capital of $3.8  million and cash and cash  equivalents  of
$48.6 million,  and no remaining  availability  under its credit facility.  As a
result, the Company is completely dependent on available cash and operating cash
flow to pay debt service and meet its other capital  needs.  If such sources are
not sufficient, alternative funding sources may not be available.

Due to the factors  described in the Company's Annual Report for the fiscal year
ended September 30, 2003, management made changes to the assumptions  underlying
its long-range  business plan. These factors included slower subscriber  growth,
increased  competition  and churn and our  dependence  on  Sprint  and  Sprint's
changes to various  programs and fees.  These  factors led the Company to revise
its business  strategy and take actions to cut costs during 2003.  These actions
included the following:

     o    Restructuring the Company's organization and eliminating more than 150
          positions;

     o    Reducing capital expenditures;

     o    Reducing spending for sales and marketing activities; and

     o    Reducing per minute network  operating costs by more closely  managing
          connectivity costs.

These  actions  improved  operating  cash  flow,  however,  under the  Company's
business plan during 2003, our compliance with the financial covenants under our
credit facility was not assured and the Company's ability to generate sufficient
cash flow to meet its financial  covenants and payment  obligations  in 2005 and
beyond was  substantially  uncertain.  There was substantial risk that under its
business plan, the Company would not have sufficient  liquidity to meet its cash
interest  obligations  under the Old Notes in 2006.  As a  result,  the  Company
initiated the  Recapitalization  Plan. In light of these  circumstances  and the
possibility of the Prepackaged  Plan, in connection with their audit of our 2003
financial statements,  KPMG LLP, the Company's independent auditors, included an
explanatory  paragraph  regarding the  Company's  ability to continue as a going
concern in their audit opinion.  Such explanatory  paragraph would have resulted
in a default  under our  credit  facility;  however,  the  Company  obtained  an
amendment  of its credit  facility  to permit  this  explanatory  paragraph  and
prevent a default.  The  completion  of the  Recapitalization  Plan improved the
Company's  capital  structure  and  reduced  the  required  payments  under  the
Company's  Old  Notes  and we  believe  we will  have  sufficient  cash and cash
equivalents  and cash flow from  operations to satisfy the  Company's  liquidity
needs for at least the next twelve months.

Pursuant  to the  Recapitalization  Plan,  all but 0.6% of the  13.5%  Old Notes
maturing in 2009 were  replaced by the 9 3/8% New Notes  maturing in 2009.  As a
result,  after 2004, the financial  restructuring  provides estimated cumulative
cash savings of $255 million through 2009, by reducing our principal  payment by
$139.2 million and annual cash interest  payment by $25.5 million per year after
2004.

Over time,  Sprint has  increased  fees charged to the Company and other network
partners and has added fees that were not  anticipated  when the agreements with
Sprint were entered  into.  Sprint also sought to collect  money from us that we
believe is not authorized under the agreements.  In addition, Sprint has imposed
additional  programs,  requirements and conditions that have adversely  affected
our financial  performance.  If these increases,  additional charges and changes

                                       32



continue,  our  operating  results,  liquidity  and capital  resources  could be
adversely affected.  As of March 31, 2004, we have disputed  approximately $12.4
million in invoiced  charges and $2.7 million claimed by Sprint but not invoiced
for such increases and additional  charges,  which have not been fully resolved.
While we believe that we have adequately reserved for these disputed amounts, if
they are  resolved in favor of Sprint and against  the  Company,  the payment of
this amount of money could adversely affect our liquidity and capital resources.
The  resolution  of all  disputes  in favor of Sprint and  payment  of  disputed
amounts would reduce our cash position by approximately $15.1 million.

Capital Resources

As of  March  31,  2004,  the  Company  had  $48.6  million  of  cash  and  cash
equivalents.  The Company has no further  borrowing  available  under the credit
facility.

