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 JUNE 30, 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|

     11,771,019 shares of common stock,  $0.01 par value, were outstanding as of
August 4, 2004.






                                AIRGATE PCS, INC.
                         FORM 10-Q FOR THE QUARTER ENDED
                                  JUNE 30, 2004

                                TABLE OF CONTENTS

PART I    FINANCIAL INFORMATION
Item 1.   Financial Statements..........................................      3
          Condensed Consolidated Balance Sheets at
           June 30, 2004 (unaudited) and September 30, 2003.............      3
          Condensed Consolidated Statements of Operations
           for the Quarters and Nine Months ended
           June 30, 2004 and 2003 (unaudited)...........................      4
          Condensed Consolidated Statements of Cash Flows
           for the Nine Months ended June 30, 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..................................................     33
Item 4.   Controls and Procedures.......................................     34
PART II   OTHER INFORMATION
Item 1.   Legal Proceedings.............................................     35
Item 2.   Changes in Securities and Use of Proceeds.....................     35
Item 3.   Defaults Upon Senior Securities...............................     35
Item 4.   Submission of Matters to a Vote of Security Holders...........     35
Item 5.   Other Information.............................................     35
Item 6.   Exhibits and Reports on Form 8-K..............................     35


                                      -2-


PART I.  FINANCIAL INFORMATION

Item 1.  -- Financial Statements

                       AIRGATE PCS, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS



                                                                        June 30,        September 30,
                                                                          2004               2003
                                                                    -----------------  -----------------
                                                                      (unaudited)
                                                                    (Dollars in thousands, except share
                                                                           and per share amounts)
                                                                                 
Assets
Current assets:
    Cash and cash equivalents                                               $ 61,962           $ 54,078
    Accounts receivable, net of allowance for doubtful
      accounts of $4,009 and $4,635                                           26,219             26,994
    Receivable from Sprint                                                    14,371             15,809
    Inventories                                                                2,709              2,132
    Prepaid expenses                                                           3,519              2,107
    Other current assets                                                         306                145
                                                                    -----------------  -----------------
      Total current assets                                                   109,086            101,265
Property and equipment, net of accumulated depreciation and
    amortization of $165,660 and $129,986                                    154,199            178,070
Financing costs                                                                2,999              6,682
Direct subscriber activation costs                                             2,245              3,907
Other assets                                                                   1,046                992
                                                                    -----------------  -----------------
                Total assets                                               $ 269,575          $ 290,916
                                                                    =================  =================

Liabilities and Stockholders' Deficit
Current liabilities:
    Accounts payable                                                         $ 2,775            $ 5,945
    Accrued expense                                                           18,969             12,104
    Payable to Sprint                                                         50,215             45,069
    Deferred revenue                                                           8,694              7,854
    Current maturities of long-term debt                                      19,156             17,775
                                                                    -----------------  -----------------
      Total current liabilities                                               99,809             88,747
Deferred subscriber activation fee revenue                                     3,829              6,701
Other long-term liabilities                                                    2,273              1,841
Long-term debt, excluding current maturities                                 252,812            386,509
Investment in iPCS                                                                 -            184,115
                                                                    -----------------  -----------------
      Total liabilities                                                      358,723            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; 11,771,019 and 5,192,238
     shares issued and outstanding at June 30, 2004
     and September 30, 2003                                                      118                 52
    Additional paid-in-capital                                             1,046,376            924,095
    Unearned stock compensation                                                   (5)              (203)
    Accumulated deficit                                                   (1,135,637)        (1,300,941)
                                                                    -----------------  -----------------
      Total stockholders' deficit                                            (89,148)          (376,997)
                                                                    -----------------  -----------------
                Total liabilities and stockholders' deficit                $ 269,575          $ 290,916
                                                                    =================  =================





                See accompanying notes to the unaudited condensed
                       consolidated financial statements.

                                      -3-



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



                                                                    Quarter Ended                   Nine Months Ended
                                                                       June 30,                         June 30,
                                                     ------------------------------------   ------------------------------------
                                                           2004               2003                2004               2003
                                                     -----------------  -----------------   -----------------  -----------------
                                                             (Dollars in thousands, except share and per share amounts)
                                                                                                  
Revenue:
     Service revenue                                         $ 65,037           $ 64,936           $ 188,866          $ 185,032
     Roaming revenue                                           17,389             15,764              47,370             48,569
     Equipment revenue                                          3,612              2,486               9,341              8,199
                                                     -----------------  -----------------   -----------------  -----------------
        Total revenue                                          86,038             83,186             245,577            241,800

Operating Expense:
     Cost of service and roaming (exclusive of
      depreciation and amortization as shown
      separately below)                                        43,278             46,040             125,179            138,210
     Cost of equipment                                          6,670              4,969              20,458             15,271
     Selling and marketing expense                             10,890             12,703              36,931             40,906
     General and administrative expense                         4,970              5,401              17,806             15,437
     Depreciation and amortization of property
      and equipment                                            12,015             11,588              35,674             34,832
     Loss (gain) on disposal of property and
      equipment                                                    (2)                 -                  (7)               418
                                                     -----------------  -----------------   -----------------  -----------------
        Total operating expense                                77,821             80,701             236,041            245,074
                                                     -----------------  -----------------   -----------------  -----------------
        Operating income (loss)                                 8,217              2,485               9,536             (3,274)
Interest income                                                   188                 38                 510                 63
Interest expense                                               (6,230)           (10,770)            (28,857)           (31,161)
                                                     -----------------  -----------------   -----------------  -----------------
        Income (loss) from continuing operations
         before income tax                                      2,175             (8,247)            (18,811)           (34,372)
Income tax                                                          -                  -                   -                  -
                                                     -----------------  -----------------   -----------------  -----------------
        Income (loss) from continuing operations                2,175             (8,247)            (18,811)           (34,372)
Discontinued Operations:
     Loss from discontinued operations                              -                  -                   -            (42,571)
     Gain on disposal of discontinued operations
      net of $0 income tax expense                                  -                  -             184,115                  -
                                                      -----------------  -----------------   -----------------  -----------------
        Income (loss) from discontinued operations                  -                  -             184,115            (42,571)
                                                     -----------------  -----------------   -----------------  -----------------
        Net income (loss)                                     $ 2,175           $ (8,247)          $ 165,304          $ (76,943)
                                                     =================  =================   =================  =================

Weighted-average number of shares outstanding
     Basic shares                                          11,769,976          5,187,967           8,359,868          5,179,483
     Dilutive shares                                       11,857,479          5,187,967           8,359,868          5,179,483


Basic and diluted earnings (loss) per share:
     Basic:
     Income (loss) from continuing operations                  $ 0.18            $ (1.59)            $ (2.25)           $ (6.64)
     Income (loss) from discontinued operations                     -                  -               22.02              (8.22)
                                                     -----------------  -----------------   -----------------  -----------------
        Net income (loss)                                      $ 0.18            $ (1.59)            $ 19.77           $ (14.86)
                                                     =================  =================   =================  =================

     Diluted:
     Income (loss) from continuing operations                  $ 0.18            $ (1.59)            $ (2.25)           $ (6.64)
     Income (loss) from discontinued operations                     -                  -               22.02              (8.22)
                                                     -----------------  -----------------   -----------------  -----------------
        Net income (loss)                                      $ 0.18            $ (1.59)            $ 19.77           $ (14.86)
                                                     =================  =================   =================  =================





                See accompanying notes to the unaudited condensed
                       consolidated financial statements.

                                      -4-



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



                                                                                          Nine Months Ended
                                                                                               June 30,
                                                                                ------------------------------------
                                                                                      2004               2003
                                                                                -----------------  -----------------
                                                                                      (Dollars in thousands)

                                                                                              
Cash flows from operating activities:
     Net income (loss)                                                             $ 165,304          $ (76,943)
       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                        35,674             34,832
       Amortization of financing costs into interest expense                             812                907
       Provision for doubtful accounts                                                  (553)             3,724
       Interest expense associated with accretion of discounts                        15,242             24,480
       Non-cash stock compensation                                                       485                506
       Loss (gain) on disposal of property and equipment                                   (7)              418
                Changes in assets and liabilities:
                   Accounts receivable                                                  1,328            (2,555)
                   Receivable from Sprint                                               1,438            15,173
                   Inventories                                                           (577)            2,093
                   Prepaid expenses, other current and non-current assets                  35               401
                   Accounts payable, accrued expenses and
                    other long-term liabilities                                         1,262            (1,781)
                   Payable to Sprint                                                    5,146           (13,376)
                   Deferred revenue                                                       840              (713)
                                                                                -----------------  -----------------
       Net cash provided by operating activities                                       42,314             29,737
                                                                                -----------------  -----------------

Cash flows from investing activities:
     Purchases of property and equipment                                             (11,803)           (10,369)
                                                                                -----------------  -----------------
       Net cash used in investing activities                                         (11,803)           (10,369)
                                                                                -----------------  -----------------

Cash flows from financing activities:
     Borrowings under credit facility                                                       -             8,000
     Repayments of credit facility                                                    (17,019)           (1,518)
     Financing cost on credit facility                                                   (884)              -
     Transaction costs capitalized to equity                                           (4,759)              -
     Stock issued to employee stock purchase plan                                           -                56
     Proceeds from stock option exercises                                                  35               -
                                                                                -----------------  -----------------
       Net cash (used in) provided by financing activities                            (22,627)            6,538
                                                                                -----------------  -----------------
       Net increase in cash and cash equivalents                                        7,884            25,906
Cash and cash equivalents at beginning of period                                       54,078             4,887
                                                                                -----------------  -----------------
Cash and cash equivalents at end of period                                           $ 61,962           $ 30,793
                                                                                =================  =================

Supplemental disclosure of cash flow information:
     Interest paid                                                                    $ 5,518            $ 5,748
Supplemental disclosure for non-cash investing activities:
     Capitalized interest                                                                 112                173
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
                                  June 30, 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")
for  interim  financial  reporting  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
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 nine months  ended June 30, 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  PCS  ("Sprint"),  which is a group of  wholly-owned
subsidiaries of Sprint Corporation that operate and manage Sprint's PCS products
and  services.  We have 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 October 17, 2003, the Company  irrevocably  transferred  all of its shares of
common  stock of iPCS,  Inc.  and its  subsidiaries  ("iPCS") to a trust for the
benefit of the Company's  shareholders of record as of the date of the 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 disposal of
discontinued   operations.   The  Company's  condensed   consolidated  financial
statements  reflect the results of iPCS as  discontinued  operations  (described
below in Note 6).

