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 September 30, 2009

	Or

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

	For the transition period from to

Commission File Number 000-51844

iPCS, INC.

(Exact name of registrant as specified in its charter)

Delaware		36-4350876
(State or other jurisdiction of incorporation or		(I.R.S. Employer Identification No.)
organization)

1901 N. Roselle Road, Schaumburg, Illinois		60195
(Address of principal executive offices)		(Zip code)

(847) 885-2833

(Registrant’s telephone number, including zip 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 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 o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o		Accelerated filer x

Non-accelerated filer o		Smaller reporting company o
(Do not check if a smaller reporting company)

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

As of October 27, 2009, there were 16,539,190 shares of common stock, $0.01 par value per share, outstanding.

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

iPCS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(In thousands, except share and per share amounts)

	September 30, 2009			December 31, 2008 (a)

Assets
Current Assets:
Cash and cash equivalents	$	77,092		$	55,940
Accounts receivable, net of allowance for doubtful accounts of $6,884 and $8,125, respectively	44,922			37,859
Receivable from Sprint (Note 3)	29,168			25,623
Inventories, net	6,346			5,465
Assets held for sale (Note 4)	—			389
Prepaid expenses	7,653			7,223
Other current assets	34			63
Total current assets	165,215			132,562
Property and equipment, net (Note 4)	159,726			162,014
Financing costs, net	5,387			6,419
Deferred customer activation costs	2,935			3,816
Intangible assets, net (Note 5)	83,720			90,602
Goodwill (Note 5)	141,783			141,783
Other assets	432			416
Total assets	$	559,198		$	537,612

Liabilities and Stockholders’ Deficiency
Current Liabilities:
Accounts payable	$	5,044		$	5,051
Accrued expenses	19,848			18,337
Payable to Sprint (Note 3)	49,709			41,067
Deferred revenue	14,793			13,410
Accrued interest	3,672			5,519
Current maturities of long-term debt and capital lease obligations (Note 6)	42			37
Total current liabilities	93,108			83,421
Deferred customer activation fee revenue	2,935			3,816
Interest rate swap (Note 7)	11,749			16,621
Other long-term liabilities	6,761			6,551
Long-term debt and capital lease obligations, excluding current maturities (Note 6)	477,667			475,401
Total liabilities	592,220			585,810

Commitments and contingencies (Note 15)

Stockholders’ Deficiency:
Preferred stock, par value $.01 per share; 25,000,000 shares authorized, none issued	—			—
Common stock, par value $.01 per share; 75,000,000 shares authorized, 17,262,954 and 17,163,221 shares issued, respectively	173			172
Additional paid-in-capital	171,021			167,531
Accumulated deficiency	(183,448		)	(199,280		)
Accumulated other comprehensive loss (Note 7 and 12)	(11,749		)	(16,621		)
Treasury stock, at cost; 658,863 and 0 shares, respectively (Note 13)	(9,019		)	—
Total stockholders’ deficiency	(33,022		)	(48,198		)
Total liabilities and stockholders’ deficiency	$	559,198		$	537,612

(a) Derived from the Company’s audited financial statements as of December 31, 2008.

See Notes to unaudited consolidated financial statements.

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iPCS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

(Dollars in thousands, except share data)

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2009			2008			2009			2008

Revenue:
Service revenue	$	108,480		$	96,097		$	319,600		$	282,370
Roaming revenue	27,783			32,282			83,556			94,083
Equipment and other	5,141			3,678			14,571			10,633
Total revenue	141,404			132,057			417,727			387,086
Operating Expense:
Cost of service and roaming	74,038			74,520			217,838			213,167
Cost of equipment	18,497			15,905			50,029			40,442
Selling and marketing	17,542			18,091			51,528			52,394
General and administrative	8,948			10,028			25,565			25,108
Gain on Sprint settlement (Note 3)	—			—			(4,273		)	—
Depreciation	8,986			10,592			29,233			33,809
Amortization of intangible assets (Note 5)	2,294			2,295			6,882			6,882
Loss on disposal of property and equipment, net	113			71			629			329
Total operating expense	130,418			131,502			377,431			372,131
Operating income	10,986			555			40,296			14,955
Interest income	47			316			211			1,420
Interest expense	(8,065		)	(8,320		)	(24,096		)	(25,456		)
Other income, net	72			63			99			93
Income (loss) before provision for income tax	3,040			(7,386		)	16,510			(8,988		)
Provision for income tax (Note 9)	358			108			678			758
Net income (loss)	$	2,682		$	(7,494	)	$	15,832		$	(9,746	)

Income (loss) per share of common stock:
Basic	$	0.16		$	(0.44	)	$	0.94		$	(0.57	)
Diluted	$	0.16		$	(0.44	)	$	0.93		$	(0.57	)

Weighted average shares of common stock outstanding:
Basic	16,595,364			17,159,794			16,828,193			17,150,061
Diluted	16,917,497			17,159,794			16,994,820			17,150,061

See Notes to unaudited consolidated financial statements.

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iPCS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(In thousands)

	For the Nine Months Ended September 30,
	2009			2008
Cash Flows from Operating Activities:
Net income (loss)	$	15,832		$	(9,746	)
Adjustments to reconcile net income (loss) to net cash flows from operating activities:
Loss on disposal of property and equipment	629			329
Depreciation and amortization	36,115			40,691
Non-cash interest expense	1,032			1,032
Payment-in-kind interest	3,600			—
Stock-based compensation expense	3,502			4,778
Provision for doubtful accounts	8,044			15,791
Changes in assets and liabilities:
Accounts receivable	(15,105		)	(21,395		)
Receivable from Sprint	(3,546		)	9,885
Inventories, net	(881		)	(3,476		)
Prepaid expenses, other current and long-term assets	464			206
Accounts payable, accrued expenses and other long-term liabilities	(1,048		)	5,753
Payable to Sprint	8,642			(815		)
Deferred revenue	502			1,081
Net cash flows provided by operating activities	57,782			44,114
Cash Flows from Investing Activities:
Purchases of property and equipment	(27,910		)	(52,435		)
Proceeds from disposition of property and equipment	248			156
Net cash flows used in investing activities	(27,662		)	(52,279		)
Cash Flows from Financing Activities:
Payments on capital lease obligations	(27		)	(22		)
Proceeds from the exercise of stock options	5			582
Payment of special cash dividend	(89		)	(109		)
Repurchase of common stock	(8,857		)	(19		)
Net cash flows (used in) provided by financing activities	(8,968		)	432
Net increase (decrease) in cash and cash equivalents	21,152			(7,733		)
Cash and cash equivalents at beginning of period	55,940			77,599
Cash and cash equivalents at end of period	$	77,092		$	69,866

Supplemental disclosure of cash flow information - cash paid for interest (net of amount capitalized)	$	21,254		$	24,978
Supplemental disclosure for non-cash investing activities:
Accounts payable and accrued expenses incurred for the acquisition of property, equipment and construction in progress	$	1,552		$	12,070

See Notes to unaudited consolidated financial statements.

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iPCS, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(1) Business and Basis of Presentation

iPCS, Inc. (the “Company” or “iPCS”) is a holding company that operates as a PCS Affiliate of Sprint through three wholly owned subsidiaries: iPCS Wireless, Inc., Horizon Personal Communications, Inc. and Bright Personal Communications Services, LLC. Each of these subsidiaries is a party to separate affiliation agreements with Sprint PCS, the operator of a 100% digital wireless personal communications services (“PCS”) network with licenses to provide voice and data service to the entire United States population. These affiliation agreements grant the iPCS subsidiaries the exclusive right to sell wireless mobility communications network products and services under the Sprint brand in 81 markets, including markets in Illinois, Indiana, Iowa, Michigan, Pennsylvania, Ohio, Maryland, Nebraska, New York, New Jersey, Tennessee and West Virginia.

On October 18, 2009, the Company, Sprint and Ireland Acquisition Corporation (“the Purchaser”), a wholly owned subsidiary of Sprint, entered into an Agreement and Plan of Merger (the “Merger Agreement”) pursuant to which Sprint agreed to acquire all of the Company’s outstanding common stock for a cash price of $24 per share. See Note 17 for a further discussion of the Merger Agreement.

The unaudited consolidated balance sheets as of September 30, 2009 and December 31, 2008, the unaudited consolidated statements of operations for the three and nine months ended September 30, 2009 and 2008, the unaudited consolidated statements of cash flows for the nine months ended September 30, 2009 and 2008 and related footnotes have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. The financial information presented herein should be read in conjunction with the Company’s 2008 Annual Report on Form 10-K which includes information and disclosures not presented herein. All intercompany accounts and transactions have been eliminated in consolidation. Subsequent events have been evaluated through November 3, 2009, the date these financial statements were issued. In the opinion of management, the unaudited consolidated financial statements contain all of the adjustments, consisting of normal recurring adjustments as well as those related to the Company’s settlement of certain disputes with Sprint, necessary to present fairly, in summarized form, the consolidated financial position, results of operations and cash flows of the Company. The results of operations for the three and nine months ended September 30, 2009 are not indicative of the results that may be expected for the full year 2009.

(2) Per Share Data

Basic income (loss) per share for the Company is calculated by dividing net income (loss) by the weighted average number of shares of common stock of the Company, outstanding during the period, net of shares held in treasury. Diluted income per share for the Company is based upon the weighted average number of common and common equivalent shares of common stock of the Company, outstanding during the period, net of shares held in treasury.

Net income and a reconciliation of the weighted average number of shares outstanding, net of shares held in treasury, used in calculating diluted income (loss) per share are as follows (in thousands, except share data):

	For the Three Months Ended September 30,					For the Nine Months Ended September 30,
	2009		2008			2009		2008
Net income (loss)	$	2,682	$	(7,494	)	$	15,832	$	(9,746	)

Weighted average shares outstanding - Basic	16,595,364		17,159,794			16,828,193		17,150,061
Net effect of dilutive stock options and restricted shares	322,133		—			166,627		—
Weighted average shares outstanding - Diluted	16,917,497		17,159,794			16,994,820		17,150,061

Net income (loss) per share:
Basic	$	0.16	$	(0.44	)	$	0.94	$	(0.57	)
Diluted	$	0.16	$	(0.44	)	$	0.93	$	(0.57	)

For the three and nine months ended September 30, 2008, basic and diluted loss per share are the same because the inclusion of the incremental potential shares of common stock from any assumed exercise of stock options is anti-dilutive. Potential shares of common stock excluded from the income (loss) per share computations because their inclusion would be anti-dilutive were 1,008,522 and 1,356,889 for the three and nine months ended September 30, 2009, respectively, and were 1,406,094 for both the three and nine months ended September 30, 2008.

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(3) Sprint Agreements

On October 18, 2009, the Company, Sprint and Ireland Acquisition Corporation (“the Purchaser”), a wholly owned subsidiary of Sprint, entered into the Merger Agreement pursuant to which Sprint agreed to acquire all of the Company’s outstanding common stock for a cash price of $24 per share. See Note 17 for a further discussion of the Merger Agreement.

Each of iPCS Wireless, Inc., Horizon Personal Communications, Inc. and Bright Personal Communications Services, LLC has entered into affiliation agreements with Sprint PCS. Under these agreements, which have been amended from time to time, most recently on March 3, 2008, Sprint provides the Company significant support services such as customer service, billing, long distance transport services, national network operations support, national pricing plans, inventory logistics support, use of the Sprint and Sprint PCS brand names, national advertising, national distribution, product development and the supply of financial and operational data.

The costs incurred by the Company for the support services provided by Sprint are determined on a per average monthly cash cost per user (“CCPU”) rate and on a monthly cost per gross addition (“CPGA”) rate. For 2008 and 2009, the CCPU rate was $6.50 and $5.85, respectively, as adjusted and subject to further adjustments as described below. The CPGA rate for each period was $19.00.

The CCPU rate in effect from 2008 through 2010 is to be reduced from the then current rate by $0.15 if the Company hits certain milestones with respect to its voluntary deployment of EV-DO Rev. A, a recent version of the further evolution of code division multiple access (“CDMA”) high-speed data technology called Evolution Data Optimized (“EV-DO”). Specifically, the CCPU rates set forth above are to be reduced by $0.15 from the then current rate when the Company’s EV-DO Rev. A deployment covers at least 6.0 million in population (“POPs”); by another $0.15 from the then current rate when the Company covers at least 7.0 million POPs; and by another $0.15 from the then current rate when the Company covers at least 9.0 million POPs. The Company’s EV-DO Rev. A deployment exceeded 6.0 million POPs during June 2008 and exceeded 7.0 million POPs during July 2008. As a result, the CCPU rate was reduced to $6.35 starting July 1, 2008, was further reduced to $6.20 starting August 1, 2008 for the remainder of 2008 and has been reduced to $5.85 and $5.55 for 2009 and 2010, respectively, subject to any further adjustments related to incremental EV-DO Rev. A coverage. On October 31, 2009, in accordance with the Company’s affiliation agreements with Sprint, Sprint PCS notified the Company of proposed CCPU and CPGA rates for the three year period from 2011 through 2013. See Note 17 for a further discussion of these proposed rates.

The Company receives roaming revenue when subscribers of Sprint and other PCS Affiliates of Sprint incur minutes of use in the Company’s territories, and the Company incurs expense payable to Sprint and to other PCS Affiliates of Sprint when Sprint subscribers based in the Company’s territory incur minutes of use in the territories of Sprint and other PCS Affiliates of Sprint. Effective January 1, 2008 through December 31, 2010, subject to adjustment as described below, 3G data roaming is not settled separately with Sprint; however, the Company does settle 3G data roaming separately with the other PCS Affiliates of Sprint. For 2008, reciprocal roaming rates were $0.0400 per minute for voice and 2G data, excluding certain markets as described below, and $0.0003 per kilobyte for 3G data. For 2009, reciprocal roaming rates are $0.0400 per minute for voice and 2G data, excluding certain markets as described below, and $0.0001 per kilobyte for 3G data.

With respect to certain of the Company’s markets in western and eastern Pennsylvania, the Company receives the benefit of a special reciprocal rate for voice and 2G data of $0.1000 per minute. This special rate will terminate, with respect to each of these two sets of markets, on the earlier of December 31, 2011 or the first day of the calendar month which follows the first calendar quarter during which the Company achieves a subscriber penetration rate of at least 7% of the Company’s covered populations in those markets. The Company does not anticipate reaching a 7% subscriber penetration rate in these markets in the foreseeable future.

Commencing on January 1, 2010, and each January 1 thereafter, either Sprint or the Company may initiate a review to determine whether the 3G data roaming ratio between the two for the prior calendar year has changed by more than 20% from the calendar year that is two years prior. If the ratio has changed by more than 20%, then the parties will commence discussions as to whether an appropriate adjustment in other fees can be made to compensate for such changes. If the parties cannot agree, then the parties will revert to settling 3G data roaming separately and any CCPU reductions related to incremental EV-DO Rev. A coverage, currently totaling $0.30, will be foregone effective January 1 of the year in which such review was initiated.

The Company’s affiliation agreements with Sprint also provide the Company with protective rights to decline to implement certain future program requirement changes that Sprint proposes that would adversely affect the Company’s business. The Company also has a right of first refusal to build out new coverage within the Company’s territory. If the Company does not exercise this right, then Sprint may build out the new coverage, or may allow another PCS Affiliate of Sprint to do so, in which case Sprint has the right to manage the new coverage.

Roaming expense is recorded in cost of service and roaming within the statements of operations. Cost of service and roaming transactions with Sprint include the 8% affiliation fee, long distance, roaming expense and Sprint’s CCPU charges for support services. Cost of equipment relates to inventory sold by the Company that was purchased from Sprint under the Company’s affiliation

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agreements with Sprint. Selling and marketing transactions relate to subsidized costs on wireless handsets and commissions under Sprint’s national distribution program.

For the three and nine months ended September 30, 2009, approximately 96% and 97%, respectively, of the Company’s revenue was derived from information provided by Sprint on the basis of data within Sprint’s possession and control. For each of the three and nine months ended September 30, 2008, approximately 97% of the Company’s revenue was derived from information provided by Sprint on the basis of data within Sprint’s possession and control. For the three and nine months ended September 30, 2009, approximately 58% and 59%, respectively, of the Company’s cost of service and roaming was derived from information provided by Sprint on the basis of data within Sprint’s possession and control. For each of the three and nine months ended September 30, 2008, approximately 58% of the Company’s cost of service and roaming was derived from information provided by Sprint on the basis of data within Sprint’s possession and control. Subject to and in accordance with the terms of the Merger Agreement and related agreements described in Note 17, the Company reviews all such amounts settled to and from Sprint and, in the event the Company believes any such amounts to be erroneous, it may dispute, and has disputed, such settlements in accordance with the procedures set forth in the affiliation agreements with Sprint. The Company has disputed certain items with Sprint which remain unresolved as of November 3, 2009. The final outcome of these unresolved disputed items is unknown at this time.

On January 22, 2009, the Company reached a settlement with Sprint related to previously disputed 2008 items, which resulted in a Gain on Sprint settlement of $4.3 million being recorded in the Company’s consolidated statement of operations for the nine months ended September 30, 2009.

Amounts relating to the Sprint affiliation agreements for the three and nine months ended September 30, 2009 and 2008 and as of September 30, 2009 and December 31, 2008 are as follows (in thousands):

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2009		2008		2009		2008
Amounts included in the Consolidated Statements of Operations:
Service revenue	$	108,480	$	96,097	$	319,600	$	282,370
Roaming revenue	$	27,783	$	32,282	$	83,556	$	94,083
Cost of service and roaming	$	43,025	$	42,927	$	128,368	$	124,021
Cost of equipment	$	18,497	$	15,905	$	50,029	$	40,442
Selling and marketing	$	3,582	$	2,266	$	9,127	$	7,311

	September 30, 2009		December 31, 2008
Amounts included in the Consolidated Balance Sheets:
Receivable from Sprint	$	29,168	$	25,623
Payable to Sprint	49,709		41,067

(4) Property and Equipment, Net

Property and equipment consists of the following at September 30, 2009 and December 31, 2008 (in thousands):

	September 30, 2009			December 31, 2008
Network assets	$	325,696		$	295,550
Land	114			114
Building	1,566			1,566
Computer equipment	7,929			6,773
Furniture, fixtures, and office equipment	9,939			9,744
Vehicles	3,066			2,540
Construction in progress	14,408			23,980
Total property and equipment	362,718			340,267
Less accumulated depreciation and amortization	(202,992		)	(178,253		)
Total property and equipment, net	$	159,726		$	162,014

During the nine months ended September 30, 2009, the Company sold its remaining Motorola equipment, which was previously recorded as Assets held for sale, which was replaced by Nortel equipment. A loss of approximately $0.3 million was realized upon sale of these assets during the nine months ended September 30, 2009.

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(5) Goodwill and Intangible Assets

Goodwill, totaling $141.8 million, represents the excess of purchase price over the fair value of the net assets acquired, including identifiable intangible assets. Goodwill is not deductible for income tax purposes.

Intangible assets represent the values assigned to the Company’s customer base, the right to provide service under the Sprint affiliation agreements and an FCC license for a small market in Ohio.

The intangible assets relating to the customer base were amortized over the estimated average life of a customer of 30 months. The intangible assets relating to customer bases were fully amortized as of December 31, 2007. The intangible assets relating to the right to provide service under the Sprint affiliation agreements are being amortized over the remaining term of the respective agreements. The FCC license was determined to have an indefinite life as it is expected to be renewed with minimal effort and cost. The FCC license is for sale, however the Company believes the sale of this asset is unlikely within the next year. The Merger Agreement, dated October 18, 2009, provides that the Company shall obtain the consent of Sprint for the sale of assets in which the aggregate consideration exceeds $200,000. On October 26, 2009, the Company and the Purchaser filed an application with the FCC for the transfer of control of the FCC license in connection with the consummation of the transactions contemplated by the Merger Agreement.