Contractual Obligations

The Company is obligated to make future payments under various  contracts it has
entered into, including amounts pursuant to the credit facility,  the Old Notes,
New Notes and  non-cancelable  operating lease agreements for office space, cell
sites,  vehicles and office equipment.  Expected future minimum contractual cash
obligations  for the next five years and in the aggregate at September 30, 2003,
giving effect to changes made as a result of the  Recapitalization  Plan, are as
follows (dollars in thousands):



                                                         Payments Due By Period for Years Ending September 30,
                                        ----------------------------------------------------------------------------------------
                                             Total       2004        2005        2006        2007        2008       Thereafter
                                        -------------  ----------  ----------  ----------  ----------  ----------  -------------
                                                                                             
Credit facility, principal (1)             $ 151,475    $ 20,275    $ 21,200    $ 30,107    $ 39,893    $ 40,000      $       -
Credit facility, interest (2)                 24,188       7,460       6,779       5,327       3,430       1,192              -
Old Notes, principal                           1,795           -           -           -           -           -          1,795
Old Notes, interest (3)                        1,212           -         242         242         242         243            243
New Notes, principal                         159,035           -           -           -           -           -        159,035
New Notes, interest (4)                       84,487      14,909      14,909      14,909      14,909      14,909          9,942
Operating leases (5)                          60,262      18,899      14,396       9,485       6,632       5,159          5,691
                                        -------------  ----------  ----------  ----------  ----------  ----------  -------------
                                           $ 482,454    $ 61,543    $ 57,526    $ 60,070    $ 65,106    $ 61,503      $ 176,706
                                        =============  ==========  ==========  ==========  ==========  ==========  =============



(1)  Total repayments are based upon borrowings  outstanding as of September 30,
     2003.
(2)  Interest  rate  is  assumed  to  be  5.5%.  As  of  March  31,  2004,   the
     weighted-average  interest rate on the credit facility was 4.96%.  Due to a
     $10.0 million  pre-payment made on February  20,2004,  offset by subsequent
     credits,  projected  interest  decreased  approximately  $0.5 million in FY
     2004.
(3)  Interest rate on Old Notes is 13.5% with payments starting in 2005.
(4)  Interest rate on New Notes is 9.375% with payments starting in June 2004.
(5)  Operating leases do not include payments due under renewals to the original
     lease term.

On August 16, 1999,  the Company  entered into a $153.5  million  senior  credit
facility.  The credit  facility  provides for (i) a $13.5 million senior secured
term loan  ("Tranche  I Term  Loan")  which  matures  on June 6, 2007 and (ii) a
$140.0  million  senior secured term loan ("Tranche II Term Loan") which matures
on September 30, 2008. Under the Credit  Agreement,  the Company makes quarterly
payments  which began on December  31, 2002 for Tranche I and March 31, 2004 for
Tranche II. The quarterly payments are predetermined  based upon a percentage of
the  aggregate  balance  and consist of (i) eight  payments of 3.75%,  (ii) four
payments of 5%, (iii) six payments of 7.143% and (iv) a final payment of 7.142%.
No amounts remain available for borrowing under the credit facility.  The credit
facility  is  secured  by all the  assets  of the  Company  and  its  restricted
subsidiaries.  The  interest  rate for the credit  facility is  determined  on a
margin  above either the prime  lending rate in the United  States or the London
Interbank Offer Rate.

The credit facility contains ongoing  financial  covenants,  including  reaching
covered  population  targets,  maximum annual spending on capital  expenditures,
attaining  minimum  subscriber  revenues,  and maintaining  certain leverage and
other ratios such as debt to total capitalization, debt to EBITDA (as defined in
the credit facility agreement,  "Bank EBITDA") and Bank EBITDA to fixed charges.
The credit  facility  restricts  the ability of the  Company and its  restricted
subsidiaries  to:  create  liens;  incur  indebtedness;  make certain  payments,
including  payments of dividends and  distributions in respect of capital stock;
consolidate,  merge and sell  assets  and engage in  certain  transactions  with
affiliates.  As of March 31, 2004, the Company was in compliance in all material
respects with covenants contained in the credit facility.

The Company  entered into an  amendment  to the credit  facility on November 30,
2003. Certain changes were effective for periods ended December 31, 2003 and are
used in  determining  compliance  with  financial  covenants  for periods  ended
December  31,  2003 and  thereafter.  These  changes  include (i) changes to the
definition of Bank EBITDA to provide that,  among other things,  in  determining
Bank EBITDA, certain additional items will be added back to our consolidated net
income or loss (to the extent  deducted  in  determining  such  income or loss),
including any charges incurred in connection with the restructuring,  up to $2.0
million per year to pursue claims  against,  or dispute claims by, Sprint and up
to $5.0 million in start-up costs in connection  with any outsourcing of billing
and customer care  services;  (ii)  calculating  the ratio of total debt to Bank
EBITDA and senior  secured  debt to Bank  EBITDA  based on the four most  recent
fiscal quarters, rather than the last two quarters annualized and (iii) deleting
the minimum  subscriber  covenant.  In addition,  the  amendment  provides for a