 (b)  Liquidity

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
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").

Since inception,  the Company has financed its operations through debt financing
and proceeds  generated from public  offerings of its common stock. The proceeds
from these  transactions  have been used to fund the  build-out of the Company's
portion of the PCS network of Sprint,  subscriber  acquisition costs and working
capital.  Since  inception,  the Company  has  invested  over $300.0  million in
capital expenditures.

As of June 30,  2004,  the Company had working  capital of $9.3 million and cash
and cash equivalents of $62.0 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.  The Company  believes  that the cash on hand plus the  additional
liquidity that it expects to generate from operations will be sufficient to fund
expected capital  expenditures and to cover its working capital and debt service
requirements for at least the next 12 months.

While the  Company has  incurred  substantial  net losses  since  inception  and
negative cash flows from operating  activities  through  September 30, 2002, the
Company generated $42.5 million of cash flows from operating  activities for the
year ended  September  30, 2003.  For the nine months  ended June 30, 2004,  the
Company generated $42.3 million of cash flows from operating activities.

As part of the Company's  financial  restructuring  to address future  liquidity
concerns (the "Recapitalization Plan"), in November 2003 the Company amended its
credit  facility  and in  February  2004  completed  an exchange of 99.4% of the
$300.0 million in outstanding 13 1/2% Old Notes for $159.0 million in 9 3/8% New

                                      -6-



Notes and issuance of 6,568,706 shares of common stock,  representing 56% of the
shares of common stock issued and outstanding  immediately  after the completion
of the Recapitalization Plan.

The  accompanying  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  registered  public  accounting
firm,  included an  explanatory  paragraph  regarding the  Company's  ability to
continue as a going concern in their audit opinion.

The  Company's  future  liquidity  will be  dependent  on a  number  of  factors
influencing its  projections of operating cash flow,  including those related to
subscriber  growth,  retention  and  credit  quality;  revenue  growth  and  the
Company's  ability to manage  operating  expense.  Should actual  results differ
significantly from these assumptions,  the Company's liquidity position could be
adversely  affected and it could be in a position that would require it to raise
additional  capital which may or may not be available on terms acceptable to the
Company,  if at all. The Company's  inability to raise capital when needed could
have a material adverse effect on the Company's  ability to achieve its intended
business objectives.

 (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 did not 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.

(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
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 an 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.

Although the Company  acknowledges  its  responsibility  for all of its internal
controls,  the  Company  relies  upon  Sprint as a service  provider  to provide
accurate  information  for the settlement of revenue and certain  expense items.
The Company makes estimates used in connection with the preparation of financial
statements  based on the  financial  and  statistical  information  provided  by
Sprint.  The  Company  assesses  the  accuracy of this  information  through the
Company's audit procedures, analytic reviews and the reliance on the Type II SAS
70 report,  "Report  on  Controls  Placed in  Operation  and Tests of  Operating
Effectiveness for the Reporting and Financial  Settlement Process," for Sprint's
internal  control  processes.  The report is  prepared  for  Sprint by  Sprint's
service  auditor.  Inaccurate or incomplete  data from Sprint in connection with
the  services  provided to the Company by Sprint  could have a material  adverse
effect on the Company's financial position, results of operations or cash flow.

Amounts  recorded  relating  to the Sprint  Agreements  for the quarter and nine
months ended June 30, 2004 and 2003 are as follows:

                                      -7-




                                                                   Quarter Ended                     Nine Months Ended
                                                                      June 30,                            June 30,
                                                          ----------------------------------  ----------------------------------
                                                               2004              2003              2004              2003
                                                          ----------------  ----------------  ----------------  ----------------
                                                               (Dollars in thousands)

                                                                                                   
Amounts included in the Condensed Consolidated
 Statements of Operations:
    Roaming revenue                                              $ 16,737          $ 14,595          $ 45,389          $ 45,588
    Cost of service and roaming:
      Roaming                                                    $ 12,380          $ 11,548          $ 36,154          $ 37,261
      Customer service                                              7,195             9,313            20,542            31,040
      Affiliation fee                                               4,879             4,203            14,263            13,748
      Long distance                                                 3,301             3,309             9,976             9,353
      Other                                                           906               546             2,188             1,536
                                                          ----------------  ----------------  ----------------  ----------------
         Total cost of service and roaming                       $ 28,661          $ 28,919          $ 83,123          $ 92,938
                                                          ================  ================  ================  ================

    Purchased inventory                                           $ 5,600           $ 3,971          $ 21,015          $ 12,192
                                                          ================  ================  ================  ================

    Selling and marketing                                         $ 2,750           $ 3,672           $ 9,672           $ 9,784
                                                          ================  ================  ================  ================



                                                                                              As of
                                                                                ----------------------------------
                                                                                   June 30,        September 30,
                                                                                     2004              2003
                                                                                ----------------  ----------------
                                                                                     (Dollars in thousands)
                                                                                                
Receivable from Sprint                                                              $ 14,371          $ 15,809
Payable to Sprint                                                                   $ 50,215          $ 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 nine months  ended
June 30, 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 to  reimburse
      Sprint for certain 3G related  development  expenses.  For the nine months
      ended June 30,  2004,  Sprint  invoiced  the Company  and we have  accrued
      approximately  $3.2 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 nine  months  ended June 30,
      2004, Sprint invoiced the Company and we have accrued  approximately  $1.3
      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 $2.3 million for the nine months ended June 30, 2004 for the
      cost of IT projects  completed by Sprint. We are disputing  Sprint's right
      to collect these fees.

The payable to Sprint includes disputed amounts  (including,  but not limited to
amounts disclosed above) for which Sprint has invoiced the Company approximately
$15.0 million.  The invoiced amount does not include $2.7 million which has been
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.  Sprint has unilaterally reduced
the reciprocal roaming rate charged among Sprint and its network partners,  in a
manner we believe is a breach of the Sprint Agreements.

During the nine months ended June 30, 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

                                      -8-



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 nine  months  ended June 30, 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 reductions to cost of service.

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 June
30, 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.

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

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.

(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 nine months ended June 30, 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  disposal 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.

                                      -9-



(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 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  disposal  of  discontinued  operations.   The  Company's
condensed  consolidated  financial  statements  reflect  the  results of iPCS as
discontinued  operations.  Subsequent  to February 23, 2003 and prior to October
17, 2003 the Company  accounted for iPCS as an investment  using the cost method
of accounting. Excluding the gain on disposal of $184.1 million recorded October
17, 2003, there were no losses from discontinued  operations for the quarter and
nine  months  ended  June  30,  2004.  The  following  reflects  the  loss  from
discontinued operations of iPCS for the nine months ended June 30, 2003 (dollars
in thousands):

                                                      Nine Months Ended
                                                           June 30,
                                                    -----------------------
                                                             2003
                                                    -----------------------
Revenue                                                           $ 79,364
Cost of revenue                                                     63,200
Selling and marketing                                               16,418
General and administrative                                           6,881
Depreciation and amortization                                       20,989
                                                    -----------------------
   Operating expense                                               107,488
                                                    -----------------------
   Operating loss                                                  (28,124)
   Interest expense, net                                           (14,447)
                                                    -----------------------
   Loss from discontinued operations                             $ (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), the Old Notes (see Note 10) 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.