The weighted average amortization period, gross carrying amount, accumulated amortization and net carrying amount of intangible assets at September 30, 2009 and December 31, 2008 are as follows (in thousands):

	September 30, 2009
	Weighted Average Amortization Period	Gross Carrying Amount		Accumulated Amortization			Net Carrying Value
Non-amortized intangible asset:
FCC license	—	$	300	$	—		$	300
Amortized intangible assets:
Right to provide service under the Sprint affiliation agreements	167 months	126,521		(43,101		)	83,420
Customer base	30 months	71,956		(71,956		)	—
	117 months	$	198,777	$	(115,057	)	$	83,720

	December 31, 2008
	Weighted Average Amortization Period	Gross Carrying Amount		Accumulated Amortization			Net Carrying Value
Non-amortized intangible asset:
FCC license	—	$	300	$	—		$	300
Amortized intangible assets:
Right to provide service under the Sprint affiliation agreements	167 months	126,521		(36,219		)	90,302
Customer base	30 months	71,956		(71,956		)	—
	117 months	$	198,777	$	(108,175	)	$	90,602

Amortization expense for the three months ended September 30, 2009 and 2008 was $2.3 million for each period. Amortization expense for the nine months ended September 30, 2009 and 2008 was $6.9 million for each period. Aggregate amortization expense relative to existing intangible assets for the periods shown is currently estimated to be as follows:

Year Ended December 31
2009	$	9,176
2010	9,176
2011	9,176
2012	9,176
2013	9,176
Thereafter	44,422
Total	$	90,302

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(6) Long-Term Debt

Long-term debt consists of the following at September 30, 2009 and December 31, 2008 (in thousands):

	September 30, 2009			December 31, 2008
First lien senior secured floating rate notes	$	300,000		$	300,000
Second lien senior secured floating rate notes	177,297			175,000
Capital lease obligations	412			438
Total long-term debt and capital lease obligations	477,709			475,438
Less: current maturities	(42		)	(37		)
Long-term debt and capital lease obligations, excluding current maturities	$	477,667		$	475,401

First Lien and Second Lien Senior Secured Floating Rate Notes

The Company has outstanding $477.3 million in aggregate principal amount of senior secured notes, consisting of $300.0 million in aggregate principal amount of First Lien Senior Secured Floating Rate Notes due 2013 (“First Lien Notes”) and $177.3 million in aggregate principal amount of Second Lien Senior Secured Floating Rate Notes due 2014 (“Second Lien Notes” and together with the First Lien Notes, the “Secured Notes”). The offering of the Secured Notes closed on April 23, 2007.

The Secured Notes are senior secured obligations of the Company and are unconditionally guaranteed on a senior secured basis by all the Company’s existing and future domestic restricted subsidiaries. The First Lien Notes are secured by a first priority security interest, subject to permitted liens, in substantially all of the assets of the Company and its subsidiary guarantors, including, but not limited to: (1) all the capital stock of each restricted subsidiary owned by the Company, or any subsidiary guarantor; (2) all deposit accounts, security accounts, accounts receivable, inventory, investment property, inter-company notes, general intangible assets, equipment, instruments, contract rights, chattel paper, promissory notes and leases; (3) all fixtures; (4) patents, trademarks, copyrights and other intellectual property; and (5) all proceeds of, and all other amounts arising from, the collection, sale, lease, exchange, assignment, licensing, or other disposition or realization of the foregoing assets (collectively the “Collateral”); provided that the security documents provide that a portion of the capital stock of any subsidiary shall automatically be deemed released from, and not to have been a part of, the Collateral to the extent necessary so as not to require the preparation and filing with the SEC of separate audited financial statements of such subsidiary pursuant to Rule 3-16 of the SEC’s accounting rules and regulations. The Second Lien Notes are secured by a second priority security interest, subject to permitted liens, in the Collateral.

The indentures governing the Secured Notes contain covenants which restrict the Company’s and its restricted subsidiaries’ ability to incur additional indebtedness, merge, pay dividends, dispose of its assets, and certain other matters as defined in the indentures. At September 30, 2009, the Company believes it was in compliance with these covenants.

Interest on the First Lien Notes accrues at an annual rate equal to three-month LIBOR plus 2.125% and is payable quarterly in cash on February 1, May 1, August 1 and November 1 of each year. Interest on the Second Lien Notes accrues at an annual rate equal to three-month LIBOR plus 3.25% and is payable quarterly on February 1, May 1, August 1 and November 1 of each year. The Company may elect to pay interest on the Second Lien Notes entirely in cash or entirely by increasing the principal amount of the Second Lien Notes (“Payment-in-kind interest” or “PIK Interest”). PIK Interest on the Second Lien Notes accrues at an annual rate equal to three-month LIBOR plus 4.0%. On August 3, 2009, the Company paid its interest payment in relation to its Second Lien Notes entirely by increasing the principal amount of the outstanding Second Lien Notes by approximately $2.3 million. The Company has additionally elected PIK Interest in relation to its November 1, 2009 and February 1, 2010 interest payments on the Second Lien Notes. Accrued PIK Interest of approximately $1.3 million is reflected in Other long-term liabilities until the interest payment date, when it will be reflected as additional principal of the Second Lien Notes. The Company has made no other decisions regarding the future election of PIK Interest. Three-month LIBOR for the Secured Notes resets on February 1, May 1, August 1 and November 1 of each year and was 0.48% on September 30, 2009.

Capital Lease Obligations

Interest on capital lease obligations is all at fixed rates, which, on a weighted average basis, approximated 12.5% per annum at September 30, 2009.

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(7) Interest Rate Swap

On July 20, 2007, the Company entered into an interest rate swap to manage interest rate risks associated with a portion of its variable rate debt. The interest rate swap agreement is for a notional amount of $300.0 million associated with the interest on the Company’s First Lien Notes effective August 1, 2007 for a period of three years. Under this agreement, the Company receives interest at a floating rate of three-month LIBOR and pays interest at a fixed rate of 5.34%, resulting in an effective interest rate for the First Lien Notes of 7.47% throughout the term of the swap. The interest rate swap agreement qualifies and is designated as a cash flow hedge under the requirements of the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Derivatives and Hedging Topic (“ASC 815”). As such, the swap is accounted for as an asset or liability in the consolidated balance sheets at fair value, including adjustment for nonperformance risk in accordance with ASC Topic 820, “Fair Value Measurements and Disclosures” (“ASC 820”). Changes in fair value of the effective portion of the swap are recorded in Accumulated other comprehensive loss (“AOCL”), net of income taxes, until earnings are affected by the variability in cash flows of the designated hedged item. Any ineffective changes in the value of the swap are recognized currently as interest expense in the consolidated statements of operations. No component of the interest rate swap is excluded from the assessment of effectiveness and no ineffectiveness has been recognized on the swap since inception.

If, in the future, the swap is determined to no longer be effective as a hedge, is sold or terminated, or is de-designated from the hedge relationship, any net gain or loss remaining in Accumulated other comprehensive loss would be reclassified into earnings in the same periods during which the hedged debt payments affect earnings. If the cash flow hedge is discontinued in the future because it becomes probable that the hedged debt payments will not occur, the net gain or loss would be reclassified into earnings in that period.

See Note 8 for information regarding fair values of the interest rate swap as of September 30, 2009 and December 31, 2008.

The following table presents the impact of our interest rate swap on our Consolidated Statements of Operations and Consolidated Balance Sheets for the three and nine months ended September 30, 2009 and 2008 (in thousands):

	Amount of Loss Recognized in AOCL on the Interest Rate Swap (Effective Portion)				Amount of Loss Reclassified into Interest Expense (Effective Portion)				Amount of (Gain) Loss Recognized in Interest Expense on the Interest Rate Swap (Ineffective Portion)
	Three months ended September 30,				Three months ended September 30,				Three months ended September 30,
Liabilities	2009		2008		2009		2008		2009		2008

Interest rate swap	$	1,728	$	1,799	$	3,575	$	1,930	$	—	$	—

	Amount of Loss Recognized in AOCL on the Interest Rate Swap (Effective Portion)				Amount of Loss Reclassified into Interest Expense (Effective Portion)				Amount of (Gain) Loss Recognized in Interest Expense on the Interest Rate Swap (Ineffective Portion)
	Nine months ended September 30,				Nine months ended September 30,				Nine months ended September 30,
Liabilities	2009		2008		2009		2008		2009		2008

Interest rate swap	$	4,530	$	4,237	$	9,402	$	4,874	$	—	$	—

The amount of loss recorded in Accumulated other comprehensive loss at September 30, 2009 that is expected to be reclassified to interest expense in the next twelve months if interest rates underlying the Company’s fair value calculations remain unchanged is approximately $11.7 million.

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(8) Fair Value Measurements

Fair value estimates and assumptions and methods used to estimate the fair value of the Company’s assets and liabilities are made in accordance with the requirements of the ASC 820, “Financial Instruments and Fair Value Measurements and Disclosures”.

ASC 820 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, ASC 820 establishes a three-tier value hierarchy, which prioritizes the inputs used in measuring fair value as follows: Level 1 are observable inputs such as quoted prices in active markets; Level 2 are inputs other than the quoted prices in active markets that are observable either directly or indirectly; and Level 3 are unobservable inputs in which there is little or no market data, which require the Company to develop its own assumptions. This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. On a recurring basis, the Company measures certain assets and liabilities at fair value, including the Company’s money market funds, commercial paper and interest rate swap.

The following table presents the Company’s assets and liabilities measured at fair value on a recurring basis as of September 30, 2009 and December 31, 2008 (in thousands):

	September 30, 2009								December 31,
			Level 1		Level 2		Level 3		2008
	Fair Value		Inputs		Inputs		Inputs		Fair Value
Assets:
Money market funds(a)	$	64,503	$	—	$	64,503	$	—	$	27,194
Commercial paper(a)	—		—		—		—		14,117
Total assets measured at fair value	$	64,503	$	—	$	64,503	$	—	$	41,311
Liabilities:
Interest rate swap(b)	$	11,749	$	—	$	11,749	$	—	$	16,621
Total liabilities measured at fair value	$	11,749	$	—	$	11,749	$	—	$	16,621

(a) The fair values of the Company’s money market funds and commercial paper are based on third party estimates using recent trading activity and other relevant market information.

(b) The fair values of the interest rate swap are derived from a discounted cash flow analysis based on the terms of the contract and observable market data, including adjustment for nonperformance risk.

The following table presents carrying value and estimated fair value of the Company’s financial instruments that are carried at historical cost (in thousands):

	September 30, 2009				December 31, 2008
	Carrying amount		Estimated fair value		Carrying amount		Estimated fair value
First lien senior secured floating rate notes(a)	$	300,000	$	253,500	$	300,000	$	211,500
Second lien senior secured floating rate notes(a)	177,297		134,746		175,000		105,875

(a) The fair values of the Company’s senior secured floating rate notes are based on third party estimates using recent trading activity and other relevant market information.

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(9) Income Taxes

The Company’s effective income tax rate for the interim periods presented is based on management’s estimate of the Company’s effective tax rate for the applicable year and differs from the federal statutory income tax rate primarily due to nondeductible permanent differences, federal alternative minimum taxes, state income taxes and changes in the valuation allowance for deferred income taxes. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. There was no federal income tax expense recorded for the three and nine months ended September 30, 2009, as income generated is offset by the utilization of previously recorded net operating loss carryforwards (“NOL’s”) and the reversal of the related valuation allowance. No federal income tax benefit has been recorded for the three and nine months ended September 30, 2008, as the net deferred income tax asset generated, primarily from temporary differences related to the NOL, was offset by a full valuation allowance because it is considered more likely than not that these benefits will not be realized due to the Company’s history of net operating losses prior to January 1, 2009. The income tax provision for each of the three and nine months ended September 30, 2009 relate to federal alternative minimum tax as well as state income taxes which are estimated based upon the taxable income generated. The income tax provision for each of the three and nine months ended September 30, 2008 relate to state income taxes which are estimated based upon the taxable income generated in each state.

In July 2009, in relation to the built-in gain provisions of Internal Revenue Code Section 382, the five-year period subsequent to the ownership change that occurred in July 2004 upon the Company’s emergence from bankruptcy lapsed; resulting in the Company’s inability to utilize NOL’s beyond the annual limitation and realized built-in gains. Consequently, approximately $111 million of NOL’s, from a total of approximately $528 million of NOL’s, are no longer available to be realized by the Company as of September 30, 2009. This had no impact on net income as these NOL’s were fully reserved with a valuation allowance.

(10) Stock-Based Compensation

The Company has two long-term incentive plans. The Horizon PCS 2004 stock incentive plan, as amended (the “Horizon Plan”), was assumed by the Company in its merger with Horizon PCS, Inc. in 2005. The iPCS 2004 long-term incentive plan, as amended (the “iPCS Plan”), was approved by the Company’s Board of Directors as provided by the Company’s plan of reorganization. Both plans have been approved by the Company’s stockholders.

Horizon Plan. Under the Horizon Plan, the Company may grant to employees, directors and consultants of the Company or its subsidiaries incentive or non-qualified stock options or stock appreciation rights. All of the stock options issued to date under the Horizon Plan have a ten-year life and vest equally in six-month increments over three years from the respective date of grant. The Horizon Plan provides for the accelerated vesting of awards in the event of a change in control (as defined in the Horizon Plan). The total number of shares that may be granted under the Horizon Plan is 558,602 shares of the Company’s common stock, which equals the number of shares underlying awards previously made under the Horizon Plan.

iPCS Plan. Under the iPCS Plan, the Company may grant to employees, directors and consultants of the Company or its subsidiaries incentive and non-qualified stock options, stock appreciation rights, restricted and unrestricted stock awards and cash incentive awards. The stock options awarded to date under the iPCS Plan have a ten-year term with vesting on a quarterly basis over four years for employees and quarterly over one year for directors. Restricted stock awards granted to date to employees under the iPCS Plan vest over various periods ranging from a quarterly basis over four years to vesting entirely at the end of two or three years. The iPCS Plan provides for the accelerated vesting of awards in the event of a change in control (as defined in the iPCS Plan). The total number of shares that may be awarded under the iPCS Plan is 4,592,630 shares of common stock, of which amount, 2,066,390 shares remained available for awards as of September 30, 2009.

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The Company did not award any stock options during the three months ended September 30, 2009. During the nine months ended September 30, 2009, the Company awarded 332,452 stock options to management and the Board of Directors at an exercise price of $8.76, which was the closing price on the date of grants. The fair value of each grant is estimated at the grant date using the Black-Scholes option pricing method. The table below outlines the assumptions used for the options granted during the nine months ended September 30, 2009:

	For the Nine Months Ended September 30, 2009
	Range	Weighted Average
Risk-free interest rate	2.50% to 2.66%	2.63		%
Volatility		70.00		%
Dividend yield		0.00		%
Expected life in years		5.85
Fair value price		$	5.54

The risk-free interest rate was determined using the then implied yield currently available for zero-coupon U.S. government issues with a remaining term equal to the expected life of the stock options. The expected volatility assumption used in the Black-Scholes option pricing models was based on the historical volatility of peer companies as adjusted for the Company’s volatility since its existence as a publicly traded company in 2004. The Company does not currently intend to pay cash dividends and thus has assumed a 0% dividend yield. The Company uses the simplified method for calculating the expected life for stock options in place of using historical exercise data. The Company’s stock has been publicly traded since August 2004 and the Company cannot provide a reasonable basis upon which to estimate the expected term of options granted.

On May 2, 2007, in connection with the $11.00 special cash dividend paid in 2007, the Compensation Committee of the Board of Directors of the Company resolved that each stock option that was outstanding under the iPCS Plan and the Horizon Plan, on the trading day immediately preceding the trading day designated by the NASDAQ Stock Market as the ex-dividend date (the “Adjustment Date”) would be adjusted as follows effective as of the opening of business on the Adjustment Date:

· The number of shares of stock then subject to each option would be adjusted by dividing the number of shares of stock then subject to the option by the Adjustment Factor; and

· The exercise price of each option would be adjusted by multiplying the exercise price by the Adjustment Factor.

The “Adjustment Factor” was 0.78282 which was equal to one minus the percentage reduction in the closing sale price of a share of stock on the Adjustment Date reported by the NASDAQ Stock Market at the regular hours closing price (“Closing Price”) as compared to the Closing Price of a share of stock on the Adjustment Date minus $11.00. In addition, on the Adjustment Date, the number of shares under the iPCS Plan and the Horizon Plan was adjusted by dividing the number of shares of stock reserved for issuance by the Adjustment Factor; thereby increasing the number of shares reserved for issuance. The modification resulted in an additional 184,537 shares to 72 employees and directors who had options outstanding on the modification date. With this modification, the Company will record additional stock-based compensation expense of approximately $6.5 million, of which approximately $3.2 million was recorded as of the date of modification and the remainder is being recognized over the remaining vesting period for the options, subject to reduction for forfeitures. An additional $0.1 million and $0.2 million of compensation expense related to the modification was recorded in the three and nine months ended September 30, 2009, respectively, and an additional $0.1 million and $1.0 million was recorded in the three and nine months ended September 30, 2008, respectively, with the quarterly vesting of stock options. As of September 30, 2009, approximately $0.3 million of additional stock-based compensation expense related to this modification remains to be recognized over the remaining vesting period of the options.

The following table shows stock-based compensation expense by type of share-based award for the three and nine months ended September 30, 2009 and 2008 included in the consolidated statements of operations (in thousands):

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2009		2008		2009		2008
Restricted stock	$	322	$	254	$	906	$	808
Fair value expense of stock option awards	800		793		2,400		2,979
Fair value expense of stock option modifications related to special cash dividend (Note 11)	66		71		196		991
Total stock-based compensation	$	1,188	$	1,118	$	3,502	$	4,778

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The following table shows the total remaining unrecognized compensation cost related to restricted stock grants and fair value expense of stock option awards, as well as the weighted average remaining required service period over which such costs will be recognized as of September 30, 2009:

	Total Remaining Unrecognized Compensation Cost		Weighted Average Remaining Required Service Period
	(in millions)		(in years)
Restricted stock	$	1.9	1.59
Fair value expense of stock option awards	6.6		2.28

Stock-based compensation expense is included in the consolidated statements of operations as follows (in thousands):

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2009		2008		2009		2008
Cost of service and roaming	$	89	$	116	$	258	$	442
Selling and marketing	141		129		421		546
General and administrative	958		873		2,823		3,790
Total stock-based compensation	$	1,188	$	1,118	$	3,502	$	4,778

The following is a summary of options outstanding and exercisable at September 30, 2009:

	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life	Aggregate Intrinsic Value
					(in years)	(in thousands)
Outstanding at December 31, 2008	1,397,947		$	22.80
Granted	332,452		8.76
Exercised	(540	)	8.76
Forfeited	(420	)	39.47
Expired	(27,703	)	20.88
Outstanding at September 30, 2009	1,701,736		$	20.09	7.55	$	6,144
Exercisable at September 30, 2009	1,038,864		$	20.07	6.82	$	4,062

The following is a summary of activity for the nine months ended September 30, 2009 related to the Company’s restricted shares granted under its long-term incentive plans:

	Shares		Weighted Average Grant Date Fair Value
Restricted shares at December 31, 2008	56,534		$	36.32
Granted	101,200		8.76
Vested	(12,984	)	43.23
Forfeited	(900	)	8.76
Restricted shares at September 30, 2009	143,850		$	16.48

The iPCS Plan permits, at the employee’s direction, the surrendering of common shares to satisfy certain tax withholding obligations in connection with vesting of restricted stock.

(11) Special Cash Dividend

On April 26, 2007, the Board of Directors declared a special cash dividend of $11.00 per share, approximately $187.0 million in the aggregate, payable to all holders of record of the Company’s common stock on May 8, 2007. Of this amount, approximately $186.5 million was paid on May 16, 2007. The remaining unpaid dividends relate to restricted stock awards and are being paid out starting in July 2007 as these awards vest. As of September 30, 2009, approximately $0.2 million of this dividend remains to be paid.