                                       33



waiver, effective September 30, 2003, of the requirement that the Company obtain
an  opinion  from  its  independent  auditors  with  respect  to  the  financial
statements  for the year ended  September 30, 2003 that does not contain a going
concern or other similar qualification.  Other changes include: (i) revising the
threshold  requirements  for minimum revenues and most of the ratios that we are
required to maintain;  (ii) providing the ability to incur certain other limited
indebtedness  and related  liens;  (iii)  providing  the ability to make certain
investments  and form  subsidiaries  under  limited  circumstances  that are not
subject to certain  restrictive  covenants  contained in the credit  facility or
required to guarantee the credit  facility and (iv) permitting us to repurchase,
at a  discount,  the Old  Notes  or the New  Notes  from  our cash on hand in an
aggregate  amount not to exceed $25  million in value of those  notes,  provided
that we at the same  time  incur  an  equal  amount  of  permitted  subordinated
indebtedness.

The  amendment  will  not  affect  any of the  other  provisions  of the  credit
facility,  including  those  which  restrict  the  Company's  ability  to merge,
consolidate  or sell  substantially  all of its assets.  In connection  with the
amendment,  the Company  prepaid  $10.0  million in  principal  under the credit
facility,  which will be credited pro rata against principal  payments otherwise
due in  fiscal  years  2004  and 2005 in the  amount  of $7.5  million  and $2.5
million,  respectively.  The amendment  did not  otherwise  affect the Company's
obligation  to pay interest,  premium,  if any, or any other of the principal on
the credit facility, when due.

On  February  20,  2004,  the Company  issued  approximately  $159.0  million in
aggregate principal amount of new senior subordinated  secured notes that mature
on September 1, 2009 in exchange for Old Notes in an aggregate  principal amount
of $298.5  million.  The New Notes bear interest at the rate of 9 3/8% per year,
accruing  from  January 1, 2004,  which is  payable  each  January 1 and July 1,
beginning  on July 1, 2004.  The Company may redeem some or all of the New Notes
at any time on or after January 1, 2006 at specified redemption prices.

The New Notes are  subordinated to up to $175.0 million of the Company's  senior
debt under its credit facility and are fully and unconditionally guaranteed on a
senior  subordinated  basis by the  Company's  subsidiaries  that  guarantee the
Company's obligations under the credit facility. In addition,  the New Notes are
secured by a second-priority  lien,  subject to certain exceptions and permitted
liens,  on all the  collateral  that  secures the  Company's  and its  guarantor
subsidiaries'  obligations  under the Company's credit facility.  If the Company
undergoes a change of control (as defined in the indenture  that governs the New
Notes),  then it must make an offer to  repurchase  the New Notes at 101% of the
principal amount of the notes then outstanding.

The New Notes contain covenants,  subject to certain  exceptions,  that prohibit
the  Company's  ability to, among other things,  incur more debt;  create liens;
repurchase  stock and make certain  investments;  pay  dividends,  make loans or
transfer  property  or  assets;  enter  into  sale and  leaseback  transactions,
transfer or dispose of substantially  all of the Company's  assets; or engage in
transactions  with  affiliates.  Some  exceptions  to  the  restrictions  on the
Company's ability to incur more debt include: up to $175 million of indebtedness
under  the  Company's  credit  facility;  up  to $5  million  of  capital  lease
obligations;  and up to $50 million of additional  general  indebtedness.  As of
March 31, 2004,  the Company was in  compliance  in all material  respects  with
covenants contained in the note indenture.

The Company has no off-balance  sheet  arrangements and has not entered into any
transactions  involving   unconsolidated,   limited  purpose  variable  interest
entities or commodity contracts.

As of March 31,  2004,  two major  credit  rating  agencies  rate the  Company's
unsecured debt. The ratings were as follows:

       Type of facility     S&P       Moody's
       ----------------     ---       -------
       New Notes            CCC-      Caal
       Credit Facility      CCC+      B2

Related Party Transactions

See Note 3 to the condensed  consolidated financial statements for a description
of transactions with Sprint.