AirGate Network Services LLC ("ANS") is a wholly-owned  restricted subsidiary of
the Company. ANS has fully and unconditionally guaranteed the New Notes, the 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, the 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 June 30,
2004 and  September 30, 2003 and for the quarters and nine months ended June 30,
2004 and 2003 (dollars in thousands):











                                      -10-



                Unaudited Condensed Consolidating Balance Sheets
                               As of June 30, 2004



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

                                                                                        
Cash and cash equivalents                      $ 61,970                 $ (8)                  $ -              $ 61,962
Other current assets                            108,236                  529               (61,641)               47,124
                                    --------------------  -------------------   -------------------  --------------------
    Total current assets                        170,206                  521               (61,641)              109,086
Property and equipment, net                     124,119               30,080                     -               154,199
Other noncurrent assets                           6,290                    -                     -                 6,290
                                    --------------------  -------------------   -------------------  --------------------
    Total assets                              $ 300,615             $ 30,601             $ (61,641)            $ 269,575
                                    ====================  ===================   ===================  ====================

Current liabilities                           $ 100,110             $ 61,340             $ (61,641)             $ 99,809
Intercompany                                   (123,601)             123,601                     -                     -
Long-term debt                                  252,812                    -                     -               252,812
Other long-term liabilities                       6,102                    -                     -                 6,102
Investment in subsidiaries                      154,340                    -              (154,340)                    -
                                    --------------------  -------------------   -------------------  --------------------
    Total liabilities                           389,763              184,941              (215,981)              358,723
                                    --------------------  -------------------   -------------------  --------------------
Stockholders' deficit                           (89,148)            (154,340)              154,340               (89,148)
                                    --------------------  -------------------   -------------------  --------------------
    Total liabilities and
     stockholders' deficit                    $ 300,615             $ 30,601             $ (61,641)            $ 269,575
                                    ====================  ===================   ===================  ====================




                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 June 30, 2004



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

                                                                                               
Revenue                                                    $ 86,038                $ -                $ -           $ 86,038

Cost of revenue                                              45,627              4,321                  -             49,948
Selling and marketing                                        10,377                513                  -             10,890
General and administrative                                    4,846                124                  -              4,970
Depreciation and amortization of
 property and equipment                                       9,638              2,377                  -             12,015
Gain on disposal of property and equipment                       (2)                 -                  -                 (2)
                                                   -----------------  -----------------  -----------------  -----------------
    Total operating expense                                  70,486              7,335                  -             77,821
                                                   -----------------  -----------------  -----------------  -----------------
    Operating income (loss)                                  15,552             (7,335)                 -              8,217
Loss in subsidiaries                                         (7,294)                 -              7,294                  -
Interest income                                                 188                  -                  -                188
Interest expense                                             (6,271)                41                  -             (6,230)
                                                   -----------------  -----------------  -----------------  -----------------
    Income (loss) from continuing operations
     before income tax                                        2,175             (7,294)             7,294              2,175
    Income tax                                                    -                  -                  -                  -
                                                   -----------------  -----------------  -----------------  -----------------
       Net income (loss)                                    $ 2,175           $ (7,294)           $ 7,294            $ 2,175
                                                   =================  =================  =================  =================





            Unaudited Condensed Consolidating Statement of Operations
                       For the Quarter Ended June 30, 2003




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

                                                                                                 
Revenue                                                    $ 83,186                $ -                $ -           $ 83,186

Cost of revenue                                              46,786              4,223                  -             51,009
Selling and marketing                                        11,656              1,047                  -             12,703
General and administrative                                    5,069                332                  -              5,401
Depreciation and amortization of
 property and equipment                                      10,798                790                  -             11,588
                                                   -----------------  -----------------  -----------------  -----------------
    Total operating expense                                  74,309              6,392                  -             80,701
                                                   -----------------  -----------------  -----------------  -----------------
    Operating income (loss)                                   8,877             (6,392)                 -              2,485
Loss in subsidiaries                                         (6,383)                 -              6,383                  -
Interest income                                                  38                  -                  -                 38
Interest expense                                            (10,779)                 9                  -            (10,770)
                                                   -----------------  -----------------  -----------------  -----------------
    Loss  before income tax                                  (8,247)            (6,383)             6,383             (8,247)
    Income tax                                                    -                  -                  -                  -
                                                   -----------------  -----------------  -----------------  -----------------
       Net loss                                            $ (8,247)          $ (6,383)           $ 6,383           $ (8,247)
                                                   =================  =================  =================  =================





                                      -12-









            Unaudited Condensed Consolidating Statement of Operations
                     For the Nine Months Ended June 30, 2004



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

                                                                                               
Revenue                                                   $ 245,577                $ -                $ -          $ 245,577

Cost of revenue                                             132,917             12,720                  -            145,637
Selling and marketing                                        35,339              1,592                  -             36,931
General and administrative                                   17,405                401                  -             17,806
Depreciation and amortization of
 property and equipment                                      28,544              7,130                  -             35,674
Gain on disposal of property and equipment                       (7)                 -                  -                 (7)
                                                   -----------------  -----------------  -----------------  -----------------
    Total operating expense                                 214,198             21,843                  -            236,041
                                                   -----------------  -----------------  -----------------  -----------------
    Operating income (loss)                                  31,379            (21,843)                 -              9,536
Loss in subsidiaries                                        (21,731)                 -             21,731                  -
Interest income                                                 510                  -                  -                510
Interest expense                                            (28,969)               112                  -            (28,857)
                                                   -----------------  -----------------  -----------------  -----------------
    Loss from continuing operations
     before income tax                                      (18,811)           (21,731)            21,731            (18,811)
    Income tax                                                    -                  -                  -                  -
                                                   -----------------  -----------------  -----------------  -----------------
       Loss from continuing operations                      (18,811)           (21,731)            21,731            (18,811)
       Income from discontinued operations                  184,115                  -                  -            184,115
                                                   -----------------  -----------------  -----------------  -----------------
       Net income (loss)                                  $ 165,304          $ (21,731)          $ 21,731          $ 165,304
                                                   =================  =================  =================  =================




            Unaudited Condensed Consolidating Statement of Operations
                     For the Nine Months Ended June 30, 2003



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

                                                                                              
Revenue                                                   $ 241,800                $ -                $ -          $ 241,800

Cost of revenue                                             140,678             12,803                  -            153,481
Selling and marketing                                        37,910              2,996                  -             40,906
General and administrative                                   13,824              1,613                  -             15,437
Depreciation and amortization of
 property and equipment                                      27,671              7,161                  -             34,832
Loss on disposal of property and equipment                      418                  -                  -                418
                                                   -----------------  -----------------  -----------------  -----------------
    Total operating expense                                 220,501             24,573                  -            245,074
                                                   -----------------  -----------------  -----------------  -----------------
    Operating income (loss)                                  21,299            (24,573)                 -             (3,274)
Loss in subsidiaries                                        (24,456)                 -             24,456                  -
Interest income                                                  63                  -                  -                 63
Interest expense                                            (31,278)               117                  -            (31,161)
                                                   -----------------  -----------------  -----------------  -----------------
    Loss from continuing operations
     before income tax                                      (34,372)           (24,456)            24,456            (34,372)
    Income tax                                                    -                  -                  -                  -
                                                   -----------------  -----------------  -----------------  -----------------
       Loss from continuing operations                      (34,372)           (24,456)            24,456            (34,372)
       Loss from discontinued operations                    (42,571)                 -                  -            (42,571)
                                                   -----------------  -----------------  -----------------  -----------------
       Net loss                                           $ (76,943)         $ (24,456)          $ 24,456          $ (76,943)
                                                   =================  =================  =================  =================




                                      -13-





            Unaudited Condensed Consolidating Statement of Cash Flows
                     For the Nine Months Ended June 30, 2004



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

                                                                                                   
Operating activities, net                                 $ 42,053                $ 261                   $ -             $ 42,314
Investing activities, net                                  (11,534)                (269)                    -              (11,803)
Financing activities, net                                  (22,627)                   -                     -              (22,627)
                                               --------------------  -------------------  --------------------  -------------------
    Change in cash and
     cash equivalents                                        7,892                   (8)                    -                7,884
Cash and cash equivalents
 at beginning of period                                     54,078                    -                     -               54,078
                                               --------------------  -------------------  --------------------  -------------------
Cash and cash equivalents
 at end of period                                         $ 61,970                 $ (8)                  $ -             $ 61,962
                                               ====================  ===================  ====================  ===================




            Unaudited Condensed Consolidating Statement of Cash Flows
                     For the Nine Months Ended June 30, 2003




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

                                                                                                   
Operating activities, net                                 $ 29,121                $ 616                   $ -             $ 29,737
Investing activities, net                                   (9,632)                (737)                    -              (10,369)
Financing activities, net                                    6,538                    -                     -                6,538
                                               --------------------  -------------------  --------------------  -------------------
    Change in cash and cash equivalents                     26,027                 (121)                    -               25,906
Cash and cash equivalents
 at beginning of period                                      4,769                  118                     -                4,887
                                               --------------------  -------------------  --------------------  -------------------
Cash and cash equivalents at end of period                $ 30,796                 $ (3)                  $ -             $ 30,793
                                               ====================  ===================  ====================  ===================




(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 39,835,  53,841, and 39,588 for the quarter ended
June 30,  2003 and the nine months  ended June 30,  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
effected on February 13, 2004 (described below in Note 10).