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(12) Comprehensive Income (Loss)

Comprehensive income (loss), which includes all changes in the Company’s equity during the period except transactions with stockholders, consisted of the following for the three and nine months ended September 30, 2009 and 2008 (in thousands):

	For the Three Months Ended September 30,					For the Nine Months Ended September 30,
	2009		2008			2009		2008
Net income (loss)	$	2,682	$	(7,494	)	$	15,832	$	(9,746	)
Other comprehensive income — Unrealized income on interest rate swap, net of tax	1,847		131			4,872		637
Comprehensive income (loss)	$	4,529	$	(7,363	)	$	20,704	$	(9,109	)

(13) Stock Repurchase Plan

On January 30, 2009, the Company’s Board of Directors authorized the repurchase of up to $15.0 million of the Company’s common stock in a stock repurchase program during the 12-month period beginning on the date of authorization. The Company may purchase shares from time to time in open market or privately negotiated transactions at prices deemed appropriate by management, depending on market conditions, applicable laws and other factors. The stock repurchase program does not require the Company to repurchase any specific number of shares and may be discontinued at any time. Pursuant to this stock repurchase program, during the nine months ended September 30, 2009, the Company purchased 658,863 shares of its common stock at an average price of $13.69 per share for approximately $9.0 million, of which approximately $8.8 million had been settled in cash as of September 30, 2009. These repurchased shares are reflected as Treasury stock, at cost in the Consolidated Balance Sheet as of September 30, 2009. As of September 30, 2009, approximately $6.0 million remained available under the stock repurchase program.

Pursuant to the terms of the Merger Agreement discussed in Note 17, as of October 18, 2009, the Company is not permitted to repurchase shares of its common stock on or after such date.

(14) New Accounting Pronouncements

Effective July 1, 2009, the FASB Accounting Standards Codification (“ASC”) became the single official source of authoritative, nongovernmental generally accepted accounting principles (“GAAP”) in the United States. The historical GAAP hierarchy was eliminated and the ASC became the only level of authoritative GAAP, other than guidance issued by the Securities and Exchange Commission. Our accounting policies were not affected by the conversion to ASC. However, references to specific accounting standards in the footnotes to our consolidated financial statements have been changed to refer to the appropriate section of ASC.

In September 2006, the FASB issued guidance which defines fair value, establishes a framework and gives guidance regarding the methods used for measuring fair value, and expands disclosures about fair value measurements. This guidance is contained in ASC Topic 820, “Fair Value Measurements and Disclosures” (“ASC 820”). In February 2008, the FASB deferred the effective date of this guidance for all non-financial assets and non-financial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually) to fiscal years beginning after November 15, 2008. The Company adopted the new standard included in ASC 820 as it applies to financial assets and liabilities as of January 1, 2008. The Company adopted the new standard included in ASC 820, as it relates to non-financial assets and liabilities as of January 1, 2009. See Note 8 for further discussion of fair value measurements of financial instruments.

In March 2008, the FASB issued guidance which amends and expands the disclosure requirements of ASC Topic 815, “Derivatives and Hedging” (“ASC 815”), requiring enhanced disclosures about the Company’s hedging activities. The Company is required to provide enhanced disclosures about (a) how and why it uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under ASC 815, and (c) how derivative instruments and related hedged items affect the Company’s financial position, results of operations, and cash flows. The new provisions of ASC 815 are effective for fiscal years and interim periods beginning after December 15, 2008, with comparative disclosures of earlier periods encouraged upon initial adoption. The Company adopted the new provisions of ASC 815 effective January 1, 2009. See Note 7 for the Company’s disclosures about its derivative instruments and hedging activities.

In April 2009, the FASB issued guidance requiring disclosures about fair value of financial instruments in interim financial statements as well as in annual financial statements. This guidance is contained in ASC Topic 825, “Financial Instruments” (“ASC 825”). The new disclosure standard included in ASC 825 is effective for interim periods ending after June 15, 2009, but early adoption is permitted for interim periods ending after March 15, 2009. The Company adopted the new disclosure standard included in ASC 825 effective for the interim period ended March 31, 2009. See Note 8 for the Company’s disclosures about its fair values of financial instruments.

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In April 2009, the FASB issued additional guidance in determining whether a market for a financial asset is not active and a transaction is not distressed for fair value measurement purposes. This guidance is contained in ASC 820. This new guidance included in ASC 820 is effective for interim periods ending after June 15, 2009, but early adoption is permitted for interim periods ending after March 15, 2009. The Company adopted the new guidance included in ASC 820 effective for the interim period ended March 31, 2009.

In April 2009, the FASB issued guidance in determining whether impairments in debt securities are other than temporary, and modifies the presentation and disclosures surrounding such instruments. This guidance is contained in ASC Topic 320, “Investments — Debt and Equity Securities” (“ASC 320”). This new guidance included in ASC 320 is effective for interim and annual periods ending after June 15, 2009, but early adoption is permitted for interim periods ending after March 15, 2009. The Company adopted the provisions of this new guidance included in ASC 320 effective for the interim period ended March 31, 2009.

In May 2009, the FASB issued guidance which sets forth general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. This guidance is contained in ASC Topic 855, “Subsequent Events” (“ASC 855”). This new guidance in ASC 855 is effective for interim periods ending after June 15, 2009. The Company adopted the new provisions of ASC 855 for the interim period ended June 30, 2009.

In June 2009, the FASB issued guidance to address the elimination of the concept of a qualifying special purpose entity. This guidance is contained in ASC Topic 810, “Consolidation” (“ASC 810”). This new guidance included in ASC 810 also replaces the quantitative-based risks and rewards calculation for determining which enterprise has a controlling financial interest in a variable interest entity with an approach focused on identifying which enterprise has the power to direct the activities of a variable interest entity and the obligation to absorb losses of the entity or the right to receive benefits from the entity. Additionally, this new guidance included in ASC 810 provides more timely and useful information about an enterprise’s involvement with a variable interest entity. This new guidance is effective for fiscal years beginning after November 15, 2009. The Company does not anticipate that the implementation of this new guidance included in ASC 810 will have a material impact on its consolidated financial statements.

In September 2009, the FASB issued guidance which modifies the way companies allocate revenue amongst multiple deliverables in a contract. The new guidance, included in ASC Topic 605, “Revenue Recognition” (“ASC 605”), allows companies to allocate consideration in a multiple element arrangement in a manner that better reflects the transaction economics. When vendor specific objective evidence or third party evidence for deliverables in an arrangement cannot be determined, companies will now be allowed to develop a best estimate of the selling price to separate deliverables and allocate arrangement consideration using the relative selling price method. Additionally this new guidance eliminates the use of the residual method. This new guidance in ASC 605 is effective for fiscal years beginning after June 15, 2010. The Company is currently evaluating the impact of this new guidance in ASC 605 on its consolidated financial statements.

(15) Commitments and Contingencies

(a) Commitments

On March 13, 2009, the Company signed a letter of agreement with Nortel Networks to purchase EV-DO Rev. A equipment and services totaling approximately $19.7 million in aggregate, consisting of a non-cancelable purchase of approximately $14.8 million of equipment and services and an option to purchase up to an additional approximately $4.9 million of equipment and services. Under this letter of agreement, the Company agreed to return to Nortel Networks certain equipment replaced by the purchased equipment by March 1, 2010. The Company has submitted non-cancelable purchase orders for approximately $14.8 million of equipment and services and therefore has no remaining commitment under this letter of agreement to submit additional non-cancelable purchase orders. As of September 30, 2009, the Company has received approximately $13.8 million and paid for approximately $13.1 million of equipment and services and has returned approximately half of the replaced equipment to Nortel. The remaining replaced equipment is expected to be returned to Nortel by the end of 2009.

As discussed in Note 17, on October 18, 2009, the Company, Sprint and the Purchaser, a wholly owned subsidiary of Sprint, entered into the Merger Agreement pursuant to which Sprint agreed to acquire all of the Company’s outstanding common stock for a cash price of $24 per share. The Merger Agreement provides for certain termination rights for each of Sprint and the Company and further provides that upon termination of the Merger Agreement under specified circumstances, the Company will be required to pay Sprint a termination fee of $12.5 million.

(b) FCC Licenses

Sprint PCS holds the licenses necessary to provide wireless services in the Company’s territory. The FCC requires that licensees like Sprint PCS maintain control of their licensed spectrums and not delegate control to third-party operators or managers without FCC consent and are subject to renewal and revocation by the FCC. The FCC has adopted specific standards that apply to wireless personal communications services license renewals. Any failure by Sprint PCS or the Company to comply with these standards could result in the non-renewal of the Sprint PCS licenses for the Company’s territory. Additionally, if Sprint PCS does not

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demonstrate to the FCC that Sprint PCS has met the construction requirements for each of its wireless personal communications services licenses, it can lose those licenses. If Sprint PCS loses its licenses in the Company’s territory for any of these reasons, or any other reason, the Company would not be able to provide wireless services without obtaining rights to other licenses.

If Sprint PCS loses its licenses in another territory, Sprint PCS or the applicable PCS Affiliate of Sprint would not be able to provide wireless services without obtaining rights to other licenses and the Company’s ability to offer nationwide calling plans would be diminished and potentially more costly.

(c) Other

The State of Michigan is currently auditing the Company’s sales and use tax returns for the years 2003 through 2006. The outcome of this audit cannot be determined at this time.

(d) Litigation and Arbitration

As discussed in Note 17, in connection with the Merger Agreement, Sprint Nextel Corporation, WirelessCo L.P., Sprint Spectrum L.P., SprintCom, Inc., Sprint Communications Company, L.P., Nextel Communications, Inc., PhillieCo L.P. and APC PCS LLC (collectively, the “Sprint Parties”) and Horizon Personal Communications, Inc., Bright Personal Communications Services, LLC, iPCS Wireless, Inc. and the Company (collectively, the “iPCS Parties”) entered into a Settlement Agreement and Mutual Release, dated October 18, 2009 (the “Settlement Agreement”). Under the terms of the Settlement Agreement, the Sprint Parties and the iPCS Parties have agreed to stay all pending litigation between them, subject to certain exceptions and conditions, and not to sue each other during the pendency of the transactions contemplated by the Merger Agreement, subject to certain exceptions.

Sprint/Nextel Merger Litigation. On July 15, 2005, the Company’s wholly owned subsidiary, iPCS Wireless, Inc. (“iPCS Wireless”), filed a complaint against Sprint and Sprint PCS in the Circuit Court of Cook County, Illinois (the “Circuit Court”). The complaint alleged, among other things, that Sprint’s conduct following the consummation of the merger between Sprint and Nextel would breach Sprint’s exclusivity obligations to iPCS Wireless under its affiliation agreements with Sprint PCS. On August 14, 2006, the Circuit Court issued its decision and on September 20, 2006, the Circuit Court issued a final order effecting its decision. The final order provided that:

· Within 180 days of the date of the final order, Sprint and those acting in concert with it must cease owning, operating and managing the Nextel wireless network in iPCS Wireless’s territory.

· Sprint shall continue to comply with all terms and conditions of the Forbearance Agreement between iPCS Wireless and Sprint setting forth certain limitations on Sprint’s operations post-merger with Nextel.

On September 28, 2006, Sprint appealed the Circuit Court’s ruling to the Appellate Court of Illinois, First Judicial District (the “Appellate Court”), and, at Sprint’s request, the Circuit Court’s ruling was stayed by the Appellate Court pending the appeal. On March 31, 2008, the Appellate Court unanimously affirmed the 2006 Circuit Court decision. On May 5, 2008, Sprint filed a petition for leave to appeal with the Supreme Court of Illinois. On September 24, 2008, the Supreme Court of Illinois (the “Supreme Court”) denied Sprint’s petition for leave to appeal the Appellate Court’s decision.

On Sprint’s motion for reconsideration, the Supreme Court again denied Sprint’s petition for leave to appeal on November 12, 2008. The Supreme Court at that time directed the Circuit Court to modify its order of September 20, 2006, in the following manner:

· To grant Sprint 360 days (rather than 180 days) to comply with the Circuit Court’s order to cease owning, operating and managing the Nextel wireless network in iPCS Wireless’s territory.

· To permit Sprint to seek an extension of the 360-day period upon a showing of good cause, with due consideration given to the hardship(s) imposed on iPCS Wireless by the requested extension.

On January 30, 2009, the Circuit Court entered its final order, as directed by the Supreme Court, providing that:

· Sprint, and those acting in concert with it, must cease owning, operating and managing the Nextel wireless network in iPCS Wireless’s service area.

· Sprint has until January 25, 2010 (360 days from the date of the Circuit Court’s order) to comply with the order. Sprint may seek an extension of such deadline upon a showing of good cause, giving due consideration to the hardships that would be imposed on iPCS Wireless if such extension were granted.

· Sprint must continue to comply with all terms and conditions of the Forbearance Agreement between iPCS Wireless and Sprint.

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On October 19, 2009, pursuant to the Settlement Agreement, the Circuit Court stayed this litigation, including Sprint’s obligations to comply with the Circuit Court’s final order by January 25, 2010. If the stay is vacated for any reason, Sprint shall have until 120 days after the date on which the stay is vacated to comply with the requirements of the final order.

On September 22, 2008, Sprint also filed a petition with the Circuit Court seeking to vacate that Court’s original order. On January 20, 2009, the Circuit Court denied Sprint’s petition with prejudice. On February 18, 2009, Sprint appealed the decision of the Circuit Court denying Sprint’s petition to vacate to the Illinois Appellate Court.

On October 20, 2009, pursuant to the Settlement Agreement, the Illinois Appellate Court stayed Sprint’s appeal. The stay will be automatically vacated if the Merger Agreement is terminated for any reason.

Sprint/Clearwire Transaction Litigation. On May 7, 2008, Sprint announced a proposed transaction among itself, Clearwire Corporation, and certain other parties (the “Sprint-Clearwire Transaction”) to form a new competing network (“New Clearwire”), pursuant to which transaction Sprint transferred its next generation of wireless technology (“4G”) to the New Clearwire. The same day, Sprint filed a complaint for declaratory judgment against iPCS and certain of its subsidiaries, iPCS Wireless, Horizon Personal Communications, Inc. and Bright Personal Communications Services, LLC (collectively, the “iPCS Subsidiaries”) in the Court of Chancery of the State of Delaware (the “Delaware Chancery Court”). In that lawsuit, Sprint sought a declaration that the Sprint-Clearwire Transaction would not constitute a breach of the Sprint affiliation agreements it has with the iPCS Subsidiaries.

On May 12, 2008, the iPCS Subsidiaries filed a lawsuit against Sprint and certain of its affiliates in the Circuit Court, seeking declaratory and injunctive relief with respect to the Sprint-Clearwire Transaction. In that case, the iPCS Subsidiaries are seeking a declaration that the Sprint-Clearwire Transaction constitutes a breach of Sprint’s affiliation agreements it has with those subsidiaries, and also sought an injunction barring Sprint from closing the Sprint-Clearwire Transaction until it complied with the affiliation agreements.

On July 14, 2008, the Delaware Chancery Court granted the motion to dismiss filed by our Bright and Horizon subsidiaries and dismissed them from the Delaware litigation. Pursuant to a motion filed by iPCS and iPCS Wireless, on October 8, 2008, the Delaware Chancery Court stayed all remaining Delaware litigation in favor of the lawsuit brought in Illinois by the iPCS Subsidiaries.

On November 3, 2008, the iPCS Subsidiaries filed a motion for preliminary injunction in the Circuit Court seeking to prevent Sprint from consummating the Sprint-Clearwire Transaction until such time that the Circuit Court could rule on the merits of the underlying litigation brought by the iPCS Subsidiaries against Sprint. On November 17, 2008, the iPCS Subsidiaries, Sprint, and New Clearwire reached a stipulation pursuant to which the iPCS Subsidiaries withdrew their motion for preliminary injunction without prejudice, and the Sprint-Clearwire Transaction closed on November 28, 2008. In connection with the withdrawal of the preliminary injunction motion by the iPCS Subsidiaries, the Circuit Court entered an Agreed Order and Stipulation, dated November 17, 2008 (the “Agreed Order”) pursuant to which: (i) New Clearwire stipulated that it did not presently intend to commercially launch its 4G network, sell products or services, or promote products or services that are available for sale in any part of the iPCS Subsidiaries’ territories prior to July 1, 2009, (ii) New Clearwire stipulated that it would give the iPCS Subsidiaries at least 60 days advance written notice before any commercial launch of its 4G network, any sale of products or services or any promotion of products or services that are offered for sale in any part of the iPCS Subsidiaries service areas if it plans to do so before entry of a final and non-appealable judgment by the Circuit Court in the underlying action brought by the iPCS Subsidiaries against Sprint, and (iii) New Clearwire and Sprint stipulated that neither of them nor any of their controlled affiliates would raise the fact that the Sprint-Clearwire Transaction had closed as a basis for opposing any remedy proposed by the iPCS Subsidiaries or granted by the Circuit Court.

On December 30, 2008, the Circuit Court issued a decision on a motion for partial summary judgment filed by iPCS Wireless based on the 2006 decision in the Illinois Sprint/Nextel Merger Litigation. The Circuit Court specifically recognized that pursuant to the 2006 decision, Sprint and those acting in concert with it cannot compete against iPCS Wireless in its exclusive service area, regardless of the radio frequency that they use to compete. The Circuit Court held that Sprint cannot relitigate the issue of whether Sprint and those acting in concert with it may compete with iPCS Wireless in its service area by using a frequency other than 1900 MHz. The Circuit Court granted in part iPCS Wireless’s motion for partial summary judgment with respect to these two issues and entered judgment thereon but stayed enforcement of the judgment pending a ruling on Sprint’s petition to vacate the original judgment in the Illinois Sprint/Nextel Merger Litigation, which petition to vacate was then dismissed with prejudice on January 20, 2009. The Circuit Court also found in its December 30, 2008 ruling that some material issues of fact remained and would be decided at trial including, but not limited to, whether New Clearwire is a “related party,” whether Sprint controls New Clearwire, whether the protections of exclusivity extend beyond the situation in which Sprint acts through a related party, and the question of who constitutes “those acting in concert” with Sprint.

On January 9, 2009, the Circuit Court denied Sprint’s motion for partial summary judgment against Bright and Horizon. In that motion, Sprint had sought to bar Bright and Horizon from litigating the issue of whether Sprint could compete with Horizon and Bright outside the 1900 MHz spectrum range, based on a 2006 decision by the Delaware Chancery Court. The Circuit Court denied Sprint’s motion for partial summary judgment against Bright and Horizon and found that the Delaware Chancery Court did not actually decide that issue.

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On January 30, 2009, the iPCS Subsidiaries amended their original complaint against Sprint. Under the amended complaint, the iPCS Subsidiaries included, among other things, a claim that Sprint is improperly withholding advanced technologies from the iPCS Subsidiaries and diverting those technologies to their competitor in violation of the iPCS Subsidiaries’ affiliation agreements with Sprint. The amended complaint also seeks monetary relief. On February 27, 2009, Sprint, in its response to the amended complaint, asserted several counterclaims that essentially seek declaratory relief that the Clearwire transaction does not violate the affiliation agreements.

On April 30, 2009, the Circuit Court denied a motion brought by Sprint that sought to dismiss the iPCS Subsidiaries’ claims as to whether Sprint improperly withheld advanced technology from them in connection with the Clearwire transaction. The Circuit Court also ruled that the iPCS Subsidiaries’ claims for relief could not include certain types of monetary relief but that, in addition to their existing claims for injunctive relief, the iPCS Subsidiaries would not be prevented from making “a claim for any actual or direct damages.”

On October 19, 2009, pursuant to the Settlement Agreement, the Circuit Court stayed this litigation. Under the terms of the Settlement Agreement, the stay shall not affect any rights, duties or obligations under the Agreed Order issued by the Circuit Court on November 17, 2008. The Settlement Agreement further provides that if New Clearwire takes any action that does not comply with the Agreed Order or if New Clearwire provides notice pursuant to the Agreed Order of its intention to launch a network or to promote or sell products or services in any part of the applicable iPCS Subsidiaries’ service areas, the stay shall be automatically vacated and the iPCS Subsidiaries shall be entitled to pursue all available remedies.