Item 3.    Quantitative And Qualitative Disclosure About Market Risk

In the normal  course of  business,  the  Company's  operations  are  exposed to
interest  rate  risk  on  its  credit   facilities  and  any  future   financing
requirements.  The Company's fixed rate debt consists  primarily of the carrying
value of the New Notes ($135.1 million  including  discounts of $23.9 million at
March 31, 2004) and the remaining accreted carrying value of the Old Notes ($1.7
million  at March 31,  2004).  The  Company's  variable  rate debt  consists  of
borrowings made under the credit facility  ($137.7 million  outstanding at March
31, 2004).  As of March 31, 2004, the weighted  average  interest rate under the
credit facility was 4.96%.  Our primary  interest rate risk exposures  relate to
(i) the interest rate on long-term borrowings; (ii) our ability to refinance the
New Notes at maturity  at market  rates;  and (iii) the impact of interest  rate
movements on our ability to meet  interest  expense  requirements  and financial
covenants under our debt instruments.

                                       34


The  following  table  presents the  estimated  future  balances of  outstanding
long-term  debt projected at the end of each period and future  required  annual
principal payments for each period then ended associated with the New Notes, Old
Notes (net of original  issue  discount) and credit  facility based on projected
levels of long-term indebtedness (dollars in thousands):



                                                           Years Ending September 30,
                        -------------------------------------------------------------------------------------------
                            2004            2005           2006            2007           2008        Thereafter
                        --------------  -------------  --------------  -------------  -------------- --------------
                                                                                    
New Notes                   $ 159,035      $ 159,035       $ 159,035      $ 159,035       $ 159,035    $    -
Fixed interest rate            9.375%         9.375%          9.375%         9.375%          9.375%        9.375%
Principal payments          $    -         $    -          $    -         $   -           $   -        $ 159,035

Credit facility             $ 131,200      $ 110,000       $ 79,893       $ 40,000        $   -        $    -
Variable interest rate (1)       5.5%           5.5%            5.5%           5.5%            5.5%         -
Principal payments          $  20,275      $  21,200       $ 30,107       $ 39,893        $ 40,000     $    -

Old Notes                   $   1,778      $   1,779       $  1,781       $  1,784        $ 1,788      $    -
Fixed interest rate             13.5%          13.5%           13.5%          13.5%           13.5%         13.5%
Principal payments          $    -         $    -          $  -           $    -          $   -        $   1,795



 (1) The  interest  rate on the credit  facility  equals  the  London  Interbank
Offered Rate ("LIBOR")  +3.75%.  LIBOR is assumed to equal 1.75% for all periods
presented.  A 1% increase  (decrease) in the variable interest rate would result
in a $0.8 million  increase  (decrease)  in the related  interest  expense on an
average annual basis (based upon borrowings outstanding as of March 31, 2004).


Item 4.    Controls and Procedures

We maintain  disclosure controls and procedures that are designed to ensure that
information  required to be  disclosed  in our Exchange Act reports is recorded,
processed,  summarized  and reported  within the time  periods  specified in the
Commission's  rules and forms,  and that such  information  is  accumulated  and
communicated  to our  management,  including  our Chief  Executive  Officer  and
Controller (our principal  financial officer),  as appropriate,  to allow timely
decisions regarding required disclosure.

As of the end of the  period  covered  by  this  report,  March  31,  2004  (the
"Evaluation Date"), we carried out an evaluation, under the supervision and with
the  participation  of the Company's  management,  including our Chief Executive
Officer and Controller (our principal financial  officer),  of the effectiveness
of the design and operation of our  disclosure  controls and  procedures.  Based
upon this evaluation,  our Chief Executive Officer and Controller concluded that
our disclosure controls and procedures were effective as of the Evaluation Date.

Because of our reliance on Sprint for financial information, we depend on Sprint
to design adequate internal  controls with respect to the processes  established
to provide this data and  information  to the Company and Sprint's other network
partners.  As part of this  control  process,  Sprint  engages  its  independent
auditors to perform a periodic  evaluation  of these  controls  and to provide a
"Report on Controls Placed in Operation and Tests of Operating Effectiveness for
Affiliates"  under guidance  provided in Statement of Auditing  Standards No. 70
("Type II SAS 70 reports"). The Type II SAS 70 report is provided to us annually
and covers our entire fiscal year.

In addition, at least annually, we review the prior year's Type II SAS 70 report
in light of events that have occurred during the year. We also provide  comments
to Sprint and its  independent  auditors  regarding  issues and  information the
report  should  address  that may not have been  addressed  in the prior  year's
report.