(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 quarters  and nine months ended June 30, 2004 and 2003,  the pro
forma net  income  (loss)  and  earnings  (loss)  per share  would  have been as
follows:

                                      -14-





                                                             Quarters Ended                        Nine Months Ended
                                                                June 30,                               June 30,
                                                    ------------------------------------   -----------------------------------
                                                          2004               2003               2004               2003
                                                    ------------------  ----------------   ----------------   ----------------
                                                        (Dollars in thousands, except per share data)
                                                                                                 
Net income (loss), as reported                                $ 2,175          $ (8,247)         $ 165,304          $ (76,943)
Add: stock based compensation expense included in
    determination of net income (loss)                            185               177                467                530
Less: stock based compensation expense determined
    under the fair value based method                          (1,651)           (2,426)            (4,953)            (7,278)
                                                    ------------------  ----------------   ----------------   ----------------
Pro forma, net income (loss)                                    $ 709         $ (10,496)         $ 160,818          $ (83,691)
                                                    ==================  ================   ================   ================

Basic and diluted earnings (loss) per share:
    Basic
    As reported                                                $ 0.18           $ (1.59)           $ 19.77           $ (14.86)
    Pro forma                                                  $ 0.06           $ (2.02)           $ 19.24           $ (16.16)

    Diluted
    As reported                                                $ 0.18           $ (1.59)           $ 19.77           $ (14.86)
    Pro forma                                                  $ 0.06           $ (2.02)           $ 19.24           $ (16.16)




On April 8, 2004,  the Company  issued 99,750  shares of  performance-restricted
stock. The restrictions on the stock lapse three years from the date of issuance
if certain  cumulative  performance  criteria are met at September 30, 2006. The
shares qualify for variable  accounting under Accounting  Principles Board (APB)
Statement No. 25 and Financial Accounting Standards Board Interpretation 28. The
Company  recorded  compensation  expense of $0.2 million related to these shares
during the quarter ended June 30, 2004.

On April 8, 2004, the Company also issued 299,250 stock options with an exercise
price of $15.93,  which vest ratably over three years. The shares were accounted
for in  accordance  with  APB  No.  25.  No  related  compensation  expense  was
recognized during the quarter ended June 30, 2004.

 (10)  Recapitalization Plan

In November  2003,  the Company  completed an amendment to its credit  facility.
Certain changes were effective and used in determining compliance with financial
covenants  for periods  ended  December  31, 2003 and  thereafter.  Such changes
included clarifying and modifying the definition of, and period for calculating,
EBITDA for  purposes of  complying  with  financial  covenants  under the credit
facility.

In February 2004, the Company completed the Recapitalization Plan, comprised of:

o    The exchange of  $298,205,000  of  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  issued and
     outstanding  immediately  after the  Recapitalization  Plan and (ii) $159.0
     million   aggregate   principal  amount  of  newly  issued  9  3/8%  senior
     subordinated notes due 2009 (the "New Notes"); and

o    The  removal  of  substantially  all of the  restrictive  covenants  in the
     indenture  governing the Old Notes,  release of collateral that secured the
     Company's  obligations  thereunder  and waiver of any defaults or events of
     default that occurred in connection with the recapitalization.

The  $298,205,000  of Old  Notes  exchanged  constituted  99.4% of the Old Notes
outstanding. In the recapitalization, each tendering 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 a 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.

The exchange offer comprising the Recapitalization  Plan was settled 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

                                      -15-


condensed  consolidated financial statements as of and for the nine months ended
June 30,  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
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 issued
in the restructuring.  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 June 30, 2004, the carrying
value of the New Notes  was  approximately  $135.9  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 nine  months  ended  June 30,  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;

                                      -16-



o    anticipated future losses;
o    rapid technological and market change;
o    an adequate supply of subscriber equipment;
o    declines in growth of wireless subscribers;
o    the effect of wireless local number portability;
o    the volatility of the market price of our common stock and
o    the  future  obsolescence  of our  network  assets  based on  technological
     changes.

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.

During  the  third  quarter  of 2004 we  continued  to stay  focused  on our key
financial and operating  performance  metrics,  including net income and EBITDA.
Accomplishments  during the third  quarter of fiscal 2004,  which we believe are
important  indicators  of our  overall  performance  and  financial  well-being,
include:

    o Achieving  for  the  first  time in our  Company's  history,  income  from
      continuing operations for the quarter ended June 30, 2004 of $2.2 million,
      or $0.18 per share for both basic and diluted  outstanding  common shares,
      compared  to a loss of ($8.2)  million or  $(1.59)  per share for the same
      quarter of the previous year.
    o EBITDA, earnings before interest, taxes, depreciation and amortization (as
      later  defined),  was $20.2  million for the quarter  ended June 30, 2004,
      compared to $14.1 million for the same quarter of the previous year.
    o Gross additions were 38,223 for the quarter ended June 30, 2004,  compared
      to 38,919 for the same quarter of the previous year.
    o Churn (as later defined)  decreased to 2.55% in the quarter ended June 30,
      2004,  compared  to 2.90% for the same  quarter of the  previous  year and
      2.92% in the second quarter of fiscal 2004.

The Company generated $42.3 million in cash from operating activities during the
nine months ended June 30, 2004,  compared to $29.7  million for the prior year.
We believe these results have  strengthened our balance sheet by increasing cash
and cash  equivalents  to $62.0 million from $48.6 million in the second quarter
of fiscal 2004 and from $30.8 million from the previous year.

As of June 30,  2004,  the  Company had 375,241  subscribers  and total  network
coverage of approximately 6.1 million residents,  representing approximately 82%
of the residents in its territory.

                                      -17-


iPCS, Inc.

On November 30, 2001, we acquired iPCS in a merger. 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 disposal of
discontinued  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.

Critical Accounting Policies and Estimates

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.

                                      -18-


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.

Revenue and Cost Data Provided by Sprint

Although  the Company  recognizes  its  responsibility  for all of its  internal
controls,  we  place  substantial  reliance  on  the  timeliness,  accuracy  and
sufficiency of certain  revenue,  accounts  receivable and cost data provided by
Sprint which we use in the preparation of our financial statements and financial
disclosures.  The  data  provided  by  Sprint  is the  primary  source  for  our
recognition  of service  revenue  and a  significant  portion of our selling and
marketing and cost of service and operations  expenses.  At times,  we have been
invoiced by Sprint for charges  that we  believed to be  incorrect  based on our
agreements with Sprint. We review all charges from Sprint and dispute charges if
appropriate  based upon our  interpretation  of our agreements  with Sprint PCS.
When  Sprint  does not notify us timely of  charges  that we have  incurred,  we
record  estimates  primarily based on our historical  trends and our estimate of
the amount  due to  Sprint.  Amounts  in  dispute  with  Sprint  have been fully
reserved or otherwise provided for.

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 our 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.

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.

Valuation and Recoverability of Long-Lived Assets

Long-lived assets such as property and equipment represent  approximately 57% of
the  Company's  total assets as of June 30, 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.  The 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

For the quarter ended June 30, 2004 compared to the quarter ended June 30, 2003:

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.

                                      -19-


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 generally 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.



                                             For the Quarters Ended June 30,
                          -----------------------------------------------------------------------
                                                                     Increase          Increase
                                2004               2003             (Decrease)$       (Decrease)%
                          -----------------   ----------------   -----------------   ------------
                                                (Dollars in thousands)

                                                                          
Service revenue                   $ 65,037           $ 64,936        $ 101                  0.2%
Roaming revenue                     17,389             15,764        1,625                 10.3%
Equipment revenue                    3,612              2,486        1,126                 45.3%
                          -----------------   ----------------   --------------
    Total                         $ 86,038           $ 83,186       $ 2,852                 3.4%
                          =================   ================   ==============




Service Revenue

The slight  increase in service revenue for the quarter ended June 30, 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,  substantially  offset by higher  customer  care and  promotional
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.  As a
result, the number of minutes-over-plan charged to subscribers for plan overages
used and associated revenues have decreased while the number of minutes used for
PCS to PCS calls has  increased  significantly  as compared to periods  prior to
adoption of this program.

Roaming Revenue

The  increase in roaming  revenue  for the quarter  ended June 30, 2004 over the
same quarter of the previous year is attributable to an increase of $8.8 million
resulting from higher inbound roaming traffic, partially offset by a decrease of
$7.2  million as a result of a decrease  in the  reciprocal  roaming  rate.  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.  For the quarter ended June 30, 2004, the Company's roaming revenue from
Sprint and its PCS network  partners was $16.7  million or 96% compared to $14.6
million or 92% of total roaming revenue for the quarter ended June 30, 2003.

Equipment Revenue

Equipment  revenue for the quarter ended June 30, 2004  increased  over the same
quarter of the previous year,  primarily due to increased  handset sales of $3.7
million or an 82% increase  prior to rebates and  promotion  costs,  offset by a
$2.6 million increase in handset rebates and promotions. The increase in handset
sales is comprised  of a $3.0 million  increase in sales of handsets to existing
subscribers,  a $0.6  million  increase in sales to new  subscribers  and a $0.1
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    Other cost of service, which includes:

                                      -20-


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;

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; and

o    Wireless  handset  subsidies on existing  subscriber  purchases of handsets
     through national third-party retailers.