Sprint/Virgin Mobile Transaction Litigation. On July 28, 2009, Sprint announced it agreed to acquire Virgin Mobile USA, Inc., subject to Virgin Mobile USA stockholders’ and regulatory approvals (“the Sprint-Virgin Mobile Transaction”). On September 10, 2009, the iPCS Subsidiaries filed a lawsuit against Sprint and certain of its affiliates in the Circuit Court, seeking declaratory and injunctive relief with respect to the Sprint-Virgin Mobile Transaction. In that case, the iPCS Subsidiaries are seeking a declaration that the Sprint-Virgin Mobile Transaction constitutes a breach of Sprint’s affiliation agreements with the iPCS Subsidiaries, and also sought an injunction barring Sprint from closing the Sprint-Virgin Mobile Transaction until it complied with the affiliation agreements. On the same day, the iPCS Subsidiaries filed a motion for preliminary injunction, in which they seek to enjoin the closing of the Sprint-Virgin Mobile Transaction. That motion is pending. On September 22, 2009, the defendants filed a motion to dismiss the complaint. That motion is pending. On October 19, 2009, pursuant to the Settlement Agreement, the Circuit Court stayed this litigation. Under the terms of the Settlement Agreement, Sprint agreed that, so long as the stay was in effect, it would not (i) reduce, directly or indirectly, or permit to be reduced, the reseller rates under the Virgin Mobile resale arrangement applicable to the iPCS Subsidiaries or (ii) claim or assert in any litigation proceeding or other action between Sprint and the Company or any of their respective affiliates that the iPCS Subsidiaries or any of their affiliates has waived the right to challenge the permissibility of any prior direct or indirect reductions of such reseller rates.

The Company presently cannot determine the ultimate resolution of the matters described above. The results of litigation are inherently uncertain and, while the Company believes that it has meritorious claims in the matters described above, material adverse outcomes are possible. Additionally, on October 18, 2009, the parties to the above-described lawsuits entered into the Settlement Agreement. Please see Note 17 for a more detailed description of the Settlement Agreement.

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

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(16) Consolidating Financial Information

The Secured Notes are fully, unconditionally and jointly and severally guaranteed by the Company’s domestic restricted subsidiaries, including iPCS Wireless, Inc., iPCS Equipment, Inc., Horizon Personal Communications, Inc., Bright PCS Holdings, Inc. and Bright Personal Communications Services, LLC, which are 100% owned subsidiaries of iPCS, Inc. (see Note 6). The following consolidating financial information for iPCS, Inc. as of September 30, 2009 and December 31, 2008 and for the three and nine months ended September 30, 2009 and 2008 is presented for iPCS, Inc. and the Company’s guarantor subsidiaries (in thousands):

Condensed Consolidating Balance Sheet

As of September 30, 2009

	iPCS Inc.			Guarantor Subsidiaries		Eliminations			iPCS Consolidated
Cash and cash equivalents	$	—		$	77,092	$	—		$	77,092
Intercompany receivable	554,594			295,601		(850,195		)	—
Other current assets	474			87,649		—			88,123
Total current assets	555,068			460,342		(850,195		)	165,215
Property and equipment, net	—			159,726		—			159,726
Intangible assets, net	—			225,503		—			225,503
Other noncurrent assets	5,387			3,367		—			8,754
Investment in subsidiaries	196,535			—		(196,535		)	—
Total assets	$	756,990		$	848,938	$	(1,046,730	)	$	559,198
Intercompany payable	$	295,601		$	554,594	$	(850,195	)	$	—
Other current liabilities	4,003			89,105		—			93,108
Total current liabilities	299,604			643,699		(850,195		)	93,108
Long-term debt	477,297			370		—			477,667
Other long-term liabilities	13,111			8,334		—			21,445
Total liabilities	790,012			652,403		(850,195		)	592,220
Stockholders’ equity (deficiency)	(33,022		)	196,535		(196,535		)	(33,022		)
Total liabilities and stockholders’ equity (deficiency)	$	756,990		$	848,938	$	(1,046,730	)	$	559,198

Condensed Consolidating Balance Sheet

As of December 31, 2008

	iPCS Inc.			Guarantor Subsidiaries		Eliminations			iPCS Consolidated
Cash and cash equivalents	$	—		$	55,940	$	—		$	55,940
Intercompany receivable	526,494			263,002		(789,496		)	—
Other current assets	615			76,007		—			76,622
Total current assets	527,109			394,949		(789,496		)	132,562
Property and equipment, net	—			162,014		—			162,014
Intangible assets, net	—			232,385		—			232,385
Other noncurrent assets	6,419			4,232		—			10,651
Investment in subsidiaries	178,803			—		(178,803		)	—
Total assets	$	712,331		$	793,580	$	(968,299	)	$	537,612
Intercompany payable	$	263,001		$	526,495	$	(789,496	)	$	—
Other current liabilities	5,790			77,631		—			83,421
Total current liabilities	268,791			604,126		(789,496		)	83,421
Long-term debt	475,000			401		—			475,401
Other long-term liabilities	16,738			10,250		—			26,988
Total liabilities	760,529			614,777		(789,496		)	585,810
Stockholders’ equity (deficiency)	(48,198		)	178,803		(178,803		)	(48,198		)
Total liabilities and stockholders’ equity (deficiency)	$	712,331		$	793,580	$	(968,299	)	$	537,612

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Condensed Consolidating Statement of Operations

For the Three Months Ended September 30, 2009

	iPCS Inc.		Guarantor Subsidiaries			Eliminations			iPCS Consolidated
Total revenue	$	—	$	141,404		$	—		$	141,404
Cost of revenue	—		92,535			—			92,535
Selling and marketing	—		17,542			—			17,542
General and administrative	581		8,367			—			8,948
Depreciation and amortization	—		11,280			—			11,280
Loss on disposal of property and equipment, net	—		113			—			113
Total operating expense	581		129,837			—			130,418
Other, net	—		(7,946		)	—			(7,946		)
Income in subsidiaries	3,357		—			(3,357		)	—
Income before provision for income tax	2,776		3,621			(3,357		)	3,040
Provision for income tax	94		264			0			358
Net income	$	2,682	$	3,357		$	(3,357	)	$	2,682

Condensed Consolidating Statement of Operations

For the Three Months Ended September 30, 2008

	iPCS Inc.			Guarantor Subsidiaries			Eliminations		iPCS Consolidated
Total revenue	$	—		$	132,057		$	—	$	132,057
Cost of revenue	—			90,425			—		90,425
Selling and marketing	—			18,091			—		18,091
General and administrative	558			9,470			—		10,028
Depreciation and amortization	—			12,887			—		12,887
Loss on disposal of property and equipment, net	—			71			—		71
Total operating expense	558			130,944			—		131,502
Other, net	(2,212		)	(5,729		)	—		(7,941		)
Income in subsidiaries	(4,724		)	—			4,724		—
Loss before provision for income tax	(7,494		)	(4,616		)	4,724		(7,386		)
Provision for income tax	—			108			—		108
Net loss	$	(7,494	)	$	(4,724	)	$	4,724	$	(7,494	)

Condensed Consolidating Statement of Operations

For the Nine Months Ended September 30, 2009

	iPCS Inc.		Guarantor Subsidiaries			Eliminations			iPCS Consolidated
Total revenue	$	—	$	417,727		$	—		$	417,727
Cost of revenue	—		267,867			—			267,867
Selling and marketing	—		51,528			—			51,528
General and administrative	1,807		23,758			—			25,565
Gain on Sprint settlement	—		(4,273		)	—			(4,273		)
Depreciation and amortization	—		36,115			—			36,115
Loss on disposal of property and equipment, net	—		629			—			629
Total operating expense	1,807		375,624			—			377,431
Other, net	—		(23,786		)	—			(23,786		)
Income in subsidiaries	17,733		—			(17,733		)	—
Income before provision for income tax	15,926		18,317			(17,733		)	16,510
Provision for income tax	94		584			—			678
Net income	$	15,832	$	17,733		$	(17,733	)	$	15,832

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Condensed Consolidating Statement of Operations

For the Nine Months Ended September 30, 2008

	iPCS Inc.			Guarantor Subsidiaries			Eliminations		iPCS Consolidated
Total revenue	$	—		$	387,086		$	—	$	387,086
Cost of revenue	—			253,609			—		253,609
Selling and marketing	—			52,394			—		52,394
General and administrative	2,033			23,075			—		25,108
Depreciation and amortization	—			40,691			—		40,691
Loss on disposal of property and equipment, net	—			329			—		329
Total operating expense	2,033			370,098			—		372,131
Other, net	—			(23,943		)	—		(23,943		)
Loss in subsidiaries	(7,713		)	—			7,713		—
Loss before provision for income tax	(9,746		)	(6,955		)	7,713		(8,988		)
Provision for income tax	—			758			—		758
Net loss	$	(9,746	)	$	(7,713	)	$	7,713	$	(9,746	)

Condensed Consolidating Statement of Cash Flows

For the Nine Months Ended September 30, 2009

	iPCS Inc.			Guarantor Subsidiaries			Eliminations		iPCS Consolidated
Operating activities	$	8,941		$	48,841		$	—	$	57,782
Investing activities	—			(27,662		)	—		(27,662		)
Financing activities	(8,941		)	(27		)	—		(8,968		)
Net increase in cash and cash equivalents	—			21,152			—		21,152
Cash and cash equivalents at beginning of period	—			55,940			—		55,940
Cash and cash equivalents at end of period	$	—		$	77,092		$	—	$	77,092

Condensed Consolidating Statement of Cash Flows

For the Nine Months Ended September 30, 2008

	iPCS Inc.			Guarantor Subsidiaries			Eliminations		iPCS Consolidated
Operating activities	$	(454	)	$	44,568		$	—	$	44,114
Investing activities	—			(52,279		)	—		(52,279		)
Financing activities	454			(22		)	—		432
Net decrease in cash and cash equivalents	—			(7,733		)	—		(7,733		)
Cash and cash equivalents at beginning of period	—			77,599			—		77,599
Cash and cash equivalents at end of period	$	—		$	69,866		$	—	$	69,866

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(17) Subsequent Events

On October 18, 2009, the Company, Sprint and Ireland Acquisition Corporation (the “Purchaser”), a wholly owned subsidiary of Sprint, entered into an Agreement and Plan of Merger (the “Merger Agreement”) pursuant to which, among other things, the Purchaser commenced a tender offer (the “Offer”) on October 28, 2009 to acquire all of the Company’s outstanding shares of common stock, par value $0.01 per share (the “Shares”), at a price of $24.00 per share in cash (the “Offer Price”). The Merger Agreement also provides that following the consummation of the Offer, the Purchaser will be merged with and into the Company (the “Merger”) with the Company surviving the merger as a wholly owned subsidiary of Sprint. At the effective time of the Merger, all remaining outstanding Shares not tendered in the Offer (other than (1) Shares owned by Sprint, the Purchaser or the Company and (2) Shares as to which appraisal rights have been perfected in accordance with applicable law), will be converted into a cash amount of $24.00 per share on the terms and conditions set forth in the Merger Agreement. The Offer will expire on November 25, 2009, unless extended in accordance with the terms of the Merger Agreement. The Merger Agreement is subject to (i) the condition that the number of Shares validly tendered and not withdrawn represents at least a majority of the total number of Shares outstanding on a fully diluted basis and (ii) the satisfaction or waiver of other customary closing conditions as set forth in the Merger Agreement, including the receipt of necessary regulatory approvals (including the expiration or termination of the Hart-Scott-Rodino waiting period).

In connection with the Merger Agreement, Sprint, WirelessCo L.P., Sprint Spectrum L.P., SprintCom, Inc., Sprint Communications Company, L.P., Nextel Communications, Inc., PhillieCo L.P. and APC PCS LLC (collectively, the “Sprint Parties”) and Horizon Personal Communications, Inc., Bright Personal Communications Services, LLC, iPCS Wireless, Inc. and the Company (collectively, the “iPCS Parties”) also entered into a Settlement Agreement and Mutual Release, dated October 18, 2009 (the “Settlement Agreement”). Under the terms of the Settlement Agreement, the Sprint Parties and the iPCS Parties have agreed to stay all pending litigation between them, subject to certain exceptions and conditions, and not to sue each other during the pendency of the transactions contemplated by the Merger Agreement, subject to certain exceptions. The stays of litigation and covenants not to sue will terminate if the Merger Agreement is terminated or if the Offer is not closed within the time period allowed by the Merger Agreement and the party seeking to terminate the Merger Agreement is unable to do so due to a court order or injunction that prevents termination. In addition, under the terms of the Settlement Agreement, effective upon the closing of the Merger, the Sprint Parties and the iPCS Parties will release each other from all claims, except those arising under or relating to a breach of the Merger Agreement or the Settlement Agreement, and will jointly file all such documents that are necessary to effect the dismissal with prejudice of all court orders and pending lawsuits between the Sprint Parties and the iPCS Parties.

Two putative class action lawsuits have been filed in the Circuit Court of Cook County, Illinois. The complaints name as defendants the Company and its directors, among others, and generally allege that the consideration to be received by the Company’s stockholders in connection with the Merger Agreement is unfair and inadequate. The complaints further allege that the Company’s directors breached their fiduciary duties by, among other things, approving the Merger Agreement and the other transactions contemplated by the Merger Agreement and that such breaches were aided and abetted by Sprint Nextel Corporation. The lawsuits seek, among other things, preliminary injunctive relief and monetary and attorneys’ fees. The Company believes that these lawsuits are without merit and intends to vigorously defend these actions. As permitted under applicable law, each of the Company and certain of its subsidiaries indemnifies their directors and officers for certain events or occurrences while the officer or director is, or was, serving the Company or its subsidiaries in such a capacity. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is unlimited; however, the Company has a director and officer insurance policy that should enable the Company to recover a portion of any future amounts paid.

On October 31, 2009, per the terms of the Company’s affiliation agreements with Sprint PCS, Sprint PCS notified the Company of its proposed CCPU and CPGA rates for the three year period from 2011 through 2013. The proposed rates for CCPU services are $10.23, $10.04 and $10.00 for 2011, 2012 and 2013, respectively. The proposed rates for CPGA services are $22.72, $22.58 and $23.23 for 2011, 2012 and 2013, respectively. The Company expects to enter into discussions with Sprint PCS regarding the proposed rates, which discussions are expected to commence in late November and proceed in the event that the transactions contemplated by the Merger Agreement discussed above are not consummated. These proposed rates are significantly higher than the Company’s current rates and the Company expects to strongly oppose them in the event that the transactions contemplated by the Merger Agreement discussed above are not consummated, including by submitting the matter to arbitration or litigation, if necessary. If the matter is submitted to an arbitration panel and the panel has not yet imposed different rates, the Company is required to pay the proposed rates as of January 1, 2011 subject to retroactive adjustments if any. Per the terms of our affiliation agreements, the Company has also been exploring the option of self-providing or procuring these services through third party providers in order to determine if the Company can provide or procure these services in a more cost-effective manner than Sprint can provide to the Company.

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

As used in this Quarterly Report on Form 10-Q, unless the context otherwise requires: (i) “Sprint PCS” refers to the affiliated entities of Sprint Nextel Corporation that are covered by our affiliation agreements; (ii) “Sprint” refers to Sprint Nextel Corporation and its affiliates; (iii) a “PCS Affiliate of Sprint” is an entity that operates (directly or through one or more subsidiaries) a personal communications services business pursuant to affiliation agreements with Sprint PCS and/or its affiliates or their successors; (iv) “Sprint PCS products and services” refers to digital wireless personal communications services, including wireless voice and data services, and related retail products, including handsets, in any case, offered under the Sprint brand name; and (v) “our subscribers” refers to Sprint PCS subscribers who reside in our territory, excluding reseller subscribers.

Statements in this Quarterly Report on Form 10-Q regarding Sprint or Sprint PCS are derived from information contained in our affiliation agreements with Sprint PCS, periodic reports and other documents filed by Sprint with the SEC or press releases or other statements issued or made by Sprint or Sprint PCS. This Quarterly Report on Form 10-Q contains trademarks, service marks and trade names of companies and organizations other than us. Other than with respect to Sprint PCS, our use or display of other parties’ trade names, trademarks or products is not intended to and does not imply a relationship with, or endorsement or sponsorship of us by, the trade name or trademark owners.

The following is an analysis of our results of operations, liquidity and capital resources and should be read in conjunction with the unaudited Consolidated Financial Statements and notes related thereto included in this Quarterly Report on Form 10-Q. To the extent that the following Management’s Discussion and Analysis contains statements which are not of a historical nature, such statements are forward-looking statements which involve risks and uncertainties. These risks include, but are not limited to, the risks and uncertainties listed in the next section entitled “Forward-Looking Statements” and other factors discussed elsewhere herein and in our other filings with the SEC.

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains statements about future events and expectations that are “forward-looking statements.” These statements relate to future events or our future financial performance, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” or the negative use of these terms or other comparable terminology. Any statement in this report that is not a statement of historical fact may be deemed to be a forward-looking statement and subject to the safe harbor created by the Private Securities Litigation Reform Act of 1995. These forward-looking statements include:

· statements regarding our anticipated revenue, expense levels, capital expenditures, security repurchases, liquidity and capital resources, operating losses and operating cash flows and litigation results and prospects; and

· statements regarding expectations or projections about developments in our industry and markets in our territory.

Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct. Important factors with respect to any such forward-looking statements, including certain risks and uncertainties that could cause actual results to differ materially from our expectations, include, but are not limited to:

· the ability of Sprint and us to complete the transactions contemplated by the Merger Agreement, the risk that a condition to the completion of such transactions may not be satisfied, and developments regarding such transactions;

· the impact of the pendency of the transactions contemplated by the Merger Agreement on our business generally, including relationships with our vendors and employees, particularly if the transactions contemplated by the Merger Agreement are not consummated promptly;

· our dependence on our affiliation with Sprint, as well as its reputation and performance in the marketplace;

· the compliance by Sprint with the judgment and orders of the Circuit Court of Cook County, Illinois requiring Sprint to cease owning and operating the Nextel network in iPCS Wireless, Inc.’s territory, including Sprint’s plans for the Nextel business going forward and its announcement of its intention to sell certain of its Nextel assets in our territory in light of that judgment (and whether any such sale would be in compliance with the Circuit Court’s rulings);

· the impact and final outcome of our litigation with Sprint regarding Sprint’s WiMax transaction with Clearwire, including Sprint’s plans for the Sprint-Clearwire transaction going forward in light of any future outcome;

· the impact and final outcome of our litigation with Sprint regarding Sprint’s acquisition of Virgin Mobile USA, including Sprint’s plans for the Virgin Mobile business going forward in light of any future outcome;

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· the risks of staying and then resuming our litigation with Sprint regarding Sprint’s Nextel Merger, the Sprint-Clearwire transaction and Sprint’s proposed acquisition of Virgin Mobile USA (which may have closed during the period of the stay) if the Merger with Sprint is not consummated;

· the impact and final outcome of our current and future disputes with Sprint under the affiliation agreements;

· changes in Sprint’s affiliation strategy;

· the ability of Sprint PCS to alter the terms of our affiliation agreements with it, including program requirements;

· the ongoing effectiveness of Sprint’s network as a result of Sprint’s outsourcing of its network maintenance and the effect of any network deterioration on our results of operations;

· our dependence on back office services, such as billing and customer care, as well as certain marketing and operational services provided by Sprint PCS, and the costs we incur to obtain such services, and the effect on us of Sprint PCS not performing these services adequately or of Sprint PCS devoting fewer resources to the provisioning of these services;

· changes or advances in technology in general, or specifically related to Sprint and its affiliates, that may render our technology less desirable to our customers, or any failure by Sprint to share with us the benefits of any improved technologies;

· competition in the industry and markets in which we operate;

· our ability to attract and retain skilled personnel, especially in light of the proposed Merger with Sprint;

· our potential need for additional capital or the need for refinancing any of our existing indebtedness;

· our potential inability to profitably expand existing products and services or launch new products and services, including a prepaid offering;

· changes in government regulation;

· changes in the relative attractiveness of Sprint PCS’s phones, pricing plans, customer service and coverage as well as the market’s overall perception of the Sprint brand;

· our subscriber credit quality;

· the potential for us to experience a continued high rate of subscriber turnover as compared to the industry;

· changes in the amounts of, and the relationship between, roaming revenue we receive and roaming expenses we pay;

· inaccuracies or delays in our financial and other information provided to us by Sprint, particularly in light of our 2008 migration to Sprint’s “Ensemble” billing and customer care platform;

· any failure to maintain effective internal controls to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act, which requires annual management assessments of the effectiveness of internal control over financial reporting;

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

· our significant level of indebtedness;

· the adequacy of our allowance for bad debt and other reserves;

· our subscriber purchasing patterns;

· subscriber satisfaction with our network and operations, including with services provided to us by Sprint, such as billing and customer care;

· availability of an adequate supply of subscriber equipment to Sprint PCS and to us and our distributors specifically;

· our dependence on independent third parties for a sizable percentage of our distribution;

· risks related to future growth and expansion, including subscriber growth;

· the risk of our workforce becoming unionized, particularly in light of the potential adoption of the Employee Free Choice Act;

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· depth and duration of the economic downturn in the United States and its effect on our vendors, distribution partners and existing and potential subscribers;

· risk of terrorist attack or other macro economic and political events and their impact on our current and potential subscribers;

· effects of mergers, consolidations and joint ventures within the wireless telecommunications industry, including business combinations involving Sprint or affiliates of Sprint, and unexpected announcements or developments from others in the wireless telecommunications industry;

· our dependency on key vendors such as Nortel for expansion or maintenance of our network, including the continued viability of these vendors; and

· other factors discussed under “ Recent Trends, Risks and Uncertainties That May Affect Operating Results, Liquidity and Capital Resources” below, elsewhere herein, and Item 1A, “Risk Factors,” in our 2008 Annual Report on Form 10-K and this Quarterly Report on Form 10-Q.