As was  reported in our Form 10-K for our fiscal year ended  September  30, 2003
and our Form 10-Q for our fiscal  quarter  ended  December  31,  2003,  we had a
reportable  condition in our internal controls related to an accounts receivable
issue with  Sprint.  This  reportable  condition  resulted  from our reliance on
Sprint for financial information, including information relating to our revenues
and accounts  receivable,  which underlies a substantial portion of our periodic
financial statements and other financial disclosure.

During the fourth quarter of fiscal 2002, it became apparent that  discrepancies
between  various  accounts  receivable  reports  provided  by Sprint  had become
significant.  To address these issues,  we conducted a lengthy  inquiry into the
causes of the discrepancies. Among other things, we had numerous discussions and
meetings with Sprint's  accounting staff,  requested and received additional and
more detailed reports and demanded reconciliations with our records.

In connection with our review of the accounts  receivable issue at September 30,
2002 for  purposes of  finalizing  our  financial  statements,  we  reclassified

                                       35



approximately  $10.0 million of AirGate subscriber  accounts  receivable for the
fiscal year ended September 30, 2002 to a receivable from Sprint. We provided an
allowance  to reflect  the  receivable  at its net  realizable  value,  which we
collected from Sprint subsequent to September 30, 2002.

At  September  30,  2002,  we and our  independent  auditors  believed  that the
accounts  receivable issue resulted from a reportable  condition in our internal
controls.  Notwithstanding  this  reportable  condition,  we concluded  that our
disclosure controls and procedures were effective as of September 30, 2002.

As previously  disclosed,  the reportable  condition continued during our fiscal
year ended  September  30, 2003 because most of the  procedures  implemented  to
address  the  condition  were not in place  until  the end of the  fiscal  year.
However, we reported in our Form 10-K for the 2003 fiscal year that, as a result
of the improved  processes  and  procedures  designed to address the  reportable
condition,  the Company believed no reportable  condition  existed by the end of
fiscal year September 30, 2003, but our independent  auditors have not made that
finding.  During fiscal 2004, we have continued to perform the enhanced internal
controls procedures adopted to address this reportable condition.

To avoid this  reportable  condition  in the future,  the  Company  will need to
continue the  processes we have  implemented  as  previously  disclosed in prior
filings and continue to obtain or perform the following:

o          Obtain  from  Sprint  access  to a  detailed  listing  of  subscriber
           receivables  at the account  level on a quarterly  basis and validate
           its integrity. Sprint provided this same level of detail at September
           30, 2003,  December  31, 2003,  February 29, 2004 and March 31, 2004,
           and the Company validated the report's  integrity at each date. As of
           February 29, 2004,  Sprint agreed to provide the detailed  listing of
           subscriber receivables at the account level on a monthly basis.

o          Perform a full reconciliation of the subscriber receivables detail to
           the general ledger balance, including a complete understanding of all
           reconciling  items.  During the six months ended March 31, 2004,  the
           Company performed a full reconciliation of the subscriber receivables
           detail on a monthly basis.

o          Perform a rollforward  of the accounts  receivable  information to be
           provided by Sprint and compare  these  amounts to our general  ledger
           accounts.  During the six months  ended March 31,  2004,  the Company
           performed  a  rollforward  of  the  accounts  receivable  information
           provided  by  Sprint  on a monthly  basis  and  reconciled  it to the
           Company's accounts receivable general ledger accounts.

Standing  alone,  the Company does not believe that the following issue raises a
material change in internal controls.  However,  because of the Company's unique
relationship  with Sprint,  we plan to disclose all changes in internal controls
with respect to financial  information provided by Sprint which involves an item
in excess of  $1,000,000  and on a select  basis,  those changes with respect to
financial information below this threshold.

As was  reported  in our Form 10-Q for the first  quarter  of  fiscal  2004,  in
January  2004, we were informed by Sprint of a table mapping error related to 3G
data settlements, which resulted in a $0.6 million reduction of roaming revenue.
Sprint's  data  settlement  system   erroneously   linked  IP  addresses  of  3G
subscribers to the wrong owners. Sprint identified the source of the problem and
solicited input from the affiliates to devise a system of detective  controls to
ensure that this error would not go undetected  beyond a single billing cycle in
the future.  The following  procedures were put in place during January 2004, to
ensure that future  modifications  to the table  mapping are validated by Sprint
and audited and verified by the affiliates on a timely basis:

o        Sprint now performs a quarterly review between Sprint and the Company's
         Engineering  and  Settlement   Departments  to  validate  the  3G  data
         assignment  tables used for  affiliate  settlements  for  accuracy  and
         completeness.  This review was performed during the quarter ended March
         31, 2004 and we were able to validate the tables.

o        The  Company's  Settlement  and  Engineering  Departments  have added a
         process to validate  the accuracy  and  completeness  of its 3G data IP
         address assignments. For the quarter ended March 31, 2004, we validated
         the accuracy and completeness of these assignments.