                                                             For the Quarters Ended June 30,
                                          -----------------------------------------------------------------------
                                                                                     Increase          Increase
                                                2004               2003             (Decrease)$       (Decrease)%
                                          -----------------   ----------------   -----------------   ------------
                                                                (Dollars in thousands)

                                                                                          
Cost of roaming                                   $ 12,981           $ 12,123            $ 858              7.1%
Network operating costs                             15,782             14,606            1,176              8.1%
Bad debt expense                                       165              1,570           (1,405)           (89.5%)
Other cost of service                               14,350             17,741           (3,391)           (19.1%)
                                          -----------------   ----------------   --------------
    Total cost of service and roaming             $ 43,278           $ 46,040         $ (2,762)            (6.0%)
                                          =================   ================   ==============




Cost of Roaming

The increase in cost of roaming for the quarter  ended June 30, 2004 compared to
the same quarter of the  previous  year is  attributable  to an increase of $6.2
million  resulting from higher outbound roaming  traffic,  partially offset by a
decrease  of $5.3  million as a result of a decrease in the  reciprocal  roaming
rate (see roaming revenue above). The Company's cost of roaming  attributable to
Sprint and its network  partners was $12.4  million and $11.5  million or 95% of
the total cost of roaming for both quarters ended June 30, 2004 and 2003.

Network Operating Costs

Network  operating  costs increased for the quarter ended June 30, 2004 compared
to the same  quarter of the previous  year  primarily  due to increased  network
costs resulting from a 28% increase in network usage and increased  interconnect
charges and higher feature costs.

Bad Debt Expense

Bad debt expense  decreased  for the quarter ended June 30, 2004 compared to the
same quarter of the previous  year.  During the quarter ended June 30, 2004, the
Company  recorded  a $0.3  million  reduction  to bad debt  expense  related  to
significantly past due accounts  receivable which were previously written off by
Sprint.  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.  On April  6,  2004,  the  Company  reduced  or
eliminated the deposit  requirement  for certain  subscribers in selected market
areas.  As of June 30,  2004,  the Company  has not  experienced  a  significant
increase in delinquent customers.  While we will continue to review our customer
performance  and modify  our  credit  policy to meet  short-term  and  long-term
business  objectives and closely monitor the impact of sub-prime  customers,  we
are not certain what impact in the future the change in credit  policy will have
on our financial results.

Other Cost of Service

Other cost of service  decreased for the quarter ended June 30, 2004 compared to
the same  quarter of the  previous  year as a result of a rate  reduction in the
fees paid to Sprint for back office services  provided lower subsidies and lower
customer loyalty retention costs.




                                      -21-

Cost of Equipment, Other Operating Expenses and Interest




                                                                              For the Quarters Ended June 30,
                                                           -----------------------------------------------------------------------
                                                                                                      Increase          Increase
                                                                 2004               2003             (Decrease)$       (Decrease)%
                                                           -----------------   ----------------   -----------------   ------------
                                                                                 (Dollars in thousands)

                                                                                                              
Cost of equipment                                                   $ 6,670            $ 4,969            1,701             34.2%
Selling and marketing expense                                        10,890             12,703           (1,813)           (14.3%)
General and administrative expense                                    4,970              5,401             (431)            (8.0%)
Depreciation and amortization of property and equipment              12,015             11,588              427              3.7%
Loss (gain) on disposal of property
    and equipment                                                        (2)                 -                2                NM
Interest income                                                         188                 38              150            394.7%
Interest expense                                                      6,230             10,770           (4,540)           (42.2%)




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 June 30, 2004  compared to the same  quarter of the  previous
year  primarily  as a result  of  increased  retail  handset  sales to  existing
subscribers, partially offset by slightly lower 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  decreased  for the quarter  ended June 30,  2004  compared to the same
quarter of the previous year as a result of staff  reductions and store closings
implemented in fiscal 2003 and lower estimated  commission  payments,  offset by
increased advertising and promotional expense.

General and Administrative Expense

General and administrative expense decreased for the quarter ended June 30, 2004
compared to the same quarter of the previous  year, as a result of decreased use
of outside consulting services.

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 for the quarter ended June 30, 2004 compared to
the same quarter of the previous year primarily as a result of increased capital
spending over the comparable quarter in fiscal year 2003 and prior quarters. The
Company  purchased  $4.4 million of property and  equipment in the quarter ended
June 30, 2004,  compared to property and equipment  purchases of $3.7 million in
the quarter ended June 30, 2003.

Interest Expense

Interest  expense  decreased for the quarter ended June 30, 2004 compared to the
same  quarter  of the  previous  year as a  result  of  lower  outstanding  debt
balances.  As a result of the debt  restructuring,  our  outstanding  notes were
reduced from $300.0  million to $159.0  million in New Notes and $1.7 million in
Old Notes and our interest  rate on the New Notes is 9 3/8% compared to 13.5% on
the Old Notes.  Additionally,  the outstanding balance on the credit facility is
$134.5  million with a weighted  average rate of 5.02% at June 30, 2004 compared
to $143.0 million with a weighted average rate of 5.14% at June 30, 2003.

Income Tax

No income tax benefit on  continuing  operations  was  recorded for the quarters
ended June 30, 2004 and 2003, as it was not more likely than not that the income
tax benefit would be realized.

                                      -22-


Income (Loss)  from Continuing Operations

For the quarter ended June 30, 2004, income from continuing  operations was $2.2
million  compared to a loss from  continuing  operations of $8.2 million for the
same quarter of the previous  year.  The  improvement is primarily the result of
higher  roaming  revenue,  lower cost of service and roaming,  lower selling and
marketing expense and lower interest expense.

For the nine months  ended June 30, 2004  compared to the nine months ended June
30, 2003:



                                              For the Nine Months Ended June 30,
                            -----------------------------------------------------------------------
                                                                       Increase         Increase
                                  2004               2003             (Decrease)$      (Decrease)%
                            -----------------   ----------------   ----------------   -------------
                                                    (Dollars in thousands)

                                                                              
Service revenue                    $ 188,866          $ 185,032       $ 3,834                 2.1%
Roaming revenue                       47,370             48,569        (1,199)               (2.5%)
Equipment revenue                      9,341              8,199         1,142                13.9%
                            -----------------   ----------------   --------------
    Total                          $ 245,577          $ 241,800       $ 3,777                 1.6%
                            =================   ================   ==============



Service Revenue

The increase in service revenue for the nine months ended June 30, 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 lower revenue from "minutes over plan," or airtime usage in
excess of the subscribed  usage plans and higher  customer care and  promotional
credits.

Roaming Revenue

The decrease in roaming revenue for the nine months ended June 30, 2004 over the
same period of the previous year is  attributable to a decrease of $24.7 million
as a result of a decrease in the reciprocal roaming rate, partially offset by an
increase of $23.5 million resulting from higher inbound roaming traffic. For the
nine months ended June 30, 2004, the Company's  roaming  revenue from Sprint and
its PCS network  partners was $45.4  million,  or  approximately  96% of roaming
revenue,  compared to $45.6 million or approximately  94% of roaming revenue for
the nine months ended June 30, 2003.

Equipment Revenue

Equipment  revenue for the nine months  ended June 30, 2004  increased  over the
same period of the previous  year,  primarily due to increased  handset sales of
$9.6 million or a 70% increase prior to rebates and promotion costs, offset by a
$8.8  million  increase  in  handset  rebates  and  promotions  and lower  gross
additions  from our retail  and local  distributor  channels.  The  increase  in
handset  sales is comprised  of a $7.3 million  increase in sales of handsets to
existing subscribers,  a $2.1 million increase in sales to new subscribers and a
$0.2 million increase in accessory sales.

Cost of Service and Roaming




                                                                For the Nine Months Ended June 30,
                                              -----------------------------------------------------------------------
                                                                                         Increase         Increase
                                                    2004               2003             (Decrease)$      (Decrease)%
                                              -----------------   ----------------   ----------------   -------------
                                                        (Dollars in thousands)

                                                                                             
Cost of roaming                                       $ 37,717           $ 39,258         $ (1,541)            (3.9%)
Network operating costs                                 46,944             43,452            3,492              8.0%
Bad debt expense                                          (553)             3,724           (4,277)               NM
Other cost of service                                   41,071             56,760          (15,689)           (27.6%)
                                              -----------------   ----------------   --------------
    Total cost of service and roaming                $ 125,179          $ 143,194        $ (18,015)           (12.6%)
                                              =================   ================   ==============


Cost of Roaming

The decrease in cost of roaming for the nine months ended June 30, 2004 compared
to the same period of the previous year is  attributable  to a decrease of $19.9
million as a result of a decrease  in the  reciprocal  roaming  rate,  partially
offset by an increase of $18.4 million  resulting from higher  outbound  roaming
traffic.  Cost of roaming of $36.2  million and $37.3  million or 96% and 95% of
the total cost of roaming was  attributable  to Sprint and its network  partners
for the nine months ended June 30, 2004 and 2003, respectively.

                                      -23-



Network Operating Costs

Network  operating  costs  increased  for the nine  months  ended June 30,  2004
compared to the same period of the  previous  year  primarily  due to  increased
network  costs as a result of a 30%  increase  in network  usage and higher long
distance costs and increased interconnect charges.

Bad Debt Expense

Bad debt expense  decreased  for the nine months ended June 30, 2004 compared to
the same period of the  previous  year.  During the nine  months  ended June 30,
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
and  recorded  a  $0.3  million   reduction  in  bad  debt  expense  related  to
significantly past due accounts receivable which were previously  written-off by
Sprint.  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 nine months ended June 30, 2004.