New Accounting Pronouncements

See Note 14, New Accounting Pronouncements, of the “Notes to Unaudited Consolidated Financial Statements” in this Quarterly Report on Form 10-Q for a discussion of new accounting pronouncements.

Definitions of Operating Metrics

In this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section, we provide certain financial measures that are calculated in accordance with accounting principles generally accepted in the United States (“GAAP”) and as adjusted to GAAP (“non-GAAP”) to assess our financial performance. In addition, we use certain non-financial terms that are not measures of financial performance under GAAP. Terms such as “gross subscriber additions”, “net subscriber additions” and “churn” are terms used in the wireless telecommunications industry. The non-GAAP financial measures of average revenue per user (“ARPU”) and cost per gross addition (“CPGA”) reflect standard measures of performance commonly used in the wireless telecommunications industry. The non-financial terms and the non-GAAP measures reflect wireless telecommunications industry conventions and are commonly used by the investment community for comparability purposes. The non-GAAP financial measures included in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” are reconciled below in “Reconciliation of Non-GAAP Financial Measures” and, together with the non-financial terms, are summarized as follows:

· Gross subscriber additions for the period represent the number of new activations during the period (excluding transfers into our territory).

· Net subscriber additions for the period represented is calculated as the gross subscriber additions in the period less the number of subscribers deactivated plus the net subscribers transferred in or out of our markets during the period.

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

· ARPU, or average revenue per user, is a measure of the average monthly service revenue earned from subscribers based in our territory. This measure is calculated by dividing subscriber revenue in our consolidated statement of operations by the number of our average monthly subscribers during the period divided by the number of months in the period.

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

· Licensed population represents the number of residents in the markets in our territory for which we have an exclusive right to provide wireless mobility communications services under the Sprint brand name. The number of residents located in our territory does not represent the number of wireless subscribers that we serve or expect to serve in our territory.

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· Covered population represents the number of residents covered by our portion of the wireless network of Sprint. The number of residents covered by our network does not represent the number of wireless subscribers that we serve or expect to serve in our territory.

In this “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” unless the context indicates otherwise, all references to “subscribers” or “customers” and other operating metrics mean subscribers or customers excluding subscribers of resellers known as Mobile Virtual Network Operators, or MVNOs, that use our network and resell wireless service under private brands.

Recent Developments — Proposed Merger

On October 18, 2009, the Company, Sprint and Ireland Acquisition Corporation (the “Purchaser”) and a wholly owned subsidiary of Sprint, entered into an Agreement and Plan of Merger (the “Merger Agreement”) pursuant to which, among other things, the Purchaser commenced a tender offer (the “Offer”) on October 28, 2009 to acquire all of the Company’s outstanding shares of common stock, par value $0.01 per share (the “Shares”), at a price of $24.00 per share in cash (the “Offer Price”). The Merger Agreement also provides that following the consummation of the Offer, the Purchaser will be merged with and into the Company (the “Merger”) with the Company surviving the Merger as a wholly owned subsidiary of Sprint. At the effective time of the Merger, all remaining outstanding Shares not tendered in the Offer (other than (1) Shares owned by Sprint, the Purchaser or the Company and (2) Shares as to which appraisal rights have been perfected in accordance with applicable law), will be converted into a cash amount of $24.00 per share on the terms and conditions set forth in the Merger Agreement. The Offer will expire on November 25, 2009, unless extended in accordance with the terms of the Merger Agreement. The Merger Agreement is subject to (i) the condition that the number of Shares validly tendered and not withdrawn represents at least a majority of the total number of Shares outstanding on a fully diluted basis and (ii) the satisfaction or waiver of other customary closing conditions as set forth in the Merger Agreement, including the receipt of necessary regulatory approvals (including the expiration or termination of the Hart-Scott-Rodino waiting period).

Business Overview

As a PCS Affiliate of Sprint, we have the exclusive right to provide digital wireless personal communications services, or PCS, under the Sprint brand name in 81 markets including markets in Illinois, Michigan, Pennsylvania, New York, Indiana, Iowa, Ohio and Tennessee. Our territory includes key markets such as Grand Rapids (MI), Fort Wayne (IN), the Tri-Cities region of Tennessee (Johnson City, Kingsport and Bristol), Scranton (PA), Saginaw-Bay City (MI), Central Illinois (Peoria, IL, Springfield, IL, Decatur, IL and Champaign, IL), and the Quad Cities region of Illinois and Iowa (Bettendorf and Davenport, IA, and Moline and Rock Island, IL). We own and are responsible for building, operating and managing the portion of the 100% digital, 100% PCS wireless network of Sprint PCS located in our territory. We offer national calling plans designed by Sprint PCS as well as local plans tailored to our markets. Our PCS network is designed to offer a seamless connection with the wireless network of Sprint PCS. We market Sprint PCS products and services through a number of distribution outlets located in our territory, including our company-owned retail stores, co-branded dealers, major national retailers and local third party distributors. As of September 30, 2009, our licensed territory had a total population of approximately 15.1 million residents, of which our wireless network covered approximately 12.7 million residents, and we had approximately 720,100 subscribers.

Relationship with Sprint

Our relationship with Sprint is the most significant relationship we have and is essential to the current operation of our business. The terms of our relationship are set forth in the affiliation agreements between certain of our subsidiaries and Sprint PCS. Pursuant to these affiliation agreements, we agreed to offer CDMA services using Sprint’s spectrum under the Sprint brand name on a wireless network built and operated at our own expense. We believe that our strategic relationship with Sprint provides significant competitive advantages. In particular, we believe that our affiliation agreements with Sprint allow us to offer high quality, nationally branded wireless voice and data services for lower cost and lower capital requirements than would otherwise be possible.

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We have been, and continue to be, engaged in litigation with Sprint regarding (i) its 2005 merger with Nextel, (ii) its Sprint-Clearwire transaction through which Sprint and Clearwire are developing a nationwide mobile 4G WiMax network and (iii) its proposed acquisition of Virgin Mobile. On October 18, 2009, pursuant to the Settlement Agreement, the parties agreed to stay such litigation pending the completion of the Merger and subject to certain exceptions and conditions. Subject to the terms of the Settlement Agreement, we intend to continue to vigorously protect and enforce our rights, but there is no assurance that we will prevail. For a detailed discussion of our litigation with Sprint, see “—Commitments and Contingencies” below.

Under our affiliation agreements with Sprint PCS, the costs we incur for the support services provided by Sprint are determined on a per average monthly cash cost per user (“CCPU”) rate and on a monthly cost per gross addition (“CPGA”) rate. Pursuant to our affiliation agreements with Sprint PCS, the currently applicable CCPU and CPGA rates through 2010, adjusted for achieved milestone reductions as described below, are as follows:

Year	CCPU			CPGA
2008 January – June	$	6.50		$	19.00
July	$	6.35		$	19.00
August – December	$	6.20		$	19.00
2009	$	5.85	*	$	19.00
2010	$	5.55	*	$	19.00

* Subject to further adjustments as described below.

Beginning on January 1, 2011, the rates will be reset each year based on the amount necessary to recover Sprint PCS’s reasonable costs for providing these services to us and the other PCS Affiliates of Sprint. As discussed below, we expect that Sprint will assert that its costs are substantially greater than those reflected in the rates currently in effect through December 31, 2010.

The CCPU rate in effect from 2008 through 2010 is to be reduced from the then current rate by $0.15 if we hit certain milestones with respect to our voluntary deployment of EV-DO Rev. A, a version of the further evolution of code division multiple access (“CDMA”) high-speed data technology called Evolution Data Optimized (“EV-DO”). Specifically, the CCPU rates set forth above are to be reduced by $0.15 from the then-current rate when our EV-DO Rev. A deployment covers at least 6.0 million in population (“POPs”), by another $0.15 from the then-current rate when we cover at least 7.0 million POPs; and by another $0.15 from the then-current rate when we cover at least 9.0 million POPs. Our EV-DO Rev. A deployment coverage exceeded 6.0 million POPs during June 2008 and exceeded 7.0 million POPs during July 2008. As a result, our CCPU rate was reduced to $6.35 starting July 1, 2008, was further reduced to $6.20 starting August 1, 2008 for the remainder of 2008 and has been reduced to $5.85 and $5.55 in 2009 and 2010, respectively, subject to any further adjustments related to incremental EV-DO Rev. A coverage. As of September 30, 2009, our EV-DO Rev. A deployment covered approximately 7.9 million POPs.

On October 31, 2009, per the terms of our affiliation agreements with Sprint PCS, Sprint PCS notified us of its proposed CCPU and CPGA rates for the three year period from 2011 through 2013. The proposed rates for CCPU services are $10.23, $10.04 and $10.00 for 2011, 2012 and 2013, respectively. The proposed rates for CPGA services are $22.72, $22.58 and $23.23 for 2011, 2012 and 2013, respectively. We expect to enter into discussions with Sprint PCS regarding the proposed rates, which discussions are expected to commence in late November and proceed in the event that the transactions contemplated by the Merger Agreement discussed above are not consummated. These proposed rates are significantly higher than our current rates and we expect to strongly oppose them in the event that the transactions contemplated by the Merger Agreement discussed above are not consummated, including by submitting the matter to arbitration or litigation, if necessary. If the matter is submitted to an arbitration panel and the panel has not yet imposed different rates, we are required to pay the proposed rates as of January 1, 2011 subject to retroactive adjustments if any. Per the terms of our affiliation agreements, we have also been exploring the option of self-providing or procuring these services through third party providers in order to determine if we can provide or procure these services in a more cost-effective manner than Sprint can provide to us.

We receive roaming revenue when subscribers of Sprint and other PCS Affiliates of Sprint incur minutes of use in our territories, and we incur expense to Sprint and to other PCS Affiliates of Sprint when our subscribers incur minutes of use in the territories of Sprint and other PCS Affiliates of Sprint. Effective January 1, 2008 through December 31, 2010, subject to adjustment as described below, 3G data roaming is not settled separately with Sprint; however, we do settle 3G data roaming separately with the other PCS Affiliates of Sprint. Pursuant to our affiliation agreements with Sprint PCS, the reciprocal roaming rates through 2010 are as follows:

Year	Voice & 2G Data Per Minute of Use			3G Data Per Kilobyte of Use
2008	$	0.0400	*	$	0.0003
2009	$	0.0400	*	$	0.0001
2010	$	0.0380	*	$	0.0001

* Excluding certain markets as described below.

Beginning on January 1, 2011, the rates will be reset each year to an amount equal to 90% of Sprint’s average monthly retail yield for the first nine months of the immediately preceding calendar year; provided, however, that such amount for any period will not be less than our network costs.

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Consolidated Results of Operations

Summary

For the three and nine months ended September 30, 2009 our net income was $2.7 million and $15.8 million, respectively, compared to net losses of $7.5 million and $9.7 million for the three and nine months ended September 30, 2008. Net income for the nine months ended September 30, 2009 includes a $4.3 million gain related to a Sprint settlement. The three and nine months ended September 30, 2009 reflected higher subscriber revenue, attributable to our larger subscriber base and higher ARPU, as compared to the same periods in 2008. Bad debt expense decreased in the three and nine months ended September 30, 2009, reflecting an improvement in uncollectable accounts compared to the 2008 periods. Offsetting the increased subscriber revenue and reduced bad debt expense for the three and nine months ended September 30, 2009 were higher costs related to servicing a larger network and larger subscriber base, as well as a decrease in our roaming margin as compared to the 2008 periods. Net income was positively affected by decreased Sprint related litigation expenses in the three months ended September 30, 2009 and negatively affected by increased Sprint related litigation expenses in the nine months ended September 30, 2009 as compared to the 2008 periods. Despite lower gross subscriber additions, acquisition costs for new activations were flat for the three months ended September 30, 2009, and increased in the nine months ended September 30, 2009, reflecting higher commissions related to the sale of more expensive rate plans and an increase in the percentage of gross additions coming from distribution channels with higher commission structures, as well as higher handset subsidy costs as compared to the 2008 periods, offset by lower fixed costs related to company-owned retail stores.

Presented below is a more detailed comparative data and discussion regarding our consolidated results of operations for the three and nine months ended September 30, 2009 compared to the three and nine months ended September 30, 2008.

For the Three and Nine Months Ended September 30, 2009 compared to the Three and Nine Months Ended September 30, 2008

Results of operations for any period less than one year are not necessarily indicative of results of operations for a full year.

Key Performance Metrics.

Management uses several key performance metrics to analyze the operations of our business. Below is a table setting forth the metrics that we use for the relevant time periods:

	As of and for the Three Months Ended September 30,						Increase/			Percent
	2009			2008			(Decrease)			Change
Total Subscribers	720,100			674,400			45,700			6.8	%
Gross Subscriber Additions	68,300			72,200			(3,900		)	(5.4	)
Net Subscriber Additions	9,900			20,400			(10,500		)	(51.5	)
Churn	2.4		%	2.3		%	0.1		pts	n/a
ARPU	$	50.45		$	48.31		$	2.14		4.4
CPGA	$	373		$	374		$	(1	)	(0.3	)

	As of and for the Nine Months Ended September 30,						Increase/			Percent
	2009			2008			(Decrease)			Change
Total Subscribers	720,100			674,400			45,700			6.8	%
Gross Subscriber Additions	184,200			193,200			(9,000		)	(4.7	)
Net Subscriber Additions	29,000			44,500			(15,500		)	(34.8	)
Churn	2.2		%	2.3		%	(0.1		)pts	n/a
ARPU	$	50.33		$	48.39		$	1.94		4.0
CPGA	$	400		$	376		$	24		6.4

Subscriber Additions. Gross subscriber additions decreased in the three and nine months ended September 30, 2009 as compared to the three and nine months ended September 30, 2008, reflecting tightened credit standards and increased overall wireless penetration in our markets. Net subscriber additions for the three months ended September 30, 2009 were negatively impacted by a slightly higher overall churn percentage, reflecting Sprint’s third quarter 2009 elimination of the Sprint Wireless Advantage Club (“SWAC”) discount program for employee related accounts in our territories and the related deactivations, and by the effect of churn on our larger average subscriber base as compared to the three months ended September 30, 2008. Net subscriber additions for the nine months ended September 30, 2009 were also negatively impacted by the effect of churn on our larger average subscriber base, but was offset by a lower overall churn percentage for the nine month period, as compared to the nine months ended September 30, 2008.

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Churn. Churn for the three months ended September 30, 2009 was higher than for the comparable 2008 period reflecting the effect of Sprint’s third quarter 2009 elimination of the SWAC discount program, offset by improvements in churn from credit-related deactivations. Churn for the nine months ended September 30, 2009 was lower than for the comparable 2008 period reflecting improvements in churn from credit-related deactivations, partially offset by increased voluntary churn, including the discontinuation by Sprint of its SWAC program. At September 30, 2009, approximately 81% of our subscribers were under contract compared to 84% at September 30, 2008.

Average Revenue Per User. ARPU was positively affected by an increase in monthly recurring revenue per subscriber for the three and nine months ended September 30, 2009 as compared to the three and nine months ended September 30, 2008. These increases reflect the growing popularity of Sprint’s “Simply Everything,” “Everything” and “Talk/Message” plans. Additionally, ARPU was positively impacted in the 2009 periods by moderating customer care related credits provided by Sprint to customers in our territory. Average monthly credits per subscriber, including promotional credits, were $5.79 for both for the three and nine months ended September 30, 2009, as compared to $7.66 and $6.92 for the three and nine months ended September 30, 2008, respectively. Partially offsetting these positive trends, ARPU was negatively affected by decreases in customer plan overage charges and roaming charges for the three and nine months ended September 30, 2009 as compared to the three and nine months ended September 30, 2008. These decreases also reflect the growing popularity of Sprint’s all inclusive plans.

Cost Per Gross Addition. Variable costs per gross addition increased by $6 and $27 in the three and nine months ended September 30, 2009, respectively, as compared to the same periods in 2008, reflecting higher commission costs, related to the sale of more expensive rate plans and an increase in the percentage of gross additions coming from distribution channels with higher commission structures. Fixed costs per gross addition decreased $7 and $3 in the three and nine months ended September 30, 2009 compared to the three and nine months ended September 30, 2008, respectively, reflecting a reduction in our company-owned retail presence in favor of more exclusive Sprint co-branded dealers as well as lower advertising expenses, offset by a decrease in gross subscriber additions of approximately 5% for both comparable periods. At September 30, 2009, we owned and operated 36 retail stores and contracted with 131 exclusive Sprint co-branded dealers compared to 41 retail stores and 105 exclusive Sprint co-branded dealers at September 30, 2008.

Revenue.

The following tables set forth a breakdown of revenue by type (dollars in thousands):

	For the Three Months Ended September 30,				Increase/			Percent
	2009		2008		(Decrease)			Change
Service revenue	$	108,480	$	96,097	$	12,383		12.9	%
Roaming revenue from subscribers of Sprint PCS and other PCS Affiliates of Sprint	22,932		23,764		(832		)	(3.5	)
Roaming revenue from other wireless carriers	1,827		4,619		(2,792		)	(60.4	)
Reseller revenue	3,024		3,899		(875		)	(22.4	)
Equipment and other revenue	5,141		3,678		1,463			39.8
Total revenue	$	141,404	$	132,057	$	9,347		7.1

	For the Nine Months Ended September 30,				Increase/			Percent
	2009		2008		(Decrease)			Change
Service revenue	$	319,600	$	282,370	$	37,230		13.2	%
Roaming revenue from subscribers of Sprint PCS and other PCS Affiliates of Sprint	63,808		69,916		(6,108		)	(8.7	)
Roaming revenue from other wireless carriers	10,587		12,375		(1,788		)	(14.4	)
Reseller revenue	9,161		11,792		(2,631		)	(22.3	)
Equipment and other revenue	14,571		10,633		3,938			37.0
Total revenue	$	417,727	$	387,086	$	30,641		7.9

· Service revenue. Service revenue is comprised of the monthly recurring charges for voice and data usage and the monthly non-recurring charges for voice and data minutes and data kilobytes over plan, long distance, roaming usage charges, other feature revenue and late payment fee and early cancellation fee revenues. Deductions for billing adjustments, promotional credits and certain customer care credits are recorded as a reduction to service revenue. Our service revenue growth in 2009 over the prior year three and nine month periods consists of $7.8 million and $24.9 million, respectively, from a higher average subscriber base and $4.6 million and $12.3 million, respectively, from increases in ARPU.

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· Roaming revenue from subscribers of Sprint PCS and other PCS Affiliates of Sprint. We receive revenue on a per minute basis for voice traffic when subscribers of Sprint PCS and other PCS Affiliates of Sprint use our network. We similarly receive revenue on a per kilobyte basis for data traffic when subscribers of other PCS Affiliates of Sprint use our network. In addition, we receive toll revenue for any long distance calls made by these subscribers while roaming on our network.