In preparation  for the  requirements  imposed under Section 404 of the Sarbanes
Oxley  Act of 2002,  we  retained  an  outside  accounting  firm to assist us in
documenting  processes,  identifying  gaps and  improving  our internal  control
processes,  including our processes to verify data provided by Sprint. Beginning
January  2004,  the  outside  accounting  firm  we  retained  began  documenting
processes  and  identifying  gaps in our internal  controls  with the  Company's
management.  During the quarter  ended March 31, 2004,  there were no changes to
internal  control  over  financial  reporting  that have had, or are  reasonably
likely  to have,  a  material  effect on our  internal  control  over  financial
reporting.

In light of the  additional  procedures  adopted as  described  above and in our
prior periodic  filings,  we believe that the improvements made to our system of
internal control over financial reporting were appropriate and responsive to the
internal control over financial  reporting  reportable  condition  identified at
September 30, 2002 and 2003.  We have  continued to monitor the operation of our
improved  internal  control over financial  reporting with respect to our Sprint
relationship,  and have  concluded  that,  as of March 31, 2004,  such  internal
control over financial reporting were effective.


                                       36




PART II. OTHER INFORMATION


Item 1.  Legal Proceedings

See Note 4 to the condensed consolidated financial statements in this document.


Item 2.  Changes in Securities and Use of Proceeds

In connection with the Recapitalization Plan described elsewhere in this Report,
the Company  obtained  consents of holders of 99.4% of the outstanding Old Notes
to:

     o    amend the Indenture governing the Old Notes to eliminate substantially
          all of the restrictive covenants contained in the Old Notes Indenture,
          and release all collateral  securing the Company's  obligations  under
          the Old Notes Indenture; and

     o    the waiver of any defaults  and events of default  under the Old Notes
          Indenture   that   may   have   occurred   in   connection   with  the
          Recapitalization Plan.

On  February  20,  2004,  the  Company  entered  into a  Supplemental  Indenture
regarding the Old Notes. Among other things, the Supplemental  Indenture deleted
the provisions of the Old Notes Indenture that relate to:

     o    the Company's ability to incur indebtedness;

     o    the Company's ability to make restricted payments;

     o    the Company's ability to make permitted investments;

     o    the Company's ability to issue and sell capital stock of subsidiaries;

     o    the Company's ability to enter into transactions with affiliates;

     o    the Company's ability to enter into sale and leaseback transactions;

     o    the Company's ability to create liens;

     o    the Company's ability to declare and pay dividends;

     o    the Company's and its subsidiaries' business activities;

     o    other payment restrictions affecting subsidiaries; and

     o    most events of default.

The foregoing summary of the Supplemental Indenture is qualified in its entirety
to the actual terms of the document,  which is filed with the SEC on Form 8-K on
February 26, 2004.


Item 3.  Defaults Upon Senior Securities


None


Item 4.  Submission of Matters to a Vote of Security Holders

See Note 10 to the condensed consolidated financial statements in this document.

The proposals  submitted to the shareholders at the Special Meeting received the
following votes:



                            Proposal                                    For          Against      Abstain
                            --------                                    ---          -------      -------
                                                                                        
Approve  the  issuance in the  restructuring  of up to 56% of the
Company's issued and outstanding  common stock  immediately after
the restructuring                                                      15,489,917     89,282        48,268
Approve  the   amendment   and   restatement   of  the  Company's
certificate  of  incorporation  to  implement  a 1-for-5  reverse
stock split                                                            15,356,304    220,897        50,265


Approve the  amendment  and  restatement  of the 2002 AirGate PCS,
Inc.  Long Term  Incentive  Plan to increase  the number of shares
available  and reserved for issuance  thereunder,  to make certain
other   changes,   and   to   approve   the   grant   of   certain
performance-vested  restricted  stock  units and stock  options to
certain executives of the Company                                      14,799,856    531,440       296,171



                                37



The consent proposals submitted to the holders of the Old Notes
received the following votes:




                            Proposal                                    For          Against
                            --------                                    ---          -------

                                                                               
Removal of substantially  all of the restrictive  covenants in the
indenture governing the Old Notes, release collateral that secured
the  Company's  obligations  thereunder  and waive any defaults or
events of default that occur in connection with the restructuring    298,204,000      950,000

Acceptance from holders of the Old Notes of the Prepackaged Plan     259,359,200      950,000



Item 5.  Other Information

None.