Other Cost of Service

Other cost of service decreased for the nine months ended June 30, 2004 compared
to the same period of the previous year. The decrease was  attributable to lower
service bureau costs and fees paid to Sprint,  lower  subsidies,  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.

Cost of Equipment, Other Operating Expenses and Interest




                                                                             For the Nine Months Ended June 30,
                                                           -----------------------------------------------------------------------
                                                                                                      Increase         Increase
                                                                 2004               2003             (Decrease)$      (Decrease)%
                                                           -----------------   ----------------   ----------------   -------------
                                                                                   (Dollars in thousands)

                                                                                                            
Cost of equipment                                                  $ 20,458           $ 15,271            5,187             34.0%
Selling and marketing expense                                        36,931             40,906           (3,975)            (9.7%)
General and administrative expense                                   17,806             15,437            2,369             15.3%
Depreciation and amortization of property and equipment              35,674             34,832              842              2.4%
Loss (gain) on disposal of property
    and equipment                                                        (7)               418             (425)          (101.7%)
Interest income                                                         510                 63              447            709.5%
Interest expense                                                     28,857             31,161           (2,304)            (7.4%)




Cost of Equipment

Cost of equipment  increased for the nine months ended June 30, 2004 compared to
the same period of the previous year  primarily as a result of increased  retail
sales of handsets to existing subscribers,  offset by decreased subscriber gross
additions.

Selling and Marketing Expense

Selling and marketing  expense decreased for the nine months ended June 30, 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 fiscal 2003, partially offset by increased rebate costs
for handsets sold through national third parties.

General and Administrative Expense

General and administrative  expense increased for the nine months ended June 30,
2004  compared  to the same  period of the  previous  year,  as a result of $3.1
million in costs related to the  Recapitalization  Plan and higher  salaries and
other employee  costs as a result of fully  absorbing  corporate  overhead costs
previously  shared with iPCS.  These higher costs were partially offset by lower
outside consulting costs.

Depreciation and Amortization of Property and Equipment

Depreciation  expense increased for the nine months ended June 30, 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  $11.8  million of property and  equipment in the nine months
ended June 30,  2004,  compared to property  and  equipment  purchases  of $10.4
million in the nine months ended June 30, 2003.

                                      -24-



Interest Expense

Interest  expense  decreased for the nine months ended June 30, 2004 compared to
the same  period  of the  previous  year as a result of lower  outstanding  debt
balances.  As a result of the debt  restructuring,  our  outstanding  notes were
reduced from $300.0  million to $159.0  million in New Notes and $1.7 million in
Old Notes and our interest  rate on the New Notes is 9 3/8% compared to 13.5% on
the Old Notes.  Additionally,  the outstanding balance on the credit facility is
$134.5  million with a weighted  average rate of 5.02% at June 30, 2004 compared
to $143.0 million with a weighted average rate of 5.14% at June 30, 2003.

Income Tax

No income tax benefit on continuing  operations was recorded for the nine months
ended June 30,  2004 and 2003 as it was not more likely than not that the income
tax benefit would be realized.

Loss from Continuing Operations

For the nine  months  ended  June 30,  2004,  loss  from  continuing  operations
improved to $18.8  million  compared to $34.4 million for the same period of the
previous year. The improvement is the result of higher revenue,  reduced cost of
service and roaming,  lower  selling and  marketing  expense and lower  interest
expense,  offset by higher  general and  administrative  expenses as a result of
increased spending associated with the Recapitalization Plan of $3.1 million.

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 nine months ended June 30,
2004 and a loss from the discontinued operations of iPCS of $42.6 million during
the nine months ended June 30, 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,  income (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 income  (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 income (loss)
from  continuing  operations,  as well as a  reconciliation  of EBITDA to income
(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), income (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),  income
(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:

                                      -25-


    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 equipment margin for handsets sold
      to new subscribers (equipment revenues less cost of equipment, which costs
      have historically exceeded the related revenues) and selling and marketing
      expenses related to adding new  subscribers.  Equipment margin on handsets
      sold to existing subscribers,  including handset upgrade transactions, are
      excluded,   as  these  costs  are  incurred   specifically   for  existing
      subscribers.  That net amount is then divided by the total new subscribers
      acquired during the period.  Prior to June 30, 2004, the Company  included
      upgrade costs for existing subscribers as a component of CPGA. The Company
      believes the measure is more  meaningful and comparable if these costs are
      excluded given they relate to existing subscribers.  For the quarter ended
      June 30, 2004, the Company has excluded handset upgrade costs for existing
      customers from the CPGA calculation for all periods presented.

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

The tables,  which follow present and reconcile  non-GAAP financial measures and
key  operating  metrics for the Company for the  quarters  and nine months ended
June 30, 2004 and 2003.

For the quarter ended June 30, 2004 compared to the quarter ended June 30, 2003:

The table  below  sets  forth key  operating  metrics  for the  Company  for the
quarters ended June 30, 2004 and 2003 (dollars in thousands, except unit and per
unit data):




                                                                    For the Quarters Ended June 30,
                                                      ------------------------------------------------------------
                                                                                        Increase       Increase
                                                          2004           2003          (Decrease)     (Decrease)
                                                      -------------  --------------  -------------  --------------

                                                                                              
Total subscribers, end of period                           375,241         364,157         11,084            3.0%
Subscriber gross additions                                  38,223          38,919           (696)          (1.8%)
Subscriber net additions                                     7,434           5,593          1,841           32.9%
Churn                                                        2.55%           2.90%         (0.35%)             NM
ARPU                                                       $ 58.35         $ 59.90        $ (1.55)          (2.6%)
CPGA                                                         $ 330           $ 381         $ ( 51)         (13.4%)
EBITDA                                                    $ 20,232        $ 14,073        $ 6,159           43.8%




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 June 30,
                                                      ------------------------------------------------------------
                                                                                        Increase       Increase
                                                          2004           2003          (Decrease)     (Decrease)
                                                      -------------  --------------  -------------  --------------

                                                                                             
Average Revenue Per User (ARPU):
Service revenue                                           $ 65,037        $ 64,936          $ 101            0.2%
Average subscribers                                        371,524         361,361         10,163            2.8%
ARPU                                                       $ 58.35         $ 59.90        $ (1.55)          (2.6%)




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):

                                      -26-




                                                                    For the Quarters Ended June 30,
                                                      ------------------------------------------------------------
                                                                                         Increase        Increase
                                                         2004            2003           (Decrease)      (Decrease)
                                                      -------------  --------------  ---------------   -----------

                                                                                        
Cost Per Gross Addition (CPGA):
Selling and marketing expense                             $ 10,890        $ 12,703       $ (1,813)         (14.3%)
Plus: activation costs                                         706             333            373          112.0%
Plus: cost of equipment                                      6,670           4,969          1,701           34.2%
Less: costs for existing subscribers                        (2,039)           (679)        (1,360)             NM
Less: equipment revenue                                     (3,612)         (2,486)        (1,126)             NM
                                                      -------------  --------------  -------------
Total acquisition costs                                   $ 12,615        $ 14,840       $ (2,225)         (15.0%)
                                                      =============  ==============  =============
Gross additions                                             38,223          38,919           (696)          (1.8%)
CPGA                                                         $ 330           $ 381          $ (51)         (13.4%)



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




                                                                    For the Quarters Ended June 30,
                                                      ------------------------------------------------------------
                                                                                        Increase       Increase
                                                          2004           2003          (Decrease)     (Decrease)
                                                      -------------  --------------  -------------  --------------

                                                                                           
Income (loss) from continuing operations                   $ 2,175        $ (8,247)      $ 10,422              NM
Depreciation and amortization of property and
equipment                                                   12,015          11,588            427            3.7%
Interest income                                               (188)            (38)          (150)             NM
Interest expense                                             6,230          10,770         (4,540)         (42.2%)
                                                      -------------  --------------  -------------
EBITDA                                                    $ 20,232        $ 14,073        $ 6,159           43.8%
                                                      =============  ==============  =============





Subscriber Gross Additions

Subscriber  gross  additions  decreased  slightly for the quarter ended June 30,
2004  compared to the same quarter in 2003.  This decrease is due to the loss of
distribution  from closed retail  stores and Sprint's  loss of certain  national
third-party distribution channels.

Subscriber Net Additions

Subscriber net additions increased for the quarter ended June 30, 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.

Churn

Churn improved for the quarter ended June 30, 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 June 30, 2004  compared to the
same period in 2003.

The FCC has mandated that wireless  carriers  provide for wireless  local number
portability,  or WLNP,  in certain large markets by November 24, 2003 and by May
24, 2004 in all remaining markets. Six of our thirty-seven markets were included
in the November 2003  deadline.  WLNP allows  subscribers to keep their wireless
phone number when  switching  to a different  service  provider.  As of June 30,
2004,  WLNP has not had a  material  impact  on  subscriber  churn,  but  number
portability could increase churn in the future.

Average Revenue Per User

ARPU  decreased for the quarter ended June 30, 2004 compared to the same quarter
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,
partially offset by higher subscriber  monthly recurring charges and higher data
revenue.

Cost per Gross Addition

CPGA  decreased for the quarter ended June 30, 2004 compared to the same quarter
in 2003.  The  decrease  reflects  lower third party and  employee  commissions,
partially  offset by increased  costs for  marketing,  advertising,  and handset
sales incentives.