For 2008 and 2009, the reciprocal roaming rate is $0.0400 per minute for voice traffic ($0.10 per minute in certain markets in eastern and western Pennsylvania). For the three and nine months ended September 30, 2009 compared to the three and nine months ended September 30, 2008, voice roaming revenue from subscribers of Sprint and other PCS Affiliates of Sprint, including toll revenue, decreased by $0.9 million and $6.0 million, respectively, reflecting decreases in roaming minutes and roaming toll minutes, as derived from information provided by Sprint.

For 2009 and 2008, the reciprocal roaming rate for data traffic was $0.0001 per kilobyte and $0.0003 per kilobyte, respectively. 3G data roaming revenue from other PCS Affiliates of Sprint decreased by $0.1 million for the nine months ended September 30, 2009 as compared to the nine months ended September 30, 2008 reflecting the decrease in the reciprocal rate, offset by increased kilobyte traffic from subscribers of other PCS Affiliates of Sprint on our network.

· Roaming revenue from other wireless carriers. We receive roaming revenue from wireless carriers other than Sprint PCS and other PCS Affiliates of Sprint when subscribers of such other wireless carriers roam in our territory. We do not have agreements with these other wireless carriers. Instead, we rely on the roaming arrangements Sprint PCS has negotiated with these carriers and are unable to set terms and prices or otherwise monitor these relationships. We are paid on a per minute basis for voice and 2G data and on a per kilobyte basis for 3G data traffic pursuant to these agreements. For the three and nine months ended September 30, 2009, roaming minutes were 25.7 million and 148.9 million, respectively, compared to 100.8 million and 252.8 million for the three and nine months ended September 30, 2008, decreases of 75% and 41%, respectively, reflecting the impact of the acquisition of Alltel by Verizon. The average per minute rate, including toll, increased from $0.039 per minute for the three months ended September 30, 2008 to $0.046 per minute for the three months ended September 30, 2009. The average per minute rate decreased from $0.044 per minute for the nine months ended September 30, 2008 to $0.042 per minute for the nine months ended September 30, 2009. Data roaming revenue from other wireless carriers totaled $0.6 million and $4.4 million for the three and nine months ended September 30, 2009 compared with $0.7 million and $1.3 million for the three and nine months ended September 30, 2008, reflecting a steep decline in data roaming revenue from Alltel. The majority of our roaming revenue from other wireless carriers is derived from customers of Alltel, which was acquired by Verizon Wireless in January 2009. As a result of the acquisition of Alltel, in 2009 we have experienced and may continue to experience a decline in our roaming revenue from Alltel.

· Reseller revenue. Through Sprint PCS we allow resellers, known as MVNOs, the largest of which is Virgin Mobile, to use our network. Pursuant to these arrangements, we are paid on a per minute and per kilobyte basis. The decreases in reseller revenue for the three and nine months ended September 30, 2009 compared to the three and nine months ended September 30, 2008 reflect decreased reseller ARPU, partially offset by an increase in the average reseller subscribers between the respective periods. For the three and nine months ended September 30, 2009, reseller ARPU was $3.61 and $3.68, respectively, compared to $5.19 and $5.32 for the three and nine months ended September 30, 2008, respectively. Average reseller subscribers were approximately 277,100 and 275,800 for the three and nine months ended September 30, 2009 compared to approximately 250,400 and 246,400 for the three and nine months ended September 30, 2008. At September 30, 2009, we had approximately 273,300 reseller subscribers based in our territory. Sprint’s proposed acquisition of Virgin Mobile is the subject of pending litigation brought by us. See “—Commitments and Contingencies” below for further discussion.

· Equipment and other revenue. Equipment and other revenue is derived primarily from the sale of handsets and accessories to new customers and from current customers who upgrade their handsets through our retail and local distribution channels, in each case, net of sales incentives, rebates and an allowance for returns. The increases in the three and nine months ended September 30, 2009, as compared to the three and nine months ended September 30, 2008, reflect higher revenue per new and upgraded handset and a larger number of upgrades. These increasing factors are offset by lower activations from our retail and local distribution channels.

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Operating Expense.

The following tables set forth a breakdown of operating expense by type (dollars in thousands):

	For the Three Months Ended September 30,				Increase/			Percent
	2009		2008		(Decrease)			Change
Cost of service and roaming	$	74,038	$	74,520	$	(482	)	(0.6	)%
Cost of equipment	18,497		15,905		2,592			16.3
Selling and marketing	17,542		18,091		(549		)	(3.0	)
General and administrative	8,948		10,028		(1,080		)	(10.8	)
Depreciation and amortization	11,280		12,887		(1,607		)	(12.5	)
Loss on disposal of property and equipment, net	113		71		42			59.2
Total operating expense	$	130,418	$	131,502	$	(1,084	)	(0.8	)

	For the Nine Months Ended September 30,					Increase/			Percent
	2009			2008		(Decrease)			Change
Cost of service and roaming	$	217,838		$	213,167	$	4,671		2.2	%
Cost of equipment	50,029			40,442		9,587			23.7
Selling and marketing	51,528			52,394		(866		)	(1.7	)
General and administrative	25,565			25,108		457			1.8
Gain on Sprint settlement	(4,273		)	—		(4,273		)	—
Depreciation and amortization	36,115			40,691		(4,576		)	(11.2	)
Loss on disposal of property and equipment, net	629			329		300			91.2
Total operating expense	$	377,431		$	372,131	$	5,300		1.4

Cost of service and roaming. Cost of service and roaming includes network operations expense, roaming expense relating to when our subscribers roam either on other Sprint PCS networks or other wireless carriers’ networks, back-office customer services provided by Sprint PCS, the provision for doubtful accounts, long distance expense, the 8% affiliation fee due to Sprint PCS for collected revenue and stock-based compensation expense. Network operations expense includes salaries and benefits for network personnel, cell site rent, utilities and maintenance expenses, fees relating to the connection of our cell sites to our switches and other transport and facility expenses. Roaming expense is our cost of our subscribers using Sprint PCS and other wireless carriers’ networks. Roaming expense on the Sprint PCS network is at the reciprocal rates as described above under “—Roaming revenue from subscribers of Sprint PCS and other PCS Affiliates of Sprint.” Roaming expense when our subscribers use other wireless carriers networks is at rates as determined by the roaming agreements signed by Sprint PCS with these other wireless carriers. Effective January 1, 2008, data roaming with Sprint is not settled separately, however, we continue to settle separately 3G data roaming with the other PCS Affiliates of Sprint.

The decrease in cost of service and roaming for the three months ended September 30, 2009 reflects lower bad debt expense and decreases in our monthly cash costs per user fee payable to Sprint, offset by the costs of servicing a larger network and larger subscriber base, such as higher cell site rent and interconnect costs due to more cell sites, and by increases in roaming expense with Sprint as well as carriers other than Sprint.

The increase in cost of service and roaming for the nine months ended September 30, 2009 reflects the costs of servicing a larger network and larger subscriber base, such as higher cell site rent and interconnect costs due to more cell sites, and increases in roaming expense with Sprint as well as carriers other than Sprint, offset by lower bad debt expense and decreases in our monthly cash costs per user fee payable to Sprint.

Roaming expense with Sprint increased $1.3 million and $2.4 million, from $14.5 million and $44.4 million in the three and nine months ended September 30, 2008, respectively, to $15.8 million and $46.8 million in the three and nine months ended September 30, 2009, respectively, due to higher minutes of use on Sprint’s networks.

Roaming expense with wireless carriers other than Sprint increased $0.5 million and $4.2 million, from $4.8 million and $9.8 million in the three and nine months ended September 30, 2008, respectively, to $5.3 million and $14.0 million in the three and nine months ended September 30, 2009, respectively, due to significantly higher minutes and kilobytes of use on Sprint’s roaming partners’ networks.

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Bad debt expense decreased $2.4 million and $7.8 million from $5.6 million and $15.8 million in the three and nine months ended September 30, 2008, respectively, to $3.2 million and $8.0 million in the three and nine months ended September 30, 2009, respectively. These decreases in bad debt expense reflect tightened credit policies and increases in deposit requirements in the three and nine months ended September 30, 2009 as compared to the 2008 periods.

Additionally, due to decreases in our monthly cash cost per user fee payable to Sprint, our cost of service and roaming was lower by $1.4 million and $4.1 million for the three and nine months ended September 30, 2009 as compared to the three and nine months ended September 30, 2008, respectively.

At September 30, 2009, our network consisted of 1,981 leased cell sites and five switches. At September 30, 2008, our network consisted of 1,819 leased cell sites and five switches.

Cost of equipment. Cost of equipment includes the cost of handsets and accessories sold or upgraded from our retail and local distribution channels. Cost of equipment related to upgrades increased $2.9 million and $6.3 million, or 75% and 57%, in the three and nine months ended September 30, 2009 as compared to the three and nine months ended September 30, 2008, reflecting increases in the number of subscribers receiving handset upgrades from our retail and local distribution channels and for the nine month period, an increase in the average handset cost per upgrade. Cost of equipment for new activations decreased $0.4 million, or 3%, in the three months ended September 30, 2009 as compared to the three months ended September 30, 2008, reflecting a decrease in new activations from our retail and local distribution channels, offset by an increase in the average cost per activated phone. Cost of equipment for new activations increased $3.2 million, or 11%, in the nine months ended September 30, 2009 as compared to the nine months ended September 30, 2008, reflecting an increase in the average cost per activated phone, partially offset by a decrease in new activations from our retail and local distribution channels. Handset costs have been increasing as demand has shifted toward more expensive smart phones.

Selling and marketing. Selling and marketing expense includes the costs to operate our owned retail stores, advertising and promotional expenses, commissions to our company-owned retail and local third party distributor channels, subscriber acquisition costs from national third parties and other Sprint-controlled channels and stock-based compensation expense. The decreases in the three and nine months ended September 30, 2009 were due to lower costs associated with a smaller company employed retail work force, lower advertising costs and lower costs related to promotional credits, offset by higher commissions and subscriber acquisition costs from our indirect channels.

General and administrative. General and administrative expenses include administrative salaries and benefits, legal fees, insurance expense, other professional expenses and stock-based compensation expense. For the three and nine months ended September 30, 2009, general and administrative expense included approximately $3.0 million and $9.0 million, respectively, of Sprint litigation related expenses. This compares to $5.3 million and $7.4 million for the three and nine months ended September 30, 2008, respectively. Stock-based compensation expense included in general and administrative expense totaled approximately $1.0 million and $2.8 million for the three and nine months ended September 30, 2009, respectively, compared to $0.9 million and $3.8 million for the three and nine months ended September 30, 2008, respectively.

Gain on Sprint settlement. On January 22, 2009, we reached a settlement with Sprint related to previously disputed 2008 items, which resulted in a $4.3 million gain being recorded in our consolidated statement of operations for the nine months ended September 30, 2009.

Depreciation and amortization. Amortization of intangible assets totaled $2.3 million and $6.9 million for both the three and nine months ended September 30, 2009 and 2008, respectively. Depreciation expense totaled $9.0 million and $29.2 million for the three and nine months ended September 30, 2009 compared to $10.6 million and $33.8 million for the three and nine months ended September 30, 2008, decreases of $1.6 million and $4.6 million for the three and nine month periods, respectively. These decreases reflect the full depreciation of certain assets during 2008 and 2009. During the three and nine months ended September 30, 2008, we recognized impairment charges of $1.9 million and $2.2 million, respectively, included in depreciation, related to our assets held for sale to reduce their carrying value in accordance with the guidance included in the Financial Accounting Standards Board’s Accounting Standards Codification Topic 360, “Property, Plant and Equipment”.

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Non-Operating Income and Expense.

The following tables set forth a breakdown of non-operating income and expense by type (dollars in thousands):

	For the Three Months Ended September 30,				Increase/			Percent
	2009		2008		(Decrease)			Change
Interest income	$	47	$	316	$	(269	)	(85.1	)%
Interest expense	8,065		8,320		(255		)	(3.1	)
Other income, net	72		63		9			14.3

	For the Nine Months Ended September 30,				Increase/			Percent
	2009		2008		(Decrease)			Change
Interest income	$	211	$	1,420	$	(1,209	)	(85.1	)%
Interest expense	24,096		25,456		(1,360		)	(5.3	)
Other income, net	99		93		6			6.5

Interest Income. The decrease in interest income in the three and nine months ended September 30, 2009 as compared to the three and nine months ended September 30, 2008 reflects lower yields on our investments during the three and nine months ended September 30, 2009 as compared to the three and nine months ended September 30, 2008.

Interest Expense. Interest expense consists of interest on our outstanding long-term debt (see Note 6, Long-Term Debt, of the “Notes to Unaudited Consolidated Financial Statements” in this Quarterly Report on Form 10-Q), including amortization of financing costs and net of capitalized interest and the effect of our interest rate swap (see Note 7, Interest Rate Swap, of the “Notes to Unaudited Consolidated Financial Statements” in this Quarterly Report on Form 10-Q). The decrease in interest expense in the three and nine months ended September 30, 2009 reflects a lower weighted average interest rate, net of our interest rate swap, of 6.44% and 6.52% on our outstanding long-term debt during the three and nine months ended September 30, 2009, respectively, as compared to the weighted average interest rate of 6.96% and 7.10% on our outstanding long-term debt during the three and nine months ended September 30, 2008, respectively.

In connection with our capital expenditures, we capitalized interest of approximately $0.1 million and $0.5 million in the three and nine months ended September 30, 2009, respectively. We capitalized interest of approximately $0.5 million and $1.3 million in the three and nine months ended September 30, 2008, respectively.

Reconciliation of Non-GAAP Financial Measures (All Revenues and Expenses in Thousands)

We utilize certain financial measures that are not calculated in accordance with GAAP to assess our financial performance. A non-GAAP financial measure is defined as a numerical measure of financial performance that (a) 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 (b) 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. The non-GAAP financial measures discussed in “—Results of Operations” are ARPU and CPGA. A description of each of these non-GAAP financial measures is provided in “—Definition of Operating Metrics.” The following tables reconcile the non-GAAP financial measures with our consolidated financial statements presented in accordance with GAAP, excluding subscriber data:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2009		2008		2009		2008
*ARPU*
Service revenue (in thousands)	$	108,480	$	96,097	$	319,600	$	282,370
Average subscribers	716,700		663,100		705,500		648,300
ARPU	$	50.45	$	48.31	$	50.33	$	48.39

ARPU, which is utilized by most wireless companies to determine recurring monthly revenue on a per subscriber basis, is used by analysts and investors to compare relative subscriber revenue across the wireless industry. We use ARPU to assist in evaluating past selling performance and the success of specific rate plan promotions.

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	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2009			2008			2009			2008
*CPGA*
Selling and Marketing (in thousands):	$	17,542		$	18,091		$	51,528		$	52,394
plus: Equipment costs, net of cost of upgrades	11,658			12,008			32,617			29,369
less: Equipment revenue, net of upgrade revenue	(3,555		)	(2,991		)	(10,123		)	(8,499		)
less: Stock-based compensation expense	(141		)	(129		)	(421		)	(546		)
CPGA costs	$	25,504		$	26,979		73,601			72,718
Gross additions	68,300			72,200			184,200			193,200
CPGA	$	373		$	374		$	400		$	376

CPGA is utilized by most wireless companies to determine their cost to acquire a new subscriber. CPGA is used by analysts and investors to compare us to other wireless companies. We use CPGA to evaluate past selling performance, the success of specific promotions and as a basis to determine the amount of time we must retain a new subscriber before we recover this cost.

Inflation

We believe that inflation has not had a significant impact on our revenues or our results of operations in the three or nine months ended September 30, 2009 and 2008, respectively.

Liquidity and Capital Resources

While we believe the Merger should be consummated later this year or early next year, we also believe our cash and cash equivalents and operating cash flow will be sufficient to operate our business and fund our capital needs for at least the next twelve months. Although we have certain limited additional borrowings allowed under our current debt agreements, including but not limited to PIK Interest (see Note 6, Long-Term Debt, of the “Notes to Unaudited Consolidated Financial Statements” in this Quarterly Report on Form 10-Q), we are dependent on cash and cash equivalents and operating cash flow to operate our business and fund our capital needs. However, our future liquidity is dependent on a number of factors influencing our expected earnings and operating cash flows, including those discussed below in “—Recent Trends, Risks and Uncertainties That May Affect Operating Results, Liquidity and Capital Resources.”

Significant Sources of Cash

We generated $57.8 million in net cash flows from operating activities for the nine months ended September 30, 2009, compared to $44.1 million for the nine months ended September 30, 2008, an increase of $13.7 million. Excluding changes in working capital, operating activities provided $68.8 million of cash for the nine months ended September 30, 2009, compared to $52.9 million of cash for the nine months ended September 30, 2008, generally reflecting increased earnings from our larger subscriber base and cash received related to the settlement of 2008 disputes with Sprint, offset by a decrease in our roaming margin. The nine months ended September 30, 2009 also reflected increased Sprint related litigation expenses and higher customer acquisition costs. Sprint related working capital, which includes fees and charges payable and receivable between us and Sprint, was a source of cash of $5.1 million for the nine months ended September 30, 2009 compared to a source of cash of $9.0 million for the nine months ended September 30, 2008, primarily due to the timing of cash payments both to and from Sprint. For the nine months ended September 30, 2009, non-Sprint related working capital used cash of $16.1 million, reflecting increased accounts receivable related to a higher subscriber base during the period. For the nine months ended September 30, 2008, non-Sprint related working capital used cash of $17.8 million reflecting customer account write-offs and increased accounts receivable during the period, offset by higher Sprint litigation related expense accruals.

We received approximately $0.2 million primarily from the sale of equipment during each of the nine months ended September 30, 2009 and 2008.

For the nine months ended September 30, 2008, we received $0.6 million from the exercise of options representing approximately 37,800 shares. As of September 30, 2009, there were 1,038,864 exercisable stock options outstanding with a weighted average exercise price of $20.07. We cannot predict at what level, if any, cash will be generated from stock option exercises in the future. At September 30, 2009, the intrinsic value of all of our outstanding stock options was approximately $6.1 million.

Significant Uses of Cash

Cash flows used for investing activities for the nine months ended September 30, 2009 included $27.9 million for capital expenditures. Included in this total was $24.8 million for new cell site construction and other network-related capital expenditures, of which $11.9 million was for EV-DO Rev. A equipment, and $3.1 million was for store improvements, IT and other corporate-related capital expenditures.

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Cash flows used for investing activities for the nine months ended September 30, 2008 included $52.4 million for capital expenditures. Included in this total was $50.0 million for new cell site construction and other network-related capital expenditures, of which $18.1 million was for EV-DO Rev. A equipment, and $2.4 million was for new stores, store improvements, IT and other corporate-related capital expenditures.

On January 30, 2009, our Board of Directors authorized the repurchase of up to $15.0 million of our common stock in a stock repurchase program during the 12-month period beginning on the date of authorization. We may purchase shares from time to time in open market or privately negotiated transactions at prices deemed appropriate by management, depending on market conditions, applicable laws and other factors. The stock repurchase program does not require us to repurchase any specific number of shares and may be discontinued at any time. Pursuant to this stock repurchase program, during the nine months ended September 30, 2009, we purchased 658,863 shares of our common stock at an average price of $13.69 per share for approximately $9.0 million, of which approximately $8.8 million had been settled in cash as of September 30, 2009. These repurchased shares are reflected as Treasury stock, at cost in the Consolidated Balance Sheet as of September 30, 2009. As of September 30, 2009, approximately $6.0 million remained available under the stock repurchase program.

Pursuant to the terms of the Merger Agreement discussed above in “—Recent Developments – Proposed Merger,” as of October 18, 2009, we are not permitted to repurchase shares of our common stock on or after such date.

Our uses of cash typically include providing for operating expenditures, debt service requirements and capital expenditures. Because our long-term debt does not begin to mature until 2013, we do not believe the volatility of the credit markets, unless prolonged, should have a significant impact on our ability to refinance our debt. Pursuant to the terms of the Merger Agreement discussed above in “Recent Developments – Proposed Merger,” we have agreed that capital expenditures for the remainder of 2009 will be consistent with our internal 2009 budget and thereafter will not exceed $3.0 million per month without Sprint’s prior written consent. On August 3, 2009, we paid our interest payment in relation to our Second Lien Notes entirely by increasing the principal amount of the outstanding Second Lien Notes. To date, we have additionally elected to pay our November 1, 2009 and February 1, 2010 interest payments in relation to our Second Lien Notes entirely by increasing the principal amount of the outstanding Second Lien Notes (see Note 6, Long-Term Debt, of the “Notes to Unaudited Consolidated Financial Statements” in this Quarterly Report on Form 10-Q). We have made no other decisions regarding the future election of PIK Interest.