Item 6.  Exhibits and Reports on Form 8-K

(a) Exhibits

1) Exhibit  10.1  Employment  Separation  Agreement  dated March 23, 2004 by and
between AirGate and William H. Seippel.

2) Exhibit 31.1 Rule 13a-14(a)/15d-14(a) Certification

3) Exhibit 31.2 Rule 13a-14(a)/15d-14(a) Certification

4) Exhibit 32.1 Certification Pursuant to 18 U.S.C. Section 1350

5) Exhibit 32.2 Certification Pursuant to 18 U.S.C. Section 1350


(b) Reports on Form 8-K

The following  Current  Reports on Form 8-K were filed by the Company during the
quarter ended March 31, 2004:

On January 15, 2004,  AirGate  filed a Current  Report on Form 8-K under Items 5
and 7 relating to a press release issued on January 14, 2004  announcing that it
had commenced an exchange  offer to exchange  newly-issued  shares of its common
stock and newly-issued secured notes for its outstanding discount notes.

On February 2, 2004,  AirGate  filed a Current  Report on Form 8-K under Item 12
relating to a press release  announcing its financial and operating  results for
the first quarter of fiscal 2004.

On February 12, 2004,  AirGate filed a Current  Report on Form 8-K under Items 5
and 7 relating to issued a press release announcing that its shareholders,  at a
special  meeting,  had approved the company's  recapitalization  plan,  that the
previously-announced  exchange  offers had  expired,  and that the  company  had
accepted all validly tendered and not withdrawn discount notes.

On February 17, 2004,  AirGate  filed a Current  Report on Form 8-K under Item 9
relating to a press release  announcing its financial and operating  results for
its first fiscal quarter ended December 31, 2003.

On  February  20,  2004,  AirGate  filed a  Current  Report on Form 8-K with the
Securities  and  Exchange  Commission  under  Item  5  and  7  relating  to  the
incorporation  by reference of the  consolidated  balance sheets of AirGate PCS,
Inc. and  subsidiaries  as of September 30, 2003 and 2002, and the  consolidated
statements of  operations,  stockholders'  deficit and cash flow for each of the
years in the  three-year  period  ended  September  30,  2003.  These  financial
statements  reflect a subsequent  event for iPCS,  Inc.  becoming a discontinued
operation.  In addition, the financial statements also reflect a 1-for-5 reverse
stock split of the outstanding  shares of our capital stock effected on February
13, 2004.

On February 26, 2004, AirGate filed the following  documents with the Securities
and Exchange Commission on Form 8-K under Items 5 and 7 : (i) Third Supplemental
Indenture,  dated as of February 20, 2004, by and among AirGate PCS,  Inc.,  AGW
Leasing Company,  Inc., AirGate Network Services,  LLC, AirGate Service Company,
Inc.,  and Deutsche Bank Trust Company  Americas,  and (ii) Indenture for 9-3/8%
senior  subordinated  secured notes due 2009,  dated as of February 20, 2004, by
and among  AirGate  PCS,  Inc.,  AGW  Leasing  Company,  Inc.,  AirGate  Network
Services, LLC, AirGate Service Company, Inc., and The Bank of New York.

On  March  23,  2004,  AirGate  filed a  Current  Report  on Form  8-K  with the
Securities  and  Exchange  Commission  under Item 5 relating to a press  release
issued  announcing  that William H. Seippel,  Vice President and Chief Financial
Officer, has resigned from the Company to pursue other interests.

                                38


SIGNATURES


       Pursuant to the requirements of the Securities  Exchange Act of 1934, the
       registrant  has duly caused this report to be signed on its behalf by the
       undersigned officer thereunto duly authorized.


                   AIRGATE PCS, INC.

                   By:    /s/ Louis E. Martinez
                          ------------------------
                          Louis E. Martinez
                          Title:  Corporate Controller
                           (Duly Authorized Officer, Principal Financial
                            and Chief Accounting Officer)

       Date:  May 14, 2004

                                39