                                      -27-


EBITDA

EBITDA for the quarter  ended June 30, 2004  increased  from the same quarter in
2003.  This increase is a result of higher  revenues,  lower cost of service and
roaming and lower selling and marketing expense.

For the nine months  ended June 30, 2004  compared to the nine months ended June
30, 2003:

The table  below sets forth key  operating  metrics for the Company for the nine
months ended June 30, 2004 and 2003 (dollars in  thousands,  except unit and per
unit data):



                                                 For the Nine Months Ended June 30,
                                   ------------------------------------------------------------
                                                                     Increase       Increase
                                       2004           2003          (Decrease)     (Decrease)%
                                   -------------  --------------  -------------  --------------

                                                                         
Subscriber gross additions            115,565         137,543        (21,978)           (16.0%)
Subscriber net additions               15,781          25,018         (9,237)           (36.9%)
Churn                                   2.83%           3.30%         (0.47%)               NM
ARPU                                  $ 57.13         $ 58.47       $  (1.34)            (2.3%)
CPGA                                  $   374           $ 344       $     30              8.7%
EBITDA                                $45,210        $ 31,558       $ 13,652             43.3%







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 Nine Months Ended June 30,
                                                        ------------------------------------------------------------
                                                                                          Increase       Increase
                                                            2004           2003          (Decrease)     (Decrease)%
                                                        -------------  --------------  -------------  --------------

                                                                                              
Average Revenue Per User (ARPU):
Service revenue                                          $ 188,866       $ 185,032        $ 3,834              2.1%
Average subscribers                                        367,351         351,648         15,703              4.5%
ARPU                                                       $ 57.13         $ 58.47        $ (1.34)            (2.3%)



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 Nine Months Ended June 30,
                                                        ------------------------------------------------------------
                                                                                          Increase       Increase
                                                            2004           2003          (Decrease)     (Decrease)%
                                                        -------------  --------------  -------------  --------------

                                                                                         
Cost Per Gross Addition (CPGA):
Selling and marketing expense                             $ 36,931        $ 40,906       $ (3,975)            (9.7%)
Plus: activation costs                                       2,424             747          1,677            224.5%
Plus: cost of equipment                                     20,458          15,271          5,187             34.0%
Less: costs for existing subscribers                        (7,215)         (1,396)        (5,819)               NM
Less: equipment revenue                                     (9,341)         (8,199)        (1,142)               NM
                                                      -------------  --------------  -------------
Total acquisition costs                                   $ 43,257        $ 47,329       $ (4,072)            (8.6%)
                                                      =============  ==============  =============
Gross additions                                            115,565         137,543        (21,978)           (16.0%)
CPGA                                                         $ 374           $ 344           $ 30              8.7%



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

                                      -28-





                                                                      For the Nine Months Ended June 30,
                                                        ------------------------------------------------------------
                                                                                          Increase       Increase
                                                            2004           2003          (Decrease)     (Decrease)%
                                                        -------------  --------------  -------------  --------------

                                                                                            
Loss from continuing operations                          $ (18,811)      $ (34,372)      $ 15,561                NM
Depreciation and amortization of property and
equipment                                                   35,674          34,832            842              2.4%
Interest income                                               (510)            (63)          (447)               NM
Interest expense                                            28,857          31,161         (2,304)            (7.4%)
                                                      -------------  --------------  -------------
EBITDA                                                    $ 45,210        $ 31,558       $ 13,652             43.3%
                                                      =============  ==============  =============




Subscriber Gross Additions

Subscriber  gross  additions  decreased  for the nine months ended June 30, 2004
compared  to the  same  period  in  2003.  This  decrease  is due to the loss of
distribution  from closed retail  stores and Sprint's  loss of certain  national
third-party distribution channels.

Subscriber Net Additions

Subscriber  net  additions  decreased  for the nine months  ended June 30, 2004,
compared to the same period in 2003.  This  decrease is due to the  reduction in
subscriber  gross additions,  partially offset by the improved  subscriber churn
rate.

Churn

Churn  improved for the nine months  ended June 30,  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 nine months  ended June 30, 2004  compared to
the same period in 2003.

Average Revenue Per User

ARPU  decreased  for the nine months  ended June 30,  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 and
higher data revenues.

Cost per Gross Addition

CPGA  increased  for the nine months  ended June 30,  2004  compared to the same
period  in 2003.  The  increase  reflects  increased  costs  for  handset  sales
incentives and rebates, partially offset by lower marketing and selling expenses
that were spread over a lower number of gross additions.

EBITDA

EBITDA for the nine months ended June 30, 2004 increased from the same period in
2003.  This increase is a result of an increase in revenues and decrease in cost
of services and roaming, decreased selling and marketing expense and an increase
in general and administrative expenses. The decrease in cost of service included
special Sprint  settlements  of $1.2 million  recorded for the change in certain
customer bad debt profiles and $1.2 million  resulting from Sprint's decision to
discontinue their billing system conversion. General and administrative expenses
included higher costs as a result of $3.1 million in debt restructuring costs.

Liquidity and Capital Resources

As of June 30, 2004, the Company had $62.0 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 June 30, 2004 was $9.3 million,  compared to
working  capital of $12.5  million at September  30,  2003.  The increase in the
Company's  cash  position  of $7.9  million  is  attributable  to the  following
(dollars in thousands):

                                      -29-




                                                                            For the Nine Months Ended June 30,
                                                        ----------------------------------------------------------------------------
                                                                                                       Increase         Increase
                                                                 2004             2003                (Decrease)       (Decrease)%
                                                        -----------------  ------------------  -------------------------------------
                                                                        (Dollars in thousands)

                                                                                                      
Cash provided by operating activities                       $ 42,314            $  29,737          $ 12,577            42.3%
Cash used in investing activities                            (11,803)             (10,369)           (1,434)          (13.8%)
Cash (used in) provided by financing activities              (22,627)               6,538           (29,165)         (446.1%)
                                                        -----------------  ------------------  -----------------  ------------------
              Net increase (decrease)                        $ 7,884            $ 25,906           $(18,022)          (69.6%)
                                                        =================  ==================  =================  ==================



Net Cash Provided By Operating Activities

The $42.3 million of cash provided by operating  activities  for the nine months
ended June 30, 2004 was the result of the  Company's  $165.3  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  $132.5  million  and an  increase  in  other
operating  assets and  liabilities  of $9.5  million.  The $29.7 million of cash
provided by operating activities for the nine months ended June 30, 2003 was the
result  of the  Company's  $76.9  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
$107.4  million  and  offset  by  a  decrease  in  other  operating  assets  and
liabilities of $0.8 million.


Net Cash Used in Investing Activities

The $11.8 million of cash used in investing activities for the nine months ended
June 30,  2004  represents  purchases  of  property  and  equipment  related  to
expansion of switch capacity and improvements in service  quality.  For the nine
months ended June 30, 2003, cash used in investing  activities was $10.4 million
for purchases of property and equipment  related to expansion of switch capacity
and improvements in service quality.

Net Cash (Used In)Provided by Financing Activities

The $22.6  million in cash used in financing  activities  during the nine months
ended  June  30,  2004,  consisted  of  $17.0  million  for  principal  payments
associated with the credit facility and $4.8 million in debt restructuring costs
which were  capitalized  as part of paid in  capital,  and $0.8  million in fees
capitalized  related to amending the credit  facility.  The $6.5 million of cash
provided by  financing  activities  during the nine  months  ended June 30, 2003
consisted of $8.0 million  borrowed  under the credit  facility,  offset by $1.5
million of principal payments associated with the credit facility.

Liquidity

We have  principally  relied on the proceeds from equity and debt financings and
cash provided from operations as our primary  sources of capital.  During fiscal
year 2003, we generated  approximately $42.5 million of cash flow from operating
activities.  In the nine months ended June 30, 2004, we generated  approximately
$42.3 million of cash flow from operating activities.

As of June 30,  2004,  the Company had working  capital of $9.6 million and cash
and cash equivalents of $62.0 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.  The Company  believes  that the cash on hand plus the  additional
liquidity that it expects to generate from operations will be sufficient to fund
expected capital  expenditures and to cover its working capital and debt service
requirements for at least the next 12 months.

Completion of our PCS network has required substantial capital.  Since inception
through   fiscal  2003  we  had  incurred   over  $300.0   million  for  capital
expenditures.  For the nine months  ended June 30, 2004 we have  incurred  $11.8
million of capital  expenditures.  Although we have  essentially  completed  our
network coverage build-out,  our business will likely require additional capital
expenditures primarily for capacity enhancements and coverage improvements.

While  management  does not currently  anticipate  the need to raise  additional
capital  to meet our  operating  and  capital  expenditure  requirements  in the
foreseeable  future,  our  funding  status is  dependent  on a number of factors
influencing  projections  of operating  cash flows,  including  those related to
gross new subscriber additions,  subscriber turnover,  revenues, marketing cost,
bad debt  expense and roaming and  revenue.  Further,  management  believes  our
financial  position  over the next twelve  months will be sufficient to meet the
cash  requirements of the business  including capital  expenditures,  operations
losses,  cash interest and working  capital needs.  Should actual results differ
significantly  from our current  assumptions,  our liquidity  position  could be

                                      -30-


adversely  affected and we could be in a position that would require us to raise
additional capital,  which may not be available to us or may not be available on
acceptable terms.