Pursuant to the terms of the Merger Agreement, we have certain restrictions on our ability to increase capital expenditures, pursue strategic acquisitions or new business opportunities, pay cash dividends or distributions, repurchase our stock, incur new debt, or retire or repurchase our debt.

Recent Trends, Risks and Uncertainties That May Affect Operating Results, Liquidity and Capital Resources

We have identified the following important trends and factors (as well as risks and uncertainties associated with such items) that could impact our future financial performance. This section should be read in conjunction with the “Risks Related to Our Business, Strategy and Operations” section found in Item 1A of Part I of our Annual Report on Form 10-K, filed with the SEC on March 3, 2009.

· The ability of Sprint and us to complete the transactions contemplated by the Merger Agreement, including the pending tender offer to acquire our shares, and the favorable resolution of litigation challenging such transactions, the risk that a condition to the completion of such transactions may not be satisfied, the terms and conditions on which such transactions are made and developments regarding such transactions.

· The impact of the pendency of the transactions contemplated by the Merger Agreement on our business generally, including relationships with our vendors and employees, particularly if such transactions are not consummated promptly.

· Gross additions slowed in the first nine months of 2009, reflecting tightened credit standards and increased overall wireless penetration in our markets. The percentage of our gross additions coming from Nextel subscribers switching to Sprint in our territory has declined in each of the 2009 quarters and has fallen significantly from levels we experienced in the second half of 2008. We expect this decline to continue. Additionally, gross additions were negatively impacted by the weakened economic environment, increased competitive advertising, increased competition and the relative attractiveness of competitors’ phones, pricing plans, coverage and customer service, as well as continuing concerns about the strength of the “Sprint” brand. We believe that these factors will continue to negatively affect gross additions in the remainder of 2009. To the extent we are unable to maintain, or choose to slow, our subscriber growth, it may make it more difficult for us to obtain sufficient revenue to achieve and sustain profitability.

· While our churn in the first nine months of 2009 has improved as compared to the first nine months of 2008, it increased from the second quarter of 2009 to the third quarter of 2009 and it continues to be higher than the national industry average.

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Our churn may increase in the future or remain high due to the weakening economic environment, increased competition or other factors. If churn continues to remain high or increases over the long-term, we would lose the cash flows attributable to these subscribers and may incur higher net losses or lower net profits.

· Despite our 2009 increases in per subscriber revenue as compared to 2008 levels, competition in the wireless industry remains intense and continues to put pressure on our per subscriber revenue. The introduction of more advanced handheld devices and new technologies and delivery channels, such as the WiMax offerings of Sprint through the Sprint-Clearwire transaction, further complicate the competitive environment. In addition, prepaid plans (such as those offered by new entrants into our markets like MetroPCS and existing competitors like Nextel through its Boost product), which we do not currently offer, and unlimited plans, including those offered by us, also continue to increase in popularity, which may potentially put more downward pressure on wireless service pricing as well as potentially, in the case of unlimited plans, increase our cost of providing service. Incumbent carriers, including Sprint, have offered and may continue to offer more aggressive rate plans in order to maintain or achieve subscriber growth. While customer care credits given to customers in our territory by Sprint moderated in the first nine months of 2009 as compared to 2008 levels, customer care credits remain high and the future trend of these credits is unknown. As a result of these and other factors, we expect to see continued pressure on subscriber revenue which will have a negative effect on our cash flow and our operating results.

· While our third quarter cost per gross addition, or CPGA, was comparable to our CPGA for the 2008 third quarter, our CPGA continues to remain high as compared to historical levels. We may continue to experience higher costs to acquire subscribers in the future. In the event that we increase our distribution infrastructure, we will increase the fixed costs in our sales and marketing organization. Also, more aggressive promotional efforts in the future may lead to higher handset subsidies and rebates, as would increased sales of more expensive handsets and smart phones. In addition, we may increase our marketing expenses and pay higher commissions in an effort to attract and acquire new subscribers. With a higher CPGA, subscribers must remain our subscribers for a longer period of time at a stable ARPU for us to recover those acquisition costs.

· Certain portions of our operating expense continue to increase or remain high and may increase in the future due to, among other reasons:

· Bad debt expense, which increased from the second quarter of 2009 to third quarter of 2009, could potentially continue to increase due to higher write-offs, lower bad debt recoveries as a percentage of write-offs and a weakened economic environment;

· Trend toward higher roaming expense as customers increasingly choose roam inclusive rate plans and increase their use of their handset and data devices off our network;

· Higher handset subsidies, rebates, commissions and other retention expenses for existing subscribers who upgrade to a new handset as part of promotional efforts to reduce churn;

· Higher back office and administrative expenses due to the larger number of subscribers served and the increased CCPU fees proposed by Sprint for the three year period from 2011 through 2013, if not reduced or mitigated (see “—Business Overview—Relationship with Sprint” above for further discussion of proposed CCPU fee increases);

· Higher network costs as we process increasing voice and data traffic on our network, including traffic from Sprint customers roaming in our territories, and as a result of expanding our network infrastructure and increasing our deployment of EV-DO Rev. A.; and

· If the litigation stays and covenants not to sue granted pursuant to the Settlement Agreement are vacated or terminate, higher Sprint litigation related expenses, as a result of our ongoing defense of our rights under our affiliation agreements, in particular relating to the Sprint-Clearwire transaction announced in May of 2008, the Virgin Mobile transaction announced in July of 2009, and if any actions taken by Sprint related to its announced plan to divest of the Nextel wireless network in our territory do not comply with the Circuit Court’s order.

· A substantial portion of our revenue is derived from roaming revenue, the majority of which comes when subscribers of Sprint incur minutes of use in our territories. We believe our markets have certain characteristics that have historically had a favorable effect on the level of roaming revenue from subscribers of Sprint traveling in our markets. These characteristics include being located near or around several large U.S. urban centers and having significant distances of major and secondary highways comprising principal travel corridors between these large urban centers. In the first nine months of 2009, we have seen a decrease in roaming revenue that Sprint reports to us for their subscribers’ activity in our territory which we believe reflects reduced travel into our markets related to Sprint having less subscribers and these subscribers traveling less. A continued downturn in economic conditions could result in further decreased travel activity and have a negative impact on

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our roaming revenue. Similarly, if Sprint were to continue to lose subscribers, particularly in markets adjacent to our territory, it could have a negative impact on our roaming revenue. Additionally, Sprint’s reciprocal roaming agreements with other carriers, such as its roaming agreement with Alltel, and our participation in those agreements, can change over time, potentially reducing the reciprocal rate or negatively affecting the level of roaming activity related to those roaming partners. The ratio between our roaming revenue with wireless carriers other than Sprint and our roaming expense with wireless carriers other than Sprint continued to decline in the first nine months of 2009 and was significantly below one in the third quarter of 2009. For the three and nine months ended September 30, 2009, approximately $0.8 million and $7.4 million, or 44% and 70%, respectively, of our roaming revenue from wireless carriers other than Sprint was derived from customers of Alltel, which was acquired by Verizon Wireless in January 2009. As a result, in 2009, we have experienced and expect to continue to experience a decline in our roaming revenue from Alltel. Moreover, since the ratio of inbound to outbound roaming fluctuates from period to period and year to year, the margin we earn from the difference between roaming revenue and roaming expense is difficult to predict. If this roaming margin with Sprint PCS or with other carriers declines due to less roaming revenue, more roaming expense, or both, our results of operations will be negatively affected.

· As we have added to the capacity, coverage and quality of our PCS network, we have incurred significant capital expenditures. We incurred approximately $27.9 million in capital expenditures in the nine months ended September 30, 2009, including approximately $11.9 million for continued expansion of our EV-DO Rev. A deployment. In the future we may decide to further increase our cell site expansion or EV-DO Rev. A coverage, either or both of which may increase our anticipated capital expenditures and operating expense beyond our current plans. Furthermore, unforeseen changes in technology and changes in our plans to upgrade or expand our network may require us to spend more money than we expected and have a negative effect on our cash flow. Notwithstanding the foregoing, pursuant to the terms of the Merger Agreement, we have certain restrictions on our ability to incur capital expenditures.

· We believe that Sprint’s integration of the Sprint and Nextel businesses has had, and will continue to have, a negative impact on our business and prospects. With the integration of the marketing and sales of Sprint products and services with legacy Nextel products and services, conflicts and disputes continue to arise with how Sprint and we conduct business in our territory as well as with regard to Sprint’s commitment and level of service provided to the PCS Affiliate program and to us specifically, including the timeliness, completeness and level of insight into prospective and historical information provided to us to run our business. Additionally, we believe that changes in Sprint’s billing platform, Ensemble, and related reporting systems during 2008 resulted in a number of issues which have had an adverse impact on our subscriber activity and financial results, some of which we have formally disputed and continue to dispute. As of September 30, 2009, we have also not yet achieved the same level of visibility to our subscriber information we previously had prior to the migration. Further delays in reestablishing this level of visibility into our subscriber information could continue to make it more difficult for us to effectively manage our business. If continuing or future problems with Ensemble are not resolved in a timely manner for any reason, including Sprint’s inability or unwillingness to commit resources to such issues, our business would continue to be negatively impacted. There can be no assurances that we will not have continued disputes with Sprint relating to these or other items pertaining to Sprint’s performance of its obligations under the affiliation agreements.

· Our primary subscriber base is composed of individual consumers. The current overall weakness in the United States economy, particularly weakness in the credit and housing markets, rising unemployment and volatile energy and commodity costs, have resulted in considerable negative pressure on consumer confidence and spending. As a result, we believe that these events have impacted consumers in our territories in ways that have negatively affected our business. In the event the current economic downturn in the United States continues or worsens, our current and potential wireless subscribers, especially our sub-prime subscribers, may be unable or unwilling to purchase wireless services or pay their wireless bills, which may continue to negatively impact our business, particularly as we do not yet offer a wireless prepaid plan.

· Turmoil in the credit markets and the financial services industry may negatively impact Sprint’s or our business, results of operations, financial condition or liquidity. The credit markets and the financial services industry have recently experienced a period of unprecedented turmoil characterized by the bankruptcy, failure, collapse or sale of various financial institutions and an unprecedented level of intervention from the United States federal government. While the ultimate outcome of these events cannot be predicted, such events may have a material adverse effect on Sprint’s or our liquidity and financial condition.

· Pursuant to a final order of the Circuit Court of Cook County, Illinois, Sprint and those acting in concert with it must cease owning, operating and managing the Nextel wireless network in iPCS Wireless’s territory. On October 19, 2009, pursuant to the Settlement Agreement, the Circuit Court stayed this litigation, including Sprint’s obligations to comply with the Circuit Court’s final order by January 25, 2010. If the stay is vacated for any reason, Sprint shall have until 120 days after the date on which the stay is vacated to comply with the requirements of the final order. Sprint previously announced that it intends to sell certain of its Nextel assets located in iPCS Wireless’s territory in an attempt to comply with the Circuit Court’s order. Such actions may or may not comply with the Circuit Court’s order. In addition, we do not know the impact on our business of

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any such attempts by Sprint to comply. Subject to the terms of the Settlement Agreement, we intend to diligently monitor Sprint’s actions and take such steps as may be appropriate to ensure full compliance by Sprint with the Circuit Court’s order and the Settlement Agreement. In addition, as with any litigation, it is possible that the parties may otherwise settle the dispute. In that event, we cannot speculate as to the terms and conditions of any such settlement, which could include a material economic change in our relationship with Sprint. See “—Commitments and Contingencies — Sprint/Nextel Merger Litigation” below for further discussion.

· The final outcome of our litigation with Sprint regarding the Sprint-Clearwire WiMax transaction is unknown. As discussed more fully below in “—Commitments and Contingencies — Sprint/Clearwire Transaction Litigation,” on May 7, 2008, Sprint announced a transaction among itself, Clearwire Corporation, and certain other parties (the “Sprint-Clearwire Transaction”) to form a new competing 4G network (“New Clearwire”).

On May 12, 2008, the iPCS Subsidiaries filed a lawsuit against Sprint and certain of its affiliates in the Circuit Court of Cook County, Illinois, seeking declaratory and injunctive relief with respect to the Sprint-Clearwire Transaction. In that case, the iPCS Subsidiaries are seeking a declaration that the Sprint-Clearwire Transaction constitutes a breach of Sprint’s affiliation agreements it has with those subsidiaries.

We cannot predict the outcome of these legal proceedings. If we do not prevail, Sprint may be permitted to operate, through its Sprint-Clearwire venture, a mobile WiMax network that could adversely affect our business and operations by introducing a competitive product that can be expected to reduce demand for our products and services. If we do prevail, we do not know Sprint’s intentions for complying with any ruling and its impact on our business. On October 19, 2009, pursuant to the Settlement Agreement, the Circuit Court stayed this litigation. In addition, as with any litigation, it is possible that the parties may otherwise settle the dispute. In that event, we cannot speculate as to the terms and conditions of any such settlement, which could include a material economic change in our relationship with Sprint. See “—Commitments and Contingencies — Sprint/Clearwire Transaction Litigation” below for further discussion.

· On July 28, 2009, Sprint announced it agreed to acquire Virgin Mobile USA, Inc., subject to Virgin Mobile USA stockholders’ and regulatory approvals (“the Sprint-Virgin Mobile Transaction”). On September 10, 2009, the iPCS Subsidiaries filed a lawsuit against Sprint and certain of its affiliates in the Circuit Court of Cook County, Illinois, seeking declaratory and injunctive relief with respect to the Sprint-Virgin Mobile Transaction. In that case, the iPCS Subsidiaries are seeking a declaration that the Sprint-Virgin Mobile Transaction constitutes a breach of Sprint’s affiliation agreements with the iPCS Subsidiaries, and also sought an injunction barring Sprint from closing the Sprint-Virgin Mobile Transaction until it complied with the affiliation agreements. On the same day, the iPCS Subsidiaries filed a motion for preliminary injunction, in which they seek to enjoin the closing of the Sprint-Virgin Mobile Transaction. That motion is pending. On September 22, 2009, the defendants filed a motion to dismiss the complaint. That motion is pending. On October 19, 2009, pursuant to the Settlement Agreement, the Circuit Court stayed this litigation.

· Our PCS network equipment is supplied solely by Nortel Networks. If additional equipment or support is needed for expansion or repair of our network, it generally must come from Nortel Networks in order to be compatible with our existing network equipment. Nortel Networks filed for Chapter 11 bankruptcy protection in January 2009. In July 2009, Ericsson won an auction, subject to court approval in Canada and the United States, of Nortel’s carrier-network division and a wireless-research unit. If Ericsson, or Nortel or another acquirer if this sale does not close, were to cease or delay supplying equipment or suspend warranty coverage, we could be prevented or delayed in expanding, repairing or supporting our network. Any inability to expand or repair our network could have a material effect on us. In addition, Ericsson, Nortel, or any potential successor, potentially could exert significant bargaining power over price, quality, warranty claims or other terms relating to its equipment.

· As a PCS Affiliate of Sprint, we are dependent upon Sprint for many aspects of our business, including the brand name under which we operate, the spectrum that we use, technological advances and the nationwide wireless network outside of our territory. From the subscribers’ point of view, we are “Sprint” in our markets and they use our wireless network and the rest of the Sprint PCS network as a unified network. Sprint’s performance and brand reputation nationwide—over which we have no control—impacts our performance. We believe many of Sprint’s operating metrics, including net subscriber additions and churn, have significantly underperformed relative to industry averages over the last few years, reflecting deterioration in the relative strength of the Sprint brand. If Sprint is unable to improve its operating metrics and brand image in the future, particularly in the face of an economic downturn and an increasingly maturing industry, our business would likely suffer material adverse consequences.

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Commitments and Contingencies

Proposed Merger. As discussed above in “Recent Developments — Proposed Merger,” on October 18, 2009, the Company, Sprint and the Purchaser, a wholly owned subsidiary of Sprint, entered into the Merger Agreement pursuant to which Sprint agreed to acquire all of the Company’s outstanding common stock for a cash price of $24 per share. The Merger Agreement provides for certain termination rights for each of Sprint and the Company and further provides that upon termination of the Merger Agreement under specified circumstances, the Company will be required to pay Sprint a termination fee of $12.5 million.

Sprint/Nextel Merger Litigation. On July 15, 2005, our wholly owned subsidiary, iPCS Wireless, Inc. (“iPCS Wireless”), filed a complaint against Sprint and Sprint PCS in the Circuit Court of Cook County, Illinois (the “Circuit Court”). The complaint alleged, among other things, that Sprint’s conduct following the consummation of the merger between Sprint and Nextel would breach Sprint’s exclusivity obligations to iPCS Wireless under its affiliation agreements with Sprint PCS. On August 14, 2006, the Circuit Court issued its decision and on September 20, 2006, the Circuit Court issued a final order effecting its decision. The final order provided that:

· Within 180 days of the date of the final order, Sprint and those acting in concert with it must cease owning, operating and managing the Nextel wireless network in iPCS Wireless’s territory.

· To grant Sprint 360 days (rather than 180 days) to comply with the Circuit Court’s order to cease owning, operating and managing the Nextel wireless network in iPCS Wireless’s territory.

· To permit Sprint to seek an extension of the 360-day period upon a showing of good cause, with due consideration given to the hardship(s) imposed on iPCS Wireless by the requested extension.

On January 30, 2009, the Circuit Court entered its final order, as directed by the Supreme Court, providing that:

· Sprint, and those acting in concert with it, must cease owning, operating and managing the Nextel wireless network in iPCS Wireless’s service area.

· Sprint must continue to comply with all terms and conditions of the Forbearance Agreement between iPCS Wireless and Sprint.

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On October 19, 2009, pursuant to the Settlement Agreement, the Circuit Court stayed this litigation, including Sprint’s obligations to comply with the Court’s final order by January 25, 2010. If the stay is vacated for any reason, Sprint shall have until 120 days after the date on which the stay is vacated to comply with the requirements of the final order.

Sprint/Clearwire Transaction Litigation. On May 7, 2008, Sprint announced a proposed transaction among itself, Clearwire Corporation, and certain other parties (the “Sprint-Clearwire Transaction”) to form a new competing network (“New Clearwire”), pursuant to which transaction Sprint transferred its 4G technology to the New Clearwire. The same day, Sprint filed a complaint for declaratory judgment against iPCS and certain of its subsidiaries, iPCS Wireless, Horizon Personal Communications, Inc. and Bright Personal Communications Services, LLC (collectively, the “iPCS Subsidiaries”) in the Court of Chancery of the State of Delaware (the “Delaware Chancery Court”). In that lawsuit, Sprint sought a declaration that the Sprint-Clearwire Transaction would not constitute a breach of the Sprint affiliation agreements it has with the iPCS Subsidiaries.

On May 12, 2008, the iPCS Subsidiaries filed a lawsuit against Sprint and certain of its affiliates in the Circuit Court, seeking declaratory and injunctive relief with respect to the Sprint-Clearwire Transaction. In that case, the iPCS Subsidiaries sought a declaration that the Sprint-Clearwire Transaction constitutes a breach of Sprint’s affiliation agreements it has with those subsidiaries, and also sought an injunction barring Sprint from closing the Sprint-Clearwire Transaction until it complied with the affiliation agreements.

On December 30, 2008, the Circuit Court issued a decision on a motion for partial summary judgment filed by iPCS Wireless that sought partial summary judgment based on the 2006 decision in the Illinois Sprint/Nextel Merger Litigation. The Circuit Court specifically recognized that pursuant to the 2006 decision, Sprint and those acting in concert with it cannot compete against iPCS Wireless in its exclusive service areas, regardless of the radio frequency that they use to compete. The Circuit Court held that Sprint cannot relitigate the issue of whether Sprint and those acting in concert with it may compete with iPCS Wireless in its service area by using a frequency other than 1900 MHz. The Circuit Court granted in part iPCS Wireless’s motion for partial summary judgment with respect to these two issues and entered judgment thereon but stayed enforcement of the judgment pending a ruling on Sprint’s petition to vacate the original judgment in the Illinois Sprint/Nextel Merger Litigation, which petition to vacate was then dismissed with prejudice on January 20, 2009. The Circuit Court also found in its December 30, 2008 ruling that some material issues of fact remained and would be decided at trial including, but not limited to, whether New Clearwire is a “related party,” whether Sprint controls New Clearwire, whether the protections of exclusivity extend beyond the situation in which Sprint acts through a related party, and the question of who constitutes “those acting in concert” with Sprint.

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Sprint’s motion for partial summary judgment against Bright and Horizon and found that the Delaware Chancery Court did not actually decide that issue.

We presently cannot determine the ultimate resolution of the matters described above. The results of litigation are inherently uncertain and, while we believe that we have meritorious claims in the matters described above, material adverse outcomes are possible. Additionally, on October 18, 2009, the parties to the above-described lawsuits entered into the Settlement Agreement. Please see above for a more detailed description of the Settlement.

In addition to the foregoing, from time to time, we are involved in various legal proceedings relating to claims arising in the ordinary course of business. We are not currently a party to any such legal proceedings, the adverse outcome to which, individually or in the aggregate, is expected to have a material adverse effect on our business, financial condition or results of operations.

Nortel Networks Equipment Agreement

On March 13, 2009, we signed a letter of agreement with Nortel Networks to purchase EV-DO Rev. A equipment and services totaling approximately $19.7 million in aggregate, consisting of a non-cancelable purchase of approximately $14.8 million of equipment and services and an option to purchase up to an additional approximately $4.9 million of equipment and services. Under this letter of agreement, we agreed to return to Nortel Networks certain equipment replaced by the purchased equipment by March 1, 2010. We have submitted non-cancelable purchase orders for approximately $14.8 million of equipment and services and therefore have no remaining commitment under this letter of agreement to submit additional non-cancelable purchase orders. As of September 30, 2009, we have received approximately $13.8 million and paid for approximately $13.1 million of equipment and services and have returned approximately half of the replaced equipment to Nortel. The remaining replaced equipment is expected to be returned to Nortel by the end of 2009.

State of Michigan Sales and Use Tax Audit

The State of Michigan is currently auditing our sales and use tax returns for the years 2003 through 2006. The outcome of this audit cannot be determined at this time.

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Contractual Obligations and Off-Balance Sheet Arrangements

For information regarding contractual obligations and off-balance sheet arrangements, see the captions “Contractual Obligations” and “Off-Balance Sheet Arrangements” in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008. At September 30, 2009, there had not been a material change to the contractual obligations or off-balance sheet arrangements disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008, except that at September 30, 2009, we have an off balance sheet obligation of approximately $1.0 million. See “—Nortel Networks Equipment Agreement” above for further discussion regarding this obligation.

Seasonality

Our business is subject to seasonality because the wireless telecommunications industry historically has been dependent on fourth calendar quarter results. Among other things, the industry relies on moderately higher subscriber additions and handset sales in the fourth calendar quarter as compared to the other three calendar quarters. A number of factors contribute to this trend, including: the use of retail distribution, which is heavily dependent upon the year-end holiday shopping season; the timing of new product and service announcements and introductions; competitive pricing pressures; and aggressive marketing and promotions. In addition, our roaming revenue and roaming expense is subject to seasonality because of decreased travel of wireless subscribers into our territory during the winter months.

Critical Accounting Policies

Our financial statements are prepared in conformity with accounting principles generally accepted in the United States and require us to select appropriate accounting policies. The assumptions and judgments we use in applying our accounting policies have a significant impact on our reported amounts of assets, liabilities, revenue and expenses. While we believe that the assumptions and judgments used in our estimates are reasonable, actual results may differ from these estimates under different assumptions or conditions.

We have identified the most critical accounting policies upon which our financial status depends. The critical policies were determined by considering accounting policies that involve the most complex or subjective decisions or assessments. We also have other policies considered key accounting policies; however, these policies do not meet the definition of critical accounting policies because they do not generally require us to make estimates or judgments that are complex or subjective. Our critical accounting policies include the following:

· Revenue recognition

· Allowance for doubtful accounts

· Long-lived asset recovery

· Intangible assets

· Interest rate swap

· Income taxes

· Stock-based compensation

Additional information regarding these critical accounting policies can be found in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section of our Annual Report on Form 10-K for the year ended December 31, 2008, filed with the SEC on March 3, 2009.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We do not engage in commodity futures trading activities. Although we entered into a derivative financial instrument transaction for hedging purposes as discussed below, we do not enter into derivative financial instrument transactions for trading or other speculative purposes. We also do not engage in transactions in foreign currencies that could expose us to market risk. Our exposure to market risk is limited primarily to the fluctuating interest rates associated with variable rate indebtedness.

In July 2007, we entered into an interest rate swap agreement that effectively fixes the interest rate on $300.0 million of our variable rate indebtedness at 7.47% for three years starting August 1, 2007. The fair value of our interest rate swap was a $11.7 million liability at September 30, 2009. A hypothetical increase of 100 basis points in average market interest rates would increase the fair value of our interest rate swap by approximately $3.0 million. A decrease of 100 basis points in average market interest rates would decrease the fair value of our interest rate swap by approximately $3.0 million. A prospective increase of 100 basis points in the interest rate applicable to the remaining $175.0 million of variable rate indebtedness would result in an increase of approximately $1.8 million in our annual interest expense. At September 30, 2009, after consideration of the interest rate swap described above, approximately 37% of our debt is subject to variable interest rates.

Item 4. Controls and Procedures.

Each of our Chief Executive Officer and Chief Financial Officer has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this quarterly report. Based on such evaluation, such officers have concluded that, as of the end of the period covered by this quarterly report, our disclosure controls and procedures are effective.

We place reliance on Sprint PCS to adequately design its internal controls with respect to the processes established to provide financial information and other information to us and the other PCS Affiliates of Sprint. To address this issue, Sprint engages an independent registered public accounting firm to perform a periodic evaluation of these controls and to provide a “Report on Controls Placed in Operation and Tests of Operating Effectiveness for Affiliates” under guidance provided in Statement of Auditing Standards No. 70. This report is provided to us annually.

There have been no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended September 30, 2009 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations —Commitments and Contingencies” of this report.

In addition to the above, from time to time, we are involved in various legal proceedings relating to claims arising in the ordinary course of business. We are not currently a party to any such legal proceedings, the outcome of which, individually or in the aggregate, is expected to have a material adverse effect on our business, financial condition or results of operations.

Item 1A. Risk Factors.

You should carefully consider the risks and uncertainties described in Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2008 and the updated risk factors below as well as the other information in our subsequent filings with the SEC, including this Quarterly Report on Form 10-Q. Our business, financial condition, results of operations and stock price could be materially adversely affected by any of these risks. The risks described in our Annual Report on Form 10-K and below are not the only ones facing us. Additional risks and uncertainties that are currently unknown to us or that we currently consider to be immaterial may also impair our business or adversely affect our financial condition, results of operations and stock price.

Risks Related to the Offer and related Merger with Sprint

The market price of our common stock has been, and may continue to be, materially affected by the Offer.

The current market price of our common stock reflects, among other things, the commencement and anticipated completion of the Offer. The current market price is higher than the price before the Offer was announced on October 19, 2009. To the extent that the current market price of our common stock reflects market assumptions that the Offer will be completed, it is possible that the price of our common stock could decline if these market assumptions are not realized. There are a number of conditions precedent to the completion of the Offer, and legal proceedings have been brought against the Company seeking to enjoin the closing of the Offer. However, there can be no assurance in this regard or as to any other forward-looking statements or matters relating to our stock price

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or otherwise, which are subject to numerous uncertainties and matters beyond the control of the Company, including the closing conditions set forth in the Merger Agreement. In addition, please note that the Company has published a Solicitation/Recommendation Statement on Schedule 14D-9 in accordance with the requirements of the Securities Exchange Act of 1934 and filed such Schedule 14D-9 with the Securities and Exchange Commission, which contains the recommendation of the board of directors of the Company with respect to the Offer. The statements in this report are not a solicitation or recommendation of the Company to its stockholders in connection with the proposed Offer, and stockholders should carefully review the Solicitation/Recommendation Statement before making any decision as to the Offer.

Uncertainties associated with the proposed Offer may cause a loss of employees and may otherwise materially adversely affect our business operations.

Our future results of operations depend in large part upon our ability to retain our current skilled and qualified employees and to attract new employees. The failure to continue to attract and retain such individuals could materially adversely affect our ability to compete. Our executive officers have employment agreements with change in control severance provisions. We also have a special severance program for employees and additional retention agreements with select employees all with change in control severance provisions. Despite this program and these agreements, it is uncertain whether we have provided our employees with sufficient financial incentives to continue their employment through the date of consummation of the Merger. Employees may decide to seek employment elsewhere on the assumption that the transactions contemplated by the Merger Agreement will be consummated. In addition, our retention of current employees and ability to attract prospective employees may be adversely affected by their perception of uncertainty about their continued roles with Sprint if the proposed Merger is consummated. An inability to retain key personnel during the period of the Offer could have an adverse effect on our ability to continue to operate the business as an independent entity in the event the proposed Merger is not consummated.

The Merger Agreement limits our ability to pursue an alternative acquisition proposal to the Merger and requires the payment of a termination fee of $12.5 million if we do so.

The Merger Agreement prohibits us from soliciting, initiating, encouraging or facilitating certain alternative acquisition proposals with any third party, subject to exceptions set forth in the Merger Agreement. The Merger Agreement also provides for the payment of a termination fee of $12.5 million if the Merger Agreement is terminated in certain circumstances in connection with a third party initiating a competing acquisition proposal for us, or in the event that a majority of our shares of common stock are not tendered in the Offer. These provisions limit our ability to pursue offers from third parties that could result in greater value to our stockholders. The obligation to pay the termination fee also may discourage a third party from pursuing an alternative acquisition proposal. Should the Merger Agreement be terminated in circumstances under which the termination fee is payable, the payment could have material and adverse consequences to our financial condition and operations after such time.

The Merger Agreement contains restrictive covenants that may limit our ability to respond to changes in market conditions or pursue business opportunities.

The Merger Agreement contains restrictive covenants that limit our ability to take certain significant actions during the period prior to the completion of the proposed Offer. Although the Merger Agreement provides that Sprint will not unreasonably withhold its consent to us taking otherwise prohibited actions, there can be no assurances that Sprint will grant such consent. These restrictions may materially adversely affect our ability to react to changes in market conditions or take advantage of business opportunities, either of which could have a material and adverse effect on the prospects of our business, which could be detrimental to our stockholders in the event the proposed Merger is not completed.

Before consummation of the Merger, Sprint may act in ways that are not in compliance with our affiliation agreements.

Before the consummation of the Merger, Sprint may act in ways that are not in compliance with our affiliation agreements. Although we intend to continue to seek Sprint’s full compliance with these agreements through the completion of the Merger, Sprint may nevertheless attempt to cease providing certain contractually obligated services or otherwise cease to satisfy its responsibilities under the affiliation agreements. We rely on Sprint to provide numerous services in the operation of our business. In anticipation of the consummation of the Merger, Sprint may cease to provide its obligated services under the Affiliation Agreements, or it may reduce the level of resources it commits to the provision of these services. Additionally, Sprint may breach the exclusivity provisions of our affiliation agreements in new and unforeseen ways before consummation of the Merger. Any failure by Sprint to fully satisfy its obligations as to services provided, exclusivity or otherwise under our affiliation agreements would have an adverse effect on our business and results of operations, particularly if the Merger were not to consummate.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

The following table provides information about shares of common stock the Company acquired during the third quarter of 2009:

Issuer Purchases of Equity Securities

	Total number of shares purchased (a)	Average price paid per share		Total number of shares purchased as part of publicly announced plans or programs (a)	Maximum number (or approximate dollar value) of shares that may yet be purchased under the plans or programs (a)
July 1, 2009 to July 31, 2009	87,825	$	15.36	87,825	$	8,927,173
August 1, 2009 to August 31, 2009	42,788	$	16.90	42,788	$	8,203,988
September 1, 2009 to September 30, 2009 (b)	127,720	$	17.45	127,351	$	5,981,314
Total	258,333	$	16.65	257,964	$	5,981,314

(a) On January 30, 2009, the Company’s Board of Directors authorized the repurchase of up to $15.0 million of the Company’s common stock in a stock repurchase program during the 12-month period beginning on the date of authorization. The Company may purchase shares from time to time in open market or privately negotiated transactions at prices deemed appropriate by the management, depending on market conditions, applicable laws and other factors. The stock repurchase program does not require the Company to repurchase any specific number of shares and may be discontinued at any time.

Pursuant to the terms of the Merger Agreement discussed in “Item 2 — Recent Developments — Proposed Merger,” as of October 18, 2009, the Company is not permitted to repurchase shares of its common stock on or after such date.

(b) Includes 369 shares withheld to satisfy certain tax withholding obligations in connection with vesting of restricted stock as permitted by the iPCS Third Amended and Restated 2004 Long-Term Incentive Plan.

Item 3. Defaults Upon Senior Securities.

None.

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

None.

Item 5. Other Information.

None.

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Item 6. Exhibits.

Exhibit Number		Description
2.1		Agreement and Plan of Merger, dated as of October 18, 2009, among Sprint Nextel Corporation, Ireland Acquisition Corporation and iPCS, Inc. (Incorporated by reference to Exhibit 2.1 to the Form 8-K filed by iPCS, Inc. on October 19, 2009)
2.2		Stockholders Agreement, dated as of October 18, 2009, among Sprint Nextel Corporation, Apollo Investment Fund IV, L.P., Apollo Overseas Partners IV, L.P., Timothy M. Yager, Stebbins B. Chandor, Jr., Timothy G. Biltz and Mikal J. Thomsen (Incorporated by reference to Exhibit 2.2 to the Form 8-K filed by iPCS, Inc. on October 19, 2009)
3.1		Second Restated Certificate of Incorporation of iPCS, Inc. (Incorporated by reference to Exhibit 3.1 to the Form 8-K filed by iPCS, Inc. on July 1, 2005)
3.2		Amended and Restated Bylaws of iPCS, Inc. (Incorporated by reference to Exhibit 3.2 to the Form 10-QT filed by iPCS, Inc. on February 14, 2006)
3.3		Amendment to the Amended and Restated Bylaws of iPCS, Inc. (Incorporated by reference to Exhibit 99.1 to the Form 8- K filed by iPCS, Inc. on January 4, 2008)
3.4		Certificate of Incorporation of iPCS Wireless, Inc. (Incorporated by reference to Exhibit 3.4 to the Form S-4 filed by iPCS, Inc. on January 8, 2001)
3.5		Bylaws of iPCS Wireless, Inc. (Incorporated by reference to Exhibit 3.5 to the Form S-4 filed by iPCS, Inc. on January 8, 2001)
3.6		Certificate of Incorporation of iPCS Equipment, Inc. (Incorporated by reference to Exhibit 3.6 to the Form S-4 filed by iPCS, Inc. on January 8, 2001)
3.7		Bylaws of iPCS Equipment, Inc. (Incorporated by reference to Exhibit 3.7 to the Form S-4 filed by iPCS, Inc. on January 8, 2001)
3.8		Articles of Organization of Bright Personal Communications Services, LLC (Incorporated by reference to Exhibit 3.7 to the Form S-1 filed by iPCS, Inc. on August 11, 2005)
3.9		Operating Agreement of Bright Personal Communications Services, LLC (Incorporated by reference to Exhibit 3.8 to the Form S-1 filed by iPCS, Inc. on August 11, 2005)
3.10		Articles of Incorporation of Horizon Personal Communications, Inc. (Incorporated by reference to Exhibit 3.9 to the Form S-1 filed by iPCS, Inc. on August 11, 2005)
3.11		Regulations of Horizon Personal Communications, Inc. (Incorporated by reference to Exhibit 3.10 to the Form S-1 filed by iPCS, Inc. on August 11, 2005)
4.1		Amended and Restated Common Stock Registration Rights Agreement, dated as of June 30, 2005, by and among iPCS, Inc., affiliates of Silver Point Capital, affiliates of AIG Global Investment Corp., the Timothy M. Yager 2001 Trust, Apollo Investment Fund IV, L.P. and Apollo Overseas Partners IV, L.P. (Incorporated by reference to Exhibit 99.1 to the Form 8-K filed by iPCS, Inc. on July 1, 2005)
4.2		First Lien Indenture, dated as of April 23, 2007, by and among iPCS, Inc., the Guarantors and U.S. Bank National Association, as trustee (Incorporated by reference to Exhibit 99.3 to the Form 8-K filed by iPCS, Inc. on April 25, 2007)
4.3		Second Lien Indenture, dated as of April 23, 2007, by and among iPCS, Inc., the Guarantors and U.S. Bank National Association, as trustee (Incorporated by reference to Exhibit 99.4 to the Form 8-K filed by iPCS, Inc. on April 25, 2007)
4.4		First Lien Security Agreement, dated as of April 23, 2007, made by iPCS, Inc. and the Guarantors in favor of U.S. Bank National Association, as collateral agent (Incorporated by reference to Exhibit 99.7 to the Form 8-K filed by iPCS, Inc. on April 25, 2007)
4.5		Second Lien Security Agreement, dated as of April 23, 2007, made by iPCS, Inc. and the Guarantors in favor of U.S. Bank National Association, as collateral agent (Incorporated by reference to Exhibit 99.8 to the Form 8-K filed by iPCS, Inc. on April 25, 2007)
4.6		Intercreditor Agreement, dated as of April 23, 2007, between U.S. Bank National Association, as first lien collateral agent and U.S. Bank National Association, as second lien collateral agent. (Incorporated by reference to Exhibit 99.9 to the Form 8-K filed by iPCS, Inc. on April 25, 2007)
4.7		First Amendment to the First Lien Security Agreement, dated as of October 10, 2007, made by iPCS, Inc. and the Guarantors in favor of U.S. Bank National Association, as collateral agent (Incorporated by reference to Exhibit 10.1 to the Form 10-Q filed by iPCS, Inc. on November 8, 2007)
4.8		First Amendment to the Second Lien Security Agreement, dated as of October 10, 2007, made by iPCS, Inc. and the Guarantors in favor of U.S. Bank National Association, as collateral agent (Incorporated by reference to Exhibit 10.2 to the Form 10-Q filed by iPCS, Inc. on November 8, 2007)
10.1		Settlement Agreement and Mutual Release, dated as of October 18, 2009, among Sprint Nextel Corporation, WirelessCo L.P., Sprint Spectrum L.P., SprintCom, Inc., Sprint Communications Company, L.P., Nextel Communications, Inc., PhillieCo L.P., APC PCS LLC, Horizon Personal Communications, Inc., Bright Personal Communications Services, LLC, iPCS Wireless, Inc. and iPCS, Inc. (Incorporated by reference to Exhibit 10.1 to the Form 8-K filed by iPCS, Inc. on October 19, 2009)
31.1*		Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*		Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

PART I	FINANCIAL INFORMATION	3

ITEM 1.	FINANCIAL STATEMENTS	3
	CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 2009 AND DECEMBER 31, 2008 (UNAUDITED)	3
	CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008 (UNAUDITED)	4
	CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008 (UNAUDITED)	5
	NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS	6
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	25
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	46
ITEM 4.	CONTROLS AND PROCEDURES	46

PART II	OTHER INFORMATION	46

ITEM 1.	LEGAL PROCEEDINGS	46
ITEM 1A.	RISK FACTORS	46
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	48
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	48
ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	48
ITEM 5.	OTHER INFORMATION	48
ITEM 6.	EXHIBITS	49

SIGNATURES		51

CERTIFICATIONS

	iPCS, Inc.

	By:	/s/ TIMOTHY M. YAGER
		Timothy M. Yager
		President and Chief Executive Officer (Principal Executive Officer)

Date: November 3, 2009
	By:	/s/ STEBBINS B. CHANDOR, JR.
		Stebbins B. Chandor, Jr.
		Executive Vice President and Chief Financial Officer (Principal Financial Officer)

Date: November 3, 2009

Exhibit Number		Description
32.1*		Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002