Further,  if we fail to satisfy the financial  covenants and other  requirements
contained in our credit  facility and the indentures  governing our  outstanding
notes, our debts could become  immediately  payable at a time when we are unable
to pay them, without additional capital.

During the quarter ended March 31, 2004, pursuant to the Recapitalization  Plan,
the Company  exchanged 99.4% of the 13.5% Old Notes maturing in 2009 with 9 3/8%
New Notes  maturing in 2009 and  issuance of 6,568,706  shares of common  stock,
representing   56%  of  the  shares  of  common  stock  issued  and  outstanding
immediately  after the  Recapitalization  Plan.  As a result,  after  2004,  the
financial  restructuring is estimated to provide 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
continue,  our  operating  results,  liquidity  and capital  resources  could be
adversely  affected.  As of June 30, 2004, we have disputed  approximately $15.0
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 $17.7 million.

Capital Resources

As of June 30, 2004, the Company had $62.0 million of cash and cash equivalents.
The Company has no further borrowing available under the credit facility.

Future Trends That May Affect Operating Results, Liquidity and Capital Resources

During 2003, we experienced  overall declining net subscriber growth compared to
previous  periods.  This decline is  attributable  to increased  competition and
slowing aggregate subscriber growth in the wireless telecommunications industry.
Although we have experienced  improvements in subscriber  growth during the past
two quarters of fiscal 2004,  we may  continue to  experience  net losses as the
cost to  acquire  subscribers  is  significant.  If the  trend  of  slowing  net
subscriber  growth does not improve,  we believe it will  lengthen the amount of
time it will take for us to reach a sufficient  number of subscribers  needed to
offset the costs of acquisition.  It is not yet clear what effect the FCC's WLNP
mandate will have on subscriber growth,  although we believe that it should lead
to some  increase in net  subscriber  additions  as it makes  switching  service
providers  easier for  subscribers  but may also lead to  increased  competition
among service providers.

Our  average  monthly  churn  for the  third  fiscal  quarter  of 2004 was 2.55%
compared to 2.90% for 2003.  We expect that in the near term churn may  increase
as a result  of the  implementation  of the  FCC's  WLNP  mandate  in all of our
markets  during the third  fiscal  quarter  of 2004.  Through  the third  fiscal
quarter of 2004, we have not  experienced a material  impact to churn related to
WLNP with respect to the markets in which we operate that became  subject to the
mandate in November  2003.  The  remainder  of our markets  were  subject to the
mandate  beginning in May 2004.  If average  monthly  churn  increases  over the
long-term, we would lose the cash flows attributable to those customers and have
greater than projected losses.

We may incur  significant  handset  subsidy  costs for  existing  customers  who
upgrade  to a new  handset.  As our  customer  base  matures  and  technological
advances in our services  take place,  we believe more existing  customers  will
begin to upgrade to new handsets to take  advantage of these  services.  We have
limited  historical  experience  regarding the rate at which existing  customers
upgrade  their  handsets and if more  customers  upgrade  than we are  currently
anticipating,  it could have a material  adverse impact on our earnings and cash
flows.

For the quarter ended June 30, 2004, we had income for continuing  operations of
$2.2 million,  or $0.18 per share for the first time in the  Company's  history,
primarily as a result of lower interest expense, higher net roaming revenue, and
lower bad debt expense. Each of these items is discussed below:

    o Interest  expense was lower as a result of a reduction in the  outstanding
      balance of our notes and a lower  interest  rate.  We expect  that we will
      continue  to see the  benefits  of lower  interest  expense  on the  notes
      resulting from our Recapitalization Plan.
    o Higher  net  roaming  revenue is largely  attributable  to higher  inbound
      travel  volume.  Net roaming  revenue can be affected by industry  trends,
      seasonality, and rates.
    o Throughout  fiscal year 2004, the Company has experienced lower subscriber
      write-off experience;  however, we are continually  monitoring the effects
      of changes  in our  credit  policy  for  certain  subscribers  and are not
      certain  what  effect,  if any,  the  changes  will  have on our bad  debt
      expense.
    o Additionally, during the quarter ended June 30, 2004 we did not receive or
      pay any significant special Sprint Settlements.

                                      -31-



For the quarter ended June 30, 2004, we had cash and cash  equivalents  of $62.0
million.  On July 1, 2004 we made our first interest  payment of $7.5 million on
the New Notes.

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,
the 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         7,455      14,909       14,909      14,909      14,909          17,396
Operating leases (5)                  60,262        18,899      14,396        9,485       6,632       5,159           5,691
                                -------------  ------------  ----------  -----------  ----------  ----------   -------------
                                   $ 482,454      $ 54,089    $ 57,526     $ 60,070    $ 65,106    $ 61,503       $ 184,160
                                =============  ============  ==========  ===========  ==========  ==========   =============




(1)  Total repayments are based upon borrowings  outstanding as of September 30,
     2003.
(2)  Interest  rate  is  assumed  to  be  5.5%.   As  of  June  30,  2004,   the
     weighted-average  interest rate on the credit facility was 5.02%.  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)  Stated interest rate on Old Notes is 13.5% with payments starting in 2005.
(4)  Stated interest rate on New Notes is 9.375% with payments  starting in July
     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 which was amended on November 30, 2003,  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
facility,  the Company makes quarterly payments which began on December 31, 2002
for the Tranche I Term Loan and March 31, 2004 for the Tranche II Term Loan. 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 5.0%,
(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 June 30, 2004,  the Company was in compliance in all material
respects with covenants contained in the credit facility.

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.

                                      -32-


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
June 30,  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 June 30,  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 ($135.9 million  including  discounts of $23.2 million at
June 30, 2004) and the remaining  accreted carrying value of the Old Notes ($1.7
million  at June 30,  2004).  The  Company's  variable  rate  debt  consists  of
borrowings  made under the credit facility  ($134.5 million  outstanding at June
30, 2004).  As of June 30, 2004,  the weighted  average  interest rate under the
credit facility was 5.02%.  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.

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






                                      -33-



 (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 June 30, 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 reports  pursuant to the Securities
Exchange Act of 1934 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 Chief Financial  Officer,  as appropriate,  to allow
timely decisions regarding required disclosure.

As of the  end of the  period  covered  by  this  report,  June  30,  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 Chief  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 Chief  Financial  Officer  concluded  that our
disclosure controls and procedures were effective as of the Evaluation Date.

Although the Company  acknowledges  its  responsibility  for all of its internal
controls, 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
service  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 the Reporting and Financial Settlement Process" 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 semi-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 service  auditors  regarding issues and information we believe
the report should address.

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 determined
during fiscal 2002, that we had a reportable  condition in our internal controls
related to an accounts  receivable  issue with  Sprint.  We and our  independent
auditors believed that the accounts  receivable issue resulted from a reportable
condition in our internal  controls as they related to  information  we received
from Sprint and our ability to verify that  information.  The Company  relies 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.

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 and each quarter ended to date during  fiscal 2004,  and the
           Company validated the report's integrity at each date.  Subsequent to
           February 29, 2004, Sprint provided 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. At September 30, 2003, and during the nine months
           ended June 30, 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.  At September  30,  2003,  and during the nine months ended
           June 30, 2004,  the Company
                                      -34-


           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.

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 June 30,  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 June 30, 2004,  our  disclosure
controls and procedures were effective.


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

None

Item 3.  Defaults Upon Senior Securities

None

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

None


Item 5.  Other Information

None.


Item 6.  Exhibits and Reports on Form 8-K

(a) Exhibits

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

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

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

4) 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 June 30, 2004:

On April 8, 2004, AirGate filed a Current Report on Form 8-K under items 7,9 and
12 relating to a slide presentation made to investors on April 8, 2004.

On April 9, 2004, AirGate filed a Current Report on Form 8-K under items 5 and 7
relating to a press release  announcing the appointment of three new independent
directors and the reelection of one director.

On April 13, 2004,  AirGate filed a Current Report on Form 8-K under items 7 and
12 relating to a press release announcing certain preliminary  operating results
for the second quarter of fiscal 2004.

On April 13, 2004,  AirGate filed a Current Report on Form 8-K under items 5 and
7 relating to a press release announcing the resignation of Barbara L. Blackford
as its vice president, general counsel and corporate secretary to become general
counsel to Superior Essex Inc.

On May 13, 2004,  AirGate filed a Current Report on Form 8-K under items 5 and 7
relating to a press release  announcing its financial and operating  results for
the second quarter of fiscal 2004.

                                      -35-


On May 13, 2004, AirGate filed a Current Report on Form 8-K under items 7 and 12
relating to the script of the conference call it held on May 13, 2004 to discuss
the financial and operating results for the second quarter of fiscal 2004.

On May 18, 2004,  AirGate filed a Current Report on Form 8-K under items 7,9 and
12 relating to a slide presentation made to investors on May 18, 2004.














                                      -36-


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/ William J. Loughman
                                        William J. Loughman
                                 Title: Chief Financial Officer
                                (Duly Authorized Officer, Principal Financial
                                 and Chief Accounting Officer)

       Date:  August 13, 2004










                                      -